In recent weeks I have been reflecting on the advice given to Alex Thompson, the Britain who narrowly missed coming first in the Vendee Globe round the world yacht race; “In order to finish first you first need to finish.” In a gripping climax, he managed to narrow a 900 nautical mile deficit to come in just 12 hours behind France’s Armel LeCleac’h. Thompson lost one of the foils on his yacht just 14 days into the race when he hit an unidentified object and had to compromise his sailing for the remainder of the race.
Donald Trump has certainly made front-page news every day since his inauguration and there are doubless plenty of people watching his strategy unfold who would question his chances of completing even a first term as President. But his recent announcement that he is, “going to do a big number on Dodd Frank”, will have been greeted by many in the financial markets around the world. The Dodd Frank act, quickly followed by the Volker Rule, has restricted the ability of banks to trade speculatively whilst wrapping them up in a pile of regulation.
Unsurprisingly, the legislation from the US was quickly echoed in European regulation and Mifid II and Basel III contain elements, and in some instances amplifications, of the new US regulatory framework. There is no question that financial markets and liquidity in key markets has been damaged by this wave of regulation and that, whilst some of the more prudent constraints on capital adequacy and clearing are sensible to retain, a repeal of the most cumbersome rules will be a boost for the US financial markets. But rather like the Vendee Globe this is a “round the world” race and we will all wait with baited breath to see whether a deconstruction that starts with Trump in the US will be matched by similar bold action in Europe or indeed the UK when it stands alone!