Financial Regulatory Forum

U.S. SEC bolsters money market fund rules on risk, liquidity

By Rachelle Younglai

WASHINGTON, Jan 27 (Reuters) – U.S. securities regulators adopted rules aimed at making money market funds a safer investment after the collapse of the Reserve Primary Fund triggered a run on the $3.24 trillion market in 2008.

The Securities and Exchange Commission voted 4-1 on Wednesday to bolster the funds’ liquidity, limit their riskier investments and to show investors the funds may not always maintain a stable $1 share value.

The fund industry was pleased the new rules were less restrictive than the agency initially proposed last year, but the new rules were likely to come at the expense of some yield.

Money market funds were considered as safe as cash until the collapse of Lehman Brothers pushed the value of the Reserve Fund money market fund below $1 a share and forced the federal government to create a program to backstop the market.

“One of the key lessons of the financial crisis is the need for strong liquidity buffers in money market funds,” said SEC Chairman Mary Schapiro, adding the new liquidity rules would help ensure investors are able to get their money out of a fund.

SCENARIOS-How Obama’s bank reforms could affect banks

NEW YORK, Jan 21 (Reuters) – U.S. President Barack Obama is looking at limiting risk-taking at banks.

But his proposals on Thursday were tantalizingly vague. He said he wanted to limit the amount of borrowing that banks can do relative to their peers and limit their trading activities to buying and selling securities to customers.

But it is not clear whether relative borrowing limits will be low enough to force banks to reduce their debt. And the line between buying and selling securities on behalf of customers, and doing so on behalf of the bank, can be blurry.

Obama proposes new U.S. risk rules for banks

By Jeff Mason and Kevin Drawbaugh

WASHINGTON, Jan 21 (Reuters) – U.S. President Barack Obama proposed stricter limits on financial risk-taking on Thursday in a new populist-tinged move that sent bank shares lower and aimed to shore up his own political base.

Obama proposed new rules to prevent banks or financial institutions that own banks from owning, investing in or sponsoring a hedge fund or private equity fund. The rules would also bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit.

Proprietary trading refers to a firm making bets on financial markets with its own money, rather than executing a trade for a client. These expert trading operations, which can bet on stocks and other financial instruments to rise or fall, have been enormously profitable for the banks but also increase market volatility.

European Central Bank says E.Europe bank-asset risks remain

By Boris Groendahl

VIENNA, Dec 18 (Reuters) – Western European banks could still be hit by a further rise in bad debt in emerging Europe if the economic downturn is worse than expected or if currencies decline, the European Central Bank (ECB) warned on Friday.

The ECB said in its half-yearly financial stability report that vulnerabilities eased in the region, which includes the new EU member states as well as Ukraine and others in the former Soviet Union and Croatia or Serbia the former Yugoslavia.

The region suffered a sudden reversal of fortunes this year when a boom driven by western bank loans, exports, investment, and consumer spending slammed to a halt and caused steep contractions in almost every country.

U.S. SEC hires hedge fund veteran Bookstaber for new market risk unit

 Richard Bookstaber speaks at the Reuters Global Hedge Fund and Private Equity Summit in New York in this photo taken on April 11, 2007. In his book "A Demon of Our Own Design," published in April 2007, Bookstaber made the case that financial innovation actually adds to risk. "Financial risk is also higher because the markets increasingly assume a mathematically precise rationality, as opposed to the way we actually do, or indeed really should behave," he wrote.   FOR FEATURE STORY FINANCIAL/QUANTS   BOSTON, Nov 6 (Reuters) – The Securities and Exchange Commission has hired former hedge fund executive Richard Bookstaber and two other senior officials to work in a newly created unit designed to identify risks in financial markets.


Bank of Canada raps finance industry, says G20 determined to reshape

Bank of Canada Governor Mark Carney speaks during a news conference upon the release of the Monetary Policy Report in Ottawa October 22, 2009.  (File Photo) REUTERS/Chris Wattie       (CANADA BUSINESS POLITICS)   MONTREAL, Oct 26 (Reuters) – Bank of Canada Governor Mark Carney delivered a blunt rebuke to the global financial industry on Monday, saying it had shown insensitivity over high compensation and calling on it to get on board with reforms.


EU central banker Noyer says banks have resumed risk-taking, must preserve capital

Bank of France Governor Christian Noyer attends a conference organized by the Paris Club and Institute for International Finance (IIF) in Paris June 25, 2009. (File Photo) REUTERS/Benoit Tessier   By Jan Dahinten and Neil Chatterjee
SINGAPORE, Oct 26 (Reuters) – European Central Bank Governing Council member Christian Noyer warned that banks are taking the same risks that led to the financial crisis and said they should preserve capital rather than pay it out to bankers and investors.His comments came as regulators around the world mull reforms to lower the risks that large banks can pose to the financial system and rein in the type of recklessness that fueled the credit crisis.


UK says “living wills” to drive bank restructurings

British Financial Services Minister Paul Myners (file) By Huw Jones
LONDON, Sept 18 (Reuters) – Mandatory “living wills” for banks in Britain will spark major restructuring in the sector in the next few years, a UK minister said on Friday.


G20 to stick with stimulus, little move on bank pay

By Glenn Somerville and Toni Vorobyova

LONDON (Reuters) – G20 finance leaders pledged on Saturday to keep economic life-support packages in place until a recovery is firmly secured, but reached no deal on putting limits on bankers’ pay.

Finance ministers and central bankers meeting in London agreed fiscal and monetary policy would stay “expansionary” until recovery from the worst financial crisis since World War II was certain, a draft of their joint statement seen by Reuters showed.


EU clears German crisis plan for export-credit insurance

BRUSSELS, Aug 5 (Reuters) – The European Commission approved on Wednesday a short-term export-credit insurance scheme adopted by the German government to limit the impact of the financial crisis on export companies. (more…)