The loss of portfolio diversification benefits under new trading book capital rules will be a significant driver of increased market risk capital requirements, say the authors of research into the proposed framework. This could be contributing to banks’ reluctance to use internal models to calculate the new capital requirements.

“What we reveal is that diversification, which is considered the only free lunch in capital markets, just goes away with this framework,” says Carlos Manuel Pinheiro

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Securities and Exchange Commission chairman Gary Gensler has added his voice to growing calls to unbundle client clearing and execution services for US Treasury securities.

New rules adopted by the SEC last December will require most US Treasury cash trades to be centrally cleared from the end of next year, with repos following suit in June 2026. 

Currently, most buy-side firms rely on dealers to submit trades to the Fixed Income Clearing Corporation, which has a monopoly on US Treasury clearing

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For US Commodity Futures Trading Commission chairman Rostin Behnam, the irony must have been galling – even if he didn’t show it.

As a particularly contentious open meeting of the CFTC on May 10 drew to a close, Democrat commissioner Christy Goldsmith Romero appealed to the press not to focus on partisan divisions within the agency.

Partisan disputes would seem to be the least of Behnam’s problems.

Minutes earlier, Goldsmith Romero had sided with Republicans on the commission to amend a proposed

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European Union legislators are learning something many surgeons already know. Operating may provide the only solution to alleviate a patient’s pain, but it can lead to complications.

The European Commission was given the ability to operate on one limb of a package of several reforms that will implement the Basel Committee on Banking Supervision’s global standards, known as Basel III. The EC’s scalpel was the power to delay the start date for that one part of the package, to make sure the EU

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The European Commission is ready to take steps to ensure the start dates for new bank capital rules on the trading book will align globally across all jurisdictions, Risk.net has learnt. With uncertainty clouding the timing of the US implementation for these new prudential standards, this makes it more likely the European Union will alter its own go-live date.

“We are very aware of the issue and the relevance of the market risk standard for the global level playing field,” says an EC spokesperson

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The US Federal Reserve has given five regional banks permission to treat credit-linked notes (CLNs) that transfer default risk to investors through financial guarantees as synthetic securitisations for capital purposes.

The relief – which was granted in a series of letters sent to Ally Financial, Huntington Bancshares, Santander USA, Truist and US Bancorp between November of last year and the beginning of this month – could add more fuel to an already red-hot market for credit risk transfer (CRT)

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US Republicans have been clear about what they want regulators to do with controversial proposed prudential rules: go back to the drawing board. But perhaps they need to be careful what they wish for. In practice, a fast track to finalising the US implementation of the Basel III banking standards may require the three federal regulators to scale back their ambitions, which would be more in line with what Republicans and bank lobbyists have been seeking.

Federal Reserve Governor Michelle Bowman

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The International Swaps and Derivatives Association is planning to ‘decouple’ the recalibration of its standard initial margin model (Simm) from more substantial model updates, which require regulatory approval.

The proposal, which Isda presented to global regulators last week, aims to address a quirk in new European Union rules that threatened to derail a wider effort to improve Simm’s responsiveness to market events.

“We started to think about how we could futureproof a process that would work

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The debate around banks shrinking some of their higher-velocity assets at year-end to reduce their regulatory capital requirements has been going on so long, some national regulators have already decided to act on it. Now the Basel Committee on Banking Supervision is catching up.

Proposed changes, which would specifically apply to global systemically important banks (G-Sibs), may improve year-end liquidity in short-dated instruments that are heavy on the balance sheet – especially repo markets –

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When large banks fail and markets tremble, it’s natural for regulators to want to know how to prevent another crisis in the future. So it is with the crisis of 2023, which took down Silicon Valley Bank (SVB) and First Republic in the US, and Credit Suisse in Europe. But to know if regulations need changing, you first have to agree on what exactly went wrong.

The US’s acting comptroller of the currency, Michael Hsu, thinks he has an answer. Or rather, two answers, to be precise. In January this

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