The US bank stress tests were tougher in terms of their detail than in their macroeconomic scenarios which were criticised by some for being too rosy, leading financial regulation consultant Karen Shaw Petrou said in comments on the exercise.

WASHINGTON – US Treasury secretary Tim Geithner’s proposed regulation of the over-the-counter (OTC) derivatives market, announced in mid-May, is every bit as tough as many participants feared. Among a raft of measures to establish a “comprehensive regulatory framework” for OTC derivatives, the big market players will have to maintain “conservative capital requirements,” while standardised trades will have to move onto regulated exchanges.

NEW YORK – Adair Turner, Britain’s top financial regulator, has boldly challenged much academic and political opinion, suggesting that it may be necessary to accept that some financial firms are just ‘too-big-to-fail’ or ‘too-connected-to-fail’ or both. Although many firms have been bailed out on these ground during the global financial crisis, a strong body of opinion, particularly in the US, favours putting in place policies that allow even the largest firms to go bust in future. Bailouts create moral hazard, it is said. What are needed are mechanisms that allow the resolution and orderly winding down of insolvent banks, insurance companies or other financial institutions.

WASHINGTON – Mary Schapiro, head of the US Exchange and Securities Commission (SEC), has made a strong pitch for her agency to be kept intact and given a major role in the expected re-design of the country’s regulatory structure. In a speech in early May, Schapiro set out the main elements, from her viewpoint, of the architecture of a new system. This centres on four distinct areas of regulation: markets for investment capital; banking institutions; systemic risk; and the resolution of troubled institutions.

BRUSSELS – Charlie McCreevy, the EU internal markets commissioner has given a robust defence of his regulatory reform policies amid charges from critics at both ends of the political spectrum that he is regulating too much, or alternatively, not regulating enough.

WASHINGTON – The lessons of the global financial crisis will result in either more effective supervision of specialist insurance groups and cross-sectoral financial groups, or restrictions on the scope of the activities of specialist insurers, a top Australian regulator said in mid-May. Australian Prudential Regulation Authority (APRA) executive member John Trowbridge said that as a consequence of the global financial crisis, the biggest single issue in insurance regulation today is the so-called “AIG problem”.

SINGAPORE – Standardisation of legal and regulatory rules relating to Islamic financial services is even more important as the scope of the services expands and a more diverse range of market players is attracted to this formerly niche asset class, a senior Hong Kong regulator said in May.

BASEL – The global financial crisis underscores the importance of stress testing as an essential risk management and capital planning tool, the world’s chief banking regulator said in May.

WASHINGTON – Top US federal banking regulator Sheila Bair says a strong case can be made for creating incentives that reduce the size and complexity of financial institutions.

STRASBOURG – New EU legislation, amending the Capital Requirements Directive (CRD), and imposing the controversial 5% “retention” for issuers of securitised credit products, was passed by the European Parliament on May 6. In addition to the securitisation retention, the amended CRD provides for the establishment of supervisory colleges for cross-border banks and beefs up the large exposure rules, including those for interbank exposures.