News
Fordham Students Submit Comment Letters to Basel Committee
On May 16, 2016, Fordham students participating in the Center’s Regulatory Outreach for Student Education (ROSE) Program submitted their winning comment letter on the Basel Committee’s December 17, 2015 consultation, “Identification and Measurement of Step-in Risk.”
Five teams of Fordham economics, finance, accounting, and law students participating in the ROSE Program researched and drafted comment letters, which were then submitted for judging by a panel of industry experts. The letters were then submitted to the Basel Committee on Fordham letterhead.
The ROSE Program brings together students from across the university to study our financial system, how it affects society, and, specifically, current issues in financial regulation. This year’s groups included both graduate and undergraduate suduents bringing a diverse range of perspectives and skills to the task. The consultative document, with its breadth and depth, offered an excellent opportunity for them to comment.
OFR Data Finds US Banks Still the Most Systemically Important
On April 13, 2016, the Office of Financial Research (OFR) published its annual systemic importance data for the world’s larges banks. Based on data released in 2013 and 2014 by the Basel Committee, the OFR’s report examined data for the global 30 banks designated as G-SIBs, which included eight US bank holding companies. The OFR’s data collection and analysis is particularly significant because, beginning this year, regulators will employ this systemic importance data in determining capital requirements for banks.
FSOC Asks for Enhanced and Regular Data Collection for Securities Lending
In their April 16, 2016 report, Review of Asset Management Products and Activities, the Financial Stability Oversight Council (FSOC) requested that regulators make coordinated and permanent efforts to collect more data on securities lending. Noting that that current data collections do not provide regulators and policy makers with enough information to even know the size of the market for securities lending, the FSOC urged enhanced and regular data collection and reporting, as we all as interagency data sharing regarding securities lending activities.
OFR Publishes Repo Survey Results. Calls for Better Data Standards.
The Office of Financial Research released results of its survey of the bilateral repo markets. The report, “The U.S. Bilateral Repo Market: Lessons from a New Survey,” provides aggregate statistics on U.S. dealers’ bilateral repo agreements and economically equivalent securities lending activities. The data for three “snapshot” dates in 1Q2015 were collected from the U.S.-affiliated securities dealers of nine bank holding companies as part of a voluntary pilot program run by the OFR and the Fed with input from the Securities and Exchange Commission. Among other things, the data collection found that: (1) the majority of repo activity involves the delivery or receipt of U.S. Treasuries[1], with equities a distant second; (2) the most common maturity is one day; and (3) rates are widely dispersed across asset classes.
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.
SEC Chair White and the Evolving Role of Fund Directors
In her March 29, 2016 keynote address before the Mutual Fund Directors Forum’s annual policy conference, SEC Chair Mary Jo White laid out some of her thoughts on the role of mutual fund directors in assessing risks and exercising their oversight responsibilities. In addition, she highlighted recent changes in markets and regulation affecting the role of fund directors, as well as some of the potential challenges ahead.
OCC Seeks to Bring Some Order to Financial Innovation
Banking and financial markets have always been innovative. But globalization, new regulation, and changes in technology have heightened the pace of innovation dramatically. According to a whitepaper published in March 2016 by the Office of the Comptroller of the Currency (OCC), while banks continue to innovate, “rapid and dramatic advances in financial technology are beginning to disrupt the way traditional banks do business.” In the face of this disruption, the OCC has used this white paper to enumerate eight “guiding principles” that the agency says it has formulated “to guide the development of its framework for understanding and evaluating innovative products, services, and processes that OCC-regulated banks may offer or perform.”
Should Bank Repo Activity be Exempt from the NSFR?
Banks drive economic growth by providing financing for consumers and businesses. To provide this vital financing, their business models rely heavily on cheap and efficient maturity transformation made possible, in part, through short-term financing. With an implementation date less than one year away, banks and their industry groups are raising the alarm about how the Basel III Net Stable Funding Ratio (NSFR) may drive up severely the cost of short-term financing, thereby stalling the engines of economic growth, harming global liquidity, and increasing rather than reducing systemic risks.
GAO Finds U.S. Financial Regulatory Structure Fragmented and Inefficient
In a report released March 28, 2016, the GAO concluded that fragmented and overlapping oversight has created inefficiency in the U.S. financial market regulatory structure. The GAO recommended that Congress should consider taking steps to reduce or better manage fragmentation and overlap, and also determine whether legislative changes are needed to align Financial Stability Oversight Council’s (FSOC) authorities with its mission to respond to systemic risks.
Basel Proposes Changes to Reduce Variation in Credit Risk Weighted Assets
The Basel Committee on Banking Supervision today released a consultative document proposing a set of changes to the Basel III framework’s approaches for determining Banks’ regulatory capital requirements for credit risk. The goals of these changes are to (i) reduce the complexity of the regulatory framework and improve comparability; and (ii) address excessive variability in the capital requirements for credit risk.