Editorial: Ebb and flow

Author: | Published: 11 Dec 2017
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As 2017 comes to an end, it's time to reflect on some of the key developments that shaped financial regulation this year.

'Key developments' may sound a bit optimistic given that there's really only one overarching trend that's affected markets in the past 12 months: the recalibration of regulatory burdens on either side of the Atlantic.

In the US, the appointment of Donald Trump as President in January was the trigger for a widespread legislative rollback which saw a number of key financial rules trimmed down, put on hold or shelved outright. Outgoing Commodity Futures Trading Commission chairman Timothy Massad warned in January of the threat that cutting post-crisis rules would pose to the financial markets.

The Department of the Treasury (DoT) has embraced the Trump rhetoric of two-for-one – for each new regulation introduced, two have to be eliminated – with enthusiasm. The DoT, headed by former Goldman Sachs banker Steven Mnuchin, has already released some guidelines for its proposed dismantling of the Dodd-Frank Act, in particular the much-criticised Volcker Rule.

Elsewhere, the Department of Labor has confirmed that the coming into effect of its fiduciary rule, which many have said was doomed from the start, will be delayed by another 18 months, until at least July 2019. The rule mandates that financial advisers act in the best interests of their clients, something that former US President Barack Obama said would prevent savers from losing nearly $20 billion every year to advisers' misguided advice.

The EU's shiny new Markets in Financial Instruments Directive (Mifid II) has also been a bone of contention because of its extraterritorial reach (see boxout page XXX). While most of Asia is scrambling to company with its provisions, the US is taking a more relaxed approach and complying in its own time and on its own terms.

All of which brings us to the EU, and to Mifid II's 1.4 million paragraphs of rules, which symbolise to an extent the direction the region is going in. While the US is choosing the rollback route, the EU and its soon to be 27 member states are doing things differently, regulating left, right and centre. Mifid II isn't the only example of this. In the capital markets space, the sell-side has been discouraged from differentiating between products too much, with a blanket requirement of heightened disclosure for most asset classes, from vanilla products to the more structured products. More work for everyone.

Both regions are moving at their own speed and in their own direction: the US is swiftly rolling back (at least in theory), the EU is slowly adding more rules – Mifid II's implementation was postponed one year because of its complex technical requirements.

The regulatory tide is definitely flowing differently.

Enjoy the issue.

Happy New Year, and see you in 2018.

Amélie Labbé