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Basel 3 April 2012


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Basel iii Compliance Professionals Association (BiiiCPA)

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Basel 3 April 2012

  1. 1. 1Basel iii Compliance ProfessionalsAssociation (BiiiCPA)1200G Street NW Suite800Washington, DC 20005-6705USA Tel:202-449-9750Web: www.basel-iii-association.comBasel III News,April 2012Dear Member,“Prediction is very difficult, especiallyif its about the future”NilsBohr, Nobel laureatein PhysicsIn Basel iii, Solvencyii, and many other lawsand regulations,wehave to make economicprojections.What I reallylove isthe need for “realisticassumptions”.So, wehave a crystal ball: The MonetaryPolicyReport tothe Congresswhere wecan find the“Summary of Economic Projections”Monetary Policy Report to the CongressSummary of Economic ProjectionsIn conjunction withthe January 24–25, 2012,FederalOpenMarket Committee(FOMC)meeting, themembersof the Board ofGovernorsand thepresidentsof the FederalReserveBanks, all of whom participatein thedeliberationsoftheFOMC,submittedprojectionsfor growth of real output, theunemployment rate,and inflation for theyears 2012to 2014and over the longer run.Theeconomicprojectionswerebased on informationavailableat thetimeof the meeting and participants’individual assumptionsaboutBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  2. 2. 2factorslikelytoaffecteconomicoutcomes,includingtheirassessmentsofappropriatemonetarypolicy.Startingwiththe Januarymeeting, participantsalsosubmitted theirassessmentsof thepath for thetarget federal fundsrate that theyviewedasappropriateand compatiblewiththeir individual economicprojections.Longer-run projectionsrepresent each participants’assessment of therate to whicheachvariable wouldbe expectedto con-verge over timeunder appropriate monetary policyand in the absenceof further shocks.“Appropriatemonetary policy” is defined asthe future path of policy thatparticipantsdeem most likely tofoster outcomesfor economic activityandinflationthat bestsatisfytheir individual interpretationof theFederalReserve’sobjectivesof maximum employment and stableprices.As depicted in figure1, FOMC participantsprojectedcontinuedeconomicexpansion over the 2012–14period, withreal grossdomesticproduct (GDP) risingat a modest rate this year and then strengtheningfurther through 2014.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
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  4. 4. 4Participantsgenerallyanticipated onlya small declinein theunemployment rate thisyear.In 2013and 2014,thepace of theexpansion wasprojected to exceedparticipants’estimatesof the longer-runsustainablerateof increaseinreal GDP by enough to result in a gradual further declinein theunemployment rate.However, at the end of 2014,participantsgenerallyexpected that theunemployment rate wouldstill be well above their estimatesof thelonger-run normal unemployment ratethat they currentlyview asconsistent withthe FOMC’sstatutory mandatefor promoting maximumemployment and pricestability.Participantsviewedtheupwardpressuresoninflationin 2011from factorssuch assupplychain disruptionsand risingcommodity pricesashavingwaned, and theyanticipatedthat inflation wouldfall back in 2012.Over theprojectionperiod, most participantsexpected inflation, asmeasured by the annual changein theprice index for personalconsumption expenditures(PCE), to be atorbelowtheFOMC’s objectiveof2percent that wasexpressedin theCommittee’sstatement of longer-run goalsand policy strategy.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  5. 5. 5Core inflationwasprojectedto run at about thesame rate asoverallinflation.As indicatedin table1, relativeto their previousprojectionsin November2011, participantsmadesmall downwardrevisionstotheir expectationsfortherateof increasein real GDP in 2012and 2013,but theydid notmateriallyalter their projectionsfor a noticeablystronger paceofexpansion by 2014.With the unemployment rate havingdeclined in recent monthsby morethan participantshad anticipatedin thepreviousSummary of EconomicProjections(SEP), theygenerallyloweredtheir forecastsfor the level oftheunemployment rate over the next twoyears.Participants’expectationsfor both the longer-run rate of increasein realGDP and the longer-run unemployment rate werelittlechanged fromNovember.Theydid not significantlyalter their forecastsfor the rateof inflationoverthenext threeyears.However,in light of the 2percent inflationthat is the objectiveincludedin thestatement of longer-run goalsand policy strategy adoptedat theJanuary meeting, the rangeand central tendencyof their projectionsoflonger-run inflationwereall equal to 2 percent.As shown in figure 2, most participantsjudged that highlyaccommodativemonetary policywaslikelyto bewarrantedover comingyears to promote a stronger economicexpansion in thecontext of pricestability.In particular, withthe unemployment rate projectedto remain elevatedover theprojection period and inflation expectedtobe subdued, sixparticipantsanticipatedthat, under appropriate monetary policy, the firstincreasein the target federal fundsrate wouldoccur after 2014,and fiveexpectedpolicy firmingto commenceduring 2014(theupper panel).Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  6. 6. 6Theremainingsix participantsjudged that raisingthe federalfundsratesoonerwouldbe required to forestall inflationarypressuresor avoiddistortionsin the financial system.As indicatedin the lowerpanel, all of theindividual assessmentsof theappropriatetarget federal fundsrate over thenext several years werebelow the longer-run level of the federal fundsrate, and 11participantsplacedthetarget federalfundsrateat 1percent or lowerat theendof2014.Most participantsindicated that theyexpected that thenormalization oftheFederalReserve’sbalancesheetshouldoccur in awayconsistent withtheprinciplesagreed on at the June2011meetingof the FOMC, withthetimingof adjustmentsdependent on theexpecteddateof thefirst policytightening.Afew participantsjudgedthat, given their current assessmentsof theeconomicoutlook, appropriate policywouldincludeadditional assetpurchasesin 2012,and one assumed anearlyendingof thematurityextensionprogram.Asizablemajorityof participantscontinuedto judgethe level ofuncertaintyassociatedwiththeir projectionsfor real activityand theunemployment rate asunusuallyhigh relativeto historical norms.Many alsoattached a greater-than-normal level of uncertaintyto theirforecastsfor inflation, but, compared withthe November SEP, twoadditional participantsviewed uncertaintyasbroadlysimilar tolonger-run norms.As in November, many participantssawdownsiderisks attendingtheirforecastsof real GDP growthand upsiderisks to their forecastsof theunemployment rate; most participantsviewedthe riskstotheir inflationprojectionsasbroadlybalanced.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  7. 7. 7TheOutlook for Economic ActivityThecentral tendencyof participants’forecastsfor thechangein realGDPin 2012was2.2 to2.7percent.This forecast for 2012, while slightly lower than the projection prepared inNovember, would represent a pickup in output growth from 2011 to a ratecloseto itslonger-run trend.Participantsstated that the economic informationreceivedsinceNovember showedcontinued gradual improvement in thepaceofeconomicactivityduring the second half of 2011, asthe influenceof thetemporaryfactorsthat damped activityin thefirst half of the yearsubsided.Consumer spendingincreasedat a moderate rate, exports expandedsolidly, and businessinvestment rosefurther.Recently, consumersand businessesappeared to become somewhatmore optimistic about the outlook.Financial conditionsfor domesticnonfinancialbusinessesweregenerallyfavorable, and conditionsin consumer credit marketsshowedsignsofimprovement.However,a number of factorssuggestedthat the paceof theexpansionwouldcontinue to be restrained.Although some indicators of activity in the housing sector improvedslightly at the end of 2011, new homebuilding and sales remained atdepressed levels, house priceswere still falling, and mortgage creditremainedtight.Households’realdisposableincomeroseonlymodestlythroughlate 2011.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  8. 8. 8In addition, federal spendingcontracted towardyear-end, and therestrainingeffectsoffiscalconsolidationappearedlikelytobegreaterthisyear than anticipatedat thetime of the November projections.Participantsalsoread the information on economic activityabroad,particularlyin Europe, aspointing to weakerdemand for U.S.exportsin comingquarters thanhadseemed likelywhenthey prepared theirforecastsin November.Participantsanticipatedthat the paceof theeconomic expansion wouldstrengthenoverthe2013–14period, reachingratesof increasein realGDPabovetheir estimatesof the longer-runratesof output growth.Thecentral tendenciesof participants’forecastsfor the changein realGDP were2.8 to3.2percent in 2013and 3.3to 4.0 percent in 2014.Among the considerationssupportingtheir forecasts, participantscitedtheir expectationthat the expansion wouldbe supported by monetarypolicy accommodation, ongoing improvementsin credit conditions,risinghousehold and businessconfidence,and strengtheninghouseholdbalancesheets.Many participantsjudgedthat U.S.fiscal policy would still be a drag oneconomicactivityin 2013,but many anticipatedthat progresswouldbemadein resolving the fiscal situationin Europe and that theforeigneconomicoutlookwouldbe more positive.Over time and in theabsenceof shocks,participantsexpected that therate of increaseof real GDP would converge to their estimatesof itslonger-run rate, witha central tendencyof 2.3 to2.6percent, littlechangedfrom their estimatesin November.Theunemployment rate improved more in late 2011than mostparticipantshad anticipatedwhenthey prepared their Novemberprojections,fallingfrom 9.1to8.7percent betweenthethird and fourthquarters.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  9. 9. 9As a result, most participantsadjusted downtheir projectionsfor theunemployment rate thisyear.Nonetheless,withreal GDP expectedtoincreaseat amodest rate in 2012,theunemployment rate wasprojected to declineonlya littlethis year, withthecentral tendencyof participants’forecastsat 8.2 to8.5percent at year-end.Thereafter, participantsexpected that the pickup in the paceof theexpansion in 2013and 2014wouldbe accompaniedby a furthergradualimprovement in labor market conditions.The central tendency of participants’ forecasts for the unemployment rateat the end of 2013was7.4 to8.1 percent, and it was6.7 to 7.6 percent at theend of 2014.Thecentral tendencyof participants’estimatesof the longer-run normalrate of unemployment that would prevail in theabsence of further shockswas5.2 to6.0 percent.Most participantsindicated that theyanticipatedthat five or six yearswouldbe required toclosethe gap betweenthe current unemploymentrate and their estimatesof thelonger-runrate, although some noted thatmore time wouldlikely be needed.Figures 3.Aand 3.B providedetails on the diversity of participants’viewsregardingthe likelyoutcomesfor real GDP growthand theunemployment rate over thenext three years and over thelonger run.Thedispersion in theseprojectionsreflected differencesin participants’assessmentsof many factors, includingappropriatemonetary policy anditseffectson economicactivity, theunderlying momentum in economicactivity, theeffectsof theEuropeansituation, theprospectivepathforU.S.fiscalpolicy, thelikelyevolutionof credit andfinancialmarket conditions,andtheextent of structuraldislocationsin the labor market.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  10. 10. 10Compared withtheir November projections, the rangeof participants’forecastsfor the changein real GDP in 2012narrowedsomewhat andshiftedslightlylower, assome participantsreassessed theoutlook forglobal economic growth and for U.S. fiscal policy.Many, however,made nomaterial changeto their forecastsfor growthofreal GDP this year.Thedispersion of participants’forecastsfor output growthin 2013and2014remained relativelywide.Having incorporated thedata showinga lowerrate of unemployment attheend of 2011than previouslyexpected, thedistribution of participants’projectionsfor the end of 2012shifted noticeablydownrelativeto theNovember forecasts.Therangesfor theunemployment rate in 2013and 2014showedlesspronouncedshiftstowardlowerratesand, aswasthecasewiththerangesfor output growth, remained wide.Participantsmade onlymodest adjustmentsto their projectionsof theratesof output growthand unemployment over thelonger run, and, onnet, thedispersionsof their projectionsfor both werelittlechangedfromthosereported in November.Thedispersion of estimatesfor the longer-run rateof output growthisnarrow,withonlyone participant’sestimate outside of a range of 2.2to2.7 percent.By comparison, participants’viewsabout the level towhichtheunemployment rate wouldconverge in the long run aremore diverse,reflecting, among other things,different viewson the outlookfor laborsupplyand on theextent of structural impedimentsin the labor market.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
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  15. 15. 15BIS Quarterly Review, March 2012International banking and financial market developmentsEuropean bank funding and deleveragingAsset pricesbroadlyrecoveredsome of their previouslossesbetweenearlyDecember and the end of February, asthe severityof the euroareasovereign and bankingcriseseased somewhat.Equitypricesrose byalmost 10% on average in developed countries andbya littlemore in emerging markets.Bank equitypricesincreasedparticularlysharply.Gains in credit marketsreflectedthe same pattern.Central to these developmentswas an easing of fears that funding strainsand other pressures on European banks to deleverage could lead to forcedasset sales,contractionsin credit and weakereconomicactivity.This article focuseson developmentsin European bank fundingconditionsand deleveraging, documentingtheir impact to date onfinancial marketsand the global economy.Fundingconditionsat Europeanbanksimprovedfollowingspecialpolicymeasuresintroduced by central banks around thebeginningof December.Before that time, many bankshad been unabletoraiseunsecured fundsin bond marketsand the cost of short-term funding had risen to levelsonlypreviouslyexceeded during the2008banking crisis.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  16. 16. 16Dollarfundinghadbecome especiallyexpensive.TheECB then announcedthat it would lend eurosto banksfor threeyears against a wider set of collateral.Furthermore,thecost of swappingeurosintodollarsfell around thesametime, ascentral banksreduced the priceof their international swaplines.Short-term borrowingcoststhen declined and unsecured bond issuancerevived.At theirpeak,bank fundingstrainsexacerbatedfearsofforcedasset sales,credit cutsand weakereconomicactivity.New regulatory requirementsfor major European banksto raisetheircapital ratiosbymid-2012added to thesefears.European banks did sell certain assetsand cut some types of lending,notably those denominated in dollars and those attracting higher riskweights,in late2011and early2012.However,therewaslittleevidencethat actualorprospectivesalesloweredasset prices,and overall financingvolumesheld up for most typesofcredit.This waslargely becauseother banks, asset managersand bond marketinvestorstook over thebusinessof European banks, thusreducingtheimpact on economicactivity.Bank funding pressuresand policy responsesEuropean bank fundingconditionsdeteriorated towardsthe end of 2011,asfalteringprospectsfor economic growth and fiscal sustainabilityunderminedthevalueof sovereign and other assets.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  17. 17. 17Bond issuance by euro area banksin the second half of the year, forexample, was just a fraction of its first half value (Graph 1, left-handpanel).Until December, uncollateralised issuancebybanksin countries facingsignificant fiscal challengeswasespeciallyweak.Depositsalsoflowedout of banksin thesecountries,withwithdrawalsfrom Italyand Spain accelerating in thefinal quarter of theyear (Graph 1,centre panel).At this time, US moneymarket fundssignificantlyreducedtheir claimson French banks, having alreadyeliminatedtheir exposurestoGreek,Irish, Italian, Portugueseand Spanishinstitutions(Graph 1, right-handpanel).Thepricing of long- and short-term euro-denominatedbank fundinginstrumentsalsodeteriorated, both in absolutetermsand relative tothatof non-euro instruments,asdid thecost of swappingeurosintodollars(Graph 2).Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  18. 18. 18The policy responseAround earlyDecember, central banks announced further measurestohelp tacklethese fundingstrains.On 8December, theECB saidthat it wouldsupplybanksin theeuroareawith asmuch three-year euro-denominatedfundingastheybid for in twospecial longer-term refinancingoperations(LTROs) on 21December 2011and 29 February 2012.At the same time, it announced that Eurosystem central bankswouldaccept a widerrangeof collateral assetsthanpreviously.TheECB alsosaid that it wouldhalveitsreserve ratio from 18 January,reducingthe amount that banksmust hold in the Eurosystem by around€100billion.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  19. 19. 19A few days earlier, six major central banks, including the ECB, the Bankof England and the SwissNational Bank, had announced a 50 basis pointcut tothe cost of dollar fundsoffered to banksoutsidetheUnitedStates.Theyalsoextended the availability of thisfunding by six monthstoFebruary2013.Euroareabanksraisedlargeamountsoffundingvia theECB’sthree-yearLTROs,covering much of their potential funding needsfrom maturingbondsover thenext few years.Acrossboth operations,theybid for slightlymore than €1trillion.This wasequivalent toaround 80% of their 2012–14debt redemption,more than coveringtheir uncollateralisedredemptions(Graph 3,left-handpanel).Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  20. 20. 20Banks in Italyand Spain made bidsfor a largeproportionof the fundsallocatedat the first three-year LTRO (Graph 3, centrepanel), while thefundingsituationof banksin other regionsimproved indirectly.Banks in Germany, Luxembourg and Finland, for example, did not takemuch additional fundingat thefirst LTRO.However,some of the allottedfunds,perhapsafter a number oftransactions,endedup asdepositswith thesebanks, boostingtheliquidityof their balancesheets.In turn, theysignificantlyincreased their Eurosystem deposits(Graph 3,right-hand panel).There wasalsolittlechangein the LTRO balanceat theGreek, Irish andPortuguesecentral banks.However,banks in thesejurisdictionshad alreadyborroweda combined€165billion beforeDecemberand mayhavebeenshort of collateraltouseat the first LTRO.Bank funding conditionsimproved followingthesecentral bankmeasures.Investorsreturned tolong-term bank debt markets,buying moreuncollateralisedbondsin January and February 2012than in the previousfive months(Graph 1,left-hand panel).US money market fundsalsoincreasedtheir exposureto some euro areabanksin January (Graph 1, right-hand panel).Indicatorsof thecost of long- and short-term euro-denominatedbankfundinginstrumentsalsoturned, asdidtheforeignexchangeswapspreadfor converting eurosintodollars (Graph 2).The nexusbetween sovereign and bank funding conditionsBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  21. 21. 21Fundingconditionsfor euroareasovereignsimproved in parallel tothoseof banksin December 2011and early2012.Secondarymarket yields on Irish, ItalianandSpanish government bonds,for example, declined steadily during thisperiod (Graph 4, left-handpanel).Yieldson bondswith maturitiesof up tothree years fell by more thanthoseof longer-datedbonds(Graph 4, centre panel).At this time, thesegovernmentsalsopaid loweryieldsat a series ofauctions,despiteheavy volumesof issuance.Onenotableexceptionto thistrend wasthe continued risein yields onGreek government bonds.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  22. 22. 22This reflectedcountry-specific factors,includingthe revisedterms of aprivate sectordebt exchangeand tough new conditionsfor continuedofficial sectorlending.Part of the decline in government bond yieldsappeared to reflectdiminishedperceptionsof sovereign credit risk.This wasconsistent with declinesin sovereignCDSpremia.In turn, part of the reductionin sovereign credit risk probablyreflectedimprovementsin bank fundingconditions.This could haveworkedvia twochannels.First, any reduction in the likelihood of banksfailingbecauseof fundingshortageswouldhavecut theprobabilityof government support for thesebanks.Second, any easingof pressure on banks toshedassetswouldhaveboosted the outlookfor economic activityand, hence, public finances.In addition, some of the improvements in perceptions of sovereign creditrisk during this period probablyreflected announcementsmade at the 8–9December EU summit.Theseoutlined arrangementsto strengthenfiscaldisciplinein theunionandtobring forwardthe launch of the European StabilityMechanism.Afurther part of the declinein yieldson government bondsappearedtoreflect the additional cash in thefinancial system availabletofinancetransactionsin theseand other securities.Thiswasconsistent with government bond yields decliningbymore thanCDSpremia.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  23. 23. 23Banks in Italyand Spain, for example, usednew fundstosignificantlyboost their holdingsof government bonds(Graph 4, right-hand panel).Whileothereuroareabankswerelessactivein thisrespect, theymayhavecommitted new fundsto help financepositionsin government bondsforother investors.Or theymay have purchased other assetsand thesellersof thoseassetsmay have investedthe resultingfundsin government bonds.Theseimprovementsin fundingterms for euro area sovereignsfedbackintobank fundingconditions.In particular, higher market valuesof sovereign bondsenhanced theperceivedsolvencyof banks,whichmadethem more attractivein fundingmarkets.However,this link earlier workedin reverseand could potentiallydo soagain.Deleveraging prospectsand consequencesThesharp rise in funding costsand growingconcernsover adequatecapitalisationtowardthe end of 2011addedtoexistingmarket pressureson European bankstodeleverage.Deleveragingispart of a necessarypost-crisisadjustment to removeexcesscapacityand restructurebalancesheets,thusrestoring theconditionsfor a sound bankingsector.That said, theconfluenceoffundingstrainsandsovereignrisk ledtofearsof a precipitousdeleveragingprocessthat could hurt financial marketsandthewidereconomy via asset salesand contractionsin credit.Theextension of central bank liquidityand the European BankingAuthority’s (EBA) recommendation on bank recapitalisation, however,played important parts in paving thewaytowardamore gradualdeleveragingprocess.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  24. 24. 24Deleveraging prospects: capital-raising and asset-sheddingTheEuropean bank recapitalisationplan announced in October 2011brought fearsof deleveragingtothe forefront of financial marketconcerns.It required 65major banksto attain a 9% ratioof core Tier 1capital torisk-weightedassets(RWA) by theend of June 2012,and theauthoritiesidentifiedacombinedcapitalshortfall of €84.7billionat 31majorbanksasof end-September 2011.Banks can deleverage either by recapitalisingor by reducing RWA, withdifferent economicconsequences.In order tosafeguard the flowof credit totheEU economy, supervisoryauthoritiesexplicitlydiscouraged banks from shedding assets.Banks thusplannedtomeet their shortfallspredominantlythroughcapital measures,and some madeprogressin spiteof unfavourablemarket conditions.Low shareprices,asat present, causea strong dilution effect, drawingresistancefrom incumbent shareholdersand management.Theexperienceof UniCredit, whosedeeplydiscounted €7.5billion rightsissueled toa 45% (albeit transient) plungein itsshareprice, deterredother banks from followingsuit.Capital can alsobe built through retained earnings,debt-toequityconversion or redemptionbelow par.Somebanks opted toconvert outstandingbonds, notablySantander for€6.83 billion. Overall, banks plan torely substantiallyon additionstocapital and retained earningsto reachthe9% target ratio.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  25. 25. 25Theactionsand plansof EBA banks thushelped to easemarket fearsoverpotentialsheddingof assetsamongbankswithcapitalshortfalls(seebelow).Theextent of asset-sheddingobserved inmarketsreflectsabroadertrendamongEuropean banks towardsdeleveragingover the medium term.French and Spanish banks,for instance, solddollar-fundedassetsanddivestedforeign operationspartly to focustheir businessmodels on coreactivities.MajorUK banks,similarly, continued toshrink their balancesheets,although none had tomeet any EBA capital shortfall.In view of recurring funding pressures and changing business models,many banks, with or without EBA capital shortfalls plan to extend theongoing trend of shedding assets.Industryestimatesof overall assetdisposalsby European banks over thecomingyears thusrange from €0.5trillion to asmuch as€3 trillion.Theextension of central bank liquidityeased the paceof asset-sheddingobserved in late2011, but did not turn theunderlying trend.If the banks in the EBA sample, for instance, failed toroll over theirseniorunsecured debt maturing over a two-yearhorizon, which amountstomore than €1,100billion (€600billionamongbankswitha capitalshortfall), theywouldhave toshed funded assetsin equal measure.By covering thesefunding needs, the LTROs and dollar swap lineshelped avert an accelerateddeleveragingprocess.But manybanks continued todivest assetsin anticipationof theeventualexpirationof thesefacilities.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  26. 26. 26Banks are alsomindful that a sustained increasein their capitalisationwouldfacilitateboth regulatory complianceand future accessto theseniorunsecured debt market.Limited asset-shedding among banks under the Europeanrecapitalisation planTheEuropean BankingAuthority (EBA) published itsrecommendationrelatingtothe European bank recapitalisationplan on 8 December 2011.Thisformspart ofabroadersetofEU measuresagreedinOctober2011torestore confidencein the banking sector.By theend of June 2012,65banks must reach a 9% ratio of core Tier 1capital to risk-weightedassets(RWA).Capital will be assessednet of valuation losseson EEA sovereignexposuresincurredby end-September 2011(“sovereignbuffer”).The31bankslocatedin theshadedarea belowtheregulatoryline(capital= 0.09RWA) in GraphA(left-handpanel) werebelow the9% target ratio,asof end-September2011, by an aggregateshortfall of €84.7billion.Theaggregate shortfall among all 71banks in theEBAsamplereaches€114.7 billion when six Greek banks are included with an estimatedshortfall of €30 billion against the (stricter) capital targets under theEU/IMF financial assistanceprogramme.Theplansbankssubmitted to regulatorsin January2012suggest that thesheddingof bank assetswill play a small part in reachingthetarget ratio.As the exampleof bank B in the left-handpanel illustrates,bankscandeleverageeither byrecapitalising(moving upward) or by reducingRWA(moving leftward).Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  27. 27. 27TheEBA’s firstassessment showsthat banksintendtocover96%of theiroriginal shortfallsbydirect capital measures,although theproposedmeasuresalsosurpassthe original capital shortfall by 26%.Plannedcapital measuresthusaccount for 77% of theoverall effort, andcomprise new capital and reserves(26%), conversion of hybridsandissuanceof convertiblebonds(28%), and retained earnings(16%), whiletheremaining23% rely on RWA reductions,notablyon internal modelchangespre-agreed withregulators(9%) and on theshedding of assets(10%), comprisingplanned RWAcutsof €39billionin loan portfoliosandsome€73billion through asset sales.In this regard, theEuropean bank recapitalisationplan reduced, but didnot eliminate, theneed for banks withcapital shortfallsto shed assets(GraphA, right-hand panel).Thelikely scaleof asset-sheddingcannot be inferredreliablyfrom RWAreductions.However,assuminga 75% averagerisk weight on loansand that theaveragerisk weight on disposed assetsequalsthat on holdings(43%,from averageRWAasa share of total assets,usingBloomberg data), theplannedRWAcutsof €112billion relatingto lendingcutsand asset sales(= €39+ €73billion) translateinto an estimated€221billionreductionintotal assets.Someof the lendingcutsare an inevitablepart of restructuringunderstateaid rules.While theseamountsare sizeable, theyare an order of magnitudesmallerthan if bankshad sought toreach the target ratiowithout significantadditionsto their capital.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  28. 28. 28Evidence of asset salesand price fallsAs deleveraging pressuresgrew towardsthe end of 2011, European banksofferedforsaleasignificant volume ofassets,notablythosewithhigh riskweightsor market prices close to holding values (Graph 5, left-handpanel).Offeringswithhigh risk weightsincluded low-ratedsecuritisedassets,distressedbondsand commercial property and other riskyloans.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  29. 29. 29Although some suchtransactionswerecompleted, othersdid not gothroughbecausetheofferedpriceswerebelowbanks’holdingvalues.Sellingat thesepriceswouldhave generatedlosses, thusreducingcapitaland preventing the banksfrom achievingthe intended deleveraging.In contrast, other offeringsincluded aircraft and shippingleasesandother assetswithsteadycashflowsand collateral backing, sincetheseoften fetched facevaluesand thusavoided losses.Moreover,asdollar funding remained more expensivethanhomecurrencyfunding for manyEuropean banks, dollar-denominatedassetswerein especiallystrong supply.Despitethis,there is littleevidencethat actual or expectedfuture salessignificantlyaffected asset prices.Graph 5 (centreand right-hand panels) showstime seriesof price quotesfor selected high-spreadsecuritisedassets,distressedbondsandleveragedloans.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  30. 30. 30True,thepriceof US leveragedloansfell andspreadsonsomesecuritisedassetsroseafter theEBA capital target announcement, consistent withthedeleveragingimplicationsof this news.And thepriceof distressed Lehman Brothersbondsincreased after thereduction in the cost of dollar financingfrom central banks.But thesechangeswerenot unusuallylargecomparedwith past pricemovements.Furthermore, someof the other price reactionsshownin thegraph werein directionsopposite to thoseimplied bythedeleveragingnews.That said, banksalsoofferedfor salesomeassetsthat donot haveregularprice quotes, includingpartsof their loanportfolios.Marketparticipantsreportedgapsbetweenthebest bid andofferedpricesfor some of theseassets,withlow bid pricessometimesattributed toprospectivesuppliesof similarassetsfrom other banks.ConclusionPressureson European bankstodeleverageincreasedtowardsthe end of2011asfunding strainsintensified and regulatorsimposed newcapitalisationtargets.Many of thesebanks shed assets, both through salesand by cuttinglending.However,thisdid not appear toweighheavily on asset prices, nor didoverall financingfall for most typesof credit.Thiswasbecauseotherbanks,asset managersandbond market investorstook over the businessof European banks.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  31. 31. 31An open question is whetherother financial institutionswill be able tosubstitutefor European banksasthe latter continuetodeleverage.Thereduction in deleveragingpressuresin late 2011and early 2012,aftermeasuresbycentral banksmitigatedbank fundingstrains,meansat leastthat this processmay run more gradually.This should reduceanyimpact on financial marketsand economicactivity.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  32. 32. 32From Chairman Ben S.BernankeAt the Independent CommunityBankersofAmerica National ConventionandTechworld,Nashville,Tennessee(via prerecordedvideo)March14, 2012Community BankingIm glad to havethechancetospeak again to the IndependentCommunityBankersofAmerica, even if itsby wayof prerecordedremarks.Thiswill bethefirsttimein quiteafew yearsthat I havent beenwithyouin person, but, asyou may know,the Federal Open Market Committeemet justyesterdayinWashington, soI am unabletojoin you in Nashville.I havevery much enjoyed attendingtheseannual ICBAget-togethers,especiallysinceI get the chanceto hear directlyfrom you about whatshappening in your localeconomiesand in communitybanking moregenerally.Its a tradition I hope to reestablish in thefuture.The Role of Community Banks in a Challenging EconomyCommunitybanks remain a critical component of our financial systemand our economy.Theyhelp keep their local economiesvibrant and growingbytakingonandmanagingthe risksof locallending, whichlarger banksmay beunwillingor unabletodo.Theyoften respond with greater agilitytolendingrequeststhantheirnational competitorsbecauseof their detailedknowledgeof the needsoftheir customersand their closeties tothecommunitiestheyserve.As you well know, however, community banksare alsofacingdifficultchallenges. Theirclosetiestolocaleconomiesare,onbalance, asourceofstrength, but a drawbackof thoseties isthat the fortunesof communitiesandtheir banks tend to rise and fall together.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  33. 33. 33Another concern for community banks isthenarrowingof the rangeoftheir profitablelendingactivities:Because larger bankshave used theirscaleto gain a pricingadvantage in volume-driven businessessuch asconsumer lending, communitybanks havetended to specialize in otherareas,such asloanssecured by commercial real estate.That said, I know that communitybanksare continuingto look for waystoprudentlydiversify their revenue sources.Like larger banks, communitybanks arealsobeing affected by the stateof the national economy.Despitesome recent signsof improvement, the recoveryhasbeenfrustratinglyslow,constrainingopportunities for profitablelending.And, asI will discussmomentarily, actual and prospectivechangesin theregulatorylandscapehave alsoraised concernsamong communitybankers.Thegood newsis that, for the most part, communitybanks appear tobemeetingtheir challenges.Profitsof smallerbanks wereconsiderablyhigher in 2011than in thepreviousyear, nonperformingassetswerelower,provisionsforloanlossesfell appreciably, and capital ratiosimproved.Outreach and Communication with Community BanksAs I noted, togetherwith economicconditions,regulation andsupervision are among the top concernsfor communitybanks.In that regard, I think wewouldall agree that two-waycommunicationbetweenregulators and communitybanksis critical.Banks need to understand supervisorspoliciesand expectations,butsupervisorsmust alsolistento and understand banks concerns.At the Federal Reserve, wepursueour dialoguewithcommunitybankersthrough manychannels.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  34. 34. 34Oneimportant channel is the recentlyestablished CommunityDepositoryInstitutionsAdvisory Council (CDIAC).Thecouncils membership is drawnfrom smallerbanks, credit unions,and savingsassociations.Each of the 12Reserve Banksaround thecountry hasa localadvisorycouncil, and one representativefrom each localcouncil serveson thenational council that meetswiththe Board in Washington twicea year.At arecent meeting, forexample,oneofour CDIAC membersaskedustobeclearerabout whetherparticular rules and guidanceapplytocommunitybanks.Having heard from this banker as well as others, we are now working tomore explicitly indicate which banks will be affected when we issue newregulatoryproposals, final rules,or regulatory guidance.Although thischangeseemsrelativelysimple, wehope it will help banksavoid allocatingpreciousresourcesto poring over supervisory guidancethat doesnot apply tothem.In additiontothe advisorycouncil, the Board last year establishedasupervision subcommitteeon smallerregional and communitybanking.Because of their professional backgrounds in community banking andbank supervision, I asked Governors Elizabeth Duke and Sarah BloomRaskin to serve on this subcommittee.Its primary role is toimproveour understandingof community andregional banking conditionsand toreview policy proposalsfor theirpotential effect on thesafetyand soundnessof, and the regulatorycostsimposedon, communityand regional institutions.GovernorsDukeandRaskinarealsokeenlyinterestedin howour policiescould affect the availabilityof credit to sound borrowers.Wehaveothercontactswithcommunitybanksthat haveprovedvaluable.For quitea few years, the ReserveBanks have maintained local trainingand outreach programsfor banks.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  35. 35. 35Morerecently, several of theseprogramshave been expanded nationally.For example, theFederal Reserve Bank of St. Louisorganizesnational"Ask the Fed" callstoprovidebankerswithan opportunitytohearFederal Reservestaff discussrecent policy initiativesand issuesthatexaminersare encounteringin thefield.In addition, theFederal Reserve Bank of SanFranciscohostsconsumercompliancewebinars, and the Federal Reserve Bank of Philadelphiapublishesaquarterlyoverview of consumer complianceissuesthat allowsFederal Reserve staff toaddressquestionsfrom banks.We are exploring optionsfor building on these initiatives. It is critical tokeep the communications channels open if supervisors and banks are toworktogether constructively.The Regulation and Supervision of Community BanksBank supervision requiresa delicatebalance--particularlynow.Theweakeconomy, togetherwithlooselendingstandardsin thepast, hasput pressure ontheentire bankingindustry, includingcommunitybanks.Toprotect banksfrom newproblemsdowntheroad,and tosafeguardtheDeposit InsuranceFund, supervisorsmust insist on high standardsforlending, risk management, and governance.At thesametime, it isimportant for banks,for their communities, and forthenational economy that banks lend tocreditworthyborrowers.Lending tocreditworthyborrowers,after all, is how banks earn profits.We alsoknow that supervision imposescostson institutions,and werecognizethat newregulationsandsupervisoryrequirementsmayimposedisproportionatecostson community banks.Thus, wetake quiteseriouslythe importanceof evaluatingthe costsandbenefitsof new rules.Supervisionis conductedthrough theFederal Reserves decentralizedstructure of 12regional Reserve Banks, whichhelps ustailor ourBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  36. 36. 36examinationsand supervisionto the size, complexity, risk profile, andbusinessmodel of each institution.Communitybankerstell usrepeatedlythat theyare concerned about thechangingregulatory environment.Oneparticular worryis the implementationof the Dodd-Frank WallStreet Reform and Consumer ProtectionAct (Dodd-Frank Act).It is important to emphasizethat the Congressenacted theDodd-FrankAct largely in responsetothe"too big tofail" problem, and that most ofitsprovisions--regarding, for example, capital, liquidity, and riskmanagement--applyonly, or principally, tothe largest, most complex,and internationallyactivebanks.Thesenew standardsare not meant toapply to, and clearlywouldnot beappropriatefor, community banks.We will workto maintain a clear distinction betweencommunitybanksand larger institutionsin the application of new regulations.ConclusionToconclude, I wouldlike to reemphasizetheimportancethat mycolleagueson theBoard andI placeontheFederalReserves relationshipwith communitybanks.TheFed iscommittedtofair, consistent, andinformedexaminationsthattake intoaccount thesize, complexity, and individual circumstancesofeach bank weoversee.We will do all wecan to support the banks safetyand soundnessandeliminate unnecessarycosts.Despiteeconomic uncertainties,thecondition of communitybanks is improving.Thatsgood newsnot only for banks, but for their communities and thenational economy aswell. Thanks, and enjoytherest of your meetings.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  37. 37. 37Interesting!Thepaper starts with the phrase:“Weaknessesin the “plumbing” of thefinancial system that came tolight during thefinancial crisisof2007-2009…”Thepaper hasthe title:ReplumbingOur Financial System: UnevenProgress(Preliminary, Darrell Duffie, Stanford University, March17,2012). This paper is for a conferenceof theBoard of Governorsof theFederal Reserve System, “Central Banking:Before, During andAfter theCrisis” March 23-24, 2012,WashingtonD.C.Replumbing Our Financial System: Uneven Progress(Preliminary, Darrell Duffie, Stanford University, March 17, 2012).This paper isfor a conferenceof the Board of Governorsof theFederalReserveSystem, “Central Banking:Before, During andAfter the Crisis”March23-24, 2012,Washington D.C.AbstractThefinancial crisisof 2007-2009hasspurredsignificant ongoingchangesin the“pipesand valves” through whichcash and riskflowthroughthecenter of our financial system.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  38. 38. 38Theseincludeadjustmentsto the formsof lender-of-last-resort financingfrom thecentral bank and changestheinfrastructurefor thewholesaleovernight financingof major dealer banks.Significant changesin the regulation of money market fundsareunderconsideration.TheDodd-Frank Act mandatesthecentral clearingof standardizedover-the-counterderivatives,although a pending exemption offoreign-exchangederivativesremainstobe decided.Thevulnerabilityof major dealerstorunsby primebrokerage clients isalsoan issuetobe addressed.I focus on U.S. financial plumbingand on areaswherefinancial stabilityremainsa concern.IntroductionWeaknessesin the “plumbing” of the financial system that came tolightduring thefinancial crisisof 2007-2009haveprompted reformsthat areongoing.On thepath towardgreater financial stability, progresshasbeen uneven.My objectivehereis tofocuson some weaknessesthat remain.“Plumbing” is a common metaphor for institutional elementsof thefinancial system that are fixedin theshort run and enableflowsof credit,capital, and financial risk.This institutional structure includessome big “valvesand pipes” thatconnect central banks, dealer banks, moneymarket funds, majorinstitutional investors, repo clearingbanks, over-the-counter(OTC)derivativescentral clearingparties, and exchanges.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  39. 39. 39Theconnectorsincludelendingfacilitiesofferedbycentral bankstoeachother and to dealer banks, tri-partyrepoand clearingagreements, OTCderivativesmaster swapagreements,prime-brokerageagreements,andsettlement systems arrangedthrough FedWire, CLSBank, DTC, andother major custodiansand settlement systems.Theinstitutional frameworkdependson regulations.Largely becauseofchangesin financial regulation, weare headingtowarda safer financialsystem.Of primary importancein this progressare improvementsin capital andliquidityrequirementsfor regulated banks, although these arenot mymain focushere.Improvementsin theplumbingof the financial system, however,have insome areasbeen partial or halting.Just asthewidereconomy dependson an effectivefinancialsystem fortransferringcredit, capital, and risk among ultimateeconomicactors, theinternaleffectivenessof the financial system dependson theproperfunctioningof financial infrastructure.At the onset of a financial crisis, institutional arrangementsthat are fixedin theshort run determinethe scope for discretionaryaction, of bothharmful and risk-reducingtypes.Someof thesearrangements,such ascentral-bank emergencyliquidityfacilities,are only activated during a crisis.Plumbingelementsshould not onlybe resilient tostressessuch asthedefaultsof interactingentities, theyshould alsobe placed and designedsoasto permit thesorts of transfersthat may be needed in acrisis.Typical approachestofinancialriskmanagement that balancefailure riskagainst away-from-failure operatingefficiencyshould, in my view, beBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  40. 40. 40fullyre-calibratedfor applicationstocertain keyfinancial marketinfrastructure.Although regulatorsare workingtowarda worldthat can more easilytoleratethe failure of largefinancial institutions,I doubt that weshouldview some of the keyfinancial infrastructurein thesame way.Obviouslythere should be effectivefailure-management plansfor repoclearingfacilitiesand OTC derivativescentral clearingparties(CCPs),but the publicinterestsuggeststhat thesekindsof utilitiesshould bedesigned, regulated, and managed withthe objectivethat it isextremelydifficult for them tofail catastrophically.Theexpected spillover costsof the failureof largefinancial utilitiessuchasthese aresignificant relativeto thecostsof saferdesigns.Moreover,thethreat of their potential failure can lead financial marketparticipantsto react defensively in waysthat destabilize markets.Consideringaswell the narrow scopefor moral hazard associatedwithdedicatedfinancial market utilities,my view isthat wecan afford todesignand regulatesome of theseutilitiesasthough theyare “tooimportant tofail”.If that is the case, the operationsand capital structureof theseutilitiesshould not be entangledwith thoseof larger and more complex financialinstitutions,especiallyif there is an intention to let thosefinancialinstitutionsfail whenevertheycannot meet their obligations.In the courseof thisoverview, I will focuson the followingpolicy issues:1.The emergencyplumbing availableto the Fedhaschanged.We are now in an environment in whichthe importanceof emergencyaccessto a securedlender of last resort iswidelyrecognized, but isBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  41. 41. 41availablefor a systemically important non-bank financial institutionunder a limitedand potentiallyshrinkingset of circumstances.Eventscould some day arisein whichit wouldbedifficult for the centralbank toprovideeffectiveemergencyliquidity.2.Giventhe systemic importanceof tri-party clearingagents,and giventheir high fixed costsand additional economies of scale, tri-party repoclearingservicesfor U.S. dealers and cash investorsshouldprobablyoperatethrough a dedicated regulatedutility.Although thiswouldlikely increaseoperating costsfor marketparticipants,it wouldenableinvestment in more advanced clearingtechnologyand financial expertise, allowinggreater resilienceof thetri-partyrepomarket in the faceof financial shockssuch asthedefault ofa major dealer.Themoral hazard associatedwith lendingof last resort toa dedicatedutilityis much reducedrelativeto thecaseof a financial institutionwitha widescope of risk-takingactivities.3.Largeinstitutional investorsin moneymarket fundsare pronetorun inthefaceof losses.Systemicallyimportant borrowerssuchasdealerbanksremaindependenton short-term financingfrom money market funds, particularlythroughtri-partyrepos.TheSecurities and ExchangeCommission (SEC) isconsidering newregulatoryrequirementsfor money market funds, such ascapital buffersandredemptiongates,withthegoal ofloweringtheriskof runsbymoneymarket fund investors.Further reform of moneymarket fundsisindeed necessaryfor financialstability.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  42. 42. 42Theunintendedconsequencesof the reform of money market funds,however, may includea shift toother forms of run-pronewholesaleshort-term lendingtocritical borrowers.Closeprinciples-basedsupervision of systemically important short-termwholesalefinancingwill alsobe needed.4.Central clearingparties for OTC derivativesare proliferating.Thisrisksasignificant and unnecessaryrisein counterparty exposuresaswell asthedilution of regulatory oversight acrossmany CCPs.Competition among CCPscould involvereducedmembershiprequirementsfor collateral.Fewer CCPs, each closelysupervised, should be a goal.Tothis end, arrangementsshould be made for the cross-jurisdictionalregulatory supervisionof CCPs wherever possible, with clearassignmentof regulatory responsibilitiesand linesof accesstocentral-bank liquiditysupport.Regulatoryminimum margin standardsshould be strong andharmonized.Effectiveplansfor dealingwiththe failure of a CCP are yet tobeestablished, to my knowledge.5.If it is agreedthat the central clearingof standardized OTC derivativesis an important sourceof financial stability, there is every reasontoincludeforeign exchange(FX) derivativesin the requirement for centralclearing, or some effectivesubstitute.It is currentlyproposedthat FX derivativesshould be exempted fromclearingand all other major new regulationsof theswapmarket, whichincludecollateral standardsfor unclearedpositions,trade execution inBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  43. 43. 43swapexecution facilities,trade recordingin swap data repositories, andpost-tradetransaction reporting.Regulatorsabroadare likely tofollowthe lead of the United Statesin thisarea.6. Prime brokeragewasrevealedtobe an important weaklink in thefinancialsystem immediatelyafterthefailureofLehmanBrothersin2008.Rule15-c-3of theU.S.SecuritiesExchangeAct of 1934had appearedtosafelylimit the dependence of a U.S. dealer for liquidityon itsprime-brokeragebusiness. It did not.TheUnited Kingdom had almost no regulatory standardson thisdimension.MorganStanleysuffered a lossof liquiditydue toa suddenrun by itsprime brokeragehedge-fund clientsin both theUnited Statesand theUnitedKingdom after the failure of Lehman Brothers.An in-depth forensic analysisof themechanics of this run iswarranted.The lessons learned should be published and used to revise Rule 15-c-3and to improve the regulatory treatment of prime brokerage in Londonand emerging global financial centers.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  44. 44. 442 Changesin Central Bank PlumbingBefore the financial crisisof 2007-2009, central bank liquiditywasprovided to financial markets mainlythrough normal monetaryoperationsconducted through primary dealers,and through limitedformsof lender-of-last-resort financing.Thelatterincluded secured lendingthrough thediscount window toregulated banks aswell asthepotential emergency securedlendingtoessentiallyany market participant under Section 13(3) of theFederalReserveAct.TheDodd-Frank Act now restricts13(3) emergencyfinancing to aprogram or facilitywith broad-basedeligibility.Thus, individual non-bank firmscan nolonger obtain emergencyfinancingdirectlyfrom thecentral bank.Becauseoftheextremestressesofthefinancialcrisis, theFederalReserveset up a range of broad lender-of-last-resort programsand facilities,suchBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  45. 45. 45asthe PrimaryDealer Credit Facility(PDCF), the TermAuction Facility(TAF), theMoneyMarket Investor Funding Facility (MMIFF), theAsset-Backed Commercial Paper MoneyMarket Mutual Fund LiquidityFacility, the Commercial Paper Funding Facility(CPFF), and theTermAsset-Backed Securities Loan Facility (TALF).Theseprograms wouldpresumablyhavemet the statutory criterion, hadit applied at thetime, of “broad-basedeligibility.”Theyplayed a crucial role in mitigatingtheseverityof the financial crisisof 2007-2009. Versionsof thesefacilitiescould be resurrectedin a futurecrisis.In addition, asillustratedin Figure 1,in 2007theFed set up “currencyswaplines” that provideddollar liquidityto foreign central banks.Thesecurrencyswaplinesenablea foreign central bank toprovidelender-of-last-resortfinancingin dollars tobankswithinin itsownjurisdiction, and in principleallowedtheFed togiveU.S. banksaccesstoforeign currencies.Becauseof the “reserve-currency" statusof theU.S.dollar, globalfinancial stabilitydependson global accessto emergencysecured loansof last resort in dollars.With the innovation of thesecurrencycentral-bank swap lines,the U.S.central bank hasimproved financial stability while allowingforeigncentral banksto monitor and absorb thecredit risk of thebanks towhichthedollarsultimatelyflow.That these currencyswaplineshave been a useful addition totheplumbingof the financial system wasdemonstrated during the 2007-2009crisis and more recentlyduring the Eurozone debt crisis.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  46. 46. 46TitleVIII of theDodd-FrankAct allowsthecentral bank toprovideliquiditysupport tofinancial market utilitiessuch ascentral clearingparties.Theabilitytotake advantage of thisemergencysecured lendingtostabilize a financial market utility(FMU) dependsin part on thedefaultmanagement planof theFMU. Becauseof thenatureof itsbalancesheet,a CCP may havea limitedsetsof assetstopost ascollateralto thecentralbank by thetime of its near failure or failure.As opposedtothe caseof a largebank, there wouldbe nolargeclassofunsecuredcreditorstoabsorblosses.Thecounterpartiesof a CCP are typically systemicallyimportantthemselves.Becauseof theseconcerns, Duffe and Skeel (2012) point tothepotentialimportanceof a short stayon theOTC derivativesof a CCP at itsbankruptcy, or at itsresolutionunder TitleII of the Dodd-Frank Act.Theabilityof theFederal Reserve to provideindirect liquidityto affliatesofregulatedbanks,suchasbroker-dealers,islimitedbysection23AoftheFederal ReserveAct, whichrestrictstransactionsbetweena bank and itsaffliates.Argues that during the financial crisis of 2007-2009 section 23A includedsuffcient exemptive power for the Fed to provide substantial emergencyliquidity.TheDodd-Frank Act, however, hasplacedsigniffcant additionalrestrictionson “23Atransactions.”Section 23Aand section 23B still providesomescope for exemptiveliquidityprovision, subject howevertoa findingbythe Federal DepositInsuranceCorporation that the exemption doesnot placetheDepositInsuranceFund at risk, amongother requirements.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  47. 47. 47In summary, if a systemicallyimportant non-bank market participant isthreatened by a liquiditycrisis,lender-of-last-resort secured financingfrom theFed can now be obtained only under broad programs orindirectlyvia thenew versionof section 23A, whichis generallymorerestrictive.Even assuming that a broad program could be arranged quickly enoughin an emergency situation, the design of such a program places a centralbank under some stress.Dependingonthebreathof eligibility ofsuchaprogram, thecentralbankcould be accusedof exceedingitsmandate.If the program is aimed broadlybut few borrowersultimatelyparticipate,thesameconcernscould be raised, whether or not theyare legitimate.Someof the targetedmarket participantsmight hold back in the face ofconcernsover stigma regardingtheir need for fundingor over thepotential for expectationsby the publicor some public officialsofquid-pro-quobehavior by the borrower.Among other implications,the new and more limited scope forlender-of-last-resortfinancingtonon-banksmeritsattention giventhepotential for new regulationssuch asthe Volcker Rule to incitetheemergenceof large broker-dealersthat are not affliatesof bank holdingcompanies.If that wereto occur, significant quantitiesof collateral wouldbe placedfurther from accesstolender-of-lastresort financing.Theseassetsmay include, for example, over-the-counter derivativesandforeign assetsheld on the balancesheetsof U.S.banksand banksubsidiaries.Section 23Aprovidesan exception for derivatives.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  48. 48. 48Of the fivemajor holding companies operatingOTCderivativesdealers,J.P. Morgan, Bank ofAmerica, Goldman Sachs,Citigroup, and MorganStanley, all but MorganStanleykeepmost of theirOTC derivativeson thebalancesheetsof the respectiveregulatedbanks.TheEdgeAct allowsclassesof foreign assetsto be held by subsidiariesU.S. banks, where23Arestrictionsare lessonerous.For a broker-dealerunaffliatedwitha bank, accessto a lender of lastresortthrough transactionsallowedunder Section 23A(and itsexemptions)is irrelevant, and onlybroad programmatic emergencylendingwouldbe available. This issuealsoelevatesthe importanceofstrongcapital and liquiditystandards for non-bank financial firms, whichdonot fall under thescopeof the BaselIII process.Toread the paper (you must read thepaper is what I mean):http:/ / newsevents/ conferences/Duffie.pdfBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  49. 49. 49PRESSRELEASE22 March 2012- Meeting of the European Systemic Risk BoardTheGeneral Boardof theEuropeanSystemic RiskBoard (ESRB) helditsfifth regular meeting.Thecurrent situationSincethe lastmeetingof the General Board in December 2011, the ESRBhasobserved signsof stabilisationin theEU economy and animprovement in thesituation of financial markets, notablyin responsetothemeasuresadopted by central banks, the agreement on thefiscalcompact, and the progressmade in fiscal consolidationand economicreforms in many countries.At thesametime, anenvironment ofuncertaintyandfragilityin segmentsof the EU financial system persists.Thekey systemic risk remainsthe mutual negativefeedback loopsbetweenthree main risks, namely:(i)Persistent uncertaintieson sovereigndebt;(ii)Pressureson bank fundingand excessiveand/ ordisorderlybankdeleveragingin some countries;and(iii)Subdued growthprospects.Itis thereforecrucial that:1.Countriesmake further progresstowardsrestoring sound fiscalpositionsand implementingthe structural reform agenda in order toBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  50. 50. 50strengthentheir growthpotential, increaseemployment and enhancecompetitiveness;2. Banks strengthen their resiliencefurther – the soundnessof banks’balancesheetsis a keyfactor in exitingfrom current dependenceoncentral bank support measuresand facilitatingan appropriate provisionof credit to the economy.Market conditionscontinuetobecharacterisedbydifficultiesin financialintermediationacrossEU borders(includingwithinthe euroarea).TheESRB callson all public and privateinstitutionsto undertake effortstopreserve the integrity of the European financial system.In this respect, theESRB supports effortsbyinternational and Europeaninstitutionsto reduce– through the so-called“ Vienna2.0Initiative” –risksof financial fragmentationin some economiesfrom central, easternand south-eastern Europe, both within and outsidethe EU.Looking aheadThemain issueishow toensure theprovisionof credit totheeconomy inthecurrent environment.TheESRB hasidentified the followingareasthat might warrantmacro-prudential policy measures.1.Sincesummer 2011, banks havestarted a deleveragingprocess.Theongoing deleveragingcan alsobe seen asan overdue correctionofexcessiveleverageaccumulated over thepast– albeit at different speedsacrosscountries.At thepresent time such readjustment could be achieved without riskstoa smooth provisionof credit to theeconomy.2.Towardstheendof 2011, banksfacedseverestrainsinfundingmarkets,both domesticallyand internationally.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  51. 51. 51Central bank measures,such asthe recent LTROs, have alleviatedsuchpressures.Thefull extent of their impact on thecredit supplywill become clear overtime.TheESRB will monitor lendingconditionsin theEU and standsreadytodraw attentiontotheneed for correctiveactionsin caseclearsignsof acredit crunch materialise.3.Investorshaveshownuncertaintyover banks’resilience.By providingampleliquidityand requiring banks to achievestrongercapital positions,authoritiesare puttingbanksin a position toimprovetheir financial conditions.There arefirst signsof banksreturning tomarket funding, namely byissuingsecuredand unsecured liabilities.Banks should usethiswindow of opportunitytofurther strengthen theircapital base(e.g. by retainingearnings) and toimplement businessmodelsthat rely on private funding.4.In a weakeconomybanksare exposed toa materialisationof creditrisk;theyshouldmake adequateprovision for this.Banks should managetheir loan portfoliosthrough the cycle by takingintoaccount themedium-term creditworthinessof their borrowerswithout perpetuatingnon-viablecredit positions.TheESRB intendstowork – in cooperation withthe EBA and nationalsupervisoryauthorities– on the lack of qualitativeand quantitativeinformation on forbearance.5.In thepast, ampleliquidityconditionshave been associatedwiththeemergenceof imbalancesin different segmentsof financial markets.While marketsarestill recoveringtheir pre-crisisvalues,therearesignsofa decreasein risk aversion in some selectedfinancial market segments.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  52. 52. 526.Finally, it iscentral that governmentscontinuewithfiscalconsolidationand structural reforms, the provision of crediblefirewallsagainstcontagion risk, and implementationof thefiscal compact.This would contain the impact of further adverseshocksand limitnegative spillover.Activity of the ESRBWork is alsocontinuingon structural issues,such asdevelopinga soundbasisfor macro-prudential policy and instrumentsin the EU and at thenational level.At theEU level,theESRB ismonitoring developmentsregardingrelevantlegislativeinitiativesin the EU, such asthe implementationof the BaselIII agreement in a revised Capital RequirementsDirectiveand a newRegulation for banksand other credit institutions(the so-called“CRD4”).TheESRB welcomesrecent progressin the legislativeprocess.In this respect, theESRB hasbrought tothe attentionof competentEuropeaninstitutionsthefact that relevant nationalauthoritiesneedtobeequippedwiththetoolsnecessaryfor takingearlyaction at thelocallevel – either on their owninitiativeor on therecommendation of theESRB, takingintoaccount reciprocity – tostem build-upsof systemicrisk associatedwith banks.Thisshould occur within theframeworkofanEU system ofsafeguardsoftheSingle Market, towhichtheESRB is ready to contribute.TheESRB decided todaytosend a letter totheEU legislativebodiesputtingforwarditsmacro-prudential viewson certain aspectsof theCRD4, takingintoaccountrecent developmentsinthelegislativeprocess.In its letter, the ESRB has identified a number of areasin whichitconsidersfurther strengtheningand development of the proposalstobecritical.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  53. 53. 53Such areasrelate to: thescope for macro-prudential policies,theflexibilityfor authorities toconduct effectivemacro-prudential policies,andthe governancearrangementsfor theuse of macro-prudentialinstruments.This letterwill be published on theESRB’s websiteonce it hasbeencommunicated to the recipients.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  54. 54. 54Cayman Islands– An OverviewThethree Cayman Islands,Grand Cayman, Cayman Brac and LittleCayman, arelocated in the westernCaribbean about 150milessouth ofCuba, 460milessouth of Miami, Florida, and 167milesnorthwest ofJamaica.GeorgeTown, thecapital, is on thewesternshore ofGrand Cayman.Grand Cayman, thelargest of the threeislands,hasan areaof about 76square milesand isapproximately 22mileslong withan averagewidth of four miles.Its most strikingfeature istheshallow,reef-protectedlagoon, the NorthSound, whichhasan area of about 35 squaremiles.The island islow-lying, withthe highest point about 60 feet above sealevel.Cayman Brac lies about 89 milesnortheast of Grand Cayman.It is about 12 miles long withan averagewidth of 1.25miles and hasanarea of about 15 squaremiles.Its terrain is themostspectacular of thethreeislands.TheBluff, a massivecentral limestoneoutcrop, risessteadilyalongthelengthoftheislandupto140ft. abovetheseaattheeasternend.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  55. 55. 55LittleCayman lies fivemileswestof Cayman Brac and is approximatelytenmileslong withan average widthof just over a mile.It hasan area of about 11square miles. Theisland islow-lyingwitha fewareason the north shore rising to 40 ft. above sealevel.There areno riversonanyof theislands.Thecoastsare largelyprotectedby offshorereefsand in some placesbya mangrove fringethat sometimesextendsintoinland swamps.Geographically, theCayman Islandsis part of the Cayman Ridge, whichextendswestwardfrom Cuba. The Cayman Trench, thedeepest part oftheCaribbean at a depth of over four miles,separatesthe threesmallislandsfrom Jamaica.Theislandsare alsolocated onthe plate boundary betweenthe NorthAmerican and Caribbean tectonic plates.Thetectonic platesin Cayman’s region are in continuouslateralmovement against each other.This movement, withtheCaribbean platetravellingin an eastwarddirection and the NorthAmerican plate moving west, limitsthesizeofearthquakesand there hasnever been an event recorded of more thanmagnitude7.It is not unusual for minor tremorsto berecorded. Manyresidentsdon’teven noticethem. However in December 2004a quake of 6.8magnituderocked Grand Cayman and everyone noticed. Theearthquake, short induration, opened some small sinkholesbut otherwisedidn’t cause anydamage.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  56. 56. 56Christopher Columbusfirst sighted Cayman Brac and LittleCayman on10May 1503.On hisfourthtrip totheNewWorld, ColumbuswasenroutetoHispaniola whenhis ship wasthrust westwardtoward "twovery smalland low islands,full of tortoises, aswasall the seaall about, insomuchthat theylooked like littlerocks, for whichreason these islandswerecalledLasTortugas."A1523map show all three Islandswiththename Lagartos,meaningalligatorsorlargelizards,but by1530thenameCaymanaswasbeingused.It isderivedfromtheCarib Indianwordforthemarinecrocodile,whichisnow known to have lived in the Islands.Sir Francis Drake, on his1585-86voyage, reported seeing"great serpentscalledCaymanas, like largelizards,whichare edible."It wastheIslands amplesupply of turtle, however, that madethem apopular callingplacefor shipssailingtheCaribbean and in need of meatfortheir crews. Thisbeganatrendthat eventuallydenudedlocalwatersoftheturtle, compellinglocal turtle fishermento gofurther afield toCubaandthe MiskitoCaysin searchof their catch.Thefirst recorded settlementswerelocatedon LittleCayman andCayman Brac during 1661-71.Becauseof the depredationsof Spanish privateers,the governor ofJamaicacalledthesettlersbacktoJamaica,thoughbythistimeSpainhadrecognisedBritishpossessionof theIslandsin the1670Treatyof Madrid.Often in breach of the treaty, British privateers roamed the area takingtheir prizes, probably using the Cayman Islands to replenish stocks offood and waterand careentheir vessels.Thefirst royal grant of land in Grand Cayman wasmadeby thegovernorof Jamaica in 1734.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  57. 57. 57It covered 3,000acresin the areabetweenProspect and North Sound.Others followedup to1742, developing an existing settlement, whichincludedthe useof slaves.On 8 February1794,an event occurred whichgrew intoone of Caymansfavouritelegends-- The Wreck of theTen Sail.Aconvoy of more than 58 merchantmen sailingfrom Jamaicato Englandfound itselfdangerouslycloseto thereef on theeast end of GrandCayman.Ten of the ships,includingHMS Convert, thenavy vessel providingprotection, foundered onthe reef. With the aid of Caymanians, the crewsandpassengersmostly survived, although some eight liveswerelost.ThefirstcensusoftheIslandswastakenin 1802,showingapopulationonGrand Cayman of 933, of whom 545wereslaves.Beforeslaverywasabolishedin 1834, there wereover 950slaves ownedby 116families.Though Cayman wasregarded asa dependency of Jamaica, thereinsofgovernment by that colonywerelooselyheld in the earlyyears, and atraditiongrewofself-government, withmattersof public concerndecidedat meetingsof all free males.In 1831a legislativeassemblywasestablished.Theconstitutional relationship betweenCayman and Jamaica remainedambiguousuntil 1863whenanactoftheBritishparliament formallymadetheCayman Islandsa dependencyof Jamaica.When Jamaicaachievedindependencein 1962, theIslandsopted toremain under theBritish Crown, and anadministratorappointed fromLondon assumed theresponsibilitiespreviouslyheld bythe governor ofJamaicaTheconstitutioncurrentlyprovidesfor a Crown-appointedGovernor, aLegislativeAssembly and a Cabinet.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  58. 58. 58Unless there are exceptional reasons, the Governor accepts the advice ofthe Cabinet, which comprises three appointed official members and fiveministerselectedfrom the 15electedmembersof theAssembly.TheGovernor hasresponsibilityfor the police, civil service, defenceandexternalaffairs but handedover thepresidencyof theLegislativeAssembly to theSpeaker in 1991.Cayman Islands, Banking StatisticsOverviewThere werea total of 234banksunder the supervision of theBankingSupervision Division attheend of December 2011.Thefundamentalsof the bankingsectorremain sound and theindustryin general hasbeenrelativelyresilient in a very challengingmarket environment.Banks continuetoconsolidateand restructure in search of costefficiencies,and improvementsin operational risk management andgovernance.As of September 2011,total assetswerereportedat US$1.607trillion downfrom thesame period of thepreviousyear wheretotal assetsstood at US$1.725trillion.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  59. 59. 59Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  60. 60. 60TheCayman Islandsis recognised asone of thetop 10internationalfinancial centresin the world, withover 40of the top 50banks holdinglicenceshere.Over80percent ofmorethanUS$1trillionondepositandbookedthroughtheCayman Islands,representsinter-bank bookingsbetweenonshorebanksand their Cayman Islandsbranchesor subsidiaries.Theseinstitutionspresent a very low risk profile for money laundering.Basel IITheCayman IslandMonetaryAuthority (CIMA) is implementingtheBasel II Framework.TheBasel II Framework describesa more comprehensive measureandminimum standard for capital adequacythat seeksto improve on theexistingBasel I rulesby aligningregulatorycapital requirementsmorecloselytotheunderlying risksthat banksface.TheFramework isintendedtopromotea more forwardlookingapproachtocapital supervision that encouragesbankstoidentify risksand todevelop or improvetheir ability to manage thoserisks.Asaresult, it isintendedtobemoreflexibleandbetterabletoevolvewithadvancesin marketsand risk management practices.Akey objectiveof therevisedFramework is topromote the adoption ofstronger risk management practicesby the banking industry.Banks to Which Basel II AppliesThe Basel II Framework applies to banks that are locally incorporated inthe Cayman Islands (Category A and B banks), all home regulated banksand host regulated banks (subsidiaries of foreign banks), with or withoutaphysical presence.Branchesof foreign banksoperatingtheCayman Islands,will not beBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  61. 61. 61requiredtomaintaina separatecapital requirement, and assuchwill beexcludedfrom the local Basel II requirements.However,theseforeign banks includingtheoperationsof theCaymanIslandsbranchesmust maintain theminimum capital adequacyrequirementsasstipulatedby their home jurisdictions.Implementation PhasesCIMA proposesto apply theBasel II Frameworkin twophases leveraginga practical measured approach.First PhaseThefirst phaseof theimplementationwascompleted on December 31,2010and comprised the followingPillar 1approaches:• Credit Risk – Standardized• Market Risk – Standardized• OperationalRisk– BasicIndicatorApproach and TheStandardizedApproachThefirst phaseof theBaselII implementationincludesPillar 2 –SupervisoryReview Processand Pillar 3 - Market Discipline.Second PhaseThesecond phaseof the CIMA BaselII implementation will beconsideredfor implementationafter 2012.It will includeconsideringthe implementation of advanced approaches,specificallyPillar 1– Credit Risk– Advanced Approaches (IRB),OperationsRisk– Advanced Measurement Approaches(AMA) andMarket Risk – Internal Risk Management Models.IndustryInputSincethe majority of banksimpactedbythe applicationof theBaselIIFrameworkare membersof theCayman IslandBankersAssociationBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  62. 62. 62(CIBA), CIM Ahasestablisheda joint CIMA/CIBA Basel II WorkingCommittee.Theprimary objectiveof the workingcommitteeis toprovidebanksandCIMA a forum for consultation, discussionand agreement on BaselIIrelatedissues.CIMAproposestoobtainthemajorityoffeedbackonBaselII related issuesfrom theCIBA/CIMABasel II Working Committee.CIMA alsoproposesto communicatedirectlywiththosebanks that arenot membersof CIBAor thosebanksthat have principal agentsthat arenot membersof CIBA.However,thesebanks will not have thebenefit of consultationorparticipationin discussionson BaselII issueswiththe majorityofimpactedbanks.Banks wishingtoparticipatein the CIBAconsultationsand discussionsshould contact CIBAdirectly.Basel iiiThis is thenext step, but wehave notimeline yet.According to ReinaEbanks, Head of BankingSupervision, CaymanIslandsMonetaryAuthorityat theOpeningoftheFSI & CGBSSeminar -Regional Seminar on CapitalAdequacy & BaselIII GeorgeTown, GrandCayman, Cayman IslandsFebruary22-24, 2011:“It is good that somany of our colleaguesfrom regulatorybodies in theCaribbeanregionhaveseenthevalueof thisseminar and haveseizedthisopportunitytoparticipate.I alsoappreciatetheinvolvement of our localindustry partnerswhowillserve aspresenters.We all have experiencesto share, and by sharingthoseexperienceswewill learnfrom each other.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  63. 63. 63TheCayman IslandsMonetaryAuthority believesstronglyin thenecessityand benefitsof professional training.We have alwayssought to ensure that our ownstaff membershaveeveryopportunitytoenhancetheskillsthat are necessaryfor theAuthority toeffectivelycarryout itsrole.Theregulatory reform packageof the BaselCommitteeaddressesidentifiedweaknessesofthepre-crisisbankingsectorandoutlinesseveralmeasuresto promote a more resilient banking sector.Theobjectiveof thereforms is to improve thebankingsector’sabilitytoabsorb shocks arisingfrom financial and economicstress, thusreducingtheriskof spill over from thefinancial sector tothe real economy.Thenew global standardsreferred toa “BaselIII” cover bothfirm-specific and broader, systematic risks.At this 3day seminar ourpresenterswhoare experts in their field are expectedto cover specificaspectsof BaselIII.Oneof thethingsyou learnquicklyasa regulator is how rapidlychangesoccurwithintoday’sfinancial systemsand how interconnectedandinterdependent theyare.Theinternational financial crisisunderscored this forcefully, but it isnotgoingto changeit.Productswill continuetoevolve;marketswillcontinuetochange;waysofdoing businesswill continuetobe constantlychallenged by newinnovationsdespitethe new regulationsand standardsput in place asaresult of the crisis.However,oneof thestronglessonswhichit hastaught usasregulatorsisthat, in order tostayahead of the curve, wemust expand our knowledgeof the marketsand productsweare charged withregulating and the roleof the different jurisdictions,largeand small, that are part of theglobalmarketplace.Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  64. 64. 64We must applythat knowledgeefficientlyin our day-to-day operations.We must cooperateasregulatorsat theorganizational level.We must engagein dialogue and wemust takejoint action. Thisisnecessaryif weare toregulate effectively without stiflinglegitimatebusinessand economic growth.”Basel iii ComplianceProfessionalsAssociation (BiiiCPA)
  65. 65. 65TheBaseliii ComplianceProfessionalsAssociation (BiiiCPA) is thelargest associationof Basel iii Professionalsin theworld. It is a businessunit of theBasel ii ComplianceProfessionalsAssociation (BCPA), whichis alsothe largest associationof Basel ii Professionalsin theworld.Basel III SpeakersBureauTheBasel iii ComplianceProfessionalsAssociation (BiiiCPA) hasestablished the Basel III Speakers Bureau for firmsand organizationsthat want toaccessthe Basel iii expertise of Certified BaseliiiProfessionals(CBiiiPros).TheBiiiCPAwill be the liaisonbetweenour certified professionalsandtheseorganizations,at nocost. We stronglybelievethat this can be agreat opportunityfor both, our certified professionalsand /Basel_iii_Speakers_Bureau.htmlCertified Basel iii Professional (CBiiiPro)Distance Learning and Online Certification Program.Theall-inclusivecost is $297What is included in this price:A. The official presentationsweuse in our instructor-led classes(1426 slides)You can find the coursesynopsis Course_Synopsis_Certified_Basel_III_Professional.htmlBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  66. 66. 66B. Up to 3 Online ExamsThere is onlyone exam you need topass, in order tobecomea CertifiedBasel iii Professional (CBiiiPro).If you fail, you must studyagain theofficial presentations,but you donotneedtospendmoneytotryagain. Upto3examsareincludedintheprice.Tolearnmore you may Certification_Steps_CBiiiPro.pdfC. Personalized Certificate printed in full color.Processing, printingand posting toyour office or home.Tobecome a CertifiedBaseliii Professional (CBiiiPro) you must Basel_III_Distance_Learning_Online_Certification.htmlBasel iii ComplianceProfessionalsAssociation (BiiiCPA)
  67. 67. 67Basel iii ComplianceProfessionalsAssociation (BiiiCPA)