Regulators indicate support for rollback of bank rules | Analysts note potential stress test pitfall | Setting risk-model capital floor remains unresolved
June 22, 2017
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Regulators indicate support for rollback of bank rules
Federal Reserve Governor Jerome Powell and acting Comptroller of the Currency Keith Noreika have indicated willingness to ease banking rules imposed after the financial crisis, particularly the Fed stress test and the Volcker rule. "The Volcker rule provides a practical example of how conflicting messages and inconsistent interpretation can exacerbate [the] regulatory burden," Noreika said.
Reuters (6/21),  Bloomberg (6/21),  The Wall Street Journal (tiered subscription model) (6/21) 
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Analysts note potential stress test pitfall
Analysts expect the Federal Reserve to announce today that all 34 banks that underwent an annual stress test overcame hypothetical hurdles. However, a 35% decrease in commercial real estate prices in the test would have been especially trying for banks with high exposure to this sector, analysts say.
The Wall Street Journal (tiered subscription model) (6/21) 
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Setting risk-model capital floor remains unresolved
The Basel Committee on Banking Supervision's requirement to establish a standardized capital floor for internal models still hasn't been resolved, according to a leaked committee memo. Sources say that all other aspects of the bank capital standards are in place.
Risk (subscription required) (6/21) 
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Bloomberg Insights
CFA Institute exam includes fintech questions
CFA Institute is adding technology questions to its exam. Topics include artificial intelligence, crowdfunding and bitcoin.
Bloomberg Professional Services (6/16) 
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Investors pull money from credit hedge funds
The broader hedge fund industry is experiencing a resurgence, but credit hedge funds are being left behind, continuing to suffer outflow. Credit hedge funds saw $5.4 billion in withdrawals in the first quarter.
Bloomberg Professional Services (6/21) 
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Investor relations job more demanding than ever
The role of investor relations has expanded to encompass a range of responsibilities from strategic planning to corporate responsibility. Building strong relationships with internal and external stakeholders will help IR professionals meet these new demands.
Bloomberg Professional Services (6/15) 
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Trading Trends
Low interest rates continue to shape banks' strategy
Banks shifted into low-cost liabilities to weather seven years of low interest rates, though this move did not mitigate all impact on profitability. Banks are trying to determine how to change their asset and liability mix as interest rates rise.
Liberty Street Economics (Federal Reserve Bank of New York) (6/21) 
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Interest wanes in 3-year fixed-rate bonds
Depositors appear to be losing interest in three-year fixed-rate bonds, opting instead to tie up money for one or two years.
Bank Underground (Bank of England) (6/20) 
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Global banks to vote on replacing Libor
Global banks will vote this week on an alternative to the London Interbank Offered Rate. "Getting a rate that's supported, that's well built and robust, is very important because they need to move a lot of the swaps market off of Libor," said Darrell Duffie, a Stanford University finance professor.
Reuters (6/20) 
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Operational Efficiencies
Banks could face 2-hour deadline for cyberattack recovery
Thomas Ferlazzo, senior vice president of the Federal Reserve Bank of New York, says a proposed two-hour deadline for banks to recover from a cyberattack is still under review but might come into force. Ferlazzo says that he understands misgivings about the deadline but that banks should work toward it, rather than wait for the Fed to issue a regulation.
Risk (subscription required) (6/21) 
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Fintech entering golden age of innovation, experts say
A panel of financial-technology experts and venture capital executives have discussed emerging-technology trends, Europe's revised Markets in Financial Instruments Directive, cloud computing and funding for startups. The vast amount of talent shed by the banking industry during the past 10 years is the reason for explosive growth in fintech, says Mark Beeston of Illuminate Financial Management.
MarketVoice (6/2017) 
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Bloomberg works to solve riddle of sentiment analysis
Researchers at Bloomberg are working on ways to decipher investor sentiment based on signals from social media and news articles. Sentiment data have been available on Bloomberg Terminals since 2010.
Bloomberg Professional Services (6/15) 
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Rules force firms to gauge value of research
Firms are having to evaluate the value of research they perform and distribute as regulatory changes focus on the cost of research. Pumping out content with no regard for value is no longer feasible.
Street Contxt (6/21) 
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Regulatory Review
Review of CFTC's "institutional censorship" scrapped
The Commodity Futures Trading Commission's inspector general has decided not to follow up on an audit that discovered the agency's chief economist was blocking research on politically sensitive issues, such as position limits, a policy the audit described as "institutional censorship." CFTC Deputy Inspector General Judith Ringle said the office doesn't have enough staff to pursue the matter.
MLex (subscription required) (6/19) 
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Analysis: Leverage calculation change boon to trust banks
The Treasury Department's recommendation that safe, highly liquid assets, including Treasury bonds, be excluded from total leverage calculations would particularly benefit custody banks, according to this analysis. State Street, Bank of New York Mellon and Northern Trust could see as much as 38% of their total assets freed up, while Goldman Sachs and JPMorgan Chase could gain access to 21% of their assets, Goldman analysts estimate.
The Wall Street Journal (tiered subscription model) (6/20) 
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Commentary: Treasury report moves US from leadership to gamesmanship
Easing US regulation, as outlined in a Treasury Department report, to match international standards wouldn't equalize the playing field between US and European banks, Duncan Wood writes. "It marks a radical shift in the country's post-crisis regulatory philosophy -- from leadership to gamesmanship," he writes.
Risk (subscription required) (6/20) 
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Research & Analysis
Researcher: FSB's CCP resolution proposal unnecessary
Robert Steigerwald, a senior researcher at the Federal Reserve Bank of Chicago, said the Financial Stability Board's proposal for resolution of clearinghouses adds little to what the industry would already do if faced with a crisis. "In the absence of public funding for solvency, I'm not quite sure what more there is to do by the resolution authority that hasn't been done or can't be done by the primary stakeholders," Steigerwald told an advisory panel of the Commodity Futures Trading Commission.
MLex (subscription required) (6/20) 
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