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

Current coverage period: Through May 31, 2019

CURRENT REGULATIONS:

European Banking Authority (EBA):
EBA launches Consultation on Technical Standards on the Standardised Approach for Counterparty Credit Risk
Publication Date: May 2nd 2019

Risks Covered: Counterparty Credit Risk
Business Processes Impacted: Business Continuity Management
The draft technical standards specify key aspects of the Standardised Approach for Counterparty Credit Risk (SA-CCR) and represent an important contribution to its smooth harmonized implementation in the European Union. The consultation runs until August 2, 2019.1

Federal Reserve (The Fed):
Regulation D: Reserve Requirements of Depository Institutions
Publication Date: May 10th 2019

Risks Covered: Business Cycle Risk
Business Processes Impacted: Interest Rate Risk (non-trading book)
The agency is amending Regulation D to revise the rate of interest paid on balances maintained to satisfy reserve balance requirements and the rate of interest paid on excess balances maintained at Federal Reserve Banks by or on behalf of eligible institutions.2

Federal Reserve (The Fed):
Control and Divestiture Proceedings
Publication Date: May 14th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The Board is inviting public comment on a proposal that would revise the Board’s regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the Bank Holding Company Act or the Home Owners’ Loan Act.3

Federal Reserve; Federal Deposit Insurance Corporation (FDIC):
Netting Eligibility for Financial Institutions
Publication Date: May 2nd 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Netting & Collateral Management
The agency is seeking comment on a proposal to amend Regulation EE to include certain new entities in the definition of “financial institution” contained in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) so that they are covered by FDICIA’s netting provisions.4

Financial Conduct Authority (FCA):
FCA changes Mortgage Advice Rules to encourage Consumer Choice
Publication Date: May 7th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has published proposals for changes to its mortgage sales requirements which can give consumers more choice in how they buy a mortgage.5

Department of the Treasury (US):
OFAC Issues a Framework for Compliance Commitments
Publication Date: May 2nd 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Business Continuity Management
The agency has published “A Framework for OFAC Compliance Commitments” in order to provide organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States or U.S. persons, or that use U.S.-origin goods or services, with OFAC’s perspective on the essential components of a sanctions compliance program.6

Financial Conduct Authority (FCA):
FCA launch the Financial Services Regulatory Partners Phoenixing Group
Publication Date: May 3rd 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has published a statement to address the issue of phoenixing in financial services. Representatives of the Financial Services Compensation Scheme (FSCS), the Financial Ombudsman Service, the Insolvency Service and Scotland’s Accountant in Bankruptcy met to discuss how to prevent firms and individuals from avoiding their liabilities to consumers or poor conduct history by closing down or resigning senior positions, only to re-emerge in a different legal entity.7

International Financial Reporting Standards (IFRS):
IASB proposes targeted amendments to IFRS Standards in response to IBOR Reform
Publication Date: May 3rd 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The Board has published for public comment proposed changes to the old and new financial instruments Standards, IAS 39 and IFRS 9, in light of the reform of interest rate benchmarks such as interbank offer rates (IBORs).8

Insurance Europe (IE):
Response to EIOPA paper on Systemic Risk and Macroprudential Policy
Publication Date: May 6th 2019
Risks Covered: Systemic Risk
Business Processes Impacted: Finance & Performance Management
Insurance Europe suggests limiting costs for insurers and supervisors by considering an Activity-Based Assessment (ABA) in which the supervisor would assess and engage the most vulnerable insurers to systemic risk, and would review and discuss the elements of the ABA.9

Prudential Regulation Authority (PRA):
Solvency II: Maintenance of the Transitional Measure on technical provisions
Publication Date: May 22nd 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The proposal set out guidance for firms seeking to use a proportionate approach to the Transitional Measure on Technical Provisions (TMTP) re-calculation methodology, and also provide more clarity on the consistency of Solvency I and Solvency II methodologies. Comments to be submitted by August 21, 2019.10

European Commission (EC):
Commission Delegated Regulation (EU) 2019/885 of 5 February 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards specifying information to be provided to a competent authority in an application for Authorisation of a Third Party Assessing STS Compliance
Publication Date: May 29th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Data Quality Management
The agency adopted a delegated regulation outlining regulatory technical standards that a competent authority should adhere to when providing information during the application process for third-party simple, transparent and standardized (STS) compliance authorization. This regulation entered into force on June 18, 2019.11

Office of the Comptroller of the Currency (OCC); Federal Reserve; Federal Deposit Insurance Corporation (FDIC):
Changes to Applicability Thresholds for Regulatory Capital Requirements for Certain U.S. Subsidiaries of Foreign Banking Organizations and Application of Liquidity Requirements to Foreign Banking Organizations, Certain U.S. Depository Institution Holding Companies, and Certain Depository Institution Subsidiaries
Publication Date: May 24th 2019
Risks Covered: Business Cycle Risk
Business Processes Impacted: Funding & Liquidity Management
The agencies are soliciting comments on a proposal that would determine the application of regulatory capital requirements to certain U.S. intermediate holding companies of foreign banking organizations and their depository institution subsidiaries and the application of standardized liquidity requirements with respect to certain U.S. operations of large foreign banking organizations and certain of their depository institution subsidiaries, each according to risk-based categories. Comments were to be submitted by June 21, 2019.12

Monetary Authority of Singapore (MAS); Association of Banks in Singapore (ABS):
New Industry Steering Group to Elevate Culture and Conduct Standards for Banking Industry
Publication Date: May 22nd 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Portfolio Advisory & Management
Regulators have announced the establishment of the Culture and Conduct Steering Group (CCSG) to promote sound culture and raise conduct standards among banks in Singapore.13

International Swaps and Derivatives Association (ISDA):
ISDA CDM deployed to help deliver UK Digital Regulatory Reporting Pilot
Publication Date: May 21st 2019
Risks Covered: Regulatory Risk
Business Processes Impacted: Reporting
The agency has announced the deployment of the ISDA Common Domain Model (ISDA CDM 2.0) which will assist the UK Financial Conduct Authority, the Bank of England and participating financial institutions in testing phase 2 of the digital regulatory reporting (DRR) pilots for derivatives.14

European Banking Authority (EBA); European Securities and Markets Authority (ESMA); European Insurance and Occupational Pensions Authority (EIOPA):
Draft implementing technical standards amending Implementing Regulation (EU) 2016/1799 on the Mapping of ECAIs’ Credit Assessments under Article 136(1) and (3) of Regulation (EU) No 575/2013: Final Report
Publication Date: May 20th 2019
Risks Covered: Credit Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The joint agency has published a second amendment to the Implementing Technical Standards on mapping credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation.15

European Banking Authority (EBA):
EBA updates on its work in response to the Commission’s call for advice on Basel III implementation
Publication Date: May 16th 2019
Risks Covered: Credit Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency is finalizing its impact assessment on the implementation of Basel III. The findings from this assessment cover the areas of credit risk, operational risk, securities financing transactions and output floor.16

International Swaps and Derivatives Association (ISDA):
ISDA Publishes Two Consultations on Benchmark Fallbacks
Publication Date: May 16th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has launched two new consultations on Benchmark Fallbacks. The first sets out the options for adjustments which will apply to the relevant risk-free rates (RFRs), in the instances that fallbacks are triggered for derivatives referencing the U.S. dollar LIBOR, Hong Kong’s HIBOR and Canada’s CDOR. The second consultation relates to pre-cessation issues and seeks comments on how derivatives contracts should address a regulatory announcement in which certain IBORs would be categorized as critical benchmarks under the EU Benchmarks regulation.17

European Financial Reporting Advisory Group (EFRAG):
Conference: Fostering Innovation in Corporate Reporting
Publication Date: May 17th 2019
Risks Covered: Systemic Risk
Business Processes Impacted: Reporting
This short video presents abstracts from the high-level discussions that took place at the European Reporting Lab@EFRAG conference on Fostering Innovation in Corporate Reporting.18

Financial Accounting Standards Board (FASB):
FASB issues targeted transition relief to institutions applying the credit losses standard
Publication Date: May 15th 2019
Risks Covered: Credit Risk
Business Processes Impacted: Lending & Investment
The authority has issued an Accounting Standards Update that eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value.19

FORTHCOMING REGULATIONS:

European Securities and Markets Authority (ESMA)
Impact of Brexit on the trading obligation for shares (Article 23 of MiFIR)
The agency has issued a statement regarding the impact of a no-deal scenario in regards to the United Kingdom’s withdrawal from the European Union on the trading obligation (STO) for shares under the Markets in Financial Instruments Regulation (MiFIR).20

Securities and Exchange Commission (SEC)
Amendments to Financial Disclosures About Acquired and Disposed Businesses (Federal Register)
The agency is proposing amendments to its rules and forms to improve the disclosure requirements for financial statements relating to acquisitions and dispositions of businesses, including real estate operations and investment companies. Comments should be received by July 29, 2019.21

Financial Accounting Standards Board (FASB)
FASB simplifies accounting for Goodwill and certain identifiable intangible assets for Not-For-Profits
The agency has issued an Accounting Standards Update (ASU) that reduces the cost of accounting for goodwill and measuring certain identifiable intangible assets for not-for-profit organizations. The standard is effective immediately.22

Australian Prudential Regulation Authority (APRA)
Self-assessments of Governance, Accountability and Culture
The agency has issued an information paper on self-assessments of governance, accountability and culture carried out by 36 of Australia’s largest banks, insurers and superannuation licensees in response to the Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).23

Consumer Financial Protection Bureau (CFPB)
Home Mortgage Disclosure (Regulation C)
The bureau is proposing two alternatives to amend Regulation C to increase the threshold for reporting data about closed-end mortgage loans so that institutions originating fewer than either 50 closed-end mortgage loans, or alternatively 100 closed-end mortgage loans, in either of the two preceding calendar years would not have to report such data as of January 1, 2020.24

Federal Reserve; Federal Deposit Insurance Corporation (FDIC)
Resolution Plans Required
The Board and the Corporation are inviting comment on a proposal to amend and restate the jointly issued regulation implementing the resolution planning.25

Financial Conduct Authority (FCA)
FCA begins Review of Financial Advice Market
Regulator has launched a Call for Input asking for feedback on its proposed approach to reviewing the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).26

Financial Accounting Standards Board (FASB)
FASB Issues Proposal to Simplify Accounting for Income Taxes
The agency has issued a proposed Accounting Standards Update intended to reduce cost and complexity for the accounting for income taxes. Stakeholders were asked to comment on the proposal by June 28, 2019.27

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

References:

  1. “EBA launches consultation on technical standards on the standardised approach for counterparty credit risk,” European Banking Authority, May 2, 2019. Access at: EBA launches Consultation on Technical Standards on the Standardised Approach for Counterparty Credit Risk.
  2. “Regulation D: Reserve Requirements of Depository Institutions,” Federal Register, May 10, 2019. Access at: Regulation D: Reserve Requirements of Depository Institutions.
  3. “Control and Divestiture Proceedings,” Federal Register, May 14, 2019. Access at: Control and Divestiture Proceedings.
  4. “Netting Eligibility for Financial Institutions,” Federal Register, May 2, 2019. Access at: Netting Eligibility for Financial Institutions.
  5. “FCA changes mortgage advice rules to encourage consumer choice,” Financial Conduct Authority, May 7, 2019. Access at: FCA changes Mortgage Advice Rules to encourage Consumer Choice.
  6. “OFAC Issues a Framework for Compliance Commitments,” S. Department of the Treasury, May 2, 2019. Access at: OFAC Issues a Framework for Compliance Commitments.
  7. “FCA launch the Financial Services Regulatory Partners Phoenixing Group,” Financial Conduct Authority, May 3, 2019. Access at: FCA launch the Financial Services Regulatory Partners Phoenixing Group.
  8. “IASB proposes targeted amendments to IFRS Standards in response to IBOR reform,” International Financial Reporting Standards, May 3, 2019. Access at: IASB proposes targeted amendments to IFRS Standards in response to IBOR Reform.
  9. “Response to EIOPA paper on systemic risk and macroprudential policy,” Insurance Europe, May 6, 2019. Access at: Response to EIOPA paper on Systemic Risk and Macroprudential Policy.
  10. “Solvency II: Maintenance of the transitional measure on technical provisions,” Prudential Regulation Authority, May 22, 2019. Access at: Solvency II: Maintenance of the Transitional Measure on technical provisions.
  11. “Commission Delegated Regulation (EU) 2019/885 of 5 February 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament,” Official Journal of the European Union, May 29, 2019. Access at: Commission Delegated Regulation (EU) 2019/885 of 5 February 2019 supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards specifying information to be provided to a competent authority in an application for Authorisation of a Third Party Assessing STS Compliance.
  12. “Changes to Applicability Thresholds for Regulatory Capital Requirements for Certain U.S. Subsidiaries of Foreign Banking Organizations and Application of Liquidity Requirements to Foreign Banking Organizations, Certain U.S. Depository Institution Holding Companies, and Certain Depository Institution Subsidiaries,” Office of the Comptroller of the Currency; Federal Reserve; Federal Deposit Insurance Corporation, May 24, 2019. Access at: Changes to Applicability Thresholds for Regulatory Capital Requirements for Certain U.S. Subsidiaries of Foreign Banking Organizations and Application of Liquidity Requirements to Foreign Banking Organizations, Certain U.S. Depository Institution Holding Companies, and Certain Depository Institution Subsidiaries.
  13. “New industry group to raise standards of culture and conduct among banks,” The Straits Times, May 22, 2019. Access at: New Industry Steering Group to Elevate Culture and Conduct Standards for Banking Industry.
  14. “ISDA CDM Deployed to Help Deliver UK Digital Regulatory Reporting Pilot,” International Swaps and Derivatives Association (ISDA), May 21, 2019. Access at: ISDA CDM deployed to help deliver UK Digital Regulatory Reporting Pilot.
  15. “Draft implementing technical standards amending Implementing Regulation (EU) 2016/1799 on the mapping of ECAIs’ credit assessments under Article 136(1) and (3) of Regulation (EU) No 575/2013,” European Banking Authority; European Securities and Markets Authority; European Insurance and Occupational Pensions Authority, May 20, 2019. Access at: Draft implementing technical standards amending Implementing Regulation (EU) 2016/1799 on the Mapping of ECAIs’ Credit Assessments under Article 136(1) and (3) of Regulation (EU) No 575/2013: Final Report.
  16. “EBA updates on its work in response to the Commission’s call for advice on Basel III implementation,” European Banking Authority, May 16, 2019. Access at: EBA updates on its work in response to the Commission’s call for advice on Basel III implementation.
  17. “ISDA Publishes Two Consultations on Benchmark Fallbacks,” International Swaps and Derivatives Association, May 16, 2019. Access at: ISDA Publishes Two Consultations on Benchmark Fallbacks.
  18. “Summary Video – Conference: Fostering Innovation in Corporate Reporting,” European Financial Reporting Advisory Group, May 17, 2019. Access at: Conference: Fostering Innovation in Corporate Reporting.
  19. “FASB Issues Targeted Transition Relief to Institutions Applying the Credit Losses Standard,” Financial Accounting Standards Board (FASB), May 15, 2019. Access at: FASB issues targeted transition relief to institutions applying the credit losses standard.
  20. “Impact of Brexit on the trading obligation for shares (Article 23 of MiFIR),” European Securities and Markets Authority, May 29, 2019. Access at: Impact of Brexit on the trading obligation for shares (Article 23 of MiFIR).
  21. “Amendments to Financial Disclosures About Acquired and Disposed Businesses,” Securities and Exchange Commission, May 28, 2019. Access at: Amendments to Financial Disclosures About Acquired and Disposed Businesses (Federal Register).
  22. “FASB Simplifies Accounting for Goodwill and Certain Identifiable Assets for Not-for-Profits,” Financial Accounting Standards Board, May 30, 2019. Access at: FASB simplifies accounting for Goodwill and certain identifiable intangible assets for Not-For-Profits.
  23. “Self-assessment of governance, accountability and culture,” Australian Prudential Regulation Authority, May 22, 2019. Access at: Self-assessments of Governance, Accountability and Culture.
  24. “Home Mortgage Disclosure (Regulation C),” Federal Register, May 13, 2019. Access at: Home Mortgage Disclosure (Regulation C).
  25. “Resolution Plans Required,” Federal Register, May 14, 2019. Access at: Resolution Plans Required.
  26. “FCA begins review of financial advice market,” Financial Conduct Authority, May 1, 2019. Access at: FCA begins Review of Financial Advice Market.
  27. “FASB Issues Proposal to Simplify Accounting for Income Taxes,” Financial Accounting Standards Board, May 14, 2019. Access at: FASB Issues Proposal to Simplify Accounting for Income Taxes.

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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