Articles by author
Saying how versus saying what: the choice of regulatory style in margin policy
Mandatory margin posting on derivatives portfolios is one of the key elements of post-2008 derivatives policy. Margin requirements are often calculated using risk-based models. These models typically require more margin when markets are more stressed. This can create liquidity burdens on market participants just when they are hardest to meet. There are two main approaches to addressing this: requiring that particular tools to reduce variability are incorporated in all margin models; or placing limits on the variability of margin regardless of how it is calculated. This choice is practically important and leads to insights on differences in regulatory style.
1 MAY 2022Regulatory mandates and review in the 2022 Financial Services and Markets Bill: marking their own homework
There are a number of notable features of the Bill: this article will concentrate on Chapter 3, which concerns the accountability of regulators. The key provisions for the Prudential Regulatory Authority (PRA) are in ss 27-29. These amend the Financial Services and Markets Act 2000: (i) s 27 imposes a duty on both the PRA and the Financial Conduct Authority (FCA) to review rules; (ii) s 28 gives the Treasury certain powers in relation to rule making; and (iii) s 29 grants the Treasury powers to determine matters which the regulators must include in their considerations when making rules. Together, they represent a significant change to the prudential regulatory process in the UK. In this article, the author explains the background to these provisions, discusses the current text, considers its likely effect, and explores some potential improvements to it.
1 OCT 2022
