This newsletter summarizes recent regulatory changes impacting Banking, Capital Markets & Insurance firms.

Current coverage period: Through December 31, 2019

CURRENT REGULATIONS:

European Securities and Markets Authority (ESMA):
ESMA publishes responses received to its FRANDT Consultation
Publication Date: December 12th 2019

Risks Covered: Conduct Risk
Business Processes Impacted: Clearing & Settlement – Exchange Traded & OTC

The agency has published the responses it received to its consultation on the draft technical advice on commercial terms for providing clearing services under the European Market Infrastructure Regulation and that are fair, reasonable non-discriminatory and transparent (FRANDT).1

European Securities and Markets Authority (ESMA):
ESMA Issues Briefing on Benchmark Recognition
Publication Date: December 11th 2019

Risks Covered: Operational Risk
Business Processes Impacted: Funding & Liquidity Management
The regulator has issued a briefing on the recognition regime under the Benchmark Regulation (BMR) and addressed to administrators of benchmarks located outside the European Union (EU) and that intend to apply for recognition in the EU.2

Office of the Comptroller of the Currency (OCC):
OCC Highlights Key Risks for Federal Banking System
Publication Date: December 9th 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has announced that operational, credit, and interest rate risks are among the key themes for the federal banking system in its Semiannual Risk Perspective for Fall 2019.3

Financial Industry Regulatory Authority (FINRA):
Treasuries TRAQS User Guide
Publication Date: December 9th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Brokerage Services
The regulator has announced that effective June 1, 2020, members have to report transactions in U.S. Treasury Securities executed to hedge a primary market transaction that meets the FINRA Rule 6710 definition of “List or Fixed Offering Price Transaction” or “Takedown Transaction” with an appropriate identifier.4

Federal Deposit Insurance Corporation (FDIC):
Request for Information on a Framework for Analyzing the Effects of FDIC Regulatory Actions
Publication Date: December 9th 2019
Risks Covered: Liquidity Risk
Business Processes Impacted: Reporting
The agency has issued a Request for Information (RFI) seeking comment on approaches it uses, or is considering using, to analyze the effects of its regulatory actions. The RFI is part of FDIC’s ongoing effort to strengthen the quality of its regulatory cost-benefit analyses, and comments received should assist the FDIC in this respect. Comments were due January 28, 2020.5

European Financial Reporting Advisory Group (EFRAG):
EFRAG Conference – IFRS & Regulation: Searching for Common Ground – Video recordings available
Publication Date: December 6th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has released the video recordings of its November Conference: IFRS & Regulation: Searching for Common Ground. This contains the keynote speeches provided by Michel Prada and Steven Maijoor and two panel discussions.6

Monetary Authority of Singapore (MAS):
Payment Services Regulations 2019
Publication Date: December 5th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Payments
The regulator has released the Payment Services Regulations, 2019 and which took effect on January 28, 2020.7

European Commission (EC):
Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014
Publication Date: December 5th 2019
Risks Covered: Systemic Risk
Business Processes Impacted: Lending & Investment
The agency has published a regulation regarding the prudential requirements of investment firms. The regulation entered into force on December 25, 2019 and applies as of June 26, 2021.8

BaFin (German Federal Financial Supervisory Authority):
Guidance on Solvency II reporting for insurance and reinsurance companies and insurance groups
Publication Date: December 4th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The authority has published the updated version of its Solvency II reporting circular. The guidance is mandatory for the Annual Report 2019 and for the Quarterly Report from the 1st quarter of 2020 and is addressed to insurance and reinsurance companies and insurance groups.9

Insurance Europe (IE):
Making EU insurance regulation that works and benefits consumers
Publication Date: December 4th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has published a paper discussing how EU policymaker rules for insurers work properly and benefit consumers. Regulator has called on EU policymakers to avoid continual regulatory changes and legal uncertainty. The paper also provides disclosures that are clear and consistent across the EU.10

Financial Reporting Council (UK) (FRC):
FRC moves to strengthen auditor independence and ban conflicts of interest
Publication Date: December 17th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has announced major revisions to its Ethical Standard and revised Auditing Standards, which aim to deliver stronger UK ethical requirements, ethical standards strengthening auditor independence and preventing conflicts of interest, and a new standard that bans auditors from providing recruitment and remuneration services.11

Hong Kong Monetary Authority (HKMA):
Managing ML/TF risks associated with virtual assets (VAs) and virtual asset service providers (VASPs)
Publication Date: December 16th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Fraud and Financial Crime
The authority has issued a circular to all stored value facility licensees and authorized institutions with regards to updates by the Financial Action Task Force (FATF) to its Recommendation 15, and which clarify the businesses and activities that the FATF requirements apply in the case of virtual assets and virtual asset service providers.12

Financial Reporting Council (UK) (FRC):
FRC amends FRS 102 for Interest Rate Benchmark Reform
Publication Date: December 17th 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Reporting
The agency has issued amendments to FRS 102 – interest rate benchmark reform, and which respond to a current financial reporting issue. The FRS is a single financial reporting standard that applies to the financial statements of entities that are not applying EU-adopted International Financial Reporting Standards, FRS 101 or FRS 105. The amendments are effective for accounting periods beginning on or after January 1, 2020, with early application permitted.13

Securities and Exchange Commission (SEC):
SEC Adopts Actions to Stand Up Security-Based Swap Regulatory Regime
Publication Date: December 18th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Clearing & Settlement – Exchange Traded & OTC
The regulator has issued a press release stating it has adopted a package of rule amendments, guidance, and a related order to expand and improve the framework for regulating cross-border security-based swaps, including single-name credit default swaps.14

International Swaps and Derivatives Association (ISDA); International Capital Market Association (ICMA); Association for Financial Markets in Europe (AFME); Futures Industry Association (FIA):
AFME, FIA, ICMA, ISDA and ISLA Publish Master Regulatory Reporting Agreement
Publication Date: December 19th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The Master Regulatory Reporting Agreement (MRRA) allows market participants to choose to use a single template to help them manage regulatory obligations and provide services related to reporting under the EMIR and the Securities Financing Transaction Regulation (SFTR).15

Hong Kong Monetary Authority (HKMA):
Report on Artificial Intelligence (AI) Application in Banking
Publication Date: December 23rd 2019
Risks Covered: Operational Risk
Business Processes Impacted: Data Quality Management
The report covers insights from academic and industry experts; results of an industry-wide survey on banks, industry organizations and fintech firms conducted during the third quarter of 2019; latest development trends; potential use cases; status of AI development in banking; challenges and considerations in designing and deploying the technology; as well as the market outlook.16

International Swaps and Derivatives Association (ISDA):
ISDA launches Consultation on Fallbacks for Euro LIBOR and EURIBOR
Publication Date: December 18th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Clearing & Settlement – Exchange Traded & OTC
The regulator has launched a supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing Euro London Interbank Offered Rate (LIBOR) and Euro Interbank Offered Rate (EURIBOR) in the event those benchmarks are permanently discontinued.17

European Commission (EC):
Directive/regulation establishing a European framework for markets in Crypto Assets
Publication Date: December 19th 2019
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
The agency is proposing a new directive or regulation which would clarify the applicability of EU financial services legislation to crypto-assets and related activities and would make sure that the regulatory framework adequately addresses the inherent risks of these assets and related services. The feedback period closed on January 16, 2020.18

Office of the Comptroller of the Currency (OCC); Federal Reserve (The Fed); Federal Deposit Insurance Corporation (FDIC):
Margin and Capital Requirements for Covered Swap Entities
Publication Date: December 20th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Clearing & Settlement – Exchange Traded & OTC
Numerous authorities reopened the comment period for a proposed rule that would amend the agencies’ regulations that require swap dealers and security-based swap dealers under the agencies’ respective jurisdictions to exchange margin with their counter-parties for swaps that are not centrally cleared (Swap Margin Rule). Comments were to be submitted by January 23, 2020.19

Federal Reserve (The Fed):
Federal Reserve Bank Capital Stock
Publication Date: December 16th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Business Continuity Management
The agency published a final rule that applies an inflation adjustment to the threshold for total consolidated assets in Regulation I. Federal Reserve Bank stockholders that have total consolidated assets above the threshold receive a different dividend rate on their Reserve Bank stock than stockholders with total consolidated assets at or below the threshold. This final rule is effective January 15, 2020.20

FORTHCOMING REGULATIONS:

Monetary Authority of Singapore (MAS)
Exposures and Credit Facilities to Related Concerns
The agency has released an updated “Notice on Exposures and Credit Facilities to Related Concerns.” It requires all banks to prepare quarterly statements of their exposures and credit facilities to related concerns using the form and explanatory notes provided. The Notice goes into effect on October 1, 2020.21

Federal Reserve (The Fed)
Regulatory Capital Rules: Risk-Based Capital Requirements for Depository Institution Holding Companies Significantly Engaged in Insurance Activities; Extension of Comment Period
The Fed has published a proposal to establish risk-based capital requirements for depository institution holding companies that are significantly engaged in insurance activities. The Board has determined that an extension of the comment period until January 22, 2020 was appropriate.22

Prudential Regulation Authority (PRA)
Operational Resilience: Impact tolerances for important business services
The agency published a consultation paper regarding operational resilience and which looks at the impact tolerances for important business services. All comments to be received by April 3, 2020.23

European Commission (EC)
Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU
The agency has adopted Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU.24

Financial Conduct Authority (FCA)
Conduct of Business Sourcebook (Independent Governance Committees) Instrument 2019
The agency issued the Conduct of Business Sourcebook (Independent Governance Committees) Instrument 2019. This makes amendments to the Senior Management Arrangements, Systems and Controls sourcebook (SYSC), Glossary of definitions, and the Conduct of Business Sourcebook (COBS) of the FCA Handbook. The policy is to be implementation on April 6, 2020.25

Prudential Regulation Authority (PRA)
PRA Rulebook: CRR Firms: Regulatory Reporting (Ring Fence Bodies, Capital + and FINREP) Amendment (No. 2) Instrument 2019 (not yet in force)
The agency has made the PRA Rulebook: CRR Firms: Regulatory Reporting (Ring Fence Bodies, Capital + and FINREP) Amendment (No. 2) Instrument 2019, in the exercise of section 137G (The PRA’s general rules), section 137T (General supplementary powers), and section 142H (Ring-fencing rules) of the Financial Services and Markets Act 2000. The instrument makes amendments to the Regulatory Reporting Part of the PRA Rulebook as described in Annexes A and B to the instrument, and comes into force on: (i) March 1, 2020 for Annex A; and (ii) June 1, 2020 for Annex B.26

Prudential Regulation Authority (PRA)
Pillar 2 Liquidity: PRA110 Reporting Frequency Threshold
The agency has released a policy statement setting out the feedback received to Consultation Paper CP14/19, “Pillar 2 liquidity: PRA110 reporting frequency threshold.” The implementation date for this policy is May 1, 2020.27

European Commission (EC)
Commission Delegated Regulation (EU) 2019/2100 of 30 September 2019 amending Delegated Regulation (EU) 2019/815 with regard to updates of the taxonomy to be used for the single electronic reporting format
The agency is amending a regulation with regards to updates of the taxonomy to be used for the single electronic reporting format. This regulation shall enter into force on January 5, 2020, and shall apply to annual financial reports containing financial statements for financial years beginning on or after January 1, 2020.28

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

References:

  1. “ESMA Publishes Responses Received to its FRANDT Consultation,” European Securities and Markets Authority, December 12, 2019. Access at: ESMA publishes responses received to its FRANDT Consultation.
  2. “ESMA Issues Briefing on Benchmark Recognition,” European Securities and Markets Authority, December 11, 2019. Access at: ESMA Issues Briefing on Benchmark Recognition.
  3. “OCC Highlights Key Risks for Federal Banking System,” Office of the Comptroller of the Currency, December 9, 2019. Access at: OCC Highlights Key Risks for Federal Banking System.
  4. “U.S. Treasury Securities Executed to Hedge a Primary Market Transaction,” Financial Industry Regulatory Authority, December 9, 2019. Access at: Treasuries TRAQS User Guide.
  5. “Request for Information on a Framework for Analyzing the Effects of FDIC Regulatory Actions,” Federal Deposit Insurance Corporation, December 9, 2019. Access at: Request for Information on a Framework for Analyzing the Effects of FDIC Regulatory Actions.
  6. “EFRAG Conference – IFRS & Regulation: Searching for Common Ground,” European Financial Reporting Advisory Group, December 6, 2019. Access at: EFRAG Conference – IFRS & Regulation: Searching for Common Ground – Video recordings available.
  7. “Payment Services Act 2019 providing new framework for payment systems and payment service providers in force on 28 January 2020,” Allen & Gledhill, December 19, 2019. Access at: Payment Services Regulations 2019.
  8. “Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010,” Official Journal of the European Union, December 5, 2019. Access at: Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014.
  9. “Notes on Solvency II reporting for primary insurance and reinsurance companies as well as insurance groups,” BaFin (German Federal Financial Supervisory Authority), December 4, 2019. Access at: Guidance on Solvency II reporting for insurance and reinsurance companies and insurance groups.
  10. “Making EU insurance regulation that works and benefits consumers,” Insurance Europe, December 4, 2019. Access at: Making EU insurance regulation that works and benefits consumers.
  11. “FRC moves to strengthen auditor independence and ban conflicts of interest”, Financial Reporting Council, December 17, 2019. Access at: FRC moves to strengthen auditor independence and ban conflicts of interest.
  12. “Managing ML/TF risks associated with virtual assets (VAs) and virtual asset service providers (VASPs),” Hong Kong Monetary Authority, December 16, 2019. Access at: Managing ML/TF risks associated with virtual assets (VAs) and virtual asset service providers (VASPs).
  13. “FRC amends FRS 102 for interest rate benchmark reform,” Financial Reporting Council, December 17, 2019. Access at: FRC amends FRS 102 for Interest Rate Benchmark Reform.
  14. “SEC Adopts Actions to Stand Up Security-Based Swap Regulatory Regime,” Securities and Exchange Commission, December 18, 2019. Access at: SEC Adopts Actions to Stand Up Security-Based Swap Regulatory Regime. 
  15. “AFME, FIA, ICMA, ISDA and ISLA Publish Master Regulatory Reporting Agreement,” Association for Financial Markets in Europe, December 19, 2019. Access at: AFME, FIA, ICMA, ISDA and ISLA Publish Master Regulatory Reporting Agreement.
  16. “Report on Artificial Intelligence (AI) Application in Banking,” Hong Kong Monetary Authority, December 23, 2019. Access at: Report on Artificial Intelligence (AI) Application in Banking.
  17. “ISDA launches Consultation on Fallbacks for Euro LIBOR and EURIBOR,” International Swaps and Derivatives Association, December 18, 2019. Access at: ISDA launches Consultation on Fallbacks for Euro LIBOR and EURIBOR.
  18. “Financial services – EU regulatory framework for crypto-assets,” European Commission, December 19, 2019. Access at: Directive/regulation establishing a European framework for markets in Crypto Assets.
  19. “Reopening Comment Period for Proposed Rule to Amend Swap Margin Requirements,” Federal Deposit Insurance Corporation, December 31, 2019. Access at: Margin and Capital Requirements for Covered Swap Entities.
  20. “Federal Reserve Bank Capital Stock,” Federal Register, December 16, 2019. Access at: Federal Reserve Bank Capital Stock.
  21. “MAS Updates Requirements for Related Party Transactions of Banks,” Moody’s Analytics, December 12, 2019. Access at: Exposures and Credit Facilities to Related Concerns.
  22. “Regulatory Capital Rules: Risk-Based Capital Requirements for Depository Institution Holding Companies Significantly Engaged in Insurance Activities; Extension of Comment Period,” Federal Register, December 10, 2019. Access at: Regulatory Capital Rules: Risk-Based Capital Requirements for Depository Institution Holding Companies Significantly Engaged in Insurance Activities; Extension of Comment Period.
  23. “Operational resilience: Impact tolerances for important business services,” Prudential Regulation Authority, December 5, 2019. Access at: Operational Resilience: Impact tolerances for important business services.
  24. “Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU,” Official Journal of the European Union, December 5, 2019. Access at: Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU.
  25. “Conduct of Business Sourcebook (Independent Governance Committees) Instrument 2019,” Financial Conduct Authority, December 12, 2019. Access at: Conduct of Business Sourcebook (Independent Governance Committees) Instrument 2019.
  26. “PRA Rulebook: CRR Firms: Regulatory Reporting (Ring Fence Bodies, Capital+ and Finrep) Amendment (No. 2) Instrument 2019,” Prudential Regulation Authority, December 17, 2019. Access at: PRA Rulebook: CRR Firms: Regulatory Reporting (Ring Fence Bodies, Capital + and FINREP) Amendment (No. 2) Instrument 2019 (not yet in force).
  27. Pillar 2 liquidity: PRA110 reporting frequency threshold,” Prudential Regulation Authority, December 17, 2019. Access at: Pillar 2 Liquidity: PRA110 Reporting Frequency Threshold.
  28. “Commission Delegated Regulation (EU) 2019/2100 of 30 September 2019 amending Delegated Regulation (EU) 2019/815 with regard to updates of the taxonomy to be used for the single electronic reporting format,” Official Journal of the European Union, December 16, 2019. Access at: Commission Delegated Regulation (EU) 2019/2100 of 30 September 2019 amending Delegated Regulation (EU) 2019/815 with regard to updates of the taxonomy to be used for the single electronic reporting format.

About the Monthly Regulatory Tracker

The “Regulatory Reform” newsletter is the monthly initiative aimed at updating the Finance & Risk community with the most recent regulatory changes impacting Banking, Capital Markets & Insurance firms. We track more than 70 regulatory and industry bodies covering North America, Europe and Asia-Pacific. Every month, we will highlight approximately 20 regulations shortlisted on the basis of geography of coverage and anticipated business impacts. Our summaries will highlight the risks covered and business processes affected by the regulatory reforms.

Disclaimer

This blog is intended for general informational purposes only, does not take into account the reader’s specific circumstances, may not reflect the most current developments, and is not intended to provide advice on specific circumstances. Accenture disclaims, to the fullest extent permitted by applicable law, all liability for the accuracy and completeness of the information in this blog and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professional.

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