Resolving Financial Institutions – A Joint Paper by the FDIC and the Bank of England
On December 10, the Bank of England (the Bank) and the Federal Deposit Insurance Corporation (the FDIC) published a joint paper entitled ‘Resolving Globally Active, Systemically Important, Financial Institutions’ (G-SIFIs). The joint paper sets out the strategies that the Bank and the FDIC have designed to enable large and complex cross-border firms to be resolved without threatening financial stability or putting public funds at risk. The paper builds on the work of the Financial Stability Board, and focuses on the application of “top-down” resolution strategies whereby a single resolution authority applies its powers at parent company level.
In the UK, this will involve the use of the powers under the Banking Act 2009 and those that are anticipated to be provided by the European Union Recovery and Resolution Directive and the Financial Services Bill, and will involve the bail-in (write-down or conversion) of creditors at the top of the group in order to restore the whole group to solvency.
Formal Request to ESMA for Technical Advice on the Evaluation of the Short Selling Regulation
On December 10, ESMA published a formal request it had received from the European Commission for technical advice on the observable effects of the Short Selling Regulation since its coming into force on November 1, 2012.
Amongst the specific questions ESMA has been asked to answer are:
1. To what extent any temporary restrictions and bans imposed by competent authorities on short selling have had any positive
2. To what extent the thresholds set for notification to national regulators and public disclosure are appropriate; and
3. Whether the exemption for market makers allows for liquidity provision without undue circumvention.
The European Commission is obliged to report on the issues above to the European Parliament and the Council by June 30, 2013. It has asked ESMA to deliver its technical advice by May 31, 2013. Market participants can expect ESMA to launch a consultation shortly, with a deadline for responses sometime in the spring of 2013.
On December 11, the Serious Fraud Office (the SFO) published a press release stating that three men had been arrested and interviewed in relation to its investigation into the manipulation of LIBOR. Although the three men have not been charged with wrongdoing, the move is being reported as indicative of a shift of focus in the LIBOR investigation away from institutions and onto individuals, as well as a shift of focus away from banks and onto brokers.
On December 13, the FSA published a press release announcing that Thomas Ammann, a former investment banker and FSA Approved Person at Mizuho International plc, had been sentenced to 2 years and 8 months imprisonment for two counts of insider dealing and two counts of encouraging insider dealing. The press release stated that Mr Ammann received profits of several hundred thousand dollars through insider dealing relating to the acquisition of Océ by Canon, who were being advised by MIP at the time. The FSA makes no criticism of Mizuho International plc.