Financial Regulatory Forum

U.S. regulators’ Basel III rules package signals intent to maintain momentum in big-bank reforms

By Bora Yagiz

NEW YORK, July 17 (Thomson Reuters Accelus) - In a move considered to be the most complete overhaul of U.S. bank capital standards since Basel I in 1988, three U.S. banking regulators (the Federal Reserve Board, Office of Comptroller of the Currency, and Federal Deposit Insurance Corporation) have finalized the three Basel III-related notices of proposed rulemaking (NPRs) from 2012 on capital rules.

Collectively, the rules raise capital ratios, expand the base of assets for risk-based capital calculations, make changes to the methodology for calculation of credit risk weightings for banking and trading book assets and put emphasis on a stricter definition of capital, especially with regards to common equity Tier 1 (CET1) capital, the highest quality of equity. Higher quality of equity is perceived to provide a better safety net for the financial system in economic downturns, but this safety comes with a higher cost of business for the banks. Simply put, money kept as capital is not invested.  (more…)

CORRECTED: Bank regulators globally add AML to safety and soundness issues

By Nick Paraskeva, for Compliance Complete

NEW YORK, July 8 (Thomson Reuters Accelus) - Bank regulators around the globe are increasingly focusing on anti-money laundering (AML) and operational risks as part of their role in overseeing institutional safety and soundness. This follows huge enforcement fines imposed on systemically important banks by regulators and justice ministries. It also reflects a concern that any attendant hit on a bank’s reputation could affect its ability to obtain short-term funding or trade other than on a fully-secured basis.

The Basel Committee on Banking Supervision last week proposed standards on money laundering risks, which require banks to include AML within their firm-wide risk management process. “Basel’s commitment to AML is fully aligned with its mandate to strengthen the regulation, supervision and practices of banks worldwide, with the purpose of enhancing financial stability,” the committee stated on issuing the proposal for consultation. (more…)

COLUMN: When cheating lands brokers on the street

By Suzanne Barlyn, Reuters

NEW YORK, July 5 (Thomson Reuters Accelus) - One would think that aspiring financial professionals would have learned not to cheat on tests long before setting their sights on Wall Street, but not everyone got that memo.

Every year, some would-be brokers kill their careers by cheating on licensing exams, according to a review of the Financial Industry Regulatory Authority’s disciplinary database. There aren’t very many of them – a handful every year that are not a significant percentage of the 185,000 licensing tests administered by FINRA annually. But their flameouts are colorful.  (more…)

Compliance Insight: UK regulators gain more power over overseas firms and individuals

By Jane Walshe, Compliance Complete

LONDON/NEW YORK, July 3 (Thomson Reuters Accelus) - The new regulatory structure that came in to being on April 1, 2013 introduced changes not just to the form of regulation, but also to its substance, including extensive new powers over unauthorised parent undertakings with operations on UK soil.  (more…)

Federal judge approves HSBC deferred prosecution agreement

By Brett Wolf, Compliance Complete

NEW YORK, July 3 (Thomson Reuters Accelus) - A U.S. federal judge has approved the Deferred Prosecution Agreement in which British banking giant HSBC will pay $1.9 billion to regulators and the Justice Department for operating with anti-money laundering weaknesses that among other things allowed drug cartels to launder hundreds of millions of dollars. (more…)

Retraction of global correspondent banking networks challenges financial-crime risk management

By Kim R. Manchester, Contributing author for Compliance Complete

NEW YORK, July 2 (Thomson Reuters Accelus) - Global correspondent banks have faced numerous challenges since the onset of the financial crisis in 2008, including heavy scrutiny by regulators on money-laundering and terrorism-financing defenses, shrinking transaction volumes, slashed profit margins and risk parameters that defy rational measurement. A Financial Times report on how global correspondent banks are clawing back the reach of their correspondent banking network operations and trimming respondent banks from their client lists comes as no surprise to the casual observer of international banking.

For the financial intelligence community, this retraction by global correspondent banks will blur their insight into international money laundering and terrorism financing networks and hamper efforts to disrupt organised crime and terrorist groups. For financial institutions, the retraction of networks will create new challenges in financial crime risk management, with painful and expensive consequences if compliance programs are not tailored to meet money laundering and terrorist financing threats within correspondent banking. (more…)

IA brief: Advertising compliance principles for adviser Web sites

By Jason Wallace, Compliance Complete

NEW YORK, June 26 (Thomson Reuters Accelus) - During an inspection, an examiner will inevitably ask the chief compliance officer of an advisory firm if they advertise and all too often, the examiner will receive a quick “no.” Although this may be true in the traditional sense of advertising, most firms do advertise with the use of a firm website and often don’t know it.

An adviser’s website is definitely a form of advertising and it’s usually a firm’s most public or visual form of it. Knowing some of the common compliance pitfalls when it comes to a firm website’s can save time and alleviate regulatory scrutiny. The listed pitfalls fall into four categories, they include: accuracy, disclosure, advertising rule considerations and documentation. (more…)

SEC move toward admissions of guilt may have only limited impact

By Nick Paraskeva, contributing author for Compliance Complete

NEW YORK, June 24 (Thomson Reuters Accelus) – A new enforcement policy to require admissions of guilt in serious civil cases will be a potent weapon for the Securities and Exchange Commission, (SEC), if the agency chooses to use it. The change will appease some of those who criticized the SEC for a tepid enforcement response to the crisis. However, without a transparent process, there will be little way of knowing in which cases the admission is being sought.

Recently-appointed SEC Chairman Mary Jo White this week announced a policy change, to require firms to admit guilt in the most serious enforcement cases. Like other agencies, the SEC has routinely settled cases where a defendant neither admits nor denies wrongdoing. An agreed-upon set of facts is published that describes the nature of the defendant’s actions, the charges being settled, and the agreed penalty. (more…)

Consumer Financial Protection Bureau white paper spotlights overdraft opt-in as costly choice

By Bora Yagiz, Compliance Complete

NEW YORK, June 18 (Thomson Reuters Accelus) - A recent white paper by the Consumer Financial Protection Bureau (CFPB) on bank and credit union overdraft practices found that consumers who opt in for overdraft coverage end up with more costs and more involuntary account closures. (more…)

Basel paper offers new look at bail-in models for ailing institutions

By Bora Yagiz, Compliance Complete

NEW YORK, June 12 (Thomson Reuters Accelus) - A recent Bank for International Settlements (BIS) quarterly review article attempts to solve the too-big-to-fail (TBTF) problem without causing systemic disruption to financial markets, by offering a new resolution template to recapitalize banks on the verge of bankruptcy. It may, however, inadvertently legitimize a de facto bail-in model against the consent of depositors, and put their money at risk.

Since the financial crisis of 2008, regulators worldwide have sought to reduce the likelihood of a TBTF failure through increase in capital quality and quantity enshrined internationally in Basel III, as well as setting various resolution mechanisms set to wind down failing institutions.  (more…)

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