liquidity

Financial Stability Board Issues Asset Management-Related Policy Recommendations

Posted on

On June 22, 2016, the Financial Stability Board (FSB) published for public consultation Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities. The document sets out 14 proposed policy recommendations to address the following structural vulnerabilities from asset management activities that could potentially present financial stability risks:

  1. Liquidity mismatch between fund investments and redemption terms and conditions for fund units;
  2. Leverage within investment funds;
  3. Operational risk and challenges in transferring investment mandates in stressed conditions; and
  4. Securities lending activities of asset managers and funds.

The key recommendations for liquidity mismatch and leverage focus on both public and private funds.

The FSB reported that it “intends to finali[z]e the policy recommendations by the end of 2016, some of which will be operationalized by the International Organization of Securities Commissions (IOSCO).”

Agencies Propose Net Stable Funding Ratio Rule

Posted on

On May 3, 2016, the Federal Deposit Insurance Corporation, the Federal Reserve and the Office of the Comptroller of the Currency proposed a rule, the net stable funding ratio (the “NSFR”), to strengthen banks by requiring them to maintain a minimum level of stable funding relative to the liquidity of their assets, derivatives and commitments over a one-year period.  The most stringent of the NSFR’s requirements would apply to, among others, banking organizations with $250 billion or more in total consolidated assets.  The NSFR would become effective January 1, 2018.  Release.  Proposed Rule.

Rating Agency Developments

Posted on

On April 18, 2016, Fitch issued a report entitled: Fitch Updates U.S. Tax-Supported Rating Criteria. Release.

On April 15, 2016, DBRS issued a report entitled: DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Financial Issuers. Report.

On April 14, 2016, Fitch issued a report entitled: Fitch Publishes Criteria Exposure Draft for Counterparty Risk in Structured Finance and CVBs. Release.

Central Banks Increase Liquidity Support to Global Financial System

Posted on

On November 30, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Fed and the Swiss National Bank announced coordinated actions to increase their capacity to provide liquidity support to the global financial system. Pricing on existing temporary U.S. dollar liquidity swap arrangements will be lowered by 50 basis points to a rate of the U.S. dollar overnight index swap rate plus 50 basis points, and the central banks will establish temporary bilateral liquidity swap arrangements to offer liquidity in non-domestic currencies other than the U.S. dollar. Fed Release.

Text of Basel III Rules

Posted on

On December 16, the Basel Committee issued the text of the Basel III rules that present global regulatory standards on bank capital adequacy and liquidity, along with the results of its comprehensive quantitative impact study. Basel Press Release. Basel International Framework for Liquidity Risk. Basel Global Regulatory Framework. Quantitative Impact Study Results.