Financial Regulation Roundup: March 24, 2017
Here are the top stories on the financial regulatory landscape in the U.S., E.U. and around the world over the past two weeks.
Trump’s FinReg Team
In keeping with his long-running inclination towards de-regulation, Donald Trump’s financial regulatory team have been selected with an eye towards dismantling Obama’s post-crash regulations. Picks include J. Christopher Giancarlo, James Donovan, and Steven T. Mnuchin (read here).
- Republican chairman of the House Financial Services Committee Jeb Hensarling has stated that Dodd-Frank will be “revisited” by Republican lawmakers this year, with an eye towards reduction in scale or full-scale repeal. Repeal of Dodd-Frank is an issue that enjoys support throughout an otherwise fractured Republican party, indicating that lawmakers will move into this issue with some momentum. (read here). However, S&P Global has warned that the repeal of Dodd-Frank could hurt the credit ratings of many US banks (read here).
- The future of the fiduciary rule, originally slated by the Obama administration to go into effect in April of this year, remains unclear as Trump has ordered the Department of Labor review the rule and seek legal options to delay the implementation date (read here). This has, in turn, delayed a new class of mutual funds known as “T” shares, designed to comply with a regulation that may or may not exist in the coming months (read here).
Industry Speaks Out
- Vice Chairman Philipp Hildebrand of Blackrock stated in a conference last week that the Trump administration’s penchant for deregulation is not an ideal strategy. "Rolling back regulation at this point with this much liquidity in the system strikes me as a very bad idea, we learned that lesson in 2004," stated Hildebrand (read here).
SEC Liquidity Rules
- On March 23rd, the SEC replaced its “antiquated” three-day trade settlement window with “T+2,” a 48-hour window to send payment for a purchased security. This move decreases the liquidity risk exposure from unsettled trades throughout most markets. The new standard will be implemented in September (read here).
- Former-Zuckerberg-rivals-and-Olympic-Rowers-turned-digital-currency-venture-capitalists Cameron and Tyler Winklevoss were handed an unfortunate result by the SEC on March 10. Their proposed ETF that would track the price of Bitcoin was denied. Questions and concerns about the fund’s ability to track the price of the digital currency were cited as the reason for the fund’s denial, which caused the price of the currency to fall 12% (read here).
Europe / International News
- The European Union is considering giving additional regulatory power to the ESA (European Supervisory Authorities), in the hopes of patching up potential financial oversights in the wake of Brexit. The impending relocation of the European Banking Authority is also a point of contention among EU member states, with a number of countries vying to serve as the host for the EU’s rough SEC-equivalent (read here).
- The U.K. government announced that Article 50 will be formally triggered on March 29th. Perhaps looking to capitalize on the coming uncertainty regarding regulation in the U.K., France is starting to seem like a viable alternative for FinTech startups, with a number of incubators and investors beginning to show interest in the country (read here).
- The ECB has stated that if banks move enough operations to the EU they will not have to wait for the ECB to do its own regulatory checks before starting to trade. Banks in the EU’s Single Market can currently trade throughout the bloc with approval of models from the UK’s Prudential Regulation Authority (PRA), but they will lose that right if there is no deal on passport arrangements (read here).
FCA New Conduct Rules
- Andrew Baily chief executive of the UK Financial Conduct Authority has announced that the regulator won't cap bonuses or control levels of pay, but remuneration is a focus as it tries to change the ethos in the City. He set out how the FCA's new Senior Managers and Certification Regime is intended to make senior bankers more responsible for the actions of their junior staff, stating that in the past regulators had wrongly confused "responsibility" with "culpability". The FCA's new conduct rules are intended to make sure senior managers and board directors "know what they are responsible for", while junior staff will be certified under the supervision of their bosses and the regulator (read here).
- The UK’s consultation period on the implementation of PSD2 ended in March, moving the country a significant step closer to the brave new world of a level playing field in payments to revolutionise how transactions are done online (read here). The UK’s HM Treasury intends to replace the Payments Services Regulations (PSR) 2009 with a PSR draft that will make PSD2 law in the UK.