The Shadow Financial Regulatory Committee works to identify and analyze developing trends and ongoing events that promise to affect the efficiency and safe operation of sectors of the financial services industry; explore the spectrum of short- and long-term implications of emerging problems and policy changes; help develop private, regulatory and legislative responses to such problems that promote efficiency and safety and further the public interest; and to assess and respond to proposed and actual public policy initiatives with respect to the impact on the public interest.
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There has been an ongoing controversy over whether money market funds (MMFs) pose a possible risk of systemic runs because of the prevailing policy of redeeming shares at a fixed par value of $1 even if the net asset value (NAV) of a share has fallen below that number.
Senators Sherrod Brown and David Vitter recently introduced the Terminating Bailouts for Taxpayer Fairness Act (TBTF Act, get it?) in which they propose to increase capital requirements for the largest bank holding companies (BHCs) by scrapping Basel III and substituting a 15% leverage ratio for all BHCs larger than $500 billion.
With the intention of enhancing financial stability, Title VII of the 2010 Dodd-Frank Act (DFA) seeks to set up a framework in which most standardized over-the-counter (OTC) derivatives will be cleared through registered central clearing parties (CCPs).
The Chicago Mercantile Exchange (CME) has accused researchers at the Commodities Futures Trading Commission (CFTC) of making illegal use of sensitive market data provided by private sources for research purposes.
In the past two weeks several events have emphasized the need for a simple and reliable measure of capital adequacy at large banks, which does not rely on risk-weighting assets and is less susceptible to manipulation:
The Qualified Mortgage (QM) rule recently finalized by the Consumer Financial Protection Bureau (CFPB) is a highly complex regulation with a contradiction at its core.
In response to the financial crisis, the Basel Committee proposed to reduce the vulnerability of the banking system to a liquidity shock by introducing a regulatory Liquidity Coverage Ratio. In January the Basel Committee issued a final standard for this ratio.