15 October 2008

ICMA Regulatory Policy Newsletter

Authorities have to decide whether more regulation would help to restore market confidence, Executive President Karsenti said. But although the authorities’ role is necessary in helping to restore market confidence, it is not sufficient on its own.

Authorities have to decide whether more regulation would help to restore market confidence, René Karsenti, Executive President of ICMA said introducing the latest Regulatory Policy Newsletter. Karsenti welcomed the steps that the authorities have already taken, especially when they have acted together. But although the authorities’ role is necessary in helping to restore market confidence, it is not sufficient on its own, he said.

 

However, more regulation does not necessarily mean better regulation, he noted underlining that unintended consequences have to be avoided.

 

For example, any approach to supervising credit rating agencies should be tackled globally, he said. If there is a risk of political interference in the ratings process, this will tend to undermine market confidence rather than help to restore it, Karsenti warned.

 

Also, the market needs to re-examine the originate-to-distribute model, he said. But European Commission proposals to force EU originators to keep their “skin in the game” risk harming EU competitiveness.

 

Karsenti calls to consider three additional steps that urgently need to be considered:

• First, we should build on government proposals to set up emergency funds to buy “toxic” assets from banks by encouraging banks to ring-fence the toxic assets on their balance sheets.
• Second, we should build on the proposals by ECOFIN in Europe and the SEC in the US to allow more flexibility in mark-to-market accounting by permitting banks, if they choose, temporarily to suspend their use of mark-to-market accounting.
• Third, the creation of a central clearing counterparty for credit default swaps should be implemented as soon as possible to help a proper functioning of the derivatives market.

 

The newsletter covers issues on the role of self-regulation, market practice, and regulatory issues.

 

It includes an article by Richard Britton on "Self regulation: sometimes controversial, always necessary", and articles on updating ICMA's Rules and Recommendations in the Secondary Market; ECP benchmark; repo market developments; and asset management.

 

The regulatory issues section includes articles on: immediate responses to financial turmoil; liquidity support; credit rating agencies; CRD origination proposal; transparency as a regulatory tool; disclosure of contracts for difference; short selling; extension of the statutory regime for issuer liability; MiFID transposition; clearing and settlement; and collateral management.

 

Newsletter

 

© ICMA