• CFTC probing whether leveraged-loan risks are offset by derivative trades
    11 June 2019
    The US Commodity Futures Trading Commission is examining how much lending to heavily indebted companies is hedged by derivative transactions that might mitigate the loans' potential hazards in a downturn, Chairman J. Christopher Giancarlo said.

    “We’re using the data sets we have to understand how, when leveraged lenders lend, how do they offset that risk in the derivative market,” he said at a recent conference* in Washington. “How much of that is really at risk?”

    Two banking analysts expressed skepticism that leveraged-loan risks that have drawn concern from many regulators can be eliminated with instruments such as credit-default swaps or margin payments.

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  • CFTC's clearinghouse stress tests reportedly beset by persistent troubles
    10 June 2019
    The US Commodity Futures Trading Commission’s program of clearinghouse stress tests has shown little improvement since technical shortcomings, mismanagement “dysfunction” and public deception were flagged last year, an internal review has found.

    “Substantive changes have been slow to materialize,” the CFTC’s inspector general said in his semi-annual report to Congress. “We also remain concerned that market participants may be given a misleading impression about the substantive quality and independence of CFTC’s stress-testing reports and capabilities.”

    The inspectors said they were “disappointed” that mid-level CFTC officials found responsible for “mismanagement and dysfunction” last year remain part of the stress-testing program.

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  • Fed’s Dodd-Frank rollbacks have boosted competitiveness of smaller banks, senior official says
    07 June 2019
    The US Federal Reserve’s rollbacks of Dodd-Frank Act requirements for small and regional banks that don’t pose financial stability threats has opened up opportunities for them in the marketplace, Fed general counsel Mark Van Der Weide said.

    “I think one of the effects of the tailoring regime is to help the smaller firms, the medium-sized firms compete with larger firms,” he told an industry conference* this week. “I would hope as we tailor more and more of our regulatory framework, we’ll see more and more smaller and medium-sized firms able to not have the same sort of regulatory headwinds to competition.”

    The Fed under Chairman Jerome Powell has cast its plans for capital, stress-test, liquidity and leverage relief in terms of targeting financial-stability requirements at banks presenting the greatest risk.

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  • US Libor panel to decide on seeking legislative relief from certain contracts
    06 June 2019
    A US Federal Reserve-sponsored Libor panel hopes to decide in the next few months whether to seek legislative relief from some existing contract requirements that are impeding a shift from the benchmark, said Tom Wipf, head of the Alternative Reference Rates Committee.

    “There may be no solution for some of these products,” he said at a committee roundtable* this week. “We need to be sure that the legal arguments are fully considered before deciding whether to take any steps.”

    “The analysis is in its very early stages, and it is not yet ready for 'prime time,'” said Wipf, a Morgan Stanley vice chairman.

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  • Green-investment disclosures stall as investors seek better environmental data
    05 June 2019
    Listed companies are only disclosing limited amounts of data on how they are managing climate change, a report prepared for the Financial Stability Board has shown.

    The study adds to a lively debate about how to encourage companies to publish more, so investors can figure out a company’s exposure to rising temperatures or a greener economy.

    A global grouping of issuers and investors, chaired by former New York mayor Mike Bloomberg, has prepared a list of environmental topics companies should cover in their corporate reports, outlining not only emissions of greenhouse gases — but also their targets and strategy for bringing them down.

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