A collection of stories from SmartBrief publications and around the web…

It has been a week of regulatory relief in the world of finance. The Basel Committee on Banking Supervision kicked things off by proposing a new method for banks to assess their exposure to derivatives. The new method may reduce the amount of capital banks need to meet restrictions on leverage.

The Labor Department followed suit with a less-aggressive-than-previously-mooted fiduciary rule. It might seem strange that the DoL back-pedaled a bit during a year that has seen so much rancor on the campaign trail directed at the financial services industry, but lobbying money talks on Capitol Hill and it appears the DoL went with a rule it thought might actually achieve some additional protection for consumers and not get thrashed by lawmakers.

A couple random thoughts on the DoL’s final fiduciary rule:

  1. The rule still allows for firms to sell relatively expensive in-house “proprietary” products to clients.
  2. (read more…)

Well, that’s one way of keeping your name in the headlines…

Much has been made this week about comments by new Minneapolis Federal Reserve president Neel Kashkari calling for big banks to be broken up or transformed into utility-like entities. The merits of Kashkari’s ideas aren’t really worth dissecting because it is far more appropriate to simply chuck them in the old “ain’t never gonna happen” file. After all, if the financial crisis itself wasn’t enough to drive policymakers to break up the big banks, then some comments nearly a decade later from the Land of 10,000 Lakes isn’t going to do it either.

The evolution of Kashkari himself? Now that is a fascinating story. What could make this creature of Wall Street turn on his own former colleagues? Why would the savior of the big banks go after the big banks?

Kashkari the Savior

Kashkari first hit the national spotlight when he was tapped to run the Treasury Department’s Troubled Asset Relief Program. (read more…)

PayPal CEO Dan Shulman sees change afoot in the financial services industry. While speaking on a panel at the World Economic Forum in Davos, Switzerland, Shulman outlined the 5 trends that are re-shaping the way financial services are conducted around the world.

  1. Money is digitizing – 85% of global financial transactions are conducted in cash (based on volume, not value). However, Shulman says the trend is clear. Checks are disappearing. Cash is disappearing.
  2. Mobile is exploding – Shulman notes that the bill of materials is for a smart phone is down to $30. That means more customers around the world will be able to harness the power of an entire bank branch in the palm of their hand. “Imagine thinking about banking and starting it in a world of software and mobile. It would be fundamentally different for basic consumer financial services. … That affords an opportunity to bring in the billions of people across the world who are outside the system right now.”
  3. The onslaught of data is not going to stop – The growing volume of data presents privacy and security challenges for companies, but managed properly it can be a game-changer.
  4. (read more…)

Financial institutions need to focus on resilience and sharing information about cybersecurity, which should be treated seriously as a matter of national defense in the US, said experts and regulators at the Securities Industry and Financial Markets Association’s Annual Meeting in Washington, D.C., on Tuesday.

“We need national defense priority on cybersecurity,” just as with nuclear defense, because no company has the budget to battle sovereign nations launching cyberattacks, said Ronald Kruszewski, chairman and CEO of Stifel Financial.

Jim Rosenthal, chief operating officer of Morgan Stanley, suggested the Reserve Officers’ Training Corps, or ROTC, could train students toward careers in cybersecurity to help make up for the US’ talent gap in that area.

Treasury Secretary Jack Lew and Securities and Exchange Commission Chair Mary Jo White reiterated the need for companies to share breach-related information among one another and with the government. Doing so will help other firms detect wider patterns and defend against the kinds of breaches that have occurred to other organizations, Lew said. (read more…)

The financial-services sector needs to strengthen its information-sharing network to learn more quickly of threat data and thereby stay ahead of hackers, said panelists at the recent SmartBrief Cybersecurity Forum in New York City.

Cybercriminals are colluding and collaborating frequently, which creates a crucial need for the industry to work more closely together on a regular basis, said George Rettas, managing director and chief of staff, Global Information Security Department — Information Protection Directorate, Citigroup.

“You cannot beat a network without being a network yourself. You’re not going to do it alone,” Rettas explained.

Al Berg, chief security and risk officer of Liquidnet Holdings, said information shared by other organizations “can be a force multiplier for us, because we don’t have to redo that analysis.”

Karl Schimmeck, managing director of financial services operations for the Securities Industry and Financial Markets Association, said that his group and the industry has spent a decade developing relationships to share information through the Financial Services Information Sharing and Analysis Center, or FS-ISAC. (read more…)