The Changing Regulatory Environment: What You Need to Know
Global regulations are having a significant effect on banking organizations. Regulations such as Basel III, the Dodd Frank Act, Liikanen and others are requiring higher capital and liquidity at banks and, in some cases, changing the nature and scope of financial services businesses.
Key aspects to be aware of in working with banking financial providers:
- Risk and credit appetite for individual firms may continue to change as new regulations come into effect over the next several years.
- Local regulations in specific geographies, as well as timing differences in implementation of the global regulations, may mean that the effects of the new regulations are different according to the jurisdiction of the lender.
- The lines between banks and non-bank providers of credit will continue to evolve given the higher capital and liquidity requirements for banks. We are seeing a number of new linkages and affiliations between and among banks and nonbank credit providers.
Among the upcoming regulatory issues that we are tracking:
- Revisions to the Basel Securitization Framework, consultative document published by the Basel Committee. This consultative document is widely viewed by the industry as punitive for securitization structures in terms of capital requirements. Industry comments are due by March 15, 2013 with a final release from Basel to follow thereafter.
- FASB and IASB are revising and updating Impairment Requirements for Financial Institutions. At present, the approaches for designation of “impaired assets” are not aligned between FASB (US) and IASB (countries outside of the US) and industry participants are working to understand the implications and impact which could be significant for lower investment and noninvestment grade credit assets.
We would be pleased to provide additional information, and to consult with you regarding specific situations, upon request.