BASEL – The Basel Committee on Banking Supervision (BCBS) issued its full leverage ratio framework and disclosure requirements following endorsement by its governing body. An original consultative version was published in June 2013.

MADRID – The International Organisation of Securities Commissions (IOSCO) urged regulators to monitor the effects of increasingly fragmented markets for equities and exchange-traded funds, as trading migrates from traditional exchanges onto a wide range of different platforms. The IOSCO final report* recommended that “Regulators should regularly monitor the impact of fragmentation on market integrity and efficiency across different trading spaces.”

BASEL – The Joint Forum of global regulatory bodies published a second paper* examining the market for transferring longevity risk – the life expectancy of pension fund holders. The Joint Forum, which consists of the Basel Committee on Banking Supervision, IOSCO and the International Association of Insurance Supervisors, published an initial consultative report in August 2013, following up in December.

LONDON – The European Banking Authority published an impact assessment for the implementation of the Liquidity Coverage Ratio (LCR) under the EU’s capital requirements regulation (CRR), which was introduced in June 2013. Banks must hold a buffer of high-quality liquid assets (HQLAs) to cope with a 30-day liquidity stress scenario. The study, released in December, was based on end-2012 results for a sample of 357 European banks with total assets of €33,000bn, covering about two-thirds of the total assets of European banks.

BEIJING – The Chinese National Audit Office (NAO) published a comprehensive audit of national and local government debt, and the debts of state-owned companies associated with public infrastructure projects. Other state-owned company debt was excluded from the audit.

LJUBLJANA - The Slovenian government and Bank of Slovenia completed a comprehensive set of stress tests and asset quality reviews at the country’s largest banks, using four consultancies and four real estate advisors to assist with the process.

LONDON – The Bank of England and the International Capital Market Association (ICMA) have both entered the growing debate about the need for a more formal debt restructuring mechanism for sovereigns. There is no legal insolvency procedure for governments, and the International Monetary Fund (IMF) proposed in April 2013 the introduction of an automatic maturity extension or bail-in of sovereign debt ahead of any IMF assistance programme (see last edition of GRR). The multilateral also suggested a single, aggregated collective action clause (CAC) that would allow a sovereign to impose restructuring on the holders of all its bond maturities if an overall majority of holders across all maturities agreed.

BASEL – The Basel Committee on Banking Supervision (BCBS) published revised proposals for the net stable funding ratio (NSFR). Alongside the liquidity coverage ratio (LCR), this forms part of a comprehensive framework for bank liquidity regulation introduced under the Basel III prudential requirements. A first draft of the NSFR was released in 2009, with an additional draft forming part of the Basel III agreement in December 2010. The latest proposals will now be open for comment until 11 April 2014.

LONDON – The European Banking Authority (EBA), mandated by the EU’s Capital Requirements Regulation to create technical standards on the internal formulas and inputs used by banks to calculate credit valuation adjustments, issued its final draft technical standards. CVA is used to calculate the counterparty credit exposure of banks on their outstanding derivative trades.

KUALA LUMPUR – The Islamic Financial Services Board (IFSB), one of the main international regulators for the industry, has published revised capital adequacy standards for Islamic financial institutions excluding takaful (insurance) and investment funds. This is the first full revision of capital standards for sharia-compliant banks and windows (subsidiaries of conventional banks) since 2005, although a number of rules concerning specific asset classes have been tweaked in the meantime.