• CFTC's Quintenz voices concern about EU benchmarks regulation plan
    13 July 2018
    An EU proposal to give benchmarks oversight to a European watchdog could conflict with US standards, creating a second point of trans-Atlantic friction between commodity authorities, a US derivatives regulator said.

    Brian Quintenz, a Republican member of the US Commodity Futures Trading Commission, said an EU proposal last fall to change its new financial benchmarks rules could cause US firms to be subject to conflicting requirements.

    “These amendments could result in yet another example of extraterritorial overreach by EU authorities,” he said Thursday at a CFTC committee meeting on the London Interbank Offered Rate. “I hope that US regulators and their counterparts can coordinate on this issue.”

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  • UK, US regulators goad financial sector to speed preparations for Libor's demise
    12 July 2018
    UK, US and global authorities prodded market participants to accelerate plans to substitute nascent interest-rate benchmarks for scandal-plagued Libor in their contracts by 2021.

    “The pace of that transition is not yet fast enough,” Andrew Bailey, head of the UK Financial Conduct Authority, said Thursday. “There is much further to go.” As part of this coordinated effort, the International Swaps and Derivatives Association sought industry input Thursday on ways to use the fledgling benchmarks in derivative contracts in anticipation of Libor discontinuation (see here). Bailey, the global Financial Stability Board and Christopher Giancarlo, head of the US Commodity Futures Trading Commission, agreed that Libor would disappear in many markets.

    “The discontinuation of Libor is not a possibility,” Giancarlo said at a CFTC advisory panel meeting. “It is a certainty. We must anticipate it, we must accommodate it, and we must adapt to it.”

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  • Fed's eased TLAC proposal doesn't go far enough, overseas banks say
    11 July 2018
    Foreign banks in the US urged the Federal Reserve to consider relaxing debt capital requirements beyond the lower levels in its pending plan to better align American and global standards.

    The Fed also should allow time for this broader review by extending the January 2019 implementation date for these total loss-absorbing capital (TLAC) rules for global systemically important banks, the Institute of International Bankers said.

    “An additional downward adjustment to the TLAC requirements applicable to US GSIBs would better align these requirements with international standards,” the group’s recent letter said.

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  • Fed asks banks to suggest ways to include new accounting rule into stress tests
    10 July 2018
    The US Federal Reserve has asked industry to propose ways to incorporate a major new accounting standard into stress tests to avoid inflating capital losses in the annual exercises, according to an industry document.

    A Fed advisory panel, whose members include Bank of America Chief Executive Brian Moynihan and Citigroup Chief Executive Michael Corbat, has expressed concern about the upcoming impact of the credit-loss standard adopted in the wake of the financial crisis.

    The accounting rule “could amplify losses and, in all likelihood, bring losses forward” on stress tests, panel members said in a document posted after a recent meeting with the Fed.

    The executives asked that stress tests be adjusted to include the new standard “in a manner that promotes transparency and comparability, represents firm-specific credit risk, and is consistent with how the allowance would work in an actual stressed environment.”

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  • Stress tests should cover risks from low interest rates, possible rate surges, global authority says
    09 July 2018
    National regulators should adapt stress tests for banks, insurers and pension funds to cover financial stability risks posed by prolonged low interest rates and the possibility of sudden “snapback” rate increases, a global authority said.

    The historically low rates during the decade since the Great Recession present profitability challenges for some banks, and even greater risks for insurers and private pension funds, that could reverberate throughout the economy, a Bank for International Settlements panel's report said.

    The working group, headed by a European Central Bank official and a US Federal Reserve official, said that it “supports enhanced monitoring of financial institutions’ exposure to low-for-long and snapback risks, especially through stress tests that can capture both gradual buildups and sudden reversals.”

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