자료: FTI Consulting (Jan 28, 2014), Volcker, Vickers, Liikanen: Structural reforms of the banking sector – Quo Vadit Europe? (Jan 2014)
※ 발췌 (excerpts):
The global financial crisis has led to a wave of new regulation hitting financial markets and players active therein. Immediate reactions entailed raising capital requirements through Basel III and generally strengthening oversight and supervision. However, it was the size, complexity and interconnectedness of certain systemic banks that has led politicians, regulators and the broader epistemic community to consider measures that go beyond the classical regulatory approach. Thus, potential structural measures for the financial sector have been put at the heart of socio-economic discourse.
With the proposals of Volcker, Vickers and Liikanen, the regulatory approach has for the first time been shifted to also include structural measures regarding size and scope of activities. However, while having originally been deemed a straightforward way of ensuring that banks are structured in a certain manner and face constraints as regards the engagement in certain activities, market realities have proven that the implementation of structural measures is highly complex and poses a number of challenges.
As a consequence, the financial sector faces legislation that is intended to amend existing market structures and business models. This paper will critically discuss the different elements of the Volcker, Vickers and Liikanen proposals, analyse implied costs and benefits and shed light on elements that will require further work.
A relatively small number of large financial institutions account for a majority of cross-border financial intermediation. These financial institutions benefit from their diversification and scale and therefore facilitate cross-border capital flows and allocation of global savings.
However, due to their interconnectedness with other financial institutions and markets, problems within these financial institutions risk causing distress to the broader financial system. Given their complex structures and operations, such entities are difficult to regulate and supervise and pose significant challenges as far as resolutions in the event of failure are concerned.
Therefore, the Basel Committee on Banking Supervision (BCBS) has identified financial institutions that are too important to fail (TITF). BCBS outlined that there are two approaches to limiting the risks posed by these financial institutions, i.e. price-based regulations accompanied by enhanced supervision and effective resolution as well as structural limits on the size and scope of the activities of these institutions.
As for the former, the G20 proposed a set of measures to be implemented globally to reduce risks posed to the global financial system. These include higher capital requirements (Basel III), an enhanced regulatory framework, proactive and intensive supervision, an effective resolution framework, enhanced transparency and disclosure and strengthened market infrastructure.
As for the latter, several countries announced they would supplement these measures by introducing structural measures to combat systemic risks in the global financial system, including the US, the UK and the EU. Importantly, these jurisdictions are currently at varying stages of the legislative and regulatory processes and presume that price-based regulations alone do not go far enough in some areas (capital requirements, leverage ratios) and may not be implemented in a consistent manner in others (bail-in mechanisms, net stable funding ratios, cross-border resolution frameworks).1
Structural measures – Eliminating TITF concerns?
The financial crisis revealed that failing financial institutions could not be identified on the basis of their business model. This is, inter alia, underlined by distinct cases such as Lehman on investment banking or Dexia on universal banking. Nevertheless, structural measures are widely seen as a useful complement to traditional prudential tools.
The International Monetary Fund (IMF) has argued that targeting structural measures in a way that they reflect firm-specific risk profiles, increases their effectiveness if compared a one-size-fits-all approach. Activity restrictions have therefore been underlined as useful when it comes to managing risks that are difficult to measure and to address when using price-based tools.
Importantly, regulators also share the view that business lines, which are judged to be too complex for an accurate measurement of risk and effective supervision, may require outright separation.
Volcker, Vickers, Liikanen – Design of the proposals
Structural reform approaches seek to shield deposits and payments functions of banks from the risks that are generated in the investment banking activities which are linked to volatilities in the financial market. Nevertheless, it is noteworthy that the proposals exhibit important differences regarding institutional and geographic coverage, as well as the nature and scope of the separation of bank businesses. The following section discusses the main aspects of the Volcker, Vickers and Liikanen proposals, based on the latest state of affairs.2
The US has notably spearheaded international efforts on structural reforms in the banking sector. In December 2013, the Dodd-Frank Wall Street Reform and Consumer Protection Act was adopted, including what is commonly referred to as the Volcker Rule.
- The final rules prohibit proprietary trading by banking entities, i.e. engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account. Exemptions have been included for underwriting, market making related activities, risk-mitigating hedging and trading in certain government obligations.
- The final rules generally do not prohibit trading by foreign banking entities, provided the trading decisions and principal risks of the foreign banking entity occur and are held outside of the US. Trading on behalf of a customer in a fiduciary capacity or in riskless principal trades and activities of an insurance company for its general or separate account has not been prohibited.
- The final rules contain clarifying exclusions, i.e. activities that are not considered proprietary trading, provided certain requirements are met, including trading solely as an agent, broker, or custodian; trading through a deferred compensation or similar plan; trading to satisfy a debt previously contracted; trading under certain repurchase and securities lending agreements; trading for liquidity management in accordance with a documented liquidity plan; trading in connection with certain clearing activities; or trading to satisfy certain existing legal obligations.
- The final rules of the Dodd-Frank Wall Street Reform and Consumer Protection Act also prohibit banking entities from owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as ‘covered funds’. Exclusions have been included for certain entities with more general corporate purposes such as wholly-owned subsidiaries, joint ventures, and acquisition vehicles, as well as SEC-registered investment companies and business development companies. In this regard it is also noteworthy that the final rules permit a banking entity, subject to certain conditions, to invest in or sponsor a covered fund in connection with: organising and offering the covered fund; underwriting or market making-related activities; certain types of risk mitigating hedging activities; activities that occur solely outside of the United States and insurance company activities.
- Clarifying exclusions have also been included and a banking entity is not engaging in prohibited covered fund activities when it acts on behalf of customers as an agent, broker, custodian, trustee or similar fiduciary capacity; through a deferred compensation or similar plan; or in the ordinary course of collecting a debt previously contracted.
- The final rules also provide compliance requirements that vary based on the size of the banking entity and the amount of activities conducted. Banks are required to establish an internal compliance program reasonably designed to ensure and monitor compliance and documentation needs to be maintained. Banking entities with significant trading operations will also have to report certain quantitative measurements designed to monitor certain trading activities.
April 2016. Those with at least $10 bln, but less than $25 bln, on 31 Dec 2016.
The UK has spearheaded regulatory efforts on the other side of the Atlantic. The Financial Services (Banking Reform) Act 2013, which received Royal Assent in December 2013, implements the recommendations of the Independent Commission on Banking (the "Vickers Report") and the Parliamentary Commission on Banking Standards.
- The Banking Reform Act includes a prohibition on ring-fenced banks from conducting the regulated activity of "dealing in investments as principal" in the UK or elsewhere. This prohibition will be subject to certain exceptions which will still have to be agreed on in secondary legislation. They are likely to follow the recommendations of the Vickers Report, including exemptions for underwriting, payment services and institutions with less than £25 bln in retail deposits.
- The Vickers Report suggested that, subject to appropriate safeguards, various other activities would be permitted within a ring-fenced bank, including commercial lending, some simple derivatives trading, debt-equity swaps, securitization of own assets and certain ancillary activities. However, these aspects will be left to secondary legislation.
- Secondary legislation might also prohibit a ring-fenced bank from entering into certain types of transactions, contracting with certain classes of persons, establishing or maintaining a branch in a specified country and holding shares or voting powers in certain companies. Exemptions will be evaluated based on an assessment of whether a ring-fenced bank is exposed to risks as a result of an allowed activity. Moreover, there is a focus on the continuation of core services with a view to failure, i.e. whether deposit-taking might be endangered.
- The regulators may also make rules for other licensed firms which are part of a ring-fenced bank's group ("group ring-fencing rules") and regulators also have powers to impose restructuring requirements on a ring-fenced bank, any UK-regulated member of the ring-fenced bank's group and any UK corporation which is a member of the group. Such measures include the power to require the disposal of property, the transfer of the ring-fenced bank to another entity and the disposition of shares or other securities.
[CF: Wikipedia] The Independent Commission on Banking was a United Kingdom government inquiry looking at structural and related non-structural reforms to the UK banking sector to promote financial stability and competition in the wake of the financial crisis of 2007–08. It was established in June 2010 and produced its final report and recommendations in September 2011.
It was chaired by John Vickers and included four other Commissioners; Bill Winters, Martin Taylor, Clare Spottiswoode and Martin Wolf. The Commissioners were supported by a team of fourteen officials seconded from HM Treasury, the Department for Business, Innovation and Skills, the Financial Services Authority, the Bank of England and the Office of Fair Trading.
The Commission made its recommendations to the UK government on 12 September 2011. Its headline recommendation was that British banks should 'ring-fence' their retail banking divisions from their investment banking arms to safeguard against riskier banking activities, but it also made a number of other recommendations on bank capital requirements and competition in retail banking. The government announced the same day that it would introduce legislation into Parliament aimed at implementing the recommendations. ( ... ... )
The EU will publish its structural reform measure proposals in late January/ early February 2014. The proposals are based on the recommendations made in 2012 by the High-Level Expert Group, chaired by Erkki Liikanen, as well as the responses to the Commission's consultation in May 2013.
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