some questions about self-regulation and compliance May 26, 2011
Posted by Bradley in : financial regulation, Uncategorized , add a commentWhy, on recent flights between Miami and Newark, was it necessary for the pilot to threaten passengers that the flight would not be able to land or take off if they did not comply with instructions to turn off electronic devices (I know there’s controversy about whether this requirement is necessary but it is a requirement and non-compliance imposes costs on the passengers who do comply)?
Why is the SEC backdating documents (OIG Report stating the SEC’s Office of Administrative Services backdated a justification an approval of the SEC’s lease of premises)?
Is there a connection between citizens’ carelessness about paying attention to the rules and a regulatory agency’s carelessness about compliance with formalities? I suspect so.
poetry in a crisis March 31, 2011
Posted by Bradley in : financial regulation , 1 comment so farThere;’s something very poetic (but tragically so) in the Irish Finance Minister’s statement on banking:
Tuesday, 30th September, 2008 will go down in history as the blackest day in Ireland since the Civil War broke out.
The 30th September 2008 was the day on which the then Government extended the infamous guarantee to the Irish banks and decided that Anglo Irish Bank should be supported and maintained.
It quickly became apparent that Anglo was insolvent in the absence of State support, that the other banks were illiquid and that the banking system was not fit for purpose.
The banks were too big for the economy. The JCB and the swinging crane had become the logos of the banks, and Irish bankers were as likely to be funding apartment blocks on the Black Sea or dabbling in property schemes in Singapore, as they were to be investing in the Irish economy.
We are now in the third year of the banking crisis. The previous Government failed to act. They ducked and dived and procrastinated as they lurched from one crisis to the next. They went through periods of denial and periods of self justification. They paved the road to disaster with good intentions.
They never fixed the broken banks however.
developments in clearing November 10, 2010
Posted by Bradley in : financial regulation , add a commentThe CPSS has published a report on Market structure developments in the clearing industry: implications for financial stability (which focuses on “traditional markets” and OTC derivatives markets). Meanwhile, Deutsche Bank critiques the CFTC’s proposals for Requirements for Derivatives Clearing Organizations, Designated Contract Markets, and Swap Execution Facilities Regarding the Mitigation of Conflicts of Interest.
recent developments in financial regulation October 27, 2010
Posted by Bradley in : financial regulation , add a commentLots of developments, including:
G-20 Ministers Agree ‘Historic’ Reforms in IMF Governance
The Financial Stability Board published a report on Implementing OTC Derivatives Market Reforms
The Joint Forum published a Report on Developments in Modelling Risk Aggregation
The Basel Committee published a report to the G20 on its response to the crisis
The SEC has proposed rules on shareholder approval of executive compensation and golden parachutes, investment managers’ reporting of proxy votes, swap trading and clearing, issuer review of assets backing ABS
Agreement on the alternative investment funds directive in the EU
The EU Commission published Communications on An EU Framework for Crisis Management in the Financial Sector and on Taxation of the Financial Sector and a Green Paper on Audit Policy: Lessons from the Crisis (and there’s the Final Report on Strengthening Economic Governance by a task force to the Council).
fsoc details October 8, 2010
Posted by Bradley in : financial regulation , add a commentThe FSOC‘s documents announced on October 1 were published in the Federal Register on October 6th, and comments are due November 5th. Both documents show a recognition of the international context of financial activity. For example, the ANPR on regulation of non-banks asks:
Since foreign nonbank companies can be designated, what role should international considerations play in designating companies? Are there unique considerations for foreign nonbank companies that should be taken into account?
And the Volcker Rule RFI asks:
How should the international context be considered when implementing the Volcker Rule? Are
there any factors or considerations that should be taken into account regarding the application of the Volcker Rule to banking entities or nonbank financial companies that operate outside the United States? What issues does implementation of the Volcker Rule present with respect to the following:(i) Domestic banking entities that have access to foreign exchanges, (ii) foreign affiliates of domestic banking entities, and (iii) foreign non-bank financial companies
financial stability oversight council October 1, 2010
Posted by Bradley in : financial regulation , add a commentAdopted a Transparency Policy, published a Roadmap, and announced an ANPR Regarding Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies and a Notice and Request for Information Regarding the Council’s “Volcker Rule†Study and Recommendations. These documents will not be available from the Council’s web pages until they are published in the Federal Register.
speculation: pro and con (again) September 24, 2010
Posted by Bradley in : financial regulation , add a commentThis week the UK’s Business Department announced a review of corporate governance and economic short-termism and the Independent Commission on Banking published an issues paper and call for evidence which identifies as one concern excessive risk-taking by banks:
This separation of the costs of risk and the benefits of reward produces inefficiencies through the distortion of resource allocation and risk management; it incentivises excessive risk-taking.
And Adair Turner gave a speech in which he reiterated his concern about whether financial practices were all socially useful and said:
underlying all of these problems, and far more fundamental, were prudential rules and an entire philosophy of market regulation – embraced by policy makers throughout the world – which failed to identify and adequately address the dangers of excessive leverage and maturity transformation, and which too confidently relied on supposedly efficient and rational markets always to produce good results.
Last week the EU Commission published its proposals on short-selling and CDS and noted that one of the reasons for short selling is speculation. The Commission doesn’t say this is bad, but does suggest that disorderly markets (which may be in part the result of speculative short selling) are a Bad Thing:
in extreme market conditions there is a risk that short selling can lead to an excessive downward spiral in prices leading to a disorderly market and possible systemic risks.
In contrast, the bottom line of the ISDA Research Note on speculation published this week is:
In theory, a market could exist in which intermediaries match hedgers, investors, and borrowers with each other. But such a market would be costly and inefficient without the liquidity and price discovery provided by speculators hoping to profit from their investments in information. As discussed above, the news borne by speculators, especially short sellers is not always welcome. But the alternative is a world in which markets would function in a slow and costly manner.
financial supervision architecture sounds so much more substantial than … September 22, 2010
Posted by Bradley in : financial regulation , comments closedA regime (too directive?), a scheme (too much like the frauds it might be designed to prevent)… But the building metaphors in financial regulation seem to hark back to the days when financial institutions constructed (and owned) big solid buildings to show how sound they were. I’m not sure the metaphors have so much power. Anyway, the European Parliament has approved the new financial supervision architecture for the EU.
new chairman of uk consumer financial education body – too trusting? September 21, 2010
Posted by Bradley in : financial regulation , comments closedYesterday the FSA announced that Gerard Lemos is to be the chairman of the Consumer Financial Education Body. He seems to be a big believer in trust:
In other ways perhaps trust has even grown. Trust is not a zero sum game. I encounter what I might call new horizontal social movements of trust everywhere: millions of people have joined local book clubs. They didn’t need encouragement from the government or business; there is a global movement of people who sing in choirs from Jesmond to Johannesburg. And in politics, which is supposedly the place where no one trusts anyone anymore, environmental issues have galvanised hundreds of millions of people, leaving international organisations far behind and struggling to catch up.
governmental securities law violations August 19, 2010
Posted by Bradley in : financial regulation , comments closedWhen I wrote about governmental manipulation of the financial markets, this wasn’t quite what I had in mind. New Jersey is the first state to be charged with violation of the federal securities laws by the SEC (New Jersey settled the case), although it isn’t the only jurisdiction to have been criticized about financial disclosures with respect to securities issuance recently (e.g. the Greek credit default swaps issue). And given that the SEC’s charges related to disclosure about the funding of pension plans, there may be more such cases to come.