News
JPMorgan Chase Tests Blockchain Use for Securities Services
On May 16, 2018, JPMorgan Chase unveiled Dromaius, its prototype of a shared ledger for capital market services, at Coindesk’s Consensus 2018 conference. The prototype is designed to test the use of the Ethereum blockchain technology in supporting a coordinated posting by multiple entities to a single encrypted securities bookkeeping system. JPMC executive director Christine Moy said that, “We think the technology has the potential to be transformative.”
Ms. Moy, who leads J.P. Morgan’s Blockchain Center of Excellence, told the Wall Street Journal that the technology “should streamline operations, help with cost savings and overall make the experience of transacting or issuing a financial instrument like this more seamless and simplified.”
All the Bonds in Christendom
The 180th anniversary of J.P. Morgan’s birth will fall on Monday, April 17th, 2017. The great financier died aged 76, a few months after testifying before the U.S. Congress in the Money Trust hearings.
BIS Issues Further LCR Guidance
On June 8, 2017, the Basel Committee on Banking Supervision (BIS) issued a second set of frequently asked questions (FAQs) and answers on Basel III’s Liquidity Coverage Ratio (LCR).
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.
Treasury Plans Broad Industry Role in Regulatory Policy
Following up on the publication of its first banking policy report in June, the U.S. Treasury released two more reports on Capital Markets and Asset Management. From the tone of all the reports, it’s clear that Treasury intends to lead the regulatory agencies of the executive branch into a new era of consultative rule-making, with the industry taking a more active role than it has over the last several years.
Fed Reports Post-Crisis Regulation Affecting Bond Market Liquidity
In its semi-annual Monetary Policy Report submitted to Congress on July 7, 2017, the Federal Reserve Board indicated that regulatory reforms since the global financial crisis “have likely altered financial institutions’ incentives to provide liquidity.” The Fed found that In recent years, market participants have been particularly concerned with liquidity conditions in the corporate bond market.
GOP Congressmen Warn the Fed to Freeze their Rules
On February 23, 2017 House Financial Services Committee Chairman Rep. Jeb Hensarling (R-TX) and 33 GOP members of the Committee sent a letter to Federal Reserve Chair Janet Yellen requesting that the Fed “neither propose nor adopt any new rules until the U.S. Senate confirms a [Federal Reserve] Vice Chairman for Supervision.”
BIS Issues New Consultation on G-SIBs
On March 30, 2017, the Basel Committee on Banking Supervision (BIS) issued a consultation proposing changes to the framework employed to designate global systemically important banks (G-SIBs). The consultation also proposes higher capital requirements on G-SIBs. The revised G-SIB assessment framework supersedes the framework proposed by BIS in July of 2013, a process BIS has committed to revisit every three years. This latest revision maintains the previously adopted system assessing the relative systemic importance of internationally active banks based on 12 indicators in five categories, resulting in a score that measures the systemic importance of each bank. The bank’s overall score is then mapped to buckets that are associated with a higher loss absorbency (HLA) capital requirement.
Fed Chair Rejects Regulatory Roll-back
Federal Reserve Chairwoman Janet L. Yellen strongly defended post-crisis financial reforms, saying that new regulations have strengthened the U.S. financial markets and wholesale roll-back would be unwise. In remarks delivered at a symposium sponsored by the Fed in Jackson Hole, Wyoming Yellen made the case for the success of these reforms, summarizing indicators and research that show the improved resilience of the U.S. financial system, due, she said, “importantly to regulatory reform as well as actions taken by the private sector.”
Pension Funds File Sweeping Securities Lending Class Action
Three U.S. pensions have filed a class action suit against the largest prime brokers alleging collusion to fix fees and stifle competing electronic platforms in securities finance. This suit follows the theme of other class actions involving allegations of collusion and manipulation amongst the biggest global banks in relation to LIBOR, municipal bonds, Forex, and interest rate swaps. The suit filed was filed August 16, 2017 in the US Southern District Court of New York as an anti-trust action by the Iowa Public Employees’ Retirement System, Orange County Employees Retirement System and Sonoma County Employees’ Retirement Association.