26 May 2017
Washington DC
Reporter: Drew Nicol

RMA offers amendments to Dodd-Frank rules

The Risk Management Association’s (RMA) securities lending committee has written to the US Treasury as part of its President Donald Trump-mandated review of regulatory burdens on the financial system.

Trump’s February executive order on the core principles for regulating the US financial system charged the Treasury with reviewing regulations with a view to relieving unnecessary burdens.

In its letter, the RMA’s securities lending committee set out four recommendations for revisions to the Dodd-Frank Act, which “grossly overstates the risk of agency securities” and is “putting US agent banks at a severe competitive disadvantage”.

Primarily, the RMA suggested that the Federal Reserve should drop plans to adopt single-counterparty credit limits.

Single-counterparty credit limits are based on “a flawed methodology from the federal banking agencies’ capital adequacy rules that grossly overstates the risk of agency securities lending transactions, discourages sound risk management practices, and if adopted, likely would have an immediate and drastic impact on market liquidity”.

Federal banking agencies should also review the collateral haircut approach in order to ensure that agent lenders are able to continue operating effectively in the lending space.

The risk-weight for exposures to securities firms that come under capital rules could also be brought in line with similar rules in other jurisdictions, according to the RMA’s securities lending committee.

“Failure to do so places US agent banks at a severe competitive disadvantage relative to non-US banks and severely limits their ability to service the US markets”.

Finally, federal agencies could avoid placing “enormous administrative and operational burdens on agent banks without any tangible benefits to financial stability” by narrowing the scope of their proposed rules regarding contractual stay requirements for qualified financial contracts.

The narrower scope would exclude categories of agreements under US law that do not create the types of cross-border resolvability issues that the rules are intended to address.

The RMA’s securities lending committee stated: “The federal banking agencies have long acknowledged that financial regulation should not only be efficient, effective and appropriately tailored, but also should benefit American investors and ultimately help foster economic growth and vibrant financial markets.”

More regulation news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Repo passes judgement on MMF collateral rules
18 August 2017 | Brussels | Reporter: Drew Nicol
Thirteen industry stakeholders made up of major global banks and industry associations responded, with largely positive feedback on ESMA’s proposals
SEC launches new 2018 disclosure forms
15 August 2017 | Washington DC | Reporter: Drew Nicol
New securities lending disclosure forms Forms N-1A, N-3 and N‑CSR are now in play for open-end and closed-end funds in the US, as of 1 August
DC Circuit orders review of OCC’s capital plan
10 August 2017 | Chicago | Reporter: Drew Nicol
The US Court of Appeals for the DC Circuit has called on the US SEC to reconsider its premature acceptance of OCC’s amended capital plan
Electronic repo trading on the rise, says Bruni
04 August 2017 | New York | Reporter: Jenna Lomax
“Many factors” — but particularly the new margin requirements for over-the-counter (OTC) derivatives—are driving the trend
ISLA welcomes asset segregation opinion
02 August 2017 | London | Reporter: Mark Dugdale
The International Securities Lending Association has welcomed an opinion that will clarify asset segregation and the application of depository rules to central securities depositories
FDIC tells firms to prepare for T+2
31 July 2017 | Washington DC | Reporter: Mark Dugdale
US financial services firms should take appropriate steps to ensure they are prepared for the move to T+2 settlement on 5 September
US regulators to work together on Volcker Rule
28 July 2017 | Washington DC | Reporter: Stephanie Palmer
Five US federal financial regulatory agencies are coordinating the efforts to review the regulatory treatment of certain foreign funds under Section 619 of the Dodd-Frank Act, better known as the Volcker Rule