The latest G20 summit revealed the increasing movement away by the United States from its traditional western relationships, whilst global tensions increased over continued missile launches by North Korea. Paris upped its game in attracting banks to move out of the UK post-Brexit by offering tax cuts and reduced bureaucracy. An effort by the Confederation of British Industry to persuade the government to seek a delayed exit from Europe was dismissed by government ministers, whilst the UK Financial Conduct Authority chief Andrew Bailey also backed a transition period for City firms. The European Union and Japan announced the successful conclusion of negotiations for a trade deal, which is now ready to move to ratification. Here are the main stories in finance and regulation from the last two weeks.
The Central Bank published a Discussion Paper on the Consumer Protection Code and the Digitalisation of Financial Services. The paper notes the risks and benefits to consumers and discusses how they should be protected in relation to technological developments. Responses are requested for 27th October 2017.
The European Securities and Markets Authority published three consultation papers on the Prospectus Regulation, which consider simplifying the regime to allow increased access for smaller companies to capital markets. The consultations cover the format and content of the prospectus, the EU Growth prospectus and scrutiny and approval. Comments are requested for 28th September 2017 and the technical advice will be delivered for March 2018. ESMA also reported a further fall in the number of prospectuses being produced of 8.5% in the year 2015-2016, continuing a downward trend since the financial crisis.
The European Insurance and Occupational Pensions Authority called for the introduction of a recovery and resolution framework for insurers and reinsurers. It is seeking a minimum harmonisation of the fragmented arrangements for insurance company failures, which will reduce risk and costs. The framework would apply to insurance entities covered by Solvency II. Meanwhile EIOPA launched its first consultation as part of its advice on the review of Solvency II.
The European Parliament called for multinationals to disclose tax information in each country in which they operate. It said large firms should also disclose information about taxes they pay around the world. MEPs debated the issue and voted in favour of the disclosures and will now take the issue forward in drafting legislation. The European Union estimates that EU countries lose €50-70bn in tax every year under current regulations.
The European Commission proposed a Pan European Pension Product. The product, which would be offered by private companies, would be standardised and designed to offer an alternative to the current market which provides only for national pensions. Savers would be able to cross borders without the need to invest in a new pension in each country where they live and work. Initial consultations suggested that there was private sector enthusiasm to support such a product.
The Financial Conduct Authority announced a further review into the asset management industry and the fees it charges. The regulator has told firms to improve their corporate governance and change their charging structures, pointing in particular to performance fees. The report followed a two year review which had included the possibility of a referral to the competition authorities. The regulator will conduct further investigations into investment platforms in relation to competition and value for money.
The Financial Conduct Authority issued its annual report and accounts for 2016/17. The regulator referred to its core achievements during the period: the continued work on payment protection insurance, preparations for MIFID II and the Market Abuse Regulation, the review of the asset management industry and its continued focus on technological innovation. The regulator also confirmed the new chair persons of the Practitioner Panel and the Markets Practitioner Panel.
The Financial Conduct Authority announced that it was to delay making final rules on the provision of contracts for difference to retail investors due to the European Securities and Markets Authority announcement on product intervention measures under the Markets in Financial Instruments Regulation. ESMAs proposals contain similar measures to those suggested by the FCA’s own consultation on the issue.
Insurance and financial services company AIG paid just under $150,000 civil liability for 555 apparent violations of sanctions programs. Between 2007 and 2012, AIG engaged in transactions totaling approximately $396,530 in premiums and claims for the insurance of maritime shipments of various goods and materials destined for Iran, Sudan, or Cuba. The Office of Foreign Assets Control determined that AIG voluntarily self-disclosed the violations, and that they constituted a non-egregious case.
The United States increased its efforts to prevent the flow of funds to North Korea in response to increasing numbers of missile tests by the Asian country. Eight major banks were the subject of an order in the federal court for ‘damning seizure warrants’ which would allow the blocking of funds entering and leaving that bank. Prosecutors claimed that $700m of prohibited transactions had taken place with entities linked to North Korea.