Financial Regulation Roundup: January 29, 2018

Eamon Levesque  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:

  • New Fed Chair, With More Change to Come:
    • Nominee to the Federal Reserve Chair Jerome Powell was confirmed by the Senate on the 23rd by an 84-13 vote in favor. His widespread support comes from the believe that he’ll continue the largely successful policies of his predecessor, Janet Yellen – although this perception has been met with some skepticism, as Yellen herself was eligible to continue the job into a second term should President Trump have given his approval.  (NPR: read more)
    • More openings will soon need to be filled at the Federal Reserve board, including that of Vice Chairman and New York Fed Chair. Those who fill these vacancies (which notably are not by direct appointment of the President) will play a crucial role in ensuring the current period of economic health stays the course. (New York Times: read more)
  • Fiduciary Rule on Hold: Implementation of the portion of the fiduciary rule that requires financial advisors to act exclusively in their clients’ best interests when giving advice on retirement accounts has been delayed by the Labor Department till July 1, 2019, from January 1 of this year. Delay of the rule’s implementation has led some in favor of the regulation to believe that its consumer protection provisions may be gutted before it has the chance to be enacted. (CNBC.com: read more)
  • Treasury Looks to Crypto: Following a tour of Asia, where the crypto boom has made a significant with small, middle class investors, U.S Treasury Undersecretary Sigal Mandelker stated that more needs to be done to prevent money laundering, fraud and other criminal activity from occurring in the cryptocurrency markets. Mandelker indicated to reporters in Asia that she admires the steps countries such as South Korea have taken towards de-anonymizing cryptocurrency trading. Her remarks mentioned that this will be an “area of high focus” for the Treasury in the coming months. (CBS: read more)

EU News:

  • Politicians Call For Crypto Currency Regulation: UK Prime Minister Theresa May, French President Emmanuel Macron and the US Treasury Secretary Steven Mnuchin all used the platform of the World Economic Forum, held this week in Davos, to call for global collaboration on the regulation of cryptocurrencies. The International Monetary Fund responded by confirming that that it had already started “monitoring and surveilling and analyzing the risks associated with the development of cryptocurrencies and the potential benefits out of it.” (The Daily Telegraph: read more)
  • FCA: Asset Managers Can Offer Clarification of Performance Forecasts: The UK’s financial regulator is to allow investment managers to provide additional “explanatory materials” following the publication of wildly misleading performance projections by some product providers that suggested savers could earn massive returns. The FCA said that where an investment product provider was “concerned that performance scenarios are too optimistic, such that they may mislead investors, we are comfortable with them providing explanatory materials to put the calculation in context and to set out their concerns for investors to consider.” The statement follows the introduction of controversial new European rules intended to help retail investors better understand and compare the key features, risks, rewards and costs of many investment products sold by asset managers, banks and insurers. (Financial Times: read more)
  • PSD2 & Open Banking: Fintechs Impatient as British Banks Seek Extra Time to Open Up: Fintech firms were supposed to start breaking into mainstream banking this month when new rules forced Britain’s nine big banks to loosen their grip on the industry. But many fintech companies are still waiting with frustration on the sidelines after the banks delayed making the changes. The impact of the rules, which require the banks to open up their data so other companies can target their customers with tailored products and deals, was always expected to be gradual. But six of the nine banks have asked Britain’s regulator for an extension to the January 13 deadline for putting in place the ‘open banking’ regulation, which overlaps with a new European Union directive known as PSD2. (Reuters: read more)

International:

  • Blockchain May Revitalize Hong Kong Equity: A report in the South China Morning Post states that Broadridge Financial Solutions is developing blockchain-based apps which could have cost saving effects for those in the equity markets in Hong Kong. Return on equity for banks has declined in recent years despite a strong stock market, largely due to the cost of post-trade and back-office compliance and reporting. Blockchain technologies would effectively allow each transaction made to report and verify itself, allowing for healthier profit margins and a renewal of interest in the sector. (South China Morning Post: read more)
  • Chinese Regulation Continues to Tighten: The latest in a long line of high-profile moves by Chinese regulatory bodies to reduce financial crime, the Postal Savings Bank of China and 11 of its affiliate banks were fined the equivalent of 46 million USD / 33 million GBP, the third major penalty on domestic lenders since December 2017. The fine was in response to lax oversight on the part of the PSBC, which regulators allege led to a massive bill fraud cause. The continued hardline stance by the government on financial regulation is seen by many as part of a series of initiatives in Beijing to bring Chinese financial compliance rapidly up to speed with that of other financial powers in North America in the EU. (Xinhua: read more

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