Research & CSDP Papers » Banking and Capital Markets

USA, United Kingdom and Austria

15 DEC 2009

USA
On December, 11 2009 the House of Representatives passed the "Wall Street Financial Reform and Consumer Protection Act" (http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform), with a 223-202 vote. As expressly stated, it will:

  • Increase Consumer Protections: Creates the Consumer Financial Protection Agency (CFPA), a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services. 
  • Create a Financial Stability Council: Creates a council of regulators that will identify financial firms that are so large, interconnected, or risky that their collapse would put the entire financial system at risk. These systemically risky firms will be subject to increased oversight, standards, and regulation.  
  • End Taxpayer Bailouts and "Too Big to Fail": Establishes an orderly process for shutting down large, failing financial institutions like AIG or Lehman Brothers in a way that ends bailouts, protects taxpayers, and prevents contagion to the rest of the financial system. 
  • Rein in Executive Compensation: Gives shareholders a "say on pay" - an advisory vote on pay practices including executive compensation and golden parachutes. It also enables regulators to ban inappropriate or imprudently risky compensation practices, and it requires financial firms to disclose incentive-based compensation structures.
  • Safeguard Investors: Strengthens the SEC's powers so that it can better protect investors and regulate the nation's securities markets.  It responds to the failures to detect the Madoff and Stanford Financial frauds by ordering a study of the entire securities industry that will identify needed reforms and force the SEC and other entities to further improve investor protection. 
  • Regulate Derivatives:  Regulates, for the first time ever, the opaque $600 trillion over-the-counter (OTC) derivatives marketplace. Under the bill, all standardized swap transactions between dealers and "major swap participants" would have to be cleared and traded on an exchange or electronic platform. The bill defines a major swap participant as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions create such significant exposure to others that it requires monitoring. 
  • Outlaw Predatory Mortgage Lending Practices: Would incorporate the tough mortgage reform and anti-predatory lending bill the House passed earlier this year. The legislation outlaws many of the egregious industry practices that marked the subprime lending boom, and it would ensure that mortgage lenders make loans that benefit the consumer.  It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.  
  • Require the Registration of Hedge Funds: Closes a regulatory hole that allows hedge funds and their advisors to escape any and all regulation.  This bill requires almost all advisers to private pools of capital to register with the SEC, and they will be subject to systemic risk regulation by the Financial Stability regulator."

United Kingdom
Section 413(8) of the Companies Act 2006
has been recently amended (12th november 2009) so that banking companies and the holding companies of credit institutions are only required to make aggregate disclosures of the amounts specified in section 413(5)(a) and (c). These institutions are consequently no more obliged to disclose details of individual loans to their directors. These provisions will come into force on 23rd December 2009. For further details visit www.opsi.gov.uk/si/si2009/pdf/uksi_20093022_en.pdf

Austria
The EU Payment Services Directive 2007/64/EC (http://ec.europa.eu/internal_market/payments/framework) was implemented in Austria thanks to the enactment of a new Payment Services Act and a few amendments to banking and financial market laws. They became effective on November 1 2009. The directive establishes "a modern and coherent legal framework for payment services" in terms of safety and efficiency within the European Union (the Single Euro Payments Area).