Prosek’s Financial Regulation Roundup: July 14, 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.
Chair Yellen Speaks to Senate
- Chair Yellen spoke for two hours before the senate on Thursday, July 13, answering questions from both Republicans seeking rollbacks of Obama-era regulations and Democrats hoping to hear her testify to their continued importance. A notable soundbite from her appearance came when she was asked if the reductions in regulations sought by the Trump Administration may increase the chances of a new financial crisis, to which she replied, “some of them, yes.” (read here).
Randall Quarles Joins the Fed
- A little-known provision of the Dodd-Frank act created a supervisory job at the Federal Reserve, which before this week was informally given to an existing Fed board member. This week, Trump filled the position, appointed a new Vice-Chairman covering financial supervision. The Economist notes that his background and descriptions from former associates indicate a preference towards de-regulation via transparent and direct rules. (read here).
Anti-Money Laundering Efforts Discussed
- The House Financial Institutions and Consumer Credit Subcommittee held a hearing to discuss the US government’s anti-money laundering efforts under the BSA (Banking Secrecy Act). Voices from both the public and private sector recommended a number of courses of action for the US to cut down on financial crime, ranging from re-writing de-risking policies to make them more concise and effective, and updating the rules of the now forty-seven year-old law to bring them in line with new challenges. (read here).
Financial Class Action Rules Move Forward
- The Consumer Financial Protection Bureau (CFPB) adopted a rule on Monday which will allow Americans to band together in class-action lawsuits against financial companies, as well as ending practices of forced arbitration. The rule may face staunch opposition from Republicans, as it is speculated that the agency itself may be dissolved as part of the Trump administration’s de-regulation mandate. (read here).
EU Policymakers warned they should mirror US banking reforms
- European Union policymakers have been warned that they should "take the same view" as their US counterparts on banking sector reforms or risk limiting growth in the European bloc, according to senior figures at BNP Paribas and Societe Generale. There "will be a real gap" and an "unlevel playing field" according to Séverin Cabannes, the deputy chief executive officer of Societe Generale, if the two regions diverge on the implementation of Post banking crisis regulation such as Basel III. (read here).
FCA concerns over drawdown pensions
- More people are taking out so-called drawdown pensions without taking advice, the City regulator has warned. The Financial Conduct Authority (FCA) said 30% of consumers go in to drawdown without getting guidance. That compares with just 5% before the pension freedoms were introduced in April 2015. The FCA said twice as many consumers are now using drawdown rather than annuities, which provide a fixed income for life. It is also worried that too many annuity providers are leaving the market, which it said could bring a risk of weakened competition. (read here).
- The European Securities and Markets Authority (ESMA) has warned regulators in the EU27 to raise awareness on outsourcing arrangements with UK providers once it withdraws from the EU as it publishes Brexit relocation guidance for investment management, investment firms and trading venues. It warns against “letter-box” entities and says investment firms must comply with the Mifid framework from day one and on an on-going basis. Because the UK plays a prominent role in the single market, Esma warns a consistent supervisory approach to safeguard investor protection, the orderly functioning of financial markets and financial stability is important. (read here).
MiFID II Beyond the EU
- A recent industry call organized by the International Swaps and Derivatives Association, covered by the Financial Times, illustrated that global market are still coming up to speed with the impacts of MiFID II. This is for good reason: JWG, a UK financial markets consultancy, estimates that perhaps a third of the rules are still to be formalized. Concerns about cost and global compliance are still rampant with only six months left to go before the regulations are rolled out. (read here).
China Moves for FinReg Update
- China’s National Financial Work Conference (NFWC), a meeting of the country’s top regulatory powers which takes place every five years, will be held this Friday, July 14th. The results of the closed-door meeting will have widely-felt ramifications on the country’s regulatory policy, coming at an especially prudent time as President Xi Jinping has recently replaced most of his highest-ranking economic staff, and moves to curb the nations rising private-sector debt have inadvertently lowered cash availability for businesses. (read here).