Minutes from 4/2/12 meeting

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Attendees: Andre, Alexis, Rich, Eric

Andre’s report back: There was an SEC event with Commissioner George Cannellos on March 30th in NY that we missed. There are no upcoming events that Andre is aware of. He will follow up this week to determine if there are any upcoming events with Commissioners in NY or outside NY.

Potential follow up with Andre on DP radio show–would they like OSEC to come on in April? Need to come up with definite dates that one or two people can make. Alexis will follow up with the group to determine what good dates.

There was a brief discussion about the potential email to MoveOn about asking them to send a notice out to their email list. Alexis mentioned that we need to have consensus on this and isn’t sure if we have it. She also mentioned that we need a specific ask. If the effort in Congress to legislate a 1 yr delay to the Volcker Rule gains traction, a worthy ask for the list would be, Call your Congressperson and ask them NOT to delay the VR, vote NO on HR ___.

SIFI discussion
Eric noted govt bonds have a zero weight in the calculation for capital adequacy, so it disappears from the calculation. Eric noted that the capital adequacy calculation was defined in another rule, so we may not be able to ask them to change it.

Eric noted that there seems to be some similarity between Basel III and the Enhanced Prudential Standards Rulemaking.

There is a list of nine Prudential Standards in Dodd-Frank section 115 that the Fed MAY use, but is not required to use:
(A) risk-based capital requirements;
(B) leverage limits;
(C) liquidity requirements;
(D) resolution plan and credit exposure report requirements;
(E) concentration limits;
(F) a contingent capital requirement;
(G) enhanced public disclosures;
(H) short-term debt limits; and
(I) overall risk management requirements.

Eric noted that in the preamble, the Fed notes that there are a number of things in that list, such as enhanced public disclosure, that the Fed says they basically will NOT use.

Here is actual the quote from the NPR (pp. 595-596):
“In addition to the required standards, the Act authorizes but does not require the Board to establish additional enhanced standards for covered companies relating to (i) contingent capital; (ii) public disclosures; (iii) short-term debt limits; and (iv) such other prudential standards as the Board determines appropriate.[9] The Board is not proposing any of these supplemental standards at this time but continues to consider whether adopting any of these standards would be appropriate.”

Question 12 asks about short-term debt limits and whether or not they should be defining it. We should answer this question!

When the Fed does the stress test, the bank has to have an independent review. But “independent” is probably not sufficient (remember Enron).

How will the stress test be reported to the public? Will it be a granular report, or just a very high-level report and “they passed the stress test,” the public won’t know the true health of the firm.

They have to come up with a cash-flow projection. They say that the projections have to include both a 30, 60, 90 day and 1 year projection. Eric said that he really liked that they said if you’re using assets to determine cash-flow for the future, they have to take into account the volatility of the asset. Alexis asked: how are they defining volatility in this case? Implied? Historical?

Action Items:
- Andre to follow up this week to determine if there are any upcoming events with Commissioners in NY or outside NY.
- Alexis will follow up with the group to determine what good dates to go on DP show
- Eric will look up what the other rule is that defines the capital adequacy ratio calculation.
- Andre will send out a good video he saw about repo
- Eric to confirm what “short-term debt limits” refers to in the context of Dodd-Frank 115 and the “Enhanced Prudential Standards” NPR.

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