By Jane Merriman
LONDON, Oct 4 (Reuters) – Contingent capital got a boost on Monday as Swiss regulators said these bonds, which convert to equity when banks are in trouble, could help bolster the capital base of Credit Suisse and UBS.
The Swiss initiative marks a step forward for the asset class, which has failed to find a big fan base among investors since UK bank Lloyds and Dutch-based Rabobank issued contingent-style bonds in November 2009 and March this year.
If the life settlements market seems ghoulish, here’s a British scandal which isn’t doing the image of the business any favours. It’s one of the worst the country’s seen.
Around 30,000 mainly elderly investors in the UK put their money into a company called Keydata, hoping to make a little extra cash to fund their own retirement with the promise of a healthy return.
What they were buying sounded kosher, even if it did depend on how fast their wealthy American counterparts were dying. Of course, the investors may not have known that.
Sept 27 (Reuters) – European Union central bankers, lawmakers and ministers meet in Brussels this week for the annual Eurofi symposium to discuss the bloc’s financial reform plans.
Representatives of European Union states and the European Parliament also meet separately on Monday in a further bid to agree new rules to regulate managers of hedge funds and private equity groups. (more…)
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–The author is Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission. The opinions represent the view of the author and not that of Reuters.
By Bart Chilton
Now that the U.S. has approved the largest financial regulatory reform ever undertaken, it’s time for other nations to join in to ensure more efficient, effective market systems. Here is what we know: free markets without sufficient sideboards led to the global economic collapse.
Banks moved away from traditional lending and into exotic mortgages and foolhardy bets — like naked credit default swaps — and ultimately the American taxpayer was left with the bill for bailing out large institutions previously thought of as too big to fail.
Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission.
(Westlaw Business) - Swap markets and players were a main focus of Dodd-Frank, yet the SEC and CFTC were left to work out the details. The market, from Ropes & Gray to the Reinsurance Association of America, has provided these regulators with public comment and disclosure commentary. Now that the public comment period has drawn to a close, one thing is clear: issues from “security-based swap” to “swap participant” are certain to have big impact on a broad array of companies, both in financial services and beyond.
Enacted on July 21, 2010, Dodd-Frank incorporated a 360-day-window for the Act’s wrinkles to be smoothed out before implementation. One of the first casualties has been the CFTC’s rejection of discretionary Grandfather relief the Act allows the Commission to provide. Some 300 days remain in which all Dodd-Frank’s administrative detail work must be concluded. According to CFTC Chairman Gary Gensler, 30 teams have been dedicated to address the key policy and drafting issues of the new law. The working definitions of affecting the entire derivatives industry now rest in the hands of the SEC and CFTC.
Title VII of the Act, subtitled Wall Street Transparency and Accountability, defines terms as part of a complex scheme to regulate swap markets and security-based swap markets. The law looks to curtail the kinds of highly leveraged derivatives trades that have the potential to wreck the U.S. economy (again). Even more acutely, the act seeks to prevent Federally regulated institutions from (more) taxpayer bailouts. Market experts, however, have expressed concern that without narrow tailoring, these changes could not only increase compliance costs and margin requirements, but erect barriers to entry and foreclose the use of important risk management tools.
FRANKFURT, Sept 20 (Reuters) – European Central Bank policymakers are mulling ways to tackle the problem of lenders addicted to central bank liquidity, which is complicating its exit from extraordinary crisis lending measures.
Below are some of the options the ECB could consider to wean banks off the cheap and abundant funding which is pinning market interest rates for maturities of up to four months below the central bank’s benchmark interest rate.
By Caren Bohan and Dave Clarke
WASHINGTON, Sept 17 (Reuters) – From an exclusive perch close to the seat of power, Wall Street nemesis Elizabeth Warren will have plenty of autonomy as well as President Barack Obama’s ear.
The Harvard law professor, whose grandmother drove a wagon in the Oklahoma land rush, is a folk hero for consumer groups and the bane of Wall Street. She will build from scratch a new government agency to crack down on abusive practices in financial products like mortgages and credit cards.
By Huw Jones
LONDON, Sept 15 (Reuters) – Differences between new European Union and U.S. rules to crackdown on derivatives will be a key test of how well transatlantic regulators can coordinate to iron out loopholes banks may be tempted to exploit.
The United States has already approved a law to tighten supervision of the $615 trillion off-exchange derivatives markets and the EU published its own draft law on Wednesday.
Both implement pledges the EU and United States made as members of the Group of 20 countries (G20) to require central clearing of as many contracts as possible, reporting of trades to repositories and where appropriate, trading on an exchange.
– John Kemp is a Reuters market analyst. The views expressed are his own –
By John Kemp
LONDON, Sept 15 (Reuters) – Cocoa’s stunning rally and equally spectacular bust over the last five months provides compelling evidence that large positions, especially in contracts close to delivery, influence futures prices, and that regulators should develop effective position limits to ensure market prices reflect supply-demand fundamentals and not the impact of dominant positions.
Britain’s Financial Services Authority (FSA), which regulates commodity markets, continues to insist there is no evidence large positions, either singly or collectively, influence futures prices, most recently in a position paper published in December 2009 (http://www.fsa.gov.uk/pubs/other/reform_otc_derivatives.pdf).
By Erik Krusch
(Westlaw Business) – Between bank capital raises and media coverage, the Basel III era may be upon us. After months of anticipation, and more than a little dread on the part of banks, it is true that the Basel Committee on Banking Supervision (Basel Committee) has finalized the Basel III bank capital ratios and other measures. But not so fast. With history as guide, it’s apparent that there is a real gap between Basel-driven standards and actual implementation.
