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Financial Regulation Roundup: November 16, 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 Rates Steady, Signals More Rate Increases Ahead: The Federal Reserve held short-term interest rates steady Thursday and offered a mostly upbeat assessment of the U.S. economy, suggesting another rate increase is likely by year-end. The Fed repeatedly emphasized the economy’s strength in a statement released after its two-day policy meeting. It offered nothing to dispel market expectations that it would deliver its fourth rate rise of the year in December. Data released since officials last met in September indicate “that the labor market has continued to strengthen and that economic activity has been rising at a strong rate,” the Fed said. (The Wall Street Journal: read more)
  • Bipartisan Bill Proposes Putting Proxy Under SEC’s Authority: Six U.S. senators introduced a bipartisan bill on Wednesday to put proxy advisors under the regulatory jurisdiction of the Securities and Exchange Commission. The Corporate Governance Fairness Act, co-sponsored by Democrats Jack Reed of Rhode Island, Doug Jones of Alabama, and Heidi Heitkamp of North Dakota as well as Republicans John Kennedy of Louisiana, David Perdue of Georgia, and Thom Tillis of North Carolina, is endorsed by the pro-business U.S. Chamber of Commerce as well as the Consumer Federation of America. (MarketWatch: read more)
  • Maxine Waters Says Easing Banking Regulations ‘Will Come to an End’ When She Takes Committee Chair: Rep. Maxine Waters, poised to take over the powerful House Financial Services Committee when the new Congress convenes in January, laid down the law Wednesday about the future of banking regulation. Speaking ahead of remarks by Randal Quarles, the Federal Reserve’s vice chair of oversight for the banking industry, the California Democrat said efforts to loosen the reins on Wall Street financial institutions won’t be tolerated should she be committee chair, as expected. “Make no mistake, come January, in this committee the days of this committee weakening regulations and putting our economy once again at risk of another financial crisis will come to an end,” Waters said. (CNBC: read more)
  • Rollback Begins on Postcrisis Swaps-Trading Rules: Regulators started rewriting postcrisis swaps-trading rules on Monday, approving a proposal that would loosen requirements for how trades can be executed. By a 4-1 vote, the Commodity Futures Trading Commission proposed changes that would allow more ways to trade swaps on electronic platforms known as swap-execution facilities. The proposal would affect the biggest categories of products—interest-rate and credit-default swaps—that are routed through central clearinghouses. Currently, around 85% of those contracts are centrally cleared. (The Wall Street Journal: read more)
  • SEC Report: Reducing Cryptocurrency Scams Among Their Top Priorities: In the U.S. Securities and Exchange Commission’s (SEC) latest annual report, the regulatory authority explained that reducing the number of cryptocurrency-related scams is currently among their top priorities. The report specifically cites initial coin offerings (ICOs) as one such sector of the industry that they are focusing on. The report comes amidst an exponential increase in crypto-related scams that has resulted from increased public interest and the complex nature of the industry that leads many neophyte investors to fall prey to savvy scams. (NewsBTC: read more)

EU News:

  • FCA Eyes Machine Learning in a Bid to Become a 'Robo-Regulator': The Financial Conduct Authority (FCA) is embracing "science fiction" in its plans for the future of financial regulation, which could see it using artificial intelligence (AI) to identify firms and individuals that are most likely to break rules before they have a chance to act. Speaking at the Personal Investment Management & Financial Advice Association (PIMFA) summit on 31 October, acting director of strategy at the FCA Richard Monks explained technology was set to change the regulator's approach to supervision and enforcement. (Read more: Investment Week)
  • BoE, FCA Hold Calls With Bankers on Market Conditions Amid Brexit Uncertainty:The two financial regulators, the Bank of England and the Financial Conduct Authority, have been closely monitoring the markets in the wake of the sharp fall in the pound, which was on course for its biggest drop in two years following the resignation of Dominic Raab, the Brexit secretary. Banks, asset managers and investment firms were summoned on to calls on 15th November with the regulators, who are concerned about maintaining liquidity and general financial stability. The calls were described by one senior banker as routine, with regulators asking about exposures to sterling and general market positions over the day. One person present on a regulators’ call said that the overall message was that the City was well prepared for market dislocations. (Read more: Financial Times)
  • Insurance Reporting Rule Changes Delayed by a Year: Sweeping reforms to how insurers report their profits have been delayed by a year after months of intensive lobbying by the industry. The body that sets global accounting standards said on Wednesday 14th November that the new rules, known as IFRS 17, would now come into force in January 2022. The delay will give insurance companies more time to adapt to the changes and to lobby against the parts of the rules that they do not like. IFRS 17 aims to make it easier for investors and analysts to compare insurance companies. It is also designed to smooth out performance by forcing insurers to record profits from long-term policies over the life of the contract, rather than up front. (Read more: Financial Times)
  • FCA to Change Way it Calculates Fees: The Financial Conduct Authority has revealed plans to change the way it calculates how much the industry pays in regulatory levies for 2019 to 2020. In a 72-page consultation paper published on November 15, the FCA proposes axing fee-block F, which contains mutual societies that are registered on the mutuals register but not authorised by the FCA under the Financial Services Act 2000. The FCA would charge the cost of maintaining the register as an FCA overhead, representing an addition of approximately 0.3 per cent to the fees of variable fee-payers. (Read more: FT Adviser)

International News:

  • US and China Reportedly Resume Trade Talks Ahead of Trump-Xi Meeting: The United States and China have restarted talks on trade ahead of a meeting between their two leaders later this month, according to The Wall Street Journal. US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He spoke by phone on Friday, the Journal reported Monday evening, citing people briefed on the conversation. The United States is demanding that China come up with a clear offer before negotiations on a trade deal can start, but Beijing wants to talk first and then make a firm proposal later, according to the report. (CNN: Read more)
  • US Reimposes All Iran Sanctions Lifted Under Nuclear Deal: The White House announced Friday it is reimposing economic and trade sanctions on Iran, starting at midnight on Sunday. The move is intended to change the country's politics through economic pressure on its ability to sell oil. But the impact is likely to be small on world markets, and even possibly reduced, for now, on Iran itself. When President Donald Trump announced in May that the U.S. would pull out from the multi-party Iran nuclear deal and resume sanctions, global oil markets reacted quickly. Prices topped $85 a barrel, a four-year high. But the rally faded as markets digested the news and planned for the immediate future. (NBC: read more)
  • Australia’s Banking Regulator Flags Higher Capital Requirements: Australia’s bank regulator said on Thursday it wants to raise the amount of spare capital banks must carry, its third such request in three years, heaping pressure on companies already bracing for tightened regulation. The Australian Prudential Regulation Authority (APRA) wants the country’s four biggest lenders to raise their available capital by 4 to 5 percentage points by 2023 from the current 14.5 percent of total risk-weighted assets, according to a discussion paper on its website. (Reuters: read more

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