Regulator - August 2011

Welcome to our August edition of Regulator.

A sound and stable banking system depends, in part, on a clear and certain regulatory environment. It is clear that the constantly shifting and complex dynamics which we have seen since the global financial crisis make rule making by bank regulators challenging.  In this edition we look at three aspects of financial institution regulation to test how we are travelling.

Uncertainty in prudential regulation, and the market makes it challenging for institutions to select the most effective mix of funding tools.  Berkeley Cox, Greg Hammond and Ian Paterson provide a high level analysis of the key funding tools currently available to Australian financial institutions.  We would welcome thoughts as to whether our colour coded matrix is helpful.

With the resurgence ADIs in the Australian securitisation market, Paul Smith’s article considers APRA’s release of the new APS 120 and the concerns that it, along with APG 120, will hinder the market as they do not expressly permit ADIs to hold subordinated notes in their transactions.

Recovery and Resolution Plans or so called living wills have received recognition internationally.  To date, while Australian regulators have yet to comment on this publicly, dialogue has started and a requirement for Australian banks to maintain such plans seems imminent.  To help follow the debate Ian Paterson provides some guidance as to what are the key features of “Living Wills”.

We have also seen focus on financial markets regulation again - one of our key interest areas.  Damien Richard’s article provides insight into electronic trading systems known as "dark pools".

Coupled with the considerable media coverage regarding the recent volatility in global markets, there has also been significant interest in the market on the 15 day short selling ban recently announced in France, Italy, Belgium and Spain.  Mark McFarlane provides a brief update.

Given the recent focus on the Carbon Tax and following on from Scott Farrell’s article in the previous issue, Jim Boynton, Scott Farrell and Kate Jackson-Maynes comment on the impact of Clean Energy and Carbon Credits schemes on traders.

Finally, in this issue, we also introduce the first in a series of articles by Nuncio D’Angelo, fresh from some recent study at Harvard, on the subject of commercial unit trusts and the risks faced by their investors and creditors.  The increasing use of trust structures in commercial structures over many years means that many are exposed to these risks - whether they know it or not.  Having spent some months focussing on these issues, Nuncio has kindly agreed to share his thoughts in a series of articles starting today.