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 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:

  • Office of the Comptroller of the Currency’s final rules1 would set out enhanced standards for risk management, governance and internal audit of large U.S. banks.
  • Financial Conduct Authority’s proposed rules9 would shed light on its approach to supervision of financial promotions in social media by U.K. banks.
  • European Securities and Markets Authority and European Banking Authority4 create a harmonized approach to handling complaints in the securities and banking sectors across the European Union.

Current coverage period: Through August 31st, 2014
Note: Anticipated business impact for covered regulations is shown using the following rating legend:
( Low) (Medium) (High)

CURRENT REGULATIONS:

Office of the Comptroller of the Currency (OCC) ( ):
OCC Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches; Integration of Regulations
Publication Date: Sep 2nd 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Risk Management and Stress Testing
Applicable for large banks, the OCC’s final rules1 is an outcome of the realization that much stronger regulatory and supervisory standards would be necessary to handle the risks associated with large, complex financial institutions. Under a risk governance framework, the final rules stipulate roles and responsibilities for the units constituting the three lines of defense, namely front line units, independent risk management, and internal audit. In addition, the final rules would establish minimum standards for board of directors to help ensure effective functioning of the risk governance framework.

Bureau of Consumer Financial Protection (BCFP) ( ):
Home Mortgage Disclosure (Regulation C)
Publication Date: Aug 29th 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance, Reporting
Through the proposed rule2, the BCFP would implement the Dodd-Frank Act (DFA) amendments and make other changes to implement the Home Mortgage Disclosure Act (HMDA). Key changes include a) revision in the scope of reporting under HDMA, b) reporting of new data points identified in the DFA and other data points to implement HDMA, c) alignment of this regulation with other industry standards, d) reporting of data on a quarterly basis, rather than annual, for institutions with a large number of reported transactions, and e) proposals to minimize costs to reporting entities.

The Financial Accounting Standards Board (FASB) ( ):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
Publication Date: Aug 27th 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Finance and Performance Management, Audit, Legal and Compliance

Financial statements are prepared under Generally Accepted Accounting Principles (GAAP) with the critical assumption that reporting firms will continue to operate as a going concern, with limited exceptions. In the absence of adequate guidelines currently to deal with doubts on going concern, the FASB’s update to GAAP3 would define management’s responsibility to check if there is substantial doubt about a firm’s ability to continue as a going concern, and provide disclosures in such cases. This is aimed at improving comparability of disclosures.

European Securities and Markets Authority (ESMA) ( ):
Joint Committee Final Report on guidelines for complaints-handling for the securities (ESMA) and banking (EBA) sectors
Publication Date: Aug 25th 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Consumer Protection, Audit, Legal and Compliance

Joint guidance4 from ESMA and EBA is aimed at ensuring a harmonized approach to handling complaints in the securities and banking sectors across the European Union member states with a view to strengthening consumer protection. Key coverage includes a) compliance and reporting obligations, b) guidelines on complaints-handling covering complaints management policy, complaints management function, registration, reporting, internal follow-up, provision of information, and procedures for responding to complaints.

The Financial Reporting Council (FRC) ( ):
Disclosure exemptions from EU-adopted IFRS for qualifying entities
Publication Date: Aug 22nd 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Finance and Performance Management, Audit, Legal and Compliance

The FRC’s standards5 set out reduced disclosure framework and disclosure exemptions for the individual financial statements of firms that otherwise apply the recognition, measurement, and disclosure requirements of European Union-adopted International Financial Reporting Standards (IFRS). However, if the firm qualifying for exemption is a financial institution, it is not exempt from disclosure requirements of IFRS 7 (Financial Instruments), some provisions of IFRS 13 (Fair Value Measurement), and some provisions of International Accounting Standard 1 (Presentation of Financial Statements).

Monetary Authority of Singapore (MAS) ( ):
Guidebook for Audit Committees in Singapore (Second Edition)
Publication Date: Aug 19th 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance, Risk Management and Stress Testing

The guidebook6 published by the MAS contains guidance and leading practices for audit committees of Singapore-listed companies, as part of the authority’s broader objective to strengthen the standards of corporate governance in companies. It draws from the experience of the work group members, incorporates inputs and feedback from industry and stakeholders, and contains references from other jurisdictions and professional publications. The guidebook is divided into six sections – Accounting Committee Composition, Agenda, Risk Management and Internal Controls, Internal Audit, Financial Reporting and External Audit.

Australian Prudential Regulation Authority (APRA) ( ):
Supervision of conglomerate groups – Prudential standards and draft guidance
Publication Date: Aug 15th 2014
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Capital Adequacy and Capital Planning, Risk Management and Stress Testing

The regulator has published a framework7 for supervision of conglomerate groups, and the eight groups to which it will apply control (80%) of the assets of all APRA-regulated institutions. The implementation decision has been deferred until the Financial System Inquiry’s recommendations and the Government’s response are announced. This release includes prudential standards covering governance, exposure management, risk management and capital adequacy. It also contains draft practice guides that are intended to accompany the prudential standards.

European Central Bank (ECB) ( ):
Comprehensive Assessment Stress Test Manual
Publication Date: Aug 8th 2014
Risks Covered: Credit Risk, Market Risk
Business Processes Impacted: Risk Management and Stress Testing

The manual8 covers two key elements of the comprehensive assessment: a) a systematic and centrally-led quality assurance of the stress test outcomes produced by the banks, and b) a “join-up” of the asset quality review (AQR) and stress test outcomes. The manual is divided in two parts: the first part describes the checks on the stress test outcomes produced by the Single Supervisory Mechanism banks, and the second part lays out the methodology to integrate the results of the AQR and the stress test.

Financial Conduct Authority (FCA) ( ):
Social media and customer communications – The FCA’s supervisory approach to financial promotions in social media
Publication Date: Aug 6th 2014
Risks Covered: Conduct Risk, Compliance Risk
Business Processes Impacted: Consumer Protection, Audit, Legal and Compliance

The regulator has proposed guidance9 on how financial promotions on social media will be supervised, based on its interaction with other regulators and interested stakeholders. The objective is to foster effective competition in the interests of consumers as well as consumer protection. The proposed rules include sector-specific requirements, with the broader guideline that any communication made to the customer must be fair, clear and not misleading.

European Banking Authority (EBA) ( ):
Draft Technical advice on possible delegated acts on criteria and factors for intervention powers concerning structured deposits under Article 41 and Article 42 of Regulation (EU) No 600/2014 (MiFIR)
Publication Date: Aug 5th 2014
Risks Covered: Compliance Risk, Reputation Risk
Business Processes Impacted: Audit, Legal and Compliance, Risk Management and Stress Testing

Markets in Financial Instruments Regulation (MiFIR) has set up criteria that requires EBA to monitor the markets for structured deposits across the European Union. It has also set up an identical framework for the intervention powers of ESMA on financial instruments. Upon request by the European Commission for technical advice, EBA has released a consultation paper10 to propose a set of criteria and factors and explain the rationale for its deviation from the criteria published by ESMA, whose framework was the basis for EBA’s work. As per EBA, some of the criteria either did not apply or had to be adapted, while in some other cases new criteria had to be introduced.

FORTHCOMING REGULATIONS:

The International Accounting Standards Board (IASB): Are truly global standards achievable?
The IASB leadership speech11, while making a passing reference to the future of financial reporting, such as the IASB’s work program, integrated reporting and other topics shaping the future accounting standards, focuses on the fundamental topic of achievability of truly global standards. With continued economic globalization reflected by interconnected national capital markets and the level of cross-border M&A transactions, it concludes that global standards are not only achievable but inevitable.

Footnotes:

  1. Office of the Comptroller of the Currency (OCC): OCC Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches; Integration of Regulations
  2. Bureau of Consumer Financial Protection (BCFP): Home Mortgage Disclosure (Regulation C)
  3. The Financial Accounting Standards Board (FASB): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
  4. European Securities and Markets Authority (ESMA): Joint Committee Final Report on guidelines for complaints-handling for the securities (ESMA) and banking (EBA) sectors
  5. The Financial Reporting Council (FRC): Disclosure exemptions from EU-adopted IFRS for qualifying entities
  6. Monetary Authority of Singapore (MAS): Guidebook for Audit Committees in Singapore (Second Edition)
  7. Australian Prudential Regulation Authority (APRA): Supervision of conglomerate groups – Prudential standards and draft guidance
  8. European Central Bank (ECB): Comprehensive Assessment Stress Test Manual
  9. Financial Conduct Authority (FCA): Social media and customer communications -The FCA’s supervisory approach to financial promotions in social media
  10. European Banking Authority (EBA): Draft Technical advice on possible delegated acts on criteria and factors for intervention powers concerning structured deposits under Article 41 and Article 42 of Regulation (EU) No 600/2014 (MiFIR)
  11. The International Accounting Standards Board (IASB): Are truly global standards achievable?

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.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with approximately 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com.

Copyright © 2014 Accenture All Rights Reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Submit a Comment

Your email address will not be published. Required fields are marked *