EU Bank Ban, Gold Fixings, Piwowar on FSOC: Compliance

The European Union’s bid to set structure rules for about 30 of the bloc’s biggest banks has run into resistance from countries opposed to a planned proprietary trading ban, according to a report prepared by Italy, which holds the EU’s rotating presidency.

Very few countries are explicitly in favor, according to the report.

The proposal for banking-structure reform by Michel Barnier, the EU’s financial-services chief, has come under attack on multiple fronts since he presented it in January. In addition to the proprietary-trading ban, Barnier set out EU-wide standards for splitting up the most systemically important banks that would push certain kinds of derivatives and other trading activities into separately capitalized units.

The separation plan also hit a legal snag after in-house lawyers for the EU raised objections.

Compliance Policy

Gold Fixing Banks to Revamp Century-Old Pricing Process

The banks conducting the century-old London gold fixing that’s used by miners and central banks to trade and value the metal are seeking to appoint an independent administrator in a revamp of the price-setting ritual.

London Gold Market Fixing Ltd., which runs the procedure, said in a statement that the London Bullion Market Association will help with a request-for-proposals exercise for those wanting to run the fix, and that it’s seeking an independent chairman for the fixing firm.

Deutsche Bank AG’s exit from the process this year as it scales back its commodities business left Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays Plc to conduct fixings.

The gold fixing takes place twice a day by phone. A similar ritual for silver will be replaced by an electronic auction-based mechanism run by CME Group Inc. and Thomson Reuters Corp. next month after Deutsche Bank’s planned withdrawal would leave just two banks to conduct fixings for that commodity. Precious metals are getting more attention from regulators following price-rigging probes in interbank and currency benchmarks.

The gold fixing company, which runs the process for the banks, said it also will work with the U.K.’s Financial Conduct Authority and other stakeholders during the request for proposals exercise.

SEC Should End Maker-Taker, Payment for Order Flow, Levin Says

The U.S. Securities and Exchange Commission should act immediately to eliminate two stock market-pricing models that create conflicts of interest for brokers, U.S. Senator Carl Levin said in a letter to SEC Chairman Mary Jo White released July 15.

Levin, a Michigan Democrat, criticized systems that pay brokers who send orders to be filled. Intercontinental Exchange Inc. Chief Executive Officer Jeff Sprecher and IEX Group Inc. CEO Brad Katsuyama also have called for regulators to ban maker-taker, a system in which rebates are paid to brokers who provide exchanges with liquidity. Maker-taker is now the predominant way exchanges attract orders from brokers who have other options.

Money managers, some academics and exchange executives have called for an end to the maker-taker system.

SEC spokesman John Nester declined to comment about the letter.

Compliance Action

Barclays, Deutsche Bank Said to Face U.S. Senate Tax Probe

Barclays Plc and Deutsche Bank AG face scrutiny over their sale of products to a hedge-fund manager that allowed it to skirt borrowing limits and avoid taxes, according to people with knowledge of the matter.

The U.S. Senate Permanent Subcommittee on Investigations plans a hearing next week on what it calls abusive transactions by financial institutions, according to a July 14 notice from the panel. The companies, which aren’t named in the notice, are Barclays, Deutsche Bank and hedge-fund manager Renaissance Technologies LLC, the people said. Representatives for each of the companies plan to testify at the July 22 hearing, the people said.

The investigation is another blow for Antony Jenkins, chief executive officer of London-based Barclays, as he seeks to restore the firm’s reputation after it became the first lender to be fined for rigging Libor.

Kerrie Cohen, a spokeswoman for Barclays, declined to comment, as did Renee Calabro of Deutsche Bank, and Jonathan Gasthalter, who represents Renaissance. Gordon Trowbridge, a Senate subcommittee spokesman also declined to comment. The people with knowledge of the matter spoke on condition of anonymity because they weren’t supposed to reveal information before the hearing.

The subcommittee often examines legal business practices with an eye toward policy reform and isn’t able to impose penalties.


SEC Commissioner Piwowar Calls FSOC ‘Vast Left-Wing Conspiracy’

The U.S. Securities and Exchange Commission’s Michael Piwowar called the Financial Stability Oversight Council a “vast left-wing conspiracy to hinder capital formation.”

He made the remarks in a speech July 15 at the American Enterprise Institute in Washington.

The FSOC’s initials really stand for “Firing Squad on Capitalism,” Piwowar, 46, said. He called the council “the Bully Pulpit of Failed Prudential Regulators” and “the Dodd-Frank Politburo,” adding that his opinions are his own and that the pejoratives are “entirely accurate.”

The 2010 Dodd-Frank Act created the council, a panel of regulators in the Treasury Department, to prevent another financial crisis.

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