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New Broad Treasuries Repo Rate “Best Practice” Benchmark

June 29, 2017

Authors

Matthew D'Amico

New Broad Treasuries Repo Rate “Best Practice” Benchmark

June 29, 2017

by: Matthew D'Amico

On June 22, the Alternative Reference Rates Committee (the “ARRC”) identified a broad Treasuries repo financing rate (the “Broad Treasuries Financing Rate”) that, according to the ARRC, in its consensus view represents best practice for use in certain new U.S. dollar derivatives and other financial contracts.

The work of the ARRC grew out of the past instances of manipulation of the LIBOR market which caused a loss of confidence in LIBOR – particularly as it had previously been determined and reported – as a reliable interest rate benchmark.  That led the G20 to instruct the Financial Stability Board to review broadly-recognized interest rate benchmarks and devise a plan to ensure that the construction of these benchmarks are sound and used appropriately in the markets.  According to the Working Group

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Legal Lending Limits and Credit Exposure for Derivatives – Georgia

August 8, 2013

Authors

Jerry Blanchard

Legal Lending Limits and Credit Exposure for Derivatives – Georgia

August 8, 2013

by: Jerry Blanchard

As we previously discussed, the Georgia Department of Banking and Finance has confirmed that Georgia charted banks will be able to use any of the methodologies permissible for national banks when determining credit exposure for derivatives, subject to review through the examination process as to their appropriate implementation. For those elements of the OCC methodology requiring the written approval of the OCC prior to implementation, the Department’s written approval would likewise be required prior to implementation by Georgia state-chartered banks.

Notwithstanding this broad permission, we think that most community banks will find the “Conversion Factor Matrix Method” to be less burdensome and easier to calculate. Under the Conversion Factor Matrix Method, credit exposure is calculated as follows:

Credit Exposure equals Current Credit Exposure plus Potential Future Exposure [12 CFR § 32.9(b)(1)(i)]

The exposure will remain fixed at the potential future credit exposure of the derivative transaction as determined at

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Swaps, Dodd-Frank and the Community Bank

July 24, 2013

Authors

Dan Wheeler

Swaps, Dodd-Frank and the Community Bank

July 24, 2013

by: Dan Wheeler

Despite the breadth and complexity of Dodd-Frank regulation of derivatives, there are comparatively few key regulations that affect an interest rate swap offered by a typical community bank. This article provides an overview and a ray of hope that these regulations can be mastered by a community bank.

Less than 3% of banks under $1 billion in assets are engaging in interest rate swap transactions. Only 7% of all banks in the U.S. are doing so. Yet, virtually every community banker complains about losing good loans to larger banks offering long term fixed rate loans. Larger banks are only able to offer those fixed rate loans because they hedge the interest rate risk represented by a fixed rate loan with a corresponding interest rate swap. One would think that community banks would scramble to compete effectively by doing their own interest rate swaps.

A key reason

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Legal Lending Limits and Credit Exposure for Derivatives

July 16, 2013

Authors

Jerry Blanchard

Legal Lending Limits and Credit Exposure for Derivatives

July 16, 2013

by: Jerry Blanchard

On June 19, 2013, the OCC issued a final rule (the “Rule”) updating its existing regulations on legal lending limits in response to Section 610 of the Dodd Frank Act. Section 610 amended the federal lending limits statute, (12 USC § 84) to include credit exposures arising from derivative transactions and repurchase agreements, reverse repurchase agreements, securities lending transactions, and securities borrowing transactions. The Rule also takes into account differences that existed between national banks and saving associations and preserves some of the statutory exceptions that savings associations previously enjoyed. The Rule replaces, and modifies to some extent, the Interim Rule adopted on June 20, 2012. The Rule provides three different methods for calculating credit exposure, one of which will be applicable to larger banks and two that will be more attractive to regional and community banks.

The Rule is relevant to state chartered banks as well since Section 611

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Legal Lending Limits and Credit Exposure for Derivatives

October 9, 2012

Authors

Jerry Blanchard

Legal Lending Limits and Credit Exposure for Derivatives

October 9, 2012

by: Jerry Blanchard

On June 20, 2012,  the OCC issued an interim final rule (the “Rule”) that amends its existing regulations on legal lending limit in response to Section 610 of the Dodd Frank Act. Section 610 amended the federal lending limits statute, (12 USC § 84) to include credit exposures arising from derivative transactions and repurchase agreements, reverse repurchase agreements, securities lending transactions, and securities borrowing transactions. The Rule also takes into account differences that existed between national banks and saving associations and preserves some of the statutory exceptions that savings associations previously enjoyed. The Rule provides three different methods for calculating credit exposure, one of which will be applicable to larger banks and two that will be more attractive to regional and community banks.

The Rule is relevant to state chartered banks as well since Section 611 of Dodd Frank provides that state banks may only engage in derivative transactions

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Financial Services Update – July 22, 2011

July 22, 2011

Authors

Matt Jessee

Financial Services Update – July 22, 2011

July 22, 2011

by: Matt Jessee

Debt Limit Negotiations Continue

On Tuesday, the House passed its “Cut, Cap and Balance” legislation which would cut government spending now, cap it in the future and approve a constitutional amendment to balance the federal budget. On Friday, the Senate voted to table a motion to consider the measure. However, after another tense week of negotiations between the Senate Republicans, Senate Democrats, House Republicans, House Democrats, and the President Obama, the outline of a purported deal seemed to emerge late Thursday. Congressional Democrats reported that President Obama discussed with them a deal he had reached with Speaker John Boehner to raise the debt ceiling by $2.4 trillion, enough to get through the 2012 elections, with at least as much in immediate spending cuts and a promise of  “tax reform”  in 2012. On Friday, in response to the news of a “deal,” Speaker Boehner told the House Republican Conference there was

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Financial Services Update – April 29, 2011

April 29, 2011

Authors

Bryan Cave

Financial Services Update – April 29, 2011

April 29, 2011

by: Bryan Cave

Q1 GDP Slows to 1.8%

On Thursday, the Bureau of Economic Analysis announced that the U.S. GDP growth rate in the first quarter of 2011 slowed to an annual rate of 1.8 percent, compared to a rate of 3.1 percent in fourth quarter 2010 and 3.7 percent in first quarter 2010. The Bureau cited a combination of lower-than-expected economic data, global energy uncertainty, and concerns about the budget deficit as causes of the growth rate decelerating.

Bernanke Announces Rates to Stay at Near Zero, Ends Bond Buying Program

On Wednesday, Federal Reserve Chairman Ben Bernanke held his first quarterly press conference in which he said that the economy and job market are improving moderately, but the housing market and other factors such as gas prices continue to be a drag on growth. He announced that the Fed plans to end the $600 billion treasury bond-buying program in June and will

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Financial Services Update – April 22, 2011

April 22, 2011

Authors

Matt Jessee

Financial Services Update – April 22, 2011

April 22, 2011

by: Matt Jessee

Japan Announces Disaster Relief Fund

On Friday, Japanese Finance Minister Yoshihiko Noda announced a 4 trillion yen ($48.5 billion) emergency budget for disaster relief in the wake of the nuclear crisis triggered by the March tsunami. Noda said the government would not issue new bonds to pay for the fund, and the cabinet plans to submit the emergency budget to parliament on April 28. Given that the material damage alone from the disaster could top $300 billion, the government is expected to seek additional future disaster funding that will likely require tax increases and debt financing.

Justice Department Examines NYSE/Nasdaq/ICE Merger

On Wednesday, Nasdaq-OMX CEO Robert Greifeld and ICE CEO Jeffrey Sprecher disclosed in a letter to NYSE Euronext’s board that they are in discussions with the antitrust division of the Justice Department (DOJ) after buying NYSE Euronext stock which triggered the DOJ’s antitrust review. The letter also disclosed that Nasdaq-OMX

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Financial Services Update – February 4, 2011

February 8, 2011

Authors

Matt Jessee

Financial Services Update – February 4, 2011

February 8, 2011

by: Matt Jessee

Warren Interviews AGs for Consumer Protection Agency

Reports this week indicate that Elizabeth Warren, who is interim head of the U.S. Consumer Financial Protection Bureau, has interviewed four Democratic state attorneys general to be her permanent successor. The four AGs reportedly in the running are Tom Miller of Iowa, Lisa Madigan of Illinois, Roy Cooper of North Carolina and Martha Coakley of Massachusetts. The bureau is scheduled to officially start work on July 21. Under the Dodd-Frank Wall Street Reform Act, which President Obama signed in July, the bureau must have a Senate-confirmed director to perform certain functions such as the supervision and regulation of non-bank financial firms.

House Republicans Release Top Line Budget Numbers

With President Obama set to release his FY 2012 budget on February 14, House Republican leaders on Thursday announced they would seek $32 billion in spending cuts from the resolution currently funding the government. Republicans

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Financial Services Update

October 2, 2010

Authors

Matt Jessee

Financial Services Update

October 2, 2010

by: Matt Jessee

Kaufman To Replace Warren At TARP

On Thursday, Senator Harry Reid (D-NV) announced that Senator Ted Kaufman (D-DE) was appointed to replace Elizabeth Warren as chair of the Congressional Oversight Panel for the Troubled Assets Relief Program (TARP). Kaufman was appointed to fill then-Senator Joe Biden’s remaining two years of his Senate term after being elected Vice President. Kaufman will serve until a new Senator from Delaware is sworn in on November 15 

Dodd-Frank Implementation Delayed

On Wednesday, Congress passed a spending bill to fund government operations through early December and then recessed until after the November election. However, requested budget increases for financial regulators were not included in the spending bill, which will likely result in the delay in implementation of the Dodd-Frank Wall Street Reform Act until 2011. The funding shortage would be particularly impactful on the Commodity Futures Trading Commission and Securities and Exchange Commission,

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