Changing financial sector interconnectivities and their impact on regulatory frameworks

This presentation and the associated paper explore some ways in which different parts of the financial sector interact, and how this is influencing regulatary change agendas affecting each part. Particular emphasis is given to trends relating to systemic risk, and other longer term societal trends that span multiple parts of the financial community.

[as pdf]

1Changing financial sector interconnectivities and their impact on regulatory frameworks
2Changing Financial Sector Interconnectivities
3Changing Financial Sector Interconnectivities
4Malcolm Kemp
5Aims of Workshop (1)
6Aims of Workshop (2)
7Initial working thesis of paper
8Changing Financial Sector Interconnectivities
9Similarities and differences between different sectors
10Typical bank and insurer business models differ
11They also have different funding bases (excluding equity) …
12Different capital levels …
13Different accounting bases …
14Somewhat different looking Pillar 1 structures …
15Basel III capital requirements
16Solvency II SCR: Standard Formula
17And different perspectives on Pillar 1 versus Pillar 2
18However some business overlaps (and conglomerates!)
19Basel III and Solvency II: Different histories and drivers
20Basel III capital requirements
21The fundamental importance attached to systemic risk
22Human resource and other trends
23Greater mixing and interconnectivities between sectors
24However, DB (and perhaps also CDC) pension schemes?
25Changing Financial Sector Interconnectivities
26Importance to regulatory thought of systemic risk
27Ascendancy in regulatory structures
28On macro-prudential policy Haldane (2014) notes
29Note association between systemic risk and non-banks
33Consequence of decision to have some G-SIIs
34NBNI G-SIFIs assessment principles, according to FSB (2014)
35Implications for regulatory frameworks
36Implications for risk modelling
37BCBS (2012) view on ES
38Subordination, tiering and tranching
39Capital adequacy: a conceptual framework
40Changing Financial Sector Interconnectivities
41The technological and societal environment
42Cyber risk coverage in e.g. RIMS Knowledge Base
43Rationale for interest in cyber risk, e.g. Rudolph (2012)
44How important is cyber to the financial services industry?
45How ‘entrepreneurial’ do we want finance to be?
46E.g. Gracie (2014)
47IT software and hardware developments
48How computationally ‘hard’ are risk management questions?
49Broader network effects
50Seeking ‘fairness’
51Changing Financial Sector Interconnectivities
52Other regulatory drivers and trends
53Purpose of financial regulation
54‘Prudential’ ideas proposed early in financial crisis
55‘Conduct’ ideas proposed early in financial crisis
56Other recent major EU-level directives and initiatives
58MiFID II and MiFIR
60Shadow banking sector
61FSB perspective, e.g. FSB (2013)
62FSB policy work on shadow banking and systemic risk
63Changing Financial Sector Interconnectivities
64Initial working thesis of paper
65Important Information

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