News
August 2013 Financial Services Legislative Update
As they depart for the August recess, Congress has left some financial regulatory issues open to occupy their time upon their return next month. Bills addressing high frequency trading, exempting banks as municipal advisers, and relief for brokers engaging in private mergers and acquisition transactions remain open items for the new session. In addition, Congress is still waiting for answers from the SEC and CFTC regarding new cross-border derivatives regulations.
Bank Regulators Seek Input on Stress Tests for Medium-Sized Firms
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have issued a request for comments on supervisory expectations for stress tests conducted by medium-sized financial companies. The agencies define “medium-sized” to be financial companies with total consolidated assets between $10 billion and $50 billion.
EU and US Announce Landmark Pact on Cross-Border Derivatives
“As the market subject to these regulations is international, it is acknowledged that, notwithstanding the high degree of similarity that already exists between the respective requirements, without coordination, subjecting the global market to the simultaneous application of each other’s requirements could lead to conflicts of law, inconsistencies, and legal uncertainty.”
US and EU Formally Implement Basel III Standards
On July 2, 2013, the Board of Governors of the Fed issued final capital rules for banks implementing both the Basel III Capital Framework and certain additional requirements imposed by the Dodd-Frank Act. On July 17, 2013, the EU’s Capital Requirements Directive IV (CRD IV), which transposes Basel III into the EU legal framework, entered into force.
Are Institutional Investors Voting Proxies with the Correct Mindset?
The federal government is not now and has never been in the business of telling you how you should vote your proxies. But it seems that through regulatory creep, the government may have indirectly given the power to tell investors how to vote their proxies to someone else entirely. Regulating disclosures and mechanics by which we vote proxies is plainly within the scope of the Securities and Exchange Commission’s mission.
On Borrowed Time. BIS Urges “A Forceful Programme of Repair and Reform”
Central banks cannot repair the balance sheets of households and financial institutions. Central banks cannot ensure the sustainability of fiscal finances. And, most of all, central banks cannot enact the structural economic and financial reforms needed to return economies to the real growth paths authorities and their publics both want and expect. Only a forceful […]
Causes and Cures for Financial Contagion
Although it is intuitively clear that interconnectedness has some effect on the transmission of shocks, it is less clear whether and how it significantly increases the likelihood and magnitude of losses compared to a financial system that is not interconnected. The Office of Financial Research, a government study group created by the Dodd-Frank Act, has […]
New Wave of Lehman Litigation Looms as Filing Deadline Approaches
Time is running out for those who are unhappy with the settlements of some 930,000 Lehman derivatives contracts. With the statute of limitations running out on filing Lehman derivatives disputes, a flood of new cases is expected from parties holding these contracts when Lehman filed for bankruptcy in 2008. An article by law firm Orrick […]
A Whole New World of Collateral Optimization
“Some optimisation techniques are still taking shape due to a lack of clarity around new regulations. However, some elements must naturally precede others before it is possible to reach the next level.”
Post crisis regulatory changes have had dramatic effects on the landscape of collateral management, and amplified greatly its importance from a risk management, funding cost, and operational standpoint. As a result, financial institutions across the globe are overhauling their collateral management processes to deal more effectively with the new market for collateral. Traditionally, the concept of “collateral optimization” was limited to examining what is cheapest to deliver, assigning costs to collateral assets, mapping eligibility criteria, and centralizing collateral across business lines. But as a new white paper from 4sight Financial Software points out, in the new regulatory climate and collateral marketplace, effective optimization now requires a much more dynamic and custom-made approach.
Coordination is Key, Says RMA of FSB Repo and Sec Lending Proposals
The Risk Management Association’s Committee on Securities Lending has filed a 40-page response to the Financial Stability Board’s recent whitepaper on shadow banking, focusing on its recommendations regarding securities lending and repo. The January 14, 2013 comment letter represents the views of the RMA and major participants in the agency securities lending markets like BNY Mellon, BlackRock, Citigroup, Northern Trust, State Street, and others.