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

Current coverage period: Through September 30, 2019

CURRENT REGULATIONS:

Office of the Comptroller of the Currency (OCC); Federal Reserve; Federal Deposit Insurance Corporation (FDIC):
Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations
Publication Date: September 17th 2019

Risks Covered: Operational Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
Multiple agencies are adopting a final rule that provides for a simple measure of capital adequacy for certain community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (final rule). The final rule is effective on January 1, 2020.1

International Swaps and Derivatives Association (ISDA):
ISDA Response to US Proposed Rule-making on Swap Margin Requirements
Publication Date: September 17th 2019

Risks Covered: Interest Rate Risk
Business Processes Impacted: Clearing & Settlement – Exchange Traded & OTC
The agency has published a response to U.S. proposed rule-making on swap margin requirements. The association agrees that the proposed rule reflects regulators’ efforts to make the margin requirements more sensitive to risk, and to align those rules across jurisdictions.2

International Swaps and Derivatives Association (ISDA):
ISDA Publishes Consultation on Final Parameters for Benchmark Fallback Adjustments
Publication Date: September 18th 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has announced a new consultation regarding the final parameters pertaining to adjustments that apply to alternative Risk-Free Rates (RFRs) if derivatives fallbacks are triggered. Comments were to be submitted by October 23, 2019.3

Securities and Exchange Commission (SEC):
Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers
Publication Date: September 19th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
Multiple agencies are adopting record-keeping, reporting, and notification requirements applicable to Security-Based Swap Dealers (SBSDs) and major Security-Based Swap Participants (MSBSPs), securities count requirements applicable to certain SBSDs, and additional record-keeping requirements applicable to broker-dealers to account for their security-based swap and swap activities.4

Indonesian Financial Services Authority (OJK):
Implementation of Anti-Fraud Strategies for Commercial Banks
Publication Date: September 20th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Fraud and Financial Crime
The agency is seeking comments from the public on a draft Regulation on the implementation of Anti-Fraud Strategies for Commercial Banks. Comments were to be submitted by October 4, 2019.5

European Banking Authority (EBA):
EBA launches its 2019 EU-wide transparency exercise
Publication Date: September 23th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The agency has announced that it launched its annual 2019 EU-wide transparency exercise. The captured data explores capital positions, financial assets, risk exposure amounts, sovereign exposures and asset quality.6

Central Bank of the Philippines; Hong Kong Monetary Authority (HKMA):
EMEAP publishes Report “Study on the Implications of Financial Benchmark Reforms”
Publication Date: September 24th 2019
Risks Covered: IT Risk
Business Processes Impacted: Brokerage Services
The Report provides a brief overview of the LIBOR discontinuation, EU Benchmarks Regulation (BMR), and reform of local benchmarks for the Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP). It also summarizes the results of the Working Group on Financial Markets (WGFM) survey and the discussion among EMEAP members and private financial institutions, as well as identifies risk scenarios and proposes some policy recommendations for EMEAP members’ consideration.7

European Insurance and Occupational Pensions Authority (EIOPA):
EIOPA calls for a sound cyber resilience framework
Publication Date: September 17th 2019
Risks Covered: Cyber Security Risk
Business Processes Impacted: Data Privacy
The agency has published a report regarding “Cyber Risk for Insurers – Challenges and Opportunities.” The document discusses the factors that make insurers increasingly susceptible to cyber threats, the increased use of cloud computing, and an increase in the frequency and sophistication of cyber-attacks.8

European Banking Federation (EBF); Insurance Europe; European Fund and Asset Management Association (EFAMA); Association for Financial Markets in Europe (AFME):
Joint letter on regulation on sustainability disclosures
Publication Date: September 19th 2019
Risks Covered: Sovereign Risk
Business Processes Impacted: Lending & Investment
Multiple regulatory bodies have written to Olivier Guersent, European Commission (EC) Director General for Financial Stability, Financial Services and Capital Markets Union, concerning the current application date of the Regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU)2016/2341.9

Insurance Europe:
Global insurance industry letter on exposure draft – Amendments to IFRS 17
Publication Date: September 23th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
Multiple agencies have sent a joint letter to the International Accounting Standards Board (IASB) on the proposed amendments to the International Financial Reporting Standards (IFRS) 17 – Insurance Contracts. In particular, the associations require the IASB to make further improvements to IFRS 17 and to move its effective date to January 1, 2023.10

International Financial Reporting Standards (IFRS):
IASB amends IFRS Standards in response to the IBOR Reform
Publication Date: September 26th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The Board has amended its new and old financial instruments standards, International Financial Reporting Standards (IFRS) 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, as well as the related standard on disclosures, IFRS 7 Financial Instruments: Disclosures.11

Financial Conduct Authority (FCA):
Implementing MiFID II – multi-firm review of research unbundling reforms
Publication Date: September 19th 2019
Risks Covered: Third Party Risk/Vendor Risk
Business Processes Impacted: Brokerage Services
The agency has published a multi-firm review on how companies have implemented the Markets in Financial Instruments Directive (MiFID) II rules that require asset managers to explicitly pay for third-party research, and for brokers to price and provide research separately.12

Department of the Treasury (US):
Treasury Welcomes Entry into Force of Tax Protocols with Luxembourg and Switzerland
Publication Date: September 20th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The protocols bring the existing tax treaties with Luxembourg and Switzerland into closer conformity with current U.S. tax treaty policy, and to allow for greater tax information exchange that enhances efforts to bolster tax compliance and combat tax evasion.13

Bank of Thailand:
The Central Bank Group in East Asia and the Pacific (EMEAP) releases the “Study on the Implication of Financial Benchmark Reforms” report
Publication Date: September 24th 2019
Risks Covered: Interest Rate Risk (non-trading book)
Business Processes Impacted: Corporate Finance, M&A and Advisory
The Bank of Thailand has announced the publication of the “Study on the Implication of Financial Benchmark Reforms” report. The report was conducted in order to study the impact and policy implications on reference rate reforms in the financial markets.14

Consumer Financial Protection Bureau (CFPB):
Secure and Fair Enforcement for Mortgage Licensing Act
Publication Date: September 25th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The agency has published resources to help the industry understand, implement, and comply with the SAFE Act and the CFPB’s Regulations G and H.15

European Securities and Markets Authority (ESMA):
Comment letter to IASB regarding its ED – Amendments to IFRS 17 Insurance Contracts
Publication Date: September 23th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The authority supports the International Accounting Standards Board’s (IASB) approach to proposing a limited set of amendments to timely address implementation challenges with International Financial Reporting Standards (IFRS) 1. It also welcomes the IASB’s decision not to propose amendments to the level of aggregation requirements.16

European Banking Authority (EBA):
EBA consults on its proposals to create a STS framework for synthetic securitisation
Publication Date: September 25th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The EBA’s work on synthetic securitization proposes a list of criteria to be considered when labelling the synthetic securitization as simple, transparent and standardized (STS). Comments to the consultation were to be submitted to the EBA via the consultation page by November 25, 2019.17

BaFin (German Federal Financial Supervisory Authority):
Reinsurers from the USA to carry out reinsurance business with primary insurance or reinsurance undertakings in the EU
Publication Date: September 18th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Trading
The agency has released an information sheet concerning the conclusion of a new agreement between the EU and the U.S. which, subject to certain requirements under the agreement, will allow U.S. reinsurers to undertake business with reinsurers in the EU without the need for a branch in the respective EU member state.18

Prudential Regulation Authority (PRA):
Liquidity risk management for insurers
Publication Date: September 24th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Risk Management & Stress Testing
This supervisory statement is relevant to all UK Solvency II firms, the Society of Lloyd’s and its managing agents, as well as non-directive insurers. The document addresses issues related to the development and maintenance of proper policies, systems, controls and processes; the design and undertaking of forward-looking scenario analysis and stress testing programs; the identification of material liquidity risk drivers; considerations for the inclusion of highly liquid assets in the liquidity buffer; and the use of quantitative metrics and tools for measuring and monitoring liquidity risk drivers.19

European Financial Reporting Advisory Group (EFRAG):
EFRAG comment letter on IASB ED/2019/3 Reference to the conceptual framework (Proposed Amendments to IFRS 3)
Publication Date: September 24th 2019
Risks Covered: IT Risk
Business Processes Impacted: Funding & Liquidity Management
The group has submitted its comment letter in response to the International Accounting Standards Board’s (IASB) Exposure Draft ED/2019/3 Reference to the Conceptual Framework (Proposed amendments to IFRS 3).20

FORTHCOMING REGULATIONS:

Securities and Exchange Commission (SEC)
Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail (Federal Register)
The agency has proposed amendments to the Consolidated Audit Trail National Market System (CAT NMS) Plan. The proposed amendments impose public transparency requirements on the self-regulatory organizations that are participants to the CAT NMS Plan. Comments were to be received by October 28, 2019.21

Prudential Regulation Authority (PRA)
Solvency II: Prudent Person Principle
The agency has published a consultation paper on its proposed expectations for investment by firms pursuant to the Prudent Person Principle (PPP) as specified in Chapters 2 to 5 of the Investments Part of the PRA Rulebook. The proposals are relevant to all UK Solvency II firms, mutuals, third-country branches, the Society of Lloyd’s and its managing agents. Comments to be submitted by December 18, 2019.22

BaFin (German Federal Financial Supervisory Authority)
Consultation 16/2019 – Managing Sustainability Risks
The regulator has launched a consultation on a draft fact sheet on sustainability risks. Comments were to be submitted by November 3, 2019.23

European Financial Reporting Advisory Group (EFRAG)
IBOR Reform – Pre-Announcement on draft endorsement advice consultation
The agency pre-announces the launch of its draft endorsement advice consultation on the Interest Rate Benchmark Reform (Amendments to International Financial Reporting Standards (IFRS) 9, IAS 39 and IFRS 7) on September 26, 2019 and invites constituents to provide their comments.24

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

References:

  1. “Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations,” Federal Deposit Insurance Corporation, September 17, 2019. Access at: Regulatory Capital Rule: Capital Simplification for Qualifying Community Banking Organizations.
  2. “ISDA Response to US Proposed Rule-making on Swap Margin Requirements,” International Swaps and Derivatives Association, September 17, 2019. Access at: ISDA Response to US Proposed Rule-making on Swap Margin Requirements.
  3. “ISDA Publishes Consultation on Final Parameters for Benchmark Fallback Adjustments,” International Swaps and Derivatives Association, September 18, 2019. Access at: ISDA Publishes Consultation on Final Parameters for Benchmark Fallback Adjustments.
  4. “Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers,” Securities and Exchange Commission; September 19, 2019. Access at: Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers. 
  5. Comments on Anti-Fraud strategies for commercial banks’ implementation, Indonesian Financial Services Authority, September 20, 2019. Access at: Implementation of Anti-Fraud Strategies for Commercial Banks.
  6. “EBA launches its 2019 EU-wide transparency exercise,” European Banking Authority, September 23, 2019. Access at: EBA launches its 2019 EU-wide transparency exercise.
  7. “EMEAP publishes Report “Study on the Implications of Financial Benchmark Reforms”,” Hong Kong Monetary Authority, September 24, 2019. Access at: EMEAP publishes Report “Study on the Implications of Financial Benchmark Reforms”.
  8. “EIOPA calls for a sound cyber resilience framework,” European Insurance and Occupational Pensions Authority, September 17, 2019. Access at: EIOPA calls for a sound cyber resilience framework.
  9. Disclosures related to sustainable investments and sustainability risk and amending directive, European Banking Federation; Insurance Europe; European Fund and Asset Management Association; Association for Financial Markets in Europe, September 19, 2019. Access at: Joint letter on regulation on sustainability disclosures.
  10. “Global insurance industry letter on Exposure Draft – Amendments to IFRS 17,” Insurance Europe, September 23, 2019. Access at: Global insurance industry letter on exposure draft – Amendments to IFRS 17.
  11. “IASB amends IFRS Standards in response to the IBOR reform,” International Financial Reporting Standards, September 26, 2019. Access at: IASB amends IFRS Standards in response to the IBOR Reform.
  12. “Implementing MiFID II – multi-firm review of research unbundling reforms,” Financial Conduct Authority, September 19, 2019. Access at: Implementing MiFID II – multi-firm review of research unbundling reforms.
  13. “Treasury Welcomes Entry into Force of Tax Protocols with Luxembourg and Switzerland,” U.S. Department of the Treasury, September 20, 2019. Access at: Treasury Welcomes Entry into Force of Tax Protocols with Luxembourg and Switzerland.
  14. “Central Bank Group in East Asia and the Pacific (EMEAP) Publish “Study on the Implication of Financial Benchmark Reforms” report,” Bank of Thailand, September 24, 2019. Access at: The Central Bank Group in East Asia and the Pacific (EMEAP) releases the “Study on the Implication of Financial Benchmark Reforms” report.
  15. “Secure and Fair Enforcement for Mortgage Licensing Act,” Consumer Financial Protection Bureau, September 25, 2019. Access at: Secure and Fair Enforcement for Mortgage Licensing Act.
  16. “IASB’s Exposure Draft Amendments to IFRS 17,” European Securities and Markets Authority, September 23, 2019. Access at: Comment letter to IASB regarding its ED – Amendments to IFRS 17 Insurance Contracts.
  17. “EBA consults on its proposals to create a STS framework for synthetic securitisation,” Europe Banking Authority, September 25, 2019. Access at: EBA consults on its proposals to create a STS framework for synthetic securitisation.
  18. “Reinsurers from the USA to carry out reinsurance business with primary insurance or reinsurance undertakings in Germany,” BaFin (German Federal Financial Supervisory Authority), September 18, 2019. Access at: Reinsurers from the USA to carry out reinsurance business with primary insurance or reinsurance undertakings in the EU.
  19. “Liquidity risk management for insurers,” Prudential Regulation Authority, September 24, 2019. Access at: Liquidity risk management for insurers.
  20. “EFRAG Comment Letter on IASB ED/2019/3 Reference to the Conceptual Framework (Proposed Amendments to IFRS 3),” European Financial Reporting Advisory Group, September 24, 2019. Access at: EFRAG comment letter on IASB ED/2019/3 Reference to the conceptual framework (Proposed Amendments to IFRS 3).
  21. “Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail,” Securities and Exchange Commission, September 13, 2019. Access at: Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail (Federal Register).
  22. “Solvency II: Prudent Person Principle,” Prudential Regulation Authority, September 18, 2019. Access at: Solvency II: Prudent Person Principle.
  23. Consultation on Sustainability Risk, BaFin (German Federal Financial Supervisory Authority), September 24, 2019. Access at: Consultation 16/2019 – Managing Sustainability Risks.
  24. “IBOR Reform – Pre-Announcement on Draft Endorsement Advice Consultation,” European Financial Reporting Advisory Group, September 20, 2019. Access at: IBOR Reform – Pre-Announcement on draft endorsement advice consultation.

 

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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