On Friday, December 12, the Systemic Risk Council released the following statement about the repeal of Section 716 in the omnibus spending bill.
“We wish to express our strong opposition to including in the omnibus spending bill a repeal of the so-called ‘swaps push-out’ provision of the Dodd-Frank financial reform law. While this provision only pertains to a small portion of derivatives trading, its repeal would set a dangerous precedent.
First, if we want a more stable financial system, repeal of this provision, also known as Section 716, goes in the wrong direction. To increase market discipline and protect taxpayers, we should be shrinking the safety net, not expanding it. Repeal of Section 716 would allow certain high risk swap transactions to be conducted inside banks which are supported with taxpayer-backed, insured deposits, as opposed to securities and derivatives affiliates which do not use taxpayer backed funding sources. As FDIC Vice-Chair Tom Hoenig has stated, such a move is ‘illogical.’
Second, any changes to Dodd-Frank should be considered and passed under regular order, after thorough Committee consideration. If the changes to Dodd-Frank cannot pass on their own merits as part of the normal legislative process, they should not be jammed through as riders to must-pass spending bills. The American people deserve better from their elected representatives.”
On Monday, December 1, the Systemic Risk Council wrote a letter to the Financial Stability Board about cross-border recognition of resolution action.
The letter states:
“We commend the Financial Stability Board for its progress in addressing too big to fail, and in particular, addressing the important cross-border issues that can contribute to systemic instability and impede the orderly resolution of a large financial institution. Important work remains to be done before financial markets, policymakers and the public can feel confident that large, globally active financial institutions will be able to fail without destabilizing markets or needing taxpayer support. We applaud the FSB’s recent efforts to secure a protocol for a short stay for derivatives counterparties when bankruptcy courts or resolution entities begin the wind down of a failed large financial institution. We urge the FSB and individual regulators around the world to continue putting in place the policies necessary to protect taxpayers and financial markets from the failure of systemic, global firms.”
Read the full letter below:
FSB Cross-Border Letter
“I am pleased to announce that I have agreed to serve as a senior advisor to DLA Piper, a major, global law firm. I will be focusing on its international practice, particularly its public sector clients. I also hope to do compliance monitoring work at the firm. In addition, DLA has a substantial pro bono practice and they have agreed to help me organize a nonprofit in the US to raise money to build playgrounds in orphanages throughout the developing world. Over the past few years, I have been raising funds through my speaking fees to build two playgrounds at an orphanage in Hengyang, Hunan China, where our daughter lived before we adopted her. I have found this to be one of the most rewarding things I have done since leaving public office, and would like to leverage the experience and knowledge I have acquired through the Hengyang projects to launch a broader effort, focusing on orphanages in China, as well as others in developing countries.
Consistent with my policy, I will not be advising or otherwise interacting with the firm’s US banking clients, nor will I be lobbying for the firm.
DLA Piper has a global reputation and reach. I believe this new affiliation will give me an opportunity to advise international regulators about lessons learned and how to promote safer, more stable, and better regulated financial systems throughout the world.”
Today, Systemic Risk Council Chair, Sheila Bair announced the following new members of the Systemic Risk Council:
- Sharon Bowles, Former Member of European Parliament and Former Chair of the Parliament’s Economic and Monetary Affairs Committee
- Jan Pieter Krahnen, Chair of Corporate Finance at Goethe-Universität in Frankfurt and Director of the Center for Financial Studies, a non-profit research institution in Frankfurt
- Lord John McFall, Former Chair, House of Commons Treasury Committee
- Lord Adair Turner, Former Chair of the U.K. Financial Services Authority and Former Chair of the Financial Stability Board’s Standing Committee on Supervisory and Regulatory Cooperation
- Nout Wellink, Former Head of the Dutch Central Bank and Former Head of the Bank for International Settlements
“I am honored that these experts have joined the Systemic Risk Council. These strong new voices will not only expand the breadth of our understanding, but strengthen our efforts to address systemic risk and improve the global financial system.”
“We are proud that the Systemic Risk Council now includes so many senior policymakers and financial experts from both sides of the Atlantic. This is a testament to the group’s work, and to the growing internationalization of financial regulation.”
Today, Systemic Risk Council (SRC) chairman Sheila Bair welcomed Scott Powers as the newest member of the Council:
“Scott Powers is an expert on systemic risk, financial markets and investor protection. I am pleased and honored that he has agreed to bring his valuable perspective to the Systemic Risk Council.”
Scott Powers is president and chief executive officer of State Street Global Advisors (SSgA), the investment management arm of State Street Corporation and one of the largest institutional asset managers in the world. Mr. Powers is also a member of State Street’s Management Committee, the company’s senior-most strategy and policy-making team.
Prior to joining State Street in May 2008, Mr. Powers served as chief executive officer of Old Mutual US, the US operating unit of London-based Old Mutual PLC.
Sheila Bair, chair of the Systemic Risk Council, released the statement below following the SEC’s meeting on Wednesday, July 23:
“I know this has been a difficult issue for the SEC, and I commend Chairman Mary Jo White for her strong leadership in guiding the agency to final rulemaking. I also applaud the SEC for standing up to lobbying pressure and requiring a floating NAV for prime institutional funds as well as for improving the floating NAV pricing and tightening the definition of government funds.
I remain concerned however, that this approach may be too limited to address the systemic risks posed by money market funds, and that the new gates and fees could exacerbate it. A better, and simpler, approach would be to apply a floating NAV to all money funds just like other mutual funds which have operated well without systemic risk, or implicit support, since 1940.
That said, the new floating NAV for prime institutional funds marks an important step forward in the area that suffered the greatest runs during the financial crisis– runs which stopped only after taxpayers stepped in with a bailout.
I also commend Treasury Secretary Lew and the Financial Stability Oversight Council for remaining steadfast in their efforts to ensure that the systemic risks posed by money funds be addressed.
We will review the rule closely to better assess its potential impact, and I encourage the Financial Stability Oversight Council to do the same. If structural weaknesses remain that put the markets and taxpayers at risk, the FSOC should continue to take the steps necessary to ensure that they are addressed.”
On July 7, the Systemic Risk Council sent a letter to U.S. Treasury Secretary Lew commending him and the department for taking a firm stance against including financial services regulation in the ongoing Transatlantic Trade and Investment Partnership (TTIP) negotiations.
The letter states:
“The United States and its banking, securities and futures regulators have made significant progress implementing essential financial reforms to strengthen the financial markets after the global financial crisis. Through years of effort, their progress on over-the-counter derivatives, cross-border resolution, and supplemental leverage ratio requirements, among other topics, is making a real difference.
Unfortunately, despite years of international dialogue (including through the FSB, IOSCO and Basel Committee) and previous negotiated agreements (including at the G20), many foreign jurisdictions lag in their implementation of essential structural reforms.
Including financial services topics within the TTIP framework would create yet another venue for delay and could put years of U.S. progress at risk.”
Read the full letter below:
SRC Letter to Secretary Lew re TTIP 7-7-14
On June 9, the Systemic Risk Council (SRC) sent a letter to the House Financial Services Committee about its concerns with H.R. 4387, the FSOC Transparency and Accountability Act, and the proposed moratorium on Financial Stability Oversight Council (FSOC) determinations.
The letter notes that the proposed legislation would undermine FSOC’s ability to identify emerging risks in the financial system and perform the functions necessary to prevent crippling financial crises from happening in the future.
Read the full letter below:
Letter to House Financial Services June 09
On May 28, the Systemic Risk Council (SRC) filed a comment letter to the Securities and Exchange Commission (SEC) about the essential role that Central Clearing Counterparties (Clearinghouses or CCPs) play in our financial markets.
The letter notes that it is critical that CCPs have robust capital/loss absorbency and margin protections, as well as effective regulatory oversight and stress testing. It is also important that their primary regulators, the SEC and CFTC, have and allocate the resources needed to adequately oversee, and police, these large, complex institutions.
Read the full letter below:
Final SRC Ltr to SEC re CCPs 5-27-2014
Today, Systemic Risk Council (SRC) chair Sheila Bair welcomed Sallie Krawcheck as the newest member of the Council:
“Sallie Krawcheck is a leader and expert on financial institutions and the markets. Her hands-on experience at the highest levels of finance is second to none. I am pleased and honored that she has agreed to join the SRC,” Bair stated.
Sallie Krawcheck was the President of Bank of America Wealth Management, Chief Executive Officer for Citi Wealth Management, Smith Barney and Sanford C. Bernstein & Co., and Chief Financial Officer for Citi. She is currently the Business Leader of 85Broads, the leading professional women’s networking organization committed to the economic engagement of women globally.