Edition Highlights:

  • The Australian Prudential Regulation Authority releases its revised “Prudential Standard APS 120 Securitisation”
  • Bank of England publishes the UK banking stress testing results for 2016
  • The Securities and Exchange Commission finalizes liquidity risk management programs for investment companies

Current coverage period: Through November 30, 2016

Note: Anticipated business impact for covered regulations is shown using the following rating legend:       (*Low) (** Medium) (*** High)

CURRENT REGULATIONS:

Australian Prudential Regulation Authority (APRA)(**):
Prudential Standard APS 120 Securitisation
Publication Date: November 10th 2016
Risks Covered: Credit Risk

Business Processes Impacted: Capital Adequacy and Capital Planning
The final revised Prudential Standard APS 120 Securitisation (APS 120) implements internationally agreed regulatory reforms, including the Basel III securitization framework, and aims to reduce the credit and prudential risk to authorized deposit-taking institutions (ADIs) by simplifying approaches to calculating regulatory capital requirements for securitization exposures.1

 

European Commission (EC) (***):
Report from the Commission to the European Parliament and the Council under Article 85(1) of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC Derivatives, Central Counterparties and Trade Repositories
Publication Date: November 23rd 2016
Risks Covered: Counterparty Credit Risk, Credit Risk

Business Processes Impacted: Trading, Clearing and Settlement – Exchange Traded and OTC
Necessitated by the requirement to produce a report on European Market Infrastructure Regulation (EMIR), and inhibited by the fact that there are certain core requisites of EMIR which are yet to be implemented, and thus preventing an EMIR impact review, this document highlights areas where action is needed to fulfil the objectives of EMIR compliance.2

 

European Commission (EC )(***):
Commission Regulation (EU) 2016/2067 of 22 November 2016 Amending Regulation (EC) No 1126/2008 Adopting Certain International Accounting Standards in Accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 9
Publication Date: November 29th 2016

Risks Covered: Compliance Risk

Business Processes Impacted: Corporate Finance, M&A and Advisory
These amendments adopt certain international accounting standards pertaining to International Financial Reporting Standard 9 Financial Instruments.3

 

Bank of England (**):
Stress Testing the UK Banking System: 2016 Result
Publication Date: November 30th 2016

Risks Covered: Counterparty Credit Risk, Liquidity Risk, Credit Risk

Business Processes Impacted: Capital Adequacy and Capital Planning, Risk Management and Stress Testing
The results reveal, among others, capital inadequacies at three banks and their plans to build additional resilience.4

 

Financial Conduct Authority (FCA)(**):
Banking: Conduct of Business Sourcebook (Disclosure by Non Ring-fenced Bodies) (Amendment) Instrument 2016
Publication Date: November 4th 2016
Risks Covered: Conduct Risk

Business Processes Impacted: Consumer/Investor Protection
This instrument amends the Glossary of definitions and the Banking: Conduct of Business sourcebook (BCOBS) of the FCA Handbook.5

 

Board of Governors of the Federal Reserve System (The Fed)(***):
Uniform Interagency Consumer Compliance Rating System
Publication Date: November 22nd 2016

Risks Covered: Conduct Risk, Compliance Risk

Business Processes Impacted: Consumer/Investor Protection
The Federal Financial Institutions Examination Council’s (FFIEC) updated Uniform Interagency Consumer Compliance Rating System (CC Rating System) is a supervisory policy for evaluating financial institutions’ adherence to consumer compliance requirements. Federal Reserve examiners will apply the CC Rating System to all consumer compliance examinations that begin on or after March 31, 2017.6

 

Board of Governors of the Federal Reserve System (The Fed)(*):
Federal Reserve Bank Capital Stock
Publication Date: November 23rd 2016
Risks Covered: Business Cycle Risk, Conduct Risk

Business Processes Impacted: Payments
This final rule establishes procedures for payment of dividends by the Federal Reserve Banks, sets out the dividend rates applicable to Reserve Bank depository institution stockholders and amends particular provisions of Regulation I regarding treatment of accrued dividends.7

 

Office of the Comptroller of Currency (OCC) (**):
Appraisals for Higher-Priced Mortgage Loans Exemption Threshold
Publication Date: Novemberber 30th 2016
Risks Covered: Compliance Risk

Business Processes Impacted: Lending and Investment
These amendments finalize official interpretation of regulations implementing the Truth in Lending Act (TILA; Section 129H), which establishes special appraisal requirements for “higher-risk mortgages,” termed “higher-priced mortgage loans” or “HPMLs” in the agencies’ regulations.8

 

Securities and Exchange Commission (SEC)(**):
Investment Company Swing Pricing
Publication Date: November 18th 2016
Risks Covered: Market Risk

Business Processes Impacted: Pricing and Valuation, Audit, Legal and Compliance
These amendments to certain sections of the Investment Company Act permit a registered open-end management investment company, under certain circumstances, to use “swing pricing” and require funds to preserve certain records related to swing pricing.9

 

Securities and Exchange Commission (SEC)(***):
Investment Company Liquidity Risk Management Programs
Publication Date: November 18th 2016
Risks Covered: Liquidity Risk
Business Processes Impacted: Risk Management and Stress Testing, Funding and Liquidity Management
These new rules, forms and amendments are designed to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.10

 

FORTHCOMING REGULATIONS:

European Commission (EC)
Regulation of the European Parliament and of the Council on a Framework for the Recovery and Resolution of Central Counterparties and Amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365
This regulation proposes a framework for the recovery and resolution of central counterparties, amending certain other regulations in the process. While there are high regulatory standards for central counterparty clearing house (CCPs) through the European Market Infrastructure Regulation (EMIR), there are no European Union-wide rules for the recovery and resolution of CCPs.11

 

Financial Reporting Council (UK) (FRC)
Corporate Reporting Thematic Review Alternative Performance Measures (APMs)
Based on the findings of a thematic review by the Financial Reporting Council (FRC), it was announced that the reporting of alternative performance measures (APMs) has improved.12

 

Commodity Futures Trading Commission (CFTC)
Regulation Automated Trading
This notice of proposed rulemaking suggests a series of risk controls, transparency measures, and other safeguards to enhance the safety and soundness of automated trading on all designated contract markets.13

 

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

 

References:

  1.      “Prudential Standard APS 120 Securitisation,” Australian Prudential Regulation Authority, November 10, 2016. Access at:Prudential Standard APS 120 Securitisation
  2.      “Report from the Commission to the European Parliament and the Council under Article 85(1) of Regulation (EU) No 648/2012,” Journal of the European Union, November 23, 2016. Access at: Report from the Commission to the European Parliament and the Council under Article 85(1) of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC Derivatives, Central Counterparties and Trade Repositories
  1.      “Commission Regulation (EU) 2016/2067 of 22 November 2016 amending Regulation (EC) No 1126/2008,” Official Journal of the European Union, Regulations, November 29, 2016. Access at: Commission Regulation (EU) 2016/2067 of 22 November 2016 Amending Regulation (EC) No 1126/2008 Adopting Certain International Accounting Standards in Accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 9
  2.      “Stress testing the UK banking system: 2016 results,” Bank of England, November 30, 2016. Access at: Stress Testing the UK Banking System: 2016 Results
  3.      “Banking: Conduct of Business Sourcebook (Disclosure by Non Ring-Fenced Bodies) (Amendment) Instrument 2016,” Financial Conduct Authority, November 4, 2016. Access at:Banking: Conduct of Business Sourcebook (Disclosure by Non Ring-fenced Bodies) (Amendment) Instrument 2016
  4.      “Uniform Interagency Consumer Compliance Rating System,” Board of Governors of the Federal Reserve System, November 22, 2016. Access at:Uniform Interagency Consumer Compliance Rating System
  5.      “Federal Reserve Bank Capital Stock,”Board of Governors of the Federal Reserve System, Final rule, November 23, 2016. Access at:Federal Reserve Bank Capital Stock
  6.      “Appraisals for Higher-Priced Mortgage Loans Exemption Threshold,” Office of the Comptroller of Currency, Board of Governors of the Federal Reserve System and Bureau of Consumer Financial Protection, Final rule, November 30, 2016. Access at:Appraisals for Higher-Priced Mortgage Loans Exemption Threshold
  7.      “Investment Company Swing Pricing,” Securities and Exchange Commission, November 18, 2016. Access at:Investment Company Swing Pricing
  8.   “Investment Company Liquidity Risk Management Programs,” Securities and Exchange Commission, Final rule, November 18, 2016. Access at:Investment Company Liquidity Risk Management Programs
  9.   Proposal for a Regulation of the European Parliament and of the Council on a Framework for the Recovery and Resolution of Central Counterparties and Amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365,” European Commission. Access at: Regulation of the European Parliament and of the Council on a Framework for the Recovery and Resolution of Central Counterparties and Amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365 
  10.   “Corporate Reporting Thematic Review, Alternative Performance Measures (APMs),” Financial Reporting Council, November 2016. Access at: Corporate Reporting Thematic Review Alternative Performance Measures (APMs)
  11.   “Regulation Automated Trading,” Commodity Futures Trading Commission, November 25, 2016. Access at: Regulation Automated Trading   

About the Monthly Regulatory Tracker

The tracker is the monthly initiative aimed at updating the Finance and Risk community with the most recent regulatory changes impacting Banks and Capital Markets firms. We update our comprehensive regulatory database every month by tracking more than 40 regulatory and industry bodies covering North America, Europe and Asia Pacific. Every month, we will highlight approximately 10 regulations shortlisted on the basis of geography of coverage and anticipated business impacts. Our summaries highlight the risks covered and business processes affected by the regulatory reforms.

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