This newsletter brings the most recent regulatory changes impacting Banking, Capital Markets & Insurance firms.

Current coverage period: Through October 31, 2017

CURRENT REGULATIONS:

European Banking Authority (EBA):
EBA updated Risk Dashboard shows slight improvement of EU banks capital level but NPLs still affect their profitability

Publication Date: October 5th 2017

Risks Covered: Liquidity Risk

Business Processes Impacted: Information Technology

The agency has published a periodic update to its Risk Dashboard summarizing the main risks and vulnerabilities in the European Union banking sector through a set of Risk Indicators in Q2, 2017. The progress is positive, but risks remain heightened on asset quality and sustainable profitability.1

 

Consumer Financial Protection Bureau (CFPB):

Payday, Vehicle Title, and Certain High-Cost Installment Loans

Publication Date: October 5th 2017
Risks Covered: Credit Risk

Business Processes Impacted: Business Continuity Management
The agency has issued a final rule to create consumer protections for certain consumer credit products. The rule has two primary parts. First, for short-term and longer-term loans with balloon payments, the agency is identifying it as an unfair and abusive practice for a lender to make such loans without reasonably determining that consumers have the ability to repay the loans according to their terms. The rule also requires lenders to provide certain notices to the consumer before attempting to withdraw payment for a covered loan from the consumer’s account.2

 

Internal Revenue Service (IRS):
Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans

Publication Date: October 5th 2017
Risks Covered: Liquidity Risk

Business Processes Impacted: Payments
The Internal Revenue Service (IRS) published a document containing final regulations prescribing mortality tables to be used by most defined benefit pension plans. The tables specify the probability of survival year-by-year for an individual based on age, gender, and other factors.3

 

Consumer Financial Protection Bureau (CFPB):
Amendments to the 2016 Amendments to the 2013 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z)
Publication Date: October 2nd 2017
Risks Covered: Operational Risk

Business Processes Impacted: Capital Adequacy & Capital Planning
The agency is issuing an interim final rule amending a provision of the Regulation X mortgage servicing rules issued in 2016 relating to the timing for providing modified written early intervention notices to borrowers who have invoked their cease communication rights under the Fair Debt Collection Practices Act. The Bureau requests public comment on this interim final rule. This interim final rule is effective on October 19, 2017.4

 

Prudential Regulation Authority (PRA):
PRA Rulebook: CRR Firms: Leverage Ratio and Reporting Leverage Ratio (Amendment) Instrument 2017
Publication Date: October 3rd 2017
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has issued updated amendments in the leverage ratio and reporting leveraging ratio instrument 2017.5

 

European Fund and Asset Management Association (EFAMA):
Updated European PRIIPs Information Exchange Templates (EPT and CEPT version 1.1)
Publication Date: October 6th 2017
Risks Covered: Operational Risk
Business Processes Impacted: Reporting
The EFAMA published the updated Packaged Retail and Insurance-based Investment Products (PRIIPs) information templates in conjunction with Insurance Europe on October 6, 2017. Originally published in July 2017, the templates are intended to provide a functional description of the set of data to be exchanged from asset managers and banks to insurers for the purpose of helping them fulfil their PRIIPs regulatory obligations.6

 

Bank of England (BoE):
The Bank of England’s Approach to Resolution
Publication Date: October 2nd 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency published a document that sets out in three parts key features of resolution, how the Bank is likely to implement a resolution, and the Bank’s “business as usual” responsibilities. Topics covered under the document include, among other things, the objectives of the Bank as set out by the Banking Act 2009, using resolution powers only if it is in the public interest where a bank is failing or likely to fail, and strategies in place in the event of bail-in, partial transfer and insolvency.7

 

House of Commons Library:
Brexit and Data Protection
Publication Date: October 10th 2017
Risks Covered: Cyber Compliance Risk
Business Processes Impacted: Data Privacy & Data Quality Management
A Briefing paper has been produced on Brexit and data protection.8

 

European Insurance and Occupational Pensions Authority (EIOPA):
Guidelines on Insurance Distribution Directive
Publication Date: October 11th 2017
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has issued final report on Guidelines under the Insurance Distribution Directive on insurance- based investment products that incorporate a structure which makes it difficult for the customer to understand the risks involved.9

 

European Banking Authority (EBA):
EBA provides overview of Competent Authorities implementation and transposition of the CRD IV package
Publication Date: October 30th 2017
Risks Covered: Compliance Risk
Business Processes Impacted: Business Continuity Management
The agency has updated its information relating to the overview of the introduction and transposition of the Capital Requirements Directive (CRD) IV and Capital Requirements Regulation (CRR) across the European Union. The update also provides details on of the use of options by each Competent Authority as well as information on the general criteria and methodologies used for the supervisory review and evaluation process (SREP).10

 

Board of Governors of the Federal Reserve System (The Fed):
Timing Expectations for the Completion of Safety-and-Soundness Examination and Inspection Reports for Regional Banking Organizations
Publication Date: October 26th 2017
Risks Covered: Credit Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has announced timing expectations for the completion of safety-and-soundness examination and inspection reports for domestic regional financial institutions and the submission of the reports to the institutions.11

 

European Commission (EC):
Commission Delegated Regulation (EU) 2017/1943 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on information and requirements for the authorisation of investment firms
Publication Date: October 26th 2017
Risks Covered: Liquidity Risk
Business Processes Impacted: Reporting
The regulator has published Commission Delegated Regulation (EU) 2017/590 of July 28, 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the reporting of transactions to competent authorities.12

 

Hong Kong Monetary Authority (HKMA):
Banking (Capital) (Amendment) Rules 2017, Banking (Liquidity) (Amendment) Rules 2017 and Banking (Specification of Multilateral Development Bank) (Amendment) Notice 2017
Publication Date: October 20th 2017
Risks Covered: Liquidity Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The agency has announced that the Banking (Capital) (Amendment) Rules 2017, the Banking (Liquidity) (Amendment) Rules 2017, and the Banking (Specification of Multilateral Development Bank) (Amendment) Notice 2017 have been published in the Gazette on October 20, 2017. The amendments made to the Rules are aimed at implementing the Basel III-related capital and liquidity standards while the Amendment Notice are aimed at allowing banks to apply a 0% risk-weight to claims on the International Development Association as a multilateral development bank.13

 

Prudential Regulation Authority (PRA):
Solvency II: Data collection of market risk sensitivities
Publication Date: October 18th 2017
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The Bank of England Prudential Regulation Authority (PRA) have released this supervisory statement to detail the PRA expectations in regards to the reporting of sensitivities of Solvency position to various changes in market conditions.14

 

European Commission (EC):
Guidelines on Personal data breach notification under Regulation 2016/679, wp250
Publication Date: October 3rd 2017
Risks Covered: Operational  Risk
Business Processes Impacted: Data Quality Management
The regulator has published guidelines on Personal data breach notification under Regulation 2016/679, which were adopted on October 3, 2017. The General Data Protection Regulation (GDPR) has introduced the requirement for a personal data breach to be notified to the competent national supervisory authority and to communicate the breach to the individuals whose personal data have been affected by the breach.15

 

Financial Conduct Authority (FCA):
Financial Conduct Authority outlines lessons learned in year one of its Regulatory Sandbox
Publication Date: October 20th 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Reporting
The agency published a report outlining how the regulatory sandbox (sandbox) has met its objectives over the first year of operation. Among other things, the sandbox has helped reduce the time and cost of getting innovative ideas to market and enabled products to be tested and introduced to the market.16

 

Insurance Europe (IE):
More must be done to address lack of information on cyber attacks
Publication Date: October 18th 2017
Risks Covered: Cyber Security Risk
Business Processes Impacted: Data Privacy & Data Quality Management
Insurance Europe published a press release outlining the need to raise awareness about cyber risks and suggesting that insurers would be able to offer far more tailored protection and advice if they could access anonymized information on cyber attacks.17

 

Financial Stability Board (FSB):
Artificial intelligence and machine learning in financial services
Publication Date: November 1st 2017
Risks Covered: Cyber Security Risk
Business Processes Impacted: Fraud & Financial Crime
Report on the impact of artificial intelligence and machine learning on financial stability.18

 

International Financial Reporting Standards (IFRS):
Overview and Operating Procedures – Transition Resource Group (TRG) for Insurance Contracts
Publication Date: November 1st 2017
Risks Covered: Conduct Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency believes that having a discussion forum such as the TRG to provide support for stakeholders post issuance will enhanced the quality and consistency of implementation.19

 

FORTHCOMING REGULATIONS:

Financial Conduct Authority (FCA)
Summary of Feedback Received
The agency has released a summary of feedback received for “Guidance Consultation 17/4: Financial Advice Market Review (FAMR): Implementation part 1.” The FCA received 26 responses to their outreach, which set out draft guidance on streamlined advice, fact finding information and portability.20

 

Board of Governors of the Federal Reserve System (The Fed)
Rules Regarding Availability of Information
The agency has published a notice detailing that the Federal Open Market Committee is finalizing its interim final rule amending the Committee’s regulations under the Freedom of Information Act (FOIA). This rule-making finalizes the interim rule with minor edits for consistency and clarification, effective November 1, 2017.21

 

Insurance Europe (IE)
Examples of Cyber Risk-Related Initiatives & Template for Cyber Breaches Published
The agency has published an online resource on cyber risk insurance, which includes examples of insurance industry initiatives for the strengthening of cyber resilience and a template for infringement notifications under the EU’s General Data Protection Regulation developed by Insurance Europe.22

 

Monetary Authority of Singapore (MAS)
Economic Possibilities of Blockchain Technology
The Monetary Authority of Singapore’s Managing Director Mr Ravi Menon delivered a speech on the “Economic Possibilities of Blockchain Technology” mentioning the consistency and legitimacy of blockchain; applications of distributed ledger technology (DLT); growing DLT ecosystem in Singapore; Project Ubin; as well as collaboration between Singapore and Andhra Pradesh through DLT.23

 

Office of the Comptroller of the Currency (OCC); Board of Governors of the Federal Reserve System (The Fed); Federal Deposit Insurance Corporation (FDIC)
Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996
The multiple agency are inviting public comment on a notice of proposed rulemaking that would simplify compliance with certain aspects of the capital rule. A majority of the proposed simplifications would apply solely to banking organizations that are not subject to the advanced approaches capital rule (non-advanced approaches banking organizations). Specifically, the agencies are proposing that non- advanced approaches organizations apply a simpler regulatory capital treatment for: mortgage servicing assets; certain deferred tax assets arising from temporary differences; investments in the capital of unconsolidated financial institutions; and capital issued by a consolidated subsidiary of a banking organization and held by third parties (minority interest).24

 

Consumer Financial Protection Bureau (CFPB)
Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z)
The agency is proposing amendments to certain Regulation Z mortgage servicing rules issued in 2016 and relating to the timing for servicers to provide modified or unmodified periodic statements and coupon books in connection with a consumer’s bankruptcy case. Comments must be received on or before November 17, 2017.25

 

European Insurance and Occupational Pensions Authority (EIOPA)
EIOPA recommends simplifications to the calculation of capital requirements
The agency has announced that it has submitted its first set of Advice to the European Commission (EC) regarding the review of specific items in the Solvency II Delegated Regulation. The Advice submitted by the agency proposes simplified calculations of the capital requirements in the Solvency Capital Requirement (SCR) standard formula. The EIOPA’s first set of Advice responds to the first request from the EC. The second set of Advice will be in regards to the analysis of items, such as the cost of capital in the calculation of the risk margin and the calculation of non-life and life underwriting risks, catastrophe risks, unrated debt and unlisted equity. The second set of Advice is expected to be submitted to the EC by February 2018.26

 

Prudential Regulation Authority (PRA)
PRA launches series of improvements to the implementation of Solvency II
The agency has published the first in a series of consultations on the Implementation of Solvency II, which begins with the “Matching Adjustment” (MA) set out in consultation paper CP21/17. Further scheduled releases on the series include the “Model change process,” due to be circulated in December 2017, and which aims to reduce the burden on firms and make better use of supervisory resources. In January 2018, the agency will issue a consultation to reduce the reporting burden on firms. Other improvements by the agency include work on the recalculation of the transitional measure on technical provisions, and an external audit of solvency and the financial condition report.27

 

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

 

 

References:

  1. “EBA updated Risk Dashboard shows slight improvement of EU banks capital level but NPLs still affect their profitability,” European Banking Authority, October 5, 2017. Access at: EBA updated Risk Dashboard shows slight improvement of EU banks capital level but NPLs still affect their profitability.
  2. “Payday, Vehicle Title, and Certain High-Cost Installment Loans,” Consumer Financial Protection Bureau, Final Rule, October 5, 2017. Access at: Payday, Vehicle Title, and Certain High-Cost Installment Loans.
  3. “Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans,” Internal Revenue Service, October 5, 2017. Access at: Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans.
  4. “Amendments to the 2016 Amendments to the 2013 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z),” Consumer Financial Protection Bureau, October 2, 2017. Access at: Amendments to the 2016 Amendments to the 2013 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z).
  5. “Consultations by the FPC and PRA on changes to the UK leverage ratio framework relating to the treatment of claims on central banks,” Prudential Regulation Authority, October 3, 2017. Access at: PRA Rulebook: CRR Firms: – Leverage Ratio and Reporting Leverage Ratio (Amendment) Instrument 2017.
  6. “Updated European PRIIPs Information Exchange Templates (EPT and CEPT version 1.1),” European Fund and Asset Management Association (EFAMA), October 6, 2017. Access at: Updated European PRIIPs Information Exchange Templates (EPT and CEPT version 1.1).
  7. “The Bank of England’s approach to resolution,” Bank of England, October 2, 2017. Access at: The Bank of England’s Approach to Resolution.
  8. “Brexit and data protection,” House of Commons Library, October 10, 2017. Access at: Brexit and Data Protection.
  9. “Final Report on Guidelines under the Insurance Distribution Directive on Insurancebased investment products that incorporate a structure which makes it difficult for the customer to understand the risks involved,” European Insurance and Occupational Pensions Authority, October 11, 2017. Access at: Guidelines on Insurance Distribution Directive.
  10. “EBA provides overview of Competent Authorities implementation and transposition of the CRD IV package,” European Banking Authority, October 30, 2017. Access at: EBA provides overview of Competent Authorities implementation and transposition of the CRD IV package.
  11. “SR 17-12: Timing Expectations for the Completion of Safety-and-Soundness Examination and Inspection Reports for Regional Banking Organizations,” Board of Governors of the Federal Reserve System, October 26, 2017. Access at: Timing Expectations for the Completion of Safety-and-Soundness Examination and Inspection Reports for Regional Banking Organizations.
  12. “Commission Delegated Regulation (EU) 2017/1943 of 14 July 2016, supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on information and requirements for the authorisation of investment firms,” European Commission, October 26, 2017. Access at: Commission Delegated Regulation (EU) 2017/1943 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on information and requirements for the authorisation of investment firms.
  13. “Banking (Capital) (Amendment) Rules 2017, Banking (Liquidity) (Amendment) Rules 2017 and Banking (Specification of Multilateral Development Bank) (Amendment) Notice 17,” Hong Kong Monetary Authority, October 20, 2017. Access at: Banking (Capital) (Amendment) Rules 2017, Banking (Liquidity) (Amendment) Rules 2017 and Banking (Specification of Multilateral Development Bank) (Amendment) Notice 2017.
  14. “Solvency II: Data collection of market risk sensitivities,” Prudential Regulation Authority, October 18, 2017. Access at: Solvency II: Data collection of market risk sensitivities.
  15. “Guidelines on Personal data breach notification under Regulation 2016/679,” European Commission, October 27, 2017. Access at: Guidelines on Personal data breach notification under Regulation 2016/679, wp250.
  16. “Financial Conduct Authority outlines lessons learned in year one of its Regulatory Sandbox,” Financial Conduct Authority, October 20, 2017. Access at: Financial Conduct Authority outlines lessons learned in year one of its Regulatory Sandbox.
  17. “More must be done to address lack of information on cyber attacks,” Insurance Europe, October 18, 2017. Access at: More must be done to address lack of information on cyber attacks.
  18. “Artificial intelligence and machine learning in financial services – Market developments and financial stability implications,” Financial Stability Board, November 1, 2017. Access at: Artificial intelligence and machine learning in financial services.
  19. “Overview and Operating Procedures – Transition Resource Group for Insurance Contracts,” International Financial Reporting Standards, November 1, 2017. Access at: Overview and Operating Procedures – Transition Resource Group (TRG) for Insurance Contracts.
  20. “Summary of feedback received,” Financial Conduct Authority, September 29, 2017. Access at: Summary of Feedback Received.
  21. “Rules Regarding Availability of Information,” Board of Governors of the Federal Reserve System, October 2, 2017. Access at: Rules Regarding Availability of Information.
  22. “Examples of cyber risk-related initiatives & template for cyber breaches published,” Insurance Europe, October 10, 2017. Access at: Examples of Cyber Risk-Related Initiatives & Template for Cyber Breaches Published.
  23. “Economic Possibilities of Blockchain Technology” – Keynote Address by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Global Blockchain Business Conference on 9 October 2017,” Monetary Authority of Singapore, October 9, 2017. Access at: Economic Possibilities of Blockchain Technology.
  24. “Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996,” Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, October 27, 2017. Access at: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996.
  25. “Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z),” Consumer Financial Protection Bureau, October 18, 2017. Access at: Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z).
  26. “EIOPA Recommends Simplifications to the Calculation of Capital Requirements,” European Insurance and Occupational Pensions Authority, October 30, 2017. Access at: EIOPA recommends simplifications to the calculation of capital requirements.
  27. “PRA launches series of improvements to the implementation of Solvency II,” Prudential Regulation Authority, October 25, 2017. Access at: PRA launches series of improvements to the implementation of Solvency II.

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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