The new year has not brought any better luck for China’s economy. As stocks continue to slump, the People’s Bank has again devalued the Yuan to somewhat limited results. Meanwhile the debate over how best to control Wall Street is getting no less fiery. Bernie Sanders has made clear his intentions to ringfence investment banks from their commercial activities, while Hillary Clinton has taken a different tack with a monitor-and-scrutinise approach, formulated by her new trump card Gary Gensler, former chairman of the CFTC.
Finally, the race for Chief Executive of the FCA in the UK has an update of its own. In the same week that she was tipped as favourite, it has now been revealed that Tracey McDermott will not take up the role, not wishing to go beyond her temporary position as acting head. This leaves contenders such as Mark Branson, head of the FMIA, and Andy Haldane, Chief Economist at the Bank of England, still in the mix.
Over the holidays ESMA has been busy. Of particular note is the publishing of the regulation on increasing the transparency of Securities Financing Transactions (SFTs) in the Official Journal, and also on increasing the transparency of Cross-Selling practices (where more than one investment products are sold together). MiFID II of course has still found its way in the agenda – even if the potential delay occurs, the sell-side are still engaged in preparations due to the major overhaul of reporting systems required. There has also been talk of frustration in the industry over the lack of details still present around the regulation, and consequently a call for using the MiFID delay to establish a greater understanding of what exactly is required of those subjected to it.
China is still moving hastily in reaction to its continual market decline, in particular with a clampdown on financial crime and a full reassessment of its regulatory approach. Last week the central bank announced an upgrade to its macro prudential policy framework in order to address systemic risks and improve counter-cyclical adjustments. This involves a renewed focus on capital requirements and the capital adequacy ratio.
Meanwhile, progress continues with the establishment of the EU Single Resolution Mechanism, as regulation is published regarding the democratic oversight of those working on the Single Resolution Board who will monitor the Single Resolution Process. A professor of financial law this week was also sat down to discuss the differences between EU and US resolution mechanisms, and the issues that still remain in setting up an effective resolution process on a cross-border basis.
In the Eurozone, the ECB this week have laid down their five priorities for the supervision of significant banks in 2016, stating the importance of showing what it is that will be guiding their actions in the coming year. They have also announced there will be limits on the levels of bonuses, dividends and coupons that a bank can payout should it fall under the minimum regulatory capital requirements.
George Osborne has spoken of a ‘cocktail of risks’ facing the economy, and he may not be wrong to do so. Alongside China’s plunge in stock value, North Korea’s claim of a successful hydrogen bomb test has also rattled the markets, leading to the South Korean regulator the following day stressing the need for very careful risk management in light of new and existing dangers.
It has been a controversial week in the area of financial crime. The FCA have dropped two reviews (one on UK banking culture, the other on HSBC’s role in tax evasion), while also stating that they will not be publishing their findings from a review into inducements deals between investment advisers and providers, citing that MiFID II will include rules on this in any case. The Treasury Select Committee are expected to be questioning the FCA on their recent actions in coming weeks.