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Financial Regulation Roundup: June 1, 2018

Emma Townsend

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:

Trump Signs Bill Easing U.S. Banking Rules into Law

  • U.S. President Donald Trump signed into law on Thursday a bill that would ease rules on most banks for the first time since the 2007-2009 financial crisis. The legislation eases regulations on all but a handful of the nation’s largest banks, and marks a significant victory in Trump’s efforts to cut rules in a bid to spur economic growth. The legislation eases oversight of all banks below $250 billion in assets, and exempts small community banks from a host of stricter rules and oversight established by the 2010 Dodd-Frank financial reform law. (Reuters: read more)

Trump Hits Allies with Metal Tariffs; Mexico, EU and Canada Vow to Retaliate

  • President Trump is imposing steep tariffs on steel and aluminum from three of America's biggest trading partners — Canada, Mexico and the European Union. The trade penalties, 25% on imported steel and 10% on imported aluminum, take effect at midnight, Commerce Secretary Wilbur Ross told reporters Thursday. Mexico, the EU and Canada immediately announced plans to retaliate with their own tariffs against American products. (CNN Money: read more)

The Fed Just Proposed a Plan to Make Life Easier for Banks by Loosening the ‘Volcker Rule’

  • The Federal Reserve and other U.S. regulatory agencies proposed Wednesday to revise the Volcker Rule to apply to financial firms based on their trading activity. "This proposed rule will tailor the Volcker rule's requirements by focusing the most comprehensive compliance regime on the firms that do the most trading," Fed Chair Jerome Powell said in a statement. "Firms that do more modest amounts of trading will face fewer requirements." The Volcker Rule was proposed during the financial crisis in an effort to prevent banks from speculating in markets. The rule went into effect four years ago and generally prevents banks from trading for their own profit or having stakes in a hedge fund or private equity fund. (CNBC: read more)

How to Launch Cryptocurrency Derivatives: CFTC Issues New Guidance

  • The top U.S. derivatives regulator on Monday provided guidance to exchanges and clearinghouses that want to list cryptocurrency products, responding to industry concerns about the vetting process for new derivatives contracts like bitcoin futures. The advisory from the Commodity Futures Trading Commission focuses on a set of best practices for launching cryptocurrency derivative contracts. It says exchanges should have the ability to monitor underlying cryptocurrency spot markets, have a plan for coordinating with federal regulators, and reach out to market participants to solicit comments on a pending contract launch. (The Wall Street Journal: read more)

Exchanges Blast SEC for Plan to Rein In Rebates

  • Two of the biggest U.S. stock-exchange operators have accused the Securities and Exchange Commission of exceeding its legal authority with a proposal to limit the rebates they pay traders to attract stock orders. The attacks show that Nasdaq Inc. and Cboe Global Markets Inc. CBOE -1.10% may sue the SEC to block the proposal, called the Transaction Fee Pilot, some observers said. Representatives of Nasdaq and Cboe declined to comment when asked if they plan to pursue legal action. The two-year pilot program, which the SEC proposed in March, has riled big U.S. exchanges because it would undermine a key part of their businesses: a widely used system of fees and rebates called “maker taker,” in which exchanges pay rebates for some orders and charge fees for others. (The Wall Street Journal: read more)

EU News:

CEO of UK pensions regulator to step down after criticism from MPs

  • Lesley Titcomb, CEO of the UK Pensions Regulator, announced on May 31 that she would not be renewing her contract as chief executive when it expires in February next year. Of note, the Work and Pensions Committee previously questioned her leadership following evidence she had given to MPs over the collapse of Carillion, the outsourcing group. (Financial Times: read more)

European Commission reveals sustainable finance legislative proposals

  • On the 25th of May the European Commission unveiled the new sustainable finance action plan that requires asset managers and other institutional investors who claim to have sustainability goals to show how their investments are aligned with these objectives. The Commission today said its proposals “will allow the financial sector to throw its full weight behind the fight against climate change”. (IPE: read more)

Crackdown on high-interest lending announced by FCA

  • "Rent-to-own" shops that sell appliances and furniture for small weekly payments will face a price cap similar to limits on payday loans. However, the financial regulator will not rush to impose the same restrictions on bank overdrafts. The Financial Conduct Authority (FCA) has spent nearly two years looking at the cost of high interest borrowing and it has now outlined a package of plans for rent-to-own, doorstep lending and catalogue shopping. High-cost credit is used by three million people in the UK and single-parents aged 18 to 34 are three times more likely to have a high-cost loan - such as a payday loan, doorstep loan or pawnbroking loan - than the national average. (BBC: read more)

International News:

Trump Moves Forward With Tech Limits, Tariffs Ahead of China Trade Meeting

  • The Trump administration on Tuesday said it is going ahead with actions to crack down on Chinese trade practices by June 30. In a press release, the White House says President Trump is planning further export controls against China to counter Chinese intellectual property theft, including tariffs on Chinese tech exports believed to contain stolen American intellectual property. (The Hill: read more)

Kenya’s Central Bank Governor Calls for Regulation of Fintech Leaders

  • A boom in lending by financial technology (fintech) firms in Kenya has led to an increase in predatory lending practices, the country’s central bank governor said on Tuesday, calling for the sector to be regulated. Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account. More than 20 companies are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up. (Reuters: read more)

China $10 Trillion Shadow Bank Crackdown Has Long Way to Go

Chinese regulators are making progress in their attempts to tame the country’s $10 trillion shadow banking sector, but after a one-year squeeze on the riskiest areas of the industry, there’s still a lengthy battle ahead. "We’ve had a good beginning to a long journey," said Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd. "Some components of shadow banking are shrinking and interbank leverage has started to drop. But we are far from the stage where we can claim the job is done." (Bloomberg: read more)

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