Splintering of regulatory effort is putting world leaders on the spot. But remedies prove elusive while leaders seem powerless by David Keefe

A framework aimed at ending taxpayers ‘bail-out’ of banks seen as ‘too-big-to-fail’ is in sight. Creditors will be ‘bailed-in’ under new rules By Melvyn Westlake

A leaked draft proposal reveals European Commission’s plans for regulating a key part of the shadow banking sector

A selection of news items generated by the American regulatory reform agenda

LONDON – The financial transaction tax (FTT) that eleven EU countries plan to introduce, possibly as soon as next year, will “extinguish” much of Europe’s market for collateral, which underpins the security of individual financial transactions and counterparties and thereby the stability of the financial system. Given this systemic role of collateral, such an outcome should be a matter of the greatest concern for regulators, central banks, financial intermediaries, and investors and borrowers, including governments, according to an academic paper circulated in early May.

WASHINGTON – Despite considerable progress with the global financial regulatory overhaul, vulnerabilities remain. In two related areas in particular – the short-term wholesale funding markets and the problem of banks that are “too-big-to-fail” – more needs to be done, Daniel Tarullo, the US Federal Reserve governor responsible for regulation told a Washington audience in early May. “We would do the American public a fundamental disservice,” he said “were we to declare victory without tackling the structural weaknesses of short-term wholesale funding markets, both in general and as they affect the too-big-to-fail problem. This is the major problem that remains, and I would suggest that additional reform measures be evaluated by reference to how effective they could be in solving it.”

BRUSSELS – The EU executive is launching a public consultation on the performance and effectiveness of the European System of Financial Supervision (ESFS), which was established at the beginning of 2011. The ESFS, which comprises three new pan-EU supervisory authorities and a systemic risk board, working with a network of national central banks, was put in place in the wake of the financial crisis.

WASHINGTON – In a last desperate attempt to forestall imposition of initial margin requirements on non-cleared derivatives transactions, four industry lobby groups have jointly written to top global regulators expressing “grave concerns.” The margin requirements are part of the reforms of the huge, $633 trillion over-the-counter derivatives market. These reforms involve incentives to standardise and centrally clear as much of the market as possible, along with safeguards for deals that remain bespoke, including initial margin requirements.

SYDNEY – Australian regulators are taking a distinctly conservative approach to the adoption of the new Basel III liquidity rules. The main banks will not benefit from the revisions to the liquidity coverage ratio (LCR) that were announced in January by the Basel Committee, which crafted the new global standards. This decision by the Australian Prudential Regulation Authority (APRA) emerged in early May when the regulatory watchdog released its second consultation package outlining its proposed implementation of the Basel III liquidity reforms for the country’s authorised deposit-taking institutions (ADIs).

BRUSSELS – As expected, Europe’s legislators have moved to water down significantly European Union plans to shake-up the audit services market by requiring companies to change their auditors every six years.