Financial Regulatory Forum

Bankers say “derisking” underway amid sanctions crackdown; that’s the point, U.S. regulator says

A process of “derisking” is underway by financial firms exiting sectors that represent compliance landmines, bankers said on Tuesday, but a top U.S. sanctions enforcer said that is sometimes just the right move.

“It is not at all uncommon for me to hear that a compliance overhaul was done and certain customers, certain lines of activity were deemed too risky to persist. That may be exactly the right response to a situation where the risk outweighs the benefit,” said Adam Szubin, director of the U.S. Treasury’s Office of Foreign Assets Control (OFAC), the lead agency for the enforcement of U.S. financial sanctions. (more…)

Volcker rule enforcement: Regulators attempt a united front

By Henry Engler, Compliance Complete

NEW YORK, Feb. 19 (Thomson Reuters Accelus) - The question of which regulator will take the lead in enforcing the complex Volcker rule took center stage this week, as U.S. lawmakers voiced concern over the lack of clear leadership among the five agencies in charge of the statute.

In testimony before the House Financial Services Committee on Wednesday, the heads of the five agencies — the Federal Reserve, Office of the Comptroller of the Currency, Securities Exchange Commission, FDIC, and Commodities Futures Trading Commission – found themselves questioned repeatedly over which agency was at the helm. (more…)

Regulators’ emphasis on resolution plans, “too-big-to-fail,” may be misplaced

By Bora Yagiz, Compliance Complete

NEW YORK, Dec. 5 (Thomson Reuters Accelus) – Focusing on too-big-to-fail policies and hard-to-implement resolution plans may lead regulators to miss the next big financial failure, which could come in the areas of shadow banking and short-term financing, industry experts said.
This was the main message given by a panel of experts at a conference organized by the Clearing House, a banking association and payments company on Thursday.  (more…)

Reforming banking’s risk culture requires breaking “accountability firewall”

By Henry Engler, Compliance Complete

NEW YORK, Sept. 11 (Thomson Reuters Accelus) - If there is one part of the cultural makeup of Wall Street that remains firmly in place despite the financial crisis and subsequent avalanche of regulations, it is the reticence among those who lose money to come clean early.

Many of the most spectacular losses in recent years — whether the JPMorgan “London Whale” episode, the UBS “rogue trader” incident, or Jerome Kerviel’s manipulation of internal systems at Société Générale — have all had one thing in common: concealment of trades gone badly wrong, or at a minimum, a lack of transparency and early acknowledgement of losses. And if one can point to a single reason for such behavior, it is the well-known fact that raising the red flag would mean the individual responsible would be shown the door. (more…)

Goldman standards review reflects new compliance landscape

By Nick Paraskeva, for Compliance Complete

NEW YORK, May 29 (Thomson Reuters Accelus) - Goldman Sachs’ report on new business ethics and practices voiced lofty ambitions that are both frequently aired and difficult to implement. But it also articulated higher standards on issues such as reputational risk, suitability and conflicts of interests, which are increasingly demanded by customers, regulators and investors.

The 30-page report was adopted by Goldman Sachs after an extensive review in the wake of financial-crisis scandals that saw it hauled before Congress and pilloried in the press. Violations of compliance standards such as those at Goldman also emerged at several other firms in the post-crisis period. This misconduct has hurt the reputation of the entire financial industry. (more…)

New regulations require cleaner data

By Mark Davies, contributing author for Compliance Complete

LONDON, Apr. 18 (Thomson Reuters Accelus) – Continuing efforts by financial regulators and by firms themselves to monitor and offset risk have affected almost all areas of firms’ operations, including the management and maintenance of data. The overhaul of global systems following the financial crisis has led to an audit of data, and specifically of the information which firms hold about themselves and their counterparties or clients, known as business entity reference data.

More regulation

This “data exploration” is being driven by the cumulative effect of several individual pieces of regulation, including the European Market Infrastructure Regulation (EMIR) and Solvency II in Europe and the Dodd-Frank Act and the Foreign Account Tax Compliance Act (FATCA) in the U.S., all of which are likely to have an impact globally. The primary goal of these proposals, with the exception of FATCA, is to improve risk management in the financial system.  (more…)

AML again a top priority for broker-dealer exams, FINRA says

By Stuart Gittleman, Compliance Complete

(Additional reporting by Suzanne Barlyn of Reuters)

NEW YORK, Jan. 17 (Thomson Reuters Accelus) - Anti-money laundering compliance will again be a focus of Financial Industry Regulatory Authority examinations this year, particularly at broker-dealers with higher-risk business models due to their clients, products and service mix, or locations.

HSBC’s $1.9 billion fine last month highlighted, among other things, the potential AML risks associated with foreign affiliates and the business they transact through their U.S. financial institution affiliates, FINRA said in its 2013 annual regulatory and examination priorities letter(more…)

Europe’s naked short selling ban leaves investors with skin in the game

By Christopher Elias

LONDON/NEW YORK, Dec. 4 (Business Law Currents) – New European short selling regulations are dressing naked short sellers in a regulatory straightjacket, but ill-fitting provisions may leave investors with skin in the game.

In force since 1 November 2012, the regulations were supposed to curb naked short selling and to provide transparency on those trading against European sovereign debt. However, with gaps between short selling methods and alternatives popping up in exchange traded futures and synthetic forms, the holes are already becoming apparent. (more…)

Consumer groups see momentum building against more White House authority over regulators

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Nov. 20 (Thomson Reuters Accelus) - A coalition of public-interest groups is urging Congress to reject a bill that would allow the White House to review major rules proposed by the Securities and Exchange Commission and the Commodities Futures Trading Commission.

The “Independent Agency Regulatory Analysis Act” which was introduced by Republican Senator Rob Portman of Ohio, would give the White House’s Office of Information and Regulatory Affairs the power to ask independent agencies such as the SEC to submit a cost-benefit analysis on “significant rules” or rules that have an economic impact of $100 million.  (more…)

Suit against U.S. Consumer Financial Protection Bureau could force it to define limits to its authority, says banking industry lawyer

By Emmanuel Olaoye

NEW YORK, June 29 (Thomson Reuters Accelus) - Even if a small bank’s lawsuit challenging the authority and leadership of U.S. Consumer Financial Protection Bureau fails in court, it could force the bureau to publicly define its limits, a top banking industry lawyer said.

Joseph Barloon, a partner at Skadden Arps in Washington, said the bureau could be forced to say what it can and cannot do, and provide the banking industry some guidance on the agency’s positions on issues such as mortgage lending. (more…)

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