Section 2: Getting Regulation Right

Rescue packages have given way to a global rethinking of regulation and supervision as governments try to avoid the mistakes of the past. Banks, particularly those operating in multiple jurisdictions, now face the daunting task of embedding new guidelines and regulatory procedures into their operations. During 2011, banks should get a clearer idea of the extent to which they will have to re-engineer and restructure their businesses.

As details emerge of what the new regulatory landscape will look like, Etay Katz offers a four-stage plan for banks – from identification and prioritisation to lobbying and implementation. He also gives an overview of regulatory themes.

Mike Konczal examines some of the details of Basel III released in December 2010 – an increased focus on the quality and amount of Tier 1 capital, counter-cyclical capital buffers, leverage ratios, liquidity-coverage ratios and the net stable funding ratio.

In over-the-counter (OTC) markets, the orderly unwinding of 66,000 trades by LCH.Clearnet following the collapse of Lehman shows clearing houses’ potential to reduce systemic risk. But LCH.Clearnet CEO Roger Lidell warns against regulatory over-enthusiasm – migrating OTC trades into clearing systems will have to be done carefully to make sure risks are not simply passed from one institution to another.

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