A “watershed” moment for financial regulation, and “the next phase of reform”

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What Mark Carney has termed a “watershed” moment in post-crisis financial regulation passed this weekend with the G20 Leaders’ Summit in Brisbane. In a fairly short Communique, G20 political leaders declared: “We have delivered key aspects of the core commitments we made in response to the financial crisis. […] The task now is to finalise remaining elements of our policy framework and fully implement agreed financial regulatory reforms.”

Posted on 18/11/2014 | 0 Comments

International regulators confirm bail-in-able debt requirement – ‘TLAC’


Ahead of this weekend’s G20 Leader’s Summit in Brisbane, the Financial Stability Board (FSB) has published its proposals to require global systemically important banks (G-SIBs) to hold a minimum amount of capital plus bail-in-able debt, known as ‘TLAC’. While this is by no means the end of the journey to eliminate ‘too big to fail’, these proposals represent the last major outstanding piece of post-crisis prudential policy for banks. A quantitative impact study (QIS) will be run in 2015, before finalisation of the proposals. This process will not be a formality – there are questions of substance left to address.

Posted on 11/11/2014 | 0 Comments

UK leverage ratio requirement: a cornucopia of capital complexity?


The Bank of England Financial Policy Committee’s (FPC) recently published review on the role of the leverage ratio in the UK proposes moving ahead of international standards to introduce new requirements for the biggest UK banks and building societies from next year. It recommends those banks eventually meet a ‘static’ requirement of up to around 4% on an ongoing basis (comprising a minimum of 3% and a supplementary buffer capturing systemic risk). There would also be a time-varying component that varies with the credit cycle and could add around 90 basis points more for some banks at the top of the cycle (on the FPC’s current assumptions).

Posted on 4/11/2014 | 0 Comments

Driving change in FICC markets


On 27 October the Fair and Effective Markets Review (FEMR) published a consultation document outlining high-level policy proposals aimed at reinforcing confidence in the fairness and effectiveness of the Fixed Income, Currency and Commodities (FICC) markets, including associated derivatives and benchmarks.

Posted on 31/10/2014 | 0 Comments

Reconsider the principles for Sound Management of Operational Risk


Banks have invested heavily in their Operational Risk capability in recent years with many continuing to do so. The papers released at the start of the month by the Basel Committee on Banking Supervision (BCBS) indicate that the job is not yet done for such enhancement programmes and these latest proposals are likely to prompt organisations to reconsider the nature of their operational risk framework as well as their approach for operational risk regulatory capital calculation and the associated business case.

Posted on 31/10/2014 | 0 Comments

Results of the ECB’s Comprehensive Assessment

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On Sunday the much-anticipated announcement from the European Central Bank (ECB) on the result of its Comprehensive Assessment was released. The exercise, which was an in depth review of the quality of the largest European banks' assets that included a review of asset quality and a stress test, has occupied the attention of banks over the past several months. Its completion is a significant milestone and a watershed moment for the Single Supervisory Mechanism (SSM), which formally opens for business on 4 November.

Posted on 28/10/2014 | 0 Comments

Key changes for deposit takers in the Single Customer View journey


The PRA's recent release of Depositor Protection Consultation Paper CP20/14 (CP) sets out proposed changes to the PRA’s rules and is designed to promote consumer confidence and financial stability by improving the speed of compensation payouts in the event of a failure. In this article we provide banks and building societies, regardless of size, with a summary of the key changes being proposed in relation to the next stage of the Single Customer View (SCV) journey.

Posted on 8/10/2014 | 0 Comments

PRA puts ring-fencing in industry's court


The Prudential Regulation Authority's (PRA’s) first consultation paper on UK bank ring-fencing puts the ball back in industry’s court, holding back from extensive prescription in favour of an approach which gives banks some leeway to tailor solutions to their business models. In most areas there will not be a ‘one size fits all’ approach, and the onus will be on individual banks to demonstrate how their plans comply with legislation and the PRA’s objectives.

Posted on 7/10/2014 | 0 Comments

Resolvability: breaking down the barriers

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The EU’s bank Recovery and Resolution Directive (BRRD) gives EU resolution authorities wide-ranging and potentially very invasive powers to mandate changes to banks’ legal, operational and financial structures in order to improve resolvability, powers which allow resolution authorities a significant amount of discretion. In the wake of the recent announcements from the US FDIC and Federal Reserve, in which they expressed their dissatisfaction with the current state of large banks’ resolution planning in the US, it would also appear that the resolvability hurdle may be higher than previously anticipated. Ensuring that banks are resolvable has been high on the policy agenda for several years, but the practical work needed to achieve this looks set to move forward in earnest over the next year.

Posted on 8/09/2014 | 0 Comments