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Regulatory Roundup

Basel panel considers move that could cut sovereign-debt demand
The Basel Committee on Banking Supervision is considering allowing financial institutions to use more corporate debt, as well as cash and sovereign bonds, to meet liquidity standards, sources said. The move could lower demand for sovereign bonds. "One of the central pillars of the Basel III framework is the notion of a risk-free asset class," said Matthew Czepliewicz, a banking analyst at Collins Stewart Hawkpoint. "That central pillar is disintegrating. Basel is quite clearly going to have to be revised." Bloomberg Businessweek(06 Dec.)

Banks can't cut lending to meet tougher rules, EBA says
Andrea Enria, chairman of the European Banking Authority, said regulators will not let banks reduce lending to sidestep tougher capital requirements. Instead, lenders need to raise capital, Enria said. Bloomberg(05 Dec.)

National responses are worsening debt crisis, EBA says: European Banking Authority Chairman Andrea Enria warned that national responses to banks' challenges are making the sovereign-debt crisis worse. The EBA was to publish in November final details on plans to address three key issues plaguing the sector, but the regulator postponed the report until this week. Reuters(05 Dec.)

France calls for tougher rules on high-frequency trading
Jean-Pierre Jouyet, chairman of France's market regulator, said regulatory proposals covering high-speed trading need to be stronger. "The mechanism envisaged by the [European] Commission must be expanded by giving the European Securities and Markets Authority broader powers to regulate high-frequency trading more effectively; for example, as regards platforms' pricing or tick sizes," Jouyet said. Reuters(05 Dec.)

ESMA warns about unregulated firms offering FX products
The European Securities and Markets Authority said it has seen an increase in foreign exchange products offered by unregulated firms, as it warned retail investors to be wary of such companies. "As for any investment in complex or volatile products, investing in the foreign exchange market is not for the unwary or risk-averse investor," ESMA said. Financial Times (tiered subscription model)(05 Dec.), Reuters(05 Dec.)