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

Taiwan Moves to Discourage Short Selling and Securities Lending

by David Schwartz J.D. CPA | Saturday, February 19, 2011 | All, Formal Regulatory Remedies, Procedural Changes

Taiwan has recently taken steps to curb short selling and securities lending to address extreme share price volatility. In an effort to stabilize equity markets, Taiwan’s Financial Supervisory Commission on November 21 set a new daily limit on short selling of stocks. According to the new daily cap, only 20 percent of average trading volume in the last 30 sessions could be used for short-selling. The previous rules permitted short-selling of up to 3 percent of the company’s total outstanding shares.

In addition, regulators called Taiwanese insurance companies and state pension funds directly to urge them to stop lending securities to short sellers and asked securities borrowers to return their loaned shares in a bid to reduce the volume of short selling and prevent further volatility in share prices.

Basel III Implementation Progress Report

by David Schwartz J.D. CPA | Wednesday, January 19, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies

On October 18, the Basel Committee issued a report documenting Basel Committee members’ progress in adopting Basel II, Basel 2.5 and Basel III as of September 2011. The report provides a high level summary of the the status of domestic legislative and rule-making intended to incorporate the Committee’s capital standards into national law or regulation according to the internationally agreed time frames.

September 2011 Basel Committee Recap

by David Schwartz J.D. CPA | Wednesday, January 19, 2011 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

At its September 28, 2011 meeting, the Basel Committee (the “Committee) approved a range of measures aimed at finalizing the Committee’s July 2011 consultative document, “Global systemically important banks: Assessment methodology and the additional loss absorbency requirement.” The document sets out the Committee’s proposal on the assessment methodology for (1) determining global systemic importance, (2) determining the magnitude of additional loss absorbency that global systemically important banks should have, and (3) proposes the arrangements by which the methodologies will be phased in.

Infrastructures must become more resilient

by David Schwartz J.D. CPA | Sunday, December 19, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

Organized exchanges and central counterparty structures are expected to lower the threat from opaque, concentrated trading networks.

Policy Intervention may be needed to Protect Investors

by David Schwartz J.D. CPA | Sunday, December 19, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

According to the Bank of England, “The lasting legacy of this crisis is too much debt held by too many sectors against too little capital.” A McKinsey study found that, since 2000, gross debt for the ten largest economies grew by US$40 trillion, or a rise of 60%. Bank leverage soared to as much as 50 times equity, as compared with a ratio of less than 10 at the start of the 20th Century. This is not sustainable, say financial regulators.

International Regulatory Cooperation will never be Easy

by David Schwartz J.D. CPA | Wednesday, February 24, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

In a recent speech by Norwegian central banker Svein Gjedrem, the case for broader involvement by smaller banks is laid out. Instead of the G20, Mr. Gjedrem argues that the 180-member International Monetary Fund should serve as the main decision- making body for the funding of systemic risk mitigators.

Funding Markets must be made more stable

by David Schwartz J.D. CPA | Wednesday, January 27, 2010 | All, Disclosure Regimes, Formal Regulatory Remedies

As recently as 4Q09, the European Central Bank was dealing with challenges in the funding markets, noting that, “Funding liquidity problems continue to bring pressure on the major banks’ operations. While the conditions have improved substantially in most funding segments throughout 2009, including the money markets, some of these institutions and parts of the broader euro area banking system, remain reliant on temporary support measures extended by the Eurosystem and governments.”

MegaBank Failure must become a Viable Option

by David Schwartz J.D. CPA | Monday, October 19, 2009 | All, Disclosure Regimes, Formal Regulatory Remedies

The Swiss National Bank believes that resolution measures are needed to liquidate international banks without terminal damage to the real economy. “Too big to fail” and “too big to rescue” are the biggest challenges facing regulators today:

Capital Minimums, Liquidity Buffers and Regulatory Scope must Increase

by David Schwartz J.D. CPA | Monday, October 19, 2009 | All, Disclosure Regimes, Formal Regulatory Remedies

Higher capital levels are expected to form the best long-term protection, just as more liquidity will be the best buffer for short-term stresses. To insure that financial defenses are uniformly adopted, global supervisors recommend the inclusion of all business models and market domains.

Systemic Risk Controls Will Require Statutory Integration

by David Schwartz J.D. CPA | Sunday, July 19, 2009 | All, Disclosure Regimes, Formal Regulatory Remedies

Many free-market economists and politicians are concerned about the potential for loss of sovereignty when agreeing to international cooperation at a level never before considered. It may well be that the first test for many countries will be during the legislative process, when decisions must be made about enacting the recommendations of the international regulatory bodies. The United States will not move precipitously, if past experience with the Basel capital reforms can serve as a precedent.

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Formal Regulatory Remedies