Summer 2015 Financial Regulatory Update

Monday, August 10, 2015

The Fed, Financial Stability Board, and the Bank for International Settlements have beein quite busy this summer, and each issued rules or consultations in July furthering Basel III initiatives. On July 1, the Basel Committee issued a consultative document on its review of the credit valuation adjustment risk framework; on July 2, the FSB launched a peer review on the implementation of its policy framework for financial stability risks posed by non-bank financial entities other than money market funds (i.e., shadow banks"); and on July 20, the Fed finalized its capital surcharge rule for the eight US global systemically important banks (G-SIBs).

Who Will Enforce the Volcker Rule, and How?

Thursday, July 23, 2015

On July 21, 2015, following a long five-year proposal and comment period, the collection of restrictions imposed by Section 619 of the Dodd-Frank Act and the regulations thereunder (commonly referred to as the “Volcker Rule”) finally went into effect.  The aim of the rule is to stop US banks and their global affiliates from engaging in unecessarily risky speculation and head off myriad conflicts of interest arising from proprietary trading and from investment relationships with hedge funds and private equity funds. While this may sound simple enough, even after the lengthy consideration of the rule, it is almost entirely unclear how the Volcker Rule will be enforced and by whom. Adding to the uncertaintly, because the final text of the Volcker Rule leaves so many interpretive questions remaining, it is almost impossible for banks to know if they are completely in compliance with the rule.

 

European Banking Authority's Semi-Annual Report On Risks In The European Banking Sector

Tuesday, July 21, 2015

On July 3, 2015, the European Banking Authority (EBA) published its seventh semi-annual report assessing the risks and vulnerabilities in the European banking sector. The July report summarizes the primary developments and trends that have affected the EU banking sector since mid-2014 until June 12, 2015 as well as the EBA's view of the key micro-prudential risks in the near future. Because it is based on 2014 data, the report does not attempt to address the situation currently occurring with Greece. The EBA has supplemented the report, however, with an addendum based on the most recent supervisory data. Aside from more recent concerns about the effect of the situation in Greece on the greater EU financial system, the EBA highlights a number of other sensitive areas of concern.

Reform Skeptic Rep. Hensarling to Hold Hearings on Dodd-Frank and the Power of the Fed

Sunday, July 12, 2015

Long time financial reform skeptic and Dodd-Frank foe Jeb Hensarling (R-TX), chair of the  Financial Services Committee, will hold hearings on what he believes to be the Federal Reserve’s lack of transparency and accountability.  On Tuesday, July 14, 2015 at 10:00am EDT, the Oversight and Investigations Subcommittee will examine the Federal Reserve’s growing power since the passage of the Dodd-Frank Act as well as its lack of operational transparency and the absence of accountability to Congress.   

Progress Report from the New York Fed's Tri-Party Repo Task Force

Saturday, June 27, 2015

The Federal Reserve Bank of New York’s Tri-Party Repo Infrastructure Reform Task Force issued a progress report on June 24, 2015. The report touts some impressive progress since the task force’s last update in 2014, including the implementation of the task force’s new settlement regime by the major tri-party clearing player, Bank of New York Mellon.  “…Earlier this spring, Bank of New York Mellon completed the final piece of its new settlement process for triparty repo, achieving a number of reform goals and serving to bring all triparty repo trades into alignment with the roadmap originally laid out by the Industry Task Force back in 2012. As a result, the share of triparty repo volume that is financed with intraday credit from a clearing bank has dropped markedly, from 100 percent as recently as 2012, to a level averaging 3 to 5 percent today (as compared with the Task Force’s original target of no more than 10 percent). Clearing ...
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