News
Fed Goes “All In” on Basel III Standards, But Prefers a Phased Approach
The Board of Governors of the Federal Reserve System voted on June 7 to approve proposed rules intended to implement the regulatory capital standards promulgated under “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems.” These proposals are also intended to harmonize the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 with Basel III requirements. These proposals are a comprehensive set of three capital requirements that, if approved, would be applicable to all insured banks and thrifts, savings and loan holding companies, and bank holding companies with consolidated assets over $500 million.
Wallison on Shadow Banking: If It Isn’t Broken, Don’t Fix It
In a piece published June 14, Peter J. Wallison, Fellow at the American Enterprise Institute, argues against imposing any new regulation on shadow banking markets and firms without without convincing proof they need it. According to Wallison, the calls from regulators and others for additional regulation of so-called “shadow banks” are simply a rush to judgment.
European Repo Declines as Banks Seek Safety
Early in August, the European Repo Council of the International Capital Market Association released the results of its 23rd bi-annual survey of the European repo market. The survey results reflect that risk aversion is still a vital important factor to banks in the selection of collateral, but the survey shows that this is no longer automatically reflected in increased use of government bonds.
As Deadline Looms G20 Urges Action on OTC Derivatives
In their communiqué from June’s Los Cabos meeting, the G20 said that it expects member nations to finalize their OTC derivatives regulations in order to meet the the G20’s fast approaching deadline. The communiqué urges member nations to fast track their legislative and regulatory policy processes so that by the end of 2012 all standardized OTC derivative contracts are traded on exchanges or electronic trading platforms (as appropriate) and cleared through central counterparties. In addition, the G20’s committment calls for OTC derivative contracts to be reported to trade repositories, and non-centrally cleared contracts to be subject to higher capital requirements by the end of 2012 as well.
How Do Mutual Funds Really Use Proxy Advisers?
A study published this month (June 2012) by the Investor Responsibility Research Center (IRRC) Institute and conducted by Tapestry Networks takes a look at the decision-making process for proxy voting used by 19 North American asset management firms. In particular, the study looks at how these leading US mutual funds develop proxy voting guidelines and reach decisions regarding how to vote. The 19 asset management firms used in the study account for over $15.4 trillion in assets under management, or more than half of the mutual fund assets under management in the United States.
“What Good are your MMF Rules?,” U.S. Congress asks SEC.
Per the fiscal year 2013 Financial Services and General Government Appropriations bill of the House Appropriations Committee, the SEC must perform an in-depth study on the effectiveness of the Commission’s long standing rules, as well as the more recent money market regulatory reforms. In particular, Congress wants to know whether these rules help in providing liquidity to the capital and municipal markets and to what extent they promote and enhance money market fund stability, resiliency, and transparency. This proposed legislation just adds to the ongoing discussion among US regulators, Congressional leaders, and international oversight bodies on the systematic risks still posed by money market funds.
OTC Derivatives Reform: A ‘Sea of Change’?
OTC derivatives legislation and clearing reforms understandably have European and US market participants scratching their heads about what this “sea of change” has in store for them and the future of OTC markets. David Felsenthal, a partner at Clifford Chance LLP, has given the matter some serious thought, and provides some guidance in his January 14, 2012 post at Harvard Law School’s Forum on Corporate Governance and Financial Regulation.
According to Felsenthal, the reforms being considered focus primarily on transparency about on positions and exposures of individual firms in OTC derivatives, a transparency sorely missing during the financial crisis.
FSOC Adopts Final Rules Governing Nonbank Financial Companies
The Financial Stability Oversight Council (FSOC) has adopted final rules on Supervision and Regulation of Certain Nonbank Financial Companies. These final rules and the accompanying interpretive guidance lay out in detail the manner in which the FSOC intends to implement the statutory standards and the processes and procedures that the Council intends to follow.
The Ins and Outs of Deloitte’s “Shadow Banking Index”
Deloitte LLP has come up with clever new way to describe and track the size and changes in the shadow banking industry. Recognizing that market participants and regulators lacked clarity and consistency when it came to defining, measuring, and framing the debate about this complex and dynamic subject, Deloitte has devised a “Shadow Banking Index.”
US Receives Mixed Marks on its Basel Implementation Report Card
In anticipation of the G20 Leaders Summit in Los Cabos, Mexico on June 18-19, The Basel Committee has issued its latest progress reporton the implementation of its banking standards across member countries. The Committee finds that, though significant progress has been made since its last report, there are jurisdictions which have missed the globally-agreed implementation dates for Basel II and 2.5. In addition, there are also jurisdictions, including the US, that the Committee feels have not made enough progress to date on Basel III and and run the risk of failing to meet the agreed Basel III implementation date.