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Given the burgeoning level of regulation in the financial services industry, banks and other FIs must be aware of their compliance obligations at all times. They must also keep their ear to the ground regarding new, incoming regulations. In the US, given the political upheaval brought about by the 2016 presidential election, the level of regulatory scrutiny FIs face may be decreasing after years of particularly stringent regulatory oversight. The new administration’s drive to roll back regulations including the Dodd-Frank Wall Street Reform and Consumer Protection Act, for example, could be sea-change. However, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission are not expected to go quietly into the night, meaning enforcement activity may remain strong in the years to come.

UNITED STATES

Jennifer L. Achilles         

Reed Smith LLP

“Although financial institutions must continue to be vigilant about compliance with new and existing regulations in the US, the general consensus is that regulatory scrutiny may have finally reached its peak. Over the past several years, banks and financial institutions have expended significant resources to come into compliance with the heightened regulatory requirements imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act put into place following the financial crisis. Financial institutions have also faced a record number of enforcement actions and criminal investigations in recent years, resulting in multi-billion dollar fines and penalties.”

MEXICO

René Arce Lozano

Hogan Lovells

“Ever since the economic crisis of 2008, financial institutions, governments and financial authorities all over the world have taken steps toward implementing stronger regulatory systems. Mexico has been no exception. After facing its own financial crisis in 1994, Mexican authorities have been looking for different ways to strengthen the banking industry regulatory framework and supervising authorities. As a result of measures that were adopted then, the Mexican economy remained relatively stable despite fluctuations and volatility in the global market during the 2008 recession.”

UNITED KINGDOM

Rhodri Thomas

Freshfields Bruckhaus Deringer LLP

“There was a decrease in the number of fines imposed against firms by the Financial Conduct Authority (FCA) in 2016 to 2017, with penalties falling to £181m, compared to £855m in 2015 to 2016. Some point to a more conciliatory approach being taken by the FCA, but the figures do not really tell the full story. The 2014 to 2016 numbers were skewed by large wholesale market conduct enforcement investigations, such as those concerning Libor and Forex. Putting those anomalous cases aside, I have seen no evidence that regulatory and enforcement activity will ease up. In fact, we may well see the number of enforcement investigations that are opened rise, particularly in light of the FCA’s 2017 Mission Statement.”

IRELAND

Paul O’Connor

KPMG

“Financial institutions have been subject to increasing regulatory scrutiny since the dawning of the financial crisis. The introduction of the Single Supervisory Mechanism (SSM) regime and new, more prescriptive legislation at a European level, based on the G20 agenda, brings a greater need for regulators to understand the balance sheets of banks and any inherent risks. The financial crisis resulted in taxpayer funds being used to support the financial system resulting in increased scrutiny so that authorities are alerted to any issue that may result in a threat to a financial institution.”

FRANCE

Gilles Kolifrath

Kramer Levin Naftalis & Frankel LLP

“Since the financial crisis, financial institutions have been facing increasing regulatory scrutiny. Current regulation requirements impose various obligations on financial institutions, which market players must now comply with. The European Market Infrastructure Regulation (EMIR) includes the obligation to centrally clear certain classes of over-the-counter (OTC) derivative contracts through central counterparty clearing or apply risk mitigation techniques when they are not centrally cleared. For example, financial institutions that perform OTC derivative contracts not cleared by a central counterparty will be subject to margining requirements, such as cleared derivatives.”

POLAND

Beata Balas-Noszczyk

Hogan Lovells

“The economic landscape for financial institutions is dynamic. Despite recent global macroeconomic events, as well as local issues, the financial system in Poland enjoys a solid reputation within the European market. In some cases, local legislation as well as soft-law regulations issued by the regulators seem stricter in comparison to EU standards. For example, legislation which concerns administration fines for money laundering or regulations that pertain to the implementation of the Insurance Distribution Directive. However, it still seems to be acceptable for market participants.”

INDIA

Muzammil Patel

Deloitte

“Financial institutions continue to be impacted by the influx of regulations, a trend that is unlikely to abate. In addition to regulations resulting from past mishaps, regulators are increasingly focused on early identification of potential systemic issues. This at times means that regulatory supervision is more data intensive and at times intrusive. There is an increasing trend of direct regulatory intervention, especially in the area of bad loan resolution. Regulators are also directly engaging in corrective action where weak financial institutions can potentially impact the financial stability of the system.”

VIETNAM

Kent Wong

VCI Legal

“Banking reforms by the government have seen vital steps taken to revamp and restructure Vietnam’s financial sector. The boardrooms of Vietnamese banks are being zeroed in on as part of the government’s intensified scrutiny of the banking system after problems of non-performing loans. Increased pressure is not limited to the larger banks. Smaller banks – those categorised as ‘weak’ – are also facing more scrutiny. The stepped up regulatory scrutiny is the result of concerns that that recent banking problems have been due in part to banks’ boards not understanding the risks they were taking and not exercising appropriate oversight.”

UNITED ARAB EMIRATES

Sean Thomas Boyce

Jones Day

“UAE financial institutions undoubtedly operate in an environment of increasing national and international regulatory scrutiny. First, in light of the ongoing expansion of UAE financial regulatory regimes, institutions are necessarily subject to growing enforcement risks. Indeed, while the expansion promises greater market stability, the transition will involve greater compliance obligations and oversight by regulators as institutions continue to adapt to the new regulatory frameworks. Second, operating in a global business hub requires UAE institutions to confront myriad international regulatory regimes and regulators.”

CONTRIBUTORS

Deloitte

Freshfields Bruckhaus Deringer LLP

Hogan Lovells

Jones Day

KPMG

Kramer Levin Naftalis & Frankel LLP

Reed Smith LLP

VCI Legal