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How will financial regulation shape the year ahead?

The answer will vary according to where your business operates, with the promised repeal of Dodd-Frank in the US, just as Europe steps up regulatory transparency with MiFID II. The State of Regulatory Reform 2018 report by Thomson Reuters paints a picture of financial regulatory reform around the world and highlights some of the common driving forces behind regulatory progress (including technology) as well as some of the diverging approaches (such as deregulation in the US). It details current trends and upcoming new rules in the Americas, Europe, the Middle East and Asia-Pacific. Some of the key developments analysed in the report include:


EU countries introduced the Markets in Financial Instruments Directive II (MiFID II) in January this year. According to Thomson Reuters, this “is raising questions even as it seeks to resolve non-compliance issues, with a last-minute mini-flurry of waivers, extensions and consultations announced to offset many looming pressure points”. Three key areas are delayed: investor protection contracts; a six-month “breathing space” granted for issuers and traders who had failed to get a Legal Entity Identifier on MiFID II-affected transactions; and the predicted evaporation of research coverage on smaller companies as new rules on research become effective.


US President Trump promised to relax banking rules and to dismantle the financial regulations that he sees as a hindrance to economic growth. The report states: “Congressional efforts to win a broad repeal of the 2010 Dodd-Frank Act face political obstacles. The real change is coming through the executive branch, which is wielding its bureaucratic tools to carry out its agenda within existing law.” And Thomson Reuters Regulatory Intelligence's Alexander Robson commented: “In the U.S., President Trump is working to reshape the post-crisis regulatory landscape put in place by the Dodd Frank Act, even as Congress is gridlocked. His financial agencies are implementing the president's deregulatory agenda with an ambitious strategy that includes pressuring budgets, halting rules in the pipeline, revised enforcement policies and other bureaucratic tools.”


The General Data Protection Regulation (GDPR) is looming and will be a significant challenge for all companies with customers in the EU. Some have called it the biggest overhaul of data protection rules in two decades and some politicians say it is an even bigger compliance challenge than MiFID II, with high penalties for non-compliance.


Britain's departure from the EU in 13 months' time is one of the political shifts that are driving regulatory change. Robson stated: “Beyond an agreed financial settlement, the UK and EU have yet to reach terms for their planned divorce and how that will affect the provision of financial services. After Britain exits, passporting likely will be history and any structure for recognizing regulatory equivalence, whilst logical, is some way from being decided between both parties.”


Financial technology (fintech) is also pushing the boundaries and the speed of financial regulation. While it is helping with compliance, it also introduced new risks and areas that need a new approach to regulation, such as the growth of cryptocurrencies.  

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