Prosek’s Financial Regulation Roundup: June 2, 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.
Financial Regulatory Reform
- The Federal Reserve will be making some of its own changes to the way it regulates banks, ahead of a likely push from the Trump administration to loosen up post-financial crisis rules. Fed Governor Jerome Powell said, “the post-crisis reform program has been mostly completed and has mostly been successful. I think it's our obligation now as we reach completion of it to look back over it and ask what aspects of it may be redundant." (read here).
- As the pendulum swings toward deregulation in the financial industry, there is "no going back" on reforms to bank culture. That was a key theme from a forum featuring the general counsel of the New York Federal Reserve Bank, Michael Held. (read here).
- The fiduciary rule will take effect June 9 without further delay, Labor Department Secretary Alexander Acosta has said. The rule takes only partial effect on June 9. Brokers and insurance agents don’t need to comply with certain parts of the regulation until Jan. 1, 2018. (read here).
- Any Dodd-Frank overhaul is likely to reset the line between big and small banks, changing which firms are subject to stress tests and other rules. The current $50 billion boundary separates the big banks from the small. Firms with assets in excess of that figure face stricter rules on capital, mergers and other business, thanks to the Dodd-Frank Act of 2010. (read here).
- The Commodity Futures Trading Commission said that it has approved rule changes to bolster protections for whistleblowers and improve its process for reviewing claims. Under the amendments to the agency’s whistleblower program the CFTC and whistleblowers can now bring actions against an employer for retaliating against the tipster. Employers will also be prohibited from preventing would be whistleblowers from reaching out directly to the CFTC. (read here).
- Fintech's decentralized model is making it harder for regulators to understand its various components, and to design adequate rules because they have traditionally been dealing with central hubs of activities. (read here).
- The FCA has written to some of the largest asset managers asking them for information about their contingency plans depending on the outcome of Brexit. The letter contains 30 questions, including if the firms plan to move any staff to the EU following Brexit and how they think Brexit will affect their businesses. Other questions which the FCA posed included if they have applied to overseas regulators for new licenses and if Brexit will affect their capital base. (read here).
FCA Market Study
- The FCA has reaffirmed that it will deliver its final verdict on the UK asset management sector later this month. In November, the regulator unveiled a damning 200-page interim report on the country’s £7tn asset management sector, lambasting the sector for weak competition, high fund charges and a failure to deliver value for money for investors. Several proposed remedies were put forward by the FCA in its interim report, notably an all-in fee to improve transparency around fund charges. (read here).
ESMA Fines Moody’s
- The European Securities and Markets Authority (ESMA) has fined Moody’s €1.24m (Moody's UK €490,000 and Moody's Germany €750,000) for failing to publicly explain its methodology behind a series of ratings decisions. These rating decision failures concern nineteen instances between 2011 and 2013 for nine supranational entities, including the European Union, the European Investment Bank, the European Investment Fund, the European Stability Mechanism and the European Financial Stability Facility. (read here).
China Regulatory Reform
- Amidst the financial crackdown in China in the past three months, there is no doubting the serious intent of the regulatory squeeze. But, it may nevertheless not persist. It appears a safe bet, that the authorities will back off again before long and resume the stop go policy cycle. China’s commitment to a 6.5 per cent growth target, and the economy’s credit dependency, strongly suggest that the current squeeze is not really about regaining control of credit creation, and the risky ways in which financial companies fund assets. As the liabilities of these companies continue to grow in size and riskiness, though, the government will have to engage with both regulatory and macroeconomic tightening and take the economic and currency consequences. What we are watching today is a dress rehearsal for a bigger show within the next two years or so. (read here).