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Journal Commentaries

Keep Regulation Functional (October 2008)

CSFME’s Executive Director Ed Blount interviews SEC Chairman Chris Cox.
American Banking Association Banking Journal
https://www.questia.com/library/journal/1G1-187494664/keep-functional-regulation-how-financial-regulation

The Bear Market Posse, or Counterparty Risk Management during the Recent Turmoil (Sept. 2008)

by Ed Blount
The RMA Journal, v91n1, 28-32, 5 pages Sep 2008.

Searching for New Paradigms at BIS (July 2008)

by Ed Blount
Unexpected deficiencies in bank capital after recent market turmoil has regulators rethinking aspects of Basel II and “value at risk.”
American Banking Association Banking Journal
https://www.questia.com/library/journal/1G1-181991450/searching-for-new-paradigms-at-bis-market-turmoil

Will Basel II Affect The Competitive Landscape? (September 2003)

By Ed Blount
Newly elected Basel Committee Chairman Caruana, Governor of the Bank of Spain, gives his views on the revised Basel capital accord, relative to its potential effects on competition and risk management in banking markets.
American Banking Association Banking Journal
https://www.questia.com/read/1G1-108008773/will-basel-ii-affect-the-competitive-landscape-the​

CSFME Commentaries

For the Want of a Nail … the Details of Regulatory Reform

To look for the effect of new rules on banks, regulators rely on academic models that treat banks as aggregates. In truth, global banks are collections of service businesses, not simply larger versions of George Bailey’s 1946 community lender. Missing that fact may be one reason why the list of unintended consequences from regulatory reform is growing. Critics in the U.S., without anticipating a challenge, are calling for the repeal of the Dodd-Frank Act. But expecting repeal is a dangerous strategy for bankers.

No Regulatory Relief for Securities Finance

The latest legislative offering in the U.S., the Financial CHOICE Act, does nothing for securities finance. Nothing in the bill provides an exemption to the funding markets from the crushing weight of regulatory reform. At present, both political parties in the US seem willing to accept an outcome where the global funding markets are road kill from the reform steamroller. Many experts believe this legislative failure is due to analytic omissions on the regulators’ part. In that scenario, regulatory analysts simply don’t understand the global funding mechanism.

The Overlooked Merits of Bank Disclosure

European bankers are caught up in a debate over whether to disclose their full supervisory capital demands to market participants. That’s an issue because bank supervisors, under Pillar 2 of the Basel III accord, can set a bank’s regulatory capital “guidance” at a level higher than its Pillar 1 “requirements.” Bank analysts and investors can discount the securities of banks with relatively high guidance, assuming that supervisors have learned something negative in their confidential reviews. That’s the essence of Pillar 3: Market Discipline.

Enlightened, not Reactive Regulation: Now It Starts

Since passage of the Dodd-Frank Act in 2010, the financial industry has been dealing with an almost unstoppable wave of regulatory reforms. Most, if not all have been designed to prevent a repetition of the problems that followed the failure of AIG and Lehman Brothers in 2008. Now, after the U.S. election of a conservative majority in two (and soon to be all three) branches of the U.S. federal government, many bankers feel that a huge regulatory weight is about to be lifted.

Dealer-based Execution on Trial

Is it true that customers always get a better price for their trades when executions take place on a regulated exchange? That seems to be the premise underlying a putative class action suit filed in federal court last November in the Southern District of New York. Next week, on July 19th, the court and litigants will be developing the pretrial schedule, including discovery and deadlines for naming experts, in what may well be a landmark case for competition in financial services.

Surprise! Market Theories Fail in Real-World Tests!!

“There is nothing less practical than a bad theory,” wrote CEO Paul Shott Stevens of the Investment Company Institute (ICI) in a July 2016 blog. Mr. Stevens introduced a series of recent findings that the ICI suggests may present a rebuttal to their members of the “first-mover” hypothesis. What is that, one may ask, and why should I care?

More Challenges for Fund Directors in the New Regulatory Environment

Securities and Exchange Commission Chair Mary Jo White’s March 29 speech to the Mutual Fund Directors’ Forum can be seen as a showcase of the philosophical differences between market regulators and banking supervisors. For directors, the speech also reveals the sometimes conflicting results of the compliance forces created by these two complementary regulatory systems.

Global Financial Reform: Unintended Adverse Consequences in Connected Markets

Financial markets in the 21st Century are profoundly global. This fact was amply demonstrated by the 2007 – 2009 financial crisis, which was centered in the banking systems of the developed western economies but transmitted with devastating effect to economies worldwide. And yet, despite the global consequences of systemic risk transmission, the supervision of financial markets remains essentially a national discipline.

BIS Sees the Financial System at a Crossroads

In their 84th Annual Report, the Bank for International Settlements examines the current state of global financial affairs and highlights some trends it sees emerging in the financial framework. While noting that the overall financial system has has gained some strength since the crisis, banks remain in a rebuilding phase, concentrating their business models towards traditional banking.