The FCA published a consultation paper on proposed changes to the client money distribution rules in the Client Assets Sourcebook of the FCA Handbook - CASS 7A - as a result of the special administration regime review. The client money rules govern how client assets are to be distributed by an insolvency practitioner managing a failed investment firm. The proposals focus on rule changes following the introduction in early January 2017 by the Government of draft regulations to improve the regime in line with the Bloxham Report's recommendations, i.e. The Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017, the Amending SAR Regulations.

Read more. 

The Bank of England and Financial Services Act 2016 (Commencement No 4 and Saving Provision) Regulations 2017 came into force. The Regulations set March 1, 2017 as the date on which certain provisions of the Bank of England and Financial Services Act 2016 will apply, including, those provisions which will transfer the functions of the Prudential Regulation Authority to the Bank of England. Those functions will be exercised through the Prudential Regulation Committee. 

View the Regulations. 

Trump Administration Chief of Staff Reince Priebus issued a memorandum to the heads of executive departments and agencies instituting a temporary freeze of regulations that have not yet become effective in order to allow for review of such regulations by the President’s appointees or designees. The memorandum, issued on the day of President Trump’s inauguration, contains an exception for “emergency situations or other urgent circumstances relating to health, safety, financial or national security matters.” The memorandum is somewhat unclear as to its applicability to independent regulatory agencies such as the US financial regulators including the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Read more.

The European Commission launched a public consultation on the Capital Markets Union program and how it could be updated and completed, building on the initiatives that the Commission has presented so far, as part of the mid-term review. The mid-term review of the CMU action plan is scheduled for June 2017. The CMU Action Plan was published in September 2015 and set out priorities for putting in place the building blocks of a CMU by 2019. The Commission also published a Communication in September 2016 reaffirming its commitment to the CMU, calling for an acceleration of reform and outlining steps to increase the rate of completion. The Commission has completed 15 of the initiatives set out in the Action Plan (approximately half), including making progress on core legislative initiatives such as the proposed Prospectus Regulation and Securitization Regulation. Several more initiatives are expected to be launched in the coming months, including a proposal for simple efficient and competitive personal pensions, promotion of the FinTech sector with an appropriate regulatory environment and sustainable finance. 

Read more.

The CFTC designated Commissioner J. Christopher Giancarlo per seriatim as Acting Chairman of the agency. Mr. Giancarlo joined the CFTC on June 16, 2014 after being unanimously confirmed by the US Senate on June 3, 2014, to serve as a Commissioner of the CFTC. Commissioner Giancarlo succeeded Timothy Massad who had served as Chairman since June 5, 2014.

View CFTC press release.

The CFTC announced that Division of Enforcement Director Aitan Goelman will leave the agency on February 3, 2017. A successor has not yet been named.

View CFTC press release.

The SEC announced that General Counsel Anne K. Small will leave the agency later this month. Upon Ms. Small’s departure, Sanket Bulsara, Deputy General Counsel for Appellate Litigation, Adjudication, and Enforcement, will become the Acting General Counsel.

View SEC press release.

The OCC launched the agency’s new web-based Central Application Tracking System (CATS). The system will assist authorized national banks, federal savings associations and federal branches and agencies with drafting, submission and tracking of licensing and public welfare investment applications and notices. CATS also allows OCC analysts to receive, process and manage those applications and notices. CATS replaces e-Corp and CD-1 Invest, the current OCC electronic filing systems.

The OCC plans to roll out institutions’ access to CATS in three phases. The first phase includes banks that are frequent electronic filers with the OCC. The second and third phases of the roll-out of CATS are scheduled to begin in spring 2017. OCC staff will notify institutions regarding the date of their access to CATS several weeks before such access is available.

View OCC bulletin regarding the new system.
 

The US House of Representatives passed H.R. 78, the SEC Regulatory Accountability Act, sponsored by Rep. Ann Wagner (R-MO). The Act would require the US Securities and Exchange Commission to justify the costs and benefits of a proposed regulation prior to its issuance of the same. In addition, before issuing a regulation, the SEC would also be required to do the following: (i) identify the nature and source of the problem its proposed regulation is meant to address; (ii) identify and assess available alternatives; and (iii) ensure that any regulations are consistent and written in plain language. The legislation also contains language requiring the SEC to conduct a retrospective review of its regulations every five years and to perform post-adoption impact assessments of major rules.

View text of the bill.

The UK Government published draft legislation to amend the Special Administration Regulations, i.e. The Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017, the Amending SAR Regulations. The purpose of the draft legislation is to improve the return of client money when an investment firm fails. The changes are in line with the Bloxham Report's recommendations which aim to minimize the market impact of a failed firm's entry into special administration. The draft Amending SAR Regulations amend the scope of the SAR Regulations to include firms that manage an alternative investment fund or Undertakings for the Collective Investment of Transferable Securities or who act as a trustee or depositary for an AIF or UCITS. The Amending SAR Regulations will make the transfer of client assets from a failing firm to another financial institution easier because restrictions on transfers will be removed, including removing any restriction affecting what can or cannot be assigned as well as any requirement to obtain client consent. The draft Amending SAR Regulations also improve the bar date mechanism and provide for continuity of services for the safe custody of client assets. The draft Amending SAR Regulations are subject to Parliamentary scrutiny. They are expected to come into force in February 2017.

View the Amending SAR Regulations.

View the Bloxham report.

The European Commission announced the membership composition of the High-Level Expert Group on sustainable finance. The purpose of the Expert Group is to provide recommendations for a comprehensive EU strategy on sustainable finance as part of the Capital Markets Union. The Commission will draw on such recommendations when determining how to integrate considerations of sustainability into the EU’s rules for the financial sector. The Group’s advice will outline how the EU should design appropriate and proportionate financial policies, incentives and signals for financial institutions, corporate capital-raisers and markets to direct capital towards sustainable finance and to take operational steps to protect the stability of the financial system from risks related to the environment. The Group will start meeting as of January 2017. An interim report is expected around the middle of the year and a final report in December 2017.
 
View the announcement.

The European Banking Authority published recommendations for harmonizing the EU framework for covered bonds. For banks investing in covered bonds that meet certain criteria, the Capital Requirements Regulation sets preferential risk weights to be applied. The recommendations are set out in a report which builds on the EBA's 2014 Report on EU covered bond frameworks and capital treatment. The aim of the recommendations is to ensure that only financial instruments which comply with certain harmonized structural, credit risk and prudential standards are capable of being covered bonds, and as such have access to the special regulatory and capital treatment provided. Harmonizing the EU framework on covered bonds is part of the Capital Markets Union initiative launched by the European Commission in September 2015

Read more.

Over the past month, President-elect Donald Trump has made several selections for key administration posts. Notably, President-elect Trump said he would nominate Steven Mnuchin to serve as Treasury Secretary. Mnuchin was the Trump campaign’s national finance chair. He is also a former Goldman Sachs Partner and led the investor group that acquired the failed IndyMac Bank from the FDIC and operated it as OneWest Bank. While serving as campaign finance chair, Mnuchin outlined some of the economic priorities of the Trump administration: in August he said that a Trump administration would be “focused on lowering business taxes, making sure that US corporations are competitive around the world, bringing back cash from all around the world that’s sitting offshore.” President-elect Trump has also chosen Wilbur Ross as Commerce Secretary, a businessman who has not held any previous public office.

The Council of the European Union announced that it had reached an agreement with the European Parliament on prospectuses for the issuing and offering of securities. Finalization of the agreement comes after the provisional agreement reached on December 7, 2016. The draft Prospectus Regulation is part of the EU's Capital Markets Union plan. The proposed Prospectus Regulation will replace the current EU Prospectus Directive, revising the regime for companies to raise money on public markets or by public offer to potential investors. The aim is to simplify the rules and administrative obligations for companies wishing to issue shares or debt on the market and reducing the costs of preparing a prospectus, thus fostering cross-border investments in the single market, while at the same time still enabling investors to make informed investment decisions. Some compromise has been reached in the final agreement, such that no prospectuses will be required for capital raisings and crowdfunding projects up to EUR1 million. It has also been agreed, among other things, that the threshold beyond which the issuance of a prospectus is mandatory be increased from €5 million to €8 million in capital raised. Below that threshold, issuers can raise capital in accordance with rules set for local growth markets. The Council expects Parliament to approve the regulation at first reading, with the final text then to be submitted for adoption by the Council.  

View the Council's press release.

You may like to view our client note on the European Commission's proposal for a Prospectus Regulation.

The Joint Committee of the European Supervisory Authorities launched a consultation paper on the use of big data by financial institutions. The ESAs are the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. Big data refers to the collection, processing and use of high volumes of different types of data from various sources, using IT tools and algorithms. Big data is used to reveal patterns or correlations, to generate new ideas or solutions or to more accurately predict future events. The objective of the consultation is for the ESAs to better understand the impact of the increased use of big data on the financial industry and to assess whether any supervisory or regulatory actions are needed. The ESAs do not consider that the existing EU legislation on data protection, competition, consumer protection and sectoral financial services regulations explicitly addresses big data. The discussion paper seeks feedback on whether there is sufficient flexibility in the existing legislation to cover big data, whether there are any gaps and how the existing legislation impacts the use of big data by the financial services sector. Responses to the consultation are requested by March 17, 2017. The ESAs expect to publish their decision on next steps, if any, before the end of 2017. 

View the Discussion Paper. 

The International Organization of Securities Commission published its final Report outlining Guidance on reporting in compliance with its Principles for Financial Benchmarks. The purpose of the Guidance is to increase the consistency and quality of reporting by Benchmark Administrators on their compliance with the Principles, which were published in July 2013. The Principles outline a set of recommended practices that should be implemented by Benchmark Administrators and Submitters. The Report follows a survey of 29 benchmarks conducted by IOSCO, to identify any relevant challenges and issues, on topics such as the status of their implementation of the Principles and the number of benchmarks they administered. IOSCO developed the Guidance on the feedback received.  

View the Report.

View the Principles. 

The Federal Reserve appointed Andreas Lehnert as director of its Division of Financial Stability, effective December 25, 2016.

The Council of the European Union announced the conclusion of a provisional agreement with representatives of the European Parliament on new rules on prospectuses for the issuing and offering of securities. The draft Prospectus Regulation is part of the EU's Capital Markets Union plan. The proposed Prospectus Regulation will replace the current EU Prospectus Directive, revising the regime for companies to raise money on public markets or by public offer to potential investors. The aim is to simplify the rules and administrative obligations for companies wishing to issue shares or debt on the market and reducing the costs of preparing a prospectus, thus fostering cross-border investments in the single market, while at the same time still enabling investors to make informed investment decisions.

View the Council's press release.

You may like to view our client note on the European Commission's proposal for a Prospectus Regulation.

The Fixed Income, Currency and Commodities Markets Standard Board published guidelines on surveillance and training in wholesale markets. The guidance is outlined in the FMSB's Statement of Good Practice for Surveillance in Foreign Exchange Markets and Statement of Good Practice for Conduct Training. The Statement of Good Practice for Surveillance highlights the FMSB's Core Principles that firms should consider in advance of designing and implementing their surveillance measures in the foreign exchange markets, such as ensuring that: (i) the surveillance function is independent of front office; (ii) there are effective governance controls; and (iii) there is a regular review of surveillance systems to ensure that they are fit for purpose given the element of constant change in risk. It also identifies emerging practices to combat the risk of insider dealing and market manipulation, including the use of automated voice surveillance systems using techniques such as Natural Language Processing.

Read more.

The US Securities and Exchange Commission announced that Enforcement Director Andrew J. Ceresney will leave the agency by the end of the year. Upon Mr. Ceresney’s departure, Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division, will become the Acting Director.

View SEC press release.

The SEC announced that Keith F. Higgins, Director of the SEC’s Division of Corporation Finance, plans to leave the SEC in early January. Upon Mr. Higgins’s departure, Shelley Parratt, Deputy Director for the Division of Corporation Finance, will become the acting Director. Ms. Parratt has served previously as acting Director.

View SEC’s press release.

The G20 Leaders published the Priorities for the 2017 G20 Summit in Hamburg on July 7 and 8, 2017. The document sets out the areas in which the G20 will build on previous work and further areas. The priorities include improving global financial resilience with a focus on cross-border capital flows, continuing work on monitoring and regulating market-based finance (including shadow banking activities) and progressing the global and comprehensive implementation of the recommendations of the Financial Action Task Force on combating terrorist financing and money laundering, including a review of the FATF's structure and governance.

View the document setting out the G20 priorities for 2017.

The Bank of England published its latest Financial Stability report. In the Report, the Financial Policy Committee explains the key risks affecting the UK financial system, how it is addressing these risks and the developments since the Brexit referendum. The Report also includes a summary of the results of the Bank of England's 2016 bank stress test.

The first part of the Report outlines in detail the Committee’s analysis of major risks posed to the stability of the UK economy and the action it is taking in light of such risks. The second part of the Report contains a summary of the Committee’s analysis of those risks and of the resilience of the financial system. The Committee comments that since the Referendum, financial stability in the UK has been maintained despite a challenging period of uncertainty around the domestic and global economic outlook. For example, there have been significant movements in asset prices, including a 12% fall in the sterling exchange rate index. The Committee also comments that the outlook for financial stability in the UK remains challenging as the economy has entered into a period of adjustment. Since July, vulnerabilities that stem from the global economic environment and financial markets have further increased, such as the expected expansionary fiscal policy that could follow the recent US election. The Committee comments that the UK banking system is capitalized to sustain the provision of financial services when faced with severe stresses. Since the global financial crisis, UK banks have built up capital resources with the aggregate common equity Tier 1 capital held by major UK banks now at 13.5% of risk-weighted assets (as at September 2016).  

Read more.

The European Commission published a Communication to the European Parliament, the Council of the European Union on the follow-up to its Call for Evidence on the EU regulatory framework for financial services. The European Commission launched its Call for Evidence on the EU regulatory framework in September 2015 alongside its Action Plan for a Capital Markets Union. The Call for Evidence sought feedback on unnecessary regulatory burdens, inconsistencies, gaps and unintended consequences of EU financial services legislation.  Following an analysis of the feedback received, the Commission has concluded that targeted action is required to address some of the shortcomings that have been highlighted. Where possible, the Commission has integrated the feedback into existing initiatives such as the review of the Capital Requirements Regulation and the European Market Infrastructure Regulation or the future development of the CMU but there are some instances where new policy action will be needed. The Communication includes an action plan indicating how the issues are intended to be addressed. 

View the Communication. 

The SEC announced that Stephen Luparello, Director of the Division of Trading and Markets, will leave the SEC by the beginning of 2017.

View SEC press release.

The SEC announced that Matthew C. Solomon, the Chief Litigation Counsel for the SEC’s Enforcement Division, will leave the SEC early December 2016.

View SEC press release.

The Fixed Income, Currency and Commodities Markets Standard Board launched a consultation on a proposed New Issue Process Standard for the Fixed Income markets. The FMSB was established in 2015 in response to the Fair and Effective Markets Review conducted by HM Treasury, the Bank of England and the Financial Conduct Authority. The FMSB has created Standards to improve conduct in the FICC markets. The draft New Issue Process Standard is intended to improve existing practices so that the new issue process is further streamlined for all participants, including issuers, investors and lead managers. The proposed Standard builds on the ICMA recommendations for Investment Grade primary markets issuance. However, it is wider in scope as it will apply to syndicated offerings of fixed income bonds in the wholesale markets, including investment grade, high yield, securitization and emerging market debt offerings. Once published in final form, the Standard will apply to FMSB member firms who are expected to comply with it on a global basis, subject to regulatory restrictions in certain jurisdictions. Responses to the consultation are due by January 17, 2016. 

View the proposed New Issue Process Standard.

SEC Chair Mary Jo White announced that she will leave the SEC at the end of President Obama’s term.  The press release announcing her departure highlighted the SEC’s increased efforts at investor protection and the SEC’s new enforcement approaches, as well as rulemakings responding to issues raised by the financial crisis.  The SEC completed all of the mandates placed upon it by the JOBS Act, as well as the majority of those under the Dodd-Frank Act under Chair White.  The release also highlighted specific rulemaking initiatives under Chair White, as well as presented enforcement statistics over the past three years.

View SEC release.

The CFTC approved the issuance of a notice of proposed rulemaking, seeking to enhance the CFTC’s previous notice of proposed rulemaking for automated trading regulation, which proposed a series of risk controls, transparency measures and other safeguards applicable to automated trading on all designated contract markets. Among other things, the supplemental proposal revises the proposed risk control framework of Reg AT to require pre-trade risk controls at two levels, with all so-called “AT Persons” and with futures commission merchants, rather than three. In addition, the proposed rule would limit access to source code by the Division of Market Oversight to special calls issued by the Commission itself. CFTC Chairman Timothy Massad and CFTC Commissioner Sharon Bowen each issued statements in favor of the supplemental proposal. Commissioner J. Christopher Giancarlo issued a statement of dissent, asserting that the supplemental notice does not go far enough in simplifying and streamlining the regulation.

Read more.

The Bank of England announced that Dame Clara Furse had stepped down as an external member of the Financial Policy Committee.

View the announcement.

The OCC appointed Morris Morgan as the OCC’s Senior Deputy Comptroller for Large Bank Supervision. In this role, beginning on December 24, 2016, Mr. Morgan will direct the supervisors of the largest national banks and federal branches and agencies of non-US banks.

View OCC press release.

The Governor of the Bank of England, Mark Carney, announced that he would be extending his term of office at the Bank by a year to the end of June 2019. Mr. Carney commented that the extension of his term of office would go beyond the expected time for Brexit which should help to contribute to a smooth transition to the UK's new relationship with the EU.

View the announcement.

The Financial Conduct Authority launched a consultation on its approach to regulation. The consultation document, entitled 'Our future mission', asks a number of questions about the FCA's approach to regulation and aims to obtain feedback to assist in developing the FCA's future strategy. The consultation covers a wide range of topics, including, amongst others, consumer protection, the interaction between public policy and regulation, competition, the scope of regulation and whether the FCA Handbook should be reviewed. The consultation closes on January 26, 2017.

View the consultation document.

The OCC announced the appointment of Charles M. Steele as the agency’s Deputy Chief Counsel. Mr. Steele will supervise the Administrative and Internal Law, Community and Consumer Law, Enforcement and Compliance and Litigation divisions. He will also supervise the district counsel staffs in the OCC’s Southern District and Western District offices.

View the OCC press release.
 

The US Federal Reserve Board announced the approval of fee schedules, effective January 3, 2017, for payment services the Federal Reserve Banks provide to depository institutions (priced services). The Monetary Control Act of 1980 requires that the Federal Reserve Board establish fees to recover the costs of providing priced services, including imputed costs, over the long run, to promote competition between the Reserve Banks and private-sector service providers.

The Reserve Banks project that they will recover 100 percent of their priced services costs in 2017. The Reserve Banks expect to fully recover actual and imputed expenses, including profit that would have been earned if a private business firm provided the services. Overall, the Reserve Banks estimate that the price changes will result in a 3.2 percent average price increase. In particular, the Reserve Banks estimate that the price changes will result in: (i) a 5.3 percent average price increase for FedACH® customers; (ii) a 3.3 percent average price increase for Fedwire® Funds customers; (iii) an 18 percent average price increase for Fedwire Securities Service customers; and (iv) an 8.1 percent average price increase for FedLine® customers. The fees will remain unchanged for the Reserve Banks’ National Settlement Service and check service. The 2017 fee schedule for each of the priced services is available on the Federal Reserve Banks’ financial services website at FRBservices.org.

View the Federal Register notice.
 

Katharine Braddick was appointed Director General of Financial Services at HM Treasury. Ms. Braddick was previously Director for Financial Services (International and EU) at HM Treasury but has taken up her new post immediately. Ms. Braddick replaces Charles Roxborough who, in June of this year, was appointed Permanent Secretary to the Treasury.

The UK Government announced that it would not be taking forward its plans to create a secondary market for consumers to sell their annuity income.  The market was to extend the recently introduced pension freedoms and flexibilities to individuals, who retired prior to April 2015. In December 2015, the Government announced that tax changes would come into effect from April 2017, which would allow individuals to receive all of the proceeds following the sale of an annuity as a taxable lump sum, arrange for the buyer to pay all of the proceeds into a flexi-access drawdown fund or arrange for the proceeds to be used to buy a new ‘flexible’ annuity. In April this year, the UK Government and the Financial Conduct Authority consulted on the proposed regulatory framework for the secondary annuities market. The UK Government’s view is that a balance between creating conditions for a competitive market with multiple buyers and sellers of annuities combined with sufficient consumer protections could not be achieved. 

View the press release. 

View the HM Treasury consultation.

View the FCA consultation. 

The Financial Conduct Authority published its final report on the investment and corporate banking market study. The focus of the study was on primary market activities in the UK, including equity capital markets, debt capital markets and merger and acquisition services. The FCA published its interim report in April 2016, consulting on its proposed remedies to the deficiencies identified. The FCA does not consider the feedback received an indication that there is any reason to change its interim findings. The FCA concludes that whilst there are a wide range of banks and advisers active in the provision of primary markets services and despite finding that a number of clients, in particular corporate clients, believe that they are well served by such providers, there are some practices undertaken by certain providers that could have a negative impact on competition, particularly for smaller clients. 

The FCA is proposing a ban on restrictive contractual clauses in investment and corporate banking engagement letters and contracts where the clause covers future corporate finance services carried out from a UK establishment. Some banks use clauses in agreements that oblige clients to award or offer future services to that same bank. The FCA considers the most restrictive of these the “right of first refusal” and “right to act” clauses - which the regulator proposes to prohibit. The FCA is proposing to exclude engagement letters relating to bridging loans from the prohibition; because the nature of this type of loan means that banks are unlikely to offer such a loan if it cannot confirm whether it would be instructed to provide the longer term financing. Responses to the consultation are due by December 16, 2017. The FCA aims to publish a policy statement early in 2017 and is proposing that the rules would also apply from early in 2017. 

Read more.

The OCC issued risk management guidance to national banks, federal savings associations and federal branches and agencies regarding the periodic reevaluation of risks in connection with providing correspondent banking accounts for foreign banks. The guidance provides a collection of best practices for banks to consider when undertaking such periodic reevaluations and when determining whether to retain or terminate certain accounts. Such practices include, among others, communicating these decisions to bank senior management with consideration given to potential international financial inclusion impacts, considering mitigating information obtained from foreign financial institutions and ensuring a clear audit trail of the reasons and method used for account closure.

The guidance restates the OCC’s supervisory expectation that banks assess risks associated with foreign correspondent banking as part of their on-going risk management and due diligence practices. As a general matter, decisions to retain or terminate banking relationships reside with the bank. The OCC does not direct banks to open, close or maintain individual accounts without regard to the risks presented by an individual customer or the bank’s ability to manage the risk.

View OCC guidance.

The European Securities and Markets Authority published Model Written Arrangements for Benchmark Colleges (dated September 30, 2016). The Benchmark Regulation requires the national regulator of a benchmark administrator that provides a critical benchmark to establish a college of regulators. ESMA will be a member of each of the colleges. The Model Written Arrangements are intended to provide a framework for establishing a college and for the exchange of information between the relevant regulators. 

View the Model Written Arrangements.

The US Federal Reserve Board’s October 2016 Senior Loan Officer Opinion Survey revealed that, in general, banks did not change standards on commercial and industrial loans while they tightened standards on commercial real estate loans over the third quarter; banks also reported easing of standards on residential mortgage loans, whether or not the loans were eligible for purchase by government-sponsored enterprises. Banks also noted a weakening of demand from middle- and large-market firms for commercial loans and stronger demand for construction and land development loans in the CRE space. The Federal Reserve Board also asked special questions on commercial and industrial loan demand, and banks indicated that they do not expect changes in demand.

View the Federal Reserve Board’s survey report.

The European Securities and Markets Authority published for consultation the draft technical standards it is required to prepare under the Benchmark Regulation. The Benchmark Regulation sets out the authorization and registration requirements for benchmark administrators, including third country entities and requirements for governance and control of administrators.  It provides for different categories of benchmarks depending on the risks involved, imposes additional requirements on benchmarks considered to be critical and gives powers to national regulators to mandate, under certain conditions, contributions to or the administration of a critical benchmark.

Read more.

Janet Yellen, Chair of the Federal Reserve, testified before the Committee on Financial Services of the US House of Representatives. Yellen began by discussing the Federal Reserve Board’s efforts to strengthen regulation on the largest financial institutions, specifically efforts to strengthen the resiliency and provide for the resolvability of large and complex institutions. She discussed several changes to the Comprehensive Capital Analysis and Review program that have been made or are being contemplated by the Federal Reserve Board. She also highlighted efforts to reduce and streamline regulatory requirements applicable to community banks and proposed that Congress consider carving out community banks from the Volcker Rule and the incentive compensation limits of the Dodd-Frank due to the lower likelihood of the presence at community banks of the sorts of risks those provisions guard against. Yellen closed by briefly discussing current conditions in the financial system. She highlighted the improved financial conditions and funding positions of US G-SIBS, as well as the facts that large and regional banks are well capitalized and increasing in profitability and that community banks are significantly healthier and returning to profitability.

View FRB transcript of Chair Yellen's testimony.

The Bipartisan Policy Center, a US-based non-profit organization, issued a paper entitled “Did Policymakers Get Post-Crisis Financial Regulation Right?” The paper analyzes the effects of financial regulation post-financial crisis and reported that, as a general matter, consumers are better protected than before the crisis but that there were increased barriers to affordable credit. In addition, the paper reported on unintended consequences of increased financial regulation, including the curtailment or shift of certain activities from banks to nonbank providers and a lack of coordination on rulemaking. Finally, the BPC recommended that the next president and Congress instruct regulators and appoint an independent commission to conduct a formal assessment of the post-crisis financial regulatory structure.

View BPC paper.

The US Treasury Secretary testified before the US House Financial Services Committee regarding the 2016 FSOC Annual Report. Secretary Lew’s remarks included a discussion of the forward-looking approach taken by FSOC and its efforts to engage with stakeholders and the public and to avoid “one-size fits all” regulations. Members of the House Financial Services Committee questioned Secretary Lew on a variety of topics, focusing on the categorization of “Too Big to Fail” and the designation of systemically important financial institutions. In addition, the committee asked Secretary Lew for his views on the joint Federal Reserve Board, FDIC, and OCC report to Congress which recommended repealing the authority for bank holding companies to engage in merchant banking activities. Secretary Lew distanced himself from the report, stating that the Treasury was not involved in its preparation.

View Secretary Lew's opening remarks.

The Federal Reserve Bank of New York announced that Alberto G. Musalem, executive vice president and head of the Integrated Policy Analysis Group (IPA), will resign from the New York Fed effective January 6, 2017. On October 1, 2016, Mr. Musalem will assume the role of senior advisor to the president of the New York Fed, William C. Dudley.

A successor for Mr. Musalem will not be named. The work of IPA will continue, but as of October 1, 2016, its responsibilities and staff will be reassigned to the Markets, Research and Statistics, and Supervision Groups, as well as to the Executive Office.

View The New York Fed press release.

The European Commission established a task force to prepare and conduct negotiations with the United Kingdom. The Task Force will assist the Commission on all strategic, operational, legal and financial issues related to the negotiations. Sabine Weyand, currently Deputy Director-General in the Commission's trade department (DG TRADE) will become the Deputy Chief Negotiator as of 1 October 2016.  The announcement follows the appointment of Michel Barnier as Chief Negotiator on July 27, 2016. Mr. Barnier will commence his role from October 1, 2016. The Commission noted that once the UK triggers the process to leave the EU, Mr. Barnier will then make the necessary contacts with the UK authorities. 

View the press release.

You might like to view our Brexit resource page, which is available here. 

The Bank of England announced the departure of Minouche Shafik, Deputy Governor for Markets and Banking. Ms. Shafik will relinquish her position in February 2017, taking up the role of Director at the London School of Economics in September 2017. Ms. Shafik's successor has not yet been named. 

View the news release.

The Financial Conduct Authority published a consultation paper on proposed updates to the current appropriate qualification examination standards.  Individuals within regulated firms that, for example, advise on securities, derivatives or retail investment products, are required to have appropriate qualifications. The FCA will seek to amend the appropriate exams standards to ensure that exam content is current and reflects the knowledge that the FCA considers necessary for individuals to perform their roles competently. The proposed changes do not alter the FCA's policy on appropriate qualification requirements, introduce new appropriate qualification requirements or change the level of achievement required to meet the FCA rules on appropriate qualifications. The FCA is also proposing amendments to the Training and Competence Sourcebook of its Handbook to clarify how to read and use the appropriate qualification tables as well as seeking views on a standalone equity release qualification which relates to the UK mortgage market and the provision of advice on alternative sale and lease back arrangement (home reversions) accounts. Responses to the consultation are due by December 13, 2016.
 
View the consultation paper.

The European Commission published a Communication calling for implementation of the Capital Markets Union to be accelerated. The CMU is part of the third pillar of the Commission Investment Plan for Europe. The CMU Action Plan was published in September 2015.  It outlined a program for implementation by 2019 and set out changes to strengthen EU capital markets. The Commission stated that due to the changing political context in the EU, it would be taking forward priority areas to complete the CMU and undertaking a mid-term review in 2017.  Priorities include proposals to reduce differences in European insolvency regimes, the removal of withholding tax barriers, simplification of the EU personal pension products, improving the use of European savings and increasing the performance of the EU economy.  The Commission called for European Parliament and Member States to do everything within their power to deliver the measures proposed under the CMU Action Plan as soon as possible.

View the Commission press release.

View the Communication.

View the Action Plan.