This week, the European Securities and Markets Authority (ESMA) has published its consultation paper (CP) on OTC derivatives clearing and trade reporting -- as would be required under the incoming European Market Infrastructure Regulation (EMIR). From a standards for reporting perspective (a subject that is top of mind for many firms at the moment), the paper indicates that reporting requirements could include use of the global legal entity identification (LEI) standard that has been suggested by the Financial Stability Board (FSB), or a number of other options.
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As some of you know, I’m the chair of the industry Clearing and Settlement Working Group on Standards. This week’s meeting was particularly interesting in terms of discussions on broker matching and market infrastructure adoption of standard message protocols. Here are a few highlights:
To understand how transaction banking (TB) will evolve, there's no need for crystal balls.
Just look at what's happening in the procurement departments of the corporate world, and you get a sense of it. I recently attended a presentation showing the likely evolution of the role of a corporate procurement department. It follows a lifecycle roadmap where each step represents the contribution of the department to the overall value of the company. The steps are from a less mature to a fully value-generating contributing office: From “transaction and support” to “savings/cost reduction” to “minimizing total cost of ownership (TCO)” to “value creator” to “revenue generator.”
The International Organization of Securities Commissions (IOSCO) has released 15 recommendations for derivatives market intermediaries (aka clearing counterparties, market-makers, and trading venues) to tackle points of potential systemic or counterparty risk -- after all, recent regulation for these markets has all been about increasing transparency and tackling potential points of failure. Thankfully, the focus is on tailoring these particular recommendations to the OTC derivatives markets rather than going with a "one-size-fits-all" approach.
The highlights of the recommendations include:
Tooling through the National Credit Union Association website the other day -- research for an upcoming report on stress testing commercial real estate portfolios -- I came across some interesting numbers. As of year-end 2010, 7,339 U.S. credit unions reported that they had nearly 430 reverse mortgage loans with balances outstanding of US$40 million. Unfortunately, 340 of those loans -- totaling almost US$30 million -- were not FHA-insured.