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

Current coverage period: Through July 31, 2019

CURRENT REGULATIONS:

European Commission (EC):
Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014
Publication Date: July 12th 2019

Risks Covered: Sovereign Risk

Business Processes Impacted: Lending & Investment

The Regulation is applicable to alternative investment fund managers, the Undertakings for the Collective Investment in Transferable Securities (UCITS) management companies, the European Venture Capital Fund (EuVECA) and the European Social Entrepreneurship Funds (EuSEF) managers. It establishes requirements for the marketing of collective investment undertakings. This Regulation went into effect on August 1, 2019.1

Office of the Superintendent of Financial Institutions (OSFI):

Use of the Advanced Measurement Approach for Operational Risk Capital
Publication Date: July 18th 2019

Risks Covered: Operational Risk

Business Processes Impacted: Capital Adequacy & Capital Planning
The agency is revising its capital requirements for operational risk applicable to Deposit-Taking Institutions (DTIs) considering the final Basel III revisions. Institutions currently approved to use the Advanced Measurement Approach (AMA) will be required to use a revised Basel III Standardized Approach when OSFI’s revised operational risk capital requirements takes effect starting Q1 2021.2

Financial Crimes Enforcement Network (FinCEN):
Guidance on the Application of the Customer Identification Program Rule and the Beneficial Ownership Rule to Certain Introducing Brokers
Publication Date: July 22nd 2019
Risks Covered: Conduct Risk

Business Processes Impacted: Brokerage Services
The agency is issuing this interpretive guidance to clarify the obligations under the Customer Identification Program (CIP) Rule and the Beneficial Ownership (BO) Rule of a certain subset of entities operating as Introducing Brokers in commodities (IBs).3

Office of the Comptroller of the Currency (OCC); Federal Reserve; Federal Deposit Insurance Corporation (FDIC):
Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996
Publication Date: July 22nd 2019
Risks Covered: Compliance Risk

Business Processes Impacted: Capital Adequacy & Capital Planning
Multiple regulatory bodies are adopting a final rule to simplify certain aspects of the capital rule. This rule went into effect October 1, 2019, except for the amendments to 12 CFR 3.21, 3.22, 3.300, 217.21, 217.22, 217.300(b) and (d), 324.21, 324.22, and 324.300, which are effective April 1, 2020.4

Office of the Comptroller of the Currency (OCC):
Volcker Rule: Final Rule
Publication Date: July 22nd 2019
Risks Covered: Liquidity Risk
Business Processes Impacted: Funding & Liquidity Management
The joint agencies have published a final rule implementing amendments to section 13 of the Bank Holding Company Act, commonly known as the Volcker rule. The amendments are contained in sections 203 and 204 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.5

European Banking Authority (EBA):
Roadmap for IFRS 9 deliverables
Publication Date: July 23rd 2019
Risks Covered: Market Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has published its International Financial Reporting Standards (IFRS) 9 roadmap to provide an outline of planned monitoring activities on IFRS 9 implementation.6

Japan Financial Services Agency:
Result of Public Comment on the Partial Revision (Draft) of Comprehensive Supervision Guidelines for Major Banks
Publication Date: July 24th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has announced the result of public comment on the partial revision (draft) of comprehensive supervision guidelines for major banks. The guidelines took effect on July 24, 2019.7

Financial Conduct Authority (FCA):
PS19/20: Optimising the Senior Managers & Certification Regime and feedback to CP19/4
Publication Date: July 26th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has issued a policy statement responding to feedback from Consultation Paper 19/4 – Optimising the Senior Managers & Certification Regime – and Discussion Paper 16/4 – Overall responsibility and the legal function.8

Monetary Authority of Singapore (MAS):
Guidelines on Provision of Financial Advisory Service
Publication Date: July 30th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has issued the “Guidelines on Provision of Financial Advisory Service” to provide greater clarity on what constitutes the provision of financial advisory service under the Financial Advisers Act by setting out a two-stage test. The first stage involves determining whether the activity in question amounts to providing financial advice while the second stage involves determining whether the person is carrying on a business in such activity.9

International Financial Reporting Standards (IFRS):
Corporate Reporting Dialogue publishes paper on transparency and accountability
Publication Date: July 2nd 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Pricing & Valuation
In the paper, entitled “Understanding the value of transparency and accountability,” CDP, the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Accounting Standards Board, the International Integrated Reporting Council, the International Organization for Standardization and the Sustainability Accounting Standards Board set out seven principles of transparency and accountability that they commonly believe are fundamental to corporate reporting: materiality, completeness, accuracy, balance, clarity, comparability and reliability.10

European Insurance and Occupational Pensions Authority (EIOPA):
EIOPA publishes Discussion Paper on Methodological Principles of Insurance Stress Testing
Publication Date: July 22nd 2019
Risks Covered: Operational Risk
Business Processes Impacted: Risk Management & Stress Testing
The agency has published a discussion paper on Methodological Principles of Insurance Stress Testing, part of a broader process to enhance EIOPA’s stress testing framework.11

Prudential Regulation Authority (PRA):
Credit risk mitigation
Publication Date: July 23rd 2019
Risks Covered: Credit Risk
Business Processes Impacted: Audit, Legal & Compliance
The authority has updated its supervisory statement on credit risk mitigation, following the publication of PS14/19 “Credit risk mitigation: Eligibility of financial collateral.” This document outlines the PRA’s expectations regarding the recognition of credit risk mitigation in the calculation of certain risk-weighted exposure amounts. This supervisory statement is effective as of July 23, 2019, while the section on eligibility of guarantees as unfunded credit protection takes effect September 13, 2019.12

European Commission (EC):
Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European Personal Pension Product (PEPP)
Publication Date: July 25th 2019
Risks Covered: Regulatory Risk
Business Processes Impacted: Pricing & Valuation
Regulation sets out uniform rules regarding the registration, manufacturing, distribution and supervision of personal pension products that are distributed in the Union, designated as pan-European Personal Pension product (PEPP).13

Prudential Regulation Authority (PRA); Bank of England:
UK withdrawal from the EU: Changes following extension of Article 50
Publication Date: July 25th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has published a Consultation Paper containing updated information regarding the Bank of England’s and PRA’s intended use of the temporary transitional power provided for in the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (FSMA SI).14

China Insurance Regulatory Commission; National Development and Reform Commission (China); People’s Bank of China:
Key Points on Lowering Corporate Leverage in 2019
Publication Date: July 26th 2019
Risks Covered: Credit Risk
Business Processes Impacted: Consumer/Investor Protection
Multiple agencies have jointly published the “Key Points on Lowering Corporate Leverage in 2019.”15

FORTHCOMING REGULATIONS:

Financial Industry Regulatory Authority (FINRA)
FINRA Encourages Firms to Notify FINRA if They Engage in Activities Related to Digital Assets
The agency has previously taken several steps to engage with members regarding their current and planned activities relating to digital assets. The Regulator appreciates members’ co-operation over the past year and is encouraging firms to continue keeping their Regulatory Coordinators abreast of their activities related to digital assets until July 31, 2020.16

Commodity Futures Trading Commission (CFTC)
Registration With Alternative Compliance for Non-U.S. Derivatives Clearing Organizations
The agency is proposing amendments to its regulations that would permit derivatives clearing organizations (DCOs) from outside of the United States and that do not pose substantial risk to the U.S. financial system, to register with the CFTC and comply with the core principles applicable to DCOs set forth in the Commodity Exchange Act (CEA) through compliance with their home country regulatory regime, subject to certain conditions and limitations. Comments to be received by September 17, 2019.17

Monetary Authority of Singapore (MAS)
Ratings issued by Credit Rating Agencies in Singapore will continue to be recognised and used in the EU
The Authority has announced that the European Commission’s decision to repeal the equivalence status for Singapore credit rating agencies (CRAs) does not impact the operations of CRAs in Singapore as CRAs can continue to access the European Union market through the endorsement regime which they currently operate under.18

European Insurance and Occupational Pensions Authority (EIOPA)
Consultation paper on the proposal for Guidelines on outsourcing to cloud service providers
The agency has issued a consultation paper on guidelines pertaining to outsourcing to cloud service providers.19

Association of British Insurers (ABI)
“A Comprehensive Strategy to help the Financial Sector play its part” – ABI responds to the Government’s Green Finance Strategy
The agency has welcomed the Government’s Green Finance Strategy. The Director General of the ABI, Huw Evans, has remarked that it is good to see the comprehensive strategy being laid out to help the financial sector play its part in tackling the climate crisis.20

Financial Reporting Council (UK) (FRC)
Impact Assessment & Feedback Statement: Amendments to FRS 101 Reduced Disclosure Framework
The Council has published a feedback statement summarizing the ten responses received to the Financial Reporting Exposure Draft (FRED) 70: Draft Amendments FRS 101 – 2018/19 cycle issued in January 2019.21

Australian Prudential Regulation Authority (APRA)
Consultation on new application form – Approval to own or control an RSE licensee
The authority has issued a letter following the responses submitted to its draft Application Form – Approval to own or control a Registrable Superannuation Entity (RSE) licensee and an accompanying instruction guide.22

European Financial Reporting Advisory Group (EFRAG)
EFRAG’S Draft Comment letter on the IASB’s ED/2019/4 Amendments to IFRS 17
The agency has published its draft comment letter in response to the International Accounting Standards Board’s (IASB) Exposure Draft ED/2019/4 Amendments to International Financial Reporting Standards (IFRS) 17 and seeks constituents’ views on the proposals. Comments on the draft comment letter to be received by September 2, 2019.23

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

 

References:

  1. “Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014,” Official Journal of the European Union, July 12, 2019. Access at: Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014.
  2. “Use of the Advanced Measurement Approach for Operational Risk Capital,” Office of the Superintendent of Financial Institutions, July 18, 2019. Access at: Use of the Advanced Measurement Approach for Operational Risk Capital.
  3. “Guidance on the Application of the Customer Identification Program Rule and the Beneficial Ownership Rule to Certain Introducing Brokers,” Financial Crimes Enforcement Network, July 22, 2019. Access at: Guidance on the Application of the Customer Identification Program Rule and the Beneficial Ownership Rule to Certain Introducing Brokers.
  4. “Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996,” Federal Register, July 22, 2019. Access at: Regulatory Capital Rule: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996.
  5. Volcker rule – Final Rule, Office of the Comptroller of the Currency, July 22, 2019. Access at: Volcker Rule: Final Rule.
  6. “Roadmap for IFRS 9 deliverables,” European Banking Authority, July 23, 2019. Access at: Roadmap for IFRS 9 deliverables.
  7. Results on supervision guidelines for major banks, Japan Financial Services Agency, July 24, 2019. Access at: Result of Public Comment on the Partial Revision (Draft) of Comprehensive Supervision Guidelines for Major Banks.
  8. “Optimising the Senior Managers & Certification Regime – Feedback to CP19/4 and Final Rules,” Financial Conduct Authority, July 26, 2019. Access at: PS19/20: Optimising the Senior Managers & Certification Regime and feedback to CP19/4.
  9. “MAS issues Guidelines on Provision of Financial Advisory Service,” Allen & Gledhill, July 30, 2019. Access at: Guidelines on Provision of Financial Advisory Service.
  10. “Corporate Reporting Dialogue publishes paper on transparency and accountability,” International Financial Reporting Standards, July 2, 2019. Access at: Corporate Reporting Dialogue publishes paper on transparency and accountability.
  11. “Discussion Paper on Methodological principles of insurance stress testing”, European Insurance and Occupational Pensions Authority, July 22, 2019. Access at: EIOPA publishes Discussion Paper on Methodological Principles of Insurance Stress Testing.
  12. “Credit risk mitigation,” Bank of England, July 23, 2019. Access at: Credit risk mitigation.
  13. “Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European Personal Pension Product (PEPP),” Official Journal of the European Union, July 25, 2019. Access at: Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019 on a pan-European Personal Pension Product (PEPP).
  14. “UK withdrawal from the EU: Changes following extension of Article 50,” Bank of England, June 25, 2019. Access at: UK withdrawal from the EU: Changes following extension of Article 50.
  15. Points on lowering corporate leverage in 2019, China Insurance Regulatory Commission; National Development and Reform Commission, People’s Bank of China, July 26, 2019. Access at: Key Points on Lowering Corporate Leverage in 2019.
  16. “FINRA Encourages Firms to Notify FINRA if They Engage in Activities Related to Digital Assets,” Financial Industry Regulatory Authority, July 18, 2019. Access at: FINRA Encourages Firms to Notify FINRA if They Engage in Activities Related to Digital Assets.
  17. “Registration With Alternative Compliance for Non-U.S. Derivatives Clearing Organizations,” Federal Register, July 19, 2019. Access at: Registration With Alternative Compliance for Non-U.S. Derivatives Clearing Organizations.
  18. “Credit rating agencies in Singapore not hit by EU commission removal of some market access rights: MAS,” The Straits Times, July 29, 2019. Access at: Ratings issued by Credit Rating Agencies in Singapore will continue to be recognised and used in the EU.
  19. “Consultation paper on the proposal for Guidelines on outsourcing to cloud service providers,” European Insurance and Occupational Pensions Authority, July 1, 2019. Access at: Consultation paper on the proposal for Guidelines on outsourcing to cloud service providers.
  20. ““A comprehensive strategy to help the financial sector play its part” – ABI responds to the Government’s Green Finance Strategy,” Association of British Insurers, July 2, 2019. Access at: A Comprehensive Strategy to help the Financial Sector play its part” – ABI responds to the Government’s Green Finance Strategy.
  21. “Impact Assessment and Feedback Statement, Amendments to FRS 101, Reduced Disclosure Framework – 2018/19 cycle,” Financial Reporting Council, July 7, 2019. Access at: Impact Assessment & Feedback Statement: Amendments to FRS 101 Reduced Disclosure Framework.
  22. “Response: Consultation on New Application Form – Approval to Own or Control an RSE Licensee,” Australian Prudential Regulation Authority, July 15, 2019. Access at: Consultation on new application form – Approval to own or control an RSE licensee.
  23. “EFRAG’s Draft Comment Letter on the IASB’s ED/2019/4 Amendments to IFRS 17,” European Financial Reporting Advisory Group, July 15, 2019. Access at: EFRAG’S Draft Comment letter on the IASB’s ED/2019/4 Amendments to IFRS 17.

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.

About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 425,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Its home page is www.accenture.com

Copyright © 2019 Accenture. All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document is produced by Accenture as general information on the subject. It is not intended to provide advice on your specific circumstances.

Submit a Comment

Your email address will not be published. Required fields are marked *