The UK Parliament was opened with a stripped down Queen's speech, which removed many manifesto policies of the Conservative Party, focusing instead on legislative preparations for Brexit. Brexit negotiations formally began, with the UK changing its position on the first day to agree to the EU terms to discuss exit before future trading relationships; the UK later made an offer to protect the rights of EU citizens living in the country. Opinion polls meanwhile showed a general increase in support across Europe for the EU. In Ireland Leo Varadkar formally became Ireland's Taoiseach, whilst the country raised some €3bn from the floatation of Allied Irish Bank. Here are the main stories in financial and regulation for the last two weeks.
The Department of Finance published the Credit Union Restructuring Board - Rebo Final Section 43 Review. The review was required to consider whether the Board had completed its functions under the Credit Union and Co-operation with Overseas Regulators Act 2012. The report concluded that the Board had completed its work and would be wound down. It noted that the number of credit unions had shrunk, with a reduction of those with assets under €20m and a growth in those with assets of over €100m. It further noted that the sector had under-lent in recent years.
The Competition and Consumer Protection Commission published a report on Options for Ireland's Mortgage Market. The report followed a request by the government for the CCPC to work with the Central Bank to set out options in relation to market structure, legislation and regulation to lower the cost of mortgage lending and to improve competition. The paper set out options for the short, medium and long term.
The Central Bank issued Consultation Paper 110 on the Implementation of Competent Authority Options and Discretions in the European Union (Capital Requirements) Regulations 2014 and Regulation (EU) No 575/2013. It comes ahead of a plan to update the 2014 Implementation Notice in the light of harmonisation initiatives under the Single Supervisory Mechanism. Comments are requested for 4th August 2017.
The European Central Bank gave its support for the movement of the clearing of Euro denominated transactions from London after Brexit and called for an increase in its powers to allow it to directly supervise the activity. The European Securities and Markets Authority published research looking at the effectiveness of the repo markets in providing access to collateral for obligations to clear transactions such as derivatives. This followed concern from market participants that the repo markets were not providing affordable solutions to their collateral needs.
As the market readies for MIFID II, the European Securities and Markets Authority published a Consultation Paper on the Trading Obligation for derivatives under MiFIR. Responses will assist in the preparation of final regulatory technical standards. Comments are requested for 31st July 2017.
Italy confirmed that struggling banks Veneto Banca and Banca Popolare di Vicenza were to be closed, following determination by the European Central Bank that they were failing or likely to fail. The banks will be subject to usual bankruptcy proceedings rather than special resolution.
Barclays Bank was charged with fraud in an action brought by the Serious Fraud Office relating to its refinancing during the financial crisis. The bank raised capital with Qatari and Middle Eastern investors in 2008. The focus of the investigation was two loan agreements which suggested that the bank had agreed to loan back the monies which were invested, neither of which were disclosed to the market. The SFO also charged four senior bankers at Barclays: John Varley, Roger Jenkins, Tom Kalaris and Richard Boath.
The Office for National Statistics abandoned the practice of providing advanced economic information to ministers and government officials before their general release. The decision followed concern that data was being leaked to the markets, and such leaks were generating a loss of trust. Evidence pointed to favourable trading activity on the days before general release. The UK Statistic Authority welcomed the decision.
The Financial Conduct Authority notified firms that they needed to make their applications for regulatory permissions for MIFID II by 3rd July, if it is to approve them for 3rd January 2018. In other news the regulator published new proposals on advice relating to pensions transfers where consumers have safeguarded benefits. It also announced a review into travel insurance availability for consumers who had, or had suffered with, cancer.
The Alternative Reference Rate Committee, which was established by the United States government, has chosen a new reference rate to replace the use of US Dollar LIBOR in the repo markets. LIBOR's reputation has been heavily impacted by multiple manipulation scandals. A new Treasuries 'repo' rate will reflect the cost of borrowing cash against US government debt. The rate will be published by the Federal Reserve Bank in co-ordination with the Office of Financial Research.
The Federal Reserve and the Office of the Comptroller of the Currency provided support for US government proposals to reduce Dodd-Frank rules. The support was reported to make it increasingly possible to relax regulations without the changes being subject to Congressional approval. The calls for reduction included the relaxation of the Volcker rule on the segregation of risk taking activities from consumer deposits.
Deutsche Bank clashed with the US House Financial Services Committee when it declined to provide information about its relationship with President Trump. The bank contended that US laws prevented it from disclosing details of an account review undertaken in relation to the President's ties to Russia, but the committee responded that privacy laws did not apply to disclosures to Congress. President Trump also confirmed that he was personally a subject of the on-going investigation by the Department of Justice.