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Financial Regulation Roundup: August 10, 2018

Ben Shapiro  Follow

Here are the top stories on the financial regulatory landscape in the U.S., EU and around the world over the past two weeks.

U.S. News:

Fed Holds Interest Rates, Says Economy is Growing at a ‘Strong’ Pace

  • The Federal Reserve held its benchmark interest rate unchanged Wednesday and reaffirmed its plans to continue raising borrowing costs at a gradual pace. The decision to hold rates had been widely expected and came after a two-day meeting of the Federal Open Market Committee, which dictates monetary policy. "This statement is a placeholder ahead of the quarterly forecast meeting next month," Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a note. (Business Insider: read more)

SEC to Review Rules Regarding Proxy Voting

  • The U.S. Securities and Exchange Commission announced late Monday that it would hold a staff roundtable on the proxy process this fall. A spokesman for the SEC said an exact date hasn’t been set. The move comes just weeks after the Barron’s July 6 cover story argued that the proxy system is broken and needs to be improved to make sure shareholder votes are recorded and tabulated properly. In a statement, the SEC said the roundtable is being held “in light of the many changes in our markets, technology, and how companies operate since the [SEC’s 2010 concept release on the proxy voting process]….” (Barron’s: read more)

Trump Administration Embraces Fintech Startups

  • The Trump administration embraced an emerging corner of the financial sector on Tuesday, telling companies that offer new ways to bank and invest that the federal government wants to help them grow. The Treasury Department in a report recommended that regulators adopt changes it said would better support such financial companies. It recommended a “sandbox” giving regulatory financial relief to startups; encouraged the federal consumer regulator to rescind its payday-lending rule; pushed for a fresh look at rules governing fintech investments by banks; and endorsed an effort by nonbank lenders like LendingClub Corp. to ease the resale of loans. (The Wall Street Journal: read more)

House Republicans Ask Fed to Lower Capital Requirements for Megabanks

  • A group of 29 Republicans on the House Financial Services Committee — including some who could chair the panel next year — have signed a letter asking the Federal Reserve to “recalibrate” a capital surcharge for the biggest and most systemically significant banks. The July 27 letter, obtained by American Banker, implored Federal Reserve Vice Chairman for Supervision Randal Quarles to reconsider the Fed’s capital surcharge for global systemically important banks, or G-SIBs. The lawmakers argued that the surcharge goes beyond the international minimum requirements and is no longer necessary in light of other post-crisis regulatory changes. (American Banker: read more)

Wells Fargo to Pay $2 Billion Penalty for Alleged Misrepresentation of Loan Quality

  • Wells Fargo will pay $2.09 billion in penalties for allegedly misrepresenting loan quality, according to the U.S. Attorney's Office for the Northern District of California. The bank will pay the civil penalty after allegedly originating and selling tens of thousands of residential mortgage loans it knew contained misstated income information and didn't meet the quality that Wells represented, causing mortgage-backed bond investors to lose billions of dollars. Wells is not admitting to liability. (CNBC: read more)

EU News:

FCA “Open to a Broad Range” of Arrangements Post Brexit

  • Andrew Bailey, the head of the Financial Conduct Authority, in a letter to chief executives across the City of London said that the regulator was “open to a broad range” of arrangements on how to book risk and profit, provided they were properly overseen. This stance is a stark contrast to the European Central Bank which has taken a much stricter line. As the chances of a no deal Brexit seems more likely the FCA also warned that boards had to plan appropriately and consider EU expansion plans in manner that allowed for continued FCA oversight. (Financial Times: read more)

FCA partners with Global Regulators on New Sandbox

  • The Financial Conduct Authority (FCA) has partnered with financial regulators from 11 countries to launch a global regulatory sandbox. The regulators will create the Global Financial Innovation Network (GFIN) to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. It will also create a new framework for co-operation between financial services regulators on innovation, sharing different experiences and approaches. (FT Adviser: read more

FCA Warns Firms on 'Alternative' CFDs After EU Crackdown

  • The FCA has reminded firms of their client obligations when selling high-risk investment products after the introduction of tough EU rules on contract for difference (CFD) products. European Securities and Markets Authority (ESMA) rules on the sale, marketing and distribution of CFDs, first announced in June, came into force on 1st August. In January, the FCA contacted all providers and distributors of CFD products to retail customers after discovering market failings which "may cause significant consumer harm". (Professional Adviser: read more)

International News:

China’s Tariff Turnaround: U.S. Crude Oil Drops Off the Target List

  • As China made good on its threat to impose 25% tariffs on $16 billion worth of U.S. imports, one big-ticket item originally on its hit list was conspicuously missing: crude oil. Oil had been one of a slate of targets China listed in June for tariffs to counter those the Trump administration threatened on Chinese imports. The gambit jeopardized a budding relationship: Over the past two years China has become the biggest buyer of U.S. crude-oil exports, last year taking a fifth of the total. (The Wall Street Journal: read more)

Australia Grants Invasive New Power to Financial Regulator

  • Australia on Tuesday granted the corporate watchdog invasive new power to position supervisors inside financial firms after a public inquiry exposed systemic wrongdoing at some of the country’s top institutions. The new powers for the Australian Securities and Investments Commission (ASIC) add to the regulatory pressure that has already driven banks to tighten lending standards in the wake of the Royal Commission inquiry into financial-sector misconduct. (Reuters: read more)

Fund Houses That Help Unlicensed Firms to Offer Margin Financing Face Action, Hong Kong Regulator Warns

  • Hong Kong’s financial regulator has vowed to take action against asset managers and brokers that help firms without a license to offer stock margin-financing disguised as investments. “Deliberate use of an investment arrangement to conceal unlicensed margin financing activities is illegal,” said Julia Leung, the SFC’s deputy chief executive who is also the executive director of intermediaries, in a circular sent to all brokers and fund houses on Friday evening. (South China Morning Post: read more)

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