Articles From the Team

A discussion of 2019's global/EU law changes

For those of you still reeling from MiFID II (services to clients regarding ‘financial instruments’); PSD2 (payment services and payment service providers); GDPR (data protection law across the EU), and other regulatory changes that took place in 2018, then this blog post will make for some unhappy reading.

Lost amongst the noise of the UK’s disorderly exit from the EU and Trump’s ramblings, are some absolutely corking regulatory and legal changes. These changes will have far reaching impacts on your organisation. How has your preparation been and what is left to do to limit the bottom line exposure?

First up on the horizon is my absolute favourite topic for general pub whinging with friends: the ability of supranational organisations to avoid their tax obligations in countries where their revenue has been generated. Trick the border guards no more with your stolen loot and welcome the ‘catchily’ titled: The Anti Tax Avoidance Directive.

The European Union directive kicked in on the 1st January 2019. Some would cry conspiracy given the unfortunate timing of the UK exit, and the timing of directive coming into force. Will the UK become an even greater tax haven for those rogue international corporates?

The directive aims to: deter profits being shifted to low/no tax countries (Republic of Ireland watch those GDP figures tumble!); prevent EU based companies lying about profits having already been taxed in another global country; prevent the avoiding of taxes when re-locating corporate assets; discourage false debt arrangements to minimise tax burdens; and, bring an anti-abuse rule into force, even if specific rules don’t cover those dodgy accountants’ exact schemes!

It’s a thing of real beauty and my favourite directive since the great banana crisis of 2009 – although I must admit for very different reasons.

The other good one is the change with the global Basel III regulatory standards. (This was of course designed off the back of the financial crisis in 2007/2008.) Effectively, the biggest outcome is that our fractional reserve banking system will become slightly more fractionally reserved. In a world where every bank is bankrupt it makes sense to reduce the probability of future bank failures by increasing their capital adequacy. It will be interesting to see if the 31st March 2019 date met, or if bank balance sheets remain so fragile they can’t meet these miniscule requirements (4.5% CET1 ratio; come on you can do it!).

Of course, the impact on banks will be a further reduced appetite for lending to business and retail customers. This inevitably impacts the pipeline on businesses’ ability to grow, and retail customers to purchase mortgages, loans etc. further down the line. The next recession could be a doozy.

I’m sure there are many more that I haven’t kept track of. What are your favourite lights at the end of a tunnel? Hopefully not a revenue destruction train of your own making.

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