Highlighting the most important legal and regulatory developments affecting the financial industry. The BRRD was implemented in the UK via amendments to the Banking Act 2009 (the Banking Act), the Prudential Regulation Authority (PRA) Rulebook and the Financial Conduct Authority (FCA) Handbook. It introduces a set of minimum standards to allow national authorities to intervene and resolve banks and investment firms in an orderly manner without recourse to taxpayer money. In particular, it requires the preparation of recovery plans and resolution plans (also known as living wills”), and introduces the bail-in” tool, which allows a resolution authority to write down eligible liabilities or convert them to equity in the event of an institution failing. It also introduces a minimum requirement for own funds and eligible liabilities (also known as MREL) for the purpose of bail-in, which is being phased in in the UK between 1 January 2016 and 1 January 2020. The impact that the BRRD has had on banks across Europe has been considerable, in terms of both cost and resources.
The Financial Collateral Arrangements Directive, implemented in the UK by the Financial Collateral Arrangements (No.2) Regulations of 2003 (as amended) provides a preferential regime for certain types of collateralisation arrangements. In particular, for eligible security-based arrangements, perfection requirements and insolvency moratoria are disapplied, and appropriation of assets is available as a means of enforcement. The regime is broadly relied on across the financial markets, and will become still more central following the introduction of mandatory collateralisation requirements for uncleared derivatives.
The fed funds rate is typically positively correlated with short-term interest rates i.e. they will rise and fall together. This will affect the rate of return paid to holders of US Treasury bills and commercial paper issued by private corporations. This will ultimately influence medium- and longer-term interest rates such as fixed-rate mortgages and consumer loans.
If you don’t have the time to research and manage your investments then it could be a good idea to delegate these decisions to a fund manager with the expertise and scale to do this for you. They’ll also take into account things like the impact of currency movements on investment returns and check how much you have invested overseas, so you don’t have to.
Banks are already facing a dangerous cocktail of slow credit growth, which will act as a drag on their revenue growth, at a time when their problem loans are edging higher. And now investors are being forced to contemplate the possibility that, despite their rhetoric, the country’s major banks will buckle to political pressure and meekly accept a squeeze in their net interest rate margins.
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