Week InReview | FSOC's ongoing asset manager review. FSOC points to MREIT, nonbank, P2P lenders risk. SEC introduces new asset manager report rules. GSE overseer announces eligibility rules. Binge Reading Disorder.
Friday, May 22, 2015
Lew says FSOC's asset manager review is ongoing
Speaks at open session of FSOC meeting
(May 18) Treasury Secretary Jack Lew convened a meeting of the Financial Stability Oversight Council in executive and open sessions at the Treasury Department. He said FSOC's review of asset management firms is ongoing. Other points:
  • Cybersecurity in financial markets is a main focus of several government agencies
  • Regulators continue to monitor investor risk-taking amid period of low interest rates
  • Shelby legislation would roll back parts of Dodd-Frank and leave FSOC in "knots"
FSOC points to MREIT, nonbank, P2P lenders risk
Issues likely to get more regulatory interest
(May 20) The Financial Stability Oversight Council's 2015 Annual Report offers insight into where supervisors will focus in the coming year, and points to policy risk for mortgage REITs, nonbanks engaged in leveraged lending, peer-to-peer lenders, clearinghouses, and banks. The report 
  • Reiterates worry MREITs are so heavily reliant on short-term funding any disruptions could lead to fire sales
  • Flags risk crackdown on how banks underwrite leveraged loans could result in business shifting to nonbanks; may lead to poorly-underwritten leveraged loans that could go bad in downturn
  • Liquidity risk to P2P lenders, with product rapid growth
SEC introduces new asset manager report rules
Will gather more data on mutual funds, advisers
(May 20) The Securities and Exchange Commission proposed new rules that would require mutual funds and other asset managers to report much more detailed data about their holdings, e.g., their exposure to derivatives, repurchase agreements, and securities lending. The regulators' plan is one of a series of reforms announced late last year by SEC Chair Mary Jo White. The proposal comes as asset managers are facing scrutiny as part of a broader attempt to clamp down on potentially risky financial activities not fully addressed by Dodd-Frank.
GSE overseer announces eligibility rules
Capital standards set for nonbank servicers
(May 20) The FHFA, in a move meant to mitigate risk in the growing industry, announced new financial eligibility requirements for mortgage servicers. Nonbanks selling mortgages to Fannie or Freddie must meet new liquidity standards. Companies selling mortgages to Fannie or Freddie, or collecting payments on loans backed by the two U.S.-owned enterprises, must meet the new standards. Financial requirements become effective at the end of 2015. 
Binge Reading Disorder
Reads for the long weekend
  • 67 Short Pieces of Advice You Didn't Ask For (Raptitude)
  • The Priceless Art of Not Caring (Motley Fool)
  • The Ten Harsh Financial Commandments (Irrelevant Investor)
  • The Rise & Fall of Silk Road: How a 29-Year-Old Idealist Built a Global Drug Bazaar and Became a Murderous Kingpin (Wired Part 1 & Part 2)
  • The Agency That Barely Moves: The SEC is paralyzed by politics and poor leadership, staffers say (Bloomberg)
Transparency.
Inclusiveness.
Consensus.