Week InReview:  September 12, 2014

IN THE INDUSTRY

Overseas Derivatives: (Sept. 12) The Treasury Department is monitoring Wall Street efforts to escape U.S. swap-trading restrictions for overseas derivatives, according to a department official. Treasury is watching steps banks have taken to remove parent-company guarantees from their overseas affiliates and whether those steps eliminate the U.S. banks' exposure, the official said yesterday. Banks have been changing operations to trade derivatives with other dealers in the $700 trillion global market in a way that avoids curbs imposed by the Dodd-Frank Act. Read more.

Swaps Clearinghouses: (Sept. 12, 2014) The European Union's top financial-services official said he's seeking a deal with U.S. regulators on rules for swaps clearinghouses before a Dec. 15 deadline for EU banks to face tougher capital rules. The European Commission is working "very intensely" with the U.S. Commodity Futures Trading Commission to find an agreement "in the coming weeks," Michel Barnier said. Read more.

Eurofi Financial Forum 2014: (Sept. 12) Regulators, policy makers and industry officials discussed bank crisis plans, Basel standards and the asset-backed debt market were the top regulatory topics at Milan Conference. Read more.

SEC's New Office: (Sept. 12, 2014) The SEC created a new office in the Division of Economic and Risk Analysis that will coordinate efforts to help assess risk and will support ongoing work related to the Financial Stability Oversight Council (FSOC). The division will also seek a new assistant director to head the Office of Risk Assessment. Read more.

Liquidity Rule Race: (Sept. 11) Banks are falling short by $456 billion in their race to meet global rules that force them to hold easy-to-sell assets to survive a credit squeeze. The liquidity coverage ratio, set by the Basel Committee on Banking Supervision, enters fully into force in 2019. Read more.

Global Oversight:  (Sept. 10) Over-the-Counter Derivatives Regulators Group (ODRG), an international group of market overseers, releases a report updating G20 on progress in resolving OTC derivatives cross-border implementation issues. Read more.

(Sept. 9) IOSCO says progress is being made in applying commodity derivative rules. "Consistent with the 2012 review of implementation of the IOSCO's principles for commodity derivatives markets, the majority of respondents to IOSCO's 2014 update were broadly compliant with the principles," IOSCO said on their website. Read more.

SIFI Surcharge: (Sept. 9) The biggest U.S. banks must decide whether to voluntarily reduce their size and complexity or face capital charges that are some of the toughest in the world, the Fed's top financial-regulation official said at a Senate hearing. Read more.

Group of 20: (Sept. 5) The U.S. and the EU have "fundamental divergences" on regulatory matters such as banker bonuses and how to handle cross-border bank failures, according to a European Commission document prepared as the two sides stake out positions for this year's Group of 20 summit. Read more.

Uncleared Swaps: (Sept. 5) Several trade associations on Aug. 29 asked that sponsors of registered investment companies and private investment funds be allowed to net uncleared swaps in certain situations. Read more.

Liquidity & Munis: (Sept. 3) Final rule approved by the Fed, the FDIC, and the OCC creating a standardized minimum liquidity requirement for large and internationally active banks precludes municipal bonds from approved list of high liquidity assets banks must hold. Read more.

ON THE HILL

Inversions:  (Sept. 11) House Ways and Means Committee Chair Dave Camp (R-MI) said, at a Business Roundtable event, that the Republican goal is to "get as much permanent as we can" in terms of tax extenders and that details still need to be negotiated. Camp is retiring at the end of the current term. Read more.

(Sept. 10) Congressional Republicans appear sour on a bill that seeks to curb corporate inversions, released by Senators Charles E. Schumer and Richard J. Durbin, as the likelihood for a legislative deal in September dimmed further. Read more.

Resolution of Financial Institutions: (Sept. 10) The House Judiciary Committee by voice vote approved a bipartisan bill that would add a new subchapter V to Chapter 11 of the Bankruptcy Code in order to facilitate the resolution of financial institutions, though some lawmakers express concern over the bill's "strict deadlines." Read more.

Dodd-Frank:  (Sept. 9) As SEC Chair Mary Jo White prepared to testify before the Senate Banking Committee on Tuesday, the agency released her written testimony that outlined its overall rulemaking progress under the Dodd-Frank Act. The statement said that rulemakings under eight provisions of Dodd-Frank have yet to be proposed, including on stress tests, pay versus performance disclosures and short-sale reforms. Read more.

AT THE AGENCIES

Comings & Goings:  (Sept. 10) In several CFTC advisory committee appointments, CFTC Chair Timothy Massad will lead the agency's Agricultural Advisory Committee.Commissioner J. Christopher Giancarlo will lead the Energy and Environmental Markets Advisory Committee, and Commissioner Sharon Bowen will head the Market Risk Advisory Committee. Massad, Bowen and Giancarlo joined the commission in June 2014.Commissioner Mark Wetjen will continue to sponsor the Global Markets Advisory Committee. Meanwhile, sponsorship of the Technology Advisory Committee will be shared by commissioners on a rotating basis, with Wetjen being the first. Read more.

(Sept. 10) The MSRB hired trader John Bagley to become its chief market structure officer of the self-regulatory organization. Read more.

(Sept. 8) The SEC has named Victor Valdez as the Enforcement Division's chief operating officer and managing executive. Read more. (Sept. 5) The SEC has appointed a new head for its Office of the Secretary and its first-ever ombudsman. Read more.

Swaps: (Sept. 8) The SEC proposed a rule that would exempt certain communications involving security-based swaps from 1933 Securities Act registration requirements. Rule 135d, proposed Sept. 8, would apply to the publication or distribution of price quotes for security-based swaps and any guarantees of such swaps that may be purchased only by eligible contract participants, the SEC said in its proposing release. Read more.

CPO Reporting Relief: (Sept. 9) The term "commodity pool" does not include any entity formed by affiliated life insurance companies that invests directly or indirectly in commodity interests, CFTC said. As such, according to an interpretive letter posted to the CFTC's web site Sept. 9, the life insurance companies that formed the entity would not have to register as commodity pool operators. Read more.

Fannie/Freddie: (Sept. 4) CFTC staff won't recommend enforcement actions against Fannie & Freddie if the GSEs don't register as commodity pool operators in connection with strategies they use to shift mortgage risk. Read more.

Fed Rulemaking: (Comments due: Oct. 27, 2014)  Proposal to repeal Regulation AA under Dodd-Frank, which repeated the Fed's authority to write rules to address unfair or deceptive acts. Read more.

SEC Rulemaking: (Comments due: Nov. 10, 2014)  Treatment of certain communications involving security-based swaps that may be purchased only by eligible contract participants. Read more.

This is not an all-inclusive list of congressional, agency and market participant actions related to these issues. It is a snap-shot of what we believe is of most interest to institutional investors. Some links are to subscriber-only sites.

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