Posts Tagged ‘Hal Scott’

Some Improvement in U.S. Public Equity Capital Market Competitiveness

Posted by Hal Scott, Harvard Law School, on Wednesday January 2, 2013 at 8:56 am
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Editor’s Note: Hal Scott is the director of the Program on International Financial Systems at Harvard Law School and the director of the Committee on Capital Markets Regulation. This post is based on a statement from the committee, available here.

The Committee on Capital Markets Regulation (CCMR), an independent and nonpartisan research organization dedicated to improving regulation and enhancing the competitiveness of U.S. public equity capital markets, today released data from the third quarter of 2012. According to the new study, U.S. capital markets reversed the second quarter downgrade and showed slightly improved competitiveness, though most measures of competitiveness still fall short of historical averages. Hal S. Scott, Director of the Committee said, “While foreign companies continue to prefer non-U.S. financial markets for raising capital outside their home markets, and regulatory reform is still needed, this quarter’s data offers a promising sign that competitiveness can be restored to U.S. markets.”

Of the global initial equity offerings conducted outside a company’s home market, 18.3% of these IPOs, by value, were listed on a U.S. exchange. While this measure is at its highest level over the past five years, the U.S. share of this volume remains well below its historical average of 28.7% (1996-2006). These percentages include all IPOs by foreign companies listed on either U.S. public markets or issued through private Rule 144A offerings. Excluding global IPOs that use the Rule 144A markets, the percentage of global IPOs listed on a U.S. exchange rises to 55.9%. However, the total value of these IPOs has decreased from $79.8 billion in 2010 and $39.3 billion in 2011 to only $9 billion thus far in 2012.

…continue reading: Some Improvement in U.S. Public Equity Capital Market Competitiveness

Hedging Under the Volcker Rule

Posted by Hal Scott, Harvard Law School, on Thursday July 12, 2012 at 9:21 am
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Editor’s Note: Hal Scott is the director of the Program on International Financial Systems at Harvard Law School and the director of the Committee on Capital Markets Regulation. This post is based on a statement from the committee, available here.

Debate continues around the proposed regulations to implement the Volcker Rule, most lately around its provisions related to permitted hedging activities. As the Committee on Capital Markets Regulation (CCMR) has commented in the past, the proposed regulations should be appropriately constructed to address activities that are specifically permitted under Dodd-Frank, including market-making, underwriting and hedging.

Following the recent JPMorgan (JPM) trading losses, some have called for tightening or even removing the provisions for portfolio hedging that are incorporated in the proposed regulations. Dodd-Frank permits hedging on aggregated positions but critics suggest this should not be interpreted to allow hedging on a portfolio basis. Despite the JPM losses, however, CCMR believes that portfolio hedging should in general be permitted.

Portfolio hedges are crucial for banks to reduce overall volatility and risk. Overly restricting hedging would actually increase bank risk, the very outcome the critics themselves seek to avoid. Suggestions that portfolio hedges need to be correlated to individual underlying positions are both unworkable and overlook the reality that banks seek to hedge their overall mix of assets, and potential movements across an entire portfolio, rather than single movements of individual assets. Furthermore, correlations evolve over time and hedging is a dynamic process.

…continue reading: Hedging Under the Volcker Rule

Capital Markets Committee Proposes Blueprint for Compromise on Financial Reform

Posted by Hal Scott, Harvard Law School, on Thursday May 6, 2010 at 9:00 am
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Editor’s Note: Hal Scott is the Director of the Program on International Financial Systems at Harvard Law School and the co-chair of the Committee on Capital Markets Regulation. This post relates to a letter recently submitted to U.S. Congressional leaders by Committee on Capital Markets Regulation; the letter is available here.

As Senator Dodd and Senator Shelby continue to meet and search for a bipartisan financial regulatory reform bill, the Committee on Capital Markets Regulation (CCMR), an independent, non-partisan research organization and proponent of broad financial regulatory reform, has sent congressional leaders a letter outlining a blueprint for a compromise that would achieve practical and effective financial reform legislation.

In the 37-page letter the CCMR comprehensively evaluates all major elements in the financial reform proposals that have emerged from Senate committees, but focuses especially on four as areas ripe for compromise:

  • “Never” is bad public policy. Federal regulators must have the ability to use tax dollars (and recoup them later) to pay for the orderly resolution of failing institutions in cases where they judge the alternative would be national and/or international financial catastrophe. However, the CCMR does not support the arbitrary $50 billion fund in the proposed Dodd bill, since no one can or should try to guess the cost of such bailouts. A better solution: give the Secretary of the Treasury the power to use public money, and then recoup funds after any needed bailout, starting first by recovering bailout funds from the creditors of the failed bank.
  • …continue reading: Capital Markets Committee Proposes Blueprint for Compromise on Financial Reform

Committee On Capital Markets Regulation Proposes Fed-Regulated Clearinghouses To Reduce Systemic Risk

Posted by Hal Scott, Harvard Law School, on Thursday March 11, 2010 at 9:46 am
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Editor’s Note: Hal Scott is the Director of the Program on International Financial Systems at Harvard Law School and the co-chair of the Committee on Capital Markets Regulation. This post relates to a letter from the Committee to the Chairmen and Ranking Members of the Senate Banking Committee and House Financial Services Committee; the letter is available here.

The Committee on Capital Markets Regulation (CCMR), an independent, non-partisan research organization and a leading proponent of carefully considered financial regulatory reform, has proposed a comprehensive approach to reforming regulatory oversight of derivatives markets to reduce systemic risk in the financial system, through greater use of derivatives clearinghouses, to be overseen by the Federal Reserve.

In a 28-page letter to the Chairmen and Ranking Members of the Senate Banking Committee and House Financial Services Committee, the CCMR has provided a framework for legislating on many of the largest and thorniest financial reform issues on the Congressional agenda.

…continue reading: Committee On Capital Markets Regulation Proposes Fed-Regulated Clearinghouses To Reduce Systemic Risk

International Experts Form Council on Global Financial Regulations

Posted by Scott Hirst, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday February 27, 2010 at 11:11 am
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Editor’s Note: This post draws on an article that first appeared on the Harvard Law School website.

Hal Scott, the Nomura Professor and director of the Program on International Financial Systems at Harvard Law School, has been named co-chair of the newly-organized Council on Global Financial Regulation. The Council has been formed by a group of private sector international financial leaders to provide national and international policymakers with independent recommendations from outside government for effective regulation of the global financial system, particularly regulation with significant cross-border implications.

According to a statement released by the Council on Global Financial Regulation, the Council believes that the worldwide financial crisis demonstrates that sound financial regulation must be achieved through international cooperation. Government leaders have called for a greater role for the G-20 and other international government bodies, such as the Financial Stability Board, to encourage a better coordinated international financial regulatory system. The Council aims to play a constructive role in supporting that process by providing government policymakers and regulators with independent recommendations, research, analysis and commentary. The Council also aims to be available for consultation with government officials as a resource on cross-border financial regulatory issues.

…continue reading: International Experts Form Council on Global Financial Regulations

Implications of the “Volcker Rules” for Financial Stability

Posted by Hal Scott, Harvard Law School, on Friday February 5, 2010 at 9:05 am
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Editor’s Note: Hal Scott is the Director of the Program on International Financial Systems at Harvard Law School. This post is based on Professor Scott’s recent testimony before the Senate Committee on Banking, Housing And Urban Affairs, omitting footnotes. Professor Scott’s testimony is in his own capacity and does not purport to represent the views of the Committee on Capital Markets Regulation, of which he is the director. The full testimony of Professor Scott, including footnotes, is available here.

Let me preface my testimony by stressing the urgent need for broad regulatory reform in light of the financial crisis on matters ranging from the structure of our regulatory system, to the reduction of systemic risk in the derivatives market, to improving resolution procedures for insolvent financial companies, to increasing consumer protection, and to revamping the GSEs. The Committee on Capital Markets Regulation dealt with these issues in its May 2009 Report titled The Global Financial Crisis: A Plan for Regulatory Reform. These issues were also fully laid out in the Treasury Department’s June 2009 proposal on financial regulatory reform, and have been vigorously debated in public meetings, the press, and Congressional hearings for months. These efforts have so far culminated in the Wall Street Reform and Consumer Protection Act (H.R. 4173) as well as in Senator Dodd’s thoughtful Discussion Draft. And I applaud the ongoing efforts of this Committee to reach bipartisan consensus on these issues. In my judgment, we should not hold up these important reforms while we debate activity and size limitations.

…continue reading: Implications of the “Volcker Rules” for Financial Stability

The Global Financial Crisis

Posted by Andrew Tuch, co-editor, HLS Forum on Corporate Governance and Financial Regulation on Thursday December 24, 2009 at 9:31 am
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The Global Financial Crisis, recently published by Foundation Press, describes the basic causes of the financial crisis; analyzes the regulatory, political and market responses to it; and discusses the merits of various recent reform proposals. Written by Hal S. Scott, the Nomura Professor and Director of the Program on International Financial Systems at Harvard Law School, the book represents perhaps the most learned and succinct account of the financial crisis to date. Its careful focus on the terms of regulation – existing and proposed, U.S. and international – and its clear explanation and analysis of scholarly studies set it apart from many other recent offerings on this topic. The author offers rich, forthright insights and skillfully situates events in their historical and regulatory context. The book will likely hold strong appeal for scholars and policy makers and for others with an interest in rigorous, concise analysis of perplexing policy questions.

The book is structured as follows:

  • Chapter 1 – causes and severity of the financial crisis
  • Chapter 2 – measures taken throughout the crisis to stabilize the financial system
  • Chapter 3 – problems afflicting the housing market and proposed solutions
  • Chapter 4 – proposals for reforming regulatory rules
  • Chapter 5 – proposals for reforming U.S. regulatory structure
  • Chapter 6 – international responses to the crisis

Each chapter is further divided and sub-divided into topics, each of which is just a page or two in length. This structured approach aids understanding without compromising the book’s readability. In this brief post I touch on some of the material covered in the book. I cannot convey the depth of the author’s analysis or reproduce his succinct and engaging literary style.

…continue reading: The Global Financial Crisis

CFPA Legislation Goes Too Far on Some Issues, Not Far Enough on Others

(Editor’s Note: This post is based on a letter sent by Hal S. Scott, R. Glenn Hubbard and John L. Thornton of the Committee on Capital Markets Regulation, an independent and nonpartisan research organization dedicated to improving the regulation and enhancing the competitiveness of the U.S. financial system, to the Chairmen and Members of the House Financial Services Committee and the Senate Banking, Housing and Urban Development Committee.)

The Committee on Capital Markets Regulation (“Committee”) has, since its establishment in 2005, provided empirical, independent research dedicated to improving the regulation of U.S. capital markets. In May 2009, the Committee published its report entitled, The Global Financial Crisis: A Plan for Regulatory Reform, setting out 57 recommendations for enhancing the soundness and effectiveness of the U.S. financial regulatory framework. [1] As part of its recommendations, the report sets out the Committee’s proposals for reforming the U.S. regulatory architecture to make it more robust and better designed to address the needs of investors and consumers of financial services. In this context, we felt that it would be useful to set out our position on the Administration’s proposal— presently embodied in H.R. 3126, the Consumer Financial Protection Agency Act of 2009 (Act)—that would establish the Consumer Financial Protection Agency (CFPA) as a dedicated agency for regulating and overseeing consumer protection issues in the provision of financial services. Where appropriate, we also make reference to the revised discussion draft of H.R. 3126 (revised discussion draft), proposing changes in the CFPA bill, circulated by Chairman Frank to the House Committee on Financial Services on September 22, 2009. [2]

From the outset, the Committee wishes to emphasize that establishing an independent regulatory agency for consumer and investor protection is one option the Committee believes deserves serious consideration; the other option, in our view, would be to incorporate this function as a division of a new consolidated regulatory agency. The Committee’s position on the Administration’s proposal, outlined below, is premised on the understanding that an independent agency would be created along the lines of H.R. 3126.

…continue reading: CFPA Legislation Goes Too Far on Some Issues, Not Far Enough on Others

 
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