Change may be afoot with Dodd-Frank legislation – but there’s no reason to panic.
Our thoughts on last Friday’s announcement:
The moment we have been expecting since inauguration day has arrived – sort of. After promising during the election campaign to do away with the Dodd-Frank regulations implemented in the years following the financial crisis, President Trump has hit a six-month pause button on the provisions of Dodd-Frank that authorize the liquidation of distressed banks and the designation of non-banks as systemically important financial institutions.
What’s actually happening?
The Friday announcement was two-fold. The first part is an executive order giving the Treasury Secretary 150 days to review “all significant 2016 tax regulations to determine if they impose an undue financial burden on taxpayers, are needlessly complex, create unnecessary requirements, or exceed what is allowed under law”
The second part is a presidential memorandum giving 180 days to compile a report into the Orderly Liquidation Authority, to ascertain whether it “encourages risk-taking, creates moral hazard, or exposes taxpayers to potential liability.”
The banking sector reacts…
The Dodd-Frank question has been on everyone’s lips for the past few months, and it is very much top-of-mind when we speak to both clients and professionals in the compliance space. Many are sceptical about whether the changes will happen at all, given the vastness of the legislation and the difficulty in reversing it. Prominent commentators on either side of the aisle have both supported and criticised the move.
What does this mean for compliance recruitment?
It seems that either new legislation will be announced or the existing legislation will remain in reduced form. In each case, additional complexity will be introduced into the compliance function, requiring further capacity from an already overstretched function. It seems likely that this extra support will come in the form of permanent, temporary, or consulting support and this will be determined by the outcome of this legislation.
Business as usual, for now – and a positive outlook…
Despite uncertainty about what the next six months holds for the financial services industry, the outlook seems bright. Q1 saw a lot of movement and hiring, plus Morgan Stanley posted a 70% YoY increase in fixed revenue income, and Wall Street is expected to report its biggest week in a decade any day now.
It seems that firms – for the time being – are not trying to second guess what will happen with the regulatory landscape; bridges will be crossed when we come to them. In the meantime, business is decidedly booming. Businesses may be making hay while the sun shines…a lot of hay can be made in six months.
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