EBA Issues Good Practices for Banks' ETF Risk Management
On March 7, the European Banking Authority (EBA) issued an opinion addressed to National Supervisory Authorities (NSAs) on good practices for credit institutions in their risk management of exchange traded funds (ETFs).
The EBA's opinion aims to assist bank supervisors in assessing risk when participating in ETF businesses, by setting out high level descriptions of non binding good practice and guidance in relation to managing the key risks encountered by credit institutions. The opinion specifically focuses on funding requirements and liquidity, credit risk and collateral management and market risk. The EBA has noted that how credit institutions choose to implement good practice will differ depending on their individual characteristics and their exact involvement with ETFs.
FSA Report Relating to the LIBOR Scandal
On March 5, The FSA published a report and management response concerning the manipulation of LIBOR. The report finds that the FSA was aware of disruption in the LIBOR market during the period between summer 2007 and early 2009, but such disruption may have been solely caused by volatile market conditions at the time. Nevertheless, the report concludes that the FSA should have considered whether manipulation of the benchmark interest rate was taking place.
The report recommends improvements in the sharing of intelligence between the soon to be established new financial regulatory authorities (FCA and PRA), to ensure that future indications of misbehavior in the LIBOR market are not ignored or missed.
An investigation by the Serious Fraud Office into the manipulation of LIBOR, which has so far resulted in the arrest of three men, is ongoing.
OFT Launches Review into Payday Lending
On February 24, the OFT launched a review of the payday lending sector, to be carried out alongside enforcement actions being taken within the payday lending sector, as a result of concerns that certain payday lenders were taking advantage of people in financial difficulty.
The OFT will carry out on-site investigations of 50 major payday lenders and review whether they are complying with both the Consumer Credit Act and its guidance on irresponsible lending. The review will focus on: (i) loans which are given to borrowers without sufficient evaluation of repayment likelihood; (ii) inappropriate targeting of groups; and (iii) rolling loans which result in escalating charges.
The OFT intends that the review will increase industry standards, improve customer protection and force non compliant payday lenders to give up their licenses.