Minimum standards of Compliance – nice try or wise decision?

Ever since the start of the Financial Crisis, everywhere around the world governments are trying to find general applicable regulations that make sure such a crisis will not occur again.

On 30th June 2010 the German “Bundesanstalt für Finanzdienstleistungsaufsicht” (Federal Institute for Financial Services Supervision) published a paper called “Mindestanforderungen an Compliance” (Minimum standards of Compliance), as a structured collection of previous regulations and interpretations (CFO world). It is compulsory for all financial services companies to implement it by end of year 2010.

With this paper the Federal Institute of Financial Services Supervision aims to enhance the trust of investors in the functionality of the capital market, to protect investors as well as financial services companies including their employees and to strengthen the institutional functionality of capital markets (download paper). Being the first standardized set of regulations it emphasizes which duties concerning organization, behavior and transparence financial services companies have to implement if they provide transactions in securities for customers.

What does this mean for financial services companies in Germany? Will they stop dealing in risky financial products or will they just try to convince investors that they follow those newly established regulations?

I believe it might be a step into the right direction, as banks, insurances and other financial services companies obviously did whatever they wanted out of greed, power and competition before the financial crisis. On the other hand it might not be very effective as everything seems to be back to normal in the capital market already, without anyone asking what effects the last crisis really had.

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3 Responses to Minimum standards of Compliance – nice try or wise decision?

  1. A very interesting source that you could find there, especially due to the fact that it is such a sensitive case.
    Nonetheless, I believe that standardized compliance regulations are put in terms that are too general, coonsiderably when these standards (directly or indirectly) focus on over-the-counter trading.
    And still, the problem about a possible financial “domino effect” is not prevented by these regulations because the risk of each other’s trading counterparty is NOT minimised. Yet, I think that any compulsory measures taken to try prevent such a crisis are welcomed because they are a strong symbol of the people’s will to prevent this from happening again.

  2. bravenewloock says:

    The German Governement just released a draft regulation preventing investors in open REITs to divest more than 5.000 Euro in a 2-year retention period… The Financial Times Germany ( states that this is just one measure in a broader campaign by the German Government to strengthen investor’s rights.
    I think that this might set a very good example how regulations can rebuild trust, as the abrupt divestment of huge sums invested in REITs was one factor of the crisis.

  3. olexa5 says:

    I agree with Kizzel. In most cases such discussions about new regulations and changes are initiated by major events and crises, ending up in being an exagerated long story. Eventually, all parties are so fed up that one agrees on a general framework which then isn’t even able to serve the purpose anymore.

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