This newsletter summarizes recent regulatory changes impacting Banking and Capital Markets firms.

This newsletter covers some of the more recent regulatory changes impacting Banking, Capital Markets and Insurance firms. We track more than 70 regulatory and industry bodies across North America, Europe and Asia Pacific. The shortlisted entries highlight the risks covered and business processes affected by the regulatory reforms.

CURRENT REGULATIONS:

European Commission (EC):
Digital Finance Outreach 2020
Publication Date: February 4th 2020

Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection

The agency announced the digital finance road-trip 2020 (between March and early May 2020), a series of events in Member States on fintech and digital innovation in the financial sector and to prepare the new European Union digital finance strategy.1

Federal Reserve (The Fed):

Federal Reserve Board releases hypothetical scenarios for its 2020 stress test exercises
Publication Date: February 6th 2020

Risks Covered: Credit Risk
Business Processes Impacted: Risk Management & Stress Testing
The agency has released the hypothetical scenarios for the 2020 stress test exercises to help confirm that large banks have adequate capital and processes and are able to continue lending to households and businesses, even during a severe recession.2

Bank of England (BoE):
Crossing the credit channel: Credit spreads and firm heterogeneity
Publication Date: February 7th 2020
Risks Covered: Credit Risk
Business Processes Impacted: Data Quality Management
The bank has released a Staff Working Paper on credit spreads and firm heterogeneity, which indicates that credit spreads tend to rise after a monetary policy tightening, but spread reactions remain heterogeneous across firms.3

International Organization of Securities Commissions (IOSCO):
IOSCO publishes key considerations for regulating Crypto-Asset trading platforms
Publication Date: February 12th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The agency has published a final report on issues, risks and regulatory considerations relating to crypto-asset trading platforms.4

European Banking Authority (EBA):
EBA calls for measures to ensure a more balanced composition of management bodies in institutions
Publication Date: February 3rd 2020
Risks Covered: Credit Concentration Risk
Business Processes Impacted: Data Privacy
The authority has issued a new report on diversity practices in credit institutions and investment firms since its 2015 diversity benchmarking exercise. The representation of women in management bodies is still relatively low and many institutions do not have a gender diverse board.5

International Swaps and Derivatives Association (ISDA):
ISDA publishes results of consultation on Fallbacks for derivatives referencing euro LIBOR and EURIBOR
Publication Date: February 24th 2020
Risks Covered: Credit Concentration Risk
Business Processes Impacted: Data Quality Management
The agency has issued a statement setting out an overview of 57 responses submitted to its supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing Euro LIBOR and EURIBOR.6

Federal Deposit Insurance Corporation (FDIC):
FDiTech Releases New Guide to Help ‘FinTechs’ Connect with Banks
Publication Date: February 24th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Data Quality Management
The agency has issued a press release stating its technology lab (FDiTech) has released a new guide to help financial technology companies and others partner with banks. This is part of the agency’s continuing effort to encourage technology innovation in the banking sector.7

Bank of England (BoE):
Legal Entity Identifiers: the code to a digital economy?
Publication Date: February 21st 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
As part of its Bank Overground series, the bank has published information on Legal Entity Identifiers (LEI). LEI records include basic information on the legal entity and is used by over 1.5 million legal entities in over 200 jurisdictions.8

European Commission (EC):
Public consultation on a potential initiative on the digital operational resilience in the area of financial services
Publication Date: February 21st 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Data Privacy
The agency has updated details on its public consultation aiming to collect stakeholders’ feedback on the need for legislative improvements within financial services to improve resilience against cyber-attacks.9

European Insurance and Occupational Pensions Authority (EIOPA):
Consultation Paper on Implementing Technical Standards regarding the format of supervisory reporting and the cooperation and exchange of information between competent authorities for the Pan-European Personal Pension Product (PEPP)
Publication Date: February 20th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The new regulation aims to lay down technical standards for the application of Regulation (EU) 2019/1238 concerning the format of supervisory reporting to the competent authorities and for the co-operation and exchange of information between relevant authorities and EIOPA. Responses to the consultation were to be submitted by May 20, 2020.10

International Securities Lending Association (ISLA):
Clarification on the SFTR Scope of Non-EU AIFs
Publication Date: February 10th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Payments
The ISLA has submitted a letter to the European Commission and the European Securities and Markets Authority regarding Regulation on reporting and transparency of securities financing transactions.11

International Swaps and Derivatives Association (ISDA):
ISDA to Re-consult on Pre-cessation Fallbacks
Publication Date: February 5th 2020
Risks Covered: Credit Risk
Business Processes Impacted: Risk Management & Stress Testing
The agency has announced that it is going to re-consult on the implementation of pre-cessation fallbacks. The results should inform how to create and deliver an appropriate, industry endorsed fallback solution that can be released later in 2020.12

European Securities and Markets Authority (ESMA):
ESMA amends guidelines for further harmonisation of the enforcement of financial information by NCAs
Publication Date: February 4th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Risk Management & Stress Testing
The ESMA has published amended guidelines for Member State national competent authorities (NCAs) undertaking enforcement of financial information under the Transparency Directive.13

European Free Trade Association (EFTA):
Frequently asked questions on EFTA, the EEA, EFTA membership and Brexit
Publication Date: February 3rd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The European Free Trade Association has published FAQs on Brexit and made a number of statements clarifying the UK’s position regarding European Economic Area membership.14

Securities and Exchange Commission (SEC):
Delegation of Authority to the General Counsel of the Commission
Publication Date: February 20th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency is revising regulations with respect to the delegation of authority to the SEC’s General Counsel. The revisions are a result of the SEC’s experience with its bankruptcy program and they are intended to conserve SEC resources by delegating to staff the discretion to file objections in bankruptcy cases with respect to the frequently recurring issue of non-debtor third-party releases.15

Commodity Futures Trading Commission (CFTC):
Swap Execution Facility Requirements and Real-Time Reporting Requirements
Publication Date: February 19th 2020
Risks Covered: Market Risk
Business Processes Impacted: Business Continuity Management
The agency proposes to amend certain parts of its regulations relating to the execution of package transactions on swap execution facilities (SEFs); the execution of block trades on SEFs; and the resolution of error trades on SEFs. Comments were to be received by April 20, 2020.16

Financial Crimes Enforcement Network (FinCEN); Financial Transactions and Reports Analysis Centre (FINTRAC):
Financial Intelligence Units Meet to Discuss Global Issues Surrounding Virtual Assets
Publication Date: February 19th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
A group of agencies have published details of a meeting held on February 16, 2020, during which 50 senior officials and experts of Financial Intelligence Units (FIUs) from Financial Action Task Force countries and the Egmont Group Secretariat met to discuss the international ramifications of virtual assets from the FIUs’ perspective.17

Office of the Comptroller of the Currency (OCC); Federal Deposit Insurance Corporation (FDIC):
Extension of Comment Period for Community Reinvestment Act Regulations
Publication Date: February 26th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
A group of agencies have extended the public comment period for proposed changes to the rules implementing the Community Reinvestment Act (CRA) until April 8, 2020.18

Office of the Comptroller of the Currency (OCC):
Standardized Approach for Counterparty Credit Risk: Final Rule
Publication Date: February 18th 2020
Risks Covered: Counterparty Credit Risk
Business Processes Impacted: Data Privacy
A group of agencies have published a final rule to provide an updated framework for measuring the exposed amount of derivatives contracts.19

Financial Services Compensation Scheme (FSCS); Financial Conduct Authority (FCA):
FCA, ICO and FSCS publish joint statement to insolvency practitioners and authorised firms
Publication Date: February 7th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
A group of regulators have published a joint statement warning insolvency practitioners and FCA-authorized firms that they should be responsible for the handling of personal data, as some firms have unlawfully tried to sell the personal data of clients to claims management companies (CMCs).20

 

FORTHCOMING REGULATIONS:

Federal Deposit Insurance Corporation (FDIC)
Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions
The agency is inviting comment on proposed revisions to its regulations relating to the brokered deposits restrictions that apply to less than well capitalized insured depository institutions.21

European Insurance and Occupational Pensions Authority (EIOPA)
EIOPA discussion paper: IBOR Transitions
The paper sets out the potential impact of the IBOR transitions on the definition and the use of the Credit Rate Adjustment currently applied to the EIOPA risk-free rate (RFR) term structures, and proposes options and a consistent approach for dealing with the new term structures calculated with the new benchmark rates for all currencies.22

International Swaps and Derivatives Association (ISDA)
ISDA launches new consultation on Pre-cessation Fallbacks
The association has issued a new consultation on how to implement pre-cessation fallbacks for derivatives.23

Prudential Regulation Authority (PRA)
Strengthening individual accountability in banking
The agency has issued an updated supervisory statement SS28/15 setting out the PRA’s approach to strengthening individual accountability in banking. It details the PRA’s expectations of how relevant firms should comply with the regulatory framework of: the Senior Managers Regime; the certification regime; the assessment of fitness and propriety; conduct rules; and regulatory references. This version is effective as of February 24, 2020.24

International Swaps and Derivatives Association (ISDA)
Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds
Multiple regulators are inviting comment on a proposal that would amend the regulations implementing section 13 of the Bank Holding Company Act. Comments were to be submitted by April 1, 2020.25

Prudential Regulation Authority (PRA)
The PRA’s methodologies for setting Pillar 2 capital
The authority has updated its statement of policy setting out the methodologies used by the PRA to inform the setting of Pillar 2 capital for firms to which Capital Requirements Directive IV applies. This statement of policy was updated following the publication of Policy Statement (PS) 3/20 “Responses to Occasional Consultation Paper 25/19 – Chapters 2 and 3” and is effective from February 24, 2020.26

European Commission (EC)
Negotiating directives for a new partnership with the United Kingdom
The draft mandate covers all areas outlined in the political declaration agreed to between the UK and European Union in October 2019 and proposes a single comprehensive partnership agreement, covering economic arrangements, security arrangements and overarching principles and governance (based on a level playing field and subject to separate agreement on fisheries).27

HM Treasury
UK financial sanctions guidance from 11pm, 31 December 2020
The agency has published guidance on financial sanctions under the UK Sanctions Act which shall continue uninterrupted as of 11pm on December 31, 2020. Existing European Union sanctions will transfer into UK law in the form of Statutory Instruments. Specific guidance regarding financial sanctions for Russia have been published by the Office of Financial Sanctions Implementation and comes into effect on December 31, 2020 or when the Russia (Sanctions) (EU Exit) Regulations 2019 come into force.28

 

Footnotes:

  1. “Digital finance outreach 2020,” European Commission, February 4, 2020. Access at: Digital Finance Outreach 2020.
  2. “Federal Reserve Board releases hypothetical scenarios for its 2020 stress test exercises,” Federal Reserve, February 6, 2020. Access at: Federal Reserve Board releases hypothetical scenarios for its 2020 stress test exercises.
  3. “Crossing the credit channel: credit spreads and firm heterogeneity,” Bank of England, February 7, 2020. Access at: Crossing the credit channel: credit spreads and firm heterogeneity.
  4. “IOSCO publishes key considerations for regulating crypto-asset trading platforms,” International Organization of Securities Commissions, February 12, 2020. Access at: IOSCO publishes key considerations for regulating crypto-asset trading platforms.
  5. “EBA calls for measures to ensure a more balanced composition of management bodies in institutions,” European Banking Authority, February 3, 2020. Access at: EBA calls for measures to ensure a more balanced composition of management bodies in institutions.
  6. “ISDA Publishes Results of Consultation on Fallbacks for Derivatives Referencing Euro LIBOR and EURIBOR,” International Swaps and Derivatives Association, February 24, 2020. Access at: ISDA publishes results of consultation on Fallbacks for derivatives referencing euro LIBOR and EURIBOR.
  7. “FDiTech Releases New Guide to Help ‘FinTechs’ Connect with Banks,” Federal Deposit Insurance Corporation, February 24, 2020. Access at: FDiTech Releases New Guide to Help ‘FinTechs’ Connect with Banks.
  8. “Legal Entity Identifiers: the code to a digital economy?,” Bank of England, February 21, 2020. Access at: Legal Entity Identifiers: the code to a digital economy?.
  9. “Financial services – improving resilience against cyberattacks (new rules),” European Commission, February 21, 2020. Access at: Public consultation on a potential initiative on the digital operational resilience in the area of financial services.
  10. “Implementing Technical Standards regarding the format of supervisory reporting and the cooperation and exchange of information between competent authorities for the Pan-European Personal Pension Product (PEPP),” European Insurance and Occupational Pensions Authority, February 20, 2020. Access at: Consultation Paper on Implementing Technical Standards regarding the format of supervisory reporting and the cooperation and exchange of information between competent authorities for the Pan-European Personal Pension Product (PEPP).
  11. “Clarification on the SFTR Scope of Non-EU AIFs,” International Securities Lending Association, February 10, 2020. Access at: Clarification on the SFTR Scope of Non-EU AIFs.
  12. “ISDA to Re-consult on Pre-cessation Fallbacks,” International Swaps and Derivatives Association, February 5, 2020. Access at: ISDA to Re-consult on Pre-cessation Fallbacks.
  13. “Guidelines – On enforcement of financial information,” European Securities and Markets Authority, February 4, 2020. Access at: ESMA amends guidelines for further harmonisation of the enforcement of financial information by NCAs.
  14. “Frequently asked questions on EFTA, the EEA, EFTA membership and Brexit,” European Free Trade Association, February 3, 2020. Access at: Frequently asked questions on EFTA, the EEA, EFTA membership and Brexit.
  15. “Delegation of Authority to the General Counsel of the Commission,” Securities and Exchange Commission, February 20, 2020. Access at: Delegation of Authority to the General Counsel of the Commission.
  16. “Swap Execution Facility Requirements and Real-Time Reporting Requirements,” Federal Register, February 19, 2020. Access at: Swap Execution Facility Requirements and Real-Time Reporting Requirements.
  17. “Financial Intelligence Units Meet to Discuss Global Issues Surrounding Virtual Assets,” Financial Crimes Enforcement Network; Financial Transactions and Reports Analysis Centre; Financial Intelligence Unit, February 19, 2020. Access at: Financial Intelligence Units Meet to Discuss Global Issues Surrounding Virtual Assets.
  18. “Community Reinvestment Act Regulations; Extension of Comment Period,” Federal Register, February 26, 2020. Access at: Extension of Comment Period for Community Reinvestment Act Regulations.
  19. “Standardized Approach for Counterparty Credit Risk: Final Rule,” Office of the Comptroller of the Currency, February 18, 2020. Access at: Standardized Approach for Counterparty Credit Risk: Final Rule.
  20. “FCA, ICO and FSCS publish joint statement to insolvency practitioners and authorised firms,” Financial Conduct Authority, February 7, 2020. Access at: FCA, ICO and FSCS publish joint statement to insolvency practitioners and authorised firms.
  21. “Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions,” Federal Register, February 10, 2020. Access at: Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions.
  22. “EIOPA Discussion Paper – IBOR transitions,” European Insurance and Occupational Pensions Authority, January 30, 2020. Access at: EIOPA discussion paper: IBOR Transitions.
  23. “ISDA Launches New Consultation on Pre-cessation Fallbacks,” International Swaps and Derivatives Association, February 25, 2020. Access at: ISDA launches new consultation on Pre-cessation Fallbacks.
  24. “Strengthening individual accountability in banking,” Prudential Regulation Authority, February 24, 2020. Access at: Strengthening individual accountability in banking.
  25. “Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds,” Office of the Comptroller of the Currency; Federal Reserve System; Federal Deposit Insurance Corporation; Commodity Futures Trading Commission and Securities and Exchange Commission, February 24, 2020. Access at: Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds.
  26. “The PRA’s methodologies for setting Pillar 2 capital,” Prudential Regulation Authority, February 24, 2020. Access at: The PRA’s methodologies for setting Pillar 2 capital.
  27. “Draft text of the Agreement on the New Partnership with the United Kingdom,” European Commission, February 24, 2020. Access at: Negotiating directives for a new partnership with the United Kingdom.
  28. “UK financial sanctions guidance from 11pm, 31 December 2020,” HM Treasury, January 30, 2020. Access at: UK financial sanctions guidance from 11pm, 31 December 2020.

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