Beginning even before the full impact of the 2007-2009 (and continuing) financial crisis was appreciated, governments, financial regulators, and the financial institutions themselves have implemented major changes in the practices of those institutions. These changes continue and will have a dramatic impact on the ways that the finance industry operates. These changes include (but are certainly not limited to):
• The Dodd-Frank Bill in the US
• The Basel III capital standards which will significantly increase the amount and type of capital that banks are required to hold
• Intervention by central banks to support the liquidity of financial institutions by purchasing securities from or lending against those securities as collateral to the institutions (which also functions as a monetary policy device to increase the money supply and maintain low interest rate)
• Nationalizing or forcing the merger of financial institutions
• Separating commercial banking and investment banking operations
• Limiting the size or market share of institutions
• Restricting commercial and investment banks from trading for their own account
• Requiring all (or a greater proportion of) derivatives trades to be conducted over listed exchanges
• Restructuring how LIBOR (or a replacement interest rate benchmark) is calculated
• Forcing junior and senior bondholders (and depositors in the case of Cyprus) to share in the losses when a bank is bailed out
• Limiting or banning certain practices such as short selling of the equity of financial Institutions
• Bank lending practices, including predatory lending
• Limiting or intervening in the foreclosure of defaulted mortgage loans
• Restricting the use of ratings developed by the commercial rating agencies such as Moody’s, Standard & Poor’s and Fitch
• Restructuring Fannie Mae and Freddie Mac as well as other GSEs
The post Changes in Institutions and Capital Markets Following the Financial Crisis first appeared on COMPLIANT PAPERS.
