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

Current coverage period: Through November 30, 2019 

CURRENT REGULATIONS:

European Financial Reporting Advisory Group (EFRAG):
IFRS & Regulation: Searching for common ground – Europe has a leading role to play in shaping Future Financial Reporting Standards
Publication Date: November 28th 2019 
Risks Covered: Conduct Risk 
Business Processes Impacted: Reporting 
High-level speakers discussed the dynamics between the International Financial Reporting Standards (IFRS) standards and regulation on financial reporting at the conference organized by the EFRAG.1 

European Central Bank (ECB): 
Working group on euro risk-free rates issues high level recommendations for fallback provisions in contracts referencing EURIBOR
Publication Date: November 6th 2019
Risks Covered: Interest Rate Risk 
Business Processes Impacted: Pricing & Valuation
The bank has announced that the private sector working group on euro risk-free rates has published recommendations for fallback provisions in contracts for cash products and derivative transactions referencing the Euro Interbank Offered Rate (EURIBOR).2 

European Central Bank (ECB):
Goodbye EONIA, Welcome €STR!
Publication Date: November 7th 2019
Risks Covered: Interest Rate Risk 
Business Processes Impacted: Compliance Risk
The launch of the Euro Short-Term Rate (€STR) was successful from both a technical and a market perspective. The launch of the new reference rate and the change to the Euro Overnight Index Average (EONIA) methodology had been well communicated to and anticipated by the financial industry, resulting in no serious disruptions.3 

European Financial Reporting Advisory Group (EFRAG):
EFRAG’S feedback statement on its comment letter to IASB ED/2019/1 Interest Rate Benchmark Reform
Publication Date: November 8th 2019
Risks Covered: Interest Rate Risk 
Business Processes Impacted: Reporting
The regulator has published its feedback statement on its final comment letter to the International Accounting Standards Board’s ED2019/1 Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39).4 

Financial Accounting Standards Board (FASB):
FASB approves finalization of guidance to assist in transition away from Interbank Offered Rates to New Reference Rates
Publication Date: November 13th 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Reporting
The agency has approved an Accounting Standards Update (ASU) to provide temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.5 

Financial Accounting Standards Board (FASB):
FASB proposes clarifications to certain areas of the Derivatives and Hedging Standard
Publication Date: November 12th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The Board has issued a proposed Accounting Standards Update (ASU) to clarify certain sections of its 2017 hedge accounting standard. Stakeholders were asked to review and comment on the proposed ASU by January 13, 2020.6 

Financial Conduct Authority (FCA):
Conduct risk during LIBOR transition: Questions and answers
Publication Date: November 19th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Finance & Performance Management
The regulator has published a set of questions and answers on its expectations of firms during the transition from LIBOR, which will end after 2021, and to help firms transition to alternative rates by the end of 2021.7 

International Association of Insurance Supervisors (IAIS):
IAIS adopts first global frameworks for supervision of internationally active insurance groups and mitigation of systemic risk in the insurance sector
Publication Date: November 14th 2019
Risks Covered: Systemic Risk
Business Processes Impacted: Business Continuity Management
The agency has announced the adoption of a comprehensive set of reforms which would allow effective cross-border supervision of insurance groups and contribute to global financial stability.8 

Office of the Superintendent of Financial Institutions (OSFI):
OSFI issues a public consultation on draft regulatory forms and instructions to support IFRS 17 implementation
Publication Date: November 21st 2019
Risks Covered: Operational Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency is seeking views on the draft regulatory forms and instructions updated for IFRS 17. Comments are welcome until March 21, 2020. This lengthy consultation process allows for early identification and mitigation of potential issues.9 

European Financial Reporting Advisory Group (EFRAG):
EFRAG final comment letter on the IASB exposure draft ED/2019/5 Deferred Tax related to assets and liabilities arising from a single transaction – Proposed Amendments to IAS 12
Publication Date: November 14th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Trading
The advisory group supports the IASB’s efforts to address the current diversity in the initial recognition of deferred tax related to assets and liabilities arising from a single transaction.10 

Australian Prudential Regulation Authority (APRA):
Response to submissions – Proposed revisions to SPG 516
Publication Date: November 27th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Audit, Legal & Compliance
Regulator expects all registrable superannuation entities to update their strategic objectives, business plans and expenditure management processes, so as to be compliant with SPS 515 beginning January 1, 2020.11 

Australian Prudential Regulation Authority (APRA):
Transforming governance, culture, remuneration and accountability: APRA’s approach
Publication Date: November 19th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The authority has published an information paper, setting out an intensive regulatory approach to scale up its efforts to lift standards of governance, culture, remuneration and accountability across the industries it regulates.12 

Prudential Regulation Authority (PRA):
Statement on the delegated regulation changes published by the European Commission
Publication Date: November 20th 2019
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
Beginning January 1, 2020, the deferred part of the delegated regulation changes published by the European Commission go into effect, and these may affect the calculation of the Solvency Capital Requirement (SCR).13 

Federal Reserve (The Fed):
Prudential Standards for Large Bank Holding Companies, Savings and Loan Holding Companies, and Foreign Banking Organizations
Publication Date: November 1st 2019
Risks Covered: Credit Risk
Business Processes Impacted: Reporting
The final rule amends certain prudential standards, including standards relating to liquidity, risk management, stress testing, and single-counterparty credit limits. These are to reflect the risk profile of banking organizations under each category; applies prudential standards to certain large savings and loan holding companies using the same categories; makes corresponding changes to reporting forms; and makes additional modifications to the Board’s company-run stress test and supervisory stress test rules, consistent with section 401 of the  Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).14 

Hong Kong Monetary Authority (HKMA):
Briefing to the Legislative Council Panel on Financial Affairs
Publication Date: November 7th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The watchdog has published the presentation slides for briefing to the Legislative Council Panel on financial affairs covering updates on the assessment of risk to Hong Kong’s financial stability, banking supervision, financial infrastructure, development of financial markets, and the investment performance of the Exchange Fund and Hong Kong Mortgage Corporation.15 

Hong Kong Monetary Authority (HKMA):
Interest Rate Risk in the Banking Book: Frequently Asked Questions
Publication Date: November 28th 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Fraud and Financial Crime
The authority has published answers to frequently asked questions (FAQs) pertaining to the Interest Rate Risk in the Banking Book (IRRBB) framework. Authorized institutions not exempted from the new local IRRBB framework are encouraged to make reference to these FAQs for their IRRBB compliances.16 

European Securities and Markets Authority (ESMA):
ESMA Publishes Responses to Consultation on Aligning MiFIR to the Changes Introduced by EMIR Refit
Publication Date: November 27th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Data Quality Management
The regulator has published the responses it received to its consultation on aligning the Markets in Financial Instruments Regulation (MiFIR) requirements to the changes introduced by the change to the European Market Infrastructure Regulation (EMIR Refit).17 

European Banking Authority (EBA):
EBA holding research workshop on the future of stress tests in the banking sector
Publication Date: November 27th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The regulator organized a research workshop on “The future of stress tests in the banking sector – approaches, governance and methodologies” on November 27-28, 2019. The workshop focused on the future of stress testing in the banking sector and explored what measures could be taken by policy makers to benefit from the exercise.18 

European Commission (EC); European Central Bank (ECB):
Guideline (EU) 2019/1849 of the European Central Bank of 4 October 2019 amending Guideline ECB/2012/27 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) (ECB/2019/30)
Publication Date: November 5th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
Numerous regulators adopted a Guideline on the Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET2). The amendments were made to clarify the conditions in which investment firms are able to participate in TARGET2, and to make clear that participants in TARGET2 component systems have to meet the TARGET2 self-certification requirement, including the requirements for endpoint security of the TARGET2 network service providers.19 

 

FORTHCOMING REGULATIONS:

Australian Prudential Regulation Authority (APRA)
Prudential Practice Guide SPG 516 – Business Performance Review
The authority released the final Prudential Practice Guide SPG 516 Business Performance Review (SPG 516) which provides guidance to the superannuation industry on undertaking APRA’s new requirements for an annual Business Performance Review under Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515). The new legislated member outcomes assessment. SPG 516 goes into effect on January 1, 2020.20 

Bank for International Settlements (BIS)
Basel Committee publishes more details on global systemically important banks
The authority has announced that the Basel Committee on Banking Supervision has published additional details underlying the scoring method in relation to its global systemically important banks (G-SIBs). The Committee is to complete the next review of the G-SIB framework by 2021.21 

European Banking Authority
2020 EU-wide stress test – Methodological Note
The agency has published the final methodological note setting out guidance on the implementation of the 2020 EU-wide stress test. The purpose of the EU-wide stress test is to provide supervisors, banks and other market participants with a common analytical basis for consistent comparison and assessment of the resilience of EU banks to shocks, as well as to increase market discipline.22 

International Association of Insurance Supervisors (IAIS)
Draft Application Paper on Liquidity Risk Management for Public Consultation
The agency has published a consultation paper regarding the draft Application Paper on Liquidity Risk Management. The amendments to the draft Application Paper on Liquidity Risk Management include improvements to the Enterprise Risk Management requirements in the Insurance Core Principle (ICP) 16 (Enterprise Risk Management for Solvency Purposes), and that address liquidity risk. Comments were to be received by January 20, 2020.23 

Federal Reserve (The Fed)
Supervision and Regulation Assessments of Fees for Bank Holding Companies and Savings and Loan Holding Companies With Total Consolidated Assets of $100 Billion or More
The Fed is proposing changes to the Board of Governors of the Federal Reserve System’s Regulation TT and that provide an expired comment period end date. Comments were to be received by January 9, 2020.24 

Insurance Europe (IE)
Insurance fraud: not a victimless crime
The agency published a paper outlining the impact of insurance fraud, noting that it is not a victimless crime and results in harm to consumers.25 

Australian Prudential Regulation Authority (APRA)
Class approval: foreign ADI disclosure statements (in effect from 1 March 2020)
The authority has released a new Class approval – Foreign Authorised Deposit-Taking Institutions (ADIs) disclosure statements, requiring foreign ADIs to inform prospective depositors in Australia of the requirements of the Banking Act to which it is not subject. Class approval made under paragraph 11E(2)(b) of the Act on September 4, 2015 is revoked accordingly. The order takes effect March 1, 2020.26 

Financial Conduct Authority (FCA)
Bank of England, PRA, FCA and PSR review Memorandum of Understanding in relation to payment systems in the UK
A group of regulators signed a memorandum of understanding that outlines the high-level framework used by the Authorities in relation to UK payment systems.27 

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

References:  

  1. “IFRS & Regulation: Searching for Common Ground – Europe has a Leading Role to Play in Shaping Future Financial Reporting Standards,” European Financial Reporting Advisory Group, November 28, 2019. Access at: IFRS & Regulation: Searching for common ground – Europe has a leading role to play in shaping Future Financial Reporting Standards.
  2. “Working group on euro risk-free rates issues high level recommendations for fallback provisions in contracts referencing EURIBOR,” European Central Bank, November 6, 2019. Access at: Working group on euro risk-free rates issues high level recommendations for fallback provisions in contracts referencing EURIBOR
  3. “Goodbye EONIA, welcome €STR!,” European Central Bank, November 7, 2019. Access at: Goodbye EONIA, Welcome €STR!
  4. “EFRAG’s Feedback Statement on its Comment Letter to IASB ED/2019/1 Interest Rate Benchmark Reform,” European Financial Reporting Advisory Group, November 8, 2019. Access at: EFRAG’S feedback statement on its comment letter to IASB ED/2019/1 Interest Rate Benchmark Reform.  
  5. “FASB Approves Finalization of Guidance to Assist in Transition Away from Interbank Offered Rates to New Reference Rate,” Financial Accounting Standards Board, November 13, 2019. Access at: FASB approves finalization of guidance to assist in transition away from Interbank Offered Rates to New Reference Rates
  6. “FASB Proposes Clarifications to Certain Areas of the Derivatives and Hedging Standard,” Financial Accounting Standards Board, November 12, 2019. Access at: FASB proposes clarifications to certain areas of the Derivatives and Hedging Standard. 
  7. “Conduct risk during LIBOR transition: Questions and answers,” Financial Conduct Authority, November 19, 2019. Access at: Conduct risk during LIBOR transition: Questions and answers. 
  8. “IAIS adopts first global frameworks for supervision on internationally active insurance groups and mitigation of systemic risk in the insurance sector,” International Association of Insurance Supervisors, November 14, 2019. Access at: IAIS adopts first global frameworks for supervision of internationally active insurance groups and mitigation of systemic risk in the insurance sector. 
  9. “Consultation on Draft IFRS 17 Regulatory Forms and Instructions for Federally Regulated Insurers,” Office of the Superintendent of Financial Institutions Canada, November 21, 2019. Access at: OSFI issues a public consultation on draft regulatory forms and instructions to support IFRS 17 implementation
  10. “EFREG Final Comment Letter on the IASB Exposure Draft ED/2019/5 Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction – Proposed Amendments to IAS 12,” European Financial Reporting Advisory Group, November 14, 2019. Access at: EFRAG final comment letter on the IASB exposure draft ED/2019/5 Deferred Tax related to assets and liabilities arising from a single transaction – Proposed Amendments to IAS 12
  11. “Response to submissions – Proposed revisions to SPG 516,” Australian Prudential Regulation Authority, November 27, 2019. Access at: Response to submissions – Proposed revisions to SPG 516
  12. “Transforming governance, culture, remuneration and accountability: APRA’s approach,” Australian Prudential Regulation Authority, November 19, 2019. Access at: Transforming governance, culture, remuneration and accountability: APRA’s approach
  13. “Statement on the delegated regulation changes published by the European Commission,” Prudential Regulation Authority, November 20, 2019. Access at: Statement on the delegated regulation changes published by the European Commission.
  14. “Prudential Standards for Large Bank Holding Companies, Savings and Loan Holding Companies, and Foreign Banking Organizations,” Federal Register, November 1, 2019. Access at: Prudential Standards for Large Bank Holding Companies, Savings and Loan Holding Companies, and Foreign Banking Organizations
  15. “Briefing to the Legislative Council Panel on Financial Affairs – Translation,” Hong Kong Monetary Authority, November 4, 2019. Access at: Briefing to the Legislative Council Panel on Financial Affairs
  16. “Interest Rate Risk in the Banking Book: Frequently Asked Questions,” Hong Kong Monetary Authority, November 28, 2019. Access at: Interest Rate Risk in the Banking Book: Frequently Asked Questions
  17. “ESMA Publishes Responses to Consultation on Aligning MIFIR to the Changes Introduced by EMIR REFIT,” European Securities and Markets Authority, November 27, 2019. Access at: ESMA Publishes Responses to Consultation on Aligning MiFIR to the Changes Introduced by EMIR Refit
  18. “EBA holding research workshop on the future of stress tests in the banking sector,” European Banking Authority, November 27, 2019. Access at: EBA holding research workshop on the future of stress tests in the banking sector
  19. “Guideline (EU) 2019/1849 of the European Central Bank of 4 October 2019 amending Guideline ECB/2012/27,” Official Journal of the European Union, November 5, 2019. Access at: Guideline (EU) 2019/1849 of the European Central Bank of 4 October 2019 amending Guideline ECB/2012/27 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) (ECB/2019/30). 
  20. “SPG 516 – Business Performance Review,” Australian Prudential Regulation Authority, November 27, 2019. Access at: Prudential Practice Guide SPG 516 – Business Performance Review
  21. “Basel Committee publishes more details on global systemically important banks,” Bank of International Settlements, November 22, 2019. Access at: Basel Committee publishes more details on global systemically important banks
  22. “EBA publishes 2020 EU-wide stress test methodology and draft templates,” European Banking Authority, November 7, 2019. Access at: 2020 EU-wide stress test – Methodological Note
  23. “Application Paper on Liquidity Risk Management,” International Association of Insurance Supervisors, November 19, 2019. Access at: Draft Application Paper on Liquidity Risk Management for Public Consultation
  24. “Supervision and Regulation Assessments of Fees for Bank Holding Companies and Savings and Loan Holding Companies With Total Consolidated Assets of $100 Billion or More,” Federal Register, November 19, 2019. Access at: Supervision and Regulation Assessments of Fees for Bank Holding Companies and Savings and Loan Holding Companies With Total Consolidated Assets of $100 Billion or More.  
  25. “Insurance fraud: not a victimless crime,” Insurance Europe, November 19, 2019. Access at: Insurance fraud: Not a victimless crime
  26. “Class approval – Foreign ADI disclosure statements,” Australian Prudential Regulation Authority, November 8, 2019. Access at: Class approval: foreign ADI disclosure statements (in effect from 1 March 2020)
  27. “Bank of England, PRA, FCA and PSR review Memorandum of Understanding in relation to payment systems in the UK,” Financial Conduct Authority, November 13, 2019. Access at: Bank of England, PRA, FCA and PSR review Memorandum of Understanding in relation to payment systems in the UK. 

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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