Wednesday News Roundup: everyone can be a SIFI, the staying power of regulatory arbitrage (Finadium subscribers only)

A roundup of news and interesting commentary we haven’t otherwise gotten to.

Now everyone can be a SIFI. The Financial Stability Board has released “Assessment Methodologies for Identifying Non-bank Non-insurer Global Systemically Important Financial Institutions,” introducing a new abbreviation into the alphabet soup of regulation: NBNI G-SIFI, or non-bank non-insurer G-SIFI. The methodology itself follows previous SIFI methodologies, so no surprises there. But the clarification of this SIFI category will catch new organizations in new capital mandates and orderly resolution planning in the years ahead.

European overview. For a good general overview of the current state of European capital markets, be sure to check out the ICMA Quarterly Report First Quarter 2014. There is some useful background on ICMA’s advocacy work on the FTT and repo initiatives.

Regulatory Arbitrage? Really? A tragicomic article last week in Reuters (“EU plans for trading rules widen global gap in bank regulations“) highlights the painful reality that global regulatory arbitrage will be alive and well under new financial regulatory reforms. In spite of the best efforts of the Basel Committee, domestic regulators still don’t see eye to eye, giving market participants all sorts of incentives to do their business elsewhere. According to Reuters, “The latest example of poor coordination was this week’s leak of EU plans from the bloc’s financial services chief Michel Barnier to stop banks from making bets with their own money, known as proprietary trading…. Adding to the confusion and the cost of compliance, the three biggest EU economies, Germany, France and Britain, are writing their own separate rules.” The Reuters article also notes different rules for account segregation, an important topic we covered last month in an Finadium research report (“Collateral Segregation Rules and Risk Mitigation in the US and UK“).

Risk management for US FMUs.The Fed has asked for comments on their risk management plans (Reg HH) for US Financial Market Utilities (the list of FMUs is here). Here’s where this is going: “The Board believes that the implementation of risk-management standards based on the [Principles for Financial Market Infrastructures] by the relevant payment, clearing, and settlement systems and their regulators, both domestically and internationally, can help promote the safety and efficiency of these systems and financial stability more broadly. Implementation also supports the initiatives of the Group of Twenty Finance Ministers and Central Bank Governors (G20) and the FSB to strengthen core financial infrastructures and markets around the world.” The full Fed document is here.

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