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Financial Regulation Roundup: November 30, 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 Officials Eye December Rate Hike But Stress Path From There is Uncertain: Minutes: Federal Reserve officials were firm at their last policy meeting that they expected to increase interest rates in December, but they were much more uncertain about the path of monetary policy in 2019, according to a summary of their discussion released Thursday. Many officials said it was time to drop the language from their statement that “further gradual increases” in the benchmark federal funds rate were to be expected. (MarketWatch: read more)
  • Would CFPB Nominee Mirror Mulvaney or Go Her Own Way?: As she moves closer to Senate approval as head of the Consumer Financial Protection Bureau, Kathy Kraninger is still somewhat of a mystery to the agency and industry she would oversee. Now a senior official at the Office of Management and Budget, Kraninger has signaled that she favors a pro-free-market, limited government approach to regulation and will hew closely to the vision of her boss Mick Mulvaney, the acting CFPB director who also heads the OMB. But unlike Mulvaney — who before running the CFPB referred to the bureau as a "sick, sad joke" — Kraninger is not linked with such rhetoric, making her views about the agency uncertain. (American Banker: read more)
  • Fed Identifies Top Vulnerabilities Facing U.S. Financial System: The Federal Reserve identified elevated asset prices, historically high debt owed by U.S. businesses and rising issuances of risky debt as top vulnerabilities facing the U.S. financial system, according to an inaugural financial stability report released Wednesday. Officials cited potential risks tied to nonfinancial corporate borrowing, including low premiums demanded by investors in certain business debt, such as leveraged loans and high-yield corporate debt. It also flagged possible concerns in commercial real estate, in which property prices have rapidly outpaced growth in rents. (The Wall Street Journal: read more)
  • Slackening US Bank Regulation in the Line of Fire for Democrats: As the Democrats prepare to take control of the House of Representatives following this month’s midterm elections, senior members say they plan to subject the financial services industry to far greater scrutiny than it has faced in the past two years. “For the last two years, Republicans in Congress have served as accomplices to Trump and have completely neglected Congress’ oversight responsibilities, enabling corruption and destructive policies to run rampant,” said Maxine Waters, who is poised to take over as head of the House financial services committee. She added: “It is critical that we bring accountability to the Trump administration and the regulatory agencies under the committee’s jurisdiction.” (Financial Times: read more)
  • SEC to Take Up Trump’s Request on Quarterly Earnings Reports: Securities regulators plan to explore changes for public companies’ quarterly earnings reports, following President Trump’s summer request for them to take up the issue. The Securities and Exchange Commission on Thursday said it would vote next week on asking companies and investors for feedback on the “nature and content of quarterly reports and earnings releases.” Mr. Trump asked the SEC in August to study less frequent earnings reporting as a way for companies to have “greater flexibility and save money.” The president’s request came after a meeting with corporate executives at his golf course in Bedminster, N.J. (The Wall Street Journal: read more)

EU News:

  • FCA Calls For Regulation Pact To Combat No-Deal Brexit Threat: The UK's top financial regulator has urged European and British lawmakers to quickly recognise each other's rules for banks and insurers to avoid significant disruption from a no-deal Brexit. The message comes as government agencies and regulatory bodies scramble to assess the impact of various Brexit scenarios amid the likelihood that the UK parliament will reject Prime Minister Theresa May's exit deal with the European Union. The Financial Conduct Authority said on November 29 that consumers and City companies will be hit hard by a crash-out Brexit, where the country leaves the European Union without a trade agreement. (read more: Financial News)
  • City Watchdog Steps Up Its Inquiries Into ‘Crypto’ Firms: As the price of the controversial “cryptocurrency” Bitcoin plunges, new figures show that the City watchdog is stepping up its investigations into the murky sector. The number of inquiries into businesses involved in the new breed of digital currencies has doubled, according to figures from the Financial Conduct Authority (FCA) obtained by Telegraph Money. In response to a Freedom of Information request the FCA said it had conducted inquiries into 50 firms it suspected of operating in areas of financial services without its permission. In May this year it had looked at only 24 firms. (read more: The Daily Telegraph)
  • Greater Government Powers Over Takeover Deals Could Be Used For Political Purposes, Critics Warn: Leading investors, trade bodies, lawyers and banks have criticised proposals to give the government greater powers to intervene in mergers and acquisitions (M&A), raising concerns that new rules could be exploited for political purposes. The proposals would give officials greater scope to scrutinise deals on security grounds. A senior minister could call-in any merger, acquisition or investment if they had a “reasonable suspicion” it may give rise to national security concerns. Government officials are currently conducting a charm offensive, visiting financial sector stakeholders to reassure them and gauge their criticisms. (read more: City A.M.)

International News:

  • U.S., China Explore Deal as Leaders Meet at G-20 Summit: The U.S. and China, looking to defuse tensions and boost markets, are exploring a trade deal in which Washington would hold off on further tariffs through the spring in exchange for new talks looking at big changes in Chinese economic policy, said officials on both sides of the Pacific. The talks have been conducted, via telephone, for several weeks, and are coming to a head shortly before President Trump and Chinese President Xi Jinping meet for dinner on Saturday at the end of the Group of 20 leaders summit in Buenos Aires. But it is far from clear whether the discussions will produce any agreement. (The Wall Street Journal: read more)
  • Fed's Quarles to Chair Financial Stability Board: U.S. Federal Reserve Governor Randal Quarles has been appointed chair of the Financial Stability Board, the international regulatory body said on Monday. He replaces Bank of England Governor Mark Carney, who steps down in December as chair of the FSB, a body that has been coordinating new banking rules for the Group of 20 (G20) since the global financial crisis a decade ago. (Reuters: read more
  • China Grants Market Access to Two More Foreign Financial Institutions – Regulator: China has given the go-ahead for two more foreign financial institutions to set up local subsidiaries, the country’s banking and insurance regulator said in a notice on Sunday, bringing the total number of approvals to 12. German insurer Allianz will be permitted to establish China’s first foreign insurance holding company, and Hong Kong’s Chiyu Bank has also been approved to set up a branch in Shenzhen, the China Banking and Insurance Regulatory Commission (CBIRC) said. The regulator said it would “steadily expand” the opening up of China’s financial sector, while at the same time improve its risk prevention and supervision capabilities.  (Reuters: read more

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