In the UK, senior ministers publicly contradicted one another over the Chancellor’s assertion they had agreed to seek a transitional period after Brexit takes effect. Greece issued €3bn in sovereign debt, its first issuance in three years, suggesting the start of a return to economic health. President Trump hired and fired a new Director of Communications in just 10 days and appointed a new chief of staff, as special counsel Mueller was reported to have convened a grand jury to move forward his investigations. The United Nations agreed sweeping new sanctions against North Korea following its series of missile tests. Below we cover the main stories in finance and regulation for the last two weeks.
Leo Varadkar insisted that there must be no economic border with Northern Ireland when the UK leaves the European Union. He said that he would not designate an Irish border just because “the Brexiteers” in the UK wanted one, adding that it was for London to design the solution to the problem. The Central Bank published Frequently Asked Questions on Brexit, covering its approach to authorisation applications and on-going supervision. The Department for Finance also issued a call for the establishment of a Central Securities Depository in Ireland due to the impact that Brexit could have on shared clearing and settlement for financial market.
The Central Bank issued Consultation Paper 111 on the Second Edition of the Central Bank Investment Firms Regulations including changes related to MiFID II. The paper relates to the potential rule changes that will follow legislative changes implemented through the Department of Finance. It followed this with Consultation Paper 112 on Enhanced Mortgage Measures: Transparency and Switching in which it proposed further measures to increase consumer protections and potential amendments to the Consumer Protection Code.
The Financial Services and Pensions Ombudsman Act 2017 became law, with an effective date to be set by the Minister for Finance. The Act will merge the two offices of the Financial Services Ombudsman and the Pensions Ombudsman into a single service, following a review into cost saving measures in 2013.
The European Banking Authority published Final Guidelines on major incident reporting under the Payment Services Directive (PSD2) and issued a consultation on the electronic central register. The European Central Bank issued a consultation paper on a guide to on-site inspections and internal model investigation, with a request for responses for 15th September 2017. The European Securities and Markets Authority issued an opinion on Asset Segregation and Custody Services under AIFMD and UCITS regulations.
Andrew Bailey, Chief Executive of the Financial Conduct Authority, questioned the future sustainability of the LIBOR interest rate. Speaking to Bloomberg London, he noted that the FCA had been regulating the rate since 2013 but foresaw difficulty in sustaining it due to an underlying weakness in the market activity from which its measurements are drawn. He set out a planned withdrawal and replacement of the rate by 2021.
The review into high-cost credit by the Financial Conduct Authority was published, indicating that its regulation of pay-day lending has provided a clear benefit to consumers. The regulator pointed to costs savings of £150m across 760,000 borrowers and a reduction in fewer referrals to debt charities as evidence of its achievements. The review identified that unauthorised overdrafts, rent-to-own schemes, home collected credit and catalogue schemes continued to be a cause of concern
The Financial Conduct Authority announced proposals to extend the Senior Managers and Certification Regime to all regulated financial services firms, and its eventual replacement of the Authorised Persons regime. New conduct rules applying to all staff have been proposed: individuals must act with integrity, due care, skill and diligence, be open and cooperative with regulators, and pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct.
The Financial Conduct Authority secured a confiscation order for £350,000 against Damien Clarke, a convicted insider dealer. Mr Clarke was ordered by the Southwark Crown Court to pay the amount within three months or face a further three years in prison. Mr Clarke, a former fund manager and equities trader, originally pleaded guilty to 9 counts of insider dealing and received a two year prison sentence.
Gulnara Karimova, the eldest daughter of Islam Karimov, the former dictator of Uzbekistan, was arrested and charged with stealing $1.6bn. She had previously been sentenced in her absence to 5 years in prison on charges of tax evasion, embezzlement and appropriating state assets. In Pakistan, Prime Minister Nawaz Sharif was disqualified from public office by the Supreme Court on the basis that he was ‘not honest’. The allegations of corruption came out of the leak of the Mossack Fonseca documents which included details of his family’s affairs and ownership of luxury apartments in London.
Both Houses of Congress in the United States overwhelmingly approved new legislation which limits the President’s power to impose sanctions against Russia. President Trump reluctantly gave his approval to the bill, and Russia responded with an expulsion order against multiple US diplomats. The passing of the bill is said to reflect the level of concern about Russian interference in the 2016 election.