standard chartered presentation by barbara ridpath

7/31/2019 Standard Chartered Presentation by Barbara Ridpath

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International Centre for Financial Regulation 2010. All rights reserved. 1

While you were away: An update onregulatory developments

September 2011www.icffr.org


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Agenda

Background: setting the scene Key recent actions

Whos who?

State of play US

Europe

Business Implications Conclusion and discussion


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About the ICFR

The only independent, non-partisan organisation exclusively focused onbest practice in all aspects of financial regulation internationally.

Operating in developed and emerging markets, we deliver work throughresearch, events and training, that seek to be practical and focussed onoutcomes.

We believe in the promotion of efficient, orderly and fair markets whichoffer appropriate protection for investors and retail consumers alike.Financial centres of the future should be based upon sound principles ofregulation, with supervisors, regulators and participants who act in theinterest of all stakeholders.

The ICFR intends to play a crucial part in facilitating this.


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ICFRs Structure

Research

The ICFR encourages,develops and supportsnon-partisan and innovativeresearch into a wide rangeof topics on the regulationof financial servicesglobally.

We draw on a broad varietyof sources and partners.

Events

ICFR events are designedto improve understanding,promote dialogue, and lookto innovative solutions onsubjects within internationalfinancial regulation.

We hold a regular series of

events ranging frombreakfast briefings andknowledge sessions toinvitation-only forums andlarge international

conferences.

Training

The ICFR will train onregulation, compliance, riskmanagement, and relatedknowledge and skills.

We will help the financialsector and its regulatorsaround the world toconnect with relevantexisting training offeringsand to address gaps.

MemberOrganisations

ICFR AcademicPanel

ICFR InternationalAdvisory Council

ICFR

ICFR Board


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Basel II, CRD Iimplemented

Global liquiditydeteriorates

Northern Rockbailout

Lehman filesfor bankruptcy

Fannie Mae andFreddie Macbailout:$110bn

AIG bailout$85bn

Obama elected

Dow hits 12-yrbottom

Madoffsentenced

Recap of the Financial Crisis

G20Washington

G20London

G20Pittsburgh

CRD IIadopted inParliament

NOTE: the blue line is the Dow Jones Industrial Average


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8/28 International Centre for Financial Regulation 2010. All rights reserved. 8

Sept Nov 2012 2013 2014 2015 2016 2017 2018 2019

The Way Forward?

Proposalsfor G-SIFIs

G20Mexico

Most CRD IVpoints in place

Solvency IIin effect

Basel III finalimplementationdeadline

Solvency IIimplementationdeadline

Extra capitalsurchargefor SIFIs

AIFMimplementationdeadline

LCRimplementationdeadline

NSFRimplementationdeadline

US presidentialelection

FSBconsultationdeadline (SIFIs)

G20

Cannes



Key Recent Actions



June July August

Markets ECB raises interestrates

US downgraded to

AA+Fed to keep rates lowfor indefinite futureUS and EU stocksplummetEU bank concerns

LegislatorsUS: deficit debatesUK: Osborneendorses ring-fencing

EU: Transaction taxmooted again

Regulators BIS: SIFIidentification andsurcharges

EU: new capitalrulesEBA releases

stress testsFSB: resolutionplans for SIFIs

IOSCO: Derivativestransaction datapublicationShort-sellingrestrictions re-imposedand extended in selectEuropean countries

A Busy Summer



Whos Who?



G20


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European Regulatory Structure

Microprudential

Super

vision

ECB

EUROPEAN SYSTEMIC RISK BOARD (ESBR)

President ECB,Vice-President & 27EU national Central

Bank Governors

Chairs of 3authorities: EBA,EIOPA & ESMA

EuropeanCommission

Observers:National Supervisor

RepsChair of Economic

& FinancialCommittee

Micro-prudential information Information on systemic risk

EUROPEAN SYSTEM OF FINANCIAL SUPERVISORS (ESFS)Steering Committee

National BankingSupervisors

National Insurance &Pension Supervisors

National SecuritiesSupervisors

European Securities& Markets Authority

(ESMA)

European Insurance& Occupational

Pensions Authority(EIOPA)

European BankingAuthority (EBA)

Macroprudential

Supervision

ECOFIN: Earlyrisk warnings &

policyrecommendati

ons togovernments


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EBC

Commission Parliament

EIOPC ESC FCC

EnforcementCommission

Council

L1

L2

L3

L4

Legislation

Implementing details

Convergence

EIOPA = European Insurance and Occupational Pensions AgencyEBA = European Banking AgencyEBC = European Banking CommitteeEIOPC = European Insurance and Occupational Pensions CommitteeESC = European Securities CommitteeESMA = European Securities Market AgencyFCC = Financial Conglomerates Committee

Finance ministries

Supervisors and

Central Banks

Supervisors

Source: Professor Kern Alexander


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FINANCIAL STABILITY OVERSIGHTBOARD

OTS

InvestmentAdvisory Derivatives

ConsumerLending

CommercialLending

Broker-dealer

RetailBanking

AlternativeInvestment

s

InvestmentBanking

Payment andClearingSystems

SEC

FINRA

CFTC OCCFEDERALRESERVE

OFFICE OFFINANCIALRESEARCH

CFPB

FDIC

State RegulatoryAuthorities and AGs

OFAC/FinCEN

Source: JP Morgan Chase & Co.


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State of Play: Where are We?


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US Dodd-Frank Act: an

Introduction

A. The Act

1. The nature of an omnibus act

2. The Act and the implementation of regulation

3. When is a deadline not a deadline?

B. The Actorsor death by a thousand cuts

1. Congress

2. The impact of budget constraints3. Internecine warfare


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Is Bigger Necessarily Better?


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US: Dodd-Frank Act

A. Volcker Rule Prohibits investments in private equity funds or hedge funds

It applies also to foreign banks with US branches and US bank holding companies

However they can continue to make investments outside the US in proprietarytrading, effectively pushing such business offshore

The Fed may grant extensions for certain cases (1, 3, or more years)

Exempt transactions:

transactions on the behalf of the customer

Transactions in the obligations of the US or US agencies(Freddie Mac,Fannie Mae..)

B. Hedge funds: Any hedge fund with at least $100m in assets will have to register with the SEC.


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US: Dodd-Frank Act(2)

Exemptions: Foreign hedge funds that do not have a place of business in the US,have fewer than 15 clients and have less than $25m in assets.

Foreign fund managers of such funds must not serve as investment managers of aninvestment company registered under US investment company act.

C. Derivatives New rules to define swaps.

End user exception to mandatory clearing on security-based swaps.

Rule on registration and regulation of securities-based swaps.

Rule on securities based swap clearing agencies.

The Act prohibits insured US banks and branches of foreign banks from engagingin a variety of swaps businesses.

Exemption: insured depository institutions are not subject if their swapsare limited to hedging and other risk mitigation activities or transactioninvolving rates. Foreign banks are not exempt.


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US: Dodd-Frank Act(3)

SEC or CFTC can ban a certain entities from engaging in swap transactions in theUS for specific cases (undermines the stability of the US financial system)

D. Legal Entity Identifier (LEI) To help monitor systemic risk

Overseen by Office of Financial Research with international support

Securities industry to come up with a plan for creating and distributing them

LEI to be developed and maintained by international voluntary consensusstandards body

CFTC issuing LEI standards around derivatives

E. Whistleblower provision To report conduct which is believed constitutes a violation of federal law relating to

financial, securities or shareholder fraud Whistle-blowers to get 10 30% of sanctions collected

High-quality, original information required

SEC must collect over US$1m in sanctions


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US: Beyond Dodd-Frank

FATCA (Foreign Account Tax Compliance Act)U.S. Treasury Code Sections 1471 through 1474

Effective for payments after December 31, 2012

All foreign financial institutions (FFIs) will be required to enter into disclosure complianceagreements with the U.S. Treasury, and all non-financial foreign entities (NFFEs) mustreport and/or certify their ownership or be subject to the same 30 percent withholding.

This new reporting and withholding regime will ultimately impact current account openingprocesses, transaction processing systems and know your customer procedures utilized

by foreign banks. Chief compliance officers, tax reporting heads and other key players willneed to evaluate the potential impact of these regulations and develop a plan formanaging and remediating any potential risk associated with Foreign Account TaxCompliance Act (FATCA) non-compliance.

Source: Deloittes


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EU: Alphabet Soup

AIFMD

EMIR

CRD

MiFID II

EIOP

A ESMAEBA

ESRB MAD?

ESFS


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EU CRD IV = Capital Requirements Directive = Banking regulation

Issued July 2011 Based on BCBS recommendations but less stringent

Entry into force: Jan 2013; Full implementation: Jan 2019

AIFMD =Fund Management Directive=treatment of hedge funds

Regulations on third-country issues due late summer

Technical rules submission postponed to16 Nov 2011 EMIR =Market Infrastructure=CCPs and some OTC derivatives issues

Current problems: coverage of derivatives & powers of ESMA

Due for second hearing in Autumn 2011; Adoption possibly in Feb/Mar2012

MiFID II = Securities = high speed trading, trade execution Proposal delayed from Jul to Oct 2011

Planned legislation: Late 2011/Early 2012

Transparency = Corporate Governance; Remuneration


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More Europe or Less Europe?

What are the issues?

EFSF: European Financial Stability Fund

Fiscal authority

The Eurozone and the periphery


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Whats Missing?

Convergence Macroprudential tools

SIFIs

Cross-border crisis resolution and living wills Bank liability structures; tax deductibility of debt


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Business Implications and

conclusions Managing under uncertainty Growth and the impact of regulation on growth

Future profitability by business line future structure and strategy of

banks

Costs of implementation, particularly where regulations differ by

jurisdiction : Information technology

Compliance

Future ROE and impact on:

Ability to raise equity Compensation

Other?


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For further information

www.icffr.orghttp://www.icffr.org/Research/Regulatory-Round-ups/2011/September-2011/While-You-

Were-Away.aspx
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