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Update

ISSUE 68, February 2008

Prudential Regulation


	Look out for…

The latest edition of the FSA's Handbook Development newsletter (No 95), indicates, inter alia , that the following consultation papers, discussion papers and feedback statements, which are likely to be of interest to FOA members, are due to be published over the coming months:

Star Rating*	Title	Expected date	Consultation period	Expected date of feedback
N/A	UK Discussion paper on the Commission's review for the financial regulatory framework of commodity and exotic derivatives – FS to joint DP with HM Treasury	Q2 2008	N/A	N/A
N/A	Definition of Capital - FS to DP07/6	June 2008	N/A	N/A
2	Review of Accounting and Prudential Requirements – CP	Under Review	3 months	Under Review

* As explained in Handbook Development newsletter No 47, 3 star CPs are “high-profile consultations, and major policy changes affecting a large number of consumers or financial sectors,” 2 star CPs contain “other important policy changes” and 1 star CPs contain “minor changes.”


	Have you read…?

CP/PS/DP	Title	Consultation period ends / Comments by
PS07/22	External assurance on regulatory returns – Including feedback on CP07/15	N/A
PS07/23	Integrated Regulatory Reporting (IRR): Changes to reporting requirements affecting most firms – feedback to CP07/17	N/A
DP	UK Discussion paper on the Commission's review of the financial regulatory framework for commodity and exotic derivatives. A joint consultation by HM Treasury and the FSA	14th March 2008
CP07/24	Implementation of the 8 th Company Law Directive	28th March 2008

CEBS and CESR publish call for evidence on commodities

The Committee of Europeans Banking Supervisors (CEBS) and the Committee of European Securities Regulators (CESR) have published a joint call for evidence on commodities. The call for evidence seeks to examine the existing MiFID and CRD exemption for certain categories of commodity firm and determine industry views on possible regulation going forward

From a prudential perspective, the call for evidence specifically seeks recommendations for an bespoke regime that might be implemented going forward.

The deadline for responses on this matter is now 29 th February. If you are not already in contact with the FOA and have any points to make with regard to the CRD exemptions and capital treatment of commodity firms going forward, please contact Simon Andrews .


	Netting agreement legal opinions

The FOA maintains a Master Netting Agreement (MNA) supported by a library of legal opinions affirming its validity in 55 different global jurisdictions. The MNA and the supporting legal opinions are available to members for a one off charge.

The legal opinion library has recently been updated and opinions are now available to library members online at our website. FOA member firms who do not currently subscribe to the library can still access the Master Netting Opinion and view a full list of jurisdictions covered by the library, along with information about subscribing

Any members who do not currently subscribe to the library but would be interested in further information or existing library members who experience difficulty accessing the legal opinions should contact Simon Andrews .


	Systems and Controls for Risk Management

The FOA recognises that the vast majority of banks and other financial institutions have high grade systems and controls for managing transactional risk in place, but feels that, in the light of recent events at SocGen, it is appropriate to draw members' attention to the FOA's guidelines for managing transactional risk, which were first produced post-Barings, but which have since been updated on two occasions to reflect changes in scope, practice and procedure. In the light of regulatory concerns and public unease generate by publicity over the sub-prime crisis and “rogue trader” vulnerability, members may find it helpful, where appropriate, to refer their corporate and institutional customers and counterparties to those guidelines. A summary of the core principles is attached to this update.


	Risk Management course – Member feedback requested

The FOA is in discussion with Risk Audit over the provision of a one-day training course for FOA members covering such topics as:

• Overview of key market, credit and operational risks

• Managing client credit risk

• Managing proprietary trading risk

• Key operational controls

• Information technology

• Management of regulatory risk

• Other operational risks

The course is primarily designed to appeal to compliance officers and risk managers working in small to medium sized firms who feel that they would benefit from an overview of the key risk areas which apply to their business and the ways in which those risks can most effectively be managed, although representatives from firms of all sizes would be welcome.

If you wish to express an early interest in this course and would like to propose particular topics that you feel should be covered please contact Simon Andrews