The Clearing House and SIFMA on October 31, 2017 submitted a letter to US Treasury Secretary Steven Mnuchin as chairman of the US Financial Stability Oversight Council raising financial stability concerns created by the EU’s proposed “payments moratorium,” and asking Treasury and the US banking agencies to raise these concerns at the FSB and the EU-US regulatory dialogue scheduled for early November 2017. The payments moratorium would be implemented through an amendment to the European BRRD and would give EU regulators the power to impose a prolonged form of single-institution “bank holiday” by suspending payment obligations of an EU bank to its counterparties and customers (including its depositors) for up to twelve business days, and possibly longer. The letter asserts the new power creates a number of problems, many of which would reduce financial stability. Among other things, the power would: (i) incentivize creditors to run sooner, making bank failure more likely and sudden, (ii) mark a significant departure from globally agreed norms on such powers, jeopardizing netting as a risk management tool and significantly raising costs for hedging transactions, and (iii) put non-EU CCPs at a competitive disadvantage via their EU peers, the latter of which would enjoy an exemption from the powers while the former would not.
You Might Also Be Interested In...
Bank Activities and Structure Financial Services Industry United in Opposition to Marshall-Durbin Credit Routing Legislation
Bank Activities and Structure The FDIC’s Proposed Increase in Deposit Insurance Assessments May Be Based On Incorrect Projections
Bank Activities and Structure Quality Patents Coalition Express Key Priorities for Patent Reform Legislation in Letter to Congress
Industrial Loan Company Bank, Credit Union and Consumer Groups Support Committee Vote to Close the Industrial Loan Company Loophole
More Posts by This Author
Digital Assets BPI Comments on Treasury Department Review of Digital Assets in Response to Executive Order
Community Reinvestment Act BPI Comments on Federal Banking Agencies’ Community Reinvestment Act Proposal
Bank Liquidity The Bank of England Just Released Its Plan for Getting Smaller. The Fed Could Learn from it.