International Organizations Advance Aggressive Policy Agenda Despite Regional Upheaval

The current geopolitical landscape presents unique challenges to international supervisory and regulatory bodies. Following unprecedented political upheaval, domestic regulators and financial institutions might be expected to gravitate more intensely towards these centralized organizations. However, as more countries trend towards financial deregulation, these institutions could face greater obstacles in building consensus around the adoption and implementation of major reforms.

EU Aims for Renewed Stability in 2017

The European Union is half way through a defining year with significant events already passed and more major milestones ahead. The United Kingdom’s Brexit referendum last year has challenged economic and political stability, but the bloc’s remaining members appear largely committed to strengthening their alliance and shared interests.  The EU’s political and regulatory agenda is focused on carefully managing Brexit negotiations and major elections, while implementing key regulatory initiatives to sure up the resilience of financial markets. Regulators are coalescing around supervisory and regulatory harmonization, with a continued emphasis on conduct in the financial sector.

The UK in 2017 – Not Business as Usual

It’s not business as usual for the United Kingdom this year. Major political disruption and uncertainty stemming from Brexit are likely to spill onto regulatory agendas.

In March, the British Prime Minister Theresa May triggered Article 50 to begin negotiations with the EU. Despite the UK’s initial hopes to maintain most of the business privileges associated with EU-membership, both parties have appeared to harden positions, each ruling out ongoing membership of the Single Market. UK companies are therefore unlikely to maintain important passporting rights.

Many financial institutions based in the UK depend on these rights to extend business and resources throughout the EU. Several EU cities, including Paris, Dublin, Frankfurt and Amsterdam, are competing for companies looking to relocate.

UK regulators have expressed concern over the course of Brexit negotiations. Financial Conduct Authority Chief Executive Andrew Bailey has cautioned against a ‘hard Brexit’ approach, citing ongoing regulatory initiatives in the EU and UK. Both he and Mark Carney, Governor of the Bank of England, have advocated for a more collaborative approach to Brexit, favoring some regulatory harmonization and thoughtful transition agreements.

UK regulators are also working on implementing large-scale regulatory initiatives this year. The regulators remain focused on fostering a positive culture in financial services while guarding against misconduct. Some agencies also plan to shift enforcement approaches this year.

Key Enforcement Trends for Financial Services – Germany & Switzerland

Heading into the second half of 2017, the Germans prepare for uncertainty while the Swiss, characteristically, persist with stability. Chancellor Angela Merkel, an advocate of diplomatic relations and globalization, is up for reelection to serve her fourth term. The election of President Trump has had a polarizing effect on German politics, ushering in a rise in popularity for both the Social Democrats and the far-right Alternative for Germany party. In recent years, the country has received an increasingly steady stream of migrants, and it has become an economic leader in the EU – a position that has become more important as the UK prepares to exit the bloc.

Meanwhile, Switzerland’s labor market has rebounded from its unrest in 2015 and is expected to make up any losses by 2018. Gross domestic product (GDP) growth is expected to improve from 2016 to 2017 to 1.8%. Swiss banks appear well capitalized with few problematic loan ratios.

Given their somewhat different economic climates, the key regulatory agencies, Germany’s Federal Financial Supervisory Authority (BaFin) and Switzerland’s Financial Market Supervisory Authority (FINMA), have adopted differentiated regulatory agendas.

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Deregulation poses global threat of regulatory arbitrage

American Banker shared Charles Hastie’s insights on the recent pivot away from globally harmonized financial regulation and the threats this trend poses, in an article he wrote, Deregulation Poses Global Threat of Regulatory Arbitrage.

Read it @

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