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:

Commodity Futures Trading Commission (CFTC):
CFTC’s Climate-Related Market Risk Subcommittee Releases Report
Publication Date: September 9th 2020 

Risks Covered: Operational Risk
Business Processes Impacted: Fraud and Financial Crime 
The agency’s Market Risk Advisory Committee has released a report entitled “Managing Climate Risk in the U.S. Financial System.” The report presents 53 recommendations to mitigate the risks to financial markets posed by climate change.1

Prudential Regulation Authority (PRA):
Guidelines for completing regulatory reports
Publication Date: September 4th 2020

Risks Covered: Compliance Risk
Business Processes Impacted: Data Quality Management
The agency has published an updated version of its supervisory statement setting out its expectations for how firms should complete the data items and returns required by Regulatory Reporting, Close Links and Change in Control Parts of the PRA Rulebook.2

Financial Conduct Authority (FCA):
Digital sandbox pilot: FCA DataSprint
Publication Date: September 2nd 2020
Risks Covered: Data Security Risk
Business Processes Impacted: Data Quality Management
The agency held a three-week DataSprint in July and August 2020, bringing together 120 participants from across regulated firms, startups, academia, professional services, data scientists, and subject-matter experts. They collaborated on developing high-quality synthetic financial datasets to be used by participants in the forthcoming digital sandbox pilot.3

Monetary Authority of Singapore (MAS):
Guidelines on Individual Accountability and Conduct
Publication Date: September 10th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has issued the “Guidelines on Individual Accountability and Conduct” containing the five high level outcomes that financial institutions should achieve to promote the accountability of senior managers, strengthen oversight over material risk personnel, and reinforce conduct standards among all employees.4

Monetary Authority of Singapore (MAS):
Information Paper on Culture and Conduct Practices of Financial Institutions
Publication Date: September 10th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has issued an information paper on culture and conduct practices of financial institutions  towards specific areas such as governance, hiring, communication channels and performance management. The paper also provides examples of good practices gathered from a thematic survey and dialogue sessions conducted by the agency.5

European Securities and Markets Authority (ESMA):
ESMA Confirms Securitisation Regulation Requirements Entry into Force on 23 September 2020
Publication Date: September 4th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The agency has announced that effective 23 September 2020, different elements of the new regime under the Securitization Regulation come into force. This includes the effectiveness of new disclosure templates and the opening of applications for entities to register as Securitization Repository.6

Insurance Europe (IE):
Response to EC roadmap consultation on an EU digital ID scheme
Publication Date: September 9th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Data Privacy
The agency has published its response to a roadmap consultation by the European Commission on a European Union digital ID scheme. The agency welcomes the evaluation of the 2014 eIDAS Regulation and the accompanying revision of the current legal framework and believes that the extension of the legal framework to the private sector should be welcomed in principle.7

International Association of Insurance Supervisors (IAIS):
IAIS issues a survey invitation on the existing prudential treatments for investments in infrastructure and strategic equity (Public)
Publication Date: September 7th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Lending and Investment
The agency is conducting a survey regarding the existing prudential treatments for investments in infrastructure and strategic equity. This is part of its investigation into whether there should be a differentiated capital treatment of certain eligible infrastructure in addition to strategic equity investments within the Insurance Capital Standard (ICS).8

FIA:
FIA releases surveillance and market abuse guidelines
Publication Date: September 9th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The agency has released new guidelines to assist market participants in fulfilling obligations set by UK and European regulators in relation to surveillance and market abuse requirements. The guidelines are not meant to be one-size-fits-all but rather should be considered in conjunction with a market participant’s size, scale and strategy.9

Financial Stability Board (FSB):
FSB extends implementation timelines for securities financing transactions
Publication Date: September 7th 2020
Risks Covered: Business Cycle Risk
Business Processes Impacted: Lending and Investment
The Group of Central Bank Governors and Heads of Supervision decided in March 2020 to defer the implementation of the Basel III framework by one year to January 2023. For bank-to-non-bank transactions, the updated implementation date is January 2023 (instead of January 2022). For non-bank-to-non-bank transactions, the updated implementation date is January 2025 (instead of January 2024).10

Financial Crimes Enforcement Network (FinCEN):
Customer Identification Programs, Anti-Money Laundering Programs, and Beneficial Ownership Requirements for Banks Lacking a Federal Functional Regulator
Publication Date: September 15th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The regulator has issued a final rule implementing sections 352, 326 and 312 of the USA PATRIOT Act and removing the anti-money laundering program exemption for banks that lack a Federal functional regulator.11

Commodity Futures Trading Commission (CFTC):
Bankruptcy Regulations
Publication Date: September 24th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Business Continuity Management
The agency is proposing a revision of the proposed amendments with respect to a particular issue, specifically, efforts to foster a resolution proceeding under Title II of the Dodd-Frank Act. Comments to be received by 26 October 2020.12

Prudential Regulation Authority (PRA):
UK withdrawal from the EU: Changes before the end of the transition period
Publication Date: September 22nd 2020
Risks Covered: Data Privacy
Business Processes Impacted: Business Continuity Management
The agency has published a consultation paper on proposals to fix deficiencies arising from UK’s withdrawal from the EU and make consequential changes before the end of the transition period. Comments should be submitted by 17 November 2020.13

Financial Conduct Authority (FCA):
The FCA and the Bank of England encourage market participants in further switch to SONIA in interest rate swap markets
Publication Date: September 28th 2020
Risks Covered: Liquidity Risk
Business Processes Impacted: Funding and Liquidity Management
The agency and Bank of England support and encourage liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on the Sterling Overnight Index Average (SONIA) rate instead of LIBOR from 27 October 2020.14

Monetary Authority of Singapore (MAS):
FATF Report on Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing
Publication Date: September 21st 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The report can help financial institutions identify and report potential money laundering and terrorism financing (ML/TF) activities involving virtual assets (VAs), facilitate financial institutions’ application of a risk-based approach to customer due diligence, and allow them to better understand the ML/TF risks.15

European Financial Reporting Advisory Group (EFRAG):
EFRAG’s Endorsement Advice on Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Publication Date: September 14th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Payments
The agency recommends the endorsement of the Amendments, stating that they are needed to properly account for changes in determining the contractual cash flows of financial instruments and lease modifications accounted for under the International Financial Reporting Standards (IFRS) and to deal with the implications on hedge accounting arising from the IBOR Reform, including avoiding the discontinuation of hedging relationships due solely to the impacts of the IBOR Reform.16

European Commission (EC):
Capital Markets Union: Commission to boost Europe’s capital markets
Publication Date: September 24th 2020
Risks Covered: Systemic Risk
Business Processes Impacted: Data Privacy
The agency has published an Action Plan to enhance the Capital Markets Union in the coming years. The Commission put forward 16 measures, including: the creation of a single access point to company data for investors; strengthening investment protection to promote more cross-border investment in the European Union; facilitating the monitoring of pension adequacy across Europe; and making insolvency rules more harmonized or convergent.17

European Commission (EC):
Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses
Publication Date: September 24th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Payments
The agency has adopted a new Digital Finance Package, which includes Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience.18

Financial Conduct Authority (FCA):
FCA launches consultation on the regulation of international firms
Publication Date: September 25th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The agency has launched consultation paper CP20/20 on its approach to the authorization and supervision of international firms operating in the UK. The authority does not propose to change existing rules or provisions. The deadline for consultation responses is 27 November 2020.19

Bank for International Settlements (BIS):
Basel Committee approves annual G-SIBs assessment, updates workplan to evaluate post-crisis reforms
Publication Date: September 25th 2020
Risks Covered: Business Cycle Risk
Business Processes Impacted: Business Continuity Management
The agency has announced that the Basel Committee on Banking Supervision met to review COVID-19 risks to the global banking system and related vulnerabilities, and to discuss a number of policy and supervisory initiatives.20

FORTHCOMING REGULATIONS:

Securities and Exchange Commission (SEC)
Supplement to Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers
The agency has published supplementary guidance regarding the proxy voting responsibilities of investment advisers under its regulations issued under the Investment Advisers Act of 1940 in light of the SEC’s amendments to the rules governing proxy solicitations under the Securities Exchange Act of 1934. This went into effect on 3 September 2020.21

Prudential Regulation Authority (PRA)
PRA Rulebook: CRR Firms: Regulatory Reporting (Capital +) Amendment Instrument 2020 (not yet in force)
The agency has issued amendments to the Regulatory Reporting (Capital +) part of its handbook. These amendments are effective as of 8 September, 2020.22

Monetary Authority of Singapore (MAS)
Execution of Customer’s Orders
The regulator has issued “Notice SFA 04-N16 Execution of Customer’s Orders,” setting out requirements for financial institutions to have policies and procedures to place and execute customers’ orders on the best available terms and to support fair outcomes. The Notice is effective 3 March 2022.23

International Swaps and Derivatives Association (ISDA)
ISDA Self-Disclosure Exercise for Regulatory IM Phases 5 and 6
The agency has announced that it plans to rerun the multi-lateral Initial Margin self-disclosure exercise to be prepared for the Initial Margin requirements on 1 September 2021 (Phase 5) and 1 September 2022 (Phase 6).24

Insurance Europe (IE)
Response to EC roadmap consultation on ethical and legal requirements for trustworthy AI
The agency has published a position paper with its comments regarding the European Commission’s roadmap consultation on the ethical and legal requirements for trustworthy artificial intelligence.25

Commodity Futures Trading Commission (CFTC)
Capital Requirements of Swap Dealers and Major Swap Participants
The agency is adopting new regulations imposing minimum capital requirements and financial reporting requirements on swap dealers and major swap participants that are not subject to a prudential regulator. These amendments go into effect on 16 November 2020 and complied with by 6 October 2021.26

Federal Reserve (The Fed)
Federal Reserve Board amends implementation date of modifications to Reserve Bank payment services and corresponding changes to the Policy on Payment System Risk
The agency has announced that it is amending the implementation date for modifications to the Federal Reserve Banks’ payment services to facilitate adoption of a later same-day automated clearinghouse (ACH) processing and settlement window and for corresponding changes to the Federal Reserve Policy on Payment System Risk (PSR policy).27

Financial Conduct Authority (FCA)
General Insurance value measures reporting and publication
The agency has issued a policy statement on general insurance (GI) value measures setting out requirements for firms to report and publish value measures data across a wide range of GI products. The value measures product governance rules come into force on 1 January 2021 and the value measures reporting rules come into force on 1 July 2021.28

Footnotes:

  1. “CFTC’s Climate-Related Market Risk Subcommittee Releases Report,” Commodity Futures Trading Commission, 9 September 2020. Access at: CFTC’s Climate-Related Market Risk Subcommittee Releases Report
  2. “Guidelines for completing regulatory reports,” Prudential Regulation Authority, SS34/15, September 2020. Access at: Guidelines for completing regulatory reports
  3. “Digital sandbox pilot: FCA DataSprint,” Financial Conduct Authority, 2 September 2020. Access at: Digital sandbox pilot: FCA DataSprint
  4. “Monetary Authority of Singapore Issues Guidelines on Individual Accountability and Conduct,” Sidley Austin LLP, 15 September 2020. Access at: Guidelines on Individual Accountability and Conduct.
  5. “MAS Issues Guidelines to Promote Senior Management Accountability,” Moody’s Analytics, 10 September 2020. Access at: Information Paper on Culture and Conduct Practices of Financial Institutions.
  6. “ESMA Confirms Securitisation Regulation Requirements Entry Into Force on 23 September 2020,” European Securities and Markets Authority, 4 September 2020. Access at: ESMA Confirms Securitisation Regulation Requirements Entry into Force on 23 September 2020.
  7. “Response to EC roadmap consultation on an EU digital ID scheme,” Insurance Europe, 9 September 2020. Access at: Response to EC roadmap consultation on an EU digital ID scheme.
  8. “IAIS issues a survey invitation on the existing prudential treatments for investments in infrastructure and strategic equity (Public),” International Association of Insurance Supervisors, 7 September 2020. Access at: IAIS issues a survey invitation on the existing prudential treatments for investments in infrastructure and strategic equity (Public).
  9. “FIA releases surveillance and market abuse guidelines,” FIA, 9 September 2020. Access at: FIA releases surveillance and market abuse guidelines.
  10. “FSB extends implementation timelines for securities financing transactions,” Financial Stability Board, 7 September 2020. Access at: FSB extends implementation timelines for securities financing transactions.
  11. “Financial Crimes Enforcement Network; Customer Identification Programs, Anti-Money Laundering Programs, and Beneficial Ownership Requirements for Banks Lacking a Federal Functional Regulator,” Federal Register, 15 September 2020. Access at: Customer Identification Programs, Anti-Money Laundering Programs, and Beneficial Ownership Requirements for Banks Lacking a Federal Functional Regulator.
  12. “Bankruptcy Regulations,” Federal Register, 24 September 2020. Access at: Bankruptcy Regulations.
  13. “UK withdrawal from the EU: Changes before the end of the transition period,” Prudential Regulation Authority, 22 September 2020. Access at: UK withdrawal from the EU: Changes before the end of the transition period.
  14. “The FCA and the Bank of England encourage market participants in further switch to SONIA in interest rate swap markets,” Financial Conduct Authority, 28 September 2020. Access at: The FCA and the Bank of England encourage market participants in further switch to SONIA in interest rate swap markets.
  15. “Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing,” Financial Action Task Force. Access at: FATF Report on Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing.
  16. “EFRAG’s Endorsement Advice on Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16,” European Financial Reporting Advisory Group, 14 September 2020. Access at: EFRAG’s Endorsement Advice on Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
  17. “Capital Markets Union: Commission to boost Europe’s capital markets,” European Commission, 24 September 2020. Access at: Capital Markets Union: Commission to boost Europe’s capital markets
  18. “Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses,” European Commission, 24 September 2020. Access at: Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses.
  19. “Extension of Annual Financial Crime Reporting Obligation,” Financial Conduct Authority, September 2020. Access at: Extension of Annual Financial Crime Reporting Obligation.
  20. “Basel Committee approves annual G-SIBs assessment, updates workplan to evaluate post-crisis reforms,” Bank for International Settlements, 25 September 2020. Access at: Basel Committee approves annual G-SIBs assessment, updates workplan to evaluate post-crisis reforms.
  21. “Supplement to Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers,” Federal Register, 3 September 2020. Access at: Supplement to Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers.
  22. “PRA Rulebook: CRR Firms: Regulatory Reporting (Capital+) Amendment Instrument 2020,” Prudential Regulation Authority, 2 September 2020. Access at: PRA Rulebook: CRR Firms: Regulatory Reporting (Capital +) Amendment Instrument 2020 (not yet in force).
  23. “MAS issues Notices and Guidelines on Best Execution requirements,” Allen & Gledhill LLP, 15 September 2020. Access at: Execution of Customer’s Orders
  24. “ISDA Self-Disclosure Exercise for Regulatory IM Phases 5 and 6,” International Swaps and Derivatives Association, 2 September 2020. Access at: ISDA Self-Disclosure Exercise for Regulatory IM Phases 5 and 6
  25. “Response to EC roadmap consultation on ethical and legal requirements for trustworthy AI,” Insurance Europe, 17 September 2020. Access at: Response to EC roadmap consultation on ethical and legal requirements for trustworthy AI.
  26. “Capital Requirements of Swap Dealers and Major Swap Participants,” Federal Register, 15 September 2020. Access at: Capital Requirements of Swap Dealers and Major Swap Participants.
  27. “Federal Reserve Board amends implementation date of modifications to Reserve Bank payment services and corresponding changes to the Policy on Payment System Risk,” Federal Reserve, 25 September 2020. Access at: Federal Reserve Board amends implementation date of modifications to Reserve Bank payment services and corresponding changes to the Policy on Payment System Risk
  28. “General Insurance value measures reporting and publication,” Financial Conduct Authority, September 2020. Access at: General Insurance value measures reporting and publication.

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