The “Regulatory Reform” newsletter is the monthly initiative aimed at updating the Finance and Risk community with the most recent regulatory changes impacting Banks and Capital Markets firms. We update our comprehensive regulatory database every month by tracking more than 40 regulatory and industry bodies covering North America, EALA and APAC. Every month, we will seek to highlight approximately 10 regulations shortlisted on the basis of geography of coverage and anticipated business impacts. Our summaries will seek to highlight the risks covered and business processes affected by the regulatory reforms. This newsletter is planned to supplement the existing newsletter “Regulatory Insights” which provides a deeper analysis of business implications and Accenture’s point of view on a single or much smaller set of regulatory changes.

Edition Highlights:

  • The Office of the Comptroller of the Currency’s (OCC) proposals8 would establish minimum standards for the design and implementation of a risk governance framework by the board of directors of large banks.
  • The European Central Bank’s report9 on security of internet payments identifies key areas of focus with assessment questions for consistent evaluation.
  • The Basel Committee leadership speech2 reiterates the importance of leverage ratio as an essential component of the Basel III framework.

Current coverage period: Through February 28th, 2014
Note: Anticipated business impact for covered regulations is shown using the following rating legend:
(Low) (Medium) (High)

CURRENT REGULATIONS:

Financial Conduct Authority (FCA) (): Consumer Credit: further amendments to Decision Procedure and Penalties Manual and Enforcement Guide
Publication Date:
February 28th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Consumer Protection, Audit, Legal and Compliance
The FCA has issued a consultation paper1 proposing to make amendments to the FCA Handbook to prohibit or restrict European Economic Area (EEA) authorized payment institutions and electronic money institutions from undertaking certain consumer credit business in the UK. The proposed amendments are a direct result of the transfer of consumer credit regulation from the Office of Fair Trading to the FCA. The paper1 is aimed at firms, their advisers and trade bodies. While the proposals are not directly relevant to consumers, they may indirectly affect consumers as a result of the impact on the EEA authorized payment institutions and electronic money institutions.
Bank for International Settlements (BIS) (): Banking on leverage
Publication Date:
February 26th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Risk Management and Stress Testing, Reporting
In this keynote address2, the Chairman of the Basel Committee clarifies the role and importance of the leverage ratio in the Basel III framework. He further explains how the leverage ratio should be seen as complementing the risk-based capital adequacy regime and should serve as a safety-net or backstop. For the leverage ratio to be effective and to be able to balance its relationship with the risk-based framework, the Committee needs to get the right calibration of the leverage ratio as part of its remaining work on the post-crisis reforms and as was agreed when the Basel III package was settled in 2010.
Federal Deposit Insurance Corporation (FDIC) (): Consumer Compliance Examination Procedures for Mortgage Rules
Publication Date:
February 25th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance, Consumer Protection
The FDIC has issued revised interagency consumer compliance examination procedures3 applicable to the mortgage rules issued pursuant to the Dodd-Frank Act. These procedures would be used to assess compliance with the following mortgage loan rules: ability-to-repay/qualified mortgage rule, loan originator compensation rule, mortgage servicing rules, high-cost mortgage and homeownership counseling amendments rule, higher-priced mortgage loan (HPML) escrow rule, HPML appraisal rule and equal credit opportunity act appraisal rule.
China Banking Regulatory Commission (CBRC) (): Liquidity Risk Management of Commercial Banks
Publication Date:
February 19th, 2014
Risks Covered: Liquidity Risk
Business Processes Impacted: Risk Management and Stress Testing, Funding and Liquidity Management
The CBRC has issued measures4 on liquidity risk management of commercial banks in China. These are based on CBRC’s detailed assessment of liquidity risk related problems faced by the banking sector. The CBRC also follows the international regulatory reforms closely and has made amendments to the liquidity related regulations based on standards set by Basel III. For the commercial banks, the regulations are covered in 4 chapters: general provisions, covering scope, definition and general requirements; overall framework and qualitative requirements; supervision, covering specific indicators, and framework and tools for liquidity risk monitoring; supplementary provisions covering implementation timelines, and more.
European Securities and Markets Authority (ESMA) (): Markets in Financial Instruments Directive (MiFID) practices for firms selling complex products
Publication Date:
February 7th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Consumer Protection, Risk Management and Stress Testing
Citing substantial increase in selling of complex financial products by investment firms to retail investors and its negative impact on retail investors, the ESMA’s regulation5 sets out business conduct standards. Key expectations include a) firms’ organization and internal controls, b) the assessment of appropriateness of products from the perspective of retail investors, c) disclosure in relation to features of certain products, d) enhanced monitoring of the sales function, and e) compliance risk assessment.
Monetary Authority of Singapore (MAS) (): Review of Securities Market Structure and Practices
Publication Date:
February 7th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Trading, Clearing and Settlement – Exchange Traded and Over-the-Counter (OTC)
The proposed MAS6 regulation aims at strengthening how the securities market in Singapore function. Major components are a) setting of minimum trading prices to address the risk of high volatility and its negative impacts of speculation and market manipulation, b) collateral requirements based on open positions and credit risk management practices, c) enhanced reporting of short positions through aggregate position reporting and disclosure of significant individual short positions, and d) improvements in transparency of measures used for market intervention.
International Organization Of Securities Commissions (IOSCO) (): Crowd-funding: An Infant Industry Growing Fast
Publication Date:
February 5th, 2014
Risks Covered: Strategic Risk
Business Processes Impacted: Risk Management and Stress Testing
Crowd-funding is broadly defined as “the use of small amounts of money, obtained from a large number of individuals or organizations, to fund a project, a business or personal loan, and other needs through an online web-based platform”. The IOSCO, in its first publication7 of this topic a) provides a global overview of the industry b) surveys the current regulatory regime and practices by country, and c) analyses potential systemic and others risks, and investor protection concerns.
Office of the Comptroller of the Currency (OCC) (): Heightened Standards for Large Banks
Publication Date:
February 5th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Risk Management and Stress Testing, Audit, Legal and Compliance
The OCC is seeking comments on its proposed guidelines8 to set up minimum standards for the design and implementation of a risk governance framework for large insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $50 billion or more (covered banks). It is also requesting comments on its proposal to make safety and soundness regulations applicable to both national banks and federal savings associations.
European Central Bank (ECB) (): Assessment Guide for the Security of Internet Payments
Publication Date:
February 4th, 2014
Risks Covered: IT Risk, Operational Risk
Business Processes Impacted: Risk Management and Stress Testing, Payments
Focused on supervisory authorities, the ECB’s assessment guide9 proposes a consistent and comparable assessment of the security of internet payments across the European Union. Key recommendations and assessment questions are in the areas of a) general control and security environment covering governance, risk assessment, incident monitoring and reporting, risk control and mitigation, and traceability, b) specific control and security measures for internet payments, and c) customer awareness, education, and communication.
Financial Stability Board (FSB) (): Approaches to aggregate OTC derivatives data
Publication Date:
February 4th, 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance, Risk Management and Stress Testing
Referring to good progress made in establishing trade repositories across the globe for the reporting of OTC derivatives data, the FSB’s consultation10 underscores the need for aggregating the data for effective identification and mitigation of systemic risk. Key coverage includes a) requirements for aggregated OTC derivatives data, b) legal considerations, c) data and technology considerations, and d) options for aggregation of data in terms of storage of data, removing duplication, masking, and data delivery to authorities.
FORTHCOMING REGULATIONS:

European Securities and Markets Authority (ESMA): 2014 Regulatory Work Programme

ESMA, as per its detailed work plan for 201411, aims at developing single rule books for a number of legislations. Key ones include a) Alternative Investment Fund Managers Directive, b) European Market Infrastructure Regulation, c) Market Abuse Regulation, d) Markets in Financial Instruments Directive / Regulation, e) Regulation on Central Securities Depositories, and f) Regulation for Undertakings for Collective Investment in Transferable Securities.

Footnotes:

  1. Financial Conduct Authority (FCA): Consumer Credit: further amendments to DEPP and EG
  2. Bank for International Settlements (BIS): Banking on leverage
  3. Federal Deposit Insurance Corporation (FDIC): Consumer Compliance Examination Procedures for Mortgage Rules
  4. China Banking Regulatory Commission (CBRC): Liquidity Risk Management of Commercial Banks
  5. European Securities and Markets Authority (ESMA): MiFID practices for firms selling complex products
  6. Monetary Authority of Singapore (MAS): Review of Securities Market Structure and Practices
  7. International Organization Of Securities Commissions (IOSCO): Crowd-funding: An Infant Industry Growing Fast
  8. Office of the Comptroller of the Currency (OCC): Heightened Standards for Large Banks
  9. European Central Bank (ECB): Assessment Guide for the Security of Internet Payments
  10. Financial Stability Board (FSB): Approaches to aggregate OTC derivatives data
  11. European Securities and Markets Authority (ESMA): 2014 Regulatory Work Programme
DISCLAIMER: This blog is intended for general informational purposes only, does not take into account the reader’s specific circumstances, may not reflect the most current developments, and is not intended to provide advice on specific circumstances. Accenture disclaims, to the fullest extent permitted by applicable law, all liability for the accuracy and completeness of the information in this blog and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professional. If you require advice or further details on any matters referred to, please contact your Accenture representative.
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