Risk: ECB exposes LCR window-dressing
Liquidity rules are being gamed, the European Central Bank (ECB) has found. The supervisor conducted a specialised stress test that found a number of banks have taken steps to make…
Read More ECB paper: Does liquidity regulation impede the liquidity profile of collateral?
Kirsten Schmidt Working Paper Series No 2256 / March 2019 We analyze the pledging behavior of Euro area banks during the introduction of the liquidity coverage ratio (LCR). The LCR…
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How the Basel change on settled-to-market will impact balance sheets (Premium)
The Basel Committee has issued a new FAQ on how banks need to treat settled-to-market derivatives transactions in the Liquidity Coverage Ratio and Net Stable Funding Ratio. This will renew…
Read More Basel Committee reduces advantages of “settled-to-market” derivatives
The Basel Committee today issued responses to Frequently Asked Questions (FAQs) related to the treatment of settled-to-market (STM) derivatives under the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio…
Read More Fed’s Quarles on liquidity regulation and size of balance sheet
Excerpts from speech by Randal Quarles, Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System, at the “Currencies, Capital, and Central Bank Balances: A Policy…
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A Proposal for Smart Regulation in European SFT Markets
In a post-crisis era, Europeans must focus on efficient and smart regulation in Securities Financing Transactions (SFT) to support competitive financial markets. This can be achieved but requires regulatory attention…
Read More Fed’s Quarles outlines direction of post-crisis regulation
Speech: Early Observations on Improving the Effectiveness of Post-Crisis Regulation by Vice Chairman for Supervision Randal Quarles at the American Bar Association Banking Law Committee Annual Meeting, Washington, D.C. The Federal Reserve…
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Success stories this week in securities finance (Premium)
After what seems like years of difficult news, we would like to publicly recognize situations and groups of people that are moving the collateralized trading markets in the right direction.…
Read More Fed research: how have banks been managing the composition of HQLA?
Leading up to 2014, US banks increased their holdings of high quality liquid assets (HQLA) in part to comply with the liquidity coverage ratio (LCR) requirement. However, once the requirement was met,…
Read More Bank of England’s Sam Woods on regulatory arbitrage and off-balance sheet leverage
Selected passages from “Looking Both Ways” speech given by Sam Woods, Deputy Governor, Prudential Regulation and CEO, Prudential Regulation Authority “I am especially mindful that financial institutions will always be…
Read More Basel Committee report card on LCR in China, EU, and US
Today the Basel Committee on Banking Supervision published reports assessing the implementation of the Liquidity Coverage Ratio (LCR) in China, the European Union and the United States. Overall, the LCR…
Read More EBA sees considerable improvement in the average LCR across EU banks
The European Banking Authority (EBA) published today its third impact assessment Report for the liquidity coverage ratio (LCR), together with a review of its phasing-in period. The Report shows a…
Read More Federal Reserve requires disclosure of LCR metrics
The Federal Reserve Board on Monday approved a rule requiring for the first time that large banking organizations publicly disclose certain quantitative liquidity risk metrics. The disclosures will provide market…
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How much regional disparity is there really in Basel III adoption? (Premium)
We talk a lot about how different regions are at different points of adoption for Basel III. It’s easy to point out specific categories like the Leverage Ratio where some…
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The Leverage Ratio is working – can regulators relax? (Premium)
Continuing our pre-game analysis of the Basel Committee’s meeting today and tomorrow, there is new evidence that the Leverage Ratio is working to improve bank capital positions. Could this be…
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Fed notes that LCR could seriously disrupt bank lending and policy transmission (Premium)
In one of those moments where regulators make great policy points but miss a potentially disastrous avalanche up ahead, a new article from the Federal Reserve highlights that the Liquidity…
Read More Federal Reserve finalizes rule adding certain investment grade general obligation state and local municipal bonds to types of assets big banks may hold to meet liquidity needs during time of financial stress
The Federal Reserve Board on Friday finalized a rule to include certain U.S. general obligation state and municipal securities in the range of assets large banking organizations may use to…
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Bank collateral managers talk transfer pricing and the central collateral funding desk (Premium)
With collateral being at the heart of regulatory efforts to reduce complexity, banks find themselves needing to change organizational structures. But how internal desks will ultimately end up designed is…
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LCR, NSFR, HQLA? The technical reasons for why that FT article was off base
Following the publication of the FT’s article on November 30, “Regulators’ boost for securities lending has risky implications,” and our reply, “The FT suggests that collateral transformations amount to regulatory…
Read More The FT suggests that collateral transformations amount to regulatory arbitrage
In a strongly worded article, the Financial Times yesterday came out swinging against collateral transformations. This was a surprise attack against a practice that certainly carries some risk, but is…
Read More Federal Reserve proposes rule on LCR disclosures
The Federal Reserve Board on Tuesday proposed a rule requiring large banking organizations to publicly disclose several measures of their liquidity profile. These measures will be the first required public…
Read More Mind the gap: building evergreen style portfolios throughout the operational value chain
Evergreen financing structures are gaining popularity as a way to manage the complexity of Liquidity Coverage Ratio (LCR) funding requirements. However, most trading and post-trade systems are not set up…
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Nobody wants your cash
We keep on hearing stories about the trouble hedge funds are having in finding a home for their cash. What is going on here? Continue reading
Read More Basel Committee: big banks on track for LCR requirements
Basel III Monitoring Report September 2015 This report presents the results of the Basel Committee’s latest Basel III monitoring exercise. The study is based on the rigorous reporting process set…
Read More Two solutions to the Hot Cash / operational deposits problem (Premium Content)
The problem of prime brokers and custodians holding hedge fund cash and other operational deposits is becoming acute. We are now seeing two sets of solutions emerge to solve this…
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Measuring the impact of LCR and other liquidity regulation on banks – a new study by the Bank of England
The Bank of England has released a first-of-its-kind study on the empirical impact of liquidity regulations (LCR, and in the UK, Individual Liquidity Guidance or ILG) on bank activities. In…
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US Office of Financial Research takes a closer look at funding shocks
The US Office of Financial Research (OFR) published on July 22nd an interesting paper “Incorporating Liquidity Shocks and Feedbacks in Bank Stress Tests”, written by Jill Cetina. There is something…
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BCBS, IOSCO and IAIS release joint report on risk management. They address collateral shortages and illiquid margin.
The Joint Forum, consisting of the Basel Committee on Banking Supervision (BCBS), International Organization of Securities Commissioners (IOSCO), and the International Associate of Insurance Supervisors (IAIS) released on June 2nd…
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The Fed releases proposed rules on using Muni bonds for LCR requirements. But the devil is in the details.
The Federal Reserve released on May 18th “Liquidity Coverage Ratio: Treatment of U.S. Municipal Securities as High-Quality Liquid Assets, a Notice of Proposed Rulemaking with Request for Public Comment”. General…
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Who will close the gap between short-term securities loans and the LCR? (Premium Content)
We’re seeing a hole in the market, one that we thought would be solved already but that remains an attractive opportunity for an institution able to take on some maturity…
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Widespread media coverage of end of quarter UST repo rate hikes, but this is the new normal
Pretty much all the big media outlets covered US Treasury repo spikes at the end of the quarter. The data from DTCC’s GCF repo tell the story well for intra-broker…
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Managing LCR turns out to be hard for banks
Earlier this month there was an interesting article in Bloomberg Briefs “Leveling High-Quality Liquid Assets Under Basel III Proves Difficult for Banks” by Cady North and Matthew Debrabant. It turns…
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A new LCR-compliant basket for European repo trading
The European repo market is seeing the emergence of an LCR-compliant trading basket that takes the work out of conducting credit analysis on individual bonds, especially in light of national…
Read More Debevoise & Plimpton publishes a guide to NSFR — providing some clarity to a confusing topic
Basel III, Liquidity Management, Market infrastructure, Primary Dealers, Prime Brokerage, Regulatory, Repo, Securities Lending
Last month Debevoise & Plimpton published a nice guide to the Net Stable Funding Ratio (NSFR), “Client Update Basel Committee Adopts Net Stable Funding Ratio: How Much Liquidity Is Enough?”.…
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Part II: The Fed releases rules on capital for GSIBs, includes extra requirements for securities financing trades
Basel III, Dodd-Frank, Federal Reserve, Liquidity Management, Market infrastructure, Regulatory, Repo
This is part II of our post on the Fed’s new capital rules. We look at the calculation methodology and some observations about the rules. Continue reading
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Part I: The Fed releases rules on capital for GSIBs, includes extra requirements for securities financing trades
Basel III, Dodd-Frank, Federal Reserve, Liquidity Management, Market infrastructure, Regulatory, Repo, Securities Lending, Systemic Risk, Uncategorized
The Fed has released the latest capital rules for Global Systemically Important Bank Holding Companies (GSIBs). One critical part of this set of rules is the inclusion of a second…
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Corporates: how to invest their cash? Is non-intermediated access to centrally cleared tri-party repo coming?
Two articles on how corporates invest their cash caught our attention. Both were published on November 3, 2014. The first is from the Wall Street Journal “New Rules, New Corporate…
Read More European Commission accepts ABS as a Level 2B asset
Recognising the good liquidity performance of certain securitisations and to ensure consistency across financial sectors, the Commission has made some securitisation instruments eligible as level 2b assets for credit institutions’…
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What should be part of the LCR buffer: risk managers say no to covered bonds
An article in Risk by Lukas Becker, dated Oct. 1st “Banks avoiding covered bonds for LCR buffer over liquidity fears” caught our attention. For those not familiar with covered bonds – they are…
Read More Updates to the LCR rules: some winners, some losers
The latest incarnation of the Liquidity Coverage Ratio (LCR) rules were released. “Liquidity Coverage Ratio: Liquidity Risk Measurement Standards” clocks in at 399 pages – there is a lot minutiae…
Read More WSJ writes about increase in bank UST positions being a Volcker Rule dodge. We wonder if it might be about LCR compliance?
A July 21st article in the Wall Street Journal “The Volcker Risk Bubble” by John Carney described a study by economists Jussi Keppoy and Josef Kortez about how banks are taking…
Read More The NY Fed on funding of risky assets in tri-party: WAMs have moved longer
Last week there was an interesting post in the New York Fed’s Liberty Street Economics blog. Entitled “What’s Your WAM? Taking Stock of Dealers’ Funding Durability” by Adam Copeland, Isaac…
Read More WSJ article on leveraging CLOs — haven't we seen this movie before?
A May 5th Wall Street Journal article, “Banks Revive Role in Complex Debt, Lenders Had Eschewed Loan-Bond Leverage Since Crisis, but New Rules Spur Them to Seek Buyers” by Katy…
Read More Highlights from comment letters on the Net Stable Funding Ratio (Finadium subscribers only)
The Basel Committee on Banking Supervision has released 48 comment letters in response to its consultative document, “Basel III: the Net Stable Funding Ratio,” published January 12, 2014. These letters…
Read More Hedge funds not getting much love from LCR or NSFR
Can hedge funds get a break? It looks like they are not getting much love from LCR or NSFR.Continue reading
Read More What will be the gating factor in sec finance, the LCR or the Leverage Ratio?
This conversation keeps coming back around and we’re not yet satisfied with the conclusions that we are hearing. Most recently, Fed Governor Jeremy Stein brought it up again. The tricky…
Read More A look at the impact of a Government default on collateral markets
An article in efinancialnews.com by Anish Puaar called “Safety of collateral questioned after US Woes”, published Nov. 4th, makes some interesting points about the knock-on effects of a US government…
Read More The Fed has released their LCR rules with a couple surprises
The Federal Reserve came out with their LCR proposals today. Comments on the 100 page plus document are due back by January 31, 2014. We took a look and have…
Read More The CFTC and liquidity rules for DCOs: do they need committed repo facilities for their US Treasuries?
There is a battle brewing between the CFTC and DCOs over collateral liquidity. And its impact on repo will potentially be enormous. Continue reading
Read More Fed Governor Stein has some ideas on how to mitigate fire sale risk
This is the 2nd post on Fed Governor Jeremy Stein’s important speech at the Oct. 4th New York Fed workshop on fire sales and tri-party repo, “The Fire-Sales Problem and…
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