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

Current coverage period: Through March 31, 2018

CURRENT REGULATIONS:

Consumer Financial Protection Bureau (CFPB):
Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z)
Publication Date: March 6th 2018

Risks Covered: Operational Risk

Business Processes Impacted: Audit, Legal & Compliance

The agency has issued a final rule amending certain Regulation Z mortgage servicing rules issued in 2016 and relating to the timing for servicers’ to transition to providing modified or unmodified periodic statements and coupon books in connection with a consumer’s bankruptcy case. The final rule is effective April 19, 2018.1

The Board of Governors of the Federal Reserve System (The Fed):

Rules Regarding Delegation of Authority: Delegation of Authority to the Secretary of the Board
Publication Date: March 6th 2018

Risks Covered: Compliance Risk

Business Processes Impacted: Audit, Legal & Compliance
The Fed has amended its rules on delegation of authority to delegate to the Secretary of the Board the authority to review and determine an appeal of denial of access to Board records under the Freedom of Information Act, the Privacy Act, and the Board’s rules regarding such access. The final rule is effective on March 6, 2018.2

Federal Deposit Insurance Corporation (FDIC):
Alternatives to References to Credit Ratings With Respect to Permissible Activities for Foreign Branches of Insured State Nonmember Banks and Pledge of Assets by Insured Domestic Branches of Foreign Banks
Publication Date: March 5th 2018
Risks Covered: Compliance Risk

Business Processes Impacted: Reporting
The agency issued a press release announcing its adoption of a final rule to amend its international banking regulations consistent with section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the FDIC’s authority under section 5(c) of the Federal Deposit Insurance Act. The rule goes into effect on April 1, 2018.3

Financial Stability Board (FSB):
Securities Financing Transactions: Reporting Guidelines
Publication Date: March 5th 2018
Risks Covered: Conduct Risk

Business Processes Impacted: Audit, Legal & Compliance
The FSB has issued a guidance document titled “Securities Financing Transactions: Reporting Guidelines.” The document defines the reporting guidelines for implementing the data standards set out by the FSB in its November 2015 report on “Standards and Processes for Global Securities Financing Data Collection and Aggregation,” the November 2015 Standards.4

European Commission (EC):
Commission Implementing Regulation (EU) 2018/308 of 1 March 2018 laying down implementing technical standards for Directive 2014/59/EU of the European Parliament and of the Council with regard to formats, templates and definitions for the identification and transmission of information by resolution authorities for the purposes of informing the European Banking Authority of the minimum requirement for own funds and eligible liabilities
Publication Date: March 2nd 2018
Risks Covered: Conduct Risk
Business Processes Impacted: Information Technology
The European Commission (EC) has issued Commission Implementing Regulation (EU) 2018/308, which lays down implementing the technical standards for Directive 2014/59/EU of the European Parliament and the council in regards to definitions, formats and templates for the identification and transmission of information by resolution authorities. The purposes of this is to inform the European Banking Authority of the minimum which is required for eligible liabilities and own funds.5

Insurance Europe (IE):
Insurers welcome EC Fintech Action Plan
Publication Date: March 8th 2018
Risks Covered: Strategic Risk
Business Processes Impacted: Reporting
IE has provided feedback regarding the European Commission’s Fintech Action Plan to support innovation in financial services. William Vidonja, who heads the Conduct of Business division at Insurance Europe, stated that the Commission must ensure that any new rules are applicable to both existing market players and market entrants to permit fair competition.6

European Commission (EC):
Frequently Asked Questions: Financial Technology (FinTech) Action Plan
Publication Date: March 8th 2018
Risks Covered: Cyber Security Risk
Business Processes Impacted: Fraud and Financial Crime
The agency has published a fact sheet addressing frequently asked questions in respect to the Financial Technology (FinTech) Action plan.7

Insurance Europe (IE):
Consequences of Brexit on Existing Contracts
Publication Date: March 5th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
IE published a position paper on March 5, 2018, in respect to the consequences of Brexit on existing contracts. The key elements of the paper, among others, are that as things stand, EU and European Economic Area (EEA) (re)insurers can provide contracts to customers in the UK, and UK (re)insurers can provide contracts to customers in the EU/EEA through Passporting.8

The International Accounting Standards Board (IASB):
IFRS 17 Recognising the Contractual Service Margin (CSM) in P&L
Publication Date: March 7th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Information Technology
The International Financial Reporting Standards (IFRS) Foundation conducted a webcast on IFRS 17 Insurance Contracts which provided a basic overview on recognizing the contractual service margin in profit or loss.9

European Commission (EC):
FinTech: Commission takes action for a more Competitive and Innovative Financial Market
Publication Date: March 8th 2018
Risks Covered: Cyber Security Risk
Business Processes Impacted: Information Technology
The European Commission has unveiled an Action Plan on how to harness the opportunities presented by technology-enabled innovation in financial services (FinTech).10

The Board of Governors of the Federal Reserve System (The Fed):
Federal Reserve to study Payments Fraud and Security Vulnerabilities
Publication Date: March 29th 2018
Risks Covered: Operational Risk
Business Processes Impacted: Payment
The Fed has announced that work would begin on a new study that would measure fraud and associated costs in the U.S. payments system and identify the causes and contributing factors to fraud. The study is part of the Fed’s ongoing effort to improve and support payment security throughout the industry, as outlined in the Federal Reserve Next Steps in the Payment Improvement Journey paper released last year.11

Financial Conduct Authority (FCA):
FCA statement on EU withdrawal following the March European Council
Publication Date: March 28th 2018
Risks Covered: IT Risk
Business Processes Impacted: Information Technology
The FCA has published a statement welcoming the agreement reached on the terms of the implementation period that would run from March 29, 2019 until the end of December 2020 following the UK’s withdrawal from the European Union (EU). During this time, EU law will remain applicable in the UK, including consumer rights and protections derived from EU law, and firms and funds can continue to passport between the UK and the European Economic Area.12

European Commission (EC):
2018 Rolling Plan for ICT Standardisation released
Publication Date: March 26th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Information Technology
The EC released its 2018 Rolling Plan on ICT Standardisation, which identified activities in support of EU policies, on March 26, 2018. The 2018 plan includes the addition of chapters on “blockchain and distributed digital ledger technologies” and “regulatory technology” (extending the ‘fintech’ chapter). The rolling plan provides a unique overview of standardization activities in the field of information and communication technologies (ICT) linked to EU legislation and policies, such as healthcare, cloud computing, intelligent transport systems, security, accessibility, Internet of Things, eGovernment, smart grids and many others.13

Bank for International Settlements (BIS):
Pillar 3 disclosure requirements: Regulatory Treatment of Accounting Provisions – Consultative Document (March 2018)
Publication Date: March 22nd 2018
Risks Covered: Conduct Risk
Business Processes Impacted: Audit, Legal & Compliance
The BIS has published a technical amendment to Pillar 3 disclosure requirements for areas implementing an Expected Credit Loss (ECL) accounting model and for those adopting transitional measures for the regulatory treatment of accounting provisions. The BIS welcomed comments on or before May 4, 2018 on this technical amendment.14

European Banking Authority (EBA):
EBA published an Assessment of the Current Credit Risk Mitigation Framework
Publication Date: March 19th 2018
Risks Covered: Conduct Risk
Business Processes Impacted: Lending & Investment
The EBA published a Report on its assessment of the current Credit Risk Mitigation (CRM) framework. The Report: (i) Clarifies the application to the different credit risk approaches of the provisions currently laid down in the Capital Requirements Regulation (CRR) regarding credit risk mitigation (CRM); (ii) Highlights, for the consideration of the Commission, the limited guidance provided in the current CRR provisions on CRM under the Advanced-IRB (A-IRB) Approach; and (iii) Re-iterates the EBA’s position regarding the 3 mandates for technical standards in the area of CRM identified within the CRR.15

Financial Conduct Authority (FCA):
Women in Finance: Keeping up the Pressure for Progress
Publication Date: March 22nd 2018
Risks Covered: Strategic Risk
Business Processes Impacted: Reporting
The FCA has published a speech by its Director of Supervision, Investment, Wholesale and Specialists, Megan Butler focusing on the success of the Women in Finance Charter. Director Butler’s speech also touched on current gender pay gap, ways that regulators can encourage diversity while striving for progress, and the FCA’s approach to gender diversity.16

Insurance Europe (IE):
GDPR data breach Reporting Templates developed by Insurance Industry
Publication Date: March 19th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The IE has issued a press release in respect of the General Data Protection Regulations (GDPR) data breach reporting templates. The agency has developed a template that could assist companies to meet the GDPR obligation to inform their competent supervisory authority about personal data breaches.17

Financial Accounting Standards Board (FASB):
SEC Accepts 2018 GAAP Financial Reporting Taxonomy
Publication Date: March 19th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The FASB announced that the U.S. Securities and Exchange Commission (SEC) has accepted the 2018 GAAP Financial Reporting Taxonomy. The FASB also announced that the SEC has accepted the 2018 SEC Reporting Taxonomy (SRT), which is new this year.18

The European Supervisory Authorities (ESA):
“Report on Big Data from European Supervisory Authorities (ESAs) analysing its Impact on Consumers and Financial Firms”
Publication Date: March 15th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Recovery & Resolution planning
Overall, the ESAs have found that while the development of Big Data poses some potential risks to financial services consumers, the benefits of this innovation currently outweigh these. Many of the risks identified by the ESAs are mitigated by existing legislation.19

The French Prudential Supervision and Resolution Authority (ACPR):
The Digital Revolution in the French banking and Insurance sectors
Publication Date: March 20th 2018
Risks Covered: Compliance Risk
Business Processes Impacted: Funding & Liquidity Management
As the pace of change in the digital revolution quickens, the ACPR’s FinTech Innovation Unit conducted a survey on digital transformation in the French banking and insurance sectors.20

FORTHCOMING REGULATIONS:

Australian Prudential Regulation Authority (APRA)
APRA has Released revised Prudential Standard LPS 230 Reinsurance Management
The agency published the final version of Prudential Standard LPS 230 Reinsurance (LPS 230) following the consultation carried out in November 2017. The revised LPS 230, effective April 1, 2018, clarifies that the reinsurance report can be submitted as a stand alone report, or in conjunction with another report the party submits to the agency.21

Securities and Exchange Commission (SEC)
Investment Company Liquidity Disclosure
The agency is proposing amendments to its forms designed to improve the reporting and disclosure of liquidity information by registered open-end investment companies.22

European Commission (EC)
Initiative on an Integrated Covered Bond Framework
The EC issued a proposal on amending Regulation (EU) No 575/2013 as regards exposures in the form of covered bonds. Adopted on March 11, 2018, the package includes measures to deepen the Capital Markets Union together with the Communication “Completing Capital Markets Union by 2019 – time to accelerate deliver.”23

Financial Industry Regulatory Authority (FINRA)
FINRA Requests Comment on the Effectiveness and Efficiency of Its Carrying Agreements Rule
FINRA is conducting a retrospective review of Rule 4311 (Carrying Agreements). The rule, which governs requirements applicable to members when entering into agreements for the carrying of customer accounts, was approved by the SEC in 2011 and is the consolidated successor to former NASD Rule 3230, Incorporated NYSE Rule 382 and corresponding interpretations. Comments to be submitted on or before May 23, 2018.24

Financial Conduct Authority (FCA)
FCA sets out its Approach to Supervision and Enforcement
FCA has announced that it published its Approach to Supervision and its Approach to Enforcement. Both of these approach documents are open for consultation until June 21, 2018. The Approach to Supervision indicates that the FCA aims to be more forward-looking and pre-emptive with its supervision firms, as firms’ strategies and cultures are a major cause in most major failings. The Approach to Enforcement details the way in which the FCA conducts investigations and its powers. This Approach document also shows how FCA enforcement attempts to achieve fair and just outcomes in response to misconduct and to ensure FCA rules and requirements adhered to.25

European Financial Reporting Advisory Group (EFRAG)
Two New IFRS 17 Briefing Papers
The EFRAG issues two background briefing papers on the Release of the Contractual Service Margin and the Transition Requirements of IFRS 17 Insurance Contracts.26

 

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

 

References:

  1. “Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z),” Consumer Financial Protection Bureau (CFPB), Final Rule, March 6, 2018. Access at: Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z).
  2. “Rules Regarding Delegation of Authority: Delegation of Authority to the Secretary of the Board,” The Board of Governors of the Federal Reserve System, Final Rule, March 6, 2018. Access at: Rules Regarding Delegation of Authority: Delegation of Authority to the Secretary of the Board.
  3. “Alternatives to References to Credit Ratings With Respect to Permissible Activities for Foreign Branches of Insured State Nonmember Banks and Pledge of Assets by Insured Domestic Branches of Foreign Banks,” Federal Deposit Insurance Corporation, Final Rule, March 5, 2018. Access at: Alternatives to References to Credit Ratings With Respect to Permissible Activities for Foreign Branches of Insured State Nonmember Banks and Pledge of Assets by Insured Domestic Branches of Foreign Banks.
  4. “Securities Financing Transactions: Reporting Guidelines,” Financial Stability Board, Bank for International Settlements, March 5, 2018. Access at: Securities Financing Transactions: Reporting Guidelines.
  1. “Commission Implementing Regulation (EU) 2018/308 of 1 March 2018,” Official Journal of the European Union, March 2, 2018. Access at: Commission Implementing Regulation (EU) 2018/308 of 1 March 2018 laying down implementing technical standards for Directive 2014/59/EU of the European Parliament and of the Council with regard to formats, templates and definitions for the identification and transmission of information by resolution authorities for the purposes of informing the European Banking Authority of the minimum requirement for own funds and eligible liabilities.
  2. “Insurers welcome EC Fintech Action Plan,” Insurance Europe, March 8, 2018. Access at: Insurers welcome EC Fintech Action Plan.
  1. “Frequently asked questions: Financial Technology (FinTech) Action Plan,” European Commission, March 8, 2018. Access at: Frequently Asked Questions: Financial Technology (FinTech) Action Plan.
  1. “Consequences of Brexit on existing contracts,” Insurance Europe, March 5, 2018. Access at: Consequences of Brexit on Existing Contracts.
  1. “Recognising the contractual service margin in profit or loss,” International Accounting Standards Board, March 7, 2018. Access at: IFRS 17 Recognising the Contractual Service Margin (CSM) in P&L.
  2. “FinTech: Commission takes action for a more competitive and innovative financial market,” European Commission, Press Release, March 8, 2018. Access at: FinTech: Commission takes action for a more Competitive and Innovative Financial Market.
  3. “Federal Reserve to study payments fraud and security vulnerabilities,” The Board of Governors of the Federal Reserve System, Press Release, March 29, 2018. Access at: Federal Reserve to study Payments Fraud and Security Vulnerabilities.
  4. “FCA statement on EU withdrawal following the March European Council,” Financial Conduct Authority, March 28, 2018. Access at: FCA statement on EU withdrawal following the March European Council.
  5. “2018 Rolling Plan for ICT Standardisation released,” European Commission, March 26, 2018. Access at: 2018 Rolling Plan for ICT Standardisation released.
  6. “Pillar 3 disclosure requirements: regulatory treatment of accounting provisions,” Bank for International Settlements, March 22, 2018. Access at: Pillar 3 disclosure requirements: Regulatory Treatment of Accounting Provisions – Consultative Document (March 2018).
  7. “EBA published an assessment of the current credit risk mitigation framework,” European Banking Authority, March 19, 2018. Access at: EBA published an Assessment of the Current Credit Risk Mitigation Framework.
  8. “Women in finance: keeping up the pressure for progress,” Speech, Financial Conduct Authority, March 22, 2018. Access at: Women in Finance: Keeping up the Pressure for Progress.
  9. “GDPR data breach reporting templates developed by insurance industry,” Insurance Europe, March 19, 2018. Access at: GDPR data breach Reporting Templates developed by Insurance Industry.
  10. “SEC Accepts 2018 GAAP Financial Reporting Taxonomy,” Financial Accounting Standards Board, March 19, 2018. Access at: SEC Accepts 2018 GAAP Financial Reporting Taxonomy.
  11. “ESAs weigh benefits and risks of Big Data,” European Supervisory Authorities, March 15, 2018. Access at: “Report on Big Data from European Supervisory Authorities (ESAs) analysing its Impact on Consumers and Financial Firms”.
  12. “The digital revolution in the French banking and insurance sectors,” The French Prudential Supervision and Resolution Authority, March 20, 2018. Access at: The Digital Revolution in the French banking and Insurance sectors.
  13. “Consultation on LPS 230 Reinsurance – March 2018,” Australian Prudential Regulation Authority, March 9, 2018. Access at: APRA has Released revised Prudential Standard LPS 230 Reinsurance Management.
  14. “Investment Company Liquidity Disclosure,” Proposed Rule, Securities and Exchange Commission, March 14, 2018. Access at: Investment Company Liquidity Disclosure.
  15. “Regulation of the European Parliament and of the Council on amending Regulation EU No 575/2013 as regards exposures in the form of covered bonds,” European Commission, March 12, 2018. Access at: Initiative on an Integrated Covered Bond Framework.
  16. “Retrospective Rule Review – FINRA Requests Comment on the Effectiveness and Efficiency of Its Carrying Agreements Rule,” Regulatory Notice 18-10, Financial Industry Regulatory Authority, March 23, 2018. Access at: FINRA Requests Comment on the Effectiveness and Efficiency of Its Carrying Agreements Rule.
  17. “FCA sets out its Approach to Supervision and Enforcement,” Press Release, Financial Conduct Authority, March 21, 2018. Access at: FCA sets out its Approach to Supervision and Enforcement.
  18. “Two New IFRS 17 Briefing Papers,” European Financial Reporting Advisory Group, March 22, 2018. Access at: Two New IFRS 17 Briefing Papers.

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

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