Page |1        International Association of Risk and Compliance                     Professionals (IARCP)    1200 G Street...
Page |2Indonesia, Korea, Russia and the United States.Turkey will issue its draft regulation early next year.Read more at ...
Page |3Capital Adequacy FrameworkPrudential Supervision Department,Document BS2AIssued: December 2012Interesting pictures ...
Page |4Dollar Funding and Global BanksGovernor Jeremy C. SteinAt the Global Research Forum, International Financeand Macro...
Page |5Can you program a radio todominate the spectrum?New DARPA challenge is lookingfor innovative approaches toadaptive,...
Page |6Joy to AllWith themes like, "Joy toAll", "Shine, Give, Share"and "Simple Gifts", theholiday customs celebratedby th...
Page |7the wealthiest Americans to pay more; a proposal that will strengthen themiddle class over the long haul and grow o...
Page |8I just spoke to Speaker Boehner and I also met with Senator Reid.In the next few days, Ive asked leaders of Congres...
Page |9And then Id ask every member of Congress while they’re back home tothink about that.Think about the obligations we ...
P a g e | 10And we’ve just got to get that aligned. But we’ve only got 10 days to do it.So I hope that every member of Con...
P a g e | 11“This year’s theme is ‘Joy to All.’It celebrates the many joys of theholiday seasons: the joy of givingand ser...
P a g e | 12Opinion of the European BankingAuthority on the recommendations of theHigh-level Expert Group on reformingthe ...
P a g e | 13repealing Commission Decision 2009/78/EC1. In accordance withArticle 14(5) of the Rules of procedure of the EB...
P a g e | 14However, only a thorough impact assessment could provide an evaluationof the potential benefits of such measur...
P a g e | 157. Implementation of any structural measures, such as a legal separationof risky financial activities from dep...
P a g e | 16migration of risks to non regulated financial intermediaries and theoverall effect on the build up of risks in...
P a g e | 17“bail-inable” debt instruments, besides ensuring a minimumloss-absorbing capacity, has also the advantage to c...
P a g e | 18To ensure a consistent application of these thresholds in the SingleMarket, there should be a need for technic...
P a g e | 19An update of the large exposures regulation – which is foreseen in theReport – will therefore be necessary to ...
P a g e | 20To ensure a consistent application of these standards on recovery andresolution, such ex post review will be a...
P a g e | 21generating systemic risk that justified public bail-outs) has beencounterparty risk, especially in derivatives...
P a g e | 22Opinion of the European Insurance andOccupational Pensions Authority of oninterim measures regarding Solvency ...
P a g e | 23January 2014 in accordance with the ("Quick Fix") Directive 2012/23/EUof 12 September 2012.5. This opinion is ...
P a g e | 24In his letter, dated 4 October 2012, the Chair not only expressed the needfor a stable and reliable time plan ...
P a g e | 25In the run-up to the new system the following key areas of Solvency IIneed to be addressed in order to ensure ...
P a g e | 26Proposed actions by national competent authorities16. As part of the preparation for Solvency II, national com...
P a g e | 2722. National competent authorities are expected to ensure that therequirements mentioned above are applied in ...
P a g e | 28Capital Adequacy Framework(Standardised Approach)Prudential Supervision Department,Document BS2A,Issued: Decem...
P a g e | 29SPVs…    _____________________________________________________________   International Association of Risk and...
P a g e | 30Only 3 credit rating agencies…     _____________________________________________________________    Internatio...
P a g e | 31Securitization…     _____________________________________________________________    International Association...
P a g e | 32Capital Adequacy Framework (Internal Models BasedApproach)Prudential Supervision Department, Document BS2BIssu...
P a g e | 33 _____________________________________________________________International Association of Risk and Compliance...
P a g e | 34 _____________________________________________________________International Association of Risk and Compliance...
P a g e | 35 _____________________________________________________________International Association of Risk and Compliance...
P a g e | 36How can financial institutions achieve thegoal of early and effective internal triggers, while avoidingnegativ...
P a g e | 37Credit SuisseIt is essential that triggers are viewed assoft triggers, i.e. trigger breaches lead topredetermi...
P a g e | 38Deutsche BankThe question should be focused on the executionof recovery actions rather than triggers.Internal ...
P a g e | 39It is not necessarily the case that there will be an ideal number of triggerswhich can be identified for the i...
P a g e | 40Scenario design:We support the approach taken by the FSB and consider the elementslisted on page 9 to be compr...
P a g e | 41- integrated into standard risk management practices;- transparent, with unambiguous definitions and good inte...
P a g e | 42Early warning indicators:A firm-specific approach should also be encouraged for early warningindicators which ...
P a g e | 43Implementation of the Basel III FrameworkAt its meeting on 13-14 December, the Basel Committeeon Banking Super...
P a g e | 44It is expected that as remaining jurisdictions finalise their domesticregulations during 2013, they will incor...
P a g e | 45Governor Jeremy C. SteinAt the Global Research Forum,International Finance andMacroecomomics, Sponsored by the...
P a g e | 46and availability of such dollar funding highly sensitive to changingperceptions of these banks creditworthines...
P a g e | 47overed-interest-parity (CIP) relationship--a breakdown of the sort that wehave seen during times of extreme ma...
P a g e | 48We also found that, even holding fixed the identity of the borrowing firm,a syndicate formed to make a dollar-...
P a g e | 49It is useful to bear in mind that our current regulatory regime evolvedduring a period when the U.S. operation...
P a g e | 50These rules should reduce the pressure on foreign banks that rely heavilyon short-term dollar funding to eithe...
P a g e | 51PCAOB Auditing Standard No. 16,Communications with Audit Committees,and Amendments to other PCAOBStandards App...
P a g e | 52Communication with Audit Committees, and amends other PCAOBstandards.The PCAOB adopted the new standard on Aug...
P a g e | 53Objectives3.   The objectives of the auditor are to:- Communicate to the audit committee the responsibilities ...
P a g e | 54This understanding includes communicating to the audit committee thefollowing:- The objective of the audit;- T...
P a g e | 55discuss with the audit committee the significant risks identified duringthe auditors risk assessment procedure...
P a g e | 5611. The auditor should communicate to the audit committee significantchanges to the planned audit strategy or ...
P a g e | 57Critical accounting estimates.(1) A description of the process management used to develop criticalaccounting e...
P a g e | 58Auditors Evaluation of the Quality of the Companys FinancialReporting13. The auditor should communicate to the...
P a g e | 59Significant unusual transactions.The auditors understanding of the business rationale for significantunusual t...
P a g e | 60Difficult or Contentious Matters for which the AuditorConsulted15. The auditor should communicate to the audit...
P a g e | 61(1) The effects, if any, on the financial statements and the adequacy ofthe related disclosure; and(2)    The ...
P a g e | 62When the auditor expects to modify the opinion in the auditors report,the reasons for the modification, and th...
P a g e | 63- Unreasonable management restrictions encountered by the auditor  on the conduct of the audit; and- Managemen...
P a g e | 64The appropriate timing of a particular communication to the auditcommittee depends on factors such as the sign...
P a g e | 65Report to Congress onAssigned Credit RatingsAs Required by Section 939F of theDodd-Frank Wall Street Reform an...
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
Monday December 31 2012 - Top 10 Risk Management News
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Monday December 31 2012 - Top 10 Risk Management News

  1. 1. Page |1 International Association of Risk and Compliance Professionals (IARCP) 1200 G Street NW Suite 800 Washington, DC 20005-6705 USA Tel: 202-449-9750 www.risk-compliance-association.com Top 10 risk and compliance management related news stories and world events that (for better or for worse) shaped the weeks agenda, and what is nextDear Member,I wish you every success for 2013. Successdefined by what you achieve in theworkplace, measured in financial terms, andof course success in your family life.I hope your longs will keep going up and your shorts will keep comingdown We are in 1013… we have the Basel iii deadline… or not?The 11 jurisdictions that will be implementing Basel III from January 1are: Australia, Canada, China, Hong Kong, India, Japan, Mexico, SaudiArabia, Singapore, South Africa and Switzerland.The 7 jurisdictions that have issued draft regulations and are workingtowards final versions are: Argentina, Brazil, the European Union, _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  2. 2. Page |2Indonesia, Korea, Russia and the United States.Turkey will issue its draft regulation early next year.Read more at Number 6 below.Welcome to the Top 10 list.Joy to AllWith themes like, "Joy to All", "Shine,Give, Share" and "Simple Gifts", theholiday customs celebrated by theObama family in the White House.Opinion of the European Banking AuthorityThe recommendations of the High-levelExpert Group on reforming the structureof the EU banking sectorOpinion of the European Insurance andOccupational Pensions AuthorityInterim measures regarding Solvency II _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  3. 3. Page |3Capital Adequacy FrameworkPrudential Supervision Department,Document BS2AIssued: December 2012Interesting pictures from the Basel iii implementation in New ZealandHow can financial institutions achieve thegoal of early and effective internal triggers, while avoidingnegative market reaction to recovery actions taken?Comments received on the FSB consultative document on Recovery andResolution Planning.Implementation of the Basel III FrameworkAt its meeting on 13-14 December, the Basel Committeeon Banking Supervision discussed the progress of itsmembers in implementing the capital adequacy reformswithin Basel III.The Basel Committee has been actively monitoring on acontinuing basis the progress of members in implementing the Basel IIIpackage of regulatory reforms, as well as the implementation of Basel IIand Basel 2.5. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  4. 4. Page |4Dollar Funding and Global BanksGovernor Jeremy C. SteinAt the Global Research Forum, International Financeand Macroecomomics, Sponsored by the EuropeanCentral Bank, Frankfurt am Main, GermanyPCAOB Auditing Standard No. 16,Communications with Audit Committees,and Amendments to other PCAOBStandards Approved by SECEffective for Fiscal Years Beginning On or After Dec. 15, 2012Washington, D.C., Dec. 20, 2012Report to Congress onAssigned Credit RatingsAs Required by Section 939F of theDodd-Frank Wall Street Reform andConsumer Protection ActInteresting Parts _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  5. 5. Page |5Can you program a radio todominate the spectrum?New DARPA challenge is lookingfor innovative approaches toadaptive, software-based radiocommunicationsRadios are used for a wide range of tasks, from the mostmundane to the most critical of communications, fromgarage door openers to military operations. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  6. 6. Page |6Joy to AllWith themes like, "Joy toAll", "Shine, Give, Share"and "Simple Gifts", theholiday customs celebratedby the Obama family in theWhite House.Visitors during the holidayseason have been enchanted by therepresentations of the First Dog, Bo, who hasbeen recreated using pipe cleaners, trash bags,buttons, pompoms and even chocolate.Statement by the President on the Fiscal CliffTHE PRESIDENT: Good afternoon, everybody.Over the last few weeks Ive been working with leaders of both parties ona proposal to get our deficit under control, avoid tax cuts -- or avoid taxhikes on the middle class, and to make sure that we can spur jobs andeconomic growth -- a balanced proposal that cuts spending but also asks _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  7. 7. Page |7the wealthiest Americans to pay more; a proposal that will strengthen themiddle class over the long haul and grow our economy over the long haul.During the course of these negotiations, I offered to compromise withRepublicans in Congress.I met them halfway on taxes, and I met them more than halfway onspending.And in terms of actual dollar amounts, were not that far apart.As of today, I am still ready and willing to get a comprehensive packagedone.I still believe that reducing our deficit is the right thing to do for thelong-term health of our economy and the confidence of our businesses.I remain committed to working towards that goal, whether it happens allat once or whether it happens in several different steps.But in 10 days, we face a deadline.In 10 days, under current law, tax rates are scheduled to rise on mostAmericans.And even though Democrats and Republicans are arguing about whetherthose rates should go up for the wealthiest individuals, all of us -- everysingle one of us -- agrees that tax rates shouldn’t go up for the other 98percent of Americans, which includes 97 percent of small businesses.Every member of Congress believes that.Every Democrat, every Republican.So there is absolutely no reason -- none -- not to protect these Americansfrom a tax hike.At the very least, let’s agree right now on what we already agree on. Let’sget that done. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  8. 8. Page |8I just spoke to Speaker Boehner and I also met with Senator Reid.In the next few days, Ive asked leaders of Congress to work towards apackage that prevents a tax hike on middle-class Americans, protectsunemployment insurance for 2 million Americans, and lays thegroundwork for further work on both growth and deficit reduction.Thats an achievable goal.That can get done in 10 days.Once this legislation is agreed to, I expect Democrats and Republicans toget back to Washington and have it pass both chambers.And I will immediately sign that legislation into law, before January 1st ofnext year. It’s that simple.Averting this middle-class tax hike is not a Democratic responsibility or aRepublican responsibility.With their votes, the American people have determined that governing isa shared responsibility between both parties.In this Congress, laws can only pass with support from Democrats andRepublicans.And that means nobody gets 100 percent of what they want. Everybodyhas got to give a little bit, in a sensible way.We move forward together, or we dont move forward at all.So, as we leave town for a few days to be with our families for the holidays,I hope it gives everybody some perspective.Everybody can cool off; everybody can drink some eggnog, have someChristmas cookies, sing some Christmas carols, enjoy the company ofloved ones. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  9. 9. Page |9And then Id ask every member of Congress while they’re back home tothink about that.Think about the obligations we have to the people who sent us here.Think about the hardship that so many Americans will endure if Congressdoes nothing at all.Just as our economy is really starting to recover and were starting to seeoptimistic signs, and weve seen actually some upside statistics from awhole range of areas including housing, now is not the time for moreself-inflicted wounds -- certainly not those coming from Washington.And there’s so much more work to be done in this country -- on jobs andon incomes, education and energy.Were a week away from one of the worst tragedies in memory, so we’vegot work to do on gun safety, a host of other issues.These are all challenges that we can meet.They’re all challenges that we have to meet if we want our kids to grow upin an America that’s full of opportunity and possibility, as muchopportunity and possibility as the America that our parents and ourgrandparents left for us.But we’re only going to be able to do it together.We’re going to have to find some common ground.And the challenge that we’ve got right now is that the American peopleare a lot more sensible and a lot more thoughtful and much more willingto compromise, and give, and sacrifice, and act responsibly than theirelected representatives are. And that’s a problem.There’s a mismatch right now between how everybody else is thinkingabout these problems-- Democrats and Republicans outside of this town-- and how folks are operating here. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  10. 10. P a g e | 10And we’ve just got to get that aligned. But we’ve only got 10 days to do it.So I hope that every member of Congress is thinking about that.Nobody can get 100 percent of what they want.And this is not simply a contest between parties in terms of who looksgood and who doesn’t.There are real-world consequences to what we do here.And I want next year to be a year of strong economic growth.I want next year to be a year in which more jobs are created, and morebusinesses are started, and we’re making progress on all the challengesthat we have out there -- some of which, by the way, we don’t have asmuch control over as we have in terms of just shaping a sensible budget.This is something within our capacity to solve.It doesn’t take that much work. We just have to do the right thing.So call me a hopeless optimist, but I actually still think we can get itdone.And with that, I want to wish every American a merry Christmas. Andbecause we didn’t get this done, I will see you next week. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  11. 11. P a g e | 11“This year’s theme is ‘Joy to All.’It celebrates the many joys of theholiday seasons: the joy of givingand service to others; the joy ofsharing our blessings with oneanother; and, of course, the joy ofwelcoming our friends and familiesas guests into our homes over thesenext several weeks.”First Lady Michelle Obama _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  12. 12. P a g e | 12Opinion of the European BankingAuthority on the recommendations of theHigh-level Expert Group on reformingthe structure of the EU banking sectorIntroduction and legal basis1. The High-level Group on reforming the structure of the EU bankingsector was set up by the European Commission in February 2012 with amandate to determine whether, in addition to ongoing regulatoryreforms, structural reforms of EU banks would strengthen financialstability and improve efficiency and consumer protection, and if that isthe case, to make recommendations as appropriate.2. On 2 October 2012, the Group published its final report (“the Report”)which recommends actions in the five following areas:a. Mandatory separation of proprietary trading and other high-risktrading activities when these activities are material within a groupb. Possible additional separation of activities conditional on the recoveryand resolution planc. Possible amendments to the use of the bail-in instruments as aresolution toold. Review of the capital requirements on trading assets and real estaterelated loanse. Strengthening banks’ governance and controls3. The EBA competence to deliver an opinion is based on Article 34(1) ofRegulation No 1093/2010 of the European Parliament and of the Councilof 24 November 2010 establishing a European Supervisory Authority(European Banking Authority) amending Decision No 716/2009/EC and _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  13. 13. P a g e | 13repealing Commission Decision 2009/78/EC1. In accordance withArticle 14(5) of the Rules of procedure of the EBA, the Board ofSupervisors has adopted this opinion.General comments4. The EBA welcomes the contribution of the Report to the discussion onpossible initiatives to strengthen the regulatory framework of the EU.The introduction of structural measures to complement the existing andforthcoming regulatory reform is being considered in several MembersStates.The EBA emphasises the need to ensure consistency across the SingleMarket in order to foster level playing field and to avoid regulatoryarbitrage.Otherwise, there is a risk that the development of structural measures atthe national level ends up supporting a ring fencing of nationalestablishments and contributes to a segmentation of the Single Market.The EBA stands ready to contribute to the design of an EU frameworkand to monitor possible flexibility left to national authorities.5. The EBA emphasises the need to strike an appropriate balance in thetrade off between preserving the core features of the traditional Europeanmodel of universal banking and strengthening the resilience of thefinancial sector by segregating riskier capital market business into aseparate legal entity.The proposals put forward by the High Level Group are mindful ofbalancing these two objectives by preserving the benefits of universalbanking thanks to a separate legal entities approach within a singlebanking group rather than by adopting a complete separation ofactivities. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  14. 14. P a g e | 14However, only a thorough impact assessment could provide an evaluationof the potential benefits of such measures on the European bankingsector and on the real economy and to compare them with their costs.In conducting this impact assessment, the EBA suggests that particularattention should be devoted to the impact of the increase in the cost ofcapital and funding for trading firms to assess whether this would becommensurate to the objectives of the reform and would not createunintended adverse consequences.The possible consequences on the structure of the market for investmentbanking services in the EU should also be assessed.6. The EBA would also like to stress the need to maintain full consistencybetween the legislation on bank recovery and resolution and anyadditional structural measures.As the draft Directive on Bank Recovery and Resolution already providesstrong incentives to modify business models away from complex firmstructures, which would not allow for a smooth management of a crisis,the assessment of additional structural measures should focus on theincremental net benefit of a legal obligation to segregate tradingactivities.Within this framework, it will be appropriate to consider that in theabsence of a legal segregation, as proposed by the High Level Group, itmight be extremely difficult for a supervisory authority to exercise itsdiscretionary judgment and impose a break up of a universal bank,especially if other competent authorities are not responding with similarlyharsh measures in comparable cases.Some common, EU-wide legal constraints could be helpful in supportingthe supervisory work on bank resolvability.This consideration, however, also points to the need to maintain anappropriate sequencing and coordination of the different legislativemeasures. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  15. 15. P a g e | 157. Implementation of any structural measures, such as a legal separationof risky financial activities from deposit-taking within a group, wouldneed to be reasonably enforceable by competent authorities.Clear and fair criteria must be established in order to determine situationswhere this separation is mandatory, bearing in mind that the purpose ofthis breakdown is to protect the socially most vital parts of the bankinggroup and to limit the taxpayers’ stake in the trading parts of the group.8. Any structural measure should not be viewed as a substitute foradequate supervision.The crisis showed that any form of banking business carries a highpotential for systemic risk.This is true for liquidity and maturity transformation in traditionalbanking as well as for complex derivatives transactions conducted onbanks’ accounts in the trading book.All types of activities generating systemic concerns should be subject tointensive supervision.The fact that certain business is done on wholesale markets, betweenparties who should be able to properly assess the risks stemming from thetransactions, and does not entail an immediate impact on retail businessand payment activities is not a sufficient reason to reduce supervisorycoverage.During the past 20 years, major operational losses faced by individualinstitutions occurred from activities considered non-risky, where riskmanagement was inadequate.9. These measures should be accompanied by review clauses andmacro-prudential monitoring.Since structural measures are easily eroded via financial innovations, theyshould be accompanied by arrangements for swift review, whilemacro-prudential authorities should be requested to closely monitor the _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  16. 16. P a g e | 16migration of risks to non regulated financial intermediaries and theoverall effect on the build up of risks in the financial system as a whole.One should avoid that such structural breakdown unintentionally feedsthe development of the shadow banking system.10. Beyond such structural measures, the Report also “strongly supportsthe use of designated bail-in instruments within the scope of the BRRDirective, as it improves the loss-absorbency of the bank”.It calls for a clear definition of the position of bail-in instruments in thehierarchy of commitments, which would facilitate the pricing and tradingof such instruments and the resulting market discipline and monitoring.11. The EBA also considers that there is a need to further develop thebail-in framework in the BRR Directive in order to improve itspredictability.As already expressed in the 3 March 2011 Opinion on “Technical Detailsof a Possible EU Framework for Bank Recovery and Resolution”, theEBA would rather support a two tier regime where bail-in requirementswould be applied explicitly first to a certain category of debt instruments(targeted approach) and, if this proved insufficient, only in a second stageand within a proper administrative procedure for resolution to theremaining classes of debtors (comprehensive approach).Bail-in needs to be carefully designed in order to ensure legal andoperational certainty and prevent the risk that its implementation impairthe pricing mechanism of banks’ liabilities and cause unintendedconsequences, triggering destabilising effects on other financialinstitutions and the financial stability as a whole.In the absence of a targeted approach, there is a risk that a wide ex antescope of bail-in instruments turns out to be limited once the resolutionoccurs.12. As noted in the abovementioned EBA Opinion, requiring creditinstitutions to issue and hold a minimum percentage of their liabilities as _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  17. 17. P a g e | 17“bail-inable” debt instruments, besides ensuring a minimumloss-absorbing capacity, has also the advantage to create large marketvolumes, which in turn will provide market participants with an incentiveto standardise contracts, and rating agencies to focus properly on ratingsuch debt instruments.13. The EBA believes that clear requirements for a minimum amount ofloss-absorbing liabilities, calibrated according to a thorough impactassessment and combined with a comprehensive statutory approach tobail-in would ensure strict adherence to creditors’ hierarchy and would beappropriately targeted, while preserving the essential features of acomprehensive statutory approach.Specific comments14. On the mandatory separation of proprietary trading activities andother significant trading activities’ proposal of the Report, significantwork on the calibration of the trigger for mandatory separation will needto be carried out before any translation into the EU regulatory framework.The Report adopts a two-stage approach based firstly on trading bookand available for sale-related quantitative indicators to set a preliminaryview on which banks can be subject to separation and secondly, asupervisors’ assessment based on more complex criteria which wouldeventually determine the need for separation.The EBA stands ready to contribute to possible Commission’s work onthe calibration of the threshold to be applied by National supervisors inorder to ensure a clear identification of the banks for which a ring-fence oftrading activities is relevant.As a preliminary remark, it should be underlined that some of the assetswhich are referred to for the first threshold may be similar to the assetsrequired for the Liquidity Coverage Ratio, which may not be satisfactory,if one wants to avoid conflicting regulations.Therefore, the EBA suggests that available for sale components ofliquidity portfolios are excluded from the first threshold calculation. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  18. 18. P a g e | 18To ensure a consistent application of these thresholds in the SingleMarket, there should be a need for technical standards to adopt acommon definition and accounting framework.Moreover, the EBA could provide some mediation at the EU level toensure consistent application across the EU.15. Regarding the activities to be ring-fenced, the Report introduces someexceptions by stating that “the provision of hedging services tonon-banking clients which fall within narrow position risk limits inrelation to own funds, to be defined in regulation, and securitiesunderwriting and related activities do not have to be separated”.To ensure a consistent application of such exceptions across the EU, theEBA stands ready to contribute to the definition of these hedgingservices.16. According to the Report, “transfer of risks or funds between thedeposit bank and the trading entity within the same group would be onmarket-based terms and restricted according to the normal largeexposures rules on interbank exposures”.In such organisation, there will be a need for clear rules on the transfer ofrisks between the “deposit bank” and the “trading entity” in a bankholding company.However, the abovementioned restriction according to the normal largeexposures rules on interbank exposures is not applicable in the currentframework since the treatment of credit institutions’ intra-groupexposures is not harmonised.Article 113 (4)(c) of the 2006/48 Directive offers Member States thepossibility to “fully or partially exempt exposures, includingparticipations or other kinds of holdings, incurred by a credit institutionto its parent undertaking, to other subsidiaries of that parent undertakingor to its own subsidiaries, in so far as those undertakings are covered bythe supervision on a consolidated basis to which the credit institutionitself is subject”. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  19. 19. P a g e | 19An update of the large exposures regulation – which is foreseen in theReport – will therefore be necessary to implement these rules on risktransfer between a deposit bank and a trading entity within a group.17. Moreover, any financial support between the deposit bank and thetrading entity will have to be ruled by clear and transparent principles thatwould go beyond simple reference to market price.The EBA stands ready to provide its expertise in setting up suchstandards and monitor their correct application throughout the EU.18. The EBA also underlines that the draft Directive establishing aframework for the recovery and resolution of credit institutions andinvestment firms (“BRR” Directive) introduces measures on intra-groupfinancial support.Thus, Institutions operating within the same group should be able toenter into agreements to provide financial support to other entities withinthe group experiencing financial difficulties.Such release of the legal restrictions for intra-group financial supportwithin a group would have to be implemented consistently withintra-group financing restrictions between “deposit” and “trading”institutions.19. Regarding additional functional separation of activities in the contextof recovery and resolution plans, the EBA stands ready to promote aconsistent application of recovery and resolution plans’ content andassessment across the EU.To fulfil this objective, the EBA should set binding technical standards tobe applied by national supervisors (including the ECB) and resolutionauthorities.The EBA should then have a mandate to conduct a rigorous review tocheck that consistency has been achieved. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  20. 20. P a g e | 20To ensure a consistent application of these standards on recovery andresolution, such ex post review will be a crucial component.20. As already mentioned in the general comments, the Report suggestspossible amendments to the use of the bail-in instrument as a resolutiontool.The EBA agrees that “such debt should be held outside the bankingsystem” which would require appropriate mechanisms in order to preventthe acquisition of such securities by the banking sector (e.g. introducinga particular risk-weight for such debt).Moreover, the EBA welcomes the suggestion to use bail-in instruments(i) In remuneration schemes for top management and(ii) By introducing a mandatory share of variable remuneration intobail-in bonds.Such measures could be adopted in a swift manner and may efficientlycontribute to the overall efforts to reduce moral hazard and restoreconfidence between the public and the banking system.21. As regards the recommendations to improve the robustness of thetrading book capital requirement byi) Setting an extra, non-risk based, capital buffer requirement for alltrading book assets; and/or byii) Introducing a strict floor risk-based requirement, the EBA understandsthat the Group’s initiative is brought to the general review of the capitalrequirements in the trading book conducted under the aegis of the BaselCommittee which would bring a global answer to this particular issue.The EBA considers that such extra capital buffer may be justified withreference to market risk and operational risk, but one should underlinethat a major driver for bringing down banks during the crisis (or at least _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  21. 21. P a g e | 21generating systemic risk that justified public bail-outs) has beencounterparty risk, especially in derivatives transactions.Any additional capital requirement related to trading assets should,therefore, also refer to counterparty risk and explicitly mention derivativestransaction together with trading operations in order to capture theunderlying risk generated by these activities.22. Finally, the Report calls for a consistent application of loan-to-valueand loan-to-income ratio in all member states, which is stronglysupported by the EBA.To ensure this consistency, ex post monitoring should be conducted bymicroprudential and/or macroprudential authorities across the EU.This opinion will be published on the EBA’s website.Andrea EnriaChairpersonFor the Board of Supervisors _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  22. 22. P a g e | 22Opinion of the European Insurance andOccupational Pensions Authority of oninterim measures regarding Solvency IILegal Basis1. This opinion is issued under the provisions of Article 29(1) (a) ofRegulation (EU) No 1094/2010 of the European Parliament and of theCouncil of 24 November 2010 (hereafter the ‘Regulation’) in conjunctionwith Directive 2009/138/EC of the European Parliament and the Councilof 25 November 2009 on the taking-up and pursuit of the business ofInsurance and Reinsurance (hereafter Solvency II Directive).2. As established in Article 29(1) (a) of the Regulation, EIOPA shall playan active role in building a common Union supervisory culture andconsistent supervisory practices, as well as in ensuring uniformprocedures and consistent approaches throughout the Union.3. As established under Article 1 (6) of the Regulation EIOPA shallcontribute to improving the functioning of the internal market, includingin particular a sound, effective and consistent level of regulation andsupervision, (Art. 1(6)(a)) preventing regulatory arbitrage and promotingequal conditions of competition (Art. 1(6)(d)). EIOPA shall alsocontribute to enhancing consumer protection (Art. 1(6)(f)).4. As established under Article 8 (1) of the Regulation EIOPA’s task is tocontribute to the establishment of high quality common regulatory andsupervisory standards and practices (Art. 1(6)(a)) and to contribute to theconsistent application of legally binding Union acts ensuring consistent,efficient and effective application of the acts referred to in Art. 1 (2) of theRegulation (Art. 1(6)(b)).The fact that the Solvency II Directive has entered into force, means thatit is considered “Union law”, but it will not have legally binding effectuntil after the date of its application, which is currently set to 1 _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  23. 23. P a g e | 23January 2014 in accordance with the ("Quick Fix") Directive 2012/23/EUof 12 September 2012.5. This opinion is addressed to the national competent authoritiesrepresented in EIOPA’s Board of Supervisors.Context6. During the Board of Supervisors (BoS) meeting of September 2012,Members expressed their strong concerns with respect to the currentstatus of the OMNIBUS II negotiations which might further delay theapplication of the Solvency II Directive.7. In its explanatory memorandum to the Proposal for the Solvency IIDirective the European Commission states:“The present solvency rules are outdated.They are not risk sensitive, they leave too much scope to Member Statesfor national variations, they do not properly deal with group supervisionand they have meanwhile been superseded by industry, international andcross-sectoral developments.This is the reason why a new solvency regime, called Solvency II, whichfully reflects the latest developments in prudential supervision, actuarialscience and risk management and which allows for updates in the futureis necessary.”8. In addition, in the absence of a final agreement on Solvency II,European supervisors may be forced to develop national solutions inorder to ensure sound risk sensitive supervision.Instead of reaching consistent and convergent supervision in the EU,different national solutions may emerge to the detriment of a goodfunctioning internal market.9. The BoS mandated the Chair of EIOPA to write to the OMNIBUS IItrialogue parties setting out its concerns. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  24. 24. P a g e | 24In his letter, dated 4 October 2012, the Chair not only expressed the needfor a stable and reliable time plan but also the need to reflect on an earlierimplementation of some Solvency II elements.{Note: Do you remember the letter?}Undertakings which are well-governed and which, in particular, measurecorrectly, mitigate and report the risks which they face will be more likelyto be prepared for the new regulatory framework and act in the interests ofpolicyholders.10. In that regard it is of key importance that there will be a consistent andconvergent approach with respect to the preparation of Solvency II. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  25. 25. P a g e | 25In the run-up to the new system the following key areas of Solvency IIneed to be addressed in order to ensure proper management ofundertakings and to ensure that supervisors have sufficient information athand.These are the system of governance, including risk management systemand a forward looking assessment of the undertakings own risks (basedon the ORSA principles), pre-application of internal models, andreporting to supervisors.11. EIOPA sets out below its expectations for the national competentauthorities.These actions are consistent with EIOPA’s obligation to fostersupervisory convergence.12. EIOPA will, taking into account its objective under Article 1 Para 6and its tasks and powers under Article 8 of the Regulation, contribute tothe consistent efficient and effective preparation of supervisors andinsurance and reinsurance undertakings for the application of theSolvency II Directive.13. As a follow-up to the opinion, and by making use of its powers underArticle 16 of the Regulation, EIOPA will publish guidelines addressed tonational competent authorities on how to proceed in the interim phaseleading up to Solvency II.14. Within 2 months of the issuance of the guidelines, each nationalcompetent authority shall confirm whether it complies or intends tocomply with the guidelines.In the event that a national competent authority does not comply or doesnot intend to comply, it shall inform EIOPA, stating its reasons.15. EIOPA will publish the fact that a national competent authority doesnot comply or does not intend to comply with that guideline. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  26. 26. P a g e | 26Proposed actions by national competent authorities16. As part of the preparation for Solvency II, national competentauthorities should put in place, starting on 1 January 2014 certainimportant aspects of the prospective and risk based supervisory approachto be introduced in order to address the concerns set out above.17. National competent authorities are expected to ensure that insuranceand reinsurance undertakings have in place an effective system ofgovernance which provides for sound and prudent management of theundertaking and an effective risk management system including aforward looking assessment of the undertakings own risks (based on theORSA principles).18. National competent authorities are expected to ensure that insuranceand reinsurance undertakings have in place an effective risk-managementsystem comprising strategies, processes and reporting proceduresnecessary to identify, measure, monitor, manage and report, on acontinuous basis the risks, at an individual and at an aggregated level, towhich they are or could be exposed, and their interdependencies.19. National competent authorities are expected to review and evaluatewith respect to the undertakings concerned the system of governance, theassessment of the risks which those undertakings face or may face andthe assessment of the ability of those undertakings to assess those riskstaking into account the environment in which the undertakings areoperating.20. Through internal model pre-application processes, nationalcompetent authorities engaged in pre-application of internal modelsshould continue to work with undertakings to form a view onundertakings’ degree of readiness for internal model applications, andshould also follow subsequent evolutions to the internal modelframework.21. National competent authorities are encouraged to request all theinformation necessary for applying a prospective and risk basedsupervisory approach. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  27. 27. P a g e | 2722. National competent authorities are expected to ensure that therequirements mentioned above are applied in a manner which isproportionate to the nature, scale and complexity inherent in the businessof the insurance and reinsurance undertaking. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  28. 28. P a g e | 28Capital Adequacy Framework(Standardised Approach)Prudential Supervision Department,Document BS2A,Issued: December 2012Interesting pictures from the Basel iii implementation in New ZealandIntroduction to frameworkThis document sets out the methodology to be used by locallyincorporated registered banks that have adopted the standardisedapproach for calculating capital requirements.This methodology is to be used for the purposes of determining thesebanks’ compliance with conditions of registration relating to capital andfor disclosing information about capital.Starting from reciprocal cross holdings… _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  29. 29. P a g e | 29SPVs… _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  30. 30. P a g e | 30Only 3 credit rating agencies… _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  31. 31. P a g e | 31Securitization… _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  32. 32. P a g e | 32Capital Adequacy Framework (Internal Models BasedApproach)Prudential Supervision Department, Document BS2BIssued: December 2012This document sets out the methodology to be used by locallyincorporated registered banks that have been accredited to use theinternal models based approaches to calculating capital ratiorequirements.This methodology is to be used for the purposes of determining thesebanks’ compliance with conditions of registration relating to capital andfor disclosing information about capital. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  33. 33. P a g e | 33 _____________________________________________________________International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  34. 34. P a g e | 34 _____________________________________________________________International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  35. 35. P a g e | 35 _____________________________________________________________International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  36. 36. P a g e | 36How can financial institutions achieve thegoal of early and effective internal triggers, while avoidingnegative market reaction to recovery actions taken?Comments received on the FSB consultative document on Recovery andResolution PlanningOn 2 November 2012, the Financial Stability Board (FSB) published itsconsultative document on Recovery and Resolution Planning. Interestedparties were invited to provide written comments by 7 December 2012.Some of these comments to the question: How can financial institutionsachieve the goal of early and effective internal triggers, while avoidingnegative market reaction to recovery actions taken? are available below.UBSAs part of regular risk management,firms should have early warning signalswhich, when breached, could trigger the initiation of preventive actions.These early warning indicators serve to monitor disruptions (minimum tosevere) and ensure appropriate management attention and action beforegoing in a recovery situation.The use of early warning signals will allow firms to respond to threatsprior to them becoming so severe as to trigger a formal recovery response.With respect to recovery measures, senior management of firms andregulators need to ensure that communication is sufficiently forthcoming,factual, clear and transparent to avoid unwarranted reactions by marketparticipants. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  37. 37. P a g e | 37Credit SuisseIt is essential that triggers are viewed assoft triggers, i.e. trigger breaches lead topredetermined escalation and informationprocess up to senior management level within the firm.Recovery triggers should not lead to automatic, compulsory reactions asthis may jeopardize flexibility to develop a discretionary response inaccordance with the specifics of the situation and is counter- productivein a stress scenario.We also agree that this can also help avoid awkward situations where anill-timed public disclosure might be forced by the existence of hardtriggers, which could exacerbate distress.British Bankers’ AssociationIt is important that the recovery plan and itstrigger framework enable the G-SIFI to identifythe need to take action before the market does.The metric escalation governance and escalationprocess must also be supported by a realistic communication plan thatseeks to avoid unhelpful reputational impacts in the markets that mayexacerbate the situation, and that remedial action is implemented fullyand without delay.It is absolutely vital however that the recovery programme and itsassociated metrics should be treated as highly confidential by all thoseparty to the information therein and that neither the bank nor any of theauthorities with access to it should disclose it in any way. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  38. 38. P a g e | 38Deutsche BankThe question should be focused on the executionof recovery actions rather than triggers.Internal triggers documented within aninstitution’s recovery plan – whether they areearly warning indicators or triggers as to invokerecovery governance procedures – should besubject to strict confidentiality.Confidentiality provisions should apply to the preparation andimplementation of any aspect of the recovery planning process.There should be no expectation that the process of recovery planningaffects the criteria or level of expectation used to apply listing and marketdisclosure rules.Interesting parts from Deutsche Bank’s Response to FSBConsultative Document on Recovery and Resolution Planning:Making the Key Attributes Requirements OperationalTriggers vs. early warning indicators:It should be very clear that there is a difference between recovery triggersand early warning indicators.We contend that some of the quantitative triggers listed on page 8 shouldbe considered to be early warning indicators rather than recovery triggerssince they don’t reflect the financial health of an institution.Examples include GDP forecasts and three-month LIBOR.When considering the appropriateness of triggers, on page 9 the FSB haspointed out that some firms do not have specific recovery triggers andalso mentions that between three and seven triggers are the norm. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  39. 39. P a g e | 39It is not necessarily the case that there will be an ideal number of triggerswhich can be identified for the industry as a whole and therefore trying todetermine this may be counterproductive.Triggers and the link to risk management:The proposed guidance mentions that triggers should be aligned butshouldn’t be limited to existing triggers, which we take to mean thosealready embedded within the bank’s risk management framework - forexample those linked to the bank’s risk appetite and regulatoryrequirements.We recommend that instead the guidelines should refer to situations“where existing triggers are not sufficient” in order to reflect the workthat has already been done and to avoid the assumption that there mustbe a suite of separate triggers.Assuming authorities have reviewed the arrangements and consider thatthe firm is able to take into account the various warning signs andindicators, the firm should not automatically be expected to have a certainnumber of supplementary triggers over and above those already beingused.The focus of the assessment should be to understand how triggers arecombined and supported by high quality management information.Group-level planning:We recommend the FSB include in the guidance the explicit expectationthat recovery planning is done at group level and that there should not bea proliferation of local level requirements.In the proposed guidance there is no clear statement about theappropriateness of local frameworks.If these are ultimately implemented, there is a need for guidance abouthow authorities and firms should coordinate. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  40. 40. P a g e | 40Scenario design:We support the approach taken by the FSB and consider the elementslisted on page 9 to be comprehensive.We agree that conceptually the practice of reverse stress-testing mayprovide a helpful perspective and is good practice within riskmanagement.Any requirements for reverse stress-testing should be in this context andused to support recovery planning, but should not be a mandatory part ofthe framework.Definition of triggers:We believe trigger definition should be at the discretion of the institutionand that supervisors should work with them to identify the right metricsfor each bank.This is highly dependent on the risk management framework and riskprofile of the institution and so should be considered on a firm-specificbasis.Recovery triggers should reflect the institution’s financial health in termsof sufficient liquidity and capitalisation in order to prevent a near-defaultor default situation of the firm.Examples of such recovery triggers are the Common Equity Tier 1 ratio,the stressed net liquidity position as well as the firm’s economic capitaladequacy.These universally apply to all types of financial institutions irrespective oftheir portfolio composition.To identify triggers, we have employed guiding principles and this type ofapproach may be helpful to reflect in the guidance.We believe that appropriate triggers should be: _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  41. 41. P a g e | 41- integrated into standard risk management practices;- transparent, with unambiguous definitions and good internalunderstanding; - related to the bank’s stress-testing processes with metrics embeddedin that process; and- relevant to the Recovery Plan and viability of the firm.Quantitative triggers:Referring to the potential quantitative triggers listed we would make thefollowing observations:- The proposed guidance refers to the renewal of wholesale funding and withdrawal of deposits and other funding. We recommend considering these risk types separately. For example, in the case of liquidity risk, rather than looking purely at renewal of wholesale funding or deposit activity (which would be very bank-specific in terms of relevance) supervisors should be encouraged to ensure that a bank’s recovery trigger is aligned with its approved Liquidity Risk Management framework. Where possible a stressed net liquidity position should be used as the recovery trigger (therefore incorporating inflows and outflows, including deposits and wholesale funding) until such time as the Liquidity Coverage Ratio (LCR) is implemented. The LCR should subsequently become the trigger.- Some of the suggested triggers are based on external factors such as LIBOR, GDP, etc. These may be considered more appropriate for scenario planning or as early warning indicators. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  42. 42. P a g e | 42Early warning indicators:A firm-specific approach should also be encouraged for early warningindicators which need to be portfolio - and therefore institution - specific,in order to ensure an effective monitoring and default prevention process. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  43. 43. P a g e | 43Implementation of the Basel III FrameworkAt its meeting on 13-14 December, the Basel Committeeon Banking Supervision discussed the progress of itsmembers in implementing the capital adequacyreforms within Basel III.The Basel Committee has been actively monitoring ona continuing basis the progress of members in implementing the BaselIII package of regulatory reforms, as well as the implementation of BaselII and Basel 2.5.To date, it has published three progress reports and two reports to theG20.The number of member jurisdictions that have published the final set ofBasel III regulations effective from the start date of 1 January 2013 is 11.These include Australia, Canada, China, Hong Kong SAR, India, Japan,Mexico, Saudi Arabia, Singapore, South Africa and Switzerland.Seven other jurisdictions - Argentina, Brazil, the European Union,Indonesia, Korea, Russia and the United States - have issued draftregulations, and have indicated they are working towards issuing finalversions as quickly as possible.Turkey will issue draft regulations early in 2013.Stefan Ingves, Chairman of the Basel Committee and Governor of theSveriges Riksbank, said "While some jurisdictions have not been able tomeet the planned start date, a large number will be ready to beginintroducing the new capital requirements as planned on 1 January 2013."Mr Ingves also said, "The globally agreed timeline includes a number ofmilestones from 2013 to 2019, designed to provide for a gradual phasing inof the new capital requirements. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  44. 44. P a g e | 44It is expected that as remaining jurisdictions finalise their domesticregulations during 2013, they will incorporate all the remainingtransitional deadlines in line with the original global agreement, evenwhere they have not been able to meet the 1 January 2013 start date.Hence, by the end of 2013, almost all Basel Committee jurisdictions willbe implementing Basel III in accordance with the agreed timetable.This is an absolutely critical step towards strengthening the resilience ofthe global banking system.""Furthermore", Mr Ingves added, "even though there are delays inimplementing the regulations, national supervisors are ensuring thatinternationally active banks are, where necessary, making steady progressin strengthening their capital base in accordance with the Basel IIIframework."All Basel Committee members have reiterated their commitment toimplement the globally-agreed reforms, and several members are due toundergo a peer review of the consistency of their final regulations during2013.At the conclusion of this set of peer reviews, all jurisdictions that are thehome regulator for global systemically important banks (G-SIBs) willhave been subject to a peer review of their Basel III implementation.Other jurisdictions will be subject to peer reviews shortly thereafter. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  45. 45. P a g e | 45Governor Jeremy C. SteinAt the Global Research Forum,International Finance andMacroecomomics, Sponsored by theEuropean Central Bank, Frankfurt amMain, GermanyDollar Funding and Global BanksThanks very much. Its a pleasure to be part of this panel on the future offinancial globalization.I will focus my remarks on one important aspect of this issue--namely, thegrowing use of wholesale dollar funding by global financial institutions.Ill begin by briefly discussing research Ive been doing, along with mycoauthors Victoria Ivashina and David Scharfstein, which examines someof the consequences of this funding model during times of market stress.Ill then touch on the policy implications of this and related work. Butfirst, the usual disclaimer:The views that follow are my own and do not necessarily reflect thethinking of my colleagues on the Federal Open Market Committee. By way of background, the dollar liabilities of foreign banks have grownrapidly in the past two decades and now stand at about $8 trillion, roughlyon par with those of U.S. banks.A significant proportion of foreign banks dollar liabilities are raised viaU.S. branches, most of which are legally precluded from raising depositsinsured by the Federal Deposit Insurance Corporation.The main source of funding for these branches, therefore, comes fromuninsured wholesale claims such as large time deposits, making the cost _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  46. 46. P a g e | 46and availability of such dollar funding highly sensitive to changingperceptions of these banks creditworthiness.In our work, we asked how shocks to the ability of foreign banks to raisedollar funding might lead to changes in their lending.We began with a simple conceptual model: Imagine a European bankthat lends in euros to European firms and in dollars to U.S. firms.To finance its euro-denominated lending, it funds itself by issuinginsured euro deposits to its local retail deposit base.By contrast, to finance its dollar-denominated lending, it raises funds inthe wholesale dollar market. Because the banks dollar liabilities are uninsured, an adverse shock tothe banks perceived creditworthiness will result in a spike in its dollarfunding costs.At the same time, the cost to the bank of funding in euros is unchanged tothe extent that its euro deposits are insured.So we might expect such a shock to induce the bank to shift its fundingaway from the U.S. wholesale market and toward the European depositmarket.But what are the consequences of this adjustment, both for thegeographic distribution of its lending and for the functioning of foreignexchange (FX) swap markets? Note that if the bank wants to maintain the volume of its dollar-basedlending, it will have to tap its insured deposit base to raise more euros andthen swap these euros into dollars using the FX swap market.However, if the induced funding realignment is big enough, and ifarbitrageurs have limited capacity to take the other side of the trade, thislarge swap demand can cause a breakdown in the usual _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  47. 47. P a g e | 47overed-interest-parity (CIP) relationship--a breakdown of the sort that wehave seen during times of extreme market stress.In this case, the direction of the deviation would be such that the cost ofsynthetic dollar borrowing--in other words, euro borrowing combinedwith an FX swap--would go up and would approach that of thenow-elevated cost of funding directly in the wholesale dollar market. And given that any method of dollar funding--direct or synthetic--hasbecome more expensive relative to euro funding, it then follows that anadverse shock to a global banks perceived creditworthiness leads to adecline in its dollar-denominated lending relative to its euro-denominatedlending.So, two principal effects of the dollar funding shock are intimatelyconnected: a widening of the so-called CIP basis in the FX swap market,and a reduction in credit supply to firms that borrow in dollars.To test the models implications, my coauthors and I focused on events inthe second half of 2011, when the credit quality of a number of largeeuro-area banks became a concern and U.S. prime money market fundssharply reduced their lending to those banks.In a span of four months, the exposure of money funds to euro-area banksfell by half, from about $400 billion in May to about $200 billion inSeptember.Coincident with this contraction in dollar funding, the CIP basis widenedin the direction predicted by our model, increasing the cost of obtainingsynthetic dollars via the FX swap market.We used data from the international syndicated loan market to test themodels predictions about the reaction of lending to this type of fundingstress.We found that dollar-denominated lending by euro-area banks fell relativeto their euro-denominated lending, while this result did not hold for U.S.banks. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  48. 48. P a g e | 48We also found that, even holding fixed the identity of the borrowing firm,a syndicate formed to make a dollar-denominated loan during this periodwas less likely to include euro-area banks, while the same was not true ofsyndicates making euro-denominated loans.Finally, euro-area banks that relied most on funding from U.S. moneymarket funds also cut back most sharply on their dollar-denominatedlending.This last result is similar to one in recent work by my Fed colleaguesRicardo Correa, Horacio Sapriza, and Andrei Zlate.They documented that the U.S. branches of foreign banks thatexperienced the most shrinkage in their dollar-denominated large timedeposits--funding that had been mostly provided by money market fundsprior to mid-2011--cut their U.S.-based commercial and industrial lendingby more than banks that fared better on this score.Taken together, these findings have two types of policy implications: onefor central bank responses to dollar funding pressures and another formeasures to regulate foreign banking firms that rely heavily on short-termwholesale funding. This analysis underscores that the Federal Reserves temporary dollarliquidity swap lines with the European Central Bank and other centralbanks are an effective response to stresses in dollar funding markets.Last week, the FOMC approved the extension of these swap lines throughFebruary 1, 2014.These lines have helped avert fire sales of dollar assets and maintain theflow of credit to U.S. households and firms.Although we documented cutbacks in dollar lending in the latter half of2011 by foreign banks reliant on wholesale dollar funding, those cutbackslikely would have been more pronounced in the absence of the swap linesI will now turn to regulation. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  49. 49. P a g e | 49It is useful to bear in mind that our current regulatory regime evolvedduring a period when the U.S. operations of foreign banks were largelynet recipients of funding from their parents.However, their reliance on less stable, short-term wholesale fundingincreased significantly in the decade leading up to the financial crisis,when U.S. branches of foreign banks began borrowing large volumes ofdollars to send to their foreign parents.Such activity increases the vulnerabilities I described earlier.And it may not only pose the risk of a cutback in lending, but could alsothreaten the safety and soundness of the foreign banks themselves--and ofthe U.S. entities exposed to those banks.The regulation of U.S. branches of foreign banks has changed little overthe past decade, even in the face of these significant changes in the globalbanking landscape.However, last week, the Federal Reserve Board proposed new rules forforeign banking organizations that would address some of the concernsthat Ive discussed and thereby mitigate the attendant risks to U.S.financial stability.These proposed rules apply enhanced prudential standards to foreignbanking organizations and are designed to increase their resiliency.Importantly, the rules will not disadvantage foreign banks relative todomestic U.S. banking firms, but rather the rules seek to maintain a levelplaying field.To avoid or mitigate potential disruptions in wholesale dollar fundingmarkets, the proposed rules require foreign banking organizations to holdsufficient high-quality liquid assets to meet expected near-term netoutflows in a stress scenario. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  50. 50. P a g e | 50These rules should reduce the pressure on foreign banks that rely heavilyon short-term dollar funding to either sell illiquid dollar assets or cut backon dollar lending in times of financial stress.By helping to alleviate disruptions in dollar funding markets the rulesshould also reduce the reliance on swap lines in a future stress episode. Finally, the central role played by money market funds in the 2011episode is a reminder of the fragility of these funds themselves--and of therisk created by their combination of risky asset holdings, stable-valuedemandable liabilities, and zero-capital buffers.The events following the Lehman Brothers bankruptcy in 2008 provideeven starker evidence of the risks that money market funds pose for thebroader financial system.In light of these vulnerabilities, I welcome the recent proposedrecommendations by the Financial Stability Oversight Council for furthermoney market fund reforms.To conclude: Financial globalization undoubtedly brings with itsubstantial benefits.At the same time, it creates important challenges for financial stabilityand for the appropriate design of regulation.The research discussed in conferences such as this one will help us betterunderstand and respond to these challenges.Thank you, and I look forward to your questions. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  51. 51. P a g e | 51PCAOB Auditing Standard No. 16,Communications with Audit Committees,and Amendments to other PCAOBStandards Approved by SECEffective for Fiscal Years Beginning On or After Dec. 15, 2012Washington, D.C., Dec. 20, 2012The Public Company Accounting Oversight Board announced that theSecurities and Exchange Commission approved Auditing Standard No.16, Communications with Audit Committees, and amendments to otherPCAOB standards.The new standard and related amendments are effective for publiccompany audits of fiscal periods beginning on or after Dec. 15, 2012.Additionally, the SEC determined that the standard and relatedamendments will apply to audits of "emerging growth companies" underthe Jumpstart Our Business Startups Act of 2012."AS 16 supports the critical role of auditors and audit committees infinancial reporting," said PCAOB Chairman James R. Doty."The standard moves the auditors communication with the auditcommittee away from compliance checklists, and decisively in thedirection of meaningful, effective interchange."The standard establishes requirements that enhance the relevance andtimeliness of the communications between the auditor and the auditcommittee, and is intended to foster constructive dialogue between thetwo on significant audit and financial statement matters.The standard supersedes the Boards interim auditing standards AU sec.310, Appointment of the Independent Auditor, and AU sec. 380, _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  52. 52. P a g e | 52Communication with Audit Committees, and amends other PCAOBstandards.The PCAOB adopted the new standard on Aug. 15, 2012.The SEC approved the standard on Dec. 17, 2012.Auditing Standard No. 16Communications with Audit CommitteesIntroduction1. This standard requires the auditor to communicate with thecompanys audit committee regarding certain matters related to theconduct of an audit and to obtain certain information from the auditcommittee relevant to the audit.This standard also requires the auditor to establish an understanding ofthe terms of the audit engagement with the audit committee and to recordthat understanding in an engagement letter.2. Other Public Company Accounting Oversight Board ("PCAOB")rules and standards identify additional matters to be communicated to acompanys audit committee.Various laws or regulations also require the auditor to communicatecertain matters to the audit committee.The communication requirements of this standard do not modify orreplace communications to the audit committee required by such otherPCAOB rules and standards, and other laws or regulations.Nothing in this standard precludes the auditor from communicatingother matters to the audit committee. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  53. 53. P a g e | 53Objectives3. The objectives of the auditor are to:- Communicate to the audit committee the responsibilities of the auditor in relation to the audit and establish an understanding of the terms of the audit engagement with the audit committee;- Obtain information from the audit committee relevant to the audit;- Communicate to the audit committee an overview of the overall audit strategy and timing of the audit; and- Provide the audit committee with timely observations arising from the audit that are significant to the financial reporting process.Note: "Communicate to," as used in this standard, is meant to encourageeffective two-way communication between the auditor and the auditcommittee throughout the audit to assist in understanding mattersrelevant to the audit.Appointment and Retention - Significant Issues Discussed withManagement in Connection with the Auditors Appointment orRetention4. The auditor should discuss with the audit committee any significantissues that the auditor discussed with management in connection withthe appointment or retention of the auditor, including significantdiscussions regarding the application of accounting principles andauditing standards.Establish an Understanding of the Terms of the Audit5. The auditor should establish an understanding of the terms of theaudit engagement with the audit committee. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  54. 54. P a g e | 54This understanding includes communicating to the audit committee thefollowing:- The objective of the audit;- The responsibilities of the auditor; and- The responsibilities of management.6. The auditor should record the understanding of the terms of theaudit engagement in an engagement letter and provide the engagementletter to the audit committee annually.The auditor should have the engagement letter executed by theappropriate party or parties on behalf of the company.If the appropriate party or parties are other than the audit committee, orits chair on behalf of the audit committee, the auditor should determinethat the audit committee has acknowledged and agreed to the terms ofthe engagement.7. If the auditor cannot establish an understanding of the terms of theaudit engagement with the audit committee, the auditor should decline toaccept, continue, or perform the engagement.Obtaining Information and Communicating the Audit StrategyObtaining Information Relevant to the Audit8. The auditor should inquire of the audit committee about whether it isaware of matters relevant to the audit, including, but not limited to,violations or possible violations of laws or regulations.Overall Audit Strategy, Timing of the Audit, and SignificantRisks9. The auditor should communicate to the audit committee an overviewof the overall audit strategy, including the timing of the audit,7/ and _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  55. 55. P a g e | 55discuss with the audit committee the significant risks identified duringthe auditors risk assessment procedures.Note: This overview is intended to provide information about the audit,but not specific details that would compromise the effectiveness of theaudit procedures.10. As part of communicating the overall audit strategy, the auditorshould communicate the following matters to the audit committee, ifapplicable:- The nature and extent of specialized skill or knowledge needed to perform the planned audit procedures or evaluate the audit results related to significant risks;- The extent to which the auditor plans to use the work of the companys internal auditors in an audit of financial statements;- The extent to which the auditor plans to use the work of internal auditors, company personnel (in addition to internal auditors), and third parties working under the direction of management or the audit committee when performing an audit of internal control over financial reporting;- The names, locations, and planned responsibilities of other independent public accounting firms or other persons, who are not employed by the auditor, that perform audit procedures in the current period audit; andNote: The term "other independent public accounting firms" in thecontext of this communication includes firms that perform auditprocedures in the current period audit regardless of whether theyotherwise have any relationship with the auditor.The basis for the auditors determination that the auditor can serve asprincipal auditor, if significant parts of the audit are to be performed byother auditors. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  56. 56. P a g e | 5611. The auditor should communicate to the audit committee significantchanges to the planned audit strategy or the significant risks initiallyidentified and the reasons for such changes.Results of the Audit - Accounting Policies and Practices,Estimates, and Significant Unusual Transactions12. The auditor should communicate to the audit committee thefollowing matters:Significant accounting policies and practices.(1) Managements initial selection of, or changes in, significantaccounting policies or the application of such policies in the currentperiod; and(2) The effect on financial statements or disclosures of significantaccounting policies in(i) controversial areas or(ii) areas for which there is a lack of authoritative guidance or consensus,or diversity in practice.Critical accounting policies and practices.All critical accounting policies and practices to be used, including:(1) The reasons certain policies and practices are considered critical;and(2) How current and anticipated future events might affect thedetermination of whether certain policies and practices are consideredcritical. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  57. 57. P a g e | 57Critical accounting estimates.(1) A description of the process management used to develop criticalaccounting estimates;(2) Managements significant assumptions used in critical accountingestimates that have a high degree of subjectivity; and(3) Any significant changes management made to the processes usedto develop critical accounting estimates or significant assumptions, adescription of managements reasons for the changes, and the effects ofthe changes on the financial statements.Significant unusual transactions(1) Significant transactions that are outside the normal course ofbusiness for the company or that otherwise appear to be unusual due totheir timing, size, or nature; and(2) The policies and practices management used to account forsignificant unusual transactions.Note: If management communicates any of these matters, the auditordoes not need to communicate them at the same level of detail asmanagement, as long as the auditor:(1) Participated in managements discussion with the audit committee,(2) Affirmatively confirmed to the audit committee that management hasadequately communicated these matters, and(3) With respect to critical accounting policies and practices, identifiedfor the audit committee those accounting policies and practices that theauditor considers critical.The auditor should communicate any omitted or inadequately describedmatters to the audit committee. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  58. 58. P a g e | 58Auditors Evaluation of the Quality of the Companys FinancialReporting13. The auditor should communicate to the audit committee thefollowing matters:Qualitative aspects of significant accounting policies andpractices.(1) The results of the auditors evaluation of, and conclusions about,the qualitative aspects of the companys significant accounting policiesand practices, including situations in which the auditor identified bias inmanagements judgments about the amounts and disclosures in thefinancial statements; and(2) The results of the auditors evaluation of the differences between(i) estimates best supported by the audit evidence and(ii) estimates included in the financial statements, which are individuallyreasonable, that indicate a possible bias on the part of the companysmanagement.Assessment of critical accounting policies and practices.The auditors assessment of managements disclosures related to thecritical accounting policies and practices, along with any significantmodifications to the disclosure of those policies and practices proposedby the auditor that management did not make.Conclusions regarding critical accounting estimates.The basis for the auditors conclusions regarding the reasonableness ofthe critical accounting estimates. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  59. 59. P a g e | 59Significant unusual transactions.The auditors understanding of the business rationale for significantunusual transactions.Financial statement presentation.The results of the auditors evaluation of whether the presentation of thefinancial statements and the related disclosures are in conformity with theapplicable financial reporting framework, including the auditorsconsideration of the form, arrangement, and content of the financialstatements (including the accompanying notes), encompassing matterssuch as the terminology used, the amount of detail given, theclassification of items, and the bases of amounts set forth.New accounting pronouncements.Situations in which, as a result of the auditors procedures, the auditoridentified a concern regarding managements anticipated application ofaccounting pronouncements that have been issued but are not yeteffective and might have a significant effect on future financial reporting.Alternative accounting treatments.All alternative treatments permissible under the applicable financialreporting framework for policies and practices related to material itemsthat have been discussed with management, including the ramificationsof the use of such alternative disclosures and treatments and thetreatment preferred by the auditor.Other Information in Documents Containing Audited FinancialStatements14. When other information is presented in documents containingaudited financial statements, the auditor should communicate to theaudit committee the auditors responsibility under PCAOB rules andstandards for such information, any related procedures performed, andthe results of such procedures. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  60. 60. P a g e | 60Difficult or Contentious Matters for which the AuditorConsulted15. The auditor should communicate to the audit committee mattersthat are difficult or contentious for which the auditor consulted outsidethe engagement team and that the auditor reasonably determined arerelevant to the audit committees oversight of the financial reportingprocess.Management Consultation with Other Accountants16. When the auditor is aware that management consulted with otheraccountants about significant auditing or accounting matters and theauditor has identified a concern regarding such matters, the auditorshould communicate to the audit committee his or her views about suchmatters that were the subject of such consultation.Going Concern17. The auditor should communicate to the audit committee, whenapplicable, the following matters relating to the auditors evaluation of thecompanys ability to continue as a going concern:If the auditor believes there is substantial doubt about the companysability to continue as a going concern for a reasonable period of time, theconditions and events that the auditor identified that, when considered inthe aggregate, indicate that there is substantial doubt;If the auditor concludes, after consideration of managements plans, thatsubstantial doubt about the companys ability to continue as a goingconcern is alleviated, the basis for the auditors conclusion, includingelements the auditor identified within managements plans that aresignificant to overcoming the adverse effects of the conditions and events;If the auditor concludes, after consideration of managements plans, thatsubstantial doubt about the companys ability to continue as a goingconcern for a reasonable period of time remains: _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  61. 61. P a g e | 61(1) The effects, if any, on the financial statements and the adequacy ofthe related disclosure; and(2) The effects on the auditors report.Uncorrected and Corrected Misstatements18. The auditor should provide the audit committee with the schedule ofuncorrected misstatements related to accounts and disclosures that theauditor presented to management.The auditor should discuss with the audit committee, or determine thatmanagement has adequately discussed with the audit committee, thebasis for the determination that the uncorrected misstatements wereimmaterial, including the qualitative factors considered.The auditor also should communicate that uncorrected misstatements ormatters underlying those uncorrected misstatements could potentiallycause future-period financial statements to be materially misstated, evenif the auditor has concluded that the uncorrected misstatements areimmaterial to the financial statements under audit.19. The auditor should communicate to the audit committee thosecorrected misstatements, other than those that are clearly trivial, relatedto accounts and disclosures that might not have been detected exceptthrough the auditing procedures performed, and discuss with the auditcommittee the implications that such corrected misstatements mighthave on the companys financial reporting process.Material Written Communications20. The auditor should communicate to the audit committee othermaterial written communications between the auditor and management.Departure from the Auditors Standard Report21. The auditor should communicate to the audit committee thefollowing matters related to the auditors report: _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  62. 62. P a g e | 62When the auditor expects to modify the opinion in the auditors report,the reasons for the modification, and the wording of the report; andWhen the auditor expects to include explanatory language or anexplanatory paragraph in the auditors report, the reasons for theexplanatory language or paragraph, and the wording of the explanatorylanguage or paragraph.Disagreements with Management22. The auditor should communicate to the audit committee anydisagreements with management about matters, whether or notsatisfactorily resolved, that individually or in the aggregate could besignificant to the companys financial statements or the auditors report.Disagreements with management do not include differences of opinionbased on incomplete facts or preliminary information that are laterresolved by the auditor obtaining additional relevant facts or informationprior to the issuance of the auditors report.Difficulties Encountered in Performing the Audit23. The auditor should communicate to the audit committee anysignificant difficulties encountered during the audit.Significant difficulties encountered during the audit include, but are notlimited to:- Significant delays by management, the unavailability of company personnel, or an unwillingness by management to provide information needed for the auditor to perform his or her audit procedures;- An unreasonably brief time within which to complete the audit;- Unexpected extensive effort required by the auditor to obtain sufficient appropriate audit evidence; _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  63. 63. P a g e | 63- Unreasonable management restrictions encountered by the auditor on the conduct of the audit; and- Managements unwillingness to make or extend its assessment of the companys ability to continue as a going concern when requested by the auditor.Note: Difficulties encountered by the auditor during the audit couldrepresent a scope limitation, which may result in the auditor modifyingthe auditors opinion or withdrawing from the engagement.Other Matters24. The auditor should communicate to the audit committee othermatters arising from the audit that are significant to the oversight of thecompanys financial reporting process.This communication includes, among other matters, complaints orconcerns regarding accounting or auditing matters that have come to theauditors attention during the audit and the results of the auditorsprocedures regarding such matters.Form and Documentation of Communications25. The auditor should communicate to the audit committee thematters in this standard, either orally or in writing, unless otherwisespecified in this standard.The auditor must document the communications in the work papers,whether such communications took place orally or in writing.Timing26. All audit committee communications required by this standardshould be made in a timely manner and prior to the issuance of theauditors report. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  64. 64. P a g e | 64The appropriate timing of a particular communication to the auditcommittee depends on factors such as the significance of the matters tobe communicated and corrective or follow-up action needed, unless othertiming requirements are specified by PCAOB rules or standards or thesecurities laws.Note: An auditor may communicate to only the audit committee chair ifdone in order to communicate matters in a timely manner during theaudit.The auditor, however, should communicate such matters to the auditcommittee prior to the issuance of the auditors report. _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com
  65. 65. P a g e | 65Report to Congress onAssigned Credit RatingsAs Required by Section 939F of theDodd-Frank Wall Street Reform andConsumer Protection ActInteresting PartsThis is a study by the Staff of the Division of Trading and Markets of theU.S. Securities and Exchange Commission.The Commission has expressed no view regarding the analysis, findingsor conclusions contained herein.December 2012On July 21, 2010, President Obama signed the Dodd-Frank Wall StreetReform and Consumer Protection Act (the “Dodd-Frank Act”) into law.Title IX, Subtitle C of the Dodd-Frank Act (“Title IX, Subtitle C”),“Improvements to the Regulation of Credit Rating Agencies,” amongother things, established new self-executing requirements applicable tonationally recognized statistical rating organizations (“NRSROs”),required certain studies, and required that the Commission adopt rulesapplicable to NRSROs in a number of areas.Under section 939F of Title IX, Subtitle C (“section 939F”), the U.S.Securities and Exchange Commission (“Commission”) must submit tothe Committee on Banking, Housing, and Urban Affairs of the Senateand the Committee on Financial Services of the House ofRepresentatives, not later than 24 months after the date of enactment ofthe Dodd-Frank Act, a report containing:(1) the findings of a study on matters related to assigning credit ratings forstructured finance products; and _____________________________________________________________ International Association of Risk and Compliance Professionals (IARCP) www.risk-compliance-association.com

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