RMASL: no fate but where the Fed sets interest rates
15 October 2015 Miami
Image: Shutterstock
The ongoing debate over whether there is enough liquidity in the market will be answered when the Federal Reserve finally decides to raise interest rates, heard attendees of the Risk Management Association 麻豆传媒 Lending Conference in Miami.
The second day of the conference opened with a rigorous analysis of how the bond market will cope in the event of an interest rate hike.
鈥淭he thing that is on everyone鈥檚 mind is what will happen when the Federal Reserve starts tightening,鈥� commented one panellist.
鈥淭here will always be liquidity, it will just be at a greater price,鈥� responded another.
Central counterparties (CCPs) were recommended as an answer to how direct repo transactions could operate as another source of liquidity.
鈥淚n the current world we live in, a CCP is the solution,鈥� observed a speaker. 鈥淏ut to get it right it needs to be all encompassing.鈥�
Another panellist agreed and suggested that it would be crucial for any CCP solution to tackle the problems that were at the core of the 2008 crash to ensure it doesn鈥檛 happen again.
In the second panel, attendees learned that agent lenders have had to adapt to a world with less collateral available and less flexibility in dictating what their clients post. This has led to a shift away from high quality liquid assets (HQLA) towards accepting equity a collateral.
The point was made that not all beneficial owners are equal, and neither are all borrowers. Beneficial owners are becoming increasingly picky about their collateral parameters and causing headaches for their agent lenders, which are struggling to marry up lenders and borrowers with similar strategies.
The majority of the panel, made up of agent lenders and broker-dealers, agreed that the securities and correct collateral did exist in the market, but 鈥渕obilising鈥� it with all the restrictions in place is one of the biggest challenge they face day-to-day.
The agent lending disclosure (ALD) went under the microscope in a roundtable on market transparency.
A work group has been set up to create a two-way dialogue between regulators and the industry to improve the quality of reporting data from the market.
A pilot reporting programmee has since been created by the US Treasury and templates have been sent to select participants to test the new minimum standards for reporting. The aim is to tackle issues around the inconstancies and inefficiencies in the current data being reported to regulators.
The ALD work group will submit a new set of minimum standards that individual states can then choose to build upon or maintain.
Although the project is moving forward, some concerns have been raised that most financial institutions don鈥檛 have the technology to provide the level or format of data being requested.
The US focused work group is engaging with members of the European Central Bank to try and minimise the reporting burden for international firms that will have to report data in separate styles to each of the relevant regulators.
鈥淎LD groups are going to be very busy over the next two years,鈥� predicted one panellist.
The second day of the conference opened with a rigorous analysis of how the bond market will cope in the event of an interest rate hike.
鈥淭he thing that is on everyone鈥檚 mind is what will happen when the Federal Reserve starts tightening,鈥� commented one panellist.
鈥淭here will always be liquidity, it will just be at a greater price,鈥� responded another.
Central counterparties (CCPs) were recommended as an answer to how direct repo transactions could operate as another source of liquidity.
鈥淚n the current world we live in, a CCP is the solution,鈥� observed a speaker. 鈥淏ut to get it right it needs to be all encompassing.鈥�
Another panellist agreed and suggested that it would be crucial for any CCP solution to tackle the problems that were at the core of the 2008 crash to ensure it doesn鈥檛 happen again.
In the second panel, attendees learned that agent lenders have had to adapt to a world with less collateral available and less flexibility in dictating what their clients post. This has led to a shift away from high quality liquid assets (HQLA) towards accepting equity a collateral.
The point was made that not all beneficial owners are equal, and neither are all borrowers. Beneficial owners are becoming increasingly picky about their collateral parameters and causing headaches for their agent lenders, which are struggling to marry up lenders and borrowers with similar strategies.
The majority of the panel, made up of agent lenders and broker-dealers, agreed that the securities and correct collateral did exist in the market, but 鈥渕obilising鈥� it with all the restrictions in place is one of the biggest challenge they face day-to-day.
The agent lending disclosure (ALD) went under the microscope in a roundtable on market transparency.
A work group has been set up to create a two-way dialogue between regulators and the industry to improve the quality of reporting data from the market.
A pilot reporting programmee has since been created by the US Treasury and templates have been sent to select participants to test the new minimum standards for reporting. The aim is to tackle issues around the inconstancies and inefficiencies in the current data being reported to regulators.
The ALD work group will submit a new set of minimum standards that individual states can then choose to build upon or maintain.
Although the project is moving forward, some concerns have been raised that most financial institutions don鈥檛 have the technology to provide the level or format of data being requested.
The US focused work group is engaging with members of the European Central Bank to try and minimise the reporting burden for international firms that will have to report data in separate styles to each of the relevant regulators.
鈥淎LD groups are going to be very busy over the next two years,鈥� predicted one panellist.
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