This newsletter summarizes recent regulatory changes impacting Banking, Capital Markets and Insurance 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:

Financial Industry Regulatory Authority (FINRA):
Business in the Time of COVID-19: BCPs, Regulatory Relief & More
Publication Date: April 1st 2020 
Risks Covered: Conduct Risk 
Business Processes Impacted: Business Continuity Management 
The agency has announced that it has released a podcast with FINRA’s Chief Legal Officer Bob Colby and Head of Member Supervision Bari Havlik to communicate the authority’s expectations at this time and how firms and authority are adapting to the current situation.1

Prudential Regulation Authority (PRA); HM Treasury (HMT):
Statement from HM Treasury and the Prudential Regulation Authority on the implementation of the Basel 3.1 standards
Publication Date: April 2nd 2020

Risks Covered: Liquidity Risk
Business Processes Impacted: Funding and Liquidity Management
The agencies have indicated that they welcome the announcement from the Group of Central Bank Governors and Heads of Supervision’s (GHOS) delaying the implementation of the Basel 3.1 standards by one year.2

Prudential Regulation Authority (PRA):
Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets
Publication Date: April 2nd 2020
Risks Covered: Credit Risk
Business Processes Impacted: Netting and Collateral Management
The agency is providing feedback to the responses received to the “Solvency II: Income producing real estate loans and internal credit assessment for illiquid, unrated assets” policy statement (PS). The PS targets UK insurance and reinsurance companies holding or intending to hold Income Producing Real Estate (IPRE) loans or firms investing in illiquid, unrated assets within their Solvency II matching adjustment (MA) portfolios.3

Prudential Regulation Authority (PRA); Financial Conduct Authority (FCA):
Joint FCA and PRA statement Senior Managers and Certification Regime (SM&CR) and coronavirus (Covid-19): Our expectations of dual-regulated firms
Publication Date: April 3rd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal and Compliance
The agency has announced certain changes to its Senior Management Functions (SMFs) to allow for increased regulatory flexibility in light of the ongoing COVID-19 outbreak.4

Insurance Europe (IE):
Europe’s insurers support GFIA statement on COVID-19
Publication Date: April 6th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The Global Federation of Insurance Associations would like to stress to governments worldwide that requiring insurers to cover losses retroactively would not be an appropriate way to manage the large-scale financial impacts of the pandemic and could endanger the financial stability of the insurance industry and undermine insurers’ capacity to pay for other types of claims.5

Office of the Comptroller of the Currency (OCC); Federal Reserve (The Fed); Federal Deposit Insurance Corporation (FDIC):
Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework
Publication Date: April 23rd 2020
Risks Covered: Interest Rate Risk
Business Processes Impacted: Capital Adequacy and Capital Planning
Numerous regulators have published an interim final rule which provides a graduated transition to a community bank leverage ratio requirement of 9 percent from the temporary 8 percent community bank leverage ratio requirement (transition interim final rule).6

Financial Conduct Authority (FCA):
FCA 2020/15: COVID-19: Deferral of Commencement (Pension Transfers, Investment Pathways, Platform Switching, Access to Insurance) Instrument 2020
Publication Date: April 3rd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Lending and Investment
The agency has published a list of instruments that are affected by a deferred commencement date due to COVID-19 and which are effective 6 April 2020.7

Securities and Exchange Commission (SEC):
Examinations that Focus on Compliance with Regulation Best Interest
Publication Date: April 7th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Brokerage Services
The regulator’s office of compliance inspections and examinations has issued a risk alert to provide broker-dealers with information about the scope and content of initial examinations after the compliance date for Regulation Best Interest.8

International Swaps and Derivatives Association (ISDA):
ISDA announces preliminary results of consultation on pre-cessation fallbacks for LIBOR
Publication Date: April 15th 2020
Risks Covered: Counterparty Conduct Risk
Business Processes Impacted: Trading
The agency has declared that the initial results from their consultation indicate a significant majority of respondents are in favor of including both pre-cessation and permanent cessation fallbacks as standard language in the amended 2006 International Swaps and Derivatives Association (ISDA) Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades.9

Financial Stability Board (FSB):
FSB consults on regulatory, supervisory and oversight recommendations for “global stablecoin” arrangements
Publication Date: April 14th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Funding and Liquidity Management
The authority has published for consultation 10 high-level recommendations to address the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements.10

Consumer Financial Protection Bureau (CFPB):
Consumer Financial Protection Bureau Issues Final Rule Raising Data Reporting Thresholds Under the Home Mortgage Disclosure Act
Publication Date: April 16th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Payments
The agency has issued a final rule raising the loan-volume coverage thresholds for financial institutions reporting data under the Home Mortgage Reporting Act (HMDA). The rule amends Regulation C which increases the permanent threshold for collecting and reporting data about closed-end mortgage loans from 25 to 100 loans effective July 1, 2020. It also increases the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, effective 1 January 2022, when the current temporary threshold of 500 open-end lines of credit expires.11

Australian Prudential Regulation Authority (APRA):
APRA announces new commencement dates for prudential and reporting standards
Publication Date: April 16th 2020
Risks Covered: Credit Risk
Business Processes Impacted: Reporting
The agency has prescribed the new commencement dates for CPS 226 Margining and Risk Mitigation for Non-Centrally Cleared Derivatives (phase-in of initial margin requirements), CPS 234 Information Security (third-party arrangements transition provision), APS 220 Credit Risk Management, APS 222 Associations with Related Entities, ARS 222.0 Exposures to Related Entities and ARS 222.2 Exposures to Related Entities – Step-in risk.12

Federal Reserve (The Fed):
Federal Reserve announces it is working to expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders as soon as possible
Publication Date: April 23rd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Risk Management and Stress Testing
The regulator has announced that to facilitate lending to small businesses via the Small Business Administration’s PPP, it is working to expand access to its Paycheck Protection Program Liquidity Facility for additional Small Business Administration-qualified lenders as soon as possible.13

Financial Reporting Council (UK) (FRC):
Interest Rate Benchmark Reform—Ph 2 (Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
Publication Date: April 28th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal and Compliance
The council has provided draft comments in response to the International Accounting Standards Board’s (IASB) Exposure Draft regarding Phase 2 of Interest Rate Benchmark Reform.14

Office of the Superintendent of Financial Institutions (OSFI):
COVID-19 Measures – FAQs on regulatory reporting for Federally Regulated Financial Institutions
Publication Date: April 28th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The office has published COVID-19 Measures – FAQs on regulatory reporting for Federally Regulated Financial Institutions (FRFIs). This FAQ consists of a series of questions and answers on regulatory reporting requirements and the recent measures taken to offer FRFIs some flexibility to meet upcoming deadlines for filing regulatory returns.15

Federal Reserve (The Fed):
Federal Reserve Board announces it is expanding the scope and eligibility for the Main Street Lending Program
Publication Date: April 30th 2020
Risks Covered: Market Risk
Business Processes Impacted: Business Continuity Management
The Reserve is expanding the scope and eligibility for the Main Street Lending Program. As part of its broad effort to support the economy, the Federal Reserve developed the Main Street Lending Program to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic.16

Monetary Authority of Singapore (MAS):
MAS Supports Inaugural Cloud-Based G20 TechSprint
Publication Date: April 29th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Information Technology
The authority has announced that it will support the inaugural G20 TechSprint initiative, launched by the Saudi G20 Presidency and the Bank for International Settlements (BIS) Innovation Hub on the API Exchange (APIX) innovation platform. The TechSprint initiative should help central banks and financial regulators collaborate with fintech firms on technology solutions to strengthen regulatory and supervisory practices.17

European Commission (EC):
Commission Regulation (EU) 2020/551 of 21 April 2020 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 3
Publication Date: April 22nd 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
The commission has adopted 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 Standards (IFRS) 3. This Regulation entered into force on 13 May 2020.18

European Banking Authority (EBA):
EBA updates its list of risk indicators, IMF-FSI mapping and respective guides
Publication Date: April 20th 2020
Risks Covered: Counterparty Credit Risk
Business Processes Impacted: Data Privacy
The authority has updated its guide on the International Monetary Fund’s (IMF) Financial Soundness Indicators (FSIs) reporting, as well as its revised methodological guide on the compilation of risk indicators and detailed risk analysis tools. These updates are based on the recently published 2019 IMF FSI Guide and changes in securitizations information and non-performing and forborne exposures.19

Monetary Authority of Singapore (MAS):
ESMA and MAS Sign MOU on Singapore’s Financial Benchmarks
Publication Date: April 17th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy and Capital Planning
Under the signed Memorandum of Understanding (MOU), the European Securities and Markets Authority and MAS are to share information and supervisory activities on Singapore-regulated financial benchmarks. The MOU further allows financial institutions in the European Union to continue using the Singapore Interbank Offered Rate (SIBOR) and the SGD Swap Offer Rate (SOR) as reference rates in their contracts.20

FORTHCOMING REGULATIONS:

Consumer Financial Protection Bureau (CFPB)
Request for information to assist the taskforce on Federal Consumer Financial Law
The agency is seeking comments and information from interested parties to assist the Taskforce on Federal Consumer Financial Law. Comments were to be submitted by 1 June 1 2020.21

European Commission (EC)
Consultation on a new digital finance strategy for Europe / FinTech action plan
The agency is to propose in Q3 2020 a new digital finance strategy/FinTech action plan setting out a number of areas of focus for public policy over the next 5 years.22

Securities and Exchange Commission (SEC)
SEC enhances standards for critical market infrastructure
The agency has adopted amendments to its rules for securities clearing agencies to apply enhanced standards to all SEC-registered central counter-parties and central securities depositories.23

European Commission (EC)
Consultation on the renewed sustainable finance strategy
The authority seeks feedback to its consultation on the renewed sustainable finance strategy, with a view to providing increased private investment in sustainable activities to support the European Green Deal as well as to integrate climate and environmental risks into the financial system.24

Financial Conduct Authority (FCA)
COVID-19 Motor Finance and High Cost Credit Instrument 2020
The authority has issued the COVID-19 Motor Finance and High Cost Credit Instrument 2020, which makes amendments to the Consumer Credit sourcebook (CONC) of the FCA Handbook. This instrument came into force on 27 April 2020.25

Financial Conduct Authority (FCA)
Further statement from the RFRWG on the impact of Coronavirus on the timeline for firms’ LIBOR transition plans
The authority has issued a further statement on the impact of the Coronavirus on firms’ LIBOR transition plans. The FCA recognizes the challenges presented by the current operating environment and has worked with members of the Working Group on Sterling Risk-Free Reference Rates (RFRWG) to provide recommendations.26

Financial Conduct Authority (FCA)
Strong Customer Authentication and Coronavirus
The authority has extended the implementation date for its strong customer authentication (SCA) to 14 September 2021 in light of the ongoing situation regarding COVID-19. The extended date, which replaces the previous deadline of 14 March 2021, is the date by which firms are expected to comply with the FCA’s revised implementation plan and critical path.27

Insurance Europe (IE)
Joint letter to EC on DAC6 deferral
The agency has issued a joint letter along with other regulatory bodies to request that the European Commission consider extending the reporting deadline amending Directive 2011/16/EU (DAC6). The joint letter calls for domestic reporting deadlines to be deferred across the European Union to a start date of 1 July 2020 and a retrospective reporting deadline of 31 August 2020 to give members time to introduce new processes once workforce levels and IT capacity have recovered.28

Footnotes:

  1. “Business in the Time of COVID-19: BCPs, Regulatory Relief & More,” Financial Industry Regulatory Authority podcast, April 1, 2020. Access at: Business in the Time of COVID-19: BCPs, Regulatory Relief & More.
  2. “Statement from HM Treasury and the Prudential Regulation Authority on the implementation of the Basel 3.1 standards,” GOV.UK, April 2, 2020. Access at: Statement from HM Treasury and the Prudential Regulation Authority on the implementation of the Basel 3.1 standards.
  3. “Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets,” Bank of England, April 2, 2020. Access at: Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets.
  4. “Joint FCA and PRA statement Senior Managers and Certification Regime (SM&CR) and coronavirus (Covid-19): our expectations of dual-regulated firms,” Financial Conduct Authority, April 3, 2020. Access at: Joint FCA and PRA statement Senior Managers and Certification Regime (SM&CR) and coronavirus (Covid-19): Our expectations of dual-regulated firms.
  5. “Europe’s insurers support GFIA statement on COVID-19,” Insurance Europe, April 6, 2020. Access at: Europe’s insurers support GFIA statement on COVID-19.
  6. “Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework,” Federal Register, April 23, 2020. Access at: Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework.
  7. “COVID-19: Deferral of Commencement (Pension Transfers, Investment Pathways, Platform Switching, Access to Insurance) Instrument 2020,” Financial Conduct Authority, April 3, 2020. Access at: FCA 2020/15: COVID-19: Deferral of Commencement (Pension Transfers, Investment Pathways, Platform Switching, Access to Insurance) Instrument 2020.
  8. “Examinations that Focus on Compliance with Regulation Best Interest,” Securities and Exchange Commission, April 7, 2020. Access at: Examinations that Focus on Compliance with Regulation Best Interest.
  9. “ISDA Announces Preliminary Results of Consultation on Pre-cessation Fallbacks for LIBOR,” International Swaps and Derivatives Association, April 15, 2020. Access at: ISDA announces preliminary results of consultation on pre-cessation fallbacks for LIBOR.
  10. “FSB consults on regulatory, supervisory and oversight recommendations for “global stablecoin” arrangements,” Financial Stability Board, April 14, 2020. Access at: FSB consults on regulatory, supervisory and oversight recommendations for “global stablecoin” arrangements.
  11. “Consumer Financial Protection Bureau Issues Final Rule Raising Data Reporting Thresholds Under the Home Mortgage Disclosure Act,” Consumer Financial Protection Bureau, April 16, 2020. Access at: Consumer Financial Protection Bureau Issues Final Rule Raising Data Reporting Thresholds Under the Home Mortgage Disclosure Act.
  12. “APRA announces new commencement dates for prudential and reporting standards,” Australian Prudential Regulation Authority, April 16, 2020. Access at: APRA announces new commencement dates for prudential and reporting standards.
  13. “Federal Reserve announces it is working to expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders as soon as possible,” Federal Reserve, April 23, 2020. Access at: Federal Reserve announces it is working to expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders as soon as possible.
  14. “Exposure Draft ED/2020/1 Interest Rate Benchmark Reform—Phase 2 Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16,” Financial Reporting Council, April 28, 2020. Access at: Interest Rate Benchmark Reform—Ph 2 (Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS.
  15. “COVID-19 Measures – FAQs on regulatory reporting for Federally Regulated Financial Institutions (FRFIs),” Office of the Superintendent of Financial Institutions, April 28, 2020. Access at: COVID-19 Measures – FAQs on regulatory reporting for Federally Regulated Financial Institutions.
  16. “Federal Reserve Board announces it is expanding the scope and eligibility for the Main Street Lending Program,” Federal Reserve, April 30, 2020. Access at: Federal Reserve Board announces it is expanding the scope and eligibility for the Main Street Lending Program.
  17. “MAS Supports Inaugural Cloud-Based G20 TechSprint,” Monetary Authority of Singapore, April 29, 2020. Access at: MAS Supports Inaugural Cloud-Based G20 TechSprint.
  18. Commission Regulation (EU) 2020/551 of 21 April 2020, European Commission, April 22, 2020. Access at: Commission Regulation (EU) 2020/551 of 21 April 2020 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 3.
  19. “EBA updates its list of risk indicators, IMF-FSI mapping and respective guides,” European Banking Authority, April 20, 2020. Access at: EBA updates its list of risk indicators, IMF-FSI mapping and respective guides.
  20. “ESMA and MAS Sign MOU on Singapore’s Financial Benchmarks,” Monetary Authority of Singapore, April 17, 2020. Access at: ESMA and MAS Sign MOU on Singapore’s Financial Benchmarks.
  21. “Request For Information To Assist the Taskforce on Federal Consumer Financial Law,” Federal Register, April 1, 2020. Access at: Request for information to assist the taskforce on Federal Consumer Financial Law.
  22. “Consultation on a new digital finance strategy for Europe / FinTech action plan,” European Commission, April 15, 2020. Access at: Consultation on a new digital finance strategy for Europe / FinTech action plan.
  23. “Definition of “Covered Clearing Agency,” Securities and Exchange Commission, April 9, 2020. Access at: SEC enhances standards for critical market infrastructure.
  24. “Consultation on the renewed sustainable finance strategy,” European Commission, April 8, 2020. Access at: Consultation on the renewed sustainable finance strategy.
  25. “COVID-19 Motor Finance and High Cost Credit Instrument 2020,” Financial Conduct Authority, April 23, 2020. Access at: COVID-19 Motor Finance and High Cost Credit Instrument 2020.
  26. “Further statement from the RFRWG on the impact of Coronavirus on the timeline for firms’ LIBOR transition plans,” Financial Conduct Authority, April 29, 2020. Access at: Further statement from the RFRWG on the impact of Coronavirus on the timeline for firms’ LIBOR transition plans.
  27. “Strong customer authentication and coronavirus,” Financial Conduct Authority, April 30, 2020. Access at: Strong Customer Authentication and Coronavirus.
  28. “Joint letter to EC on DAC6 deferral,” Insurance Europe, April 21, 2020. Access at: Joint letter to EC on DAC6 deferral.

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