Week InReview | Financial Sector Must Better Manage Climate Risks

The financial sector needs to build up its expertise in managing the risks of climate change, according to Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board, who spoke during the spring meetings of the International Monetary Fund and World Bank.  Carney calls this a "tragedy of the horizons." 

"It's not something we've had to do outside of insurance, because those risks, from a financial perspective, are largely over a [time] horizon much beyond that of private actors."  An international agreement on climate change reached in Paris at the end of 2015 "starts to change that," Carney said.

Around the same time the Paris deal was reached, the FSB formed an industry-led task force to develop by year's end a set of global benchmarks that companies should follow when reporting on climate-related risks so that lenders, insurers, investors and others in the financial sector have the information they need to watch out for risks.
Friday, April 22, 2016
Let's recap
In case you missed it . . .
Limit up-limit down plan
SEC extends pilot period for 1 year
(Apr 21) The Securities and Exchange Commission issued an order that extends the pilot period for a "National Market System Plan to Address Extraordinary Market Volatility," commonly known as the limit up-limit down plan (LULD). 
  • The SEC also modified how the LULD plan establishes a reference price in cases where a security doesn't trade in opening auction on primary listing exchange.
  • Under those circumstances, the reference price for a security will be the previous day's closing price, or, if there isn't a closing price, the last reported sale price on the primary listing exchange will be used.
  • The SEC says the modification is "appropriate to potentially prevent unnecessary trading pauses that are unrelated to extraordinary volatility."
Rollover, fee advice
SEC examiners zero in
(Apr 20) Retirement account rollovers, fee selection and share class advice given by investment advisers are all attracting additional scrutiny by Securities and Exchange Commission examiners. 
  • The priorities of the agency's Office of Compliance Inspections and Examinations are changing as examiners move from handling broker-dealer exams to investment advisers.
  • When rolling over employer managed-retirement accounts to individual ones managed by advisers, those advisers have a duty to tell clients whether the move is in their best interest.
  • The OCIE is also focused on whether advisers recommend account types, share classes and fee or commission structures that are in a client's best interest.
Basel on track with global post-crisis reforms
... says regulator's secretary general
(Apr 19)  The Basel Committee on Banking Supervision is "well on track" to wrap up global post-crisis regulatory reforms, says William Coen, the regulator's secretary general.
  • "As it does, it will continue to be guided by three overarching principles: (i) a firm commitment to enhancing global financial stability, (ii) an extensive consultation process with a wide range of stakeholders, and (iii) a comprehensive and rigorous assessment of the impact of its reforms," Coen wrote in an article prepared for a conference in Amsterdam.
  • "In assessing the impact of post-crisis reforms, it is important to take a medium-term perspective. The Basel III reforms are expected to have a transitional impact; they were introduced to tackle the major fault lines highlighted by the financial crisis. But in the medium-term, a banking system that is resilient will be able to support the real economy and contribute positively to growth. This is ultimately the key outcome for society."
  • Banks have made "impressive progress" toward meeting Basel III requirements, Coen says.
Binge reading disorder
Hand-curated, chosen with love
Everyone worries too much about 'Black Swans'

Asset managers, prepare to have your business disrupted

Active managers smash passive -- in the UK

Say goodbye to the Fed you once knew

Treasury market's fastest traders don't like trading Treasuries
Transparency.
Inclusiveness.
Consensus.