Our free roundup also covers JPMorgan Asset Management & 55ip, RFIs for climate change research from Calpers, and a new chairman for Credit Suisse.
Authorities: Steer Clear of USD LIBOR
Key industry regulators are warning financial services firms not to use U.S. dollar (USD) LIBOR as a reference rate after Dec. 31, 2021 to avoid “consumer protection, litigation, and reputation risks.”
The Nov. 30 statement, which underscores the need for firms to move away from the London Inter-bank Offered Rate (LIBOR), a scandal-ridden interest rate average, was endorsed by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corp. (FDIC).
The regulators want banks to “transition away from USD LIBOR as soon as practicable … in order to facilitate an orderly — and safe and sound — LIBOR transition.”
The regulators say that “entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and will examine bank practices accordingly,” according to the statement.
“New contracts entered into before December 31, 2021 should either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation,” according to the statement. “These actions are necessary to facilitate an orderly — and safe and sound— LIBOR transition.”
The agencies add that they “recognize that there may be limited circumstances when it would be appropriate for a bank to enter into new USD LIBOR contracts after December 31, 2021” such as:
- Transactions executed for purposes of required participation in a central counterparty auction procedure in the case of a member default, including transactions to hedge the resulting USD LIBOR exposure;
- Market making in support of client activity related to USD LIBOR transactions executed before January 1, 2022;
- Transactions that reduce or hedge the bank’s or any client of the bank’s USD LIBOR exposure on contracts entered into before January 1, 2022;
- And novations of USD LIBOR transactions executed before January 1, 2022.
“The LIBOR transition is a significant event that poses complex challenges for banks and the financial system,” according to the statement. “This statement should not be read as announcing that the LIBOR benchmark has ceased, or will cease, to be provided permanently or indefinitely or that it is not, or no longer will be, representative for the purposes of language adopted by the International Swaps and Derivatives Association [ISDA].”
JPMorgan Asset Management Acquires Tax IT Pioneer
J.P. Morgan Asset Management is acquiring 55ip, described as a financial technology company that helps financial advisors “deliver tax-smart investment strategies at scale,” officials say.
“The company will continue to operate as a separate entity, under its own brand, with the full support of J.P. Morgan and remains committed to serving its existing clients and enterprise partners. The terms of the deal were not disclosed,” according to a statement from JPMorgan Asset Management.
“At the heart of the experience is 55ip’s ActiveTax Technology, which includes tax-smart transitions, management (including systematic tax-loss harvesting), and withdrawals. 55ip also helps advisors deliver ongoing tax-smart trading and tax benefit reporting to clients,” officials say.
“Automating sophisticated strategies while also allowing for customization for tax and individual preferences is a differentiator and will be a key driver of success,” says Jed Laskowitz, global head of asset management solutions at J.P. Morgan Asset Management, in a prepared statement.
Dr. Vinay Nair, founder and executive chairman of 55ip, will stay on as a consultant and special advisor to J.P. Morgan Asset Management, officials say.
Calpers Issues RFIs for Climate Change & HCM
The California Public Employees’ Retirement System (Calpers) pension fund has issued two requests for information (RFIs) that seek providers who can help the investment staff gather research on climate change risk and human capital management (HCM).
“This curated and peer-reviewed research will help ensure CalPERS’ investment decisions are grounded on cutting-edge, evidence-based economic insights,” according to a CalPERS statement.
“We have long understood that climate change impacts investment risk and return over the long term. We also understand that human capital management, such as a company’s regard for diversity and inclusion, impacts the organization’s performance,” says Marcie Frost, CEO of Calpers in a prepared statement. “Investors must understand the complexities of these topics and how they can impact their returns.”
The RFIs were issued Dec. 2, which “opens a 60-day period for receiving proposals. All proposals will be reviewed by CalPERS prior to commissioning research,” officials say. “Submissions and questions can be emailed.”
“CalPERS has a demanding target rate of return which is driven by our fiduciary duty to both manage risk and find opportunity in order to help pay for our two million members’ benefits,” said Anne Simpson, CalPERS managing investment director (MID) of Board Governance and Sustainability. “By increasing our understanding of climate risk and human capital management we are able to better capitalize on opportunities and mitigate risk in our portfolio.”
The total fund market value for Calpers is approximately $432 billion, officials say.
Credit Suisse Group Taps Lloyds for New Chairman
António Horta-Osório, currently the group chief executive of Lloyds Banking Group in the U.K., will be the new chairman of the board of directors for Credit Suisse Group AG, as of spring 2021, officials say.
The board used a “dedicated search committee” that ultimately recommended that the board urge shareholders to elect Horta-Osório as the new chairman. Horta-Osório will officially become chairman of the board at the annual general meeting of Credit Suisse on April 30, 2021
Horta-Osório will “succeed Urs Rohner who will step down in 2021 as previously announced upon reaching the statutory term of 12 years,” officials say.
Horta-Osório, a 56-year-old citizen of Portugal, began his career in banking in 1987 at Citigroup in Portugal where he served as head of capital markets, officials say. He has also worked in corporate finance at Goldman Sachs in New York and London; executive functions at Grupo Santander; and since March 2011, he has been at Lloyds.