In America serving governor Jay Powell was nominated as the next Chair of the Federal Reserve, in a move which signalled continuity with existing economic policies. In Spain, European arrest warrants were issued for the former ministers of the disbanded Catalan government, and nine others were detained on charges of rebellion, sedition and embezzlement. The European Commission confirmed its gradual reduction of the policy of quantitative easing and the Bank of England raised interest rates for the first time in 10 years. Below are the main stories in finance and regulation for the last two weeks.


   Ireland

The Central Bank published the first Systemic Risk Pack, a bi-annual publication designed to facilitate macroprudential analysis and provide a comprehensive perspective on risk. The pack includes heatmaps providing ‘point in time’ and historical overviews of Ireland’s systemic risk.

Director of Insurance Supervision at the Central Bank Sylvia Cronin wrote to all insurance companies operating in Ireland instructing them to submit details of the potential impact of Brexit on their businesses and their contingency plans. The move follows concerns from meetings with the industry in September.


   Europe

Following reference to money laundering through the island of Cyprus in the indictment of Paul Manafort in the United States, Justice Minister Ionas Nicolaou defended the country’s reputation. He pointed to improvements made in fixing weaknesses which were ahead of schedule and the number of prosecutions and regulatory resolutions of such instances. Between 2011 and 2015 he noted that 91 individuals were convicted and that 149 money laundering cases were ‘solved’ in the present year.

The European Commission set out its Work Programme for 2018, which included 26 new initiatives incorporating the completion of existing programmes and an intention to increase democracy and unity in the Union. The EU also reached agreement with the Parliament and the Council on its banking reform package, with a fast track process on its review of the Bank Recovery and Resolution Directive and the Capital Requirements Regulation, with agreed text to be in place by 2018.


   United Kingdom

In Brexit news Scotland’s First Minister Nicola Sturgeon called on Theresa May to clarify what Brexit transition period would be agreed, whilst the CBI warned that investment and recruitment plans would be cut by businesses if a transition was not agreed by March 2018. The government conceded that it should publish the 58 sector impact studies it had commissioned but had previously withheld. The expected number of jobs losses in financial services was in the news as one consultancy predicted the City could lose 75,000 jobs, numbers which were reportedly being considered by the Bank of England. Howard Davies, former head of the Financial Services Authority, and current Chairman of the Royal Bank of Scotland, argued that future financial regulation could not be left to be resolved by the Brexit negotiations.

A former Barclays Bank employee was jailed for providing internal help to hackers to money launder £16m through 400 fake accounts at the bank. Personal banking manager Nilesh Sheth opened accounts using fake documents for an Eastern European gang operating out of London. Five gang members were sentenced to a total of 28 years in prison, whilst Sheth received a sentence of four years.

The Financial Conduct Authority fined Merrill Lynch International £34.5m for failing to report exchange traded derivative transactions between 2014 and 2016. The enforcement action was the first of its kind under the EMIR legislation, and was based on a breach of Article 9, as well as a breach of PRIN 3 of the FCA’s own regulations. The bank had also previously been fined by the regulator for misreporting in 2015.

Financial Conduct Authority banned Adrian and Christine Whitehurst from the financial services industry for dishonestly misappropriating client money through a debt management company, First Step Finance Limited. 4000 customers lost a total of more than £6m. The firm’s licence was revoked in 2013 by the Office of Fair Trading following the discovery that client money had been used to fund an extravagant lifestyle. However, the losses are not covered by the Financial Services Compensation Scheme. The matter has been referred to the City of London police.

3.32 million complaints were made to regulated financial services firms in the first half of 2017, according to reporting to the Financial Conduct Authority. Of 3160 firms, 226 received 97% of the total number of complaints. One third of complaints related to PPI, the next two most complained about products being current accounts and credit cards. £1.99bn had been paid by firms out in redress in the period. For the first time the reporting included complaints which were resolved by the end of the next business day after they were received.


   International

The investigation by United States Special Counsel Robert Mueller stepped up with the issuing of charges against Donald Trump’s former campaign manager Paul Manafort and his business partner Rick Gates. Manafort and Gates were charged with conspiracy to launder money, acting as unregistered foreign agents, making false statements and failing to report foreign bank and financial accounts. Another member of the Trump campaign team George Papadopoulos pleaded guilty to charges that he had lied to FBI investigators about meetings with persons connected to Russia offering information about Hilary Clinton. Manafort and Gates deny the charges against them.

The People’s Bank of China was reported to be tightening the regulation of fintech and online consumer loans. The move was expected to impact future flotations of Chinese debt companies as well as impacting existing listed companies. Shares in one company, Qudian, listed on Nasdaq, fell below their IPO price on concerns that the regulator was planning introduce a comprehensive regulatory framework on internet consumer lending.

The Securities and Exchange Commission published three ‘no action’ relief letters in relation to MiFID II obligations for payments for bank investment research. The letters mean that US banks will be able to accept payments for research without it being considered investment advice. The decision keeps open the continued receipt of research by European clients and aligns EU and US law. The ‘no action’ letters will last for 30 months commencing from the 3 January 2018 MiFID implementation date.

Topics covered by Better Regulation include
  • AIFMD
  • BRRD
  • Banking Structural Reform
  • Basel
  • Benchmarks Regulation
  • Brexit
  • Capital Markets Union
  • Capital Requirements Legislation
  • Central Securities Depositories Regulation
  • Credit Rating Agencies Regulation
  • Deposit Guarantee Schemes Directive
  • Dodd-Frank
  • EMIR
  • GDPR
  • Solvency II
  • Insurance Distribution Directive
  • Interchange Fees Regulation
  • Market Abuse/Insider Dealing
  • Markets in Financial Instruments Legislation
  • Money Laundering Directives
  • Money Market Funds Regulation
  • Mortgage Credit Directive
  • Payment Services Directive
  • PRIIPs Regulation
  • Prospectus Directive
  • Ring-fencing
  • Securities Financing Transactions Regulation
  • Securitisation Regulation
  • Senior Insurance Managers Regime
  • Senior Managers Regime
  • Undertakings for Collective Investment in Transferable Securities Directive