March Global Regulatory Brief: Risk, capital and financial stability

Recent periods of financial stress and the proliferation of risks across the financial system are fueling the development of regulatory initiatives to strengthen requirements and promote international best practice. The following policy developments represent a sample of wider regulatory and policy coverage available to Bloomberg Terminal customers. Run REGS <GO> to find out more or contact your Bloomberg representative:

• US: Treasury signals reset of bank liquidity rules
• China: CSRC unveils regulation on Private Fund Information Disclosure
• Japan: JFSA publishes analytical note on OTC derivatives
• EU: Commission consults on banking competitiveness

US treasury signals reset of bank liquidity rules

Public remarks prepared by US Treasury Secretary Scott Bessent and delivered by Under Secretary for Domestic Finance Jonathan McKernan underscore the policy focus on improving bank liquidity rules.

Important context

The Treasury Department views the post-GFC framework for bank liquidity as overly constraining bank lending.

• Around a quarter of large bank balance sheets are currently allocated to safe assets, which is up from approximately one tenth before the crisis.
• The current US policy agenda for artificial intelligence, manufacturing, and improving domestic supply chains requires a significant expansion in lending capacity, placing liquidity regulation under renewed scrutiny.
• The speech also points to the 2023 banking turmoil as evidence that liquidity risk can transmit far more rapidly than before, raising questions about whether existing regulatory assumptions remain calibrated to modern stress dynamics.

Possible reform

The speech outlines several areas where changes may be warranted:

• A broader reassessment of the liquidity framework over the longer term;
• Shorter-term adjustments to the Liquidity Coverage Ratio (LCR);
• Revisions to the cap on recognized discount window borrowing capacity tied to prepositioned collateral; and
• Consideration of a mechanism to adjust that cap dynamically during periods of severe stress.

Looking ahead

Liquidity reform is framed by the US Treasury as a critical step toward enabling stronger bank lending as regulators advance a number of related supervisory and regulatory initiatives.

CSRC unveils the regulation on Private Fund Information Disclosure

CSRC unveiled the Regulation on Private Fund Information Disclosure which will be effective from September 1, 2026. The regulation establishes a unified and binding framework for information disclosure by private fund managers, custodians and related intermediaries including the baseline disclosure requirements, prohibited practices and look-through arrangement.

Context

The Regulation implements statutory information disclosure obligations under the Fund Law and Private Fund Regulation by State Council. CSRC conducted a public consultation from 5 July to 5 August 2024, received 96 submissions and made changes based on the feedback.

Key takeaways

• Definition: information disclosure refers to the information provided to investors in a non-public way.
• Scope: Applies to private fund managers, custodians, distributors and service providers involved in information disclosure or valuation.
• Core disclosure duties: Information must be truthful, accurate, complete and timely. Private fund managers must not rely on distributors to satisfy their own obligations.
• Prohibitions: No performance forecasts, no implicit/explicit guarantees, no misleading claims, no public or disguised public disclosures, and no selective or marketing‑driven disclosures.
• Periodic reporting:
  • Securities funds: Quarterly reports within one month; annual reports within four months (audited where required).
  • PE/VC funds: Semi‑annual reports within two months; annual reports within six months with audited financials.
• Look‑through disclosure: More granular transparency on underlying assets, including investment amounts, structures and ownership verification.

Next steps

• The Regulation takes effect 1 September 2026.
• Newly filed private funds must comply immediately.
• Existing private funds must ensure compliance when amending fund contracts.

JFSA publishes analytical note on OTC derivatives

Summary

The JFSA’s Analytical Notes, published on March 6, 2026, analyzes Trade Repository (TR) data on OTC derivatives to improve methods for understanding actual market conditions, focusing on derivative types and participant attributes. In the note, the study finds that currency‑option contracts with corporate clients surged during periods of sharp exchange‑rate movements. It also uses multi‑layer network analysis, suggesting that financial institutions play different roles in the OTC derivatives market depending on their business category.

Context

As the environment and revenue structures of financial institutions continue to evolve, it is increasingly important to understand economic and market developments through data and to accurately grasp the conditions of individual financial institutions as well as the resilience and vulnerabilities of the financial system as a whole. From this perspective, the JFSA conducts analyses using highly granular data such as lending data and individual firm‑level data. Some of these analyses are published as part of the “JFSA Analytical Notes — Collection of Data Analysis Case Studies by the JFSA”.

Key takeaway

1. As of June 2025, Japan’s OTC derivatives notional outstanding (USD 85.6 trillion) far exceeds exchange‑traded derivatives (USD 3.8 trillion), highlighting the systemic relevance of the OTC market and the need for continuous monitoring.
2. The JFSA conducted a study that examined (1) daily trading activity to capture developments during periods of foreign‑exchange market volatility, and (2) trends in highly central market participants across the entire OTC derivatives market using multilayer network analysis. Trade Repository (TR) data (reported since 2013 following the G20 Pittsburgh commitments) were used in the study after data cleansing to resolve duplications and inconsistencies.
3. The study found that USD/JPY currency-option transactions increase sharply during periods of rapid yen appreciation or rise in implied volatility. These spikes in transaction counts were primarily driven by currency-option trades between major banks and corporates.
4. The analysis shows that trading behaviors differ clearly across counterparty types. While major banks maintain stable activity with other financial institutions, they experience sharp, FX-driven spikes when transacting with corporates. Regional banks operate with generally low volumes, though their activity fluctuates noticeably across different counterparties. Foreign banks display consistently low, steady engagement with corporates. In contrast, Type-I securities firms stand out for their broad counterparty networks and the largest average trade sizes, reflecting their central role in the OTC derivatives market.
5. Multilayer network analysis across asset classes (IR, CD, FX, and EQ) demonstrates that institutions assume distinct structural roles. Securities firms and foreign financial institutions appear prominently as “hubs” in betweenness measures. Furthermore, securities firms dominate closeness centrality, while foreign institutions lead in eigenvector centrality. This indicates stronger connections to systemically influential participants and suggests differentiated risk transmission dynamics.
6. The study highlights that FX-related corporate trading is the primary source of short-term transaction volatility. Additionally, multilayer network results underscore that financial institutions hold distinct functional positions within the market. Given the sensitivity of outcomes to cleansing methodology and data limitations, the JFSA notes that continued refinement of TR data analysis is essential for a deeper, more reliable understanding of market behavior.

Next step

The JFSA will continue working to improve financial administration by strengthening the organization’s data‑analysis capabilities and advancing data infrastructure development. From this perspective, the JFSA continues to actively conduct analyses by utilizing high‑granularity data and plans to publish part of these analytical results in the “JFSA Analytical Notes — Collection of Data Analysis Case Studies by the JFSA.”

EU Commission consults on EU banking competitiveness

The EU Commission has launched a targeted consultation on the competitiveness of the EU banking sector, seeking stakeholder feedback across banking competitiveness, the Single Market and Banking Union, and the complexity and effectiveness of the regulatory framework. Responses will inform a forthcoming Commission report on bank competitiveness expected later in 2026. The consultation closes on 19 April 2026.

Context

The consultation follows the Commission’s Communication on the Savings and Investments Union and forms part of broader efforts to strengthen capital mobility and the international competitiveness of EU banks. While post-crisis reforms and the establishment of the Banking Union have enhanced resilience, the Commission notes continued market fragmentation, limited cross-border activity and concerns around regulatory complexity. The consultation is structured around three main pillars and contains 97 questions across detailed sub-sections.

Key takeaways

The three sections of the consultation are the following:

• Banking competitiveness in the EU and globally
  • Examines banks’ contribution to EU economic growth, financing of strategic priorities (including green, digital and defence transitions), and access to credit.
  • Seeks views on cross-border banking activity, consolidation, digitalization and the international level playing field.
• Single Market and Banking Union
  • Assesses prudential requirements and their impact on cross-border capital and liquidity allocation.
  • Explores barriers to market integration, including supervisory divergence, macroprudential buffers, national discretions and non-prudential barriers (e.g. insolvency, taxation, consumer protection).
  • Revisits crisis management, deposit protection arrangements and liquidity in resolution.
• Complexity and effectiveness of the regulatory framework
  • Requests feedback on proportionality and coherence of the framework.
  • Covers detailed aspects of the prudential regime, including the leverage ratio, Pillar 2 requirements and guidance, output floor implementation, and management buffers.
  • Seeks input on reporting and disclosure burdens, including supervisory reporting harmonization and sustainability-related reporting alignment.

The Commission emphasizes the need to balance resilience and financial stability with competitiveness, proportionality and burden reduction.

Next steps

• Consultation deadline is set for 19 April 2026.
• Responses must be submitted via the Commission’s online questionnaire.
• The consultation runs in parallel with a separate Call for Evidence on the Single Market for Banking.