Week InReview
In ICYMI: Can you have your corporate bonds and eat them too? | ISDA initiative to simplify FRTB compliance | Compliance officials can seek guidance from many sources | FSB now working with CPMI and IOSCO to ensure that CCPs do not become too-big-to-fail  |  Bond market liquidity's 'new normal' in Binge Reading Disorder
Friday, July 29, 2016
Let's recap
In case you missed it . . .
FRTB compliance simplified
New ISDA initiative 
(Jul 28)  Derivatives trade body ISDA plans to develop a standard set of data requirements to help banks comply with the Basel Committee's fundamental review of the trading book. The FRTB overhauls how banks calculate their risk-weighted assets which form part of the equation that calculates banks' overall capital ratios.  ISDA aims to reach a common industry consensus on the interpretation of risk-factor modellability rules under the FRTB.  It then hopes to come up with a shared set of business requirements to support risk-factor assessment and data capture.  As an example, a risk factor must have at least 24 observations per year, with a maximum period of one month between observations.  An ISDA study earlier this year found that non-modellable risk factors could account for 30 percent of the internal models approach capital charge.  ISDA will establish a working group to lead and facilitate industry efforts to develop standard data requirements.  The working group will engage with both data vendors and regulators throughout the project.
Derivatives CCOs seeking guidance
CFTC says it can come from many sources
(Jul 25)  Derivatives industry chief compliance officers (CCOs) are allowed to confer with senior managers at their firm - not just with chief executive officers and board members - Commodity Futures Trading Commission staff clarified. CCOs, especially  at larger firms where swap dealing isn't a major part of their business, can benefit from having a bigger pool of managers with whom to discuss compliance issues.  In addition to directors and chief executives, other senior managers in a firm with relevant experience "are likely to provide meaningful insights and assistance" to CCOs. Under the Commodity Exchange Act (CEA), CCOs of swap dealers, futures commission merchants and major swap participants are required to report directly to the board or to the firm's senior officer and to meet with either the CEO or the board at least once a year.
Ensuring CCPs aren't TBTF
FSB to work with CPMI & IOSCO
(Jul 24) Mark Carney, chairman of the Financial Stability Board gave  G20 finance ministers and central bank governors a heads up on the FSB's plans to enhance CCP (central counterparty) resilience. "Since CCPs are themselves systemic, the FSB is now working with CPMI and IOSCO to ensure that CCPs do not become too-big-to-fail. This work is focused on strengthening CCP resilience, including in relation to their ability to recover after shocks, and to be resolved in the event that recovery efforts do not succeed."
  • In the coming weeks, CPMI-IOSCO will issue proposals on "financial market infrastructure governance, credit and liquidity stress testing, coverage of financial resources, margin, and a CCP's contributions of its financial resources to losses," Carney said.
  • By the Sept 4-5 Hangzhou summit, the FSB will publish high-level guidance on CCP resolution. "In early 2017, the FSB will issue for public consultation standards or guidance for CCP resolution planning, resolution strategies and resolution tools. These will be finalised by the time of the 2017 G20 Summit," Carney says.
  • By the Hangzhou summit, the FSB will publish members' plans to remove legal and regulatory barriers to the reporting of OTC derivatives to trade repositories and facilitate authorities' access to data.
  • Also at that time, the FSB will report on progress in reducing misconduct risk.
  • By the end of 2016, the FSB will update the G-SIFI list.
Binge reading disorder
Hand-curated, chosen with love
What housing policymakers can learn  from dating websites
- Bank Underground (Bank of England staff blog)

Chai House Chat: lack of bond market liquidity is 'new normal'

A good  revolving-door story : An SEC official helped work on regulations that made it harder for banks to compete in bond trading, and then left government to make money in the space that was newly cleared of competition

The incalculable value of finding a job you love 

Vatican signs financial-cooperation agreement with Bank of Italy
Transparency.
Inclusiveness.
Consensus.