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An opinion by Tim House

The fallout from the LIBOR investigations continues to dominate the regulatory enforcement agenda and will gradually move towards a focus on the anti-trust aspects, as well as criminal prosecutions of individuals. The pace of follow-on civil claims in the courts, with claimants seeking to rely on regulatory findings (of both UK and U.S. regulators) to progress their claims against banks will increase. The lasting relevance of this from a regulatory enforcement perspective is the increased emphasis that the Anti-Trust Division of the U.S. Department of Justice has now put on investigating aspects of the financial services industry – as John F Terzaken points out in his article in the US section.

In the UK market we continue to see banks facing increasingly invasive and demanding regulatory oversight. Banks are finding it harder and harder to have a rational conversation with their regulators. There is a growing recognition that the severity of action against banks and the enormity of recent fines is impacting investor appetite in the sector which can have an impact on banks’ ability to raise capital to meet new regulatory requirements and can impact their ability to nurture a weak economic recovery. The Association of British Insurers (ABI), for instance, has highlighted that difficulties in the banking sector are being felt in the wider economy, in particular by pension funds. None of this, however, looks like affecting the enforcement agenda yet. The ABI notes that investor appetite is significantly adversely affected by lack of regulatory clarity and notes a concern that the UK may impose more stringent requirements than other jurisdictions.

Senior management remain a focus of attention for UK regulatory agencies. The FSA recently wrote to CEOs reminding them about conflicts of interest between their asset managers and customers, and seeking declarations in this regard. The FSA has said we should expect to see enforcement work in this area.

A current global theme is the harmonisation of regulation internationally. While this is a desirable goal at a policy level, at the point of enforcement the picture remains (and is increasingly) fragmented. On the ground, repeatedly we see local regulators and courts tasked with enforcing such regulations taking decisions for apparently domestic or political reasons. This is a continuing conflict.

In Asia, a consistent message is that litigation is not the primary worry for banks; rather the focus is on regulatory investigations, in particular investigations that span different markets and which are seemingly driven by U.S.-style investigation techniques. We have noted previously the challenges thrown up by the extraterritorial ambit of U.S. jurisdiction clashing with local concerns about national sovereignty and the right of self determination. There continues to be much New York based litigation against Chinese account holders which gives rise to many difficulties in this context. The U.S. Securities and Exchange Commission (SEC), for example, has issued over 50 requests for information to China recently. The majority of these requests have received no meaningful response. Against this backdrop, it is very difficult to advise clients in China as to the ambit and effectiveness of U.S. “long arm” law.

Contributed by Tim House. 

Tim House

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Tim House
Tim House
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United States
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A current global theme is the harmonisation of regulation internationally. While this is a desirable goal at a policy level, at the point of enforcement the picture remains (and is increasingly) fragmented.

 

 

 

 

 

 



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