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Prosek’s Financial Regulation Roundup: December 15, 2017

Rupert Eyles

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:

Banks Scrutinize Congressional Tax Proposals

  • As the U.S. Congress attempts to hammer out a final tax plan, Wall Street is fighting to limit the scope of a provision meant to discourage companies from sending money overseas to avoid taxes. Banks’ beef: The way the provision is written in the Senate version of the tax bill could make some key bank businesses much more expensive. These include transactions in the $2 trillion repurchase obligation, or “repo,” market, as well as the business of lending out stock that banks and other firms hold on behalf of customers. Foreign banks, too, say the tax provision will make their U.S. operations more expensive and reduce their ability to lend in the U.S. (The Wall Street Journal: read more)

Federal Reserve Banking Rules

  • Federal Reserve Chairwoman Janet Yellen doesn’t expect the Fed will dramatically depart from its current course on bank rules after she leaves early next year. Ms. Yellen sees “broad-based commitment” to those “core reforms,” such as stress testing and higher banks capital requirements. Ms. Yellen also said the U.S. has made “substantial progress” on making big banks’ bailouts less likely in the future, but stopped short of echoing Mr. Powell’s recent statement that big U.S. banks are no longer “too big to fail.” (The Wall Street Journal: read more)

SEC Market Surveillance

  • A group lobbying on behalf of big banks and brokers said it’s hopeful that regulators will soften their stance on how investor data is collected for the Securities and Exchange Commission’s far-reaching new market-surveillance system. The SEC may agree to allow broker-dealers to submit client-trading information without revealing personal identifiers attached to each individual investor as the industry is requesting, Securities Industry and Financial Markets Association President Kenneth Bentsen told reporters today in New York. (Bloomberg: read more)

E.U. News:

FCA on Credit Card Rates

  • The UK’s financial watchdog is pushing ahead with plans that would see lenders have to reduce or even cancel credit card interest and charges for customers in persistent debt. The Financial Conduct Authority on Thursday published revised proposals to those first put out in April, saying that customers would save as much as £1.3bn a year in the first few years after the planned rules take effect. (Financial Times: read more)

Banks to Take Hit From New Reforms

  • The European operations of investment banks are expected to lose $4.4 billion from new regulatory reforms, known as MiFID II. Traders will shoulder the bulk of the losses, with equity and debt markets teams expected to lose a combined $2.5 billion, according to a new report from Coalition. MiFID II is intended to heighten transparency and root out conflicts of interest, and the regulations will impact just about every global financial services firm. Banks, given their breadth and array of services, face some of the most significant changes. (Business Insider: read more)


China Bond Market Sees Influx of Foreign Investment

  • Foreign holdings of Chinese bonds have jumped 50 per cent in the past two years as overseas investors have seized on Beijing’s push to open up its estimated Rmb73tn ($11tn) fixed-income market. But, if some commentators are to be believed, we have not seen anything yet. Despite the buying spree, foreigners still only held Rmb921bn of Chinese bonds in October, according to data from the Chinese Academy of Social Sciences and Citi, as the chart below shows. (Financial Times: read more)

Deutsche Bank Unveils AI Platform in Apac

  • Earlier this week, Deutsche Bank announced the implementation of an upgraded equities trading platform with artificial intelligence ("AI") capabilities, setting a new benchmark for best execution, a key focus for financial institutions ahead of MiFID II. Under MiFID II, financial institutions will have to demonstrate they have taken sufficient steps to obtain the best possible result when executing client orders. Using a unique combination of next-generation algorithms, Deutsche Bank's enhanced equities trading platform is one of the most functionally rich solutions deployed in the market to date. (FinExtra: read more)

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