Investment Grade Credit Insights: Financial Deregulation Begins to Come into Focus

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Financial Deregulation

David Morse, CFA

David Morse, CFA - Managing Director of Global Credit Strategies & Head of Credit Research

In the U.S., a pro-growth agenda and potential easing of financial regulations led to increased investor optimism, while in Europe, political uncertainty around upcoming election outcomes rattled the Euro credit market.

Macroeconomic Backdrop for Credit:

U.S. investment grade spreads tightened in February for the fifth consecutive month as investors continued to be optimistic about President Trump’s pro-growth agenda. While the new administration has provided very few details related to many of these plans, President Trump did sign an Executive Order on February 3rd to begin the process of potentially unwinding many of the financial regulations put into place under the Obama administration. These regulations include but are not limited to Dodd-Frank, the Volker Rule and the Department of Labor Fiduciary Rule. The Executive Order specifically asks the incoming Treasury Secretary to review “any laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies” and identify those that do not comply with the following six “Core Principles”:

1. Empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

2. Prevent taxpayer-funded bailouts;

3. Foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that address systemic risk and market failures, such as moral hazard and information asymmetry;

4. Enable American companies to be competitive with foreign firms in domestic and foreign markets;

5. Advance American interests in international financial regulatory negotiations and meetings; and

6. Restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.



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