In the News
CFTC and the Volcker rule, on the outside looking in?: With five agencies required to sign off on the long-delayed Volcker rule, bank regulators are considering moving forward without the approval of the CFTC. The CFTC’s proposed changes to the rule have caused rifts within the Commission itself and threaten to delay its issuance beyond the year-end deadline imposed by the Obama Administration.
Gensler Delays Cross-Border Advisory, Banks Prepare to Sue: In a November 26 “no action” letter, the CFTC postponed its November 14 staff advisory on cross-border swaps. Banks will now have until January 14, 2014 to comply with the Dodd-Frank mandated rules on cross-border. The November 14 staff advisory surprised the banks by closing a loophole that Wall Street banks and their traders had been relying on to avoid CFTC oversight. The banks were interpreting a footnote buried in the CFTC’s July cross-border guidance to permit them to circumvent CFTC oversight of swaps if the swaps deals were set up in the U.S., but actually booked through the banks’ London affiliates. Despite the two-month delay in enforcing the advisory, banks say they have no alternative but to file a lawsuit against the CFTC for, among other things, failing to provide an adequate cost-benefit-analysis with the November 14 advisory. Other Dodd-Frank mandated guidance and advisories may be included in any industry lawsuit.
Volcker Rule, Cross-Border and Other Derivatives Rule on SEC Agenda: At a Securities Industry and Financial Market Authority (SIFMA) meeting on November 26, John Ramsay, the Acting Director of the SEC’s Division of Trading and Markets expressed confidence that the Volcker Rule would be completed in 2013 and indicated that the agency is moving to complete the derivatives rulemaking for cross-border activity by year-end. The cross-border rule would include the definition of a U.S. person and how affiliates are treated.
Banks May Charge Customers for Deposits: Banks are warning that interest rate cuts by the Federal Reserve may force them to begin charging customers to deposit their money. Fears that the Federal Reserve will begin tapering its monthly bond purchases have led to concerns that government authorities will have to look for other economic boosting options. These other options may include further cutting of interest rates. Additional rate cuts could lead to negative rates – meaning that the Fed would charge banks for holding reserves. If this happens andbanks continue to make less money on loans due to ongoing diminished interest rates, charging customers money for deposits may be the solution for the lessened profits, or at least for covering the Fed charges.
Democratic Senators want Chilton Replacement to Stand-up to Wall Street: In a letter to President Obama this week, nine Democratic Senators expressed concern that, “…some industry interests may view the Gensler and Chilton departures as opportunities to roll back or slow down essential reforms.” The senators requested that Chilton’s replacement be someone who is willing to do battle with Wall Street and push for strong Dodd-Frank rules, especially in the areas of position limits, the cross-border application of the new swaps rules and the Volcker Rule.
Bank of England Considers Tougher Leverage Ratios: The Bank of England’s Financial Policy Committee (FPC) has launched a review into whether it should have more power over the bank’s leverage ratios. Although the Basel Committee on Banking Supervision is scheduled to agree upon leverage ratios that will be mandatory on January 1, 2018, the FPC may need the power to implement new ratios ahead of that timeframe.