47 posts categorized "EMEA Centre for Regulatory Strategy"
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.”
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.
The Single Supervisory Mechanism (SSM) formally opens for business today. For months, supervisors and banks have been preparing for the transfer of supervisory responsibilities to the European Central Bank (ECB). Yet the 4 November milestone is just the start of a much longer, possibly testing journey for all involved.
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).
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.
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.
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.
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.
Individual Accountability in UK Banking | Details of Senior Management and Certification Regimes Emerge
The PRA and FCA have published a major consultation paper on the overhaul of the Approved Persons Regime (APR) for banks, building societies, credit unions, and PRA-designated investment firms in the UK. The new framework will make senior individuals more explicitly accountable for specific issues through ‘statements of responsibility’, and a wider range of staff will be subject to a regime of certification and codes of conduct.
On 7 July, the European Banking Authority (EBA) began a consultation on guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP) as provided for in the Capital Requirements Directive (CRD IV).
This is the most comprehensive document on how EU banking supervisors should assess risk issued to date - it extends the focus of the SREP from capital risk and adequacy to a much more comprehensive assessment of a bank’s business and risk profile. To put this in context the Guidelines are almost 5 times longer than those previously issued at an EU level. By providing a risk-by-risk approach, the Guidelines are intended to drive significant convergence in micro-prudential supervision across the EU. They should form the basis for SREP under the Eurozone’s Single Supervisory Mechanism (SSM), thus providing one of the first tangible insights into the practical application of supervision under the SSM.