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

Current coverage period: Through October 31, 2019

CURRENT REGULATIONS:

European Banking Authority (EBA); European Securities and Markets Authority (ESMA); European Insurance and Occupational Pensions Authority (EIOPA):
Joint Consultation Paper concerning amendments to the PRIIPs KID
Publication Date: October 16th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection

The paper addresses issues identified by stakeholders and supervisors since the implementation of key information documents (KIDs) in 2018, as well as to amend the rules so they can be applied to investment funds that are expected to prepare a KID from as of January 1, 2022.1

BaFin (German Federal Financial Supervisory Authority):
Money laundering and terrorist financing: six main risk areas
Publication Date: October 21st 2019
Risks Covered: Market Risk
Business Processes Impacted: Funding & Liquidity Management
The authority has published an article in which it describes the six main risk areas where the financial and non-financial sectors are vulnerable to money laundering and terrorist financing: anonymity, Fintech, the money transfer business, the real estate sector, major banks and cross-border business constellations.2

Monetary Authority of Singapore (MAS):
MAS and CBIRC Enhance Supervisory Cooperation and Cross-Border Regulatory Oversight
Publication Date: October 21st 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The MAS and the China Banking and Insurance Regulatory Commission signed a Supervisory Memorandum of Understanding to enhance supervisory co-operation and facilitate exchange of information between both regulators in the areas of banking and insurance supervision and crisis management.3

Financial Conduct Authority (FCA):
Building a Regulatory Framework for Effective Stewardship – Feedback to DP19/1
Publication Date: October 19th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Portfolio Advisory & Management
The discussion paper examined how effective stewardship would look, what UK standards should be, and the minimum expectations for financial service firms that invest for clients and beneficiaries.4

European Insurance and Occupational Pensions Authority (EIOPA):
EIOPA launches Field Test on revised and new templates under Solvency II Reporting and Disclosure Review 2020
Publication Date: October 9th 2019
Risks Covered: Conduct Risk
Business Processes Impacted: Reporting
The agency has launched a field test on the revised and newly proposed templates which cover both the content and structure of different templates. The field test aims to provide undertakings with the possibility of implementing the new and revised reporting requirements. Feedback welcomed until January 31, 2020.5

Insurance Europe:
New publication examines insurers’ role in increasing EU cyber resilience
Publication Date: October 9th 2019
Risks Covered: Cyber Security Risk
Business Processes Impacted: Information Technology
The regulator has announced the release of the “Insurers’ role in EU Cyber Resilience.” The publication highlights the key role insurers play in assisting the European Union in its efforts to increase cyber resilience and competitiveness, offers examples of cyber-resilience initiatives, and ways to encourage the growth of the European cyber insurance market.6

European Insurance and Occupational Pensions Authority (EIOPA):
Letter to the EC: EIOPA’s opinion on Sustainability within Solvency II
Publication Date: September 30th 2019
Risks Covered: Sustainability Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The authority believes that as a risk-based, future-oriented and market-aligned framework, Solvency II is well devised to take sustainability risks and factors into account.7

European Insurance and Occupational Pensions Authority (EIOPA):
Technical documentation of the methodology to derive EIOPA’s Risk-Free Interest Rate Term Structures
Publication Date: October 1st 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Data Privacy
The authority has released an update to its technical documentation and parallel publication of the monthly calculation of the technical information related to the risk-free interest rate (RFR) term structure.8

International Financial Reporting Standards (IFRS):
Forthcoming publication: IASB to issue a Proposed IFRS Taxonomy Update, Interest Rate Benchmark Reform for comments
Publication Date: October 10th 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Audit, Legal & Compliance
The Board expects to issue Proposed Update 1 to the IFRS Taxonomy 2019. This update includes IFRS Taxonomy elements to reflect the new disclosure requirements introduced by Interest Rate Benchmark Reform issued by the Board in September 2019 and which amended IFRS 9, IAS 39 and IFRS 7.9

Consumer Financial Protection Bureau (CFPB):
Home Mortgage Disclosure (Regulation C) – 2019 Final Rule
Publication Date: October 10th 2019
Risks Covered: Credit Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The bureau is amending Regulation C to adjust the threshold for reporting data about open-end lines of credit by extending to January 1, 2022, the current temporary threshold of 500 open-end lines of credit.10

Financial Industry Regulatory Authority (FINRA):
FINRA Provides New Reg BI and Form CRS Resources to Assist Member Firms in Complying with SEC Rules by June 30, 2020
Publication Date: October 8th 2019
Risks Covered: Operational Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has issued a news release announcing it has made available new resources to assist member firms in their efforts to comply with the SEC Regulation Best Interest (Reg BI) and Form CRS (client relationship summary) by the rule’s compliance date of June 30, 2020.11

European Securities and Markets Authority (ESMA):
Impact of no-deal Brexit on the application of MiFID II/MiFIR and the Benchmark Regulation (BMR)
Publication Date: October 7th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The authority issued a public statement on the impact of a no-deal Brexit on the application of the Markets in Financial Instruments Directive II and Markets in Financial Instruments (MiFID II/MiFIR) and the Benchmark Regulation (BMR), in the event the UK left the European Union without a withdrawal agreement by October 31, 2019.12

Bank of England (BoE):
Predicting bank distress in the UK with machine learning
Publication Date: October 4th 2019
Risks Covered: Cyber Security Risk
Business Processes Impacted: Business Continuity Management
The bank published a working paper on developing an early warning system to predict bank distress in the UK, which is anticipated to support the safety and soundness of UK banks and building societies. This working paper contributes to an emerging body of academic literature regarding the use of new methodologies to calculate distress levels and the factors that can influence bank distress.13

Federal Reserve (The Fed):
Regulation A: Extensions of Credit by Federal Reserve Banks
Publication Date: October 3rd 2019
Risks Covered: Credit Risk
Business Processes Impacted: Reporting
The Fed 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. The secondary credit rate at each Reserve Bank automatically decreased as a result of the Board’s primary credit rate action. The amendments to part 201 (Regulation A) are effective as of October 3, 2019.14

Japan Financial Services Agency:
Cabinet Office Ordinance (Draft) to Revise a Part of the Law Enforcement Rules on the Use of Information and Communication Technology in Administrative Procedures Related to Financial Laws and Regulations Controlled by the Cabinet Office
Publication Date: October 17th 2019
Risks Covered: IT Risk
Business Processes Impacted: Corporate Finance, M&A and Advisory
The agency has announced the publication of the Cabinet Office Ordinance (draft) to revise a part of the law enforcement rules on the use of information and communication technology in administrative procedures related to financial laws and regulations controlled by the Cabinet Office. Comments and opinions on this proposal were to be submitted by November 17, 2019.15

International Swaps and Derivatives Association (ISDA):
ISDA Publishes Report Summarizing Results of Benchmark Fallbacks Consultation on Pre-cessation Issues
Publication Date: October 21st 2019
Risks Covered: Interest Rate Risk
Business Processes Impacted: Fraud and Financial Crime
The Pre-Cessation Consultation aimed to gather information from market participants about their preferred approach for tackling pre-cessation issues in derivative contracts referencing any of the IBOR benchmarks if a regulator decides that a covered IBOR has ceased to be representative.16

Bank of England (BoE):
The language of rules: textual complexity in banking reforms
Publication Date: October 25th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Data Quality Management
In this paper, the bank notes that complexity is a result of repeated regulatory change, and that different definitions of regulatory complexity may be used depending on the scope of the regulation.17

Financial Conduct Authority (FCA):
Brexit – Regulatory Technical Standards for Strong Customer Authentication and Common and Secure Open Standards of Communication
Publication Date: October 25th 2019
Risks Covered: Compliance Risk
Business Processes Impacted: Consumer/Investor Protection
The authority has issued a Policy Statement providing a response to making regulatory technical standards for strong customer authentication in the UK (a ‘UK-RTS’) substantially the same as the European Union Regulatory Technical Standards for strong customer authentication (SCA-RTS).18

FORTHCOMING REGULATIONS:

Prudential Regulation Authority (PRA)
Occasional Consultation Paper – October 2019
The agency has issued an occasional consultation paper proposing minor amendments to PRA Rulebook parts, supervisory statements, statements of policy and the relevant templates.19

Internal Revenue Service (USA)
Guidance on the Transition From Interbank Offered Rates to Other Reference Rates
The proposed rules respond to a request for guidance from the Alternative Reference Rates Committee. Comments should be submitted on or before November 25, 2019.20

European Central Bank (ECB)
ECB Banking Supervision: Risk assessment for 2020
The risk assessment includes the Single Supervisory Mechanism Risk Map which shows the key risk drivers affecting the euro-area banking system over a two to three year horizon, as well as the risk driver impact and probability. The Risk Map shows that the economic, political and debt sustainability challenges in the euro area, business model sustainability and cybercrime and IT deficiencies are among the top risk drivers.21

Federal Deposit Insurance Corporation (FDIC)
Federal Regulators Seek Comment on Proposed Guidance for Credit Risk Review Systems
The multiple regulators are seeking comments on credit risk review systems. The proposed guidance discusses sound management of credit risk, a system of independent and on-going credit review, and appropriate communication regarding the performance of the institution’s loan portfolio to its management and board of directors.22

Securities and Exchange Commission (SEC)
Filing Fee Disclosure and Payment Methods Modernization
The agency proposes to amend most fee-bearing forms, schedules, statements, and related rules to require each fee table and accompanying disclosure to include all required information for fee calculation in a structured format.23

Federal Reserve (The Fed)
Regulatory Capital Rules: Risk-Based Capital Requirements for Depository Institution Holding Companies Significantly Engaged in Insurance Activities
The Board is proposing a risk-based capital framework, termed the Building Block Approach, that adjusts and aggregates existing legal entity capital requirements to establish an enterprise-wide capital requirement, together with a risk-based capital requirement excluding insurance activities, in compliance with section 171 of the Dodd-Frank Act.24

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

References:

  1. “Joint Consultation Paper concerning amendments to the PRIIPs KID,” European Banking Authority; European Securities and Markets Authority; European Insurance and Occupational Pensions Authority, October 16, 2019. Access at: Joint Consultation Paper concerning amendments to the PRIIPs KID.
  2. Risk areas in financial and non-financial sectors, BaFin (German Federal Financial Supervisory Authority), October 21, 2019. Access at: Money laundering and terrorist financing: six main risk areas.
  3. “MAS and CBIRC Enhance Supervisory Cooperation and Cross-Border Regulatory Oversight,” The Industry Spread, October 25, 2019. Access at: MAS and CBIRC Enhance Supervisory Cooperation and Cross-Border Regulatory Oversight.
  4. “Building a regulatory framework for effective stewardship – Feedback to DP 19/1,” Financial Conduct Authority, October 19, 2019. Access at: Building a Regulatory Framework for Effective Stewardship – Feedback to DP19/1. 
  5. “EIOPA launches field test on revised and new templates under Solvency II reporting and disclosure review 2020,” European Insurance and Occupational Pensions Authority, October 9, 2019. Access at: EIOPA launches field test on revised and new templates under Solvency II reporting and disclosure review 2020.
  6. “New publication examines insurers’ role in increasing EU cyber resilience,” Insurance Europe, October 9, 2019. Access at: New publication examines insurers’ role in increasing EU cyber resilience. 
  7. “EIOPA’s Opinion on Sustainability within Solvency II,” European Insurance and Occupational Pensions Authority, September 30, 2019. Access at: Letter to the EC: EIOPA’s opinion on Sustainability within Solvency II. 
  8. “Updated technical documentation and parallel publication of the monthly calculation of the technical information related to the risk-free interest (RFR) term structure,” Government World Magazine site, October 1, 2019. Access at: Technical documentation of the methodology to derive EIOPA’s Risk-Free Interest Rate Term Structures. 
  9. “IFRS Taxonomy Update—Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7),” International Financial Reporting Standards, October 10, 2019. Access at: Forthcoming publication: IASB to issue a Proposed IFRS Taxonomy Update, Interest Rate Benchmark Reform for comments.
  10. “Home Mortgage Disclosure (Regulation C) – 2019 Final Rule,” Consumer Financial Protection Bureau, October 10, 2019. Access at: Home Mortgage Disclosure (Regulation C) – 2019 Final Rule.
  11. “FINRA Provides New Reg BI and Form CRS Resources to Assist Member Firms in Complying with SEC Rules by June 30, 2020,” Financial Industry Regulatory Authority, October 8, 2019. Access at: FINRA Provides New Reg BI and Form CRS Resources to Assist Member Firms in Complying with SEC Rules by June 30, 2020.
  12. “Impact of no-deal Brexit on the application of MiFID II/MiFIR and the Benchmark Regulation (BMR),” European Securities and Markets Authority, October 7, 2019. Access at: Impact of no-deal Brexit on the application of MiFID II/MiFIR and the Benchmark Regulation (BMR).
  13. “Predicting bank distress in the UK with machine learning,” Bank of England, Staff Working Paper No. 831, October 4, 2019. Access at: Predicting bank distress in the UK with machine learning.
  14. “Regulation A: Extensions of Credit by Federal Reserve Banks,” Federal Register, October 3, 2019. Access at: Regulation A: Extensions of Credit by Federal Reserve Banks.
  15. Law enforcement rules on the use of information and communication technology in administrative procedures, Japan Financial Services Agency, October 17, 2019. Access at: Cabinet Office Ordinance (Draft) to Revise a Part of the Law Enforcement Rules on the Use of Information and Communication Technology in Administrative Procedures Related to Financial Laws and Regulations Controlled by the Cabinet Office.
  16. “Anonymized Narrative Summary of Responses to the ISDA Pre-Cessation Consultation,” The Brattle Group, October 21, 2019. Access at: ISDA Publishes Report Summarizing Results of Benchmark Fallbacks Consultation on Pre-cessation Issues.
  17. “The language of rules: textual complexity in banking reforms,” Bank of England, Staff Working Paper No. 834, October 25, 2019. Access at: The language of rules: textual complexity in banking reforms.
  18. “Brexit – Regulatory Technical Standards for Strong Customer Authentication and Common and Secure Open Standards of Communication,” Financial Conduct Authority, Policy Statement, October 25, 2019. Access at: Brexit – Regulatory Technical Standards for Strong Customer Authentication and Common and Secure Open Standards of Communication.
  19. “Occasional Consultation Paper – October 2019,” Prudential Regulation Authority, October 7, 2019. Access at: Occasional Consultation Paper – October 2019. 
  20. “Guidance on the Transition From Interbank Offered Rates to Other Reference Rates,” Federal Register, October 9, 2019. Access at: Guidance on the Transition From Interbank Offered Rates to Other Reference Rates.
  21. Risk Map for the euro-area banking system, European Central Bank, October 7, 2019. Access at: ECB Banking Supervision: Risk assessment for 2020.
  22. “Federal Regulators Seek Comment on Proposed Guidance for Credit Risk Review Systems,” Federal Deposit Insurance Corporation, October 17, 2019. Access at: Federal Regulators Seek Comment on Proposed Guidance for Credit Risk Review Systems.
  23. “Filing Fee Disclosure and Payment Methods Modernization,” Securities and Exchange Commission, October 24, 2019. Access at: Filing Fee Disclosure and Payment Methods Modernization.
  24. “Regulatory Capital Rules: Risk-Based Capital Requirements for Depository Institution Holding Companies Significantly Engaged in Insurance Activities,” Federal Register, October 24, 2019. Access at: Regulatory Capital Rules: Risk-Based Capital Requirements for Depository Institution Holding Companies Significantly Engaged in Insurance Activities.
     

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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