Financial Regulatory Developments Focus - June 2015

by Shearman & Sterling LLP

In This Issue:

- US Board of Governors of the Federal Reserve System Proposes Rule to Treat US Municipal Securities as Level 2B High-Quality Liquid Assets under the Liquidity Coverage Ratio

- US Financial Stability Oversight Council Releases Annual Report

- US Federal Bank Regulatory Agencies Seek Further Comment on Interagency Effort to Reduce Regulatory Burden

- Final EU Guidelines on the Management of Interest Rate Risk Arising from Non-Trading Activities

- European Banking Authority Publishes Report on Additional Tier 1 Capital Instruments

- UK Financial Conduct Authority Publishes Letter to Certain Firms on the Application of Malus

- UK Prudential Regulation Authority Consults on Board Responsibilities

- UK Prudential Regulation Authority Publishes Policy Statement on Ring Fencing Rules

- European Commission Launches Consultation on the Review of the European Market Infrastructure Regulation

- European Securities and Markets Authority Publishes Opinion on the Composition of CCP Colleges

- US Financial Regulators Impose Fines on Six Major Banking Organizations for Practices in the Foreign Exchange Markets

- US Securities and Exchange Commission Charges Deutsche Bank with Misstating Financial Reports during Financial Crisis

- UK Financial Conduct Authority Fines Barclays for FX Failings

- European Commission Adopts Better Regulation Agenda

- UK Financial Conduct Authority Launches Market Study into Competition in Investment and Corporate Banking

- Bank of England Publishes Guidance on Traded Risk Methodology for Stress Test of UK Banking System together with Traded Risk and Structured Finance Scenario

- Regulation on European Long-Term Investment Funds

- European Securities and Markets Authority Calls for Amendment of UCITS Directive to Eliminate Conflict with European Market Infrastructure Regulation

- European Banking Authority Publishes Final Guidelines on Implementation of Resolution Tools

- Bank of England Consults on Proposed Approach to Removing Impediments to Resolvability

- Prudential Regulation Authority Publishes Revised Rules for Depositor and Dormant Account Protection

- Prudential Regulation Authority Consults on Contractual Stays in Financial Contracts Governed by Third-Country Law

- European Banking Authority Publishes Final Guidelines on Firms Considered as Failing or Likely to Fail

- Benjamin Lawsky to Step Down as New York Superintendent of Financial Services

- CFTC Announces International Affairs Director Sarah Josephson to Assume New Role at Agency

- US Securities and Exchange Commission Names Andrew J. Donohue as Chief of Staff

- Upcoming Events

- Contacts

- Excerpt from US Board of Governors of the Federal Reserve System Proposes Rule to Treat US Municipal Securities as Level 2B High-Quality Liquid Assets under the Liquidity Coverage Ratio -

On May 21, 2015, the US Board of Governors of the Federal Reserve System issued a proposal adding certain general obligation state and municipal bonds to the range of assets a banking organization may use to satisfy the Liquidity Coverage Ratio requirement. Under the LCR requirement adopted by the federal banking agencies in September 2014, large banking organizations are required to hold High-Quality Liquid Assets that can be easily and quickly converted into cash within 30 days during a period of financial stress. The proposed rule would allow investment grade, general obligation US state and municipal bonds to be counted as HQLA up to certain levels if they meet the same liquidity criteria that currently apply to corporate debt securities. The limits on the amount of a state or municipality’s bonds that could qualify are based on the specific liquidity characteristics of the bonds. The proposed rule would apply only to entities subject to the LCR and supervised by the Federal Reserve Board. The deadline for comments on the proposed rule is July 24, 2015.

Please see full Newsletter below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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