• 20 August 2019
    Banks under the next European Commission could face a new bankruptcy framework, more than 100 billion euros ($110 billion) in extra capital requirements, a rejig of securitization rules, new EU powers to cap risky mortgages, and more intense competition for customer loyalty.

    On paper, the main banking priority of incoming commission president Ursula von der Leyen is business as usual, finishing the work of her predecessor to finalize a common EU deposit protection fund. In reality, that job will largely be for the EU’s member states, who have been stuck in talks on the issue for many years with little sign of movement. That impasse seems unlikely to be resolved any time soon.

    Perhaps more significantly, Von der Leyen says she also wants a “robust” framework to wind up failing banks, in the political guidelines she published on July 16.

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  • 16 August 2019
    The rise of digital finance and the need to invest to respond to climate change are likely to be the major, cross-sectoral themes of the next European Commission, whose top officials are due to take office in November.

    Freed from the need to firefight a crisis, financial regulators may seek to latch on to wider political trends; and it already seems clear what they will be.

    One is the need to limit, or at least adapt to, global warming, where finance must play its part: the commission reckons 180 billion euros ($202 billion) a year will be needed to cut the bloc’s dependence on fossil fuels. Another is the rise of information and communications technology, which is bringing its mix of disruptive threats and opportunities to banking, insurance and investment.

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  • 16 August 2019
    An influential industry group plans to urge jurisdictions to use similar schedules to carry out international guidance on uncleared swaps margin.

    The International Swaps and Derivatives Association praised the one-year extension granted last month by global authorities for initial margin requirements to go into effect for smaller market participants.

    "One [ISDA] priority is to encourage national regulators to adopt the BCBS/IOSCO revised implementation schedule consistently across jurisdictions," ISDA Chief Executive Scott O’Malia said yesterday.

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  • 15 August 2019
    A US Commodity Futures Trading Commission proposal should allow for broader input from industry in its process for ending US customer access to a particular foreign futures and options market, industry players said.

    The CFTC has proposed clarifying how it can terminate relief that permits US clients to buy derivatives overseas. The commission might act in response to a foreign regulator’s change in policy on customer funds, for example.

    Under the proposal, only the overseas authority or self-regulatory organization that filed the original relief petition would be given an opportunity to respond to CFTC plans — not dealers and US customers.

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  • 14 August 2019
    Mutual funds that invest in less-liquid securities such as small-cap equities and high-yield corporate bonds undergo further liquidity declines following negative economic and market news, a US Federal Reserve study found.

    “The effect is more pronounced during stress periods, suggesting that a deterioration in the funds’ liquidity could amplify vulnerabilities in situations of already weak macroeconomic conditions,” the recent study said.

    The 27-page report added: “If investors perceive that the liquidity of the fund they are invested in is at risk, they might run on the fund, in a process similar to a bank run”.

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