“Too many laws, too few examples.” That aphorism, attributed to poet and French revolutionary Louis de Saint-Just, neatly describes the state of financial-regulatory-reforms efforts both in the United States and around the world.
On the one hand, there is no question much of the new regulatory rule making confronting the financial-services industry is a necessary and critical part of making the financial system safer, stable and more secure, and has already played a role in significantly reducing the level of risk embedded in the global financial system.
On the other hand, no amount of legislation, or regulation, or rule making will by itself prevent or mitigate the effects of future financial crises so that individual investors won’t have to live again through the trauma of watching their retirement saving decline by more than 50%, or question whether they will have the liquidity they need to pay their monthly bills.
Along with more capital and less leverage and more transparent derivatives markets and circuit breakers to prevent the next flash crash and better monitoring of systemic risks and expanded powers for regulators to deal with failing financial firms, we need to address one the of root causes of the crisis — the culture of the financial-services industry, which, make no mistake about it, is still broken. (read more…)
News and analyses worth another look this weekend …
The Economist looks at how banks worldwide are going native with their lending: “A big lesson of the crisis is that banks which are global in life are national in death. The bankruptcies of Lehman Brothers and MF Global showed regulators how assets could easily get trapped in foreign jurisdictions, leaving a bigger bill for taxpayers back home. There are signs that, in response, regulators are treating foreign assets more harshly than domestic ones.”
Sallie Krawcheck explains in Politico the reason banks should be more supportive of the Consumer Financial Protection Bureau: “Across the industry, consumer satisfaction rates probably would rise, putting the industry on more stable footing with customers. This greater trust could, in time, generate greater consumer confidence in taking out loans and taking on risks they now understand, feeding through to economic growth.”
Bloomberg details how lobbyists are regulating derivatives regulators: “It is hard to see why industry would attempt an end run around the rulemaking — save that it wants to protect one of the most lucrative and highly concentrated sectors on Wall Street. (read more…)
A collection of recent commentaries and analysis pieces …
Ali Naimi, Saudi Arabia’s minister of petroleum and mineral resources, writes in the Financial Times that his country will take measures to control rising oil prices: “We want to correct the myth that there is, or could be, a shortage. It is an irrational fear, a fear without basis.”
New York City Mayor Michael Bloomberg talks taxes in The Wall Street Journal: “I believe there is enough support in both parties and both houses to pass Simpson-Bowles. And the American people deserve to know, before the November election, where their representatives —- and the candidates for president —- stand on it.”
The Financial Times examines how traders have evolved in the face of market trends and regulatory reform: “Despite the doom and gloom, more considered and disciplined trading may not be an altogether bad thing for banks.”
The New York Times on the slow road to derivatives reform: “Unfortunately, in today’s political environment, even absurd arguments have the power to delay or derail vital reforms. (read more…)
Global regulatory reform is presenting major compliance challenges for financial-services firms. SmartBrief caught up with John Wisbey, CEO of Lombard Risk, to learn what his firm is doing and hearing in the marketplace.
What aspects of global regulatory reform are firms overlooking?
One thing people haven’t grasped is the extraterritoriality issue. Some people in Europe think the Dodd-Frank Act has absolutely nothing to do with them because it’s American legislation. They are wrong. It absolutely does affect them. They are trading with counterparties in the U.S. That’s probably one of the biggest things I see people overlooking. People are shocked and wondering how it could apply to them, but it does. (read more…)
The collapse of MF Global Holdings made the protection of customer funds a hot topic for the futures industry. Dan Maguire, head of SwapClear U.S., participated in the “New Models for Protection of Customer Funds” panel at the 37th International Futures Industry Conference. SmartBrief caught up with Maguire after that panel to discuss customer protection and other market trends.
What were some of the lessons SwapClear learned from the bankruptcies of Lehman Brothers Holdings and MF Global?
The first thing is they’re very different. On the Lehman side — I can talk from personal experience because I traded a lot of the book there — we were very pleased with how we handled the Lehman default. If the central-counterparty model had not worked so well for resolving Lehman’s default, then I’m not sure we’d be talking about clearing being the right thing for swaps. (read more…)
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