Managing Regulatory Change
Bank capital and liquidity
Bank capital and liquidity rules continue to be upgraded in all regions of the globe. The US regulators are in the process of finalizing their implementation of Basel III rules, in particular the roll-out of SACCR. There is also a review of how to make leverage a back-stop to risk capital estimation, rather than a binding constraints. Post Covid, there is increased review of developing stressed liquidity modelling done by banks, in addition to the regulatory rules of LCR and NSFR.
The recent events of liquidity crisis at US regional banks highlight the importance of having robust liquidity assessment frameworks, with independent review and challenge, to protect firms during periods of market crisis.
The Panoramix team is very experienced at managing capital and liquidity constraints for capital markets businesses, and developing transfer pricing and capital attribution models for business assessment.
Uncleared margin rules
Following the financial crisis of 2008,-2009 regulators wished to increase transparency, reduce systemic risk and increase the resilience of markets, especially in times of stress, and responded by recommended the introduction on the UMR (Uncleared Margin Rules).
UMR are a set of rules that apply to margin (collateral) on uncleared OTC derivatives, and require all parties in scope to post margin to a third party institution for safe keeping.The introduction of UMR was introduced in a phased approach with the biggest financial institutions adopting UMR is 2016 with the final phase introduced in 2022.
The team at Panoramix has a deep understanding of UMR, and how to help clients manage efficiently between their cleared and bi-lateral businesses.
Stock loan and Swap reporting
In late November 2021, the US Securities and Exchange Commission (SEC) announced a new US trade reporting regime that it expects to bring greater transparency for the securities lending industry.
The proposals, which were unveiled by the SEC under Exchange Act Rule 10c-1, require lenders to report the material terms of securities lending transactions to a registered national securities association (RNSA), along with details of securities on loan and available for loan. With a similar transparency goal in mind, on December 15, 2021, the Securities and Exchange Commission (SEC) voted 3-2 to approve proposed rules that, among other things, would add new Rule 10B-1 to require a prompt disclosure of large security-based swap (SBS) positions, including credit default swaps (CDS) and total return swaps, that exceed a specified threshold.