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Today’s GRR (Global Risk Regulator) really highlights the differences between two speeches, the first, given by Sheila Bair of the FDIC and the second, by the (now retiring) Susan Schimdt Bies of the Federal Reserve.
Both of the speeches, and particularly that of Bair, merely reinforce my view that the FDIC has got it drastically wrong and that the Fed actually understand what they are talking about. It is a real pity that it is Bies that is retiring.
I attended the AML / CTF1 session in Perth on Friday with the Minister (Chris Ellison), Greg Mole and Jeff Gray from the Department and KPMG and two things became even clearer about the legislation.
- It is a fundamentally different type of regulation to that which we are used to here – truly risk based; and
- There is a lot of work to be done. Read the rest of this entry »
The more I read about the resignation of Susan Schmidt Bies from the board of the Fed the more convinced I am that the reason behind her leaving is a total disenchantment with the whole Basel II process in the US.
The reason given (“to spend more time with her family”) is the usual one given when you cannot say why you are really leaving. It is just such a cliché as to not be credible. The lack of follow up releases is indicative. Read the rest of this entry »
After my rant yesterday about APRA’s change to the LGD floor – a subject I am yet more convinced on – I was reminded of where APRA are doing it right.
I was browsing through the latest edition of the Global Risk Regulator (sorry – behind a paywall – and a steep one at USD960) when I came across an article on how the German regulator is “trailblazing” in Europe in terms of bank liquidity management by allowing banks to hold liquid assets not by a formulaic method, but by calculating their requirements for themselves. Of course, there are still lower limits in place (the German regulators probably could not help themselves) but these are at least set by the banks and approved by the regulators. Read the rest of this entry »
What is clear to me now is that the US regulators are trying to achieve two, contradictory, objectives. They are:
- Implement Basel II in the US; and
- Not disadvantage the banks that cannot achieve “Advanced” accreditation.
Problem is, you cannot do both. The result is the confusing muddle you now see in the US.
It is confirmed that APRA are seeking to impose a doubling of the minimum capital required for home loans – the banks have all received their letters confirming this over the last couple of days. This will mean two things – a home loan will be both more expensive and difficult to get in Australia.
As background (and without getting too technical) the amount of capital (the safety margin, in a way) that a bank is required to keep against any lending it makes is calculated based on past losses and the current economic situation. The ‘LGD’ is one of the factors in there. Double one of the factors and the safety margin doubles with it. This safety margin costs the bank money – so this is passed on in the form of increased interest charges on the home loan. Read the rest of this entry »
I seem to be getting a few friends sending things through to me over the last few weeks – this one, though, raised a good few laughs. I guess I have been through the audit process a few times, so this all makes some sense.
Warning – if you have never been audited, this will just make you worried, so do not open it.
Mark will probably like this the most.
Over the next week or two (as I get some time) I will be doing a series on the Basel II projects of the majors and the large regionals. All of these are currently targeting “Advanced” accreditation.
I have only been personally involved in a couple of these so the posts in this series will at least partly be based on hearsay, scuttlebutt and may, in some cases, be out of date; so feel free to correct and update as you believe is correct. I also remind you of our comments policy have a look at the FAQ page. I propose to tackle these in alphabetical order, so it will be the ANZ, Commonwealth, HBOSA (BankWest), NAB, St. George, Suncorp, and Westpac. Read the rest of this entry »
The second draft of the proposed rules have now been released, with much of the content having been expected. The big change, though, is to the identification procedures. From my reading of the rules, the scope of s38 has been limited. s38 is the one that allows third party identification – for example one bank carries out an identification procedure and another bank can rely on that procedure. Read the rest of this entry »