New Challenges in Financial Regulation and Supervision
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**Please note the chairman for this course has changed, please visit back for updates**
Tuesday 18 September
IMPACT OF THE CRISIS ON FINANCIAL REGULATION
Charles Freeland, Former Deputy Secretary General, Basel Committe on Banking Supervision
In this session, the chairman will evaluate the major international regulatory developments and will invite participants to discuss those which they anticipate will have the deepest impact on their home institution. The session gives an opportunity for the delegates to give a brief account of their local regulatory system.
The post-crisis regulatory agenda
Charles Goodhart, Professor Emeritus of Banking and Finance, London School of Economics
Regulatory initiatives are continuously developing in response to the financial crisis. Across the globe major supervisors and politicians have acted to establish new prudential regulations, and new institutions to safeguard their practice. In this session a distinguished scholar of central banking and financial regulation will consider the emerging global regulatory landscape and anticipate the difficulties it poses in regard to implementation on a national level. Group discussion will consider key international issues: augmented capital and liquidity requirements, the relationship between micro- and macroprudential supervision, moral hazards in the financial system and regulating the shadow banking sector.
Calibrating capital requirements
Klaus Duellmann, Head of Banking and Financial Supervision Research, Deutsche Bundesbank
In the media and in financial circles the onus been placed firmly on regulators to define how Basel III minimum capital requirements should be applied to institutions headquartered in their jurisdiction. The date of implementation is fast approaching, and by January 1st 2013 legislation and regulation will have to have been completely finalised. However, in a number of countries there remains a concern that regulators will fail to apply the rules with consistency across borders. This session will look at how central banks and regulators can best assess the appropriate requirements for their banking sector and how the implementation period from 2013 onward can be used to ensure institutions adapt to the new capital requirements in timely and efficient fashion. The session will also address how supervisors can make sure financial institutions are using the right models and methods for calculating risk-weighted assets.
Wednesday 19 September
IMPLEMENTING THE BASEL ACCORD
Implementing and regulating new liquidity requirements
Speaker to be confirmed
The Basel Committee's Liquidity Coverage Ratio and Net Stable Funding Ratio have caused controversy since being outlined in 2010. Although the crisis is now considered as much a crisis of liquidity as a credit crisis, there is concern amongst private and public institutions alike that the requirements are unrealistic in attempting to strictly limit maturity mismatching and are to narrow in terms of the definition of core liquid assets. In this session the speaker will facilitate group discussion on these issues and will invite attendees to share how they think these new requirements will affect the banking sector in their jurisdiction. Discussion will focus on how regulators can monitor the effectiveness of the new liquidity rules.
Industry response to new financial regulations 2008-12
Simon Baker, Senior Manager, Financial Services Risk, Ernst and Young LLP
It is widely acknowledged that the crisis showed the brittle nature of the financial network. Regulators and central banks have responded with an overhaul of financial regulation. Yet success will be in the implementation and the private sector response. In this session, the speaker will provide the group with an overview of private sector's efforts to better calibrate risk, build loss absorption and improve internal institutional risk culture. The speaker will highlight good practice examples of liquidity management, deleveraging and capital policy. The benefits of constructive dialogue with regulators will be a recurring theme.
Countercyclicality and the effects on the economy
Stefan Avdjiev, Economist, Bank for International Settlements
In 2012 no one is unaware of the destructive effect a financial crash can have on the wider economy. In an attempt to ensure that the effects of such a crash are mitigated, Basel III introduced a countercyclical buffer requiring banks to retain extra capital during good times. Yet while fine in theory, the reality of policy is far from straightforward. This session will address the issues involved in implementing countercyclical measures, in particular the analysis of when and how to intervene. Time will also be devoted to important related issues, notably accounting standards.
Case study: the ten biggest challenges of implementing Basel III for the Bank of Japan
Tomoki Tanemura, Director, Financial System and Bank Examination Department
Basel III has emerged as a priority for regulators keen to avoid a repeat of the banking crisis that damaged the global economy so deeply in 2008. However, such sweeping regulation cannot be deployed without rising to significant operational and budgetary challenges, in addition to navigating the resistance from the private sector. In this session, a senior figure in regulation and supervision at the Bank of Japan will provide a run-down of the ten most significant challenges that have complicated the progress of Basel III implementation. Focus will centre on how many of these have been overcome, and why some remain obstacles un-passed. Discussion will encourage attendees to identify the challenges which they recognise, asking them to consider if the solutions used by the Bank of Japan could be replicated at their central bank, whilst also encouraging the group to submit their own unique issues to add to the discussion.
The Fundamental Review of the Trading Book: latest approaches to regulation of market risk
Tomoki Tanemura, Director, Financial System and Bank Examination Department
In addition to Basel III, much emphasis from the Basel Committee on Banking Supervision has been placed of its initiative to re-evaluate market risk in the banking system. Basel II-5, as the trading book review became known, was due for implementation by the end of 2011. However, many jurisdictions struggled to meet this deadline following heavy scrutiny over the new rules form the private sector. In response the BCBS trading book working group has published an enhanced set of standards, titled The Fundamental Review of the Trading Book (May 2012). In this session, the speaker from the Bank of Japan, who is also a member of the trading book group who conducted the fundamental review, will explain the process through which these new requirements for market risk were designed, placing emphasis on how they address the concerns of the private sector following Basel II-5.
Thursday 20 September
REGULATING COMPLEX FINANCIAL INSTITUTIONS AND MARKETS
Regulation of systemically important financial institutions
Saad Andari, Second Vice Governor, Central Bank of Lebanon
The rescue of systemically important financial institutions during the current crisis has had a heavy impact on taxpayers money and state budgets - if not triggering a sovereign crisis. Scrutiny is now increasing on how those responsible for regulating the financial system are safeguarding against the potential collapse of systemically important financial institutions. Financial market infrastructures, insurance companies, other non-bank financial institutions and domestic systemically important banks all pose systemic risk in an equal measure. In this session, the speaker will discuss with the group how robust financial regulation can manage the "too big to fail" problem.
Regulating the shadow banking system
Antoine Bouveret, SenIor Economist, ESMA
"Shadow banking has to be understood as involving both in some cases new forms of non-bank interaction between the financial system and the real economy, and as entailing far more complex link within the financial system itself, including between banks and non-bank institutions." These remarks by Adair Turner, co-chair of the FSB's Task Force on Shadow Banking, demonstrate the degree to which shadow banking is a journey into the unknown for regulators. As a result, the establishment of sound regulation for the shadow banking sector has become a priority for regulators. In this session, the speaker from the FSB will explain how and why the board defines shadow banking. She will discuss how regulators can tackle the challenges posed by designing and implementing new and effective regulations for hedge funds, money market funds, private equity funds and securitisation. She will also dedicate time to the arguments for and against stricter enforcements.
Dealing with failed banks: resolution and reorganisation
Maria J. Nieto, Associate Director General of Banking Supervision, Bank of Spain
Limitations in the pre-crisis set-up for dealing with failed banks have been highlighted by major collapses during the crisis and the bail-outs which followed. The fallout from these events has damaged the reputation of the banks, regulators and governments involved and a policy response has been launched by the FSB. In this session the speaker will explore the proposed new governance arrangements; early intervention and new resolution policy tools including bank reorganisation and resolution funds as well as "bail-in" options. Discussion will focus on how regulators can simultaneously allow a large institution to develop as an international entity in its "life" whilst preparing to handle its resolution in its "death".
Implementing reforms to OTC derivative trade
Anthony Belchambers, Chief Executive Officer, Futures and Options Association
Since the crisis, regulators have been prioritising the establishment of stricter rules on OTC derivative trades. This task represents numerous operational challenges for regulators and has been greeted with concern from the private-sector. The Dodd-Frank Act has staunchly followed G20 guidelines that all OTC trades be cleared through central clearing counterparties and reported to licensed trade repositories. The European Commission too submitted its legislative proposal for regulations in EMIR of September 2010. In this session, the group will be encouraged to discuss the political and operational challenges that regulators face in implementing these new rules as well as the implications for the OTC and other markets.
Friday 21 September
THE NEW MACROPRUDENTIAL AGENDA
Fulfilling the macroprudential mandate
Simon Hall, Head of Macroprudential Strategy Unit, Bank of England
The Group of Thirty Working Group on Macroprudential Policy has argued that "the macroprudential supervisor (should) operate under a clearly articulated mandate provided by the country's political leadership and should be accountable to legislatures and the public." Delivering on the responsibilities of macroprudential supervision in the wake of the banking crisis will be undeniably challenging, and often controversial. In this session, the speaker will explore how macroprudential responsibility fits into the wider supervisory and economic policy frameworks and what that means for the institutional structure of financial regulators and relations with other government and central bank policy groups. Discussion will address questions of political independence, the balance between rules and discretion, communication, and encouraging international cooperation.
Assembling the macroprudential toolkit
Richhild Moessner, Senior Economist, Bank for International Settlements
The financial crisis went a long way to debunking the myth that microprudential policy alone is sufficient to supervise the complex and interconnected global financial system. The challenge for central bankers and supervisors is to understand how the various points of the macroprudential jigsaw fit together. In this session, a representative from the Bank for International Settlements will set out a framework for thinking about macroprudential policy in its widest form and will draw conclusions on the key future questions emerging from the international debate.
Chairman's closing thoughts and discussion
Chairman to be confirmed shortly
To conclude the seminar the chairman will assess what has been covered across the four days of discussion and will invite attendees to consider what they can take away from the experience and what they believe still remains unclear.