In this week’s newsletter, we provide a snapshot of the principal US, European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructure providers, asset managers and corporates.
Bank Prudential Regulation & Regulatory Capital
European Commission Issues Call for Advice on Net Stable Funding Requirements and Leverage Ratio
On August 19, 2015, the European Banking Authority issued a press release stating that it will conduct an analysis on the Net Stable Funding Requirements and Leverage Ratio under the Capital Requirements Regulation. This analysis is further to a recent call for advice issued by the European Commission to the EBA, seeking the EBA's guidance so that it can prepare legislative proposals, if necessary, on technical issues that are not explicitly mentioned in the CRR. The Commission is seeking the EBA's analysis on whether it is adequate to establish different NSFR and LR requirements for different types of institutions. This analysis would consider whether different firms could have, depending on their risk profile, size and business model: (i) different NSFR calibrations; (ii) simplified NSFR and LR requirements; or (iii) exemptions from the NSFR and LR requirements. The Commission also seeks analysis on other issues including: (i) the costs and benefits of excluding certain types of firms from the NSFR and LR requirements; (ii) the effects of the NSFR requirements on bank lending in the EU; and (iii) the impact of the NSFR on clearing, settlement and custody activities, on underwriting and market making, on business models and financing structures of institutions as well as on its interaction with risk-based capital requirements. The EBA must submit the reports on the NSFR and LR to the Commission by December 31, 2015 and October 31, 2016 respectively, although it plans to submit the LR report by July 2016.
The EBA's press release and the Commission's call for advice are available at: http://www.eba.europa.eu/-/eba-to-conduct-further-analysis-on-net-stable-funding-requirements-and-leverage-ratio; and http://www.eba.europa.eu/documents/10180/1162591/Call+for+advice.pdf.
Derivatives
US Commodity Futures Trading Commission Proposes Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps
On August 19, 2015, the US Commodity Futures Trading Commission proposed amendments to existing regulations in order to provide further clarity to swap counterparties and registered entities concerning their reporting obligations for cleared swap transactions. In addition, the proposed amendments are intended to improve the efficiency of data collection and maintenance associated with the reporting of the swaps involved in a cleared swap transaction.
Among other things, the proposed rules are intended to provide clarity as to which counterparty to a swap is responsible for reporting creation and continuation data for certain swap transactions, including clarification as to whose obligation it is to report the extinguishment of a swap upon its acceptance by a derivatives clearing organization for clearing. The CFTC believes the proposed rules will reduce the probability of double-counting notional exposures and improve the capability to trace the history of a cleared swap transaction from execution between the original counterparties to clearing.
The proposed rule would modify Part 45 of the CFTC's regulations, which the CFTC adopted on December 20, 2011. The comment period ends 60 days after the publication in the Federal Register.
The press release is available at: http://www.cftc.gov/PressRoom/PressReleases/pr7215-15.
The draft proposed rule is available at: http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/federalregister081915.pdf.
The factsheet is available at: http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/clearedswap_factsheet081915.pdf.
Original swap reporting final rule (December 2011): http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2011-33199a.pdf.
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