IMN Austin: unharmonious regulators
29 January 2014 Austin
Image: Shutterstock
Regulators are considering a range of measures, with no clear consensus for global harmonisation of standards at present, said a panellist at the 20th Beneficial Owners' International Securities Lending Conference.
The topic of regulation was, as ever, present during sessions. Bruce McDougal of BlackRock usefully separated regulations into two overarching areas: as addressing systemic risk, or investor protection.
Regulations concerning systemic risk are trying to provide transparency to regulators, and encompass collateral re-use, hypothecation, pro-cyclicality, and risks arising from fire sale of collateral assets.
While regulations concerning investor protection are trying to address the disclosure of counterparty risk and potential conflicts of interest, disclosure of fees, disclosure of lending agents, and clear and consistent disclosure of net lending revenue.
In a securities lending context, an example of systemic risk would be the Financial Stability Board's (FSB) shadow banking proposals, specifically, the recommendation on imposing minimum haircuts.
By contrast, the FSB also has recommendations that would see fund managers increasing disclosure to their investors, which relates to investor protection.
Kevin Bannerton of Deutsche Bank said that regulators are considering a range of measures, with no clear consensus for global harmonisation of standards at present.
A chart presented by the panel showed that the only rules that were agreed on by the International Organization of Securities Commissions, the European Commission and the US Securities and Exchange Commission were portfolio restrictions, and enhanced disclosure. On a mandated floating NAV, capital buffers for cNAV funds, and redemption restrictions—the regulators differ in their approach.
The topic of regulation was, as ever, present during sessions. Bruce McDougal of BlackRock usefully separated regulations into two overarching areas: as addressing systemic risk, or investor protection.
Regulations concerning systemic risk are trying to provide transparency to regulators, and encompass collateral re-use, hypothecation, pro-cyclicality, and risks arising from fire sale of collateral assets.
While regulations concerning investor protection are trying to address the disclosure of counterparty risk and potential conflicts of interest, disclosure of fees, disclosure of lending agents, and clear and consistent disclosure of net lending revenue.
In a securities lending context, an example of systemic risk would be the Financial Stability Board's (FSB) shadow banking proposals, specifically, the recommendation on imposing minimum haircuts.
By contrast, the FSB also has recommendations that would see fund managers increasing disclosure to their investors, which relates to investor protection.
Kevin Bannerton of Deutsche Bank said that regulators are considering a range of measures, with no clear consensus for global harmonisation of standards at present.
A chart presented by the panel showed that the only rules that were agreed on by the International Organization of Securities Commissions, the European Commission and the US Securities and Exchange Commission were portfolio restrictions, and enhanced disclosure. On a mandated floating NAV, capital buffers for cNAV funds, and redemption restrictions—the regulators differ in their approach.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
