Edition Highlights:

  • The Board of Governors of the Federal Reserve System explains the guidance for Compliance with Minimum Variation Margin Requirements for Non-Cleared Swaps and Non-Cleared Security -Based Swaps
  • The Prudential Regulation Authority Board is replaced by the Prudential Regulation Committee
  • The Australian Prudential Regulation Authority updates its guidance on residential mortgage lending for deposit-taking institutions

Current coverage period: Through Feb 28, 2017

Note: Anticipated business impact for covered regulations is shown using the following rating legend:       (*Low) (** Medium) (*** High)

CURRENT REGULATIONS:

The Board of Governors of the Federal Reserve System (The Fed) ( ***):
Initial Examinations for Compliance with Minimum Variation Margin Requirements for Non-Cleared Swaps and Non-Cleared Security Based Swaps
Publication Date: February 22nd 2017

Risks Covered: Compliance Risk, Market Risk

Business Processes Impacted: Clearing and Settlement – Exchange Traded and Over-the-Counter (OTC)

This guidance addresses the Federal Reserve’s expectations concerning the compliance by Commodity Futures Trading Commission (CFTC)-registered swap dealers for which the Fed is the prudential regulator establishing initial and variation margin requirements for non-cleared swaps and non-cleared security-based swaps.1

Financial Conduct Authority (FCA) (***):
Changes to DTR 2.5: Delay in the Disclosure of Inside Information
Publication Date: February 24th 2017

Risks Covered: Operational Risk

Business Processes Impacted: Clearing and Settlement – Exchange Traded and Over-the-Counter (OTC), Portfolio Advisory and Management, Trading
In light of the publication by the European Securities and Markets Authority (ESMA) of the three sets of Guidelines that it is mandated to produce under the Market Abuse Regulation (MAR), this policy statement outlines feedback received and confirms the FCA’s intent to comply with the guidelines as reflected in the revised Handbook.
2

Prudential Regulation Authority (PRA) (*):
The Prudential Regulation Committee
Publication Date: February 28, 2017

Risks Covered: Conduct Risk

Business Processes Impacted: Audit, Legal and Compliance
The PRA Board is being replaced by the Prudential Regulation Committee (PRC) effective March 1, and the PRA will be brought within the single legal entity of the Bank of England.3

The Board of Governors of the Federal Reserve System (The Fed) (**):
Federal Reserve Bank Capital Stock
Publication Date: February 24th 2017

Risks Covered: Credit Risk

Business Processes Impacted: Capital Adequacy and Capital Planning, Netting and Collateral Management
This final rule applies an inflation adjustment to the $10 billion total consolidated asset threshold in Regulation I, which implements the provision of the “Fixing America’s Surface Transportation Act” (FAST Act) that sets the dividend rate that member banks with more than $10 billion in total consolidated assets earn on their Federal Reserve Bank (Reserve Bank) stock.4

European Commission (EC) (***):
Commission Delegated Regulation (EU) 2017/208 of 31 October 2016 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on an institution’s derivatives transactions
Publication Date: February 8th 2017

Risks Covered: Liquidity Risk

Business Processes Impacted: Funding and Liquidity Management
The adoption of the Delegated Regulation (EU) 2017/208 of October 31, 2016 (Regulation) relates to regulatory technical standards for additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on an institution’s derivatives transactions.5

European Commission (EC) (**):
Commission Delegated Regulation (EU) 2017/323 of 20 January 2017 correcting Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty
Publication Date: February 25th 2017
Risks Covered: Counterparty Credit Risk, Market Risk

Business Processes Impacted: Clearing and Settlement – Exchange Traded and Over-the-Counter (OTC), Trading
The Commission Delegated Regulation (EU) 2017/323 details corrections and supplements certain other regulations on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty.
6

Prudential Regulation Authority (PRA) (***):
Amendments to the PRA’s rules on loan to income ratios in mortgage lending
Publication Date: February 27th 2017
Risks Covered: Credit Risk

Business Processes Impacted: Lending and Investment
This policy statement sets out feedback and final rules following an earlier consultation on Amendments to the PRA’s rules on loan to income ratios in mortgage lending.7

Financial Crimes Enforcement Network (FinCEN) (**):
Inflation Adjustment of Civil Monetary Penalties
Publication Date: February 10th 2017
Risks Covered: Operational Risk

Business Processes Impacted: Fraud and Financial Crime
The final rule adjusts the regulator’s civil monetary penalties (CMPs) for inflation within the jurisdiction of certain components of the Department to the maximum amount mandated (by other Acts).
8

Australian Prudential Regulation Authority (APRA) (***):
APRA updates guidance on residential mortgage lending
Publication Date: February 23th 2017
Risks Covered: Credit Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory, Lending and Investment
The updated Prudential Practice Guide APG 223 Residential Mortgage Lending sets out expectations for sound residential mortgage lending practices for authorized deposit-taking institutions (ADIs) following consultation with industry and other stakeholders.9

Monetary Authority of Singapore (MAS) (**):
Changes to Finance Company Regulations to Enhance their Ability to Finance SMEs
Publication Date: February 14th 2017
Risks Covered: Business Cycle Risk, Credit Risk
Business Processes Impacted: Business Continuity Management, Recovery and Resolution planning
The revised finance company regulations, intended to strengthen the resilience of finance companies and enhance their ability to provide financing to small and medium sized enterprises (SMEs), include: i) raising the finance company’s aggregate uncollateralized business loans from 10% to 25% of its capital funds; ii) raising the limit on uncollateralized business loans to a single borrower to up to 0.5% of capital funds.10

 

FORTHCOMING REGULATIONS:

Securities and Exchange Commission (SEC)
Inline XBRL Filing of Tagged Data
The proposed amendment to require the use of Inline XBRL format for the submission of financial statements and risk/return summaries is intended to improve data quality and decrease, over time, the cost of preparing such data for submission.11

Prudential Regulation Authority (PRA)
Supervising International Banks: The PRA’s approach to branch supervision – Liquidity Reporting
This supervisory statement sets out its expectations on liquidity reporting by PRA-regulated UK branches of third-country, and non-EU European Economic Area (EEA), credit institutions and designated investment firms.12

Financial Accounting Standards Board (FASB)
Compensation — Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting
This proposed initiative, part of the Simplification Initiative, aims to maintain or improve the usefulness of the information provided to users of financial statements while reducing cost and complexity in financial reporting.13

Visit www.accenture.com/RegulatoryCompliance for latest insights on regulatory remediation and compliance transformation.

 

References:

1. “SR 17-3: Initial Examinations for Compliance with Minimum Variation Margin Requirements for Non-Cleared Swaps and Non-Cleared Security Based Swaps,” The Board of Governors of the Federal Reserve System, February 22, 2017. Access at: Initial Examinations for Compliance with Minimum Variation Margin Requirements for Non-Cleared Swaps and Non-Cleared Security Based Swaps

2. “Changes to DTR 2.5: delay in the disclosure of inside information,” Financial Conduct Authority (FCA), February 24, 2017. Access at: Changes to DTR 2.5: Delay in the Disclosure of Inside Information

3. “The Prudential Regulation Committee,” Prudential Regulation Authority, February 28, 2017. Access at: The Prudential Regulation Committee

4. “Final rule,” Board of Governors of the Federal Reserve System, February 24, 2017. Access at: Federal Reserve Bank Capital Stock

5. “Commission Delegated Regulation (EU) 2017/208 of 31 October 2016 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on an institution’s derivatives transactions,” Official Journal of the European Union, February 8, 2017. Access at:  Commission Delegated Regulation (EU) 2017/208 of 31 October 2016 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on an institution’s derivatives transactions

6. “Regulations Commission Delegated Regulation (EU) 2017/323 of 20 January 2017 correcting Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty,” Official Journal of the European Union, February 25, 2017. Access at: Commission Delegated Regulation (EU) 2017/323 of 20 January 2017 correcting Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty

7. “Amendments to the PRA’s rules on loan to income ratios in mortgage lending,” Prudential Regulation Authority (PRA), February 27, 2017. Access at: Amendments to the PRA’s rules on loan to income ratios in mortgage lending

8. “Financial Crimes Enforcement Network, Inflation Adjustment of Civil Monetary Penalties,” Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control Treasury, February 10, 2017. Access at: Inflation Adjustment of Civil Monetary Penalties

9. “Prudential Practice Guide, APG 223 – Residential Mortgage Lending,” Australian Prudential Regulation Authority (APRA), February 23, 2017. Access at: APRA updates guidance on residential mortgage lending

10.“Changes to Finance Company Regulations to Enhance their Ability to Finance SMEs,” Monetary Authority of Singapore (MAS), February 14, 2017. Access at: Changes to Finance Company Regulations to Enhance their Ability to Finance SMEs

11.“Inline XBRL Filing of Tagged Data,” Securities and Exchange Commission, March 1, 2017. Access at: Inline XBRL Filing of Tagged Data

12.“Supervising international banks: the PRA’s approach to branch supervision – liquidity reporting,” Prudential Regulation Authority, February 2017. Access at: Supervising International Banks: The PRA’s approach to branch supervision – Liquidity Reporting

13.“CompensationꟷStock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting,” Financial Accounting Standards Board, March 7, 2017. Access at: Compensation — Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting

About the Monthly Regulatory Tracker

The tracker 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, Europe and Asia Pacific. Every month, we will highlight approximately 10 regulations shortlisted on the basis of geography of coverage and anticipated business impacts. Our summaries highlight the risks covered and business processes affected by the regulatory reforms.

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.

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