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:

International Swaps and Derivatives Association (ISDA); European Fund and Asset Management Association (EFAMA); Futures Industry Association (FIA):
EFAMA, EVIA, FIA, GFXD and ISDA Publish EMIR Reporting Best Practices
Publication Date: March 3rd 2020

Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
A number of regulatory bodies have jointly published a set of “best practices” for derivatives trade reporting under the European Market Infrastructure Regulation.1

European Central Bank (ECB):
ECB announces easing of conditions for targeted longer-term refinancing operations (TLTRO III)
Publication Date: March 12th 2020

Risks Covered: Credit Risk
Business Processes Impacted: Risk Management & Stress Testing
The agency has announced that conditions have eased for targeted longer-term refinancing operations (TLTRO III).2

European Securities and Markets Authority (ESMA):
ESMA publishes translations for guidelines on MMF stress tests
Publication Date: March 3rd 2020
Risks Covered: Credit Risk
Business Processes Impacted: Data Quality Management
The agency has issued translated versions of its Guidelines on stress test scenarios under the Money Market Funds Regulation.3

Bank of England (BoE):
How have firms’ views on financial stability risks in the UK changed over the past decade?
Publication Date: March 9th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The agency has published the results from a recent Systemic Risk Survey examining how confident market participants are in the stability of the UK financial system and what risks they think the system is facing.4

Financial Conduct Authority (FCA):
How the discontinuation of LIBOR may affect your members and stakeholders
Publication Date: March 9th 2020
Risks Covered: Credit Concentration Risk
Business Processes Impacted: Data Privacy
A number of regulatory bodies have published a letter to trade associations on how the LIBOR transition can affect their members and stakeholders.5

Insurance Europe (IE):
Insurance Europe response to EIOPA consultation on PEPP technical standards
Publication Date: March 2nd 2020
Risks Covered: Credit Concentration Risk
Business Processes Impacted: Data Quality Management
The agency has published its response to the European Insurance and Occupational Pensions Authority’s consultation on the pan-European personal pension product (PEPP) technical standards.6

Insurance Europe (IE):
Joint letter on the international competitiveness of the financial services sector
Publication Date: March 3rd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Data Quality Management
A group of agencies have expressed their support for the European Commission’s objectives of preserving and improving financial stability, protecting savers and investors, and ensuring flows of capital to where needed.7

Financial Industry Regulatory Authority (FINRA):
Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief
Publication Date: March 9th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
Due to the recent outbreak of coronavirus disease, the authority has reminded member firms to consider pandemic-related business continuity planning, including whether their Business Continuity Plans (BCPs) are sufficiently flexible to address a wide range of possible effects in the event of a pandemic in the U.S.8

Financial Industry Regulatory Authority (FINRA):
Proposed Rule Change to FINRA’s Suitability, Non-Cash Compensation and Capital Acquisition Broker (CAB) Rules in Response to Regulation Best Interest
Publication Date: March 12th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Data Privacy
The proposed rule change would: (1) Amend the FINRA and CAB suitability rules to state that these do not apply to recommendations subject to Regulation Best Interest (Reg BI), and to remove the element of control from the quantitative suitability obligation; and (2) conform the rules governing non-cash compensation to Reg BI’s limitations on sales contests, sales quotas, bonuses and non-cash compensation.9

Financial Conduct Authority (FCA):
Transforming Culture in Financial Services – Driving Purposeful Cultures
Publication Date: March 5th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The authority has published a discussion paper which contains three essays on the topic of transforming culture in financial services.10

European Commission (EC):
Council Directive (EU) 2020/284 of 18 February 2020 amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers
Publication Date: March 2nd 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Payments
The agency is introducing certain requirements for payment service providers. Member states are to adopt the necessary laws, regulations and administrative provisions to comply with the Directive, then communicate to the Commission by December 31, 2023 and shall apply those provisions as of January 1, 2024.11

Hong Kong Monetary Authority (HKMA):
Second Issue of Regtech Watch
Publication Date: March 16th 2020
Risks Covered: Credit Risk
Business Processes Impacted: Risk Management & Stress Testing
The agency publishes a newsletter titled Regtech Watch. This particular edition focuses on technology applications in credit risk management and highlights how some banks are using technology in the areas of credit underwriting and risk management processes.12

Federal Reserve (The Fed):
Regulations Q, Y, and YY: Regulatory Capital, Capital Plan, and Stress Test Rules
Publication Date: March 18th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Risk Management & Stress Testing
The agency is adopting a final rule that simplifies the Board’s capital framework while preserving strong capital requirements for large firms. This rule goes into effect May 18, 2020.13

European Commission (EC):
Review of the Benchmark Regulation
Publication Date: March 18th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency is requesting feedback on a roadmap for the review of the Benchmark Regulation (BMR). Comments were to be submitted by April 15, 2020.14

HM Treasury (HMT):
Draft guidance on the taxation impacts arising from the withdrawal of LIBOR and other benchmark rate reform
Publication Date: March 19th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has released a draft guidance paper in order to gather feedback on its views pertaining to the tax implications of changes to financial instruments driven by benchmark reform. Comments should be submitted on or before May 28, 2020.15

European Commission (EC):
Climate change mitigation and adaptation taxonomy
Publication Date: March 24th 2020
Risks Covered: Market Risk
Business Processes Impacted: Business Continuity Management
The agency has launched a consultation which seeks to establish a taxonomy to classify environmentally sustainable economic activities. Comments were to be submitted by April 20, 2020.16

Financial Reporting Council (UK) (FRC):
Discussion: Technological resources: using technology to enhance audit quality
Publication Date: March 25th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has issued a discussion paper, soliciting feedback regarding the use of technology to enhance the quality of audits. Comments to be submitted by July 3, 2020.17

Financial Industry Regulatory Authority (FINRA):
Cybersecurity Alert: Measures to Consider as Firms Respond to the Coronavirus Pandemic (COVID-19)
Publication Date: March 26th 2020
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
The agency has issued a notice stating that as work processes adjust in response to the pandemic, firms and their associated persons should take appropriate measures to address increased vulnerability to cybersecurity attacks and to protect customer and firm data on firm and home networks, as well as devices.18

Office of the Comptroller of the Currency (OCC):
Standardized Approach for Counterparty Credit Risk: Notice to Allow Early Adoption
Publication Date: March 27th 2020
Risks Covered: Counterparty Credit Risk
Business Processes Impacted: Data Privacy
In light of the COVID-19 pandemic, the agency has issued a notice to allow banking organizations to implement the final rule titled “Standardized Approach for Calculating the Exposure Amount of Derivative Contracts” (SA-CCR rule) for the first quarter of 2020, on a best efforts basis. The SA-CCR rule’s effective date remained April 1, 2020, and the mandatory compliance date remains January 1, 2022.19

Australian Prudential Regulation Authority (APRA):
APRA announces deferral of capital reform implementation
Publication Date: March 30th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The authority has deferred implementation of the Basel III reform by one year in view of the COVID-19 situation.20

FORTHCOMING REGULATIONS:

European Banking Authority (EBA)
EBA statement on actions to mitigate the impact of COVID-19 on the EU banking sector
The agency will postpone the EU-wide stress test exercise to 2021 to allow banks to focus on their core operations.21

Federal Reserve (The Fed); Federal Deposit Insurance Corporation (FDIC)
Guidance for Resolution Plan Submissions of Certain Foreign-based Covered Companies
Multiple authorities are inviting public comment on proposed changes to the guidance for resolution plans submitted by large foreign banks, including plans that are due July 1, 2021.22

Financial Conduct Authority (FCA)
Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations
The agency has published a consultation paper setting out its proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations.23

Federal Reserve (The Fed)
Regulation A: Extensions of Credit by Federal Reserve Banks
The agency has adopted final amendments to its Regulation A to reflect the Board’s approval of a decrease in the rate for primary credit at each Federal Reserve Bank.24

Federal Deposit Insurance Corporation (FDIC)
Proposed Rule: Parent Companies of Industrial Banks and Industrial Loan Companies
The agency is seeking comment on a proposed rule that would require certain conditions and commitments for each deposit insurance application approval, non-objection to a change in control notice, and merger application approval that would result in an insured industrial bank or industrial loan company becoming, after the effective date of any final rule, a subsidiary of a company that is not subject to consolidated supervision by the Federal Reserve Board.25

Securities and Exchange Commission (SEC)
Market Data Infrastructure
The agency proposes to update the National Market System (NMS) as it pertains to the information that is to be collected, consolidated, and disseminated as part of the national market system under Regulation NMS. Comments to be received by May 26, 2020.26

European Securities and Markets Authority (ESMA)
Accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9
The agency has issued a public statement on the accounting implications of the measures taken or proposed by national governments and European Union bodies to mitigate the economic impact of the pandemic.27

Financial Conduct Authority (FCA)
Impact of the coronavirus on firms’ LIBOR transition plans
The authority has published a statement acknowledging that while the coronavirus pandemic may impact the LIBOR transition plans for many firms, LIBOR is still an essential task and the target end date for LIBOR remains the end of 2021.28

Footnotes:

  1. “EFAMA, EVIA, FIA, GFXD and ISDA Publish EMIR Reporting Best Practices,” European Fund and Asset Management Association, March 3, 2020. Access at: EFAMA, EVIA, FIA, GFXD and ISDA Publish EMIR Reporting Best Practices.
  2. “ECB announces easing of conditions for targeted longer-term refinancing operations (TLTRO III),” European Central Bank, March 12, 2020. Access at: ECB announces easing of conditions for targeted longer-term refinancing operations (TLTRO III).
  3. “ESMA PUBLISHES TRANSLATIONS FOR GUIDELINES ON MMF STRESS TESTS,” European Securities and Markets Authority, March 3, 2020. Access at: ESMA publishes translations for guidelines on MMF stress tests.
  4. “How have firms’ views on financial stability risks in the UK changed over the past decade?,” Bank of England, March 9, 2020. Access at: How have firms’ views on financial stability risks in the UK changed over the past decade?
  5. “How the discontinuation of LIBOR may affect your members and stakeholders,” Bank of England, Financial Conduct Authority letter, March 9, 2020. Access at: How the discontinuation of LIBOR may affect your members and stakeholders.
  6. “Response to EIOPA consultation on PEPP technical standards,” Insurance Europe, March 2, 2020. Access at: Insurance Europe response to EIOPA consultation on PEPP technical standards.
  7. “Joint letter on the international competitiveness of the financial services sector,” Insurance Europe, European Banking Federation, European Fund and Asset Management Association, Pensions Europe, Association of Mutual Insurers and Insurance Cooperatives, March 3, 2020. Access at: Joint letter on the international competitiveness of the financial services sector.
  8. “Business Continuity Planning – Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief,” Financial Industry Regulatory Authority, March 9, 2020. Access at: Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief.
  9. Amendments on proposed rules, Financial Industry Regulatory Authority, March 12, 2020. Access at: Proposed Rule Change to FINRA’s Suitability, Non-Cash Compensation and Capital Acquisition Broker (CAB) Rules in Response to Regulation Best Interest.
  10. “Transforming culture in financial services – Driving purposeful cultures,” Financial Conduct Authority, March 5, 2020. Access at: Transforming Culture in Financial Services – Driving Purposeful Cultures.
  11. “COUNCIL DIRECTIVE (EU) 2020/284 of 18 February 2020 amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers,” Official Journal of the European Union, March 2, 2020. Access at: Council Directive (EU) 2020/284 of 18 February 2020 amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers.
  12. Regtech Watch, Issue No. 2, Hong Kong Monetary Authority, March 16, 2020. Access at: Second Issue of Regtech Watch.
  13. “Regulations Q, Y, and YY: Regulatory Capital, Capital Plan, and Stress Test Rules,” Federal Register, March 18, 2020. Access at: Regulations Q, Y, and YY: Regulatory Capital, Capital Plan, and Stress Test Rules.
  14. “Financial benchmarks (for interest rates, stock-exchange prices, exchange rates, etc.) – review of EU rules,” European Commission, March 18, 2020. Access at: Review of the Benchmark Regulation.
  15. “Draft guidance on the taxation impacts arising from the withdrawal of LIBOR and other benchmark rate reform,” HM Treasury, March 19, 2020. Access at: Draft guidance on the taxation impacts arising from the withdrawal of LIBOR and other benchmark rate reform.
  16. “Sustainable finance – EU classification system for green investments,” European Commission, March 24, 2020. Access at: Climate change mitigation and adaptation taxonomy.
  17. “Technological resources: using technology to enhance audit quality,” Financial Reporting Council, March 25, 2020. Access at: Discussion: Technological resources: using technology to enhance audit quality.
  18. “Cybersecurity Alert: Measures to Consider as Firms Respond to the Coronavirus Pandemic (COVID-19),” Financial Industry Regulatory Authority, March 26, 2020. Access at: Cybersecurity Alert: Measures to Consider as Firms Respond to the Coronavirus Pandemic (COVID-19).
  19. “Standardized Approach for Counterparty Credit Risk: Notice to Allow Early Adoption,” Office of the Comptroller of the Currency, March 27, 2020. Access at: Standardized Approach for Counterparty Credit Risk: Notice to Allow Early Adoption.
  20. “APRA announces deferral of capital reform implementation,” Australian Prudential Regulation Authority, March 30, 2020. Access at: APRA announces deferral of capital reform implementation.
  21. “EBA statement on actions to mitigate the impact of COVID-19 on the EU banking sector,” European Banking Authority, March 12, 2020. Access at: EBA statement on actions to mitigate the impact of COVID-19 on the EU banking sector.
  22. “Guidance for Resolution Plan Submissions of Certain Foreign-based Covered Companies,” Federal Reserve System, Federal Deposit Insurance Corporation, March 6, 2020. Access at: Guidance for Resolution Plan Submissions of Certain Foreign-based Covered Companies.
  23. “Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations,” Financial Conduct Authority, March 6, 2020. Access at: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations.
  24. “Regulation A: Extensions of Credit by Federal Reserve Banks,” Federal Register, March 10, 2020. Access at: Regulation A: Extensions of Credit by Federal Reserve Banks.
  25. “Proposed Rule: Parent Companies of Industrial Banks and Industrial Loan Companies,” Federal Deposit Insurance Corporation, March 31, 2020. Access at: Proposed Rule: Parent Companies of Industrial Banks and Industrial Loan Companies.
  26. “Market Data Infrastructure,” Federal Register, March 24, 2020. Access at: Market Data Infrastructure.
  27. “Accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9,” European Securities and Markets Authority, March 25, 2020. Access at: Accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9.
  28. “Impact of the coronavirus on firms’ LIBOR transition plans,” Financial Conduct Authority, March 25, 2020. Access at: Impact of the coronavirus on firms’ LIBOR transition plans.

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