ANNUAL REVIEW

Financial Regulation 2016

August 2016  |  RISK MANAGEMENT

financierworldwide.com


Click cover to download

(Subscriber-only password access)

 

Not a subscriber?

Click here to join the FREE mailing list and receive password access


For financial institutions, increased regulatory scrutiny is nothing new. Since the onset of the financial crisis, banks and financial institutions have become accustomed to the glare of the financial regulatory spotlight. However, it seems that there has been a marked increase in the level and intensity of regulatory enforcement.

 

UNITED STATES

Dwight Smith

Nelson Mullins Riley & Scarborough LLP

“The environment in the US certainly is one of increasing regulatory scrutiny, which has two sources. First, for such emerging risks as cyber threats and risks associated with a flat yield curve, the regulators expect stronger risk management. In the banking industry, the Office of the Comptroller of the Currency has taken the lead in identifying operational risk and strategic risk as two areas that require specific board and senior management attention. Effective risk management will be measured by an institution’s ability to minimise damage from cyber attacks and to plan their businesses going forward. Second, the government’s response to the financial crisis, based largely on the Dodd-Frank Act, touched nearly every part of the financial services industry with the possible exception of the insurance industry. Dodd-Frank requirements remain relatively new, and some are still evolving.”

 

CANADA

Peter Hamilton

Stikeman Elliott LLP

“Canada has historically had a regulatory system that was principles, rather than rules based, and an enforcement culture which sought to bring regulated entities into compliance as opposed to imposing sanctions. This culture, which relies upon cooperation between regulators and regulated financial institutions, remains largely in place in respect of the larger Canadian financial institutions. On the other hand, the supervisory and enforcement environment for smaller Canadian financial institutions has become more difficult. Of course, all Canadian financial institutions are exposed to the enforcement culture of other jurisdictions and, as well, to claims and proceedings brought by parties other than regulators.”

 

UNITED KINGDOM

Simon Crown

Clifford Chance LLP

“The UK’s Financial Conduct Authority (FCA) has imposed significantly fewer fines on regulated firms to date in 2016, compared to 2015. However, this does not reflect a relaxation in scrutiny or enforcement. The predecessor to the FCA – the Financial Services Authority (FSA) –reacted to the global financial crisis by significantly increasing the intensity of its scrutiny of regulated firms, and this has resulted in increased levels of enforcement. While this trend has been apparent since around 2010, there has not been a marked change in the level of scrutiny or enforcement during 2016. Regulated firms now operate in an environment in which the FCA is prepared to challenge almost any aspect of a firm’s activities, from the appointment of particular individuals, to business decisions and business models proposed by firms, to the features of proposed new products.”

 

IRELAND

Paul Foley

McKeever Rowan

“From an Irish perspective, EU regulation of the financial services sector has increased exponentially since 2012. As a result of the 2008 financial crisis, increased transparency requirements were imposed on certain financial and non financial counterparties by Regulation 8484/2012 (EMIR). These followed on from the MiFID 1 Directive in 2007 and which was implemented in Ireland in the same year. Probably the most complex of all the EU regulations in recent years are those implementing Basel III, which for the most part was implemented through the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV). The CRR had direct effect in Ireland from January 2014 and the CRD IV was implemented by Statutory Instrument No. 158 of 2014 the European Communities (Capital Requirements Directive) Regulations.”

 

FRANCE

Hubert Blanc-Jouvan

Ashurst LLP

“French financial institutions are subject to a growing number of European and national regulations which have a direct impact on both the conduct of their business with clients – particularly their distribution and marketing activities – and their own internal management, in relation to internal control, AML-CTF and corporate governance requirements. With the implementation of the Single Supervisory Mechanism and the BRRD in the EU, the expectations of national authorities have increased. In this context, French authorities have recently released guidance for businesses, including that the regulatory compliance function is essential, a true culture of risk is crucial, risk appetite must be a priority for a company’s decision makers, and AML-CTF is a priority. It is also worth noting that the number and quantum of sanctions imposed by French authorities have substantially increased in recent years.”

 

NETHERLANDS

Bastiaan Siemers

Houthoff Buruma

“In respect of today’s financial regulatory environment in the Netherlands, this statement is very true due to various reasons. First of all, ongoing legislative initiatives on a European Union level will introduce further financial regulatory rules for financial institutions in the Netherlands. In this respect, we have to see though to what extent the new European ‘better regulation’ strategy will indeed result in fewer rules. Apart from European influence, the Dutch regulators AFM and DNB have put more emphasis on regulatory enforcement, although this very much depends on the sector involved. In this respect, it must be acknowledged that the Dutch regulators seem to rely more on ‘soft’ enforcement than on ‘hard’ enforcement as the number of official sanctions, such as administrative penalties, has come down recently..”

 

SWITZERLAND

Dr Jeannette Wibmer

Badertscher Attorneys

“In the wake of the 2008 global financial crisis, international bodies revised the existing standards for financial service providers such as banks, asset managers, financial advisers and collective investment schemes, as well as their services and the financial market infrastructure, including stock exchanges, other trading facilities, central counterparts and central securities depositories. Swiss financial institutions likewise faced increased regulatory activities. These changes have affected all aspects of the Swiss financial sector ranging from cross-border private banking – in which Switzerland remains the world leader responsible for managing a quarter of global cross-border assets – to investment banking.”

 

RUSSIA

Grigory Marinichev

Morgan Lewis

“The Russian finance sector has been operating in an environment of substantially increasing regulatory scrutiny. As a result of the imposition of Western sanctions, the devaluation of the Russian currency, and the downgrade of Russia’s sovereign rating, the Russian banking sector has been put under significant pressure. Following the insolvency of a number of large Russian banks – including top-50 Vneshprombank – it appeared that the amount of assets illegally stripped from the banks exceeded several billion dollars. In response, the Central Bank of Russia (CBR) imposed more stringent supervision. This has, in turn, affected almost every sphere of financial activity, from the granting of loans to the collection of bad debts and insolvencies.”

 

UNITED ARAB EMIRATES

Sean Thomas Boyce

Jones Day

“Financial institutions are, without question, confronted with an environment of heightened regulatory scrutiny and enforcement activity. The past decade has seen a convergence of expanding regulatory regimes in response to the 2008 financial crisis and an intensified focus by regulators across multiple jurisdictions on anti-money laundering, anticorruption and sanctions compliance. Given its geographic location and its emergent economy, the UAE has been caught squarely within this new global current. As the UAE financial sector continues to rebound from the 2008 crisis, regulators have begun to enact expansive regulatory regimes designed to mitigate the risks of the next crisis, align with emerging international norms and complement global regulatory enforcement objectives.”


CONTRIBUTORS

Ashurst LLP

Badertscher Attorneys

Clifford Chance LLP

Houthoff Buruma

Jones Day

McKeever Rowan

Morgan Lewis

Nelson Mullins Riley & Scarborough LLP

Stikeman Elliott LLP


©2001-2016 Financier Worldwide Ltd. All rights reserved.