Financial Regulation Roundup: June 16, 2017

Rupert Eyles  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:

Dodd-Frank

  • For the time being, Dodd-Frank repeal seems to be on the backburner as the Trump administration aligns its priorities between the ongoing Russia investigation, health care repeal, and a number of other simmering issues. The Washington Post writes in an op-ed that a more feasible alternative to wholescale reform could be legislating a 10% capital buffer for large banks, which could alleviate liquidity issues in crisis scenarios. (read here).
  • After the Fed announced increased interest rates at their conference Wednesday, President Trump and Chairwoman Yellen’s oppositional attitudes to financial regulation were pushed into the spotlight. Yellen was instrumental in the construction of most of the regulation that Trump now seeks to see repealed. (read here).

U.S. Treasury

  • The U.S. Treasury Department released a report to President Trump, detailing its view on what regulations could be trimmed to provide economic relief and stimulate growth. It calls for reform of the Consumer Financial Protection Bureau, the improvement of market liquidity, and emphasized the importance of healthy community financial institutions. (read here).

Spoofing

  • Reuters Regulatory Intelligence released a compilation of common ways in which financial communication platforms are misused for profit. Included are breakdowns on topics such as “spoofing,” or placing phony orders on a security to manipulate price. The case of David Liew, a commodities trader prosecuted for doing just this, is used as a case study. (read here).

Puerto Rico

  • In a move that may complicate the bankruptcy filings of the U.S. territory, the citizens of Puerto Rico voted for statehood on June 11. Admitting the state would require a congressional vote, which many fear will fail in a Republican congress not keen to admit a potential new blue state. (read here).

E.U. News:

FCA defends hard-line asset management study

  • The UK financial regulator has defended the hard-line approach adopted in its asset management market review, suggesting its scrutiny of the fund sector should not have come as a surprise. The Financial Conduct Authority, which is set to unveil its long-awaited final paper on the UK’s £7tn fund management industry later this month, was scathing of asset managers in its interim report, criticising asset managers for charging high fees and accused them of failing to deliver value for money. (read here).

EU to tighten grip on euro clearing after Brexit

  • The European Commission on Tuesday revealed what it plans to do about London’s lucrative euro clearing market — the envy of financial centres on the continent. It is a critical part of London’s financial services sector and the volume of business can exceed a notional $900bn a day. It centres on the processing of euro-denominated derivatives contracts by clearing houses such as the London Stock Exchange’s LCH. Brussels’ proposal is that EU regulators should be given powers to vet overseas clearing houses. Those deemed to pose a “systemic risk” to Europe’s financial stability will face a range of requirements if they want to maintain smooth access to the EU market. In extreme cases, they could be told to relocate to Europe if they want to retain regulatory approvals that help them do business. (read here).

Paris moves to consolidate position as new regulatory hub for Europe’s Financial System

  • The EU is raising Paris’ profile as a major financial hub by centralizing European regulatory power in the French capital, according to a statement by the European Commission. This preference from ESMA demonstrates a change in the balance of regulatory power following Brexit. “As we face the departure of the largest E.U. financial center, we are committed to stepping up our efforts to further strengthen and integrate the E.U. capital markets,” said Valdis Dombrovskis, vice president of the European Commission. (read here).

Global News:

Chinese Regulators

  • Wu Xiaohui, Chairman of Anbang Group (one of China’s largest insurers and owner of the Waldorf Astoria Hotel), was detained by Chinese financial regulators earlier this week. Anbang is notable for its meteoric rise to one of China’s largest corporations in a field dominated by state institutions, its prolific investments in U.S. real estate, and their interest in buildings owned by Kushner Companies, the family company of Jared Kushner. (read here).

Correspondent Banking

  • FTSE Global markets held a roundtable with several industry leaders on how to de-risk correspondent banking, the process by which larger banks expand the availability of their services through smaller banks around the world. The conversation covers the push-and-pull between desiring global expansion and needing to protect customers. (read here). 

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