Greg Kilminster
Head of Product - Content
FINRA publishes Covered Agency Transactions Reg Notice
FINRA has confirmed the implemetation date for amendments regarding Covered Agency Transactions (CATs).
The amendments comprise three changes including:
- No more margin requirement for non-exempt accounts: The amendments remove the need for a 2% maintenance margin requirement for CATs involving non-exempt accounts. This means that financial firms don’t need to distinguish between customers with exempt accounts and those without when it comes to margin requirements for these transactions.
- Capital charge option: The changes also allow financial firms, under certain conditions and restrictions, to choose to take a capital charge instead of collecting margin for excess net mark-to-market losses on CATs. This option is designed to help ensure the stability of firms that decide to use capital charges, while also preventing larger firms from unfairly using their capital advantage to compete against smaller firms.
- Clearer rule language: The amendments also involve making changes to the wording of the CAT rule to make it more streamlined, organised, and understandable. These changes maintain and clarify important exceptions that were present in the original rule, such as exceptions for small transfers under $250,000 and larger open positions up to $10 million.
CATs are certain types of financial transactions involving government securities and related instruments. These transactions are subject to specific regulatory requirements and reporting obligations in order to promote transparency and maintain the integrity of the financial markets.
The changes become effective on 22nd May 2024.
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HMRC updates list of businesses failing to comply with ML regs
HM Revenue & Customs (HMRC) has published its latest list of businesses failing to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. All of the businesses on the list have been penalised during the first quarter of 2023. The fines range from around £2,500 to in excess of £50,000.
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Central banks at the crossroads: BIS speech
A speech by Luiz Awazu Pereira da Silva, Deputy General Manager at the Bank for International Settlements, in Kuala Lumpur identifies five key themes, or forks in the road, that central banks need to deal with.
These forks are (1) the resurgence of inflation, (2) climate change, (3) inequality, (4) advancements in digital financial systems, and (5) artificial intelligence.
Pereira da Silva picked out some of the key issues, summarised below:
Resurgence of inflation: Central banks are facing a difficult challenge in balancing the fight against inflation with the need to support economic growth. Inflation has been rising in many countries, due to factors such as supply chain disruptions and the war in Ukraine. Central banks have raised interest rates in an effort to combat inflation, but this in turn could slow economic growth. They must carefully assess the risks and benefits of different policy options in order to achieve their dual mandate of price and financial stability.
Climate change: Climate change is a threat to the global economy, and central banks have a role to play in addressing it. They can invest in green technologies and help to manage the transition to a net-zero economy. However, they must also be mindful of the potential risks of climate change, such as financial instability and social unrest.
Inequality: Inequality has been rising in many countries, and this can lead to social unrest and economic instability. Central banks can help to address inequality by promoting policies that support economic growth and job creation. They can also work to ensure that financial systems are inclusive and that everyone has access to the resources they need to succeed.
Advancements in digital financial systems: Digital financial technologies are changing the way people and businesses access financial services. Central banks must ensure that these technologies are used in a safe and responsible way. They must also be mindful of the potential risks of these technologies, such as financial instability and cybercrime.
Artificial intelligence: Artificial intelligence (AI) is rapidly developing, and it has the potential to revolutionise many industries, including finance. Central banks must carefully consider the potential benefits and risks of AI and develop policies to ensure that it is used in a responsible way. For example, AI could be used to improve the efficiency of financial markets, but it could also be used to automate decision-making and create new forms of financial risk.
The conclusion emphasises the importance of central banks in societies and the need for them to be effective in addressing the challenges of the 21st century. It also highlights the need for central banks to be innovative and adaptable in their thinking and to work with other stakeholders to achieve their goals.
Click here to read the full RegInsight on CUBE’s RegPlatform