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Financial Regulation Roundup: June 29, 2018

Georgia Brown  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:

  • Mulvaney Likely to Remain Head of Consumer Bureau for Some Time: Mick Mulvaney could be around for a while as the acting chief of the Consumer Financial Protection Bureau, despite the Trump administration’s move to nominate a permanent successor. The White House formally said Monday it would nominate Kathy Kraninger to run the 1,700-person agency created after the financial crisis. Ms. Kraninger quickly ran into opposition from the left and right, with many critics saying she wasn’t qualified for the job. She currently works as an associate director at the Office of Management and Budget for Mr. Mulvaney, who also serves as White House budget chief. Some experts said it appeared President Donald Trump’s administration was intentionally putting up a nominee who might not be confirmed by the Senate, allowing Mr. Mulvaney to stay at the CFPB for as long as two more years. (The Wall Street Journal: read more)
  • Big Banks Are Once Again Taking Risks With Complex Financial Trades, Report Says: Big banks are skirting the rules on the sale of the complex financial instruments that helped bring about the 2008 financial crisis, by exploiting a loophole in federal banking regulations, a new report says. The loophole could leave Wall Street exposed to big losses, potentially requiring taxpayers to once again bail out the biggest banks, warns the report's author, Michael Greenberger, former director of trading and markets at the Commodity Futures Trading Commission. "We've seen this movie already," he said at a news conference Tuesday. The regulations cover credit default swaps, a kind of insurance contract taken out by investors to cover potential losses in assets. Such contracts were enormously popular all over the world during the housing boom and led to big losses when the mortgage market collapsed. (NPR: read more)
  • SEC Probes Whether Companies Rounded Up Earnings Per Share: Federal regulators are investigating the case of the missing “4,” exploring the numeral’s conspicuous absence in quarterly reports that could mean companies have improperly rounded up their earnings per share to the next highest cent, according to people familiar with the matter. Enforcement officials at the Securities and Exchange Commission have sent queries to at least 10 companies, asking the firms to provide information about accounting adjustments that could push their reported earnings per share higher, one person familiar with the matter said. (The Wall Street Journal: read more)
  • Fed Reports that the Largest US Banks Passed Stress Tests: The results of the Federal Reserve Board’s supervisory stress tests show that the nation’s largest banks are strongly capitalized and would be able to lend to households and businesses during a severe global recession. The stress tests are hypothetical scenarios the Fed employs to test the stability of banks under various economic conditions. In the most extreme hypothetical scenario, the Fed projects $578 billion in total losses for the 35 banks during the nine quarters tested. It is a severe global recession with the U.S. unemployment rate rising by almost 6 percentage points to 10 percent, accompanied by a steepening Treasury yield curve. (Financial Regulation News: read more)
  • U.S. Treasury Previews Upcoming Report on Fintech Reforms: A long-awaited report from the U.S. Treasury Department on financial technology will make wide-ranging recommendations about how to modernize regulation at the federal and state levels to promote innovation in financial services, a senior U.S. official said on Thursday. The report, which is expected to be released in the coming weeks, will be the fourth and final in a series the Treasury was tasked with completing as part of an executive order from President Donald Trump on recommendations for regulatory reform. (Reuters: read more)

EU News:

  • FCA plans drawdown 'investment pathways' to boost outcomes: The Financial Conduct Authority (FCA) wants to introduce investment "pathways" for drawdown retirees to make sure people are obtaining value for money. The regulator's Retirement Outcomes Review, released on 28th June, found 60% of non-advised consumers in drawdown were unsure where their money was invested. It also found one-third of consumers were wholly invested in cash with about half of these "likely to be losing out on income in retirement". (Investment Week: read more)
  • FCA ‘looking into’ Carillion insider trading: The Financial Conduct Authority is looking into allegations of insider trading at Carillion, dating back to the time of its infamous profit warning last July. The update, which came alongside the resignation of then-chief executive Richard Howson, led to a 39 per cent drop in the FTSE250 firm’s share price. Six months later it collapsed into administration. The FCA’s inquiry - which the watchdog argues does not constitute a formal investigation at this stage - was revealed in a series of letters between boss Andrew Bailey and Labour MP Frank Field, who is currently carrying out a review into the demise of the outsourcing giant. (City A.M.: read more)
  • 'No such thing as free banking', warns FCA as big lenders strengthen grip on market: UK banking has become even less competitive since the financial crisis, with lenders’ profits buoyed by customers on bad deals still reluctant to shop around, according to Britain’s financial watchdog. The Financial Conduct Authority launched a wide-ranging report on 27th June into how high street banks make their money, paving the way for potential action to tackle sky-high overdraft costs and to ensure fairer treatment for long-term savers. (The Telegraph: read more)

International News:

  • President Donald Trump to Back Softer Restrictions on China Investment in U.S. Tech: Holding off on another trade confrontation with China, President Donald Trump asked Congress on Wednesday to strengthen a government agency that can limit or kill investments by China and other nations suspected of stealing U.S. technology. Aides had urged Trump to directly impose limits on Chinese investment in U.S. technology companies, but Trump said he would back congressional efforts to give new powers to the existing Committee on Foreign Investment in the United States (CFIUS). (USA Today: read more)
  • China Considers Banning Short-Term Dollar Bond Sales: China is slowing approvals for offshore bonds and considering whether to ban short-dated issuance in dollars, according to people familiar with the matter, moves that would reduce financing options for the debt-laden developers that sit at the center of the nation’s economy. The National Development & Reform Commission is weighing a ban on the sale of dollar bonds with tenors of less than one year, said the people, who asked not to be named because they’re not authorized to speak publicly. The regulator is already restricting offshore issuance quotas for Chinese companies, people said. (Bloomberg: read more)
  • Led by Japan, Major Economies Set to Introduce Unified Cryptocurrency Regulations: International financial authority Financial Action Task Force (FATF) is expected to collaborate with Japan, the second largest cryptocurrency market behind the US, to introduce unified cryptocurrency regulations in the upcoming months. (CryptoSlate: read more)
  • JP Morgan Australia Chairman Resigns from Bourse Directorship over Cartel Case: JP Morgan’s chairman of Australian operations has resigned from his directorships at the country’s bourse and sovereign wealth fund citing complications arising from a criminal prosecution over a stock issue the investment bank was joint-lead on. In an unprecedented move, Australian authorities earlier this month charged Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), Australia and New Zealand Banking Group Ltd (ANZ) (ANZ.AX) and several executives with criminal cartel offences over the $2.3 billion capital raising in 2015. (Reuters: read more

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