Federal Reserve Establishes a New Rating System for the Supervision of Large Financial Institutions
On November 2, the Board of Governors of the Federal Reserve System (the “FRB”) issued a final rule (the “Final Rule”) that establishes a new rating system for the supervision of large financial institutions (“LFIs”). The LFI rating system applies to all bank holding companies with total consolidated assets of $100 billion or more; all non-insurance, non-commercial savings and loan holding companies with total consolidated assets of $100 billion or more; and all U.S. intermediate holding companies of foreign banking organizations with total consolidated assets of $50 billion or more. The LFI rating system is designed to align with the FRB’s existing supervisory program for LFIs, enhance the clarity and consistency of supervisory assessments, and provide greater transparency regarding the consequences of a given rating. For LFIs, the new rating system replaces the RFI/C(D) rating system currently used by the FRB for holding companies of all sizes.Continue reading →
This post reviews the New York State Office of the Attorney General’s (the “OAG”) Virtual Markets Integrity Initiative Report (the “Report”), which was published on September 18, 2018. The publication of the OAG’s 42-page Report brings to a close its six-month fact-finding inquiry of several virtual currency platforms. The OAG sent out detailed letters and questionnaires to a number of virtual currency platforms seeking information from the platforms across a wide-range of issues, including trading operations, fees charged to customers, the existence of robust policies and procedures, and the use of risk controls. Continue reading →
Over the past two years, US firms have experienced a significant increase in the number of mandatory regulatory reports, including the future Consolidated Audit Trail (CAT), Markets in Financial Instruments Directive (MiFID II) requirements applicable to firms doing business in Europe, new reporting requirements for swaps, the SEC’s Trade Reporting and Compliance Engine (TRACE), and the Treasury Department’s Regulation Systems Compliance and Integrity (Reg SCI). Each of these reporting requirements could require some financial firms to process approximately a terabyte of metadata every day. This has resulted in financial firms’ renewed interest in leveraging cloud technology.
Although it may seem like a recent technology trend in conversation, early network references to cloud computing date back to the 1960s. The cloud computing discussed today has been derived by various technology marketing campaigns to make the language of engineers colloquial. The cloud is an easy to adopt metaphor that has a myriad of meanings; for example, firms that allow employees to Bring Your Own Devices (BYOD) or issue laptops for remote access, are technically using cloud computing. Continue reading →
An important transformation is happening in the financial industry. The rise of new technology and compliance has dramatically altered many of the key functions and functionaries of modern finance. Artificial intelligence, algorithmic programs, and supercomputers, instead of human actors, now constitute the core of many financial operations. At the same time, compliance officers have become just as critical to financial institutions as traders, bankers, and analysts. Finance as we knew it has changed and continues to change.
My recent article, Compliance, Technology, and Modern Finance, offers a detailed commentary on these unfolding changes—the crosscutting developments in compliance, technology, and modern finance. It examines the concurrent and intersecting ascents of new financial technology and compliance as well as the potential perils linked with their ascents. It also highlights the larger implications of the changing financial landscape due to the growing roles of new technology and compliance. In particular, it focuses on the challenges of financial cybersecurity, the integration of technology and compliance, and the role of humans in modern finance. Continue reading →