Senate Banking Committee overwhelmingly approved the nomination of Jerome Powell as Fed Chairman by a vote of 22-1, with only Sen. Elizabeth Warren in opposition. The nomination now goes to the full Senate.

The Federal Reserve Bank of Richmond named Thomas Barkin as its President and Chief Executive Officer. Mr. Barkin’s appointment will take effect on January 1, 2018. Mr. Barkin was appointed by the eligible directors of the Richmond Fed, and approved by the Federal Reserve Board. Mr. Barkin had previously served as a member of the board of directors for the Federal Reserve Bank of Atlanta from 2009 to 2014.

View the Federal Reserve Bank of New York  press release regarding the appointment.

The Federal Reserve Board issued a notice of proposed rulemaking regarding amendments to Regulation A. The proposed amendments would revise the provisions with regard to the establishment of the primary credit rate at the discount window in a financial emergency. Under the proposal, the primary credit rate in a financial emergency will be the target federal funds rate, or, the top of the target range, if the Federal Open Market Committee has established a target range for the federal funds rate. The Federal Reserve Board also proposes to delete provisions that relate to the use of credit ratings for collateral for extensions of credit under the Term Asset-Backed Securities Loan Facility to reflect the expiration of this program. Comments on the proposal are due on January 8.

View notice of proposed rulemaking.

The UK Competition & Markets Authority has launched a consultation on its proposed focus areas for 2018/2019. The consultation paper sets out the CMA's draft plans and priorities and a number of key commitments and initiatives across the areas of: markets and mergers, CMA development and resources, enforcement and preparing for the UK's exit from the EU. The CMA proposes, among other things, to deal with a higher volume of enforcement cases, advance consumer protection, support business compliance, consider specific markets or practices, enhance its processes around assessing mergers, improve the effects of remedies by conducting evaluations of previous projects, enhance its operational effectiveness by establishing a new digital team and to continue its preparation for Brexit. The CMA has secured additional funding for the 2017/2018 financial year to enable it to prepare for the anticipated increase in cases that will fall within the CMA's remit post-Brexit. The CMA notes that the additional £2.8 million funding per year from 2018/19, allocated in the Autumn budget, will enable it to initiate more enforcement cases against companies allegedly acting unfairly.

The consultation closes on January 14, 2018. The CMA intends to publish its final Annual Plan in March 2018.

View the consultation paper.

The US Board of Governors of the Federal Reserve System announced that it voted to maintain the countercyclical capital buffer at its current level of 0%. In coming to this decision, the Federal Reserve Board consulted with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, and followed the framework established in the Federal Reserve Board’s corresponding policy statement.  The countercyclical capital buffer is a tool that can increase financial system resiliency by providing financial institutions with a means to absorb higher losses in times of declining or fluctuating credit conditions.

View press release discussing the Federal Reserve Board’s determination.

Following its 2015 Call for Evidence on the EU regulatory framework for financial services, the Commission has issued a report on progress on the targeted follow-up measures to the Call for Evidence, which was set out in a November 2016 Communication. Alongside the progress report, the European Commission has launched a consultation on supervisory reporting requirements. Some of the respondents to the Call for Evidence had highlighted overlaps and inconsistencies between reporting requirements in certain pieces of financial legislation, a reportedly excessive number of requirements, as well as, at times, insufficient clarity as to what needs to be reported and an insufficient use of international standards. Other respondents also highlighted the costs (including IT costs) of implementing reporting requirements and a number of respondents had mentioned that many EU Member States gold-plate the requirements.

The consultation seeks feedback in a number of areas, with the aim of gaining evidence on the cost of compliance with existing EU level supervisory reporting requirements, as well as on the consistency, coherence, effectiveness, efficiency, and added value of those requirements. The feedback from the consultation will provide important guidance to the Commission when preparing, if considered appropriate, a formal Commission proposal.

Comments on the consultation are invited by February 28, 2018.

View the Consultation Paper.

View Progress Report on the Call for Evidence.

View the November 2016 Communication.

View Press Release.

Vice Chairman for Supervision of the US Federal Reserve Board Randal Quarles provided remarks at the 2017 Financial Stability and Fintech Conference regarding innovation in the payments system. Vice Chairman Quarles noted that technological innovation has greatly changed our day-to-day lives, including in the financial services industry, but cautioned that utility and innovation need to be weighed against the potential ramifications that innovation has on the safety and soundness of the financial system. He noted that this tension is not intrinsically negative, but that care should be taken to maintain stability and safety. Vice Chairman Quarles provided commentary on digital currencies, stating that it may be important to separate underlying technology, such as distributed ledger technology, from the overall concept of digital currency itself. He expressed concerns regarding the wide-spread use of digital currency in its current form, and further cautioned that central-bank-issued digital currency may not be a viable alternative, noting that the latter would require extensive review and consultation about legal and risk issues.  However, he noted that research into digital currency issues, including for use as a settlement asset for wholesale payment systems should continue. In closing, Vice Chairman Quarles noted that prudent innovation may be the best course of action to balance the need for innovation with the need for stability.

View transcript of Vice Chairman Quarles’s remarks.

The Payment Systems and Services and Electronic Money (Miscellaneous Amendments) Regulations 2017 have been published and will enter into force in part on December 22, 2017 and in part on January 13, 2018.

Read more.

The Financial Stability Board has launched a consultation on proposed guidance on two aspects of recovery and resolution of global systemically important banks. The first consultation proposes guidance on the principles of bail-in execution, and the second on the funding strategy elements of an implementable resolution plan. Both of these proposals relate to the implementation of the FSB's Key Attributes of Effective Resolution Regimes for Financial Institutions, published in 2011.

The first consultation on bail-in execution proposes a set of principles to assist resolution authorities developing bail-in resolution strategies and making resolution plans for G-SIBs operational. The FSB's Key Attributes provide for the bail-in powers that resolution authorities should have to carry out bail-in within a resolution and the Total Loss-absorbing Capacity standard sets the minimum requirements for the instruments and liabilities that should be available for bail-in. The FSB is proposing the new guidance because these omit operational aspects of executing bail-in and they consider that guidance is needed to address the challenges that have emerged in operationalizing bail-in.

Read more. 

The Trump Administration announced that Marvin Goodfriend has been nominated as a Member of the Board of Governors of the Federal Reserve System. Dr. Goodfriend is nominated to fill the vacancy from the resignation of Sarah Bloom Raskin, and if confirmed, Dr. Goodfriend would serve a 14 year term.

View the White House press release regarding Dr. Goodfriend’s nomination.

The OCC published a final rule requiring all covered qualified financial contracts of covered banks to contain a contractual stay-and-transfer provision. This provision is similar to the stay-and-transfer provision that is statutorily required under Title II of the Dodd-Frank Act and the Federal Deposit Insurance Act. The OCC final rule also limits the exercise of default rights in the event of the insolvency of a covered bank’s affiliate. In connection with these provisions, the final rule makes conforming changes to the OCC’s capital adequacy standards and liquidity risk measurement standards. The Federal Register notice notes that the final rule is substantively identical to the provision adopted by the Federal Reserve Board and by the FDIC. The OCC final rule will take effect January 1, 2018.

View the final rule.

The Banking Act 2009 (Service Providers to Payment Systems) Order 2017 has been published and will enter into force in part on November 30, 2017 and in part on January 13, 2018.

Read more.

The European Commission has published a proposed Regulation to formalize the decision to move the European Banking Authority from London to Paris as a result of the decision by the UK to leave the EU. The proposed Regulation will apply from the date on which the European Union Treaties cease to apply to the UK or from March 30, 2019, whichever is earlier. The proposed Regulation only confirms the move and does not address any of the operational aspects.

Feedback on the proposed Regulation is possible until January 29, 2018. 

View the proposed Regulation.

The Financial Conduct Authority has published a Statement of Objections issued to four asset management firms under the Competition Act 1998. Using its competition enforcement powers for the first time, the FCA alleges that Artemis Investment Management LLP, Hargreave Hale Ltd, Newton Investment Management Limited and River & Mercantile Asset Management LLP shared information by exchanging information concerning the price they intended to pay in relation to initial public offerings and a placing, shortly before the prices were set. The FCA's provisional view is that they have infringed competition law. The firms have the opportunity to respond to the allegations. Individuals that could materially assist in the FCA's assessment of the case may request a non-confidential version of the statement of objections from FCA by no later than January 12, 2018.

View the FCA's Statement of Objections.

The US Department of Labor issued a notice extending the transition period for the Best Interest Contract exemption, and other exemptions, from the prohibited transaction provisions of the Fiduciary Rule for an additional 18 months, from January 1, 2018 to July 1, 2019, in order to give the Department additional time to review the public comments received on the exemptions and to consider the impact of the exemptions on the market. In the interim, financial institutions and advisers subject to the Fiduciary Rule must continue to follow the Impartial Conduct Standards set forth in the BIC to the extent they receive forms of compensation that are otherwise prohibited by ERISA and the Code.

View text of the notice.

The US Senate Committee on Banking, Housing & Urban Affairs held the nomination hearing of Jerome Powell to serve as Chair of the Federal Reserve Board. Governor Powell’s written testimony briefly discussed his background and the Federal Reserve Board’s policy goals of maximum employment and price stability. Governor Powell acknowledged the Federal Reserve Board’s efforts to tailor regulation to a bank’s size and risk profile but stressed, however, that balance must be maintained between easing of regulatory burdens and preserving core regulatory reforms. Senator Sherrod Brown and Mike Crapo each expressed some degree of support for Governor Powell. Senator Crapo spoke briefly about the regulatory burden on the financial industry, especially with regard to smaller community institutions, and referenced bipartisan legislation that has been introduced to alleviate some of these burdens. Senator Brown, on the other hand, cautioned against deregulation, and expressed concerns about the direction of financial regulation under the current Administration.

View Governor Powell’s written testimony.

View Senator Brown’s opening statement.

View Senator Crapo’s opening statement.

Federal Reserve Bank of New York President and CEO William Dudley delivered remarks to attendees of the Evolving Structure of the US Treasury Market: Third Annual Conference. President Dudley’s remarks focused on the four priorities that were outlined in the Joint Staff Report on the Treasury flash event that occurred on October 15, 2014. These priorities include an increased need for collaboration between the public and private sectors with regard to Treasury market structure which will allow for a better understanding of the evolution of the Treasury market. The second priority discussed by President Dudley was increased data transparency regarding activities in the cash market which he argued will promote a robust and safe Treasury market, and allow for more timely response to issues that arise. A third, and related, priority raised by President Dudley is the market practices and risks associated with the Treasury market, noting that the opacity of the clearance and settlement practices can lead to information asymmetry and mispricing of risks. Finally, President Dudley discussed the importance of interagency monitoring of the Treasury market.

View transcript of President Dudley’s remarks.

Keith Noreika, First Deputy Comptroller of the Currency discussed whether bank holding companies are obsolete, a topic he described as both timely and complex. Mr. Noreika, newly relieved of his post as Acting Comptroller, contended that the correct question to be asking is whether bank holding companies are a universally sound practice for all banks, noting that they may inherently be more valuable for large, complex, institutions, as compared to smaller, more traditional banks. He suggested that many of the reasons why bank holding companies were established initially are no longer as large of a concern given the evolution of state and federal laws and regulation. Moreover, he contended that while operating a bank holding company results in very high compliance and regulatory costs, in many instances, the powers granted to banks have expanded, while those granted to bank holding companies have narrowed. Mr. Noreika also noted that while bank holding companies may be a tool for reducing systemic risk, they are not the only tool that can accomplish this end and presented alternatives to the bank holding company construct such as merging the holding company into the bank.

View transcript of Mr. Noreika’s remarks.

The European Central Bank has launched a consultation on the high level features of a new unsecured overnight interest rate for euro transactions, following its announcement of its intention to develop a new interest rate benchmark on September 21, 2017. This new ECB rate will represent the euro unsecured money market in the very short tenor (i.e. overnight) and will be based entirely on transactions in euro that are reported by banks in accordance with the ECB's money market statistical reporting. It will complement existing benchmark rates produced by the private sector and serve as a backstop reference rate.

This consultation is the first consultation in a process which, over the next two years, will see the ECB defining precisely what the new rate intends to measure, developing the calculation methodology and testing the robustness of the rate. The ECB is seeking feedback on a number of aspects in the design of the rate, including on the proposed definition of the rate's underlying interest and the scope of the rate. The ECB also welcomes feedback on any other high-level features or issues which should be taken into account.

Comments are invited by January 12, 2018. The ECB intends to produce the new rate by 2020.

View ECB consultation paper.

The Financial Policy Committee of the Bank of England has published the latest UK Financial Stability Report. The FPC notes that the UK banking system is resilient and that UK banks are stronger than they were 10 years ago. The results of the stress test show that no bank needs to improve its capital position. However, as a result of the stress test, the FPC has decided to raise the UK countercyclical buffer rate from 0.5% to 1% from November 28, 2018. In addition, the Prudential Regulation Committee will set capital buffers for individual banks. The FPC will reconsider the countercyclical buffer rate during the first half of 2018.

The FPC continues to assess the risks posed by Brexit and concludes that Brexit presents a material risk to the provision of financial services to customers in both the UK and the EU. Three main risks are discussed: risks associated with bringing EU legislation into UK law through the Great Repeal Bill, risks to the continuity of outstanding cross-border contracts and risks presented by barriers to cross-border financial services provision.

The FPC considers that the extent and nature of the changes to be brought in through the Great Repeal Bill will depend on the terms of the UK's withdrawal agreement and there is a tight timeframe in which it all needs to be achieved. In addition to the Great Repeal Bill, secondary legislation is needed, and the regulators will need to change their rulebooks. Firms will also need to make changes to comply with the amended legal framework.

Read more. 

A Commission Delegated Regulation has been published in the Official Journal of the European Union, on the criteria for identifying a liquid market for package orders under the Markets in Financial Instrument Regulation.

The Delegated Regulation sets out criteria for identifying package orders for which there is a liquid market as a whole and provides further asset-class specific criteria to be met where a package order consists exclusively of interest rate derivatives, equity derivatives, credit derivatives or commodity derivatives.

View the Commission Delegated Regulation.

Joseph Otting was sworn in by Secretary of the US Department of the Treasury Steve Mnuchin as the 31st Comptroller of the Currency. Comptroller Otting was previously confirmed by the US Senate on November 16, 2017. Comptroller Otting replaces Keith Noreika, who had been serving as Acting Comptroller of the Currency since May 2017.

View the OCC press release regarding Comptroller Otting.

The European Commission has adopted a draft Delegated Regulation setting out Regulatory Technical Standards on the security measures for strong customer authentication along with common and secure open standards for the communication between account servicing payment service providers, payment initiation service providers, account information service providers, payers, payees and other payment service providers in relation to the provision and use of payment services.

Read more.

The European Banking Authority has repealed these Guidelines, published in 2013, because they have been replaced by Implementing Technical Standards on supervisory reporting of institutions, as amended in the 2016 ITS on supervisory reporting by firms of the liquidity coverage requirement, which became effective in September 2016.

View the EBA's announcement.

A Commission Delegated Regulation amending the Capital Requirements Regulation has been published in the Official Journal of the European Union. Under CRR, for banks investing in covered bonds that meet certain criteria, a preferential risk weight is applied. The amending Regulation makes permanent the derogation previously available to national regulators to waive the own funds requirement for certain covered bonds. The CRR sets a transitional date of December 31, 2017 for the waiver to be available.

The amending Regulation follows the European Banking Authority's recommendations on the EU covered bond framework published in 2014 and the European Commission's subsequent report on capital requirements for covered bonds published in 2015.

Read more.

The Financial Conduct Authority has confirmed that the 20 panel banks for the LIBOR benchmark have agreed to support LIBOR until at least 2021. The announcement follows the statement by the FCA's Chief Executive, Andrew Bailey, earlier this year that the future of LIBOR could not be guaranteed because the underlying markets (the markets for unsecured wholesale term lending to banks) are no longer sufficiently active. Work around moving from LIBOR to alternative reference rates is underway. For example, the Bank of England announced in October this year that the implementation date for the reformed Sterling Overnight Index Average Interest Rate Benchmark, known as SONIA, would be April 18, 2018. The BoE took over as administrator of SONIA in April 2016. The transition to the reformed SONIA is set for April 2018.

View the FCA's statement.

View Andrew Bailey's speech.

The Joint Committee of the European Supervisory Authorities has announced a review of the Regulatory Technical Standards under the European Market Infrastructure Regulation which include the requirement to exchange variation margin for physically-settled FX forwards.

EMIR requires counterparties to uncleared OTC derivative transactions to implement risk mitigation techniques to reduce counterparty credit risk. The RTS prescribe required margin amounts to be posted and collected and the methodologies by which the minimum amount of initial margin and variation margin should be calculated, as well as listing securities eligible as collateral, such as sovereign bonds, covered bonds, some securitization instruments, corporate bonds, gold and some equities. The variation margin requirements have applied to all counterparties since March 1, 2017 although they will only be applicable for physically-settled FX forwards from January 3, 2018.

Market participants have experienced difficulties in exchanging VM, in particular, in transactions with end-users. In addition, the EU's implementation of the international standards on margin exchange is more extensive than that in some other jurisdictions.

Read more. 

The Financial Conduct Authority has published a note on the compliance function in wholesale banks. The note sets out the key themes and issues arising from responses to an FCA questionnaire which was sent to 22 firms as well as the FCA's own observations. The questionnaire was sent to large global banks operating across several business lines, medium-sized firms focusing on specific areas or geographies and smaller UK firms, in order that the FCA could gain insight into how the function has changed over the past few years. The key themes are that compliance functions need to evolve in response to changes impacting the industry and that more strategic thinking is needed. The FCA has not asked individual firms to take any steps in response to the note. However, the FCA indicates that all firms and heads of compliance should use the note to develop their compliance function.

View the FCA's note.

The International Organization of Securities Commissions  has published a final report on good practices for the voluntary termination of investment funds which takes into account investors' interests during the termination process. The good practices do not override any legal or regulatory requirements or insolvency regimes. The report covers open-ended and closed-ended investment funds and retail investment funds as well as funds for professional investors. Additional good practices are included for funds established as commodity funds, real estate funds or hedge funds because illiquid or hard-to-value securities can impact the voluntary termination of a fund. These good practices should be read in conjunction with the IOSCO Objectives and Principles of Securities Regulation.

View the Report.

View the Objectives and Principles of Securities Regulation.

The European Commission has published a Report to the European Parliament and the Council of the European Union on the application of the SEPA Regulation. The SEPA Regulation establishes technical and business requirements for credit transfers and direct debits in euro to allow electronic payments in euro without distinguishing between national and cross-border payments. The Commission is charged, under the SEPA Regulation, with reporting on the application of the Regulation and proposing legislative changes, if appropriate. The Commission has concluded that the SEPA Regulation is applied correctly across the EU and that a legislative proposal is unnecessary. The Report notes that identified issues, such as IBAN discrimination, have been addressed by Member States and their resolution will need to be closely monitored.

View the Report.

View the Annex to the Report.

The Federal Reserve Board, OCC, and the FDIC adopted a final rule, applicable to banking organizations that are not subject to the “advanced approaches” under the US regulatory capital rules. The final rule will extend the 2017 regulatory capital treatment for certain items, including mortgage servicing assets, certain deferred tax assets, certain significant and non-significant investments in the capital of unconsolidated financial institutions, and certain minority interests. Under the final rule, banking organizations that are not subject to the “advanced approaches” capital rules will continue to evaluate these items in accordance with the risk weight and deduction treatment that was applicable in 2017. This extension does not apply to banking organizations that are subject to the “advanced approaches” capital rules, which will continue to be subject to the transition provisions for these items currently established under the regulatory capital rules. The agencies explicitly noted that the final rule was being issued to prevent different rules from taking effect while the agencies consider a broader simplification of the capital rules which the agencies announced that they intended to do as part of the recent review of regulations under the Economic Growth and Regulatory Paperwork Reduction Act. The final rule takes effect on January 1, 2018.

View the final rule.

The final Regulatory Technical Standards under the Markets in Financial Instruments Regulation on indirect clearing arrangements for exchange-traded derivatives and amending RTS under the European Market Infrastructure Regulation on indirect clearing arrangements for OTC derivatives have been published in the Official Journal of the European Union. The versions published are equal to those which were adopted by the European Commission on September 22, 2017. Indirect clearing refers to a situation where two or more entities are intermediaries standing between a client and a CCP in a contractual chain. EMIR established RTS on indirect clearing arrangements applicable to OTC products and MiFID extends these rules and principles to exchange-traded products. The EMIR RTS is now being revised to align with the new MiFIR RTS. Both pieces of legislation allow for indirect clearing arrangements to be established, and establish structures intended to result in equivalent protections for indirect clearing to those available for direct clearing (where only one intermediary exists). Various requirements in relation to segregation and portability at client, clearing member and CCP level are established and new required procedures to manage client defaults apply at clearing member level. Two new kinds of accounts must be established at client, clearing member and CCP level which enable such persons to distinguish indirect client positions and collateral from own account client positions and collateral.

The RTS and the amending RTS will enter into force on December 11, 2017 and will apply from January 3, 2018.

View the RTS on indirect clearing under MiFIR.

View the amending RTS on indirect clearing under EMIR.

View the existing RTS on indirect clearing under EMIR.

The Financial Stability Board has published the 2017 list of Global Systemically Important Banks. The list was compiled using end-2016 data and the 2013 assessment methodology designed by the Basel Committee on Banking Supervision. The Basel Committee has proposed a revised assessment framework for G-SIBs but has not yet published the finalized version. The 2013 framework identifies G-SIBs by assessing their contribution to systemic risk and imposes higher capital requirements on G-SIBs to reduce the likelihood of their failure. Identified G-SIBs are placed into buckets based on their score of systemic importance. G-SIBs are also subject to Total Loss Absorbing Capacity requirements, higher resolvability requirements and higher supervisory expectations on risk management, risk data aggregation capabilities, risk governance and internal controls.

The G-SIB list comprises 30 banks. The 2017 list is largely the same as the 2016 list except that the Royal Bank of Canada has been added and Groupe BPCE has been removed.

View the list of G-SIBs.

View the Basel Committee 2013 assessment methodology.

Janet Yellen, Chair of the Federal Reserve Board submitted her resignation as Chair and as a Member of the Federal Reserve Board. Chair Yellen’s resignation will become effective upon the swearing in of the new Chair.

View the Federal Reserve press release regarding Chair Yellen’s announcement.

The US Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the US Federal Deposit Insurance Corporation announced changes to their respective regulations under the Community Reinvestment Act. The amendments consist of modifications to the definitions of “home mortgage loan,” and “consumer loan,” to conform to the related amendments made by the Consumer Financial Protection Bureau’s as part of its implementation of the Home Mortgage Disclosure Act in its Regulation C. The amendments make other conforming changes, including removal of reference to the Neighborhood Stabilization Program, and changes to the public file content requirements of these agencies. These amendments were the subject of a joint notice of proposed rulemaking, published on September 20, 2017, and the Agencies finalized them as proposed.  The changes take effect on January 1, 2018.

View the interagency final rule.

The European Banking Authority has published final Guidelines on the application of the Internal Ratings-Based approach, in particular, the estimation of risk parameters for non-defaulted exposures, namely of the probability of default (PD) and the loss given default (LGD), and on the treatment of defaulted assets. The Guidelines should be applied in conjunction with the requirements under the Capital Requirements Regulation and the final draft Regulatory Technical Standards on the assessment methodology for national regulators regarding compliance by firms with the requirements to use the IRB Approach.

The Guidelines aim to address concerns raised over the lack of comparability of capital requirements determined under the IRB approach across firms which the EBA raised in its Opinion and Report on the implementation of the regulatory review of the IRB approach to calculating risk-weighted exposure amounts for credit risk, published in February 2016.

Read more.

The Commodity Futures Trading Commission Division of Market Oversight has issued no-action relief to Swap Execution Facilities and their chief compliance officers from certain timing requirements regarding annual compliance reports and fourth quarter financial reports.  SEF CCOs are required to file the compliance report with the CFTC no later than 60 calendar days after the end of the SEF’s fiscal year, and a SEF must concurrently file its fourth quarter financial report with the CFTC within that same time frame.  Multiple SEFs have cited difficulty complying with CFTC time constraints.  The relief provides SEFs and their CCOs an additional 30 calendar days to concurrently file the compliance report and fourth quarter financial report with the CFTC, such that the reports will now be due no later than 90 calendar days after the end of the SEF’s fiscal year.

The relief, issued under CFTC staff letter 17-61, is set to expire November 30, 2020.

View the Press Release.

View CFTC Staff Letter 17-61.

The European Commission has published a Report of the Commission Expert Group on Corporate Bonds on improving the European corporate bond markets. The review of the EU corporate bond market is part of the European Commission's Capital Markets Union.
The Expert Group makes 22 recommendations which relate to six objectives for improving the functioning of the corporate bond markets in the EU. The recommendations include, among others, amending the Market Abuse Regulation to ease the market sounding requirements although no specific recommendations on how to achieve that are made. The requirements have been viewed as imposing disproportionate burdens on companies, underwriters and other persons. The Expert Group considers that the requirements are aimed at large and liquid markets and not the more local, less liquid markets, such as the corporate bond markets and that the effect of the burdensome requirements may deter intermediaries from conducting market soundings and also deter the less frequent issuers from carrying out new issuances.

Read more. 

The US Board of Governors of the Federal Reserve System announced an extension of the comment period for two significant proposals that are currently out for comment. One proposal concerns guidance on supervisory expectations for boards of directors, and the other concerns a new large financial institution supervisory rating system. The comment period for both proposals had been previously extended through November 30, 2017, but will now remain open through February 15, 2018.

View Proposed Guidance on Supervisory Expectations for Boards of Directors.
View Proposed Large Financial Institution Rating System.

The European Securities and Markets Authority has published proposed Guidelines on position calculation by trade repositories under the European Market Infrastructure Regulation. EMIR requires that derivatives contracts are reported to a trade repository by the parties to the contract or the CCP. Reporting parties do not have to report their trades to the same trade repositories. Instead, trade repositories must take steps to reconcile records among one another.  Repositories are required to calculate the positions by class of derivatives and the reporting entity, based on the reports received. Trade repositories are also required to publish aggregate positions by class of derivatives. ESMA is proposing new Guidelines for trade repositories on calculating the positions because trade repositories have adopted different and inconsistent approaches to position calculation which thwarts the aggregation of data across trade repositories for the purpose of monitoring systemic risks to financial stability. The proposed Guidelines seek to ensure consistency between trade repository position calculations so that overall entity-level positions can be determined by the supervising authorities. The proposed Guidelines include high-level principles and specific procedures for trade repositories to follow and require trade repositories to make available position data in four separate reports – a Position Set, Currency Position Set, Collateral Set and Collateral Currency Position Set.

ESMA is requesting feedback on the proposed Guidelines by January 15, 2018. ESMA expects to publish a final report and final Guidelines in the first half of 2018.

View the proposed Guidelines.

The European Securities and Markets Authority has published updated Guidelines on the application of the endorsement regime and Technical Advice on the equivalence of certain third-country legal and supervisory frameworks under the Credit Rating Agencies Regulation. The CRA provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may only use credit ratings for regulatory purposes issued by CRAs established in the EU and registered with ESMA. Credit ratings issued in a third country may be used for regulatory purposes in the EU under the endorsement regime or the equivalence/certification regime. Endorsement allows credit ratings issued by a third-country CRA and endorsed by an EU CRA to be used for regulatory purposes in the EU. The equivalence/certification regime allows credit ratings issued by a third-country CRA in relation to a third-country entity or financial instrument to be used in the EU for regulatory purposes - it does not cover ratings issued by a third-country CRA for an EU entity or a financial instrument issued in the EU.

Read more. 

The European Securities and Markets Authority has published technical standards, technical advice and Guidelines under the Money Market Funds Regulation. These are: final draft Implementing Technical Standards providing a reporting template for managers of MMFs to use in fulfilling their quarterly reporting obligation to the relevant national regulator, which will include information on the characteristics, portfolio indicators, assets, and liabilities of the MMF; Technical Advice to the European Commission on liquidity and credit quality requirements applicable to assets received as part of a reverse repurchase agreement and on credit quality assessments and procedures for those assessments; and Guidelines on common reference parameters of the stress test scenarios to be included in the stress tests that managers of MMFs are required to conduct.

The MMF Regulation will apply from July 21, 2018, with the exception of certain requirements which applied from July 20, 2017, including the obligation on MMF managers to report information about each MMF they manages to the fund's national regulator. The final draft ITS on the reporting template have been submitted to the Commission for endorsement.

View ESMA's final Report.

The Court of Justice of the European Union has given a preliminary ruling on the meaning and scope of "regulated market" under the Markets in Financial Instruments Directive following a referral by the Dutch Administrative Court of Appeal for Trade and Industry. A regulated market is defined in MiFID I as "a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments - in the system and in accordance with its non-discretionary rules - in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with the provisions of Title IIII". The definition is unchanged in MiFID II which will replace MiFID I from January 3, 2018.

Read more.

The US Senate voted to confirm (54-43) the nomination of Joseph Otting as Comptroller of the Currency. Once officially sworn in, Otting will replace Acting Comptroller Keith Noreika.

US Federal Reserve Board Governor Lael Brainard discussed the evolution of FinTech including the impact in the consumer space and the important role that banks, data aggregators, consumers, and other stakeholders play in the evolution of this fast-changing market. Brainard noted that consumers often are unaware of how their data is collected, who it is collected by, and how it is used, which can present issues, particularly in the fast-moving and constantly evolving FinTech space. Governor Brainard highlighted the important role that the consumer plays in the FinTech market, and cautioned consumers against allowing their financial choices to be completely on autopilot without some consideration of the underlying processes.

View Governor Brainard’s speech.

Mike Crapo, chairman of the US Senate Committee on Banking, Housing, and Urban Affairs, introduced the Economic Growth, Regulatory Relief and Consumer Protection Act which would introduce significant financial regulatory reform. Among other things, the bill, which received bipartisan support, would reduce the threshold at which a bank holding company is considered to be a “systemically important financial institution” from $50 billion to $250 billion. The bill also provides other relief for community banks, including setting a leverage ratio of tangible equity to average consolidated assets of between 8% and 10% for banks with less than $10 billion in assets. These same institutions would be exempt from the Volcker Rule. US Senator Sherrod Brown (ranking member of the US Senate Banking Committee) released a statement opposing the bill, cautioning generally against rolling back the protections of Dodd-Frank with little or no perceived benefit to working families. The full Senate Banking Committee is expected to mark up the bill after Thanksgiving.

View full text of the bill.

Two regulations and two decisions of the European Central Bank on systemically important payment systems have been published in the Official Journal of the European Union and will enter into force on December 6, 2017. These regulations and decisions have been made by the ECB in its capacity as supervisor under the Single Supervisory Mechanism for Eurozone banks, following the first comprehensive assessment of SIPS.

The two regulations amend: (i) the ECB Regulation on oversight requirements for SIPS, to make clarifications and amendments deemed necessary for the application of the highest oversight standards; and (ii) the ECB Regulation on the powers of the ECB to impose sanctions, to ensure that sanctions can be effectively imposed for oversight infringements.

The two decisions cover procedural aspects for the ECB to impose corrective measures for non-compliance with the ECB Regulation on oversight requirements and the methodology for calculating sanctions when the oversight requirements are infringed.

View Regulation Amending the Regulation on Oversight Requirements.

View Regulation Amending the Regulation on ECB Sanctions Powers.

View Decision on Procedural Aspects.

View Decision on Sanctions Calculation Methodology.

The US House Financial Services Committee announced that it had approved 23 bills, many of which are focused on financial regulatory reform. In a press release, US House Financial Services Committee Chairman Jeb Hensarling noted that the bills are intended to provide greater capital market access to small business, and relief for community banks and credit units. The 23 bills include a proposed repeal of Title VIII of Dodd-Frank, which gives the Financial Stability Oversight Council the ability to designate payment and clearing organizations as financial market utilities and allows them to have access to the Federal Reserve discount window. Other bills included in the package would improve the living will submission process and stress testing process, including that a bank holding company would only be subject to the Federal Reserve Board’s Comprehensive Capital Analysis and Review process every two years.

View full text of the bills.

Michael Held, Vice President and General Counsel of the Federal Reserve Bank of New York discussed the many lessons learned from the financial crisis and cautioned against the dangers of forgetting these lessons. Mr. Held conceded that although post-crisis reforms and regulations should be reviewed, they should not be repealed at the cost of safety and soundness. Mr. Held discussed the improved resilience of the financial system, including praising the Orderly Liquidation Authority and other post-crisis improvements to the bankruptcy process, as improving cross-border resolution. Mr. Held stressed that financial institutions and regulators need to evolve as systems and risks evolve, in order to be adequately prepared for the next economic downturn.

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US Consumer Financial Protection Bureau Director Richard Cordray sent a memo to his staff announcing that he plans to leave his position by the end of the month. An interim or permanent successor has not yet been named although it has been widely reported that President Trump is considering naming OMB Director Mick Mulvaney as interim CFPB Director.