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:

Federal Deposit Insurance Corporation (FDIC):
Assessments, Mitigating the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility
Publication Date: May 20th 2020

Risks Covered: Liquidity Risk
Business Processes Impacted: Funding & Liquidity Management
The agency is seeking comment on a proposed rule that would mitigate the deposit insurance assessment effects of participating in the Paycheck Protection Program (PPP) established by the Small Business Administration (SBA), the Paycheck Protection Program Lending Facility (PPPLF), the Money Market Mutual Fund Liquidity Facility (MMLF) and the Board of Governors of the Federal Reserve System.1

Federal Deposit Insurance Corporation (FDIC):
Interagency Guidance on Credit Risk Review Systems
Publication Date: May 8th 2020

Risks Covered: Credit Risk
Business Processes Impacted: Lending & Investment
A group of agencies has jointly issued the final Inter-agency Guidance on Credit Risk Review Systems (inter-agency guidance). This replaces the guidance in Attachment 1 – Loan Review Systems.2

Financial Action Task Force (FATF):
FATF Paper on COVID-19-related Money Laundering and Terrorist Financing – Risks and Policy Responses
Publication Date: May 8th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The agency has shared a paper on “COVID-19-related Money Laundering (ML) and Terrorist Financing (TF) – Risks and Policy Responses.” The paper focuses on new threats and vulnerabilities stemming from COVID-19-related crime and impacts on ML and TF risks, the COVID-19 impact on Anti-Money Laundering/Combating the Financing of Terrorism efforts by governments and the private sector, and suggests risk mitigation measures in response to COVID-19.3

Financial Conduct Authority (FCA):
The Financial Services Regulatory Initiatives Forum launches Grid to help financial firms’ planning
Publication Date: May 7th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Business Continuity Management
The agency has introduced a regulatory Initiatives Grid. The Grid sets out the planned timetable for major initiatives, including the transition from LIBOR and the introduction of financial services legislation in preparation of the end of the European Union withdrawal transition period.4

International Association of Insurance Supervisors (IAIS):
IAIS facilitates global coordination on financial stability and policyholder protection during Covid-19 crisis
Publication Date: May 7th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The regulator has issued a press release on its positions and efforts with regard to the Covid-19 pandemic. The IAIS states that it has been closely monitoring developments and actively coordinating with other standard-setting bodies to assess the impact of Covid-19 on the global insurance sector, and that it is committed to supporting the Financial Stability Board’s recently published principles for providing international cooperation and coordination of responses to Covid-19.5

Office of the Comptroller of the Currency (OCC):
Liquidity Coverage Ratio : Interim Final Rule Addressing Treatment of Certain Emergency Facilities
Publication Date: May 6th 2020
Risks Covered: Liquidity Risk
Business Processes Impacted: Funding & Liquidity Management
Multiple agencies have issued an interim final rule to amend the liquidity coverage ratio (LCR) rule to neutralize the impact of banks’ using two of the liquidity facilities recently created by the Federal Reserve to stabilize the financial system.6

Federal Reserve; Federal Deposit Insurance Corporation (FDIC):
Agencies extend two resolution plan deadlines
Publication Date: May 6th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Lending & Investment
The agency has announced two extensions to upcoming resolution plan deadlines. First, the submission date has been extended by 90 days, to September 29, 2020, for the resolution plans from a number of major global players. Second, the submission date has been extended by 90 days, to September 29, 2021, for the targeted resolution plans from the large foreign and domestic banks in Category II and Category III of the agencies’ large bank regulatory framework. Targeted resolution plans for the eight global systemically important banking organizations were due 1 July 2021.7

Commodity Futures Trading Commission (CFTC):
Amendments to Swap Clearing Requirement Exemptions
Publication Date: May 4th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Brokerage Services
The agency has proposed amendments to the regulations governing which swaps are exempt from the clearing requirement set forth in the Commodity Exchange Act. The proposed amendments would address the treatment of swaps entered into by certain central banks, sovereign entities, and international financial institutions.8

Financial Reporting Council (UK) (FRC):
FRC Welcomes the IAASB release of the exposure draft for proposed ISA 600
Publication Date: May 4th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has welcomed the International Auditing and Assurance Standards Board’s (IAASB) exposure draft of proposed “International Standard on Auditing (ISA) 600 (Revised), Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors).” This is expected to enhance the risk-based approach to undertaking a group audit.9

Financial Conduct Authority (FCA):
Product value and coronavirus: draft guidance for insurance firms
Publication Date: May 1st 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The authority has published a draft guidance setting out its expectations for insurers and insurance intermediaries to consider the value of their products in light of the exceptional circumstances arising out of Covid-19. Comments were to be submitted by 15 May 2020.10

Federal Reserve (The Fed):
Beige Book
Publication Date: May 27th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Payments
This report summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.11

Financial Conduct Authority (FCA):
Coronavirus and safeguarding customers’ funds: proposed guidance for payment firms
Publication Date: May 22nd 2020
Risks Covered: Credit Risk
Business Processes Impacted: Risk Management & Stress Testing
The authority has published a consultation that requests feedback to its proposed guidance on strengthening payment firms’ prudential risk management and arrangements for safeguarding customers’ funds.12

British Insurance Brokers’ Association (BIBA):
BIBA refutes Mactavish Report strongly
Publication Date: May 22nd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Risk Management & Stress Testing
The association has refuted assertions in a Report on Conflicts of Interests (published by Mactavish), and are reviewing the document in preparation for putting forward the case for brokers.13

Monetary Authority of Singapore (MAS):
Income Tax (International Tax Compliance Agreements) (Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information) (Amendment No. 2) Order 2020
Publication Date: May 27th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The order amends the “Income Tax (International Tax Compliance Agreements) (Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information) Order 2018.” The order came into force on 27 May 2020.14

Monetary Authority of Singapore (MAS):
A Guide to Digital Token Offerings
Publication Date: May 26th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has issued the updated “Guide to Digital Token Offerings,” providing general guidance on the application of relevant laws administered by authority in relation to offers or issues of digital tokens in Singapore.15

European Commission (EC):
Investment protection and facilitation framework
Publication Date: May 26th 2020
Risks Covered: Market Risk
Business Processes Impacted: Business Continuity Management
The agency has published an initiative with the aim to clarify, fill in gaps and update European Union (EU) rules that protect intra-EU investments. Comments were to be submitted by 23 June 2020.16

European Commission (EC):
The EU budget powering the recovery plan for Europe
Publication Date: May 27th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has announced a plan for setting a European Union (EU) budget with an eye toward European recovery. The proposals for this budget are based on an emergency European Recovery Instrument entitled Next Generation EU and a reinforced multiannual financial framework for 2021-2027.17

European Commission (EC):
Amendment to the LCR Delegated Regulation
Publication Date: May 28th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
The commission has launched an initiative regarding amendments to the “Liquidity Coverage Requirement Delegated Regulation (LCR DR).” This may result in an overlap with the LCR as set out in the LCR DR. In order to address this, the agency intends to amend the LCR DR in order to cater to covered bonds’ specific situation. This initiative is planned for the fourth quarter 2020.18

Insurance Europe (IE):
Response to EC consultation on pay transparency
Publication Date: May 28th 2020
Risks Covered: Counterparty Credit Risk
Business Processes Impacted: Data Privacy
The agency has published a response to commission targeted consultation on pay transparency. It is Insurance Europe’s belief that gender pay discrimination is seldom reported, and usually companies receive very few remarks concerning gender pay discrimination. In most cases these gaps are explained by differences in tasks, job requirements and performance.19

Office of the Comptroller of the Currency (OCC); Federal Reserve; Federal Deposit Insurance Corporation (FDIC); National Credit Union Administration (NCUA):
Interagency Lending Principles for Offering Responsible Small-Dollar Loans
Publication Date: May 21st 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
A group of regulators issued principles to encourage supervised banks, savings associations, and credit unions to offer responsible small-dollar loans to customers for consumer and small business purposes.20

FORTHCOMING REGULATIONS:

European Commission (EC)
Money laundering and terrorism financing – Action plan
The Commission is seeking feedback, among other things, on allocating some supervisory responsibilities at the European Union (EU)-level, on the proposal to create a support and coordination mechanism for Financial Intelligence Units, on how to leverage information exchanges and how to make sure the EU plays a strong role in the global fight against money laundering and terrorism financing. Comments to be received by 29 July 2020.21

Consumer Financial Protection Bureau (CFPB)
Application of Certain Provisions in the TILA-RESPA Integrated Disclosure Rule and Regulation Z Right of Rescission Rules in Light of the COVID-19 Pandemic
The agency has issued a final interpretive rule to provide guidance to creditors and other covered persons involved in the mortgage origination process.22

Insurance Europe (IE)
European Climate Law proposal: EU insurers ready to continue playing pivotal role in addressing climate change challenge
The agency has published a position paper about the European Commission’s proposal for a European Climate Law. European insurers are to keep contributing to the political commitment of the European Union to be climate neutral by 2050 and are to play an important role in financing the transition to become carbon-neutral and resource-efficient.23

Federal Reserve (The Fed)
Federal Reserve Board finalizes rule to extend by 18 months the initial compliance dates for certain parts of its single-counterparty credit limit rule
The agency has finalized a rule to extend by 18 months the initial compliance dates for certain parts of its single-counter-party credit limit rule. The extension applies to the combined U.S. operations of foreign banks and provides additional time for foreign jurisdictions’ implementation of the standard.24

Securities and Exchange Commission (SEC)
Amendments to Financial Disclosures about Acquired and Disposed Businesses
The agency has adopted amendments to their rules and forms to improve their application, assist registrants in making more meaningful determinations of whether a subsidiary or an acquired or disposed business is significant, and to improve the disclosure requirements for financial statements relating to acquisitions and dispositions of businesses, including real estate operations and investment companies. The final rules are effective 1 January 2021.25

Federal Reserve (The Fed)
Single-Counterparty Credit Limits for Bank Holding Companies and Foreign Banking Organizations
The board is adopting a final rule to amend the compliance dates related to final Single-Counterparty Credit Limits (SCCL) rule. This final rule modifies the initial compliance dates of 1 January 2020, for a foreign banking organization that has the characteristics of a global systemically important banking organization, and 1 July 2020, for any other foreign banking organization subject to the final SCCL rule. The final rule is effective as of 28 May 2020.26

Financial Conduct Authority (FCA)
Payment Services Regulations 2017 (Payment Account) Instrument 2020
The agency has issued the Payment Services Regulations 2017 (Payment Account) Instrument 2020. This instrument introduces amendments to the Perimeter Guidance Manual and came into force on 22 May 2020.27

European Commission (EC)
Derivatives trading – Commercial standards for central clearing
The agency has published an initiative that directs firms (clearing members) in central counterparties and their clients who provide clearing services to do so under terms that are fair, reasonable, non-discriminatory and transparent. The initiative is effective as of 18 June 2021.28

Footnotes:

  1. “Assessments, Mitigating the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility,” Federal Register, May 20, 2020. Access at: Assessments, Mitigating the Deposit Insurance Assessment Effect of Participation in the Paycheck Protection Program (PPP), the PPP Lending Facility, and the Money Market Mutual Fund Liquidity Facility.
  2. “Interagency Guidance on Credit Risk Review Systems,” Federal Deposit Insurance Corporation, May 8, 2020. Access at: Interagency Guidance on Credit Risk Review Systems.
  3. “COVID-19-related Money Laundering and Terrorist Financing – Risks and Policy Responses,” Financial Action Task Force, May 2020. Access at: FATF Paper on COVID-19-related Money Laundering and Terrorist Financing – Risks and Policy Responses.
  4. “The Financial Services Regulatory Initiatives Forum launches Grid to help financial firms’ planning,” Financial Conduct Authority, May 7, 2020. Access at: The Financial Services Regulatory Initiatives Forum launches Grid to help financial firms’ planning.
  5. “Press release: IAIS facilitates global coordination on financial stability and policyholder protection during Covid-19 crisis,” International Association of Insurance Supervisors, May 7, 2020. Access at: IAIS facilitates global coordination on financial stability and policyholder protection during Covid-19 crisis.
  6. “Liquidity Coverage Ratio: Interim Final Rule Addressing Treatment of Certain Emergency Facilities,” Office of the Comptroller of the Currency, May 6, 2020. Access at: Liquidity Coverage Ratio : Interim Final Rule Addressing Treatment of Certain Emergency Facilities.
  7. “Agencies extend two resolution plan deadlines,” Federal Reserve, May 6, 2020. Access at: Agencies extend two resolution plan deadlines.
  8. “Swap Clearing Requirement Exemptions,” Commodity Futures Trading Commission, May 4, 2020. Access at: Amendments to Swap Clearing Requirement Exemptions.
  9. “FRC Welcomes the IAASB release of the exposure draft for proposed ISA 600” Financial Reporting Council, May 4, 2020. Access at: FRC Welcomes the IAASB release of the exposure draft for proposed ISA 600.
  10. “Product value and coronavirus: draft guidance for insurance firms,” Financial Conduct Authority, May 1, 2020. Access at: Product value and coronavirus: draft guidance for insurance firms.
  11. “The Beige Book”, Federal Reserve, May 27, 2020. Access at: Beige Book.
  12. “Coronavirus and safeguarding customers’ funds: proposed guidance for payment firms,” Financial Conduct Authority, May 22, 2020. Access at: Coronavirus and safeguarding customers’ funds: proposed guidance for payment firms.
  13. “BIBA Refutes Mactavish Report Strongly,” British Insurance Brokers Association, May 22, 2020. Access at: BIBA refutes Mactavish Report strongly.
  14. “Income Tax Act – (Chapter 134),” Singapore Statutes Online, May 27, 2020. Access at: Income Tax (International Tax Compliance Agreements) (Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information) (Amendment No. 2) Order 2020.
  15. “A Guide to Digital Token Offerings,” Monetary Authority of Singapore, May 26, 2020. Access at: A Guide to Digital Token Offerings.
  16. “Cross-border investment within the EU – clarifying and supplementing EU rules,” European Commission, May 26, 2020. Access at: Investment protection and facilitation framework.
  17. “The EU budget powering the recovery plan for Europe,” European Commission, May 27, 2020. Access at: The EU budget powering the recovery plan for Europe.
  18. “Bonds trading – amended liquidity coverage rules to cater for covered bonds (delegated act),” European Commission, May 28, 2020. Access at: Amendment to the LCR Delegated Regulation.
  19. “Response to EC consultation on pay transparency,” Insurance Europe, May 28, 2020. Access at: Response to EC consultation on pay transparency.
  20. “Interagency Lending Principles for Offering Responsible Small-Dollar Loans,” Office of the Comptroller of the Currency; Federal Reserve; Federal Deposit Insurance Corporation; National Credit Union Administration, May 21, 2020. Access at: Interagency Lending Principles for Offering Responsible Small-Dollar Loans.
  21. “Money laundering & terrorism financing – action plan,” European Commission, May 7, 2020. Access at: Money laundering & terrorism financing – action plan.
  22. “Application of Certain Provisions in the TILA–RESPA Integrated Disclosure Rule and Regulation Z Right of Rescission Rules in Light of the COVID–19 Pandemic,” Federal Register, May 4, 2020. Access at: Application of Certain Provisions in the TILA-RESPA Integrated Disclosure Rule and Regulation Z Right of Rescission Rules in Light of the COVID-19 Pandemic.
  23. “European Climate Law proposal: EU insurers ready to continue playing pivotal role in addressing climate change challenge,” Insurance Europe, May 4, 2020. Access at: European Climate Law proposal: EU insurers ready to continue playing pivotal role in addressing climate change challenge
  24. “Federal Reserve Board finalizes rule to extend by 18 months the initial compliance dates for certain parts of its single-counterparty credit limit rule,” Federal Reserve, May 1, 2020. Access at: Federal Reserve Board finalizes rule to extend by 18 months the initial compliance dates for certain parts of its single-counterparty credit limit rule
  25. “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” Securities and Exchange Commission, May 20, 2020. Access at: Amendments to Financial Disclosures about Acquired and Disposed Businesses.
  26. “Single-Counterparty Credit Limits for Bank Holding Companies and Foreign Banking Organizations,” Federal Register, May 28, 2020. Access at: Single-Counterparty Credit Limits for Bank Holding Companies and Foreign Banking Organizations.
  27. “Payment Services Regulations 2017 (Payment Account) Instrument 2020,” Financial Conduct Authority, May 21, 2020. Access at: Payment Services Regulations 2017 (Payment Account) Instrument 2020
  28. “Derivatives trading – commercial standards for central clearing,” European Commission, May 19, 2020. Access at: Derivatives trading – Commercial standards for central clearing.

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