François Laurent, chair of the ROC Chair, says: “The MOU sets the basis for a fruitful cooperation between the ROC and DSB to ensure that the UPI system operates smoothly and effectively.” Emma Kalliomaki, managing director of the DSB, adds: “We are working hard to ensure that...

A staged transition away from the London interbank offered rate is underway globally, but immediately ending the London interbank offered rate by court order would likely harm consumers and businesses, the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York said in a filing Friday in federal court in San Francisco.

Some big banks are evaluating if the reference rate that is backed by regulators as the best replacement for the scandal-plagued London interbank offered rate is the only option for companies, or if they should offer other rates.

Many large U.S. financial institutions are providing the Secured Overnight Financing Rate, or SOFR, to corporate borrowers as part of the transition away from Libor.

Federal Reserve officials are nearing agreement to begin scaling back their easy money policies in about three months if the economic recovery continues, with some pushing to end their asset-purchase program by the middle of next year.

In recent interviews and public statements, several have advocated for this timetable, which would enable them to raise interest rates sooner than currently anticipated if the economy makes rapid progress toward their goals.

The central bank last December said it would continue the current pace of bond purchases until officials concluded they had achieved “substantial further progress” toward their goals of 2% average inflation and robust employment.

Officials at their July 27-28 meeting deliberated on two important questions: when to start paring their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities, and how quickly to reduce, or taper, them. The Fed is set to release on...

Shifting policy views amid unexpected economic data have opened the door for the Federal Reserve to announce in September a decision to taper its assets purchases and begin the reduction in buying a month or so after.

Interviews with officials along with their public comments show growing support for a faster taper timeline than markets had expected a month ago. Those changing views follow the strong jobs data of the past two months along with higher inflation readings.

By Liz Field May 18, 2021, Money Marketing Now that we have left the European Union (EU), HM Treasury, the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) are bringing forward new post-Brexit regulations in the areas of both financial and operational resilience – the scale of which are likely to have a significant impact on UK wealth management and large advice firms.

Dealing with the issue of financial resilience, the Investment Firm Prudential Regime (IFPR) has been designed specifically for MiFID investment firms to ensure they have sufficient strength and flexibility to withstand volatility in the economic cycle.full article

By Nicholas Pratt May 12, 2021, Funds Europe A lack of accessible product data is the leading governance concern among asset managers, according to a recent study.

The research, jointly conducted by IT services consultancy Idea Group and financial consultancy Devlin Mambo, asked the five participating European asset managers to name their most pressing regulatory-related challenge.full article

By Simon Clark May 16, 2021, The Wall Street Journal Central banks, the most powerful financial institutions in the world, want to become the guardians of the environment as well.

The central banks say climate change is a financial and economic risk. They believe rising sea levels, more wildfires and bigger storms could cause shortages that spur inflation, the regulators’ traditional nemesis.full article

By Karry Lai May 13, 2021, Practice Insight from IFLR Japan’s multi-rate regime for the Libor transition provides several alternatives for market participants, but it will also pose risks as a lack of focus on a single rate could lead to liquidity fragmentation, according to panelists at ISDA’s annual general meeting this week.  

The alternatives to Libor are: the Tokyo overnight average rate (TONA) which is administered by the Bank of Japan and is an overnight unsecured interbank interest rate based on actual transactions in the broker market; the Tokyo term risk free rate (TORF) which is administered by Quick Benchmarks and is a forward-looking term risk-free rate based on TONA overnight index swap (OIS) transactions and quotes; and the JPY Tibor (Tokyo interbank offered rate) which is administered by the JBA Tibor Administration (JBATA) and is a term unsecured interbank interest rate in the unsecured call market based on actual transactions, quotes...

By David Milliken May 12, 2021, Reuters Bank of England Governor Andrew Bailey said regulators needed to come up with reforms that address vulnerabilities in money market funds which were exposed by the “dash for cash” at the onset of the Coronavirus pandemic last year.

Investors in British money market funds withdrew 25 billion pounds ($35 billion), equivalent to 10% of their total holdings, between March 12 and March 20 last year, contributing to the BOE’s decision to restart both its bond purchase program and an emergency repo facility.full article

By Alice Tchernookova May 13, 2021, Practice Insight from IFLR Four full months have now passed since the end of the Brexit transition period, and settings in the financial regulation space are about to change significantly, sources have claimed. 

While EU and UK policies have largely remained aligned to this date, each side is now pursuing their own regulatory agenda, with views to serve their best interest. As a result, market participants could begin to face more pronounced regulatory divergence. full article

By Lucy McNulty May 13, 2021, Financial News The British prime minister’s office has called on European Union officials to use the Brexit trade deal to resolve issues arising from the UK’s European trading bloc split, instead of issuing threats.

The comments follow reports that France had sought to delay formal approval of a post-Brexit regulatory cooperation agreement for financial services amid a spat with the UK over post-Brexit fishing rights.full article

By Philip Alexander May 14, 2021, Risk The US issued its first Treasury bonds to pay for the war of independence in the eighteenth century. The first Treasury bill auctions were held almost a century ago, during the Great Depression in 1929. Since those troubled times, US Treasuries have become one of the most liquid and reliable assets in the world.But that reliability cannot be taken for granted. The past year has seen new stresses in the market, with auctions stumbling as issuance surges. The structure of the market and the mix of participants have changed, with trading technology evolving quickly over the past decade. The sheer dependability of Treasuries, however, combined with the fragmented US regulatory landscape, has meant no-one has ever taken a comprehensive look at how the entire market functions.full article

By Sharon Thiruchelvam May 12, 2021, Risk Chaos in the US Treasuries market in March 2020 was at least in part excusable, as the whole economy dashed for cash in expectation of a lockdown to combat the spread of COVID-19. But primary auction stumbles in February and March 2021 were less easy to explain away.

They have prompted the US Treasury to summon federal regulatory agencies together for a comprehensive review process to search for and alleviate any structural weaknesses in the Treasuries market and safeguard liquidity in what is supposed to be the world’s most reliable asset class.

full article

By Brian Chappatta May 11, 2021, Bloomberg If the Federal Reserve is truly as outcome-based as it claims to be under its new policy framework, it should start winding down its purchases of mortgage-backed securities. The fact that it’s not even thinking about doing so is revealing about just how hesitant it is to make even the slightest tweaks to monetary policy at this point in the economic recovery.

Lost in the shuffle last week amid all the Fedspeak about inflation and Friday’s shocking jobs report were comments from Boston Fed President Eric Rosengren. “My own personal view is that the mortgage market probably doesn’t need as much support now. And in fact, one of my financial stability concerns would be if the housing market gets too overheated,” he said. “I do think that as we think about tapering one of the things that we are going to have to think about is at what speed we taper the Treasuries versus the mortgage-backed...

By Huw Jones May 13, 2021, Reuters Britain’s financial services sector won’t get access to the European Union’s markets for the foreseeable future following Brexit, industry officials said on Thursday as a row with France simmers.

Britain fully left the EU on Dec. 31, 2020 and the City of London has been largely cut off from providing services in the bloc.full article

By Huw Jones May 13, 2021, Reuters Banks are encouraged to scrap Libor for pricing derivatives contracts from mid-June, Britain’s financial regulators said on Thursday, piling pressure on markets to speed up the long-anticipated demise of the tarnished interest rate benchmark.

Regulators have set a Dec. 31 global deadline for ending the use of the London Interbank Offered Rate or Libor in pricing new contracts such as home loans and credit cards.full article

The standing repo facility (SRF) launched by the Federal Reserve on July 28 may not be enough in itself to fix the cracks in the US Treasury market, experts say.

The facility, which conducts overnight repo operations against Treasuries and federal agency bonds, was designed as a liquidity backstop to ensure smooth money-market functioning in times of stress.

Sceptics argue the SRF, which is currently open only to primary dealers, fails to address broader, more urgent problems undermining US

The market disruption and volatility touched off by the Covid-19 pandemic subjected the ETF market to a severe real-world stress test, which it passed with flying colours according to a review by the International Organization of Securities Commissions (IOSCO).

The umbrella group of global securities regulators published a report detailing the results of a review of how well the ETF market operated both during and after the extreme volatility that arose in March 2020.

The International Organization of Securities Commissions (IOSCO) has issued a consultation with the market to tackle the lack of transparency and consistency underpinning data reporting across different industries and geographies.

The regulator is aiming to help members understand the implications of ESG ratings and data providers’ activities and help mitigate against resulting risks.

So far, the organisation said methodological shortcomings in data gathering could lead to inconsistencies in investment strategies and concerns around conflicts of interest including fee structures and insufficient separation of business lines that provide advisory services to issuers to improve their ratings performance.

IOSCO added these shortcomings are significant, given the market for ESG ratings and data has grown – and will continue doing so – with investors at risk of being exposed to greenwashing while trying to align their portfolios with...

(Bloomberg) -- In a stark contrast to a year ago when states and local governments hit by the pandemic had to woo skittish investors, more issuers are selling municipal bonds through competitive auctions that put the risk on underwriters.

The amount of long-term bonds sold through competitive deals has risen to $64.6 billion so far this year, a 32% increase from the same period of 2020 and the highest for the year-to-date period since 2016, according to data compiled by Bloomberg. Meanwhile, the volume of long-term bonds sold through a negotiated offering -- still the bulk of the market -- has gained 2.7% to about $211.8 billion, the data show.

In a competitively priced deal, underwriters bid for and buy the bonds and then have to sell them no matter the market conditions. In negotiated offerings, banks are hired in advance to set the interest rates and line up buyers for the securities.

Right now, investor demand for tax-exempt debt is so great...

(Bloomberg) -- President Joe Biden plans to name Rostin Behnam to lead the U.S. Commodity Futures Trading Commission, which oversees much of the $582 trillion global derivatives market including cryptocurrency trading, according to people with knowledge of the matter.

The White House recently selected Behnam, who’s been leading the agency on an interim basis since January, according to the people who weren’t authorized to speak publicly. The timing of an announcement is still weeks away, the people said.

The pick would end months of speculation over who will oversee the Wall Street regulator that’s become significantly more powerful since the financial crisis. A White House spokesman declined to comment and CFTC officials didn’t respond to requests for comment.

Behnam’s nomination means that the CFTC will likely spend more time on issues like climate change. Behnam’s profile rose last year after he sponsored a report by an industry group that...