The European Commission says it will review rules on banks' holdings of government bonds "to ensure that banks' exposures to individual sovereigns' risk [are] sufficiently diversified". The commission wants to break a "doom loop" between states and banks that has been partially blamed for the eurozone debt crisis. "In the medium term, it may make sense to review the treatment of bank exposures to sovereign debt, for example by setting large exposure limits," according to a report by Eurogroup President Jeroen Dijsselbloem, European Commission President Jean-Claude Juncker and others.
The European Commission has proposed, despite German opposition, the European Deposit Insurance Scheme to guarantee bank deposits. The scheme would be phased in from 2017 to 2024. "Greater mutualisation of risk will only happen gradually over time and needs to be accompanied by measures to reduce risks so that there is less risk to share in the first place," EU Financial Services Commissioner Jonathan Hill said.
Bank of England Governor Mark Carney has told lawmakers that he expects low interest rates to continue "for some time". "The question in my mind is when is the appropriate time for interest rates to increase," he said.
The Commodity Futures Trading Commission is seeking feedback on proposed rules governing automated trading. The proposal includes "common sense risk controls that I believe recognize the benefits that automated trading has brought to the markets, while seeking to protect against the possibility of breakdown and disruption that can come with it," Chairman Timothy Massad said.
Treasury Secretary Jack Lew advised President Barack Obama to veto any year-end spending bill that includes changes to the 2010 financial regulatory measure. Republican leaders are pushing for the systemically important financial institution threshold to be raised from $50 billion in assets to $500 billion. "The idea that something that amends Wall Street reform at the last minute on a must-pass bill is unacceptable," Lew said.
A simulation of cyberattacks on the financial-services industry found that market utilities, including exchanges and clearinghouses, need to play a bigger cybersecurity role.
Market participants and Treasury Department representatives recently discussed the idea of processing repurchase agreement transactions between banks and investors through clearinghouses.
US prudential regulators have included currency forwards and swaps when calculating thresholds for mandatory collateralization of non-cleared derivatives, prompting concerns that some asset managers might breach the thresholds. "It's counter-intuitive to buy-side firms that transactions that are not subject to the requirements actually count toward the compliance threshold," said Andrew Cross of Perkins Coie. "It's difficult to tell how impactful it will be at this stage but it could very well wrap many more funds under the umbrella of costly margin requirements."
A European Banking Authority analysis of 105 banks has found €1 trillion in nonperforming loans. "EU banks will need to continue addressing the level of nonperforming loans, which remain a drag on profitability," said Piers Haben, the EBA's director of oversight.
A one-year delay in Europe's revised Markets in Financial Instruments Directive would allow the industry and regulators time to prepare, according to the European Commission. "Setting the time frame at January 2018 would appear appropriate so as to be reasonably satisfied that there will be no need for a repetition of the delay, but without extending the time frame excessively and hence relax the implementation speed," the commission says.
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