Formal Regulatory Remedies - Center for the Study of Financial Market Evolution (CSFME)

OTC Derivatives Reform: A ‘Sea of Change’?

by David Schwartz J.D. CPA | Tuesday, June 19, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

OTC derivatives legislation and clearing reforms understandably have European and US market participants scratching their heads about what this “sea of change” has in store for them and the future of OTC markets. David Felsenthal, a partner at Clifford Chance LLP, has given the matter some serious thought, and provides some guidance in his January 14, 2012 post at Harvard Law School’s Forum on Corporate Governance and Financial Regulation.

According to Felsenthal, the reforms being considered focus primarily on transparency about on positions and exposures of individual firms in OTC derivatives, a transparency sorely missing during the financial crisis.

“What Good are your MMF Rules?,” U.S. Congress asks SEC.

by David Schwartz J.D. CPA | Tuesday, June 19, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

Per the fiscal year 2013 Financial Services and General Government Appropriations bill of the House Appropriations Committee, the SEC must perform an in-depth study on the effectiveness of the Commission’s long standing rules, as well as the more recent money market regulatory reforms. In particular, Congress wants to know whether these rules help in providing liquidity to the capital and municipal markets and to what extent they promote and enhance money market fund stability, resiliency, and transparency. This proposed legislation just adds to the ongoing discussion among US regulators, Congressional leaders, and international oversight bodies on the systematic risks still posed by money market funds.

FSOC Adopts Final Rules Governing Nonbank Financial Companies

by David Schwartz J.D. CPA | Tuesday, June 19, 2012 | All, Formal Regulatory Remedies

The Financial Stability Oversight Council (FSOC) has adopted final rules on Supervision and Regulation of Certain Nonbank Financial Companies. These final rules and the accompanying interpretive guidance lay out in detail the manner in which the FSOC intends to implement the statutory standards and the processes and procedures that the Council intends to follow.

As Deadline Looms G20 Urges Action on OTC Derivatives

by David Schwartz J.D. CPA | Tuesday, June 19, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

In their communiqué from June’s Los Cabos meeting, the G20 said that it expects member nations to finalize their OTC derivatives regulations in order to meet the the G20’s fast approaching deadline. The communiqué urges member nations to fast track their legislative and regulatory policy processes so that by the end of 2012 all standardized OTC derivative contracts are traded on exchanges or electronic trading platforms (as appropriate) and cleared through central counterparties. In addition, the G20’s committment calls for OTC derivative contracts to be reported to trade repositories, and non-centrally cleared contracts to be subject to higher capital requirements by the end of 2012 as well.

US Receives Mixed Marks on its Basel Implementation Report Card

by David Schwartz J.D. CPA | Friday, June 15, 2012 | All, Formal Regulatory Remedies

In anticipation of the G20 Leaders Summit in Los Cabos, Mexico on June 18-19, The Basel Committee has issued its latest progress reporton the implementation of its banking standards across member countries. The Committee finds that, though significant progress has been made since its last report, there are jurisdictions which have missed the globally-agreed implementation dates for Basel II and 2.5. In addition, there are also jurisdictions, including the US, that the Committee feels have not made enough progress to date on Basel III and and run the risk of failing to meet the agreed Basel III implementation date.

Security-Based Swaps: What’s on the SEC’s Agenda?

by David Schwartz J.D. CPA | Tuesday, June 12, 2012 | All, Formal Regulatory Remedies

The SEC has issued a policy statement laying out a roadmap for how it plans to implement new rules regulating security-based swaps and security-based swap market participants under authority granted to it by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The Statement presents a sequencing of the compliance dates for these final rules by grouping the rules into five categories and describes the interconnectedness of the compliance dates for these rules, both within and among the five categories.

ESMA Claims Lead in Regulating OTC Derivatives

by David Schwartz J.D. CPA | Monday, May 28, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

Verena Ross, Executive Director of the European Securities and Markets Authority, says that the EU will lead by example in the harmonization and convergence of regulation of OTC derivatives. With the plan for the EU regulation of OTC derivatives, central counterparties, and trade repositories (EMIR) now having been agreed upon by the European Parliament and the Council, ESMA is due to deliver draft regulatory and implementing technical standards under EMIR in June. Ross believes that if the EU is able to harmonize regulation and integrate supervision in Europe, the same convergence is possible, and necessary, globally.

German Regulator at Odds with Global Peers on Shadow Banking Wraps

by David Schwartz J.D. CPA | Wednesday, May 23, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

In an April interview with BaFin Quarterly, Dr. Elke König, the head of Germany’s Federal Financial Supervisory Authority (BaFin), called for the swift regulation of shadow banking and derivatives. Critical of the FSB’s data gathering approach to shadow banking, König said that regulators must push ahead with regulating shadow banking straight away, or they will be regulating banks while more dangerous shadow banking risks grow.

EC Cites Three Key Questions for Shadow Banking Regs

by David Schwartz J.D. CPA | Sunday, May 20, 2012 | All, Formal Regulatory Remedies

Shadow banking, i.e., credit intermediation outside the regular banking system, may represent the greatest challenge facing financial policy makers today. Since the G20 Summits in Seoul in 2010 and Cannes in 2011, regulators have struggled to envision the changes needed to reign in shadow banking practices. At an April 27 conference in Brussels, which was dedicated solely to shadow banking, the European Commission released a Consultation Paper with three questions intended to guide future regulation.

Breaking the Law of Unintended Consequences

by David Schwartz J.D. CPA | Saturday, May 19, 2012 | All, Formal Regulatory Remedies, Procedural Changes

The rush to reregulate the financial markets after the financial crisis understandably has many concerned about unintended consequences. Regardless of good intentions, the fixes put in place by legislators, central bankers, and regulators no matter how well thought out are bound to affect the complex and constantly evolving global financial markets in unanticipated ways. Professor Roberta Romano of the Yale Law School shares these worries and proposes in her latest paper, Regulating in the Dark, a mechanism for addressing and remediating the inevitable unintended consequences of hasty financial regulation.

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Formal Regulatory Remedies