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

Current coverage period: Through February 28, 2019

CURRENT REGULATIONS:

Financial Conduct Authority (FCA):
Payment Services and Electronic Money (Principles for Businesses and Conduct of Business) Instrument 2019
Publication Date: February 1st 2019 

Risks Covered: Liquidity Risk
Business Processes Impacted: Payments
The agency has published the Payment Services and Electronic Money (Principles for Businesses and Conduct of Business) Instrument 2019. This instrument comes into force on August 1, 2019.1

Financial Conduct Authority (FCA):
Brexit – What We Expect Firms and other Regulated Persons To Do Now
Publication Date: February 1st 2019

Risks Covered: Business Cycle Risk
Business Processes Impacted: Data Privacy
The agency has published a statement discussing the Treasury’s draft legislation that would grant temporary power to the FCA and the Bank of England/Prudential Regulation Authority to make transitional provisions in the event that the UK leaves the European Union with no agreement in place.2

Bank of England (BoE):
Bank of England and European Securities and Markets Authority agree Memoranda of Understanding

Publication Date: February 4th 2019
Risks Covered: Regulatory Risk
Business Processes Impacted: Data Privacy
The agency issued a press release announcing that it had agreed to Memoranda of Understanding (MoUs) with the European Securities and Markets Authority regarding co-operation and information-sharing arrangements with respect to Central Counter-Parties and Central Securities Depositories. The MoUs would only take effect in the event of a no-deal Brexit.3

Federal Reserve (The Fed):
Enhanced Disclosure of the Models Used in the Federal Reserve’s Supervisory Stress Test

Publication Date: February 28th 2019
Risks Covered: Regulatory Risk
Business Processes Impacted: Risk Management & Stress Testing
The regulator is finalizing an enhanced disclosure of the models used in the Federal Reserve’s supervisory stress test conducted under the Board’s Regulation YY, and pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Board’s capital plan rule.4

Securities and Exchange Commission (SEC):
Disclosure of Hedging by Employees, Officers and Directors (Federal Register)

Publication Date: February 6th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Pricing & Valuation
The consumer protection rule requires a company to describe any practices or policies it has adopted regarding the ability of its employees or directors to purchase financial instruments that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted as compensation, or held directly or indirectly by the employee or director. This rule went into effect on March 8, 2019.5

California Department of Insurance:
Notice of Renewal of Certificate of Authority Procedures
Publication Date: February 4th  2019
Risks Covered: Conduct Risk
Business Processes Impacted: Business Continuity Management
California Insurance Code 11401 was amended effective January 1, 2019, to require firefighter, police officer or peace officer benefit and relief associations (“Association“) to renew their Certificate of Authority on or before July 1, 2019.6

Insurance Europe (IE):
Insurance Europe Response to the Consultation on Draft Guidelines for Trustworthy Artificial Intelligence (AI)
Publication Date: February 5th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The agency has published its response to the consultation from the European Commission High-Level Expert Group on Artificial Intelligence (“the HELG”) and concerning draft guidelines for trustworthy artificial intelligence (AI).7

European Commission (EC):
Risk Management and Supervision of Insurance Companies (Solvency 2)
Publication Date: February 7th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has issued a document which discusses the common rules to aid insurance companies in the European Union with their activities, to permit them to function in difficult times, as well as protect policyholders. The document also includes additional information on the Solvency 2 Directive and Solvency 2 Directive Regulation.8

European Commission (EC):
Formal Request to EIOPA for Technical Advice on the Review of the Solvency II Directive
Publication Date: February 11th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has published a letter from Olivier Guersent, Director General of the EC’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA). The letter focuses on several areas of the Solvency II framework that should be reassessed as part of the review of the Solvency II Directive which is scheduled for 2020.9

The Financial Accounting Standards Board (FASB):
FASB Proposes targeted transition relief to Institutions applying the Credit Losses Standard
Publication Date: February 6th 2019
Risks Covered: Credit Risk
Business Processes Impacted: Funding & Liquidity Management
The agency issued a proposed Accounting Standards Update that would ease transition to the credit losses standard by providing the option to measure certain types of assets at fair value. Stakeholders were asked to review and provide comments on the proposal by March 8, 2019.10

European Securities and Markets Authority (ESMA):
ESMA Publishes Responses to its Consultations on Sustainable Finance
Publication Date: February 25th 2019
Risks Covered: Regulatory Risk
Business Processes Impacted: Business Continuity Management
The agency has published the responses received to its consultations on integrating sustainability risks and factors in Markets in Financial Instruments Directive II, and in the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and Alternative Investment Fund Managers Directive (AIFMD).11

European Securities and Markets Authority (ESMA):
EU and Global Securities Regulators Welcome Agreement on Data Transfer
Publication Date: February 15th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Data Privacy
The agency has published a press release concerning personal data transfers between European Economic Area (EEA) Financial Supervisory Authorities and Non-EEA Financial Supervisory Authorities.12

Financial Conduct Authority (FCA):
Primary Market Bulletin
Publication Date: February 22nd 2019
Risks Covered: Regulatory Risk
Business Processes Impacted: Business Continuity Management
This edition of the Primary Market Bulletin outlined new regulatory obligations market makers were to implement in respect of the Short Selling Regulation (SSR) and Market Abuse Regulation (MAR) if the UK had left the EU on March 29 under a no-deal scenario.13

Office of the Comptroller of the Currency (OCC); Federal Reserve; Federal Deposit Insurance Corporation (FDIC):
Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations
Publication Date: February 14th 2019
Risks Covered: Credit Concentration Risk
Business Processes Impacted: Audit, Legal & Compliance
The multiple agencies are adopting a final rule to address changes to credit loss accounting under U.S. generally accepted accounting principles, including banking organizations’ implementation of the current expected credit losses methodology.14

Insurance Europe (IE):
Insurers respond to ESRB Systemic Risk Report: No additional Prudential Rules needed
Publication Date: February 25th 2019
Risks Covered: Business Cycle Risk
Business Processes Impacted: Recovery & Resolution planning
The regulator has issued a news release detailing its response to the European Systemic Risk Board’s report that discusses the macro-prudential provisions, measures and instruments for insurance.15

Insurance Europe (IE):
EU Financial Services Organisations launch FinDatEx Platform to Improve Data Exchange
Publication Date: February 18th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The aim of the Financial Data Exchange Template (FinDatEx) is to allow financial services representatives to: interact in order to develop technical templates; coordinate and organize standardization work carried out by experts from different financial services; and help disseminate technical templates to relevant European Union financial services stakeholders.16

Prudential Regulation Authority (PRA):
Solvency II: The Quality of Capital Instruments
Publication Date: February 20th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The agency has published an update to Supervisory Statement (SS) 3/15, following the publication of Policy Statement 4/19 “Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down.”17

FORTHCOMING REGULATIONS:

Securities and Exchange Commission (SEC)
Fund of Funds Arrangements (Federal Register)

The agency is proposing a new rule to streamline and enhance the regulatory framework applicable to funds that invest in other funds.18

Office of the Comptroller of the Currency (OCC); Federal Reserve; Federal Deposit Insurance Corporation (FDIC)
Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations

Multiple agencies are inviting public comment on a notice of proposed rule-making (proposal) that would provide for a simple measure of capital adequacy for certain community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. Comments to be received by April 9, 2019.19

Japan Financial Services Agency (JFSA)
Publication of a Partial Amendment (Draft) of the Notice Pertaining to Total Loss Absorption Capacity (TLAC) Regulation

The agency has announced the publication of a partial amendment (draft) of the notice pertaining to total loss absorption capacity (TLAC) regulation. Comments and opinions on this proposal were to be submitted by February 8, 2019.20

Prudential Regulation Authority (PRA)
Solvency II: Longevity Risk Transfers – Simplification of Pre-Notification Expectations

The agency published a consultation paper regarding Solvency II: Longevity risk transfers. Comments to be submitted by May 6, 2019.21

Federal Reserve (The Fed)
Regulations LL and YY; Amendments to the Company-Run and Supervisory Stress TRules

The agency is requesting comment to a proposed rule that would amend the Board’s company-run stress test and supervisory stress test rules, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.22

Securities and Exchange Commission (SEC)
Risk Mitigation Techniques for Uncleared Security-Based Swaps (Federal Register)
The agency is proposing a rule that would require the application of specific risk mitigation techniques to portfolios of security-based swaps not submitted for clearing.23

Insurance Europe (IE)
Response to Treasury IRS BEAT Regulations

The agency has published their response to the proposed regulations from the U.S. Department of the Treasury and the Internal Revenue Service (IRS), which implement the Base Erosion and Anti-abuse Tax (BEAT) under section 59A of the Internal Revenue Code.24

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

References:

  1. “Prudential Standard APS 910 Financial Claims Scheme (APS 910) Requirements and Operational Preparedness,” Australian Prudential Regulation Authority, January 10, 2019. Access at: Prudential Standard APS 910 Financial Claims Scheme (APS 910) Requirements And Operational Preparedness.
  2. “Securitisation Regulation Implementation (Fees for Third Party Verifiers) Instrument 2019,” Financial Conduct Authority, January 3, 2019. Access at: Securitisation Regulation Implementation (Fees for Third Party Verifiers) Instrument 2019.
  3. “New OTC Threshold List Data Download and API Guidelines (Effective January 14, 2019),” Financial Industry Regulatory Authority, January 8, 2019. Access at: New OTC Threshold List Data Download and API Guidelines (Effective January 14, 2019).
  4. “MAS Notice 3001 (Amendment) 2019,” Monetary Authority of Singapore, January 9, 2019. Access at: Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Money-Changer’s Licence and Remittance Licence.
  5. “Application of the Senior Managers and Certification Regime to firms in the temporary permissions regime: clarification of the PRA’s and FCA’s proposals,” Prudential Regulation Authority, January 7, 2019. Access at: Application of the Senior Managers and Certification Regime to firms in the temporary permissions regime: clarification of the PRA’s and FCA’s proposals.
  6. Update on PRIIPs Regulation, BaFin (German Federal Financial Supervisory Authority), January 7, 2019. Access at: Information Sheet on the Specialised Procedure – PRIIPs Regulation.
  7. “New Standard on leases now effective,” International Financial Reporting Standards, January 8, 2019. Access at: New Standard on Leases now Effective.
  8. “Europe’s largest reinsurers explain the supervisory benefits of using internal models,” Insurance Europe, January 9, 2019. Access at: Europe’s largest reinsurers explain the supervisory benefits of using internal models.
  9. “Public Consultation: Holistic Framework for Systemic Risk in the Insurance Sector,” International Association of Insurance Supervisors, January 8, 2019. Access at: Public Consultation: Holistic Framework for Systemic Risk in the Insurance Sector.
  10. “Multilateral Agreement on the Practical Modalities for Exchange of Information Pursuant to Article 57a(2) of Directive (EU) 2015/849,” European Banking Authority; European Securities and Markets Authority; European Insurance and Occupational Pensions Authority, January 15, 2019. Access at: ESAs announce Multilateral Agreement on the exchange of information between the ECB and AML/CFT Competent Authorities.
  11. “ECB publishes single Code of Conduct for high-level officials,” European Central Bank, January 16, 2019. Access at: ECB publishes single Code of Conduct for high-level officials.
  12. “Conduct of Business Sourcebook (Retirement Outcomes Review) Instrument 2019,” Financial Conduct Authority, January 28, 2019. Access at: Conduct of Business Sourcebook (Retirement Outcomes Review) Instrument 2019
  13. “OJK Apply the Latest Basel III Market Risk Calculation,” Indonesian Financial Services Authority, January 15, 2019. Access at: New Basel III Market Risk Calculation.
  14. “Expanded Examination Cycle Eligibility,” Office of the Comptroller of the Currency, January 17, 2019. Access at: Expanded Examination Cycle Eligibility: Final Rule.
  15. “FATF Guidance for a Risk-Based Approach for the Life Insurance Sector,” Monetary Authority of Singapore, January 18, 2019. Access at: FATF Guidance for a Risk-Based Approach for the Life Insurance Sector.
  16. “Regulatory transactions: Changes to notification and application forms,” Prudential Regulation Authority, January 17, 2019. Access at: Regulatory transactions: Changes to notification and application forms.
  17. “Virtual Currencies – Fact Sheet,” Swiss Financial Market Supervisory Authority, January 1, 2019. Access at: Fact Sheet: Virtual Currencies (Updated).
  18. Partial amendment (draft) of notice on capital adequacy regulation (first pillar/third pillar), Japan Financial Services Agency, January 9, 2019. Access at: Partial Revision (Draft) of the Notification on Capital Adequacy Ratio Regulation (First Pillar / Third Pillar).
  19. “Amending Delegated Regulation (EU) 2017/565 as regards the integration of Environmental, Social and Governance (ESG) considerations and preferences into the investment advice and portfolio management,” European Commission, January 4, 2019. Access at: Commission delegated regulation amending Delegated Regulation (EU) 2017/565 as regards the integration of Environmental, Social and Governance (ESG) considerations and preferences into the investment advice and portfolio management.
  20. “Credit risk mitigation: Eligibility of financial collateral,” Prudential Regulation Authority, January 10, 2019. Access at: Credit Risk Mitigation: Eligibility of Financial Collateral.
  21. “Evaluation of the Consumer Credit Directive,” European Commission, January 14, 2019. Access at: Evaluation of the Consumer Credit Directive.
  22. “FRTB: Revised Market Risk Standards,” Hong Kong Monetary Authority, January 17, 2019. Access at: FRTB: Revised Market Risk Standards.
  23. “Comment on the proposed general improvements to the IFRS Taxonomy 2018 by Monday 4 February,” International Financial Reporting Standards, January 16, 2019. Access at: Comment on the proposed general improvements to the IFRS Taxonomy 2018 by Monday 4 February.
  24. “Comments on the EDPB guidelines on the GDPR territorial scope,” Insurance Europe, January 17, 2019. Access at: Comments on the EDPB guidelines on the GDPR Territorial Scope.

 

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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