Simon Lovegrove: Hello everyone and welcome to this latest financial services video.
With 2017 being just around the corner, and with the possibility that the year will be a defining moment for the financial services industry, we thought we would take a look at the forthcoming Trump administration and also look at recent developments concerning Brexit.
Simon Lovegrove: Michael, beginning with the US position, there has been a lot of speculation in the press that the forthcoming Trump administration will signify significant deregulation in US financial services. What are your thoughts?
Michael Loesch: There is no doubt that financial services deregulation is a top priority for Mr Trump and his incoming administration, as he transitions into governing in the next year, financial services reform - specific efforts to repeal Dodd Frank or pieces of Dodd Frank will be at the top of the agenda.
Simon Lovegrove: And interestingly as well, both Houses are Republican controlled now.
Michael Loesch: That is true and there is a real question of how far and how soon reform will go. I think there is a lot of support, and there will be support, from Republicans who control of both Houses, but there is still a lot of opposition and loyal support for the regulations that are now in place. So it is going to be a difficult task to get comprehensive reform.
Simon Lovegrove: And appointees to regulatory bodies, I saw that Mary Jo White [SEC chair] is resigning following the election. How will that help Trump?
Michael Loesch: Well there are a number of names being floated for top positions in the administration. Those individuals will be very important to Mr Trump in the implementation of his agenda. We have seen a few names come out so far but those official nominations will not occur until next year and they will have a big impact on his ability to execute his agenda.
Simon Lovegrove: Turning now, specifically, to Dodd Frank - wholesale reform or peace-meal reform?
Michael Loesch: Yes, wholesale reform of Dodd Frank is, I think, unlikely. There are specific financial services regulations that I think are more likely to be the target of early efforts of change. The Volcker Rule is an obvious example, one which has received a lot of attention, I think that’s likely to be a target for change. The Department of Labour’s fiduciary duty standard, I think that is likely to be a target for change as well for the administration. There are other more specific areas - position limits for commodities by their Commodities Future Trading Commission, I think is also another area I think has some potential for change or rolling back. So there are quite a few specific areas I think that will be targets for change rather than comprehensive reform.
Simon Lovegrove: And what will be your key message to clients in 2017?
Michael Loesch: I think for clients it’s watch very closely, participate in the process as reform begins. I think you should not expect dramatic change in the first 3 months / 6 months of 2017 but change is coming and you need to be carefully planning for the adjustments that you need to make to stay in compliance.
Simon Lovegrove: Jonathan you have been working with many of our clients on Brexit projects, what have you been seeing lately?
Jonathan Herbst: People are doing their scenarios and options planning and that’s been going on since the referendum vote. Clearly that needs to continue. There’s a lot of work beginning now on actually looking at the options in more detail and some people are actually beginning to activate those options on the basis of what they think is the worst case.
Simon Lovegrove: And one of the hot topics is transitional arrangements at the moment.
Jonathan Herbst: The problem with transitional arrangements as everyone is aware, you’ve had very contradictory comments from different [Government] Ministers. Clearly there is a will in certain parts of Government to try and negotiate a transitions agreement and that’s important for financial services and we actually have precedents for that in many of the directives and regulations under the current EU regime. I think the problem if you are a firm, whichever kind of firm you are is you cannot rely on politics to sort out the legal problems so depending on your business you need to prepare for the worst and hope for the best.
Simon Lovegrove: And I said at the beginning 2017 is just around the corner, what would be your key message to clients?
Jonathan Herbst: Carry on doing the analysis and that’s what everyone is doing. And then look at the dynamic timeline. It’s going to be a very fast-moving process. In a sense we haven’t seen anything yet. Once Article 50 is triggered that’s when the real business starts and it’s not a static project. In many ways it’s carry on the project and in some ways the danger is the energy goes out of it, it’s completely the opposite in fact next year you are going to have to make coherent, strategic decisions throughout the year and they may change. For example you may take the view that nothing needs to be done in January/February and that may have changed by June/July. The other thing just to say, is and it comes back to what Michael was saying, it isn’t just about the UK. The Brexit debate is one piece of this but we also have all of what’s going on in the US and potential instability in many political developments in Europe so it’s dynamic both in terms of the UK development and in terms of what’s happening elsewhere. So a lot to look forward to!
Simon Lovegrove: Thanks Jonathan. That concludes this financial services video.
Obviously we will be back in a number of videos next year both on Brexit and the Trump administration.