Crypto and distributed ledger technology (blockchain) continue to evolve at breakneck speeds. Governments also are fostering this discussion as they investigate implementing their own Central Bank Digital Currencies (CBDC). More than 80 countries around the world are researching or developing CBDCs, and are at various stages of the investigating process. On January 20, 2022, the U.S. Federal Reserve issued a discussion whitepaper highlighting the features/benefits/risks of such a payment system and acknowledged they are actively investigating it. Some governments have already postponed or canceled projects, while many are still investigating the pros and cons, and others have already launched their own digital currencies.
|
As financial markets transition from IBOR to SOFR, new valuation methodologies are emerging to replace the ones used to model forward-looking rates. For banks and asset managers using tree valuation to price interest rate contracts, especially those with early termination right by either holder and/or issuer, the Willow Tree method can relieve some of the challenges presented by other models.
|
As CECL adoption ramps up and nears completion, many banks—both 2020 and 2023 filers—are looking to validate CECL estimates, ensure that models remain predictive, and address auditor concerns. And the volatility of the macroeconomic environment doesn’t help, changing a bank’s portfolio mix and adding additional stress on CECL models.
|
On August 10, 2022, the Securities and Exchange Commission approved proposing rule amendments to expand reporting requirements for large hedge funds and private equity firms. In a 3-2 vote, the SEC proposed amendments to its Form PF to require hedge funds to provide additional information on performance, investment exposure, investment concentration, and borrowing and financing arrangements.
|
Middle-office operations are critical to your business, but often bogged down by manual processes, paper documents, and human error. Artificial intelligence (AI), digital transformation, intelligent automation, and other next-generation technologies help address these challenges. There are a variety of ways to improve middle-office efficiency and accuracy, such as through outsourcing or hosting services. SS&C is hosting a selection of free webinars related to middle-office operations.
|
Fundamental Review of the Trading Book, or FRTB, was introduced following the 2008 global financial crisis as a boundary between the trading book and the banking book. This shifts risk measurement from value at risk to a wider view of market liquidity risk, requiring banks to calculate more complex and risk-sensitive models than in the past.
|
AEOI compliance presents enormous challenges for financial institutions. First, there are the basic differences between FATCA, which targets only US taxpayers investing abroad, and CRS, which targets taxpayers from all participating countries investing in any other participating country. Interpreting the reporting requirements adds still more complexity, as they vary widely among different jurisdictions—such as the requirements for what is reportable or non-reportable. So do the definitions of accounts and individuals which must be reported. Moreover, as with all types of financial regulation, simply keeping up with changes and updates is an onerous task in itself. In such a tangled regulatory web, the risk of critical details falling through the cracks is acute.
|
The starts and stops of digital asset regulation have started to congeal around an emerging scheme of regulation. The Biden Administration’s Executive Order on Ensuring Responsible Development of Digital Assets underscores this important development. The order calls for a broad review of digital assets and sets several objectives including consumer and investor protection, financial stability, mitigation of illicit finance and national security risks.
|