September was a good month in the financial market as stocks and cryptocurrencies bounced back amid central bank interest rate cuts and Chinese stimulus. As an agency specialising in financial services marketing, our team has rounded up the biggest changes that happened last month and what’s coming up in October. Here’s our Regulations Roundup – October 2024.
Gary Gensler reiterates Bitcoin is not a security
Gary Gensler, the head of the Securities and Exchange Commission (SEC), reiterated his view that Bitcoin was not a security. In an interview with CNBC, he said that Bitcoin was akin to a digital commodity, which explains why the agency approved spot ETFs. In line with that, the agency approved the first Bitcoin options ETF by Blackrock, the biggest asset manager in the world with over $10 trillion in assets.
FDIC focuses on bank mergers
Another top regulatory story was the decision by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) to change the guidelines to use when evaluating bank mergers.
The new rules will focus on financial stability risk, where banks with over $100 billion in assets will be placed under more scrutiny. The agencies will also look at the impact on competition, the effectiveness of anti-money laundering issues, and the convenience and needs of society. The agencies have been working on these rules after last year’s mini banking crisis that led to the collapse of companies like Silicon Valley Bank and First Republic Bank.
FCA urges banks to offer better rates
In the UK, the Financial Conduct Authority (FCA) put more pressure on local banks to offer more attractive interest rates even as the Bank of England (BoE) started cutting interest rates. It also warned banks that failure to give these customers better returns would lead to fines and warnings.
Last year, the FCA pushed banks to hike rates, netting customers £4 billion in extra cash in their savings accounts. In a statement, the agency said:
We will expect a clear explanation should we identify that a firm has changed its savings rates significantly more quickly and fully in response to interest rate reductions, compared to previous interest rate increases.
Financial Reporting Council warns on private equity investments
The FRC warned heads of UK audit companies to report whenever private equity companies approached them for an acquisition or investments. In a statement, Richard Moriarty, the agency’s head, said he was not opposed to private equity firms taking stakes in accounting companies. However, he was concerned that these investments would lead to substantial risks that need to be carefully managed.
The statement came at a time when demand for accounting is rising from private investors. For example, Grant Thornton UK has drawn interest from PE companies like Carlyle, Blackstone, Permira, and CVC Capital.
SEC questions FTX auditor
Meanwhile, the SEC warned that Prager Metis, a top 100 accounting company in the US, erred when it audited FTX, the collapsed crypto exchange. It accused the auditor of not having an experienced team that understood the crypto industry. It also did not understand the relationship between FTX and Alameda Research, which could borrow unlimited customer funds from FTX.
APRA proposes banks phase out tier 1 bonds
In Australia, the Prudential Regulation Authority (APRA) proposed that banks should start phasing out tier 1 bonds to meet capital requirements. In the statement, the agency recommended banks seek to replace these bonds with cheaper and more reliable forms of capital by 2032.
Its concerns stem from last year’s collapse of Credit Suisse, then the second-biggest bank in Switzerland. Investors who had allocated money in the bank’s AT1 bonds lost most of their cash after the merger with UBS. The APRA said:
Unfortunately, international experience has shown that AT1 does not fulfil this function in a crisis situation due to the complexity of using it, the potential for legal challenges and the risk of causing contagion.
Data shows that European banks issued more AT1 bonds in September than in any month this year. They raised $14.5 billion, a trend that could continue.
ESMA focuses on ESG funds
Like most other regulators, the European Securities and Markets Authority (ESMA) deals with environmental, social, and governance (ESG) issues in the financial services industry. One of the top issues has been greenwashing, a situation where asset managers call funds sustainable to attract more funds from investors. Under the new guidelines by ESMA, sustainable funds will need to have a minimum of 80% of investments with environmental characteristics. As a result, 1,200+ funds with $8 trillion in assets will likely need to change their names to meet with these new requirements.
ASIC to implement more crypto regulations
The Australian Securities and Investments Commission (ASIC) said that it would consider implementing more licensing requirements for the industry. These regulations will be on top of those being drafted by the Albanese government. ASIC aims to release an update to Information Paper 225 with more details about this in November. The statement said:
ASIC’s message is clear: a significant number of crypto-asset firms in Australia will likely need a license under existing law, as many widely traded crypto assets are considered financial products.
Most financial regulators are working on regulating the fast-growing crypto industry in order to protect their citizens.
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