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With IstEin you can easily follow the international financial regulation process (About us).
- IstEin Financial Regulation Review No. 177 (06 - 19 October 2016)
- IstEin Financial Regulation Review No. 176 (22 September - 05 October 2016)
- IstEin Financial Regulation Review No. 175 (08 - 21 September 2016)
- IstEin Financial Regulation Review No. 174 (04 August - 07 September 2016)
- IstEin Financial Regulation Review No. 173 (21 July - 03 August 2016)
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The Financial Stability Board (FSB) published a methodology for assessing the implementation of the Key Attributes of effective resolution regimes for financial institutions in the banking sector.
The methodology sets out essential criteria to guide the assessment of the compliance of a jurisdiction’s bank resolution frameworks with the FSB’s Key Attributes. It is designed to promote consistent assessments across jurisdictions and provide guidance to jurisdictions when adopting or reforming bank resolution regimes to implement the Key Attributes.
See also: press release
Consultation paper on harmonisation of critical OTC derivatives data elements (other than UTI and UPI)
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published for public comment a consultative report on harmonisation of critical OTC derivatives data elements (other than UTI and UPI) - second batch.
The report responds to the G20's agreement in 2009 that all OTC derivatives contracts would be reported to trade repositories (TRs), as part of the G20's commitment to reforming OTC derivatives markets with the aim of improving transparency, mitigating systemic risk and preventing market abuse. Aggregation of the data reported across TRs will help ensure that authorities can obtain a comprehensive view of the OTC derivatives market and its activity.
Consultation will close on 30 November 2016.
See also: press release
The Basel Committee on Banking Supervision (BCBS) issued the eleventh progress report on adoption of the Basel regulatory framework.
This report sets out the adoption status of Basel III standards for each member jurisdiction of the Basel Committee as of end-September 2016.
See also: press release
This paper examines the history and the determinants of bank profits in Italy from 2005- 15. Authors first identify a number of key stylized facts by comparing the income statement of Italian lenders with that of banks in other European countries. The comparison suggests that the profitability gap of Italian banks is partly related to a business model characterized by a more conservative positioning along the risk-return frontier. Authors then use the Bank of Italy’s Quarterly Model of the Italian Economy to provide quantitative estimates of the impact of four factors (the economic activity growth rate, taxation of bank income, dynamics of operating costs and dividend policy) on profits, regulatory capital and bad debt. Counterfactual simulations suggest that the weak growth of the Italian economy is responsible for a sizeable share of the profitability gap of Italian banks, being by far the main driver of the increase in bad debts in the last decade; nonetheless, the impact of the other factors on their profitability (and capitalization) is far from negligible.
This paper explores the effect of taxation on the capital structure of banks. For identification, authors exploit exogenous regional variations in the rate of the Italian tax on productive activities (IRAP) using administrative, confidential data on regional banks provided by the Bank of Italy (1998-2011). Authors find that IRAP rate changes do not always lead to a change in banks’ leverage: banks close to the regulatory constraints do not change their leverage when tax rates change. This holds true for both tax cuts and tax hikes. Among less constrained entities, the leverage of smaller banks is more responsive to changes in tax rates than that of larger banks. Overall, the tax system has little effect on the capital structure of banks, especially for larger and possibly more systemically important institutions; regulatory constraints instead seem to be a first-order determinant.
Integrating stress tests within the Basel III capital framework: a macroprudentially coherent approach
In the post-crisis era banks’ capital adequacy is established by the Basel III capital standards and, in many jurisdictions, also by supervisory stress tests. In this paper authors first describe the ways in which supervisory stress tests can supplement the risk-based capital framework of Basel III and how this could be codified with a stress test buffer. Authors then argue that in order to ensure coherence with the macroprudential objectives of Basel III, the severity of supervisory stress tests should be procyclical. In addition, to increase the transparency and predictability of the overall capital framework, severity choices should follow a constrained discretion approach based on a simple rule. Finally, authors analyze supervisory stress testing practices across some jurisdictions and find that while the United States and the UK frameworks are in line with some of the elements of their proposal, including most notably the need for procyclical severity, this is not the case in the euro area.
Globalisation and financial stability risks: is the residency-based approach of the national accounts old-fashioned?
The Great Financial Crisis of 2007-09 and its aftermath have emphasised the need for a global approach when assessing financial stability risks. One difficulty is that the traditional apparatus, especially the System of National Accounts (SNA), relies on the criterion of residency to capture statistical information within countries' boundaries. This paper analyses how to collect meaningful data to assess consolidated risk exposures. In particular, it argues that data collected along the residency-based SNA concept can be usefully complemented by a nationality-based, global approach. This requires the establishment of a framework for assessing financial positions on a socalled "nationality-basis", that is, at a globally consolidated level.
In the wake of the Great Financial Crisis and the attendant collapse of faith in market discipline, there has been a concerted attempt by regulators and state officials to address the perceived ethical deficit in banking. This chapter asks which form of approach has the best chance of success in encouraging bankers to act more responsibly. In particular, it discusses how law and regulation should be used to control socially-excessive risk-taking, focusing on two key areas: the character of “excessive” and socially suboptimal risk-taking in finance, which is often obfuscated, and the extent to which individual liability should be used to remedy excessive risk-taking.
The regulatory changes and technological developments following the 2008 Global Financial Crisis are fundamentally changing the nature of financial markets, services and institutions. At the juncture of these two phenomena lies regulatory technology or ‘RegTech’ – the use of technology, particularly information technology, in the context of regulatory monitoring, reporting and compliance. For policymakers and regulators, the challenge of regulating rapidly transforming financial systems requires increasing the use of and reliance on RegTech.
The economic consequences of extending the use of fair value accounting in regulatory capital calculations
Authors investigate the economic consequences of the Basel III requirement to include unrealized fair value gains and losses on available-for-sale (AFS) securities in regulatory capital. Using data for U.S. banks they find negative market reactions around news indicating an increased likelihood of this regulatory change being implemented, consistent with increased regulatory costs. Authors also find that banks affected by this regulation reduce their investment in risky AFS securities relative to unaffected banks. This result suggests that extending the use of fair values for regulatory purposes reduces ex ante risk taking.
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