International Policy Digest
Sponsored Content /04 Jan 2017

Issues Facing Cross-Border Financial Control

Every country has its own set of rules and regulations set by the government or another authoritative body to control financial regulation. However, problems arise when there are financial dealings between parties in separate countries be it transferring money, trading currencies, doing business deals or other activities.

Cross-border financial control and regulation can, therefore, present all manner of issues, especially due to differing standards in individual countries. Despite advancements in technology and the world being closer than ever before in many ways, regional differences in regulation still exist.

Banking Struggles

The banking sector in particular struggles to meet cross-border compliance due to significant differences in the regulatory requirements between countries. Countries such as the USA and UK employ much stricter regulations, mainly in reaction to the financial crash of 2008, while other countries are far laxer.

It can be easier in regions such as Europe because the EU has more control over banking across its member nations. Yet in Asia and many other regions, individual countries each have their own set of banking regulations, in different languages and designed for varying purposes. This affects financial markets and investment, discouraging economic growth in particular areas and across the world as a whole.

Market Trading

Trading and investing across borders can be even harder to regulate in some ways. Having said that, markets are far more integrated today than ever before, especially within the EU.

There are rules that have been set and standards that are enforced by the ECB, which provide confidence when trading currencies with FxPro or investing in European stocks elsewhere. There will always be at least one body overseeing markets that sets common standards.

Brexit Impact

There are fears that when the UK leaves the EU there will be an impact on financial regulations regarding the EU, especially as a lot of existing standards were created by the ECB and the Bank of England jointly. At the moment, financial control will remain as it is until all the Brexit negotiations have been settled.

As the UK will need to retain close ties to the rest of Europe when it comes to banking, trade and other financial issues, it’s likely a set of standards will be agreed upon that benefit all parties. Until then some uncertainty will exist.

Recent FCA Changes

The FCA regulates thousands of financial services and markets in the UK. In December it introduced some new rules which ban bonus payments to retail traders and limit trading leverage to 50x. These have drawn some criticism, with claims that they don’t promote integrity and could drive away some FCA brokers from the UK into other countries which are far less regulated.

There are also fears that some smaller companies do not receive the same level of regulation which could also lead to imbalances. Investors should be aware of all cross-border issues when involved in any financial dealings.

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