Edition Highlights:

  • The revised module on Liquidity Risk Management seeks to provide an overview of the statutory liquidity requirements and the Monetary Authority’s approach to assessing compliance with the Banking (Liquidity) Rules by authorized institutions (AIs).
  • Her Majesty’s (HM) Treasury advises firms to take appropriate actions, which may include enhanced due diligence measures, to minimize the associated risks in relation to the following jurisdictions: Afghanistan, Bosnia and Herzegovina, Guyana, Iraq, Lao PDR, Syria, Uganda, Vanuatu and Yemen.
  • European Securities and Markets Authority has issued guidelines addressed to persons receiving market soundings and guidelines on legitimate interests of issuers to delay disclosure of inside information and situations in which the delay of disclosure is likely to mislead the public.

Current coverage period: Through July 31, 2016

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

 

CURRENT REGULATIONS:

Hong Kong Monetary Authority (HKMA)(**):
Supervisory Policy Manual (SPM): LM-1 “Regulatory Framework for Supervision of Liquidity Risk”
Publication Date: July 29th 2016

Risks Covered: Liquidity Risk

Business Processes Impacted: Funding and Liquidity Management
This statutory guideline provides an outline of the Monetary Authority’s approach to: 1) supervising authorized institution’s liquidity risk; 2) an overview of the statutory requirements regarding the Liquidity Coverage Ratio (LCR) and the Liquidity Maintenance Ratio (LMR); 3) an explanation of the approach and criteria adopted for the designation of category 1 institutions subject to the LCR requirements; 4) guidance on the LCR and LMR requirements; and 5) guidance on the disclosure of liquidity information by authorized institutions as required under the Banking (Disclosure) Rules.1

 

HM Treasury(***):
Advisory Notice on Money Laundering and Terrorist Financing controls in Overseas Jurisdictions
Publication Date: July 6th 2016

Risks Covered: Business Cycle Risk, Operational Risk

Business Processes Impacted: Fraud and Financial Crime, Know Your Customer
The updated advisory notice on Money Laundering and Terrorist Financing controls in Overseas Jurisdictions follows the publication by the Financial Action Task Force (FATF) in June 2016 of two statements identifying jurisdictions with strategic deficiencies in their anti-money laundering and counter terrorist financing regimes.2

 

European Securities and Markets Authority (ESMA)(***):
Final Report: Guidelines on the Market Abuse Regulation – Market Soundings and Delay of Disclosure of Inside Information
Publication Date: July 13th 2016

Risks Covered: Operational Risk

Business Processes Impacted: Fraud and Financial Crime, Risk Management and Stress Testing
These final Guidelines clarify the implementation of the Market Abuse Regulation (MAR) for persons receiving market soundings and delayed disclosure of inside information, setting out the factors to take into account when assessing information disclosed, the steps to be taken if identified as inside information, and the records to be maintained in order to demonstrate that they have complied with MAR.3

 

Financial Industry Regulatory Authority (FINRA)(*):
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Partial Amendment No. 2 to Proposed Rule Change to Adopt FINRA Capital Acquisition Broker
Publication Date: July 1st 2016

Risks Covered: Business Cycle Risk

Business Processes Impacted: Capital Adequacy and Capital Planning
Following the proposed rule change SR-FINRA-2015-054 by the Financial Industry Regulatory Authority, Inc. (FINRA) and Partial Amendment No. 1, the Partial Amendment No. 2 amends the proposed Capital Acquisition Broker (CAB) Rules 016(c)(1)(F) regarding a CAB’s authority to engage in qualifying, identifying, soliciting, or acting as a placement agent or finder in connection with unregistered securities transactions.4

 

European Commission (EC)(*):
Commission implementing regulation (EU) 2016/1066 of 17 June 2016 laying down implementing technical standards with regard to procedures, standard forms and templates for the provision of information for the purpose of resolution plans for credit institutions and investment firms pursuant to Directive 2014/59/EU of the European Parliament and of the Council
Publication Date: July 6th 2016
Risks Covered: Operational Risk

Business Processes Impacted: Recovery and Resolution Planning
The Commission Implementing Regulation (EU) 2016/1066 sets out implementing technical standards with regard to procedures, standard forms and templates for the provision of information for the purpose of resolution plans for credit institutions and investment firms pursuant to the Bank Recovery and Resolution Directive.5

 

European Commission (EC)(**):
Commission delegated regulation (EU) 2016/1178 of 10 June 2016 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation
Publication Date: July 20th 2016

Risks Covered: Market Risk

Business Processes Impacted: Trading, Clearing and Settlement – Exchange Traded and Over-the Counter
The Commission Delegated Regulation (EU) 2016/1178 supplements the European Market Infrastructure Regulation (EMIR) with regard to regulatory technical standards on the clearing obligation.6

 

Financial Industry Regulatory Authority (FINRA)(**):
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Reporting of U.S. Treasury Securities to the Trade Reporting and Compliance Engine
Publication Date: July 19th 2016
Risks Covered: Compliance Risk, Conduct Risk

Business Processes Impacted: Trading, Reporting, Audit, Legal and Compliance
The rule proposes to expand the Trade Reporting and Compliance Engine (TRACE) reporting rules to include most secondary market transactions in marketable U.S. Treasury securities.7

 

Office of the Comptroller of Currency (OCC)(**):
Community Reinvestment Act; Interagency Questions and Answers Regarding Community Reinvestment; Guidance
Publication Date: July 25th 2016
Risks Covered: Conduct Risk, Operational Risk

Business Processes Impacted: Consumer/Investor Protection, Lending and Investment
The Interagency Questions and Answers regarding Community Reinvestment (Questions and Answers) addresses alternative systems for delivering retail banking services; community development-related issues; and the qualitative aspects of performance, including innovative or flexible lending practices and the responsiveness and innovativeness of an institution’s loans, qualified investments, and community development services.8

 

Financial Conduct Authority (FCA)(**):
Handbook Administration (No 42) Instrument 2016
Publication Date: July 29th 2016
Risks Covered: Conduct Risk, Compliance Risk

Business Processes Impacted: Business Continuity Management, Recovery and Resolution Planning
The Handbook Administration (No 42) Instrument 2016 makes amendments to the Glossary of definitions: Senior Management Arrangements, systems and controls (SYSC), Fees manual (FEES), Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU), Prudential sourcebook for Mortgage and Home Finance Firms, Insurance Intermediaries (MIPRU), Conduct of Business sourcebook (COBS), Mortgages and Home Finance: Conduct of Business sourcebook (MCOB), Market Conduct sourcebook (MAR), Supervision manual (SUP), Decision Procedure and Penalties manual (DEPP), Dispute Resolution: Complaints (DISP), Collective Investment Schemes sourcebook (COLL), Investment Funds sourcebook (FUND).9

 

Federal Deposit Insurance Corporation (FDIC)(***):
Margin and Capital Requirements for Covered Swap Entities
Publication Date: August 1st 2016
Risks Covered: Conduct Risk
Business Processes Impacted: Trading, Capital Adequacy and Capital Planning, Clearing and Settlement – Exchange Traded and Over-the-Counter
Pursuant to Title III of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA), this final rule exempts certain non-cleared swaps and non-cleared security-based swaps with certain financial and non-financial end users that qualify for an exception or exemption from clearing.10

 

FORTHCOMING REGULATIONS:

European Securities and Markets Authority (ESMA)
Issues for consideration in implementing IFRS 15: Revenue from Contracts with Customers
The public statement on IFRS 15 is intended to promote the consistent application of IFRS 15 by issuers listed on regulated markets.11

 

International Monetary Fund (IMF)
Report on the observance of standards and codes – Basel core principles for effective banking supervision
The main findings of the report include the following: (i) The current legal framework provides the Central Bank of the Russian Federation (CBR) with necessary powers and responsibilities to supervise banks, and the licensing regime appears exhaustive; however, the legal regime for major acquisitions was found to be weak; (ii) CBR has developed its risk-based approaches and is beginning to introduce the next stage of risk-based supervision – as CBR has been restructured to support a risk-based focus and has established a separate division to supervise the systemically important banks;. (iii) The legal and regulatory framework regarding consolidated supervision has been significantly enhanced, including powers to act in the event of violations by the parent of a banking group, enhanced scope of information exchange, and expanded definitions based on International Financial Reporting Standards.12

 

Prudential Regulatory Authority (PRA)
Ring-fenced bodies (RFBs) – SS8/16
The supervisory statement, aimed at ring-fenced bodies (RFBs), sets out expectations of an RFB and members of its group in relation to the ring-fencing of core activities and services.13

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

 

References:

  1. “Supervisory Policy Manual (SPM): LM-1 “Regulatory Framework for Supervision of Liquidity Risk,” Hong Kong Monetary Authority, July 29, 2016. Access at:
    Supervisory Policy Manual (SPM): LM-1 “Regulatory Framework for Supervision of Liquidity Risk”
  2. “Advisory Notice on Money Laundering and Terrorist Financing Controls in Overseas Jurisdictions,” HM Treasury, July 6, 2016. Access at:
    Advisory Notice on Money Laundering and Terrorist Financing controls in Overseas Jurisdictions
  3. “Guidelines on the Market Abuse Regulation – market soundings and delay of disclosure of inside information,” European Securities and Markets Authority, July 13, 2016.
    Final Report: Guidelines on the Market Abuse Regulation – market soundings and delay of disclosure of inside information
  1. “Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Partial Amendment No. 2 to Proposed Rule Change to Adopt FINRA Capital Acquisition Broker Rules,” Securities and Exchange Commission, Release No. 34-78220, July 1, 2016. Access at: Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Partial Amendment No. 2 to Proposed Rule Change to Adopt FINRA Capital Acquisition Broker
  1. “Implementing Technical Standards with Regard to Procedures, Standard Forms and Templates for the Provision of Information for the Purpose of Resolution Plans for Credit Institutions and Investment Firms Pursuant to Directive 2014/59/EU of the European Parliament and of the Council,” Official Journal of the European Union, July 6, 2016. Access at: Commission implementing regulation (EU) 2016/1066 of 17 June 2016 laying down implementing technical standards with regard to procedures, standard forms and templates for the provision of information for the purpose of resolution plans for credit institutions and investment firms pursuant to Directive 2014/59/EU of the European Parliament and of the Council
  1. “Supplement Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation,” Official Journal of the European Union, July 20, 2016. Access at:
    Commission delegated regulation (EU) 2016/1178 of 10 June 2016 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation
  2. “Notice of Filing of a Proposed Rule Change Relating to the Reporting of U.S. Treasury Securities to the Trade Reporting and Compliance Engine,” Securities and Exchange Commission, Release No. 34-78359, July 19, 2016. Access at:
    Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Reporting of U.S. Treasury Securities to the Trade Reporting and Compliance Engine
  3. “Community Reinvestment Act; Interagency Questions and Answers Regarding Community Reinvestment,” Office of the Comptroller of Currency, Federal Reserve System, Federal Deposit Insurance Corporation, July 25, 2016. Access at:
    Community Reinvestment Act; Interagency Questions and Answers Regarding Community Reinvestment; Guidance
  1. “Handbook Administration (NO 42) Instrument 2016,” Financial Conduct Authority, July 28, 2016. Access at:
    Handbook Administration (No 42) Instrument 2016
  2. “Final Rule on Margin and Capital Requirements for Covered Swap Entities,” Federal Deposit Insurance Corporation, Department of the Treasury, Federal Reserve System, Farm Credit Administration, Federal Housing Finance Agency, August 1, 2016. Access at:
    Margin and Capital Requirements for Covered Swap Entities
  1. “Issues for consideration in implementing IFRS 15: Revenue from Contracts and Customers,” Public Statement, European Securities and Markets Authority, July 20, 2016. Access at: Issues for consideration in implementing IFRS 15: Revenue from Contracts with Customers
  1. “Russian Federation, Report on the Observance of Standards and Codes—Basel Core Principles for Effective Banking Supervision,” International Monetary Fund, July 2016. Access at: Report on the observance of standards and codes – Basel core principles for effective banking supervision
  1. “Supplementary materials – ring-fencing,” Prudential Regulation Authority. Access at: Ring-fenced bodies (RFBs) – SS8/16

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

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