(Reuters) - New rules for banks and financial firms are surging out of regulatory agencies and legislatures worldwide, unleashed by the 2007-2009 financial crisis.
As lobbyists work behind the scenes to water down new restrictions biting into industry profits, many firms are reconfiguring their operations to conform with tighter oversight in a climate of sluggish economic recovery.
Here is a look at some key regulatory reform areas:
Reining in hedge funds is a feature common to regulatory reform efforts worldwide and is well under way. From London’s posh Mayfair district to the Gold Coast of Connecticut, hedge funds face stricter oversight and more transparency.
G20 leaders want hedge funds to register with national regulatory authorities. The EU has approved a law to do that from 2013, with private equity groups included, too. Britain, the EU’s hedge fund center, already requires registration.
The United States is implementing a registration and reporting regime approved in the summer of 2010 as part of the Dodd-Frank Wall Street reforms, which also curbed the involvement of banks in hedge funds and private equity.
Singapore will introduce new rules for hedge funds this year. Hong Kong already has a licensing regime. But South Korea is considering easing its hedge funds regulation.
The new global Basel III pact, approved by the G20, is forcing big banks to thicken their capital cushions, with U.S. banks generally further along than non-U.S. rivals.
The EU will soon propose measures to put Basel III into law. Asian governments are mulling a Basel III strategy, though most Asian banks are above minimum thresholds.
A worldwide push is under way to redirect much of the over-the-counter market for derivatives through exchanges and central clearinghouses, with stronger capital buffers.
The G20 wants standardized contracts trading on exchanges or electronic platforms and centrally cleared by the end of 2012. The EU has a draft law to implement the G20 pledges.
Reforms along these lines are being implemented by the U.S. Commodity Futures Trading Commission, which has first drafts of all but a handful of key rules. Delays and threats from Congress to cut CFTC funding are slowing the agency’s work.
Hong Kong, Japan, and South Korea plan to introduce mandatory centralized clearing for certain over-the-counter financial derivatives by the end of 2012.
Only the United States has a solid new government process — other than bankruptcy or more bailouts — for dealing with large financial firms in distress.
Known as orderly liquidation, it was part of the Dodd-Frank reforms. It has critics who say it won’t work and proponents who argue it is a viable strategy for ending the problem of “too big to fail” institutions.
U.S. regulators are still finalizing a related rule on tagging some large firms as “systemic risks” to stability to be subjected to tougher oversight under Dodd-Frank. Insurers, mutual funds and hedge funds are trying to dodge the label, which will not officially be applied until later this year.
The G20 has only recommendations in this area and hopes to approve some measures by the end of 2011, which could be introduced over several years. The EU has outlined plans and will propose a draft law later this year.
There has been talk from some regulators in Asia of putting together a regional regulatory framework for big banks, though there are no firm plans for this yet.
Curbing speculation in the volatile commodity markets is an area of global regulatory divergence. The G20 is talking about reducing volatility and improving market information, but there is no global consensus on price curbs.
The United States is debating a range of measures — including position limits — for commodities, but no new CFTC rules are expected to be in place before early 2012.
The EU is looking toward empowering supervisors to impose position limits in some circumstances, but will likely stop short of making position limits an ongoing rule.
Asian authorities have avoided the debate. With the likes of Singapore launching new contracts for oil, metals and other commodities, expectations are growing that trading activity may shift to lightly policed markets in Asia.
Reporting by Kevin Drawbaugh, Roberta Rampton and Sarah N. Lynch in Washington, Huw Jones in London, and Rachel Armstrong in Singapore; Writing by Kevin Drawbaugh; Editing by Phil Berlowitz