On July 24, the CFTC announced temporary no-action relief to facilitate its coordination of the May 30 Notice of Proposed Rulemaking on aggregation with the implementation of positions limits under Part 151 of the Commodity Exchange Act. The relief provides two methods for compliance: (i) as if the positions limits rule were amended to include the provisions proposed in the aggregation notice and (ii) in conformity with the disaggregation criteria specified in the no-action relief. The relief is time-limited to no later than December 31. CFTC Release.
Month: July 2012
HUD Publishes Final Rule on Rental Assistance Demonstration
On July 26, the HUD’s final rule on Rental Assistance Demonstration (“RAD”) was published in the Federal Register. RAD allows public housing agencies and owners of certain federally-assisted housing properties to convert current levels of government assistance into long-term contracts. Release. Final Rule.
Basel Committee FAQs on Basel III Counterparty Credit Risk Rules
On July 25, the Basel Committee issued a second set of frequently asked questions on Basel III’s counterparty credit risk rules, updating the questions published in November 2011. The FAQs relate to counterparty credit risk, including the default counterparty credit risk charge, the credit valuation adjustment and asset value correlations. Release. FAQs.
Basel Committee Interim Rules on Bank Exposure to CCPs
On July 25, the Basel Committee issued interim rules as part of Basel III for the capitalization of bank exposures to central counterparties (“CCPs”). The interim rules are intended to create incentives for banks to increase their use of CCPs, while also ensuring that banks’ exposures to CCPs are adequately capitalized. The rules will be effective as of January 2013. Release. Interim Rules.
OCC Update to Bank Accounting Advisory Series
On July 25, the OCC updated the Bank Accounting Advisory Series, a document that promotes consistent application of accounting standards among national banks and federal savings associations. The update includes recent answers to FAQs from the industry and examiners covering areas such as acquired loans, other real estate owned, troubled debt restructurings, nonaccrual, allowance for loan and lease losses, insurance claims, and bankruptcy court discharged debt. OCC Release.
CFTC Final Regulations on Phase in Compliance with Clearing Requirements and Proposed Rule on Clearing Determination
On July 24, the CFTC approved final regulations establishing a schedule to phase in compliance with new clearing requirements under the Dodd-Frank Act. As amended by the Dodd-Frank Act, the Commodity Exchange Act provides that a person may not engage in a swap unless the swap is submitted for clearing to a derivatives clearing organization registered under the CEA, or is exempt from registration under the CEA. The regulations will phase in the clearing requirement based on the type of market participant entering into swaps subject to the clearing requirement. The compliance schedule identifies three categories of market participants, and allots a compliance timeframe for each based on level of activity, market experience, resources, and status as registrants with the CFTC or SEC. The CFTC also issued the first proposed clearing determination for credit default swaps and interest rate swaps. The compliance schedule will be triggered upon the final clearing determination. Final Rule Release. Final Rule. Proposed Rule Release. Proposed Rule.
HM Treasury Consults on Reform of UK Payments Industry
On July 19, HM Treasury published a consultation paper on the future regulation of the UK payments industry. The payments industry is central to the functioning of the economy, but the government believes it has not always responded effectively to the needs of consumers. The consultation paper details three options for reforming the regulation and governance of payment networks. The government’s preferred option would be to create a new public body called the Payments Strategy Board (PSB), which would set the strategy across the industry. This would be overseen by the Financial Conduct Authority and funded through a levy collected by the new regulator. The government will accept comments on its proposals until October 10. Consultation paper.
EBA Publishes Opinion on Green Paper on Shadow Banking
On July 17, the European Banking Authority (EBA) published its opinion on the European Commission’s green paper on shadow banking. Opinion. The opinion focuses on several key areas, including the following:
- The definition of shadow banking- The EBA agrees with the definition of shadow banking proposed in the Financial Stability Board’s recommendations in April 2011. Recommendations.
- Functional approach – The EBA recognised that shadow banking has beneficial effects on the financing of the real economy and can help to foster growth. However, there are functional risks which need to be properly regulated. The EBA classifies these risks as liquidity and maturity transformations, interconnectivity and excessive leveraged positions set up by shadow entities or instruments.
- Large exposures – The EBA believes that the large exposures regime should act as a backstop regime to “shadow activities” and tackle the risk of interconnectivity by ensuring that interconnections are duly identified.
- Regulatory arbitrage – The EBA stands ready to prevent regulatory arbitrage and assess the need for regulation ability. The risks of regulatory arbitrage could increase as a response to the overhaul of the ongoing requirements under Basel III.
Amendments to Money Laundering Regulations 2007 to Come into Force on October 1
On July 17, HM Treasury published the Government’s response to its consultation on proposed changes to the Money Laundering Regulations 2007 (MLRs) together with its Impact Assessment (June 20). Response. Impact Assessment.
The Government’s proposals aim to reduce the regulatory burden imposed by the MLRs, while strengthening the overall anti-money laundering (AML) regime. Among the proposals the Government plans to:
- Retain the criminal penalties in the MLRs (even for minor breaches of the MLRs).
- Remove the current distinction between bodies listed in Parts 1 and 2 of the MLRs for customer due diligence (CDD) reliance purposes.
- Strengthen and clarify the powers of the Office of Fair Trading and HMRC.
- Make the FSA the recognised formal supervisor for recognised investment exchanges (RIEs).
Parliamentary Commission on Banking Standards Appointed
On July 18, Parliament published a press release announcing that a parliamentary commission on banking standards has been appointed. Press Release.
The commission will consider and report on:
- Professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the London Interbank Offered Rate (LIBOR) rate-setting process.
- Lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for government policy.
The commission has been asked to report on legislative action no later than December 18 (before the Banking Reform Bill is published) and on other matters as soon as possible afterwards.