Financial Regulation Roundup: October 6, 2017
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:
AIG no longer “Too Big to Fail”
- After several years of government-mandated risk management and reorganization, AIG has been determined by a panel of US financial regulators to no longer need the strict oversight it was subject to in the years following its $182bn government bailout. The Financial Stability Council has determined that AIG is no longer critical to the health of global finance after the company shed billions in assets and implemented new policies to prevent another 2007-era scenario. The vote to remove AIG from this status was passed with three Trump appointees to the panel voting yes, and three Obama-era appointees voting against. Fed chair Janet Yellen cast a deciding vote in favor of freeing AIG from its “systematically risky” status. (Reuters: read more)
Equifax Crackdown
- After compromising the credit information of approximately half the population of the United States, US regulators warned credit check firm Equifax that it could expect a harder line from consumer watchdogs and regulators in the future. This news came on the heels of a Consumer Finance Protection Bureau report in March which revealed that the credit check industry receives thousands of complaints a year, and a push from New York’s department of Financial Services in September to make credit agencies subject to tighter cybersecurity regulations. (The Washington Post: read more)
Clearing Houses to be Regulated
- The Trump administration has been known for a single-minded pursuit of de-regulation, but this week marked a shift as a treasury report indicated the administration will advocate for addition regulation of clearing houses, citing their importance to global finance. Noting the importance of the London Stock Exchange and London Clearing House to US markets, Secretary Mnuchin suggested that streamlining these services could lead to faster market growth for the US and affiliated markets. (Financial Times: read more)
E.U. News:
Bank of England focuses on EU and UK commitment to pre-Christmas Brexit transition deal
- On Wednesday The Bank of England’s deputy governor, Sam Woods, urged UK and EU politicians to agree transitional arrangements for financial services before Christmas. Woods, who leads the Prudential Regulation Authority (PRA), plead for cooperation on a transition agreement that sought to capitalise on the government’s recent commitment to pursue mutual market access. Woods also announced that the PRA is concerned about the risks of British banks with operations in other jurisdictions with different capital regimes. (City AM: read more)
FCA leaves door open on 'risky' contingent charging
- The Financial Conduct Authority (FCA) has left the door open on contingent charging despite finding widespread problems in the suitability of pension transfers. On 3 October, the FCA published the results of some of its work on defined benefit transfers which showed the proportion of suitable advice in this area was much lower than in the wider market for pensions advice. (FT Adviser: read more)
FCA chief defends car finance despite fears it could lead to next financial crisis
- The head of Britain's financial watchdog has defended the use of car finance products despite widespread fears they could herald the next financial crisis. Andrew Bailey, chief executive of the FCA, said the growing popularity of auto loans was not “bad”, but showed consumers were more happy renting than owning a car. However, he said the FCA was “not complacent” and there were “issues” with how well consumers understood the terms of the products. (The Independent: read more)
Post-Brexit positioning
- The long, drawn-out battle to become Europe’s financial center has a new contender: Paris. Joining Berlin, Frankfurt and Luxembourg among those fighting to play the role London once held as the EU’s financial core, Paris launched a public consultation to determine what elements of its financial regulations can be pared down, in order to invite interest from institutions planning an exit from London. (Reuters: read more)
International:
Bitcoin in Asia
Several weeks ago, China sent the value of Bitcoin plummeting by illegalizing the creation of cryptocurrencies and banning Bitcoin exchanges, calling into question the viability of the technology for the world’s most populous nation. This week, the government news service, Xinhua, signaled that ban will remain, but the government will likely begin allowing experimentation with the currency after the implementation of proper KYC, AML and licensing. (Xinhua: read more) Japan and South Korea, on the other hand, have continued to show increased interest in cryptocurrency speculation and investment. (The New York Times: read more) 