News
FCA Fines Five Banks $1.7 Billion for FX Failings
On November 12 2014, the UK’s Financial Conduct Authority issued Final Notices collectively imposing record fines totaling $1.7 billion on five global banking firms for alleged rigging of the FX market. The FCA found that the banks engaged in widespread conduct that put the banks’ interests ahead of those of their clients and other market participants.
Controversial OFR Report Yields Some Valuable Findings
The September 2013 Office of Financial Research (OFR) report entitled “Asset Management and Financial Stability” attempts to present a critical analysis of how asset management firms and the activities in which they engage can introduce vulnerabilities that could pose, amplify, or transmit threats to financial stability.
Anti-Trust Ruling a Setback for LIBOR Plaintiffs
U.S. District Court Judge Naomi Reice Buchwald has ruled against a group of plaintiffs seeking to use the Sherman Antitrust Act to punish rate-setting banks for manipulating LIBOR. Although some of the defendant banks on the London Interbank Offered Rate panel have admitted colluding to fix the LIBOR rate, Judge Buchwald held that the harm caused by this collusion was not a result of anti-trust activities prohibited by the Sherman Act.
ICI President Resolute that Asset Management is Not a Source of Financial Instability
In a strong defense of the stability and safety of the asset management industry, Investment Company Institute President and CEO Paul Schott Stevens told the Mutual Fund and Investment Management Conference that not only are asset managers and the funds that they offer not sources of risk to the overall financial system, but some misguided efforts to regulate them as such may do vastly more harm than good.
SEC Proposes Rules for Systemically Important and Security-Based Swap Clearing Agencies
The Securities and Exchange Commission voted on March 12 to propose new rules to enhance the oversight of clearing agencies that are deemed to be systemically important or that are involved in complex transactions like security-based swaps. The Dodd-Frank Act calls for a new framework of regulation for certain clearing agencies, and these rules, if adopted, would apply to SEC-registered clearing agencies that have been designated as systemically important by the FSOC. The rules would also sweep into their regulatory ambit clearing agencies not deemed systemically important, but that take part in highly complex transactions, such as clearing security-based swaps.
CSFME Encourages Fordham Students to Let Their Voices Be Heard
In a web based meeting today, CSFME’s Executive Director Ed Blount and Senior Policy Analyst David Schwartz met with a group of Fordham University’s graduate and undergraduate business students to invite them to participate in the real world of regulatory policy. The focus of this meeting was the Financial Stability Board’s recent proposal regarding the “Assessment Methodologies for Identifying Non-Bank Non-Insurer Global SIFIs.” After a brief discussion of some of the goals of the FSB’s proposal and some the most provocative issues raised by the consultative document, Messrs. Blount and Schwartz challenged the students to research and formulate their own positions on the consultative document with an eye on submitting formal comment letters to the FSB.
FSB Extends SIFI Framework to Certain Non-Banks
Creating a system of enhanced monitoring of systematic risk and supervision of systematically important financial institutions (SIFIs) is a key objective of global regulatory reform in the aftermath of the financial crisis. Having established criteria for determining the SIFI players in the banking and insurance sectors, the FSB and IOSCO have moved on to determining which non-banks and non-insurance companies may be considered SIFIs. In a January 8, 2014 consultative document, the FSB and IOSCO proposed a methodology for the identification of nonbank, noninsurance financial institutions (NBNI) that pose systemic risks to the global economy. The consultation document extends the framework already established to identify bank and insurance company SIFIs to all other financial entities.
European Commission Release: Establishing a Central Database for Secured Financing Transactions
On January 29, 2014, the European Commission issued its long awaited proposal for the establishment of a central database for Secured Financing Transactions. This release is a part of a larger regulatory effort aimed at increasing the transparency of certain transactions in the shadow banking sector and to prevent regulatory arbitrage. The proposal aims to increase transparency in secured financing transactions, a term which is defined broadly to include repo, reverse repo, tri-party repo, securities lending transactions as well as total return swaps, collateral swaps and buy-sell transactions.
FSOC May Seek Better Regulation in Lieu of SIFI Designation for Asset Management Industry
In an apparent reaction to strong criticism from legislators, asset management industry groups, and even the Securities and Exchange Commission, the Financial Stability Oversight Counsel (FSOC) has indicated that it may encourage stronger regulation of the asset management industry, rather than designating certain industry participants as SIFIs. In the FSOC’s press release for its July 31, 2014 meeting, the Council indicated that it was encouraged by the new money market rules finalized by the SEC one week prior, and would take a step back to observe their effectiveness before moving forward with implementation of SIFI designations for asset managers and mutual fund groups.
Economic Recovery: Why Now, Will it Last, and What Next for Policy?
Last month in an address before the Confederation of British Industry (CBI) East of England Midwinter Lunch, Spencer Dale, Executive Director for Monetary Policy and Chief Economist at the Bank of England, touched on three questions about the economic recovery that we would all like to have answered: “why now, will it last, and what next for policy?”