April 2013 Global Regulatory Update
May 6, 2013 — This month’s IIF Global Regulatory Update features updates on current work streams, reviews recent meetings, and discusses new projects.
IIF Submission of FBO Comment Letter
April 30, 2013 — The IIF recently submitted comments on the Federal Reserve’s proposed rule for enhanced supervision and early remediation requirements for foreign banking organizations. In the letter, the IIF expressed its concerns with the proposed rule as it relates to the development of sound and consistent global financial regulation. In particular, the implementation of the proposed rule would likely a trigger a domino effect toward regulatory fragmentation and balkanization of global finance, which would have significant implications for global financial stability and the global economy. The IIF recommends that the Board revisit the proposed rule and adapt it so that it more closely aligned with the G20’s global commitments to enhanced global supervision and consistent, coordinated cross-border resolution.
IIF Weekly Wrap - April 26, 2013
Kevin Nixon, IIF Managing Director for Regulatory Affairs, discusses the increasing trend towards fragmentation—a concern raised in the IIF’s recent policy letter to the G-20 on “The Risk of Fragmentation in a Global Economy”—and the costs of layering of redundant regulations, recommending the IIF co-signed letter on “Margin Requirements for Non-Centrally Cleared Derivatives.” Kevin also previews the IIF’s upcoming report on “Promoting Greater International Regulatory Consistency,” to be released in the coming weeks, and invites members to participate in the work of the IIF’s regulatory committees and working groups.
Joint Associations’ Letter on Margin Requirements for Non-Centrally Cleared Derivatives
April 12, 2013 — The IIF, ISDA, AFME, and SIFMA submitted a letter to the BCBS, IOSCO, FSB, CPSS and CGFS reiterating industry concerns on the proposed margin requirements for non-centrally cleared derivatives. It reformulates the arguments already presented in our earlier letters on the issue, but also explicitly asked for the withdrawal or suspension of any IM requirements until their consequences have been fully analyzed and clarified.
IIF Responds to IASB Classification and Measurement Draft
April 3, 2013 — On April 3, 2013, the IIF’s Senior Accounting Group (SAG) submitted a comment letter to the International Accounting Standards Board (IASB) on its Exposure Draft 2012/4 Financial Instruments: Classification and Measurement; Limited Amendments to IFRS (the ED). The SAG concluded that the ED would resolve important issues on the boundary between instruments to be carried at Amortized Cost and as opposed to Fair Value through Profit and Loss that have arisen under the existing IFRS 9. It would also constitute an important step forward toward convergence of accounting standards, depending on the final outcome of the IASB’s proposal and a parallel proposal of the US Financial Accounting Standards Board (on which the SAG will comment in a few weeks).
March 2013 Global Regulatory Update
April 2, 2013 — This month’s IIF Global Regulatory Update features updates on current work streams and highlights upcoming events.
IIF responds to IOSCO on Client Asset Protection
March 25, 2013 — The IIF recently submitted comments in response to the IOSCO consultative report, Recommendations Regarding the Protection of Client Assets. In its comments, the IIF made clear the industry shares the concern of IOSCO for the protection of client assets and stressed the importance of supervision of intermediaries holding client assets. The IIF also noted that the responsibility for client asset protection should be shared among intermediaries, governments and clients and that there should be a balance between strengthening the protection of client assets and allowing intermediaries to develop innovative and safe means for handling client assets. Finally, the IIF recommended that IOSCO continue to consult with the industry as it pursues work on some of the areas of client asset protection not covered in the report.
IIF responds to the BCBS-IOSCO second consultation on Margin Requirements for Non-Centrally Cleared Derivatives
March 15, 2013 — The IIF sent a letter to BCBS and IOSCO in response to their second consultative document on Margin Requirements for Non-Centrally Cleared Derivatives. The letter reiterated views expressed in previous IIF letters on the topic, and expressed appreciation of the important steps taken by the BCBS and IOSCO in addressing possible liquidity impact of the proposed rules. However, additional revisions are needed to address the potential liquidity impact, to clarify the practical implementation issues of the proposed rules, and to ensure that the rules will result in a level playing field.
IIF responds to the BCBS consultation on Revisions to the Basel Securitization Framework
March 15, 2013 — The IIF sent a letter to BCBS in response to its consultative document on Revisions to the Basel Securitization Framework. The letter expressed the view that revisions to the securitization framework should reflect in a reasonable way the actual risk of the transactions. In addition, the letter noted that while it is important to address the shortcomings of the current Basel securitization framework, this should be done within the context of the structural progress market participants in securitization have made since the crisis, as well as other bodies of regulations that have made the financial system safer.
February 2013 Global Regulatory Update
March 4, 2013 — This month’s IIF Global Regulatory Update features updates on current work streams and highlights upcoming events.
IIF and IBFed letter to the BCBS Large Exposures Group
February 5, 2013 — The IIF and IBFed led industry participants in a meeting with the BCBS Large Exposures Group (LEG) on January 15 in Basel. The purpose of the meeting was to discuss industry practices in managing single-name concentration risk. The discussions at the meeting would serve as input to the LEG’s work on developing harmonized standards for large exposures rules across jurisdictions. As a follow-up step to the meeting, the IIF and IBFed wrote a letter to the LEG outlining the key messages that the industry would like the LEG to consider in developing the standards.
January 2013 Global Regulatory Update
January 31, 2013 — This month’s IIF Global Regulatory Update reviews recent IIF regulatory events as well as comment letters on derivatives, hedge accounting, shadow banking, and other current issues.
IIF provides input to the IASB Survey on disclosure
January 16, 2013 — The SAG answered an IASB survey on disclosure concepts intended to prepare for a “discussion forum” on Disclosures in Financial Reporting, stressing that the IASB should take a broad conceptual approach, focused on what disclosures are likely to look like five years hence, and highlighting the following points:
- A clear and coherent roadmap to assist users to understand annual reports should be defined;
- Standard setters should work with regulators and users to define and limit the purposes of annual reports;
- While accounting, prudential, and securities disclosures may remain siloed, each body of requirements should be defined with reference to and in awareness of the others;
- Impairment, classification and measurement, and leasing remain critical to investors in financial firms and to regulation; divergences should be minimized;
- Requiring additional disclosures is not the solution for reconciling any divergence that occurs between the major accounting standards;
- Specific, mandatory requirements should be minimized to encourage appropriate exercise of judgment and reflection of management’s view of the firm.
IIF Responds to FSB on Shadow Banking
January 11, 2013 — The IIF has sent a comment letter to the Financial Stability Board (FSB) responding to three consultative documents on shadow banking: “Strengthening Oversight and Regulation of Shadow Banking: An Integrated Overview of Policy Recommendations”, “Strengthening Oversight and Regulation of Shadow Banking: A Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities” and “Strengthening Oversight and Regulation of Shadow Banking: A Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos”.
Leading Insurers Call for Careful Consideration of Unintended Consequences Emerging from IAIS Proposals on Systemic Risk
December 17, 2012 — The debate on systemic risk regulation in insurance is at a critical point. The IAIS, in collaboration with the FSB, is developing a methodology to identify potential Global Systemically Important Insurers (G-SIIs) and is elaborating proposed policy measures. The IIF endorses the objectives and goals of this work, and emphasizes the importance of assessing the extent to which the activities of insurance firms may be a source of systemic risk.
IIF responds to IFRS Foundation Staff Analysis of SEC Final Staff Report on IFRS
December 14, 2012 — On Friday December 14th, 2012, the IIF’s Senior Accounting Group submitted a comment letter to the IFRS (International Financial Reporting Standards) Foundation on its Proposal to Establish an Accounting Standards Advisory Forum with a focus on improvement of international consistency. The IIF’s Senior Accounting Group expressed concerns about the limited structure of the Forum and urged the IFRS Foundation to give a full hearing to the FASB (Financial Accounting Standards Board), ASBJ (Accounting Standards Board of Japan) and NSS (National Standards Setters) representatives in order to create confidence, transparency and openness.
Joint Associations Letter to BCBS & IOSCO re Margin Requirements for Non-Centrally Cleared Derivatives
December 12, 2012 — The IIF, ISDA, and AFME sent a joint letter to the BCBS and IOSCO in time for their meetings this week. The letter reiterated industry views on the BCBS/IOSCO consultative document on Margin Requirements for Non-Centrally Cleared Derivatives. The letter expressed support for the proposals for a robust Variation Margin (VM) framework, but cautioned that the Initial Margin (IM) component of the proposals would severely impact liquidity in the vital uncleared OTC derivative markets, and could increase rather than decrease systemic risk. The joint letter reformulates the arguments already presented in earlier separate letters by the Associations on the issue, with emphasis on dispelling the general misperceptions on the OTC derivatives market that seem to be affecting the policy discussion.
IIF Responds to the FSB’s Consultative Document, “Recovery and Resolution Planning: Making the Key Attributes Requirements Operational”
December 7, 2012 — On December 7, 2012, the IIF’s Cross-Border Resolution Working Group submitted a comment letter in response to the consultative report, Recovery and Resolution Planning: Making the Key Attributes Requirements Operational, published by the Financial Stability Board (FSB). The IIF welcomed the efforts of the FSB to provide guidance on certain aspects of recovery and resolution planning, such as recovery triggers and stress scenarios; resolution strategies and operational resolution plans; and the identification of critical functions and critical shared services. The IIF also recommended that the FSB continue with this initiative and provide guidance on other aspects of the Key Attributes.
2012 IIF LATAM CRO Forum
December 7, 2012 — On December 6 and 7, the IIF held the Latin America Chief Risk Officer Forum in Miami, hosted by Mercantil. The forum brought together risk officers in the Latin American region to discuss risk management in a changing global financial environment. Topics covered included macroeconomic trends in the region and the impact of current global regulatory reforms on risk management for Latin American banks. The presentations featured sessions on emerging market bank lending conditions, risk-adjusted strategic planning and risk appetite, assessment of capital adequacy and risk management, managing operational risk in credit processes, and cybersecurity as well as a discussion on the IIF Risk Governance Report. The presentations along with the Annotated Agenda are located to the right of this posting, and are accessible by members.
IIF SAG responds to the IFRS 9 Financial Instruments - General Hedge Accounting Review Draft
November 29, 2012 — On Thursday November 29th, 2012, the IIF Senior Accounting Group (SAG) commented on the IFRS 9 Financial Instruments – General Hedge Accounting Review Draft.
Although the IIF Senior Accounting Group supported the Review Draft and appreciated the improvements made from prior drafts, comments on three remaining points were brought to the attention of the International Accounting Standard Board by the Group:
- Portfolio cash flow and macro fair value hedge accounting
- Assessment of ineffectiveness
- Credit risk treatment in a hedging relationship.
The Group hoped that the Board would take its comments before issuing the final version of the standard.
2012 IIF MENA CRO Forum
November 28, 2012 — On November 27-28, the Arab Monetary Fund and the Financial Stability Institute hosted the 8th High Level Meeting for the MENA region in Abu Dhabi. As it has in the past, the IIF partnered with the AMF and the FSI on this event, and concurrent with the High Level Meeting, the IIF held its MENA CRO Forum to discuss regional issues relating to risk management and financial regulation. The forum provided an opportunity for members to discuss general economic trends in the region as well as important issues drawn from two recent IIF reports, Governance for Strengthened Risk Management and Specific Impacts of Regulatory Change on End-Users.
FSI/ Basel Committee/ ASBA High Level Meeting on Regulatory Reform and Latin America
November 16, 2012 — On November 14-16, ASBA (Association of Supervisors of Banks of the Americas) held its XV’s Annual Assembly in Panama, Panama. Concurrently, a High Level meeting was organized with the FSI and the Basel Committee, in collaboration with IIF, to discuss the major regulatory developments taking place globally and their implications for Latin America.
The meeting covered all the major developments including Basel III, systemically important firms, recovery and resolution, etc. Speakers included senior regulators from the US and Europe (including Basel Committee Chairman Stefan Ingves) as well as the heads of supervision from Latin America.
November 2012 Global Regulatory Update
November 30, 2012 — This month’s IIF Global Regulatory Update reviews recent IIF regulatory events, a statement from the IIF Board of Directors on the Enhanced Disclosure Task Force, two important new reports published at the IIF’s 30th Anniversary Annual Membership Meeting in Tokyo, and other comment letters on a variety of current issues.
IIF Holds International Meeting on IAIS G-SII Policy Measures
November 15, 2012 — The IIF held an International Meeting on the “proposed IAIS G-SII Policy Measures” in Basel, Switzerland on November 15. The event attracted 45 senior regulators, supervisors and insurance industry representatives.
A constructive dialogue took place between the official sector and the re/insurance industry. The IAIS as well as the insurance industry presented general views and engaged in a discussion on systemic risk and insurance, in particular regarding the proposed IAIS Policy Measures for potential Globally Systemically Important Insurers (G-SIIs), which were released on October 17 for a two months consultation period.
As the debate on regulation in insurance is currently at a critical point, this IIF meeting provided a timely platform for dialogue between the official and private sector.
2012 IIF Asia Pacific CRO Forum
November 6, 2012 — On November 6-7, the IIF held the second Asia-Pacific Chief Risk Officers Forum for 2012 in Hong Kong, hosted by Credit Suisse. The Forum brought together risk officers in the Asia-Pacific region to discuss topics that pertain to risk management in a changing global financial environment. The forum fostered discussions on the macroeconomic trends in the Asia-Pacific region and the impact of current global regulatory reforms on risk management for Asia-Pacific banks. The presentations featured topics on progress in financial services risk management, collateral management, risk governance, risk management and finance, and others. The presentations can be found to the right of this posting, and are accessible by members.
Statement from the IIF Board of Directors on the Report of the Enhanced Disclosure Task Force
October 29, 2012 — The IIF Board of Directors welcomes the report of the Enhanced Disclosure Task Force as a valuable contribution to the shared goal of enhancing risk disclosures by financial institutions and notes in particular the leadership of the industry representatives in formulating this report. In particular, the Institute endorses the overall objective of continuing to refine and improve the quality and usefulness of risk disclosure across the industry generally, building upon current efforts by individual firms, policy makers and the industry as a whole.
IIF responds to joint BCBS/IOSCO Consultative Document – Margin requirements for non-centrally-cleared derivatives
October 24, 2012 — The Institute of International Finance (IIF) wrote to the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) regarding the Consultative Document – Margin requirements for non-centrally-cleared derivatives issued in July 2012. The IIF broadly supports the objectives of effective management of counterparty risk, the reduction of systemic risk and the promotion of central clearing. In particular, the Institute welcomes the initiative to deal with margin requirements on a global basis. None-the-less, the IIF raised some concerns regarding the impacts on liquidity and the implications for the effective use of derivatives as a risk management tool, which may arise as a result of the proposed framework. In addition, the IIF asked that BCBS and IOSCO more fully consider the practical implications of differentiating between systemic and non-systemic, non-financial entities.
Submission to BCBS WGL on Suggested Regulatory Language and CB Eligibility Criterion
October 23, 2012 — On October 22, 2012 the IIF’s Working Group on Liquidity submitted further input on the Liquidity Coverage Ratio to the BCBS Working Group on Liquidity. The IIF Working Group on Liquidity provided in specific and constructive language, some of the ideas that were submitted to the BCBS WGL in the Methodology and Objective Criteria for Defining Additional Eligible Liquid Assets for the LCR (“Methodology”) in June 2012 (submitted as a draft). The IIF proposed language were made as edits directly to the Basel III Liquidity Framework, incorporating the Decision Tree approach, which places primary emphasis on monetization via financing markets in defining High Quality Liquid Assets. The decision tree approach also provides for criteria to determine whether an asset acts as a viable secured financing vehicle under stress conditions, but applies rigorous haircuts and concentration limits or diversification requirements to such assets.
IIF Releases Report on the Potential Impact of Regulatory Change on End-Users
October 13, 2012 — Today in Tokyo at its Annual Membership Meeting, the IIF published a new report, Specific Impacts of Regulatory Change on End-Users: Initial Report. The Initial Report is the first output of a Task Force set up by the IIF Board to look at ways in which financial regulatory change is currently impacting, and may in future impact, end-users of financial services.
IIF Releases Report on Governance for Strengthened Risk Management
October 13, 2012 — At its Annual Membership Meeting in Tokyo, the IIF published a new study on industry sound practices in risk management, entitled the Report on Governance for Strengthened Risk Management.
October 2012 Global Regulatory Update
October 5, 2012 — This month’s IIF Global Regulatory Update reviews IIF comment letters on a variety of current issues including FMI Recovery and Resolution, ComFrame, Liquidity Risk and Interest Rate Risk Issues, as well as the IIF Memorandum on Extraterritoriality, and provides dates for upcoming IIF regulatory events.
IIF Memorandum “Containing Extraterritoriality to Promote Financial Stability”
October 4, 2012 — Extraterritoriality has become a topic of acute interest with the intensification of regulation after the global financial crisis. Despite the fact that the G20 has set ambitious goals for global standards of financial-industry regulation, the fragmentation and risk management challenges arising from increased levels of extraterritorial reach in national legislation are accelerating and constitute an increasing source of concern for the financial industry.
The Institute under the aegis of the IIF Special Committee on Effective Regulation (SCER) the Memorandum “Containing Extraterritoriality to Promote Financial Stability”, which was sent on October 2 to the attention of the Financial Stability Board, as the guardian of global standard setting, to urge it to act to foster more international coordination to head off extraterritoriality.
IIF Response to the CPSS-IOSCO Report on FMI Recovery and Resolution
October 3, 2012 — On September 28, 2012, the IIF’s Cross-Border Resolution Working Group, Infrastructure Working Group, and the Special Committee on Effective Regulation submitted a comment letter in response to the consultative report, Recover and Resolution of Financial Market Infrastructures, published by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO). The IIF recommended that the CPSS and IOSCO convene a roundtable of key stakeholders to discuss the important issues that are unresolved in the consultative report. In addition, the IIF suggested that the CPSS and IOSCO draw clearer distinctions between normal operating procedures, recovery and resolution in its future reports, and that the CPSS and IOSCO consider issues unique to FMIs, which may not be adequately addressed by the FSB’s Key Attributes.
IIF Comments to the FASB on Liquidity Risk Issues
September 27, 2012 — On September 25, 2012, the IIF’s Senior Accounting Group and Working Group on Liquidity submitted a comment letter to the FASB on its exposure draft on Disclosures about Liquidity Risk and Interest Rate Risk, which focuses primarily on liquidity risk issues. The comment letter acknowledges that users of financial statements have legitimate interest in the liquidity issues set out in the Exposure Draft and as the ED notes at several points, users seek as much consistency and comparability as possible. However, given the number of significant discussions on liquidity under way, it will be especially important to aim at international consistency around liquidity and disclosures. As a result, the IIF recommends that the FASB defer finalizing the liquidity disclosure proposal until the disclosure-related projects that are currently being undertaken by the FASB itself and other bodies are completed, to benefit from their extensive public discussion.
IIF Comments to the FASB on Interest Rate Issues
September 27, 2012 — On September 25, 2012, the IIF’s Senior Accounting Group submitted a comment letter to the FASB on its exposure draft on Disclosures about Liquidity Risk and Interest Rate Risk with a focus on interest rate risk issues. The comment letter acknowledges that users of financial statements have legitimate interest in market risk issues set out in the Exposure Draft and as the ED notes at several points, users seek as much consistency and comparability as possible. It also notes that implementation of the disclosure requirements will be challenging since it would certainly require building new information systems and a complex reconciliation process to the existing disclosure. However, given the number of significant discussions on disclosure under way, it will be especially important to aim at international consistency around disclosures. As a result, the IIF recommends that the FASB defer finalizing the liquidity risk and interest rate risk disclosure proposal until the disclosure-related projects that are currently being undertaken by the FASB itself and other bodies are completed, to benefit from their extensive public discussion.
Joint Associations respond to BCBS's proposed Principles for Effective Risk Data Aggregation and Risk Reporting
September 20, 2012 — The IIF, IBFed, GFMA and TCH (the “Associations”) submitted comments on the BCBS’s proposed Principles for Effective Risk Data Aggregation and Risk Reporting. The Associations recognize the benefits of improving banks’ risk data aggregation and risk reporting capabilities and assured the BCBS that firms are working toward that goal. However, the challenges firms are facing with regard to the demands imposed on them by numerous new regulatory requirements, which may lead to operational risk issues, are emphasized. The Associations also cautioned the BCBS about the quite detailed role that the proposed Principles seem to expect from the boards. This could divert boards’ time from more pressing issues facing their firms and from boards’ primary responsibility of providing strategic guidance and direction. Moreover, the Associations raised the issue of the use of an appropriate level of approximation particularly during a stress or crisis situation where quick management response is needed.
IIF Comment Letter on BCBS’s Consultative Document on Monitoring Indicators for Intraday Liquidity Management
September 19, 2012 — On Friday, September 14, the IIF submitted a comment letter in response to BCBS’s consultations on intraday liquidity management. The Basel Committee proposed a set of eight indicators that will enable supervisors to monitor how banks manage their intraday liquidity risks.
The IIF raised concerns that there is little indication of how the data gathered from the indicators will be interpreted and used, and how they will inform supervisory and regulatory decisions. A number of the issues raised are technical, and it will be beneficial for there to be face-to-face discussions between intraday specialists of both direct and indirect participants, and the official sector, in order to gain further understanding about the goals of the indicators and the nature of the issues raised.
IIF comments on ComFrame Consultation
September 14, 2012 — On August 30, the IIF submitted its comments on the ongoing ComFrame project of the International Association of Insurance Supervisors (IAIS). ComFrame is a tool being developed for establishing and improving group-wide supervision of Internationally Active Insurance Groups. While the IIF comments reiterated concerns that ComFrame should focus on establishing an umbrella framework and recognize existing regulatory regimes instead of imposing another supervisory layer on international groups, they also raised new concerns. As an example, the IIF sees the length and level of prescription of the document as a significant problem. In general, the more detailed and prescriptive the framework, the more difficult it will be to find a consensus among stakeholders. The Institute therefore suggests that in further developing ComFrame, the IAIS focuses on the development and articulation of broad principles. The IIF will further engage in this dialogue.
Joint Associations respond to the Fundamental Review of the Trading Book
September 7, 2012 — The IIF, ISDA, GFMA and IBFed (the Associations) submitted a comment letter on the Basel Committee’s Fundamental Review of the Trading Book. This puts in writing the views the Associations and their members have discussed in a number of meetings with the Basel Committee’s Trading Book Group (TBG) or its individual members. The Associations expressed support to the Fundamental Review’s aims and objectives both in strengthening capital standards and delivering a regulatory framework which achieves comparable levels of capital internationally. The Associations are also supportive of BCBS’s agenda of reforming bank regulatory standards to address the lessons of the financial crisis. In particular, the Associations believe that it is important to develop a coherent and comprehensive framework which is risk sensitive at both the individual position and portfolio levels. As such, In crafting a new coherent framework, great care needs to be taken not only to simplify the overall trading book framework but, more importantly, to achieve a closer alignment between economic risk and regulatory capital. A failure to more effectively align risk and regulatory capital will distort the effective deployment of capital and affect business decisions with often adverse economic consequences.
IIF Comments on IOSCO Consultation Report on Regulation of Securitization
August 9, 2012 — On August 3, the IIF’s Shadow Banking Advisory Group commented on IOSCO’s Consultation Report on “Global Developments in Securitization Regulation”, drawing on its recent report ‘Shadow Banking’: A Forward Looking Framework for Effective Policy.
The IIF supports the basic aims of IOSCO and international authorities in this area and in particular the push for international consistency and convergence. It highlights its concern at the actual and potential extraterritorial effects of existing and proposed EU and US rules.
July 2012 Global Regulatory Update
August 3, 2012 — This month’s IIF Global Regulatory Update reviews IIF comment letters on a variety of current issues including G-SIBs, D-SIBs, and liquidity methodology, as well as the public release of the joint IIF and Ernst & Young report on Progress in Financial Services Risk Management, and provides summaries of some recent regulatory events.
The IIF responds to the BCBS consultative document on Domestic SIBs
August 1, 2012 — On June 29, the Basel Committee on Banking Supervision (BCBS) released a consultative document, “A framework for dealing with domestic systemically important banks”, which responds to the G20 mandate, established at the Cannes 2011 Summit, requiring extension of the framework for Global Systemically Important Banks (G-SIBS) to Domestic SIBs.
The IIF response, submitted on August the 1, was produced by the Working Group on Capital Adequacy, under the aegis of the IIF Special Committee on Regulatory Capital (SCRC), and with input from the EMAC Working Group on Regulatory Reform, and the Latin America, Middle East North Africa and Asia-Pacific CRO Fora.
IIF comments on the proposed IAIS G-SII Assessment Methodology
August 1, 2012 — On July 31, 2012, the IIF submitted its comments to the IAIS on their Proposed Assessment Methodology to designate potential Global Systemically Important Insurers (G-SIIs).
The general comments point out that the IIF insurance members (1) recognize the importance of the IAIS’ work in assessing the extent to which the activities of insurance firms may be a source of systemic risk and (2) largely share the IAIS’s views on insurance and financial stability. However, the IIF questions strongly whether the proposed methodology is consistent with this IAIS position. As the value of risk pooling and the non-systemic characteristics of traditional insurance are acknowledged, the IIF believes that the methodology should focus predominantly or even exclusively on non-traditional and non-insurance (NTNI) activities.
IIF and GFMA comments on the proposed FSB Institution-to-Aggregate (I-A) data templates
July 30, 2012 — The IIF and GFMA submitted the final comment letter to the FSB on its common data template initiative. The final letter expressed appreciation of the FSB’s efforts to align the I-A templates to existing international data collection efforts, particularly the BIS International Banking Statistics (IBS) and the planned enhancements to these statistics. However, it noted that there is very little information on what these enhancements involve, so it would be difficult to assess the FSB proposals. The Associations requested that before the I-A templates are finalized, an articulation of what specific additional information will be collected in the enhanced IBS and how it relates to the FSB I-A templates should be provided.
GFMA and IIF G-SIB Common Data Template Proposal for Systemic and Structural Data Comment Letter
June 28, 2012 — The IIF and GFMA submitted another comment letter to the FSB on their common data template initiative. The new comment letter gives detailed comments on the proposed systemic and structural data templates. The letter provides general comments on the reporting frequency, time lag, and implementation timeframe. It also provides specific comments on the Systemic Importance Indicators Template, where our main concern is the alignment – of both substance and timing —of this part of the CDT with the BCBS’s G-SIB data collection. It then discusses the Group Structure Template by urging the FSB to take the time to align the template with the evolving data collection underway in the recovery and resolution plans currently being developed. Finally, it provides some technical comments on the Bridge Template, including the need to align it with the I-A templates and the BCBS’s just-released capital disclosure rules text.
Financial Services Firms Boost Risk Management Expenditures
June 21, 2012 — Leading financial services firms have made major changes in the organization and approach to risk management following the global financial crisis, but there is still much to be done to change and embed new methodologies and approaches, according to a new report by Ernst & Young, in conjunction with the Institute of International Finance.
IIF calls for a new approach to “shadow banking” debate
June 18, 2012 — The Institute of International Finance (IIF) today issued a report “Shadow Banking”: A Forward-Looking Framework for Effective Policy” calling for a new policy approach to non-bank financial activities sometimes described as “shadow banking”. The IIF focused on the potential benefits and risks of these activities and the most appropriate use of risk mitigation tools.
Mr. Douglas Flint, Chairman of the Board of Directors of the IIF, and Group Chairman of HSBC, said, “Today, the IIF releases its first report on policies concerned with non-bank financial activities. The report, developed under its Special Committee on Effective Regulation, recommends the adoption of a differentiated approach to this disparate range of activities, carefully considering each on its own merits to assess whether, and if so how, they could create systemic risks, rather than addressing them collectively as ‘shadow banking’.”
IIF responds to European Commission Green Paper on “Shadow Banking”
June 18, 2012 — The IIF has responded to the March European Commission Green Paper on “Shadow Banking”, building on its recently published paper “Shadow Banking: A Forward-Looking Framework for Effective Policy”.
The IIF’s response, produced by its Shadow Banking Advisory Group, welcomes the efforts of the Commission to understand and assess the benefits, potential risks, and where necessary risk mitigation measures in the non-bank financial sector, and its efforts to promote international consistency and coordination.
The IIF response agrees with the need for sound policy. Properly structured, and with risks properly managed, many non-bank financial activities that might separately, or in combination, amount to non-bank credit intermediation can provide significant benefits to investors, borrowers and the wider economy. As the financial crisis demonstrated, however, when the risks from these activities are not managed and mitigated effectively, they have the potential to create substantial and even systemic effects.
GFMA and IIF G-SIB Common Data Template Proposal for Funding Dependencies Comment Letter
June 15, 2012 — The IIF and GFMA submitted another comment letter to the FSB on their common data template initiative. The new comment letter gives detailed comments on the proposed top 50 funding provider template. The letter highlights several issues for the FSB’s consideration when finalizing the funding risk template. It also responds to questions 6 to 10 from the FSB’s Consultation Paper, Understanding the Financial Linkages: A Common Data Template for Global Systemically Important Banks (October 2011).
IIF-GFMA Comment Letter on the FSB Top 50 Counterparty Proposed Template
June 13, 2012 — As a follow-up to their May 25th letter to the FSB on general comments on the proposed Common Data Templates, the IIF and GFMA submitted detailed comments on the proposed top 50 counterparty template. The letter outlined the industry concerns with respect to the metrics and definitions in the current proposal, the degree to which the proposal has been or will be harmonized with other data collection initiatives, and its incremental cost.
IIF Holds Second High-Level Symposium on Effective Supervision
June 4, 2012 — The IIF recently organized a Second High-Level Symposium on Effective Supervision in Madrid, Spain, hosted by the Banco de España on May 21-22 and with an opening dinner hosted by BBVA and Santander. The symposium followed an earlier one held in Toronto in May 2011.
June 2012 Global Regulatory Update
June 7, 2012 — This month’s IIF Global Regulatory Update reviews major IIF reports being released in the coming weeks on resolution and shadow banking, public sector releases on the trading book and systemically-important insurers, and IIF comment letters on a variety of current issues.
IIF Proposes Key Steps to Strengthen Cross-border Resolution of Major Multinational Banks
June 7, 2012 — “One of the most important lessons of the financial crisis was that banks must be able to take risks, must be able to fail, and therefore must be capable of being resolved upon failure. With the determination of national authorities and the cooperation of private financial institutions, we believe that an effective resolution system can be put in place,” said Mr. Douglas Flint, Chairman of the Board of Directors of the Institute of International Finance and Group Chairman, HSBC. The IIF today released a report on the effective cross-border resolution of financial institutions.
Industry associations respond to IOSCO consultation on suitability requirements
June 4, 2012 — The IIF, the International Banking Federation and the Joint Associations Committee on Retail Structured Products responded on May 21 to the IOSCO Consultation Report “Suitability Requirements with respect to the Distribution of Complex Financial Products” issued for comment in March 2012. The response builds on an earlier written contribution to IOSCO by the industry associations in March 2011.
The response is broadly supportive of the direction of the principles set out in the IOSCO consultation report but strongly urges IOSCO to drop their current distinction between complex and non-complex financial products and to adopt a wider approach that is applicable to all securities, collective investment schemes and related derivatives instruments and the balance of risk and reward associated with them.
IIF-GFMA Letter to the FSB on Common Data Template
May 25, 2012 — The IIF and GFMA participated in a workshop conducted by the FSB on May 2nd in Basel to discuss the proposed common data template for G-SIBs. The workshop provided participants a better understanding of the status, content, and objectives of the common data template initiative. As a follow-up, the IIF and GFMA submitted a letter to the FSB providing additional comments and feedback.
IIF ComFrame Update - 4 May 2012
May 16, 2012 — On May 4, the IIF submitted its comments on the ongoing work of the International Association of Insurance Supervisors (IAIS) on ComFrame, a tool being developed for improving group-wide supervision of Internationally Active Insurance Groups. The comments made by the IIF raised the point that ComFrame should focus on the coordination and recognition of existing regulatory regimes instead of imposing another supervisory layer on international groups. Priority should be given to establishing an umbrella framework enabling supervisors to coordinate their efforts to monitor insurers’ group-wide activities and to address the enterprise wide risks comprehensively arising out of these. The IIF also raised its key messages during the ComFrame Dialogue in Washington DC on May 8. The discussion between IAIS members and the private sector revealed that ComFrame should add clarity on how it could integrate and rely on existing risk management practices, capital and accounting standards. The IIF will further engage in this dialogue and provide in-depth comments during the consultation period starting on July 2.
IIF Response to FATCA
May 2, 2012 — In its comments to the US Internal Revenue Service (IRS) on the Foreign Account Tax Compliance Act (FATCA), the IIF welcomes the IRS’ acknowledgement that FATCA presents a significant undertaking for financial institutions and the efforts made in the proposed regulations to address industry concerns. While recognizing the important steps that have been taken in order to address several of the industry concerns, the Institute notes that there are a number of issues that should still be considered before finalizing FATCA. The proposed regulations will still subject foreign financial institutions (FFIs) conducting business outside the US to burdensome, extraterritorial US requirements; still create operational and legal risks; still contravene local laws in many places; and still create inefficiencies for the payments system and global finance. The IIF reiterates its call for an integrated and coordinated process to address FATCA and related issues, and restates its request for the US Treasury and IRS to take up the broad international issues raised by FATCA, including the payment-system and other systemic issues under a global framework
IIF and IBFed letter to the BCBS SIG Taskforce on SIB Supervision on the issue of data aggregation and reporting
May 1, 2012 — The IIF and IBFed led industry participants in a meeting with the BCBS SIG Taskforce on SIB Supervision on April 24 in Basel. The purpose of the meeting was to have a pre-publication discussion of the Taskforce’s thinking on the further development of the principles for effective data aggregation and reporting. As a follow-up step to the meeting, the IIF and IBFed wrote a letter to the Taskforce outlining the key messages that the industry would like the Taskforce to consider in developing the principles.