In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 25 May 2018
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Americas: goodbye, Dodd-Frank

This week saw the biggest piece of banking reform since Dodd-Frank pass its way through the House, with bipartisan support. President Trump signed Senate Bill 2155 or the Economic Growth, Regulatory Relief and Consumer Protection Act, late on Thursday. It contains provisions that will make changes including reducing the number of banks subject to the Volcker Rule and introducing a simpler capital regime for community banks.

The bill gives more flexibility for federal savings and to banks that are not systemically important financial institutions by raising the threshold for heightened prudential standards and right-sizing stress-testing requirements.

Continuing the saga, the US Court of Appeals for the 5th Circuit voted by 2-1 to reject a request by three states, California, Oregon and New York, that had asked it to reconsider a decision denying them intervention in the Department of Labor Department's fiduciary standard rule.

This week the Commodity Futures Trading Commission released new guidance about how to launch cryptocurrency derivatives. The guidance provides exchanges with best practice rules as the trend of futures based on bitcoin and other alternative currencies gains in popularity.

Asia Pacific: opening up

Hong Kong’s Securities and Futures Commission (SFC) has become one of the first signatories to Iosco’s Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information for cross-border enforcement cooperation. Securities regulators that are signatories aim to cooperate by sharing information such as phone and internet records and compelling attendance at interviews.

The Thai government has issued new royal decrees to regulate cryptocurrency and digital tokens. The decree treats digital tokens as securities and indicates that digital tokens must be offered for sale only according to conditions prescribed by the Securities and Exchange Act. They can only be offered through a service provider approved by the Securities and Exchange Commission. Business operators already engaging in digital assets business must apply for a licence by August 11 2018. The decree also imposes a requirement to withhold 15% on payment of income derived from the transfer of cryptocurrency or digital tokens.

EMEA: how to solve European NPL problem?

This week, the Association for Financial Markets in Europe (Afme) hosted a non-performing loan (NPL) conference in Brussels discussing the NPL action plan, the servicing industry and future regulatory plans.

A key takeaway was that the EU NPL problem still persists. While the US has managed to address and reduce NPLs significantly, Europe is making very slow progress. Inconsistent insolvency rules and the lack of region-wide bad bank are being blamed for the slow progress. In particular, a US-style Chapter 11 would be effective in providing directors with more time to assess their options and could reduce the chances of involuntary collapses. The chances of a European bad bank are bleak, with Germany in particular reluctant to adopt it and share bank risks throughout Europe.

Italian NPLs are a huge concern and in light of the new coalition government, these fears have intensified. Italian NPLs make up 11.1% of all national loans and with big spending rises and tax cuts planned, there are fears this number could increase significantly in the future. Italy is second only to Greece in the infamous NPL table and its public debt is 131.8% of its GDP as of the end of 2017. In a leaked draft of their contract for government, it said the coalition of Five-Star Movement and League would audaciously ask the European Central Bank to forgive €250 billion of debt. The ECB is not going to agree to such demands, so a more viable solution needs to be found.

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