This newsletter summarizes recent regulatory changes impacting Banking, Capital Markets & Insurance firms.

Current coverage period: Through November 30, 2017

CURRENT REGULATIONS:

European Securities and Markets Authority (ESMA):
ESMA alerts investors to the high risks of Initial Coin Offerings (ICOs)
Publication Date: November 13th 2017

Risks Covered: Operational Risk

Business Processes Impacted: Business Continuity Management

The agency has warned those considering investing in ICOs about the following risks: (i) A lack of regulation and vulnerability to fraud or illicit activities – some ICOs may fall outside the regulated space depending on how they are structured; (ii) The loss of all invested capital – as the majority of ICOs are launched businesses that are at an early stage of development, there is an inherently high risk of failure and no guarantee that services/products will be successful; (iii) A lack of exit options and extreme price volatility – it may not be possible to trade or exchange coins for traditional currencies and when traded on virtual currency exchanges, it is possible that their price will be extremely volatile; and (iv) A lack of reliable information – that which is made available to investors is often unaudited, incomplete, unbalanced or misleading.1

Financial Conduct Authority (FCA):

Handbook Notice 49
Publication Date: November 10th 2017

Risks Covered: Conduct Risk

Business Processes Impacted: Business Continuity Management
The agency has published Handbook Notice No. 49, which announces the following legislative changes: (i) MiFID 2 Guide Instrument 2017, effective January 3, 2018; and (ii) Capital Requirements Directive IV (Amendment) Instrument 2017, effective November 10, 2017.2

The Board of Governors of the Federal Reserve System (The Fed):
Regulation D; Docket No. OP-1582; Reserve Requirements of Depository Institutions
Publication Date: November 8th 2017
Risks Covered: Liquidity Risk 

Business Processes Impacted: Capital Adequacy & Capital Planning
The agency is amending Regulation D to reflect the annual indexing of the reserve requirement exemption amount and the low reserve tranche for 2018. The Regulation D amendments set the amount of total reservable liabilities for 2018 of each depository institution that is subject to a zero percent reserve requirement at $16.0 million (up from $15.5 million in 2017). This reservable liability amount is also known as the reserve requirement exemption amount and is in effect as of December 8, 2017.3

Financial Crimes Enforcement Network (FinCEN):
Advisory to Financial Institutions Regarding Disaster-Related Fraud
Publication Date: October 31st 2017
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The agency has warned financial institutions about the potential for fraudulent transactions in the wake of recent natural disasters. The document aims to help institutions identify and prevent fraudulent activity that may interfere with legitimate relief efforts.4

International Association of Insurance Supervisors (IAIS):
Insurance Core Principles
Publication Date: November 8th 2017
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The regulator has updated its Insurance Core Principles as of November 2017.5

International Association of Insurance Supervisors (IAIS):
Revision ICPs 8, 15 and 16
Publication Date: November 8th 2017
Risks Covered: Credit Risk
Business Processes Impacted: Business Continuity Management
The agency is consulting on ICP 8 (Risk Management and Internal Controls), ICP 15 (Investment) and ICP 16 (Enterprise Risk Management for Solvency Purposes). This follows the thematic approach adopted by the IAIS in September 2015, which aims for a more efficient process of developing supervisory materials, with the management and development of supervisory materials by theme across the three tiers of standard setting: ICPs, Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame), and Global Systemically Important Insurers (G-SII) Policy Measures. Feedback on this consultation package was due January 8, 2018.6

European Commission (EC):
Commission Regulation (EU) 2017/1987 of 31 October 2017 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 15
Publication Date: November 9th 2017
Risks Covered: Cyber Conduct Risk
Business Processes Impacted: Data Privacy & Data Quality Management
The agency has issued Commission Regulation (EU) 2017/1987 of October 31, 2017 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 15. Each company shall apply the amendments referred to in Article 1, at the latest, as from the commencement date of its first financial year starting on or after January 1, 2018.7

International Association of Insurance Supervisors (IAIS):
Insurance Core Principles, Standards, Guidance and Assessment Methodology: Draft Revised ICP 3
Publication Date: November 7th 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The IAIS published a draft of its revised Insurance Core Principles (ICP) 3, which covers information sharing and confidentiality requirements.8

International Financial Reporting Standards (IFRS):
IFRS 17 Insurance Contracts Core Requirements: Recognition and derecognition
Publication Date: November 1st 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency published slides on IFRS 17 insurance contracts standard – Recognition and Derecognition theme from their November 2017 webcast.9

Office of the Comptroller of the Currency (OCC):
Mandatory Contractual Stay Requirements for Qualified Financial Contracts
Publication Date: November 29th 2017
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The agency is adopting a final rule that includes additions pertaining to enhancing the resilience, safety and soundness of federally chartered and licensed financial institutions. These additions address concerns relating to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of certain systemically important financial firms.10

Monetary Authority of Singapore (MAS):
Monetary Authority of Singapore and Abu Dhabi Global Market (ADGM) Foster Closer Cooperation in Banking Supervision
Publication Date: November 23rd 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Business Continuity Management
The MAS and ADGM have signed a Memorandum of Understanding to strengthen the supervision of cross-border operations of banking institutions. This agreement will build on their existing cooperation framework to cover the full spectrum of banks, financial markets and FinTech-related activities.11

The Office of the Comptroller of the Currency; Federal Reserve; Federal Deposit Insurance Corporation:
Regulatory Capital Rules: Retention of Certain Existing Transition Provisions for Banking Organizations That Are Not Subject to the Advanced Approaches Capital Rules
Publication Date: November 21st 2017
Risks Covered: Business Cycle Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are adopting a final rule to extend the regulatory capital treatment applicable during 2017. These include: regulatory capital deductions, risk weights, and certain minority interest limitations. This rule is effective as of January 1, 2018.12

Bureau of Consumer Financial Protection (CFPB):
Payday, Vehicle Title, and Certain High-Cost Installment Loans
Publication Date: November 17th 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investing Protection
The agency has issued a final rule establishing regulations and creating consumer protections for certain consumer credit products, as well as the official interpretations to the rule which goes into effect January 16, 2018. Sections 1041.2 through 1041.10, 1041.12 and 1041.13 have a compliance date of August 19, 2019, and the deadline to submit an application for preliminary approval for registration pursuant to § 1041.11(c)(1) is April 16, 2018.13

European Commission (EC); European Central Bank (ECB):
Regulation (EU) 2017/2095 of the European Central Bank of 3 November 2017 amending Regulation (EC) No 2157/1999 on the powers of the European Central Bank to impose sanctions
Publication Date: November 16th 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Payments
The agency has issued amendments to permit the ECB to effectively impose sanctions for oversight infringements, by providing clarification to the definition of a competent national central bank. This is a requirement to ensure consistency with the definition of a competent authority as used in Regulation (EU) No 795/2014 (ECB/2014/28). As well, the clarification of the composition of the internal independent investigating unit is required so it can independently perform its investigative functions in the payment systems oversight area. This Regulation enters into force on December 6, 2017.14

European Commission (EC); European Insurance and Occupational Pensions Authority (EIOPA):
Commission Implementing Regulation (EU) 2017/2190 of 24 November 2017 amending and correcting Implementing Regulation (EU) 2015/2452 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report according to Directive 2009/138/EC of the European Parliament and of the Council
Publication Date: November 25th 2017
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The European Commission has published Implementing Regulation (E) 2017/2190 of November 24, 2017 with regards to Technical Standards and in relation to Procedures, Formats and Templates of the Solvency and Financial condition report. This Regulation enters into force on December 15, 2017.15

Financial Conduct Authority (FCA):
From Maps to Apps: The power of Machine Learning and Artificial Intelligence for Regulators
Publication Date: November 22nd 2017
Risks Covered: IT Risk
Business Processes Impacted: Business Continuity Management
The speech by Stefan Hunt, Head of Behavioural Economics and Data Science at the FCA, was delivered as part of the Beesley lecture series on regulatory economics at the Institute of Directors and focused on the impact of machine learning on the efficiency and effectiveness of regulators.16

European Insurance and Occupational Pensions Authority (EIOPA):
Speech by Gabriel Bernardino, Chairman of EIOPA at the 7th Annual Conference: Insurance and Pensions Reloaded: A Game Changer
Publication Date: November 22nd 2017
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
EIOPA Chairman Gabriel Bernardino gave a keynote speech on “Insurance and Pensions Reloaded: A Game Changer” and touched on four main themes: 1) Maintaining sound regulation in an evolving landscape; 2) Supervisory convergence and the building up of a common European supervisory culture; 3) Reinforcing consumer protection in a digital age; and 4) Preserving stability in an uncertain world. Mr Bernardino concluded by reinforcing EIOPA’s commitment to solving emerging societal gaps such as long-term savings and the natural catastrophe protection gaps.17

Finland Financial Supervisory Authority (FIN-FSA):
Financial Services in 2022: Finland has what it takes to be a FinTech frontrunner
Publication Date: November 22nd 2017
Risks Covered: Cyber IT Risk
Business Processes Impacted: Information Technology
The FIN-FSA Director General, Anneli Tuominen, has said that while the financial sector is at the epicentre of a technological revolution, Finland has what it takes to be a frontrunner in the FinTech space, including its high level of technological expertise and a flourishing startup community.18

International Financial Reporting Standards (IFRS):
IFRS 17 Insurance Contracts: Transition to IFRS17
Publication Date: December 1st 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency published slides on its transition theme covered during its December 2017 webcast.19

 

FORTHCOMING REGULATIONS:

Australian Prudential Regulation Authority (APRA)
APRA has released draft revisions to Prudential Standard APS 330 Public Disclosure
The agency has issued a letter to all authorized deposit-taking institutions, seeking feedback from the public on proposals to revise the Prudential Standard APS 330 Public Disclosure (APS 330). The proposals would consolidate the liquidity ratios disclosure requirements in APS 330 and is tentatively set to take effect on July 1, 2018. The due date for submitting comments was December 8, 2017.20

Prudential Regulation Authority (PRA)
Authorisation and supervision of insurance special purpose vehicles – SS8/17
The Bank of England’s Prudential Regulation Authority (PRA) published a Supervisory Statement (SS) detailing their final expectations with regards to the authorization and supervision of Insurance Special Purpose Vehicles (ISPVs). This was to be formally adopted following the passing of the Risk Transformation Regulations 2017 through Parliament.21

Monetary Authority of Singapore (MAS)
Singapore FinTech Journey 2.0
In a speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), he touched on the notion of “smart financial centers.” These hubs can include an ecosystem of diverse players competing and collaborating; an open architecture economy that enables connectivity and innovation; a web of international links to promote the exchange of ideas and scale solutions; a strong talent pool and deep research capabilities; a conducive regulatory environment; and a safe and secure cyber environment.22

European Insurance and Occupational Pensions Authority (EIOPA
EIOPA’s second set of Advice to the European Commission on specific items in the Solvency II Delegated Regulation
The agency has published a paper on its second set of advice to the European Commission (EC) regarding specific items within the Solvency II Delegated Regulation. These include: simplified calculations, reducing reliance on external credit ratings, risk-mitigation techniques, and an impact assessment, among other things. Comments pertaining to the advice was to be submitted by January 5, 2018.23

The Board of Governors of the Federal Reserve System (The Fed)
Large Financial Institution Rating System; Regulations K and LL
The agency has announced that the comment period for the proposed new rating system for its supervision of large financial institutions has been extended. Comments on the proposal must be received on or before February 15, 2018.24

European Commission (EC)
Commission consults on minimum levels of bank capital to cover for future losses on new loans that become non-performing
The agency is launching a consultation on the common minimum levels of capital banks in the European Union (EU) must set aside to cover incurred and expected losses on newly originated loans that turn non-performing. This follows the comprehensive action plan to address non-performing loans, which was agreed to by all EU Member States at July’s Economic and Financial Affairs (ECOFIN) Council. The consultation will run until November 30, 2017. Those wishing to submit comments should do so through the online questionnaire enclosed in the news release.25

Central Bank of Ireland (CBI)
Innovation and insurance in Ireland: a supervisory perspective – Deputy Governor Prudential Regulation, Ed Sibley
The Central Bank of Ireland published a speech by Ed Sibley, Deputy Governor Prudential Regulation, at the Annual President’s Conference. Topics discussed included: The Central Bank of Ireland’s role in the context of European Supervisory Framework, supervisory and regulatory framework priorities for 2018, and innovation among FinTech and InsurTech firms.26

Insurance Europe (IE)
Comments on the Article 29 Working Party’s draft guidelines on automated individual decision-making profiling
The agency published its comments pertaining to Article 29 Working Party’s draft guidelines on automated individual decision-making profiling. Overall, IE welcomes the draft guidelines, but seeks further clarification on some issues, including the references to unfair, discriminatory and exclusionary profiling.27

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

References:

  1. “ESMA alerts investors to the high risks of Initial Coin Offerings (ICOs),” European Securities and Markets Authority, November 13, 2017. Access at: ESMA alerts investors to the high risks of Initial Coin Offerings (ICOs).
  2. “Handbook Notice No. 49,” Financial Conduct Authority, November 10, 2017. Access at: Handbook Notice 49.
  3. “Regulation D; Docket No. OP-1582; Reserve Requirements of Depository Institutions,” Board of Governors of the Federal Reserve System, Final Rule, November 8, 2017. Access at: Regulation D; Docket No. OP-1582; Reserve Requirements of Depository Institutions 
  1. “Advisory to Financial Institutions Regarding Disaster-Related Fraud,” Financial Crimes Enforcement Network, October 31, 2017. Access at: Advisory to Financial Institutions Regarding Disaster-Related Fraud.
  2. “Insurance Core Principles,” International Association of Insurance Supervisors, November 8, 2017. Access at: Insurance Core Principles 
  1. “Revision ICPs 8, 15 and 16,” International Association of Insurance Supervisors, November 8, 2017. Access at: Revision ICPs 8, 15 and 16 
  1. “Commission Regulation (EU) 2017/1987 of 31 October 2017 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 15,” Official Journal of the European Union, November 9, 2017. Access at: Commission Regulation (EU) 2017/1987 of 31 October 2017 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 15.
  1. “Insurance Core Principles – ICP 3,” International Association of Insurance Supervisors, November 7, 2017. Access at: Insurance Core Principles, Standards, Guidance and Assessment Methodology: Draft Revised ICP 3.
  2. “IFRS 17 Insurance Contracts – Core requirements: Recognition and derecognition,” International Financial Reporting Standards, November 1, 2017. Access at: IFRS 17 Insurance Contracts Core Requirements: Recognition and derecognition.
  3. “Mandatory Contractual Stay Requirements for Qualified Financial Contracts,” Office of the Comptroller of the Currency, Final Rule, November 29, 2017. Access at: Mandatory Contractual Stay Requirements for Qualified Financial Contracts.
  4. “Monetary Authority of Singapore and Abu Dhabi Global Market Foster Closer Cooperation in Banking Supervision,” Monetary Authority of Singapore, November 23, 2017. Access at: Monetary Authority of Singapore and Abu Dhabi Global Market Foster Closer Cooperation in Banking Supervision.
  5. “Regulatory Capital Rules: Retention of Certain Existing Transition Provisions for Banking Organizations That Are Not Subject to the Advanced Approaches Capital Rules,” Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, November 21, 2017. Access at: Regulatory Capital Rules: Retention of Certain Existing Transition Provisions for Banking Organizations That Are Not Subject to the Advanced Approaches Capital Rules.
  6. “Payday, Vehicle Title, and Certain High-Cost Installment Loans,” Bureau of Consumer Financial Protection, Final Rule, November 17, 2017. Access at: Payday, Vehicle Title, and Certain High-Cost Installment Loans.
  7. “Regulation (EU) 2017/2095 of the European Central Bank of 3 November 2017 amending Regulation (EC) No 2157/1999 on the powers of the European Central Bank to impose sanctions (ECB/2017/34),” Official Journal of the European Union, November 16, 2017. Access at: Regulation (EU) 2017/2095 of the European Central Bank of 3 November 2017 amending Regulation (EC) No 2157/1999 on the powers of the European Central Bank to impose sanctions.
  8. “Commission Implementing Regulation (EU) 2017/2190 of 24 November 2017 amending and correcting Implementing Regulation (EU) 2015/2452 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report according to Directive 2009/138/EC of the European Parliament and of the Council,” Official Journal of the European Union, November 25, 2017. Access at: Commission Implementing Regulation (EU) 2017/2190 of 24 November 2017 amending and correcting Implementing Regulation (EU) 2015/2452 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report according to Directive 2009/138/EC of the European Parliament and of the Council.
  9. “From maps to apps: the power of machine learning and artificial intelligence for regulators,” Financial Conduct Authority, November 22, 2017. Access at: From Maps to Apps: The power of Machine Learning and Artificial Intelligence for Regulators.
  10. “Insurance and Pensions Reloaded: A Game Changer,” European Insurance and Occupational Pensions Authority, Opening and Keynote Speech by Gabriel Bernardino, November 22, 2017. Access at: Speech by Gabriel Bernardino, Chairman of EIOPA at the 7th Annual Conference: Insurance and Pensions Reloaded: A Game Changer.
  11. “Financial Services in 2022: Finland has what it takes to be a FinTech frontrunner,” Finland Supervisory Authority, Speech by Anneli Tuominen, November 22, 2017. Access at: Financial Services in 2022: Finland has what it takes to be a FinTech frontrunner.
  12. “IFRS 17 Insurance contracts – Transition to IFRS 17, Part 1 of 2: overview,” International Financial Reporting Standards, December 1, 2017. Access at: IFRS 17 Insurance Contracts: Transition to IFRS17.
  13. “Proposed Revisions to Prudential Standard APS 330 Public Disclosure – November 2017,” Australian Prudential Regulation Authority, November 9, 2017. Access at: APRA has released draft revisions to Prudential Standard APS 330 Public Disclosure.
  14. “Authorisation and supervision of insurance special purpose vehicles,” Prudential Regulation Authority, December 8, 2017. Access at: Authorisation and supervision of insurance special purpose vehicles – SS8/17.
  15. “Singapore FinTech Journey 2.0 – Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Singapore FinTech Festival on 14 November 2017,” Monetary Authority of Singapore, December 20, 2017. Access at: Singapore FinTech Journey 2.0.
  16. “Consultation Paper on EIOPA’s second set of advice to the European Commission on specific items in the Solvency II Delegated Regulation,” European Insurance and Occupational Pensions Authority, November 6, 2017. Access at: EIOPA’s second set of Advice to the European Commission on specific items in the Solvency II Delegated Regulation.
  17. “Large Financial Institution Rating System; Regulations K and LL,” The Board of Governors of the Federal Reserve System, November 24, 2017. Access at: Large Financial Institution Rating System; Regulations K and LL.
  18. “Commission consults on minimum levels of bank capital to cover for future losses on new loans that become non-performing,” European Commission, Press Release, November 10, 2017. Access at: Commission consults on minimum levels of bank capital to cover for future losses on new loans that become non-performing.
  19. “Innovation and insurance in Ireland: a supervisory perspective – Deputy Governor Prudential Regulation, Ed Sibley,” Central Bank of Ireland, Speech by Ed Sibley, November 29, 2017. Access at: Innovation and insurance in Ireland: a supervisory perspective – Deputy Governor Prudential Regulation, Ed Sibley.
  20. “Comments on the Article 29 Working Party’s draft guidelines on automated individual decision-making profiling,” Insurance Europe, Position Paper, November 29, 2017. Access at: Comments on the Article 29 Working Party’s draft guidelines on automated individual decision-making profiling.

 

About the Monthly Regulatory Tracker

The “Regulatory Reform” newsletter is the monthly initiative aimed at updating the Finance & Risk community with the most recent regulatory changes impacting Banking, Capital Markets & Insurance firms. We track more than 70 regulatory and industry bodies covering North America, Europe and Asia-Pacific. Every month, we will highlight approximately 20 regulations shortlisted on the basis of geography of coverage and anticipated business impacts. Our summaries will 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.

 

About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 425,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Its home page is www.accenture.com

 

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