In this 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
US Office of Financial Policy and Research Renamed
On May 11, 2016 the US Board of Governors of the Federal Reserve System announced that the Office of Financial Policy and Research has been renamed as the Division of Financial Stability and designated as a division of the Federal Reserve. Federal Reserve economist Nellie Liang, who was appointed to establish the office in November 2010, will stay on as director. The Division of Financial Stability is responsible for the Federal Reserve's work on financial stability, including coordinating its interagency and international work, and its role as a member of the Financial Stability Oversight Council and the Financial Stability Board. According to the press release, the change reflects the growth in responsibilities and staffing of the Division.
The press release is available at: http://www.federalreserve.gov/newsevents/press/other/20160511a.htm.
US Office of the Comptroller of the Currency Releases Mid-Cycle Status Report
On May 11, 2016, the US Office of the Comptroller of the Currency released a mid-cycle status report on key actions that it has taken to date pursuant to its Committee on Bank Supervision's annual operating plan for the fiscal year that commenced on October 1, 2015. The plan sets forth the agency's broad supervision priorities and objectives and is used to develop individual bank supervisory strategies and make related resource allocation decisions. Key actions completed in the first half of fiscal year 2016 include issuing various supervisory communications, including 557 reports of examination, conducting workshops, issuing guidance and reports surveying best practices and ongoing outreach meetings and presentations to industry members. The OCC's supervisory priorities for the duration of the 2016 fiscal year include compliance, operational resiliency, credit risk management, stress testing, strategic planning and execution, corporate governance and interest rate risk.
The OCC's mid-cycle status report is available at: http://www.occ.gov/news-issuances/news-releases/2016/nr-occ-2016-54a.pdf.
US Federal Reserve Bank of New York Executive Vice President Discusses Importance of Liquidity Regulations
On May 4, 2016, Executive Vice President of the US Federal Reserve Bank of New York Simon Potter discussed steps the US Board of Governors of the Federal Reserve System has taken to improve the US monetary policy framework following the financial crisis in line with its principles of returning to normalization. He discussed the importance of creating a framework that can provide liquidity for monetary policy implementation and transmission. However, Potter noted that there are important tradeoffs to consider, in that financial market participants may anticipate that central banks, like the Federal Reserve, will make liquidity abundant during times of stress and manage their own liquidity conservatively. He suggested that the Basel III liquidity regulations, namely the liquidity coverage ratio which the US has adopted and the net stable funding ratio which the Federal Reserve has recently proposed, help to mitigate the risk that banks would rely too much on the central bank for liquidity. Potter also noted the importance of the US monetary policy framework being transparent in order to enable market participants to make better-informed decisions. Specifically, drawing parallels to the financial crisis, he observed that a central bank can help foster the contribution of liquidity to the financial system by market participants by committing itself to maintain liquidity.
Potter's speech is available at: https://www.newyorkfed.org/newsevents/speeches/2016/pot160504
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