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Regulatory updates

We have an ongoing regulatory watch system

Management Solutions compiles new regulations published in recent weeks by different regulatory and supervisory authorities (with a focus on the financial industry).


Relevant publications

 

COVID-19

(30/04/2020) IASB – Expousure draft COVID-19 Related Rent Concessions Proposed amendment to IFRS 16
The International Accounting Standards Board (IASB) has published the Exposure draft of COVID-19-Related Rent Concessions Proposed amendment to IFRS 16 with the aim to provide lessees of a lease agreement with practical relief during the covid-19 pandemic while enabling them to continue providing useful information about their leases to users of financial statements.

(28/04/2020) EBA – Final RTS on prudent valuation under CRR / EBA statement on additional supervisory measures in the COVID-19 pandemic / EBA Statement on the application of the prudential framework on targeted aspects in the area of market risk in the COVID-19
The EBA has issued Guidance on the use of flexibility in relation to COVID-19 and attention to risks in order to provide further clarity on how additional flexibility will guide supervisory approaches in relation to market risk, the Supervisory Review and Evaluation Process (SREP), recovery planning, digital operational resilience and ICT risk and securitisation.
(27/04/2020) Spanish Government – Real Decreto-ley 15/2020 de medidas urgentes complementarias para apoyar la economía y el empleo
The Spanish government has published Royal Decree-Law 15/2020 on urgent complementary measures to support the economy and employment, which contains a new set of measures that it reinforces, complements and extends those previously adopted and focuses on support for businesses and workers in order to respond to the needs for enhanced support arising from the prolongation of this exceptional situation, to continue to protect and support the productive and social fabric, to minimise the impact and to facilitate the recovery of economic activity as soon as this public health emergency begins to subside.

(27/04/2020) IMF – Decision to launch a New Short-Term Liquidity Line to Enhance The Adequacy Of The Global Financial Safety Net
The International Monetary Fund (IMF) has published a decision to create a New Short-Term Liquidity Line to Enhance The Adequacy Of The Global Financial Safety Net, based on the key features of the 2017 blueprint as a consequence of the need to move quickly in response to the COVID-19 crisis.

(23/04/2020) FCA – Temporary Guidance for firms: Personal loans and coronavirus / Temporary Guidance for firms: Overdrafts and coronavirus / Temporary Guidance for firms: Credit cards (including retail revolving credit) and coronavirus
The Financial Conduct Authority (FCA) has published three Temporary Guidances for firms which cover personal loans overdraft and credit cards (including retail revolving credit) and coronavirus, with the aim of protecting consumers by providing them with temporary support in the light of the current exceptional circumstances arising out of coronavirus.

(23/04/2020) EIOPA – Statement on principles to mitigate the impact of COVID-19 on the occupational pensions sector
The European Insurance and Occupational Pensions Authority (EIOPA) has published the Statement on principles to mitigate the impact of COVID-19 on the occupational pensions sector. The objective is that National Competent Authorities (NCAs) of each member state adhere to these principles in order to mitigate the impact on IORPs and their members and beneficiaries, as well as to avoid pro-cyclical effects on the real economy and the financial system.

(22/04/2020) BoS – Boletín Económico 2/2020: Escenarios Macroeconómicos de Referencia para la Economía Española tras el COVID-19
The Bank of Spain (BoS) has published the Economic Bulletin 2/2020: Reference Macroeconomic Scenarios for the Spanish Economy after COVID-19, which develops a set of scenarios for the Spanish economy that take into account different alternative assumptions about the duration of confinement and the persistence of the disturbance suffered. In particular, two methodologies of a different nature have been used: the first is based on an assessment of sectoral production losses as a result of the containment measures of the epidemic, and the second is based on simulations of the main channels of transmission of the economic effects of the pandemic, using the Bank of Spain's Quarterly Model (MTBE).

(22/04/2020) ESMA – Public Statement: Actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive / Public Statement: Actions to mitigate the impact of COVID-19 on the deadlines for the publication of periodic reports by fund managers / Extension of the response date for the Consultation Paper: MiFID II/ MiFIR review report on the transparency regime for non-equity instruments and the trading obligation for derivatives / Public Statement: ESMA postpones the publication dates of the annual transparency calculations for non-equity instruments and for the quarterly systematic internaliser data for non-equity instruments other than bonds / Public Statement: Actions to mitigate the impact of COVID-19 on the EU financial markets regarding the timeliness of fulfilling external audit requirements for interest rate benchmarks under the Benchmarks Regulation
The European Securities and Market Authority (ESMA) has published a Public Statement (PS) on actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive (TD). In particular, this PS recommends National Competent Authorities (NCAs) to apply forbearance powers towards issuers who need to delay publication of financial reports beyond the statutory deadline. Furthermore, the ESMA has published 3 documents that postpone the effective date for the presentation of responses to a consultation paper about MiFID II and MiFIR, the publication dates of the annual transparency calculations for non-equity instruments and for the quarterly systematic internaliser (SI) data for non-equity instruments other than bonds, and the deadlines for the publication of periodic reports by fund managers. Finally, the ESMA has also issued a Public Statement on Actions to mitigate the impact of COVID-19 on the EU financial markets regarding the timeliness of fulfilling external audit requirements for interest rate benchmarks under the Benchmarks Regulation.

(17/04/2020) BCBS – Measures to reflect the impact of COVID-19
The Basil committee on Banking Supervision (BCBS) has issued Measures to reflect the impact of COVID-19 which sets out technical guidance related to the exceptional measures introduced by governments and banks to alleviate the impact of the COVID-19 and ECL accounting. The guidance seeks to ensure that banks reflect the risk-reducing effect of the exceptional measures when calculating their capital requirements. It also sets out the amended transitional arrangements for the regulatory capital treatment of ECL accounting, which will provide jurisdictions with greater flexibility in how to phase in the impact of ECL on regulatory capital.

(16/04/2020) ECB – Package of temporary collateral easing measures
The European Central Bank (ECB) has published a package of temporary collateral easing measures in order to mitigate the tightening of financial conditions across the euro area. These measures along with the previously taken support the provision of bank lending especially by easing the conditions at which credit claims are accepted as collateral. At the same time the Eurosystem is increasing its risk tolerance to support the provision of credit via its refinancing operations, particularly by lowering collateral valuation haircuts for all assets consistently.

(15/04/2020) BoS – Preguntas frecuentes sobre el uso de la flexibilidad prevista en la normativa contable ante el shock causado por el Covid-19
The Bank of Spain (BoS) has published a series of FAQ on the use of the flexibility provided in the accounting regulations in response to the shock caused by COVID-19 in order to clarify certain doubts raised by the Information Note published by this same agency on 30 March 2020.

(15/04/2020) Fed/FDIC/OCC/NCUA/CPFB/Treasury – Regulatory reporting relief to small financial institutions affected by the coronavirus / Notice on Standardized Approach for Calculating the Exposure Amount of Derivative Contracts / Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances / Regulatory Capital Rule: Temporary Changes to the Community Bank Leverage Ratio Framework / Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework / Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus / Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions  Affected by the Coronavirus / Interim Final Rule on Real Estate Appraisals
The Federal Reserve (Fed) has published a Regulatory reporting relief to small financial institutions affected by the coronavirus with the aim of offering additional time to submit certain regulatory reports in light of staffing priorities and disruptions caused by the COVID-19. Furthermore, the Fed, Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC) and Treasury (the agencies) have issued a Notice on Standardized Approach for Calculating the Exposure Amount of Derivative Contracts, the Interim Final Regulatory Capital Rule: Revised transition of the current expected credit losses methodology for allowances; Temporary Changes to the Community Bank Leverage Ratio Framework; Transition for the Community Bank Leverage Ratio Framework and the Interim Final Rule on Real Estate Appraisals with the aim to support the U.S. economy and allow banking organizations to continue lending to households and businesses. Additionally, the Fed, OCC, FDIC, Consumer Financial Protection Bureau (CPFB) and National Credit Union Administration (NCUA) have published the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and the Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions  Affected by the Coronavirus.

(14/04/2020) FCA/FRC/PRA – Joint statement to address COVID-19 / PRA decision on Systemic Risk Buffer rates
The Financial Conduct Authority (FCA), the Financial Reporting Council (FRC) and the Prudential Regulatory Authority (PRA) have published a Joint statement to address COVID-19 with the objective of ensuring that information continues to flow to investors, helping companies preparing and auditors auditing financial statements in the current uncertain climate, and helping market participants and lenders to respond appropriately to audit report modifications and loan covenant breaches. Furthermore, the PRA published on April 9th a Decision on Systemic Risk Buffer rates in order to give lenders greater certainty over their capital requirements moving forward.

(03/04/2020) IFRS – Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the covid-19 pandemic
The IFRS has published a guidance document on accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the COVID-19 pandemic.

(03/04/2020) SBS/BCRP/MEF – Medidas para mitigar el impacto del COVID-19 / Oficio Múltiple n° 11170 – 2020 / Oficio Múltiple n° 11150-2020 /  Resolución n° 1264 – 2020 / Oficio Múltiple n° 11148 - 2020 / Resolución n° 1264 – 2020 / Oficio Múltiple n° 11159 – 2020 / Resolución n° 1262 – 2020 / Nota informativa 2020/03/19 / Nota informativa 2020/03/16-1 / Nota informativa 2020/03/16-1 / Nota informativa 2020/03/17 / Nota informativa 2020/03/20-1 / Nota informativa 2020/03/26 / Decreto de urgencia 029-2020 / Nota informativa 2020/03/19 / Nota informativa 2020/03/19
The Superintendencia de Banca, Seguros y Administradoras Privadas de Fondos de Pensiones (SBS), el Banco Central de Perú (BCRP), el Ministerio de Economía y Finanzas (MEF) y el Gobierno de Perú have published several measures to mitigate the impact of the COVID-19 with the aim of maintaining macroeconomic stability, thus ensuring confidence in a market in which credit channels function properly and where the monetary stimuli carried out do not compromise inflation. Among them, the SBS has published a series of measures to enable debtors to comply with their credits with entities of the financial system (SF); as well as to temporarily suspend the application of liquidity ratio limits to entities of the sector. Along the same lines, the BCRP has carried out actions aimed at providing liquidity to the market and preserving the payment and credit chain. In addition, the Government has implemented measures to promote the financing of micro and small enterprises (MYPE).

(03/04/2020) EBA – Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis
The European Banking Authority (EBA) has issued Guidelines (GL) on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis in order to provide clarity on the treatment of the moratoria applied before 30 June 2020. In particular, these GL clarify which legislative and non-legislative moratoria do not to trigger forbearance classification, while in all other cases the assessment must be done on a case-by case basis.

(03/04/2020) CMF – Medidas para la implementación de Basilea III como consecuencia del COVID-19
After the state of emergency was declared, the Comisión para el Mercado Financiero (CMF) has published Measures for the Implementation of Basel III as a consequence of COVID-19 with the objective of giving banks more flexibility in the constitution of provisions to accommodate changes in the payment conditions of their debtors.

(31/03/2020) BCBS – Deferral of Basel III implementation
The Basel Committee on Banking Supervision (BCBS) has announced the deferral of Basel III implementation to provide additional operational capacity for banks and supervisors to respond to the immediate financial stability priorities on the global banking system due to the global situation regarding COVID-19.

(31/03/2020) Fed – Statement on supervisory activities
The Feral Reserve (Fed) has published a statement on supervisory activities in order to provide additional information regarding adjustments to the agencies supervisory approach in light of the COVID- 2019. In this statement, the Fed outlines actions that are intended to help financial institutions to deploy their resources as efficiently as possible and continue to support their customers and local economies in a prudent and fair manner while meeting current challenges.

(31/03/2020) ESMA / EBA – Clarifications on the application of the prudential framework on COVID-19 measures and Guidance on accounting implications of COVID-19
The EBA has published clarifications to banks and consumers on the application of the prudential framework in light of COVID-19 measures in order to ensure consistency and comparability in risk metrics across the whole EU banking sector, which are crucial to monitor the effects of the current crisis. Furthermore, the European Securities and Markets Authority (ESMA) has published a Guidance on accounting implications of COVID-19 in order to provide guidance to issuers and auditors on the application of IFRS 9, specifically as regards the calculation of expected credit losses (ECL) and related disclosure requirements.

Sustainability

(29/04/2020) ESAs – Consultation Paper (CP) on proposed environmental, social and governance (ESG) disclosure standards
The European Banking Authority (EBA), European Securities and Markets Authority (ESMA), European Insurance and Occupational Pensions Authority (EIOPA), all together known as the European supervisory authorities (ESAs) have published the Joint Consultation Paper on ESG disclosures standards for financial market participants, advisers and products. The aim is seeking input to develop draft Regulatory Technical Standards (RTS) on sustainability-related disclosures in the financial services sector (SFDR) with regard to the content, methodologies and presentation of information in relation to sustainability indicators and the promotion of environmental or social characteristics and sustainable investments objectives in pre-contractual documents, websites and periodic reports. Furthermore, a preliminary analysis of the expected impacts of the proposed draft RTS is also included in order to gather stakeholder feedback on possible costs and benefits of the proposals and the relative scale of these costs and benefits for different stakeholders.

(21/04/2020) EU Council – First reading position on the taxonomy of sustainable activities
The Council of the European Union (EU Council) has published the First reading position on the taxonomy of sustainable activities which contains a common EU-wide classification system which will provide businesses and investors with harmonised criteria to identify economic activities that are considered environmentally sustainable in order to transition to a low-carbon, resilient and resource-efficient economy.

Basel III

(17/04/2020) BCBS / EBA – BCBS - Basel III Monitoring Report / EBA Report on Basel III Monitoring / EBA Report on Liquidity Measures / EBA updates 2019 list of Other Systemically Important Institutions (O-SIIs)
The Basel Committee on Banking Supervision (BCBS) has published the results of its latest Basel III monitoring report which sets out the impact of the finalisation of the Basel III reforms, and for the first time, it also reflects the finalisation of the market risk framework published in January 2019. In parallel with this report, the EBA has issued a Report on its Basel III monitoring exercise which includes a preliminary assessment of the impact of the Basel reform package on EU banks, assuming its full implementation. Along with this document, the European Banking Authority (EBA) has also published a Report on liquidity measures that monitors and evaluates the liquidity coverage requirements currently in place in the EU, and the updated 2019 list of Other Systemically Important Institutions (O-SIIs).

Global stablecoins

(27/04/2020) FSB – Consultative Document on Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements
The Financial Stability Board (FSB) has published a Consultative Document on Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements which explains the characteristics and risks posed by GSC arrangements andtfg proposes 10 high-level recommendations that are addressed to regulatory authorities at jurisdictional level to advance consistent and effective regulation and supervision of GSC arrangements.

Collateral ratings

(24/04/2020) ECB – Temporary measures to mitigate impact of possible rating downgrades on collateral availability
The European Central Bank (ECB) has published Temporary measures to mitigate impact of possible rating downgrades on collateral availability which complements the broader collateral easing package that was announced on April. These measures aim to ensure that banks have sufficient assets that they can mobilise as collateral with the Eurosystem to participate in the liquidity-providing operations and to continue providing funding to the euro area economy.

IFRS

(17/04/2020) IASB – Phase 2 of the Interest Rate Benchmark Reform. Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 / Snapshot: Interest Rate Benchmark Reform – Phase 2
The International Accounting Standards Board (IASB) has published the Phase 2 of the Interest Rate Benchmark Reform, with proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, with the aim to assist entities with providing useful information to users of financial statements and to support preparers in applying IFRS Standards when changes are made to contractual cash flows or hedging relationships, as a result of the transition to alternative benchmark rates. In particular, this Exposure Draft proposes amendments to specific requirements relating to: i) modifications of financial assets and financial liabilities, including lease liabilities; ii) hedge accounting; iii) disclosures; and iv) risk components.

 

 

Other publications of interest

 

COVID-19

(29/04/2020) ECB – Communication to reporting agents on the extension of deadlines for the reporting of statistical information in the context of COVID-19
The European Central Bank (ECB) has published a communication to reporting agents on the extension of deadlines for the reporting of statistical information in the context of COVID-19. In particular, the ECB has decided to postpone the following remittance dates: regarding the  Insurance Corporations statistics (Regulation (EU) No 1374/2014) the remittance date of the annual data is postponed from 7 April 2020 to 2 June 2020 and the quarterly remittance dates will be delayed from 5 May 2020 to 12 May 2020; according to the Pension Funds statistics (Regulation (EU) 2018/231) the remittance date of the annual data is postponed from 16 June 2020 to 11 August 2020 and the quarterly remittance dates will be delayed from 2 June 2020 to 16 June 2020; and with respect to the Payment statistics (Regulation (EU) No 1409/2013) the remittance date is postponed from 29 May 2020 to 26 June 2020.

(27/04/2020) Fed – Expansion of the scope and duration of the Municipal Liquidity Facility
The Federal Reserve (Fed) has announced an expansion of the scope and duration of the Municipal Liquidity Facility (MLF). This facility, is a part of an initiative to provide up to $2.3 trillion in loans to support the U.S. economy. In particular, the revision of the MLF, makes the following amendments: i) It increases the number of entities that are allowed to borrow directly from the MLF by purchasing short-term notes issued by U.S. states, counties and citites; ii) it increases in 12 months the maximum maturity date of notes, and iii) the termination date for the facility has been extended to December 31, 2020 in order to provide eligible issuers more time and flexibility.

(27/04/2020) PRA – Statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS)
The Prudential Regulation Authority (PRA) has published a statement in response to HM Treasury’s announced changes to UK coronavirus business interruption loan schemes: the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). In particular, this statement sets out: That the terms of the guarantees of the schemes do not contain features that would render these guarantees ineligible for recognition as unfunded credit risk protection, and that some of the CBILS guarantees exclude cover for interest and fees so, in accordance with the Capital Requirement Regulation (CRR), firms recognising the CBILS guarantee as eligible unfunded protection in relation to an exposure are required to adjust the exposure amount to exclude elements not covered by the CBILS guarantee.

(17/04/2020) ESMA – New Q&A on Alternative Performance Measures in the context of COVID-19
The ESMA has published a Q&A to provide guidance to issuers on the application of the ESMA Guidelines on Alternative Performance Measures (APM) in the context of the COVID-19 pandemic with the aim of promoting common supervisory approaches and practices in the application of the ESMA Guidelines on APMs. The Q&A highlights the main principles of the APM Guidelines. ESMA will review these questions and answers to identify if, in a certain area, there is a need to convert some of the material into ESMA guidelines and recommendations.

(09/04/2020) EU Council – Report on the comprehensive economic policy response to the COVID-19 pandemic
The EU Council has published a report on the comprehensive economic policy response to the COVID-19 pandemic which assesses the measures that have been adopted to minimize the effects of the COVID-19 pandemic. In particular, this report focuses on the coordinated actions taken at the level of the Member States, the EU and the euro area, and the additional crisis response instruments and measures to prepare the ground for the economic recovery.

(03/04/2020) BCBS & IOSCO – Deferral of final implementation phases of the margin requirements for non-centrally cleared derivatives
The BCBS and the IOSCO have published the deferral of final implementation phases of the margin requirements for non-centrally cleared derivatives by one year in light of the significant challenges posed by Covid-19. The aim of this measure is to provide additional operational capacity for firms to respond to the immediate impact of Covid-19 and at the same time, facilitate covered entities to act diligently to comply with the requirements by the revised deadline. With this extension, the final implementation phase will take place on 1 September 2022.

(02/04/2020) FSB – Addressing financial stability risks of COVID-19
The Financial Stability Board (FSB) has published a set of measures to address financial stability risk of COVID-19 with the goal of cooperating actively to maintain financial stability during market stress related to COVID-19. This work includes: i) regularly sharing information on evolving financial stability threats and on the policy measures that financial authorities are taking; ii) assessing financial risks and vulnerabilities in the current environment; and iii) coordinating policy responses to maintain global financial stability, keep markets open and functioning, and preserve the financial system’s capacity to finance growth. Furhermore, the FSB is also re-prioritising its work programme for 2020.

(02/04/2020) ESMA – Updates its Risk Assessment in light of the COVID-19 Pandemic
According to the European Securities and Markets Authority (ESMA), the pandemic, in combination with existing valuation risks, has led to large equity market corrections since mid-February, driven by a sharp deterioration in the outlook for consumers, businesses and of the economic environment. In this context, ESMA sees a prolonged period of risk to institutional and retail investors of market corrections and very high risks across the whole of ESMA’s remit.

(01/04/2020) EIOPA – Statement to continue to take actions to mitigate the impact of Coronavirus/COVID-19 on consumers
The European Insurance and Occupational Pensions Authority (EIOPA) has published a Statement to insurers and intermediaries, urging them to take steps to mitigate the impact of COVID-19 on consumers. The goal of this Statement is to continue treating consumers in a fairly way and keep providing access and continuity of service. The recommendations include: i) providing clear and timely information to consumers; ii) keeping consumers informed about contingency measures that have been put in place; iii) continuing to apply product oversight and governance requirements; and iv) exercising flexibility in the treatment of consumers where reasonable and practical.

(31/03/2020) ESMA – Clarifications for best execution reports under MIFID II
The ESMA has published a Public Statement to clarify issues regarding the publication of the general best execution reports required under RTS 27 and 28  of MiFID II, in light of the COVID-19 pandemic. ESMA encourages National Competent Authorities (NCAs) not to prioritise supervisory action in respect of the deadlines of the general best execution reports. Furthermore, ESMA encourages NCAs to generally apply a risk-based approach in the exercise of supervisory powers in their day-to-day enforcement of RTS 27 and 28.

(31/03/2020) PRA – Statement on deposit takers’ approach to dividend payments, share buybacks and cash bonuses in response to Covid-19
The Prudential Regulation Authority (PRA) has published a Statement on deposit takers’ approach to dividend payments, share buybacks and cash bonuses in response to COVID-19 with the aim of strengthening banks’ capital positions more than sufficient to accommodate the combined simultaneous impact of severe UK and global recessions and financial markets shocks. PRA welcomes the decisions by the boards of the large UK banks to suspend dividends and buybacks on ordinary shares until the end of 2020, and to cancel payments of any outstanding 2019 dividends. Also it expects banks not to pay any cash bonuses to senior staff and vesting of variable remuneration over coming months.

(27/03/2020) ECB – Recommendation of the European Central Bank on dividend distributions during the COVID-19 pandemic and repealing Recommendation
The European Central Bank (ECB) has published a recommendation on dividend distributions during the COVID-19 pandemic, which purpose is to help credit institutions conserve capital to retain their capacity to support the real economy in an environment of heightened uncertainty. In order to achieve it, the ECB considers that absorbing losses should take priority at present over discretionary dividend distributions and share buy-backs, and recommends that at least until 1 October 2020 no dividends are paid out and no irrevocable commitment to pay out dividends is undertaken by the credit institutions for the financial year 2019 and 2020 and that credit institutions refrain from share buy-backs aimed at remunerating shareholders.

Capital and liquidity

(23/04/2020) Fed – Expansion of access to the Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders / Temporary actions aimed at increasing the availability of intraday credit / Timely public information regarding Fed’s program to support the flow of credit to households and businesses and thereby foster economic recovery
The Federal Reserve (Fed) has published three announcements regarding credit and liquidity. The first one, informs that the Fed is working to expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders as soon as possible. The second one, notifies that the Fed has carried out temporary actions aimed at increasing the availability of intraday credit extended by Fed Banks on both a collateralized and uncollateralized basis, in order to support the flow of credit to households and businesses and to mitigate the disruptions from COVID-19. Finally, the third announcement informs that the Fed has outlined the extensive and timely public information it will make available regarding its programs to support the flow of credit to households and businesses and thereby foster economic recovery. In particular, the Fed will report substantial amounts of information on a monthly basis for the liquidity and lending facilities using Coronavirus Aid, Relief, and Economic Security, or CARES, Act funding, including the names and details of participants in each facility; the amounts borrowed and interest rate charged, and the overall costs, revenues, and fees for each facility.

(20/04/2020) PRA – Q&A on the usability of liquidity and capital buffers
The Prudential Regulation Authority (PRA) has published a set of Q&A on the usability of liquidity and capital buffers and their operation as set out in the PRA rules and guidelines and in response to the Covid-19 outbreak. The goal of this publication is to solve the doubts of the stakeholders, specially all firms to which the Capital Requirements Directive (CRD) IV applies. Among the questions stand out questions such as “what is a liquidity buffer”, “what is a capital buffer”, ”what is the expected period banks will have to restore buffers” or “what are the implications for a bank of using its capital buffers”.

(17/04/2020) EBA – Opinion on amendments to standards on risk weights to specialised lending exposures
The EBA has published an Opinion in response to the European Commission’s (EC) intention to amend the EBA’s final draft regulatory technical standards (RTS) on assigning risk weights to specialised lending exposures, in order to harmonised regulatory framework. The EBA’s Opinion identifies three substantive changes introduced by EC. The first two changes allow a certain flexibility in relation to the incorporation of risk drivers, and the third one simplifies the rules on overlapping criteria at the level of the sub-factor or of the sub-factor components. EBA`s view is that the proposed changes do not alter the draft RTS in a significant manner, as they still maintain a good balance between the flexibility and risk sensitivity required for the IRB approach.

Supervision

(14/04/2020) BoS – Estadísticas supervisoras de las entidades de crédito correspondientes al cuarto trimestre de 2019
The BoS has published supervisory statistics on credit institutions for the fourth quarter of 2019. In particular, these statistics reveal that: i) the capital ratios of credit institutions operating in Spain increased in the fourth quarter of 2019 to 15.95%; ii) the ratio of non-performing loans fell to 3.14%, and iii) the liquidity coverage ratio fell to 164.84%.

Small business loans

(16/04/2020) Fed – New Small Business Administration's Paycheck Protection Program
The Fed will establish a facility to facilitate lending to small businesses via the Small Business Administration's Paycheck Protection Program (PPP) by providing term financing backed by loans. The Small Business Administration's PPP, guarantees loans extended by qualified lenders to small businesses so that those businesses can keep workers employed. The Federal Reserve's facility will support the effectiveness of the PPP by extending credit to financial institutions that make PPP loans, using such loans as collateral. Supplying financial institutions with additional liquidity will help increase their capacity to make PPP loans.

Climate change

(14/04/2020) IOSCO – Report on Sustainable Finance and the Role of Securities Regulators
The International Organization of Securities Commissions (IOSCO) has published its Report on Sustainable Finance and the Role of Securities Regulators and IOSCO, which seeks to help market participants address issues related to sustainability and climate change. The Report highlights three recurring themes that involve multiple and diverse sustainability frameworks and standards, including sustainability-related disclosure, a lack of common definitions of sustainable activities, and greenwashing and other challenges to investor protection.

Risks

(14/04/2020) EBA – 4Q29 Risk Dashboard / Annex
The European Banking Authority (EBA) has published its quarterly Risk Dashboard covering Q4 2019 data with the aim of summarising the main risks and vulnerabilities in the EU banking sector. This Risk Dashboard is based on a sample of 147 banks, covering more than 80% of the EU banking sector (by total assets), but does not reflect the impact from the COVID-19 pandemic. This includes that reported capital ratios do not fully reflect decisions to suspend dividends or other types of distributions recently taken by banks as a follow-up to competent authorities’ statements and recommendations. Ahead of the Coronavirus crisis, EU banks’ capital ratios and asset quality have improved and should enable EU banks to weather expected upcoming impacts and to provide lending to the economy at the time of need. However, return on equity (RoE) has further worsened. The annex contents the credit risk parameters.

(27/03/2020) ESMA – Public Consultation on guidance to address leverage risk in the AIF sector
The ESMA has published a CP on its draft guidance to address leverage risks in the Alternative Investment Fund (AIF) sector with the aim of promoting supervisory convergence in the way NCAs assess how the use of leverage within the AIF sector contributes to the build-up of systemic risk in the financial system, as well as how they design, calibrate and implement leverage limits. ESMA launched this CP as a measure to response to the recommendations of the European Systemic Risk Board (ESRB) in April 2018 to address liquidity and leverage risk in investment funds.

Financial inclusion

(14/04/2020) BIS – Report on payment aspects of financial inclusion in the fintech era
The Bank for International Settlements (BIS) has published the Report on payment aspect of financial inclusion in the fincacial era. The aim of this report is to reiterates and enhances the guidance developed in the report on Payment aspects of financial inclusion (PAFI) issued by the Committee on Payments and Market Infrastructures and the World Bank Group in 2016. Since then, the PAFI framework has been adopted as the analytical underpinning for designing and implementing country-level actions and global efforts to improve access to and usage of transaction accounts. The report sets out fintech-focused key actions, and places them in the context of the overall PAFI guidance, which was formulated in a technology-neutral and holistic way, and continues to be relevant in the era of fintech.

Reporting framework

(09/04/2020) EBA – Phase 1 of the technical package on reporting framework 2.10
The EBA has published a new release of the reporting framework 2.10, which includes the validation rules, the Data Point Model (DPM) dictionary and XBRL taxonomies. In particular, this package reflects the following: i) The technical package for the updated EBA Guidelines on Funding Plans, applicable from 31 December 2020; ii) integration of the EBA Guidelines on the remuneration benchmarking exercise and the EBA Guidelines on the data collection exercise regarding high earners into the DPM and XBRL taxonomies, and iii) integration of the EBA Guidelines on fraud reporting under the second payment services directive (PSD2) into the DPM and XBRL taxonomies.

Cross-border payments

(09/04/2020) FSB – Stage 1 report of the project to develop a roadmap to enhance cross-border payments
The Financial Stability Board (FSB) has published the Stage 1 report of its project to develop a roadmap to enhance cross-border payments, with the objective of making an assessment report of existing arrangements and challenges for global cross-border payments to the G20. In particular, focuses mainly on: i) Making cross-border payments a priority during the Saudi Arabian Presidency; ii) how enhancing cross-border payments requires addressing frictions in existing cross-border payment processes; iii) how financial innovation is creating opportunities to make payments more efficient, and iv) how global cross-border payments are carried out through a diverse multi-layered set of networks, among other topics.

Insurance and reinsurance sector

(07/04/2020) EIOPA – Opinion on the supervision of remuneration principles in the insurance and reinsurance sector
The European Insurance and Occupational Pensions Authority (EIOPA) has published an Opinion on the supervision of remuneration principles in the insurance and reinsurance sector that addresses how to ensure consistent practices in the application of the remuneration principles included in Solvency II. In particular, this Opinion gives guidance to national supervisory authorities on how to challenge the application of certain principles, and to promote a proportionate approach, it focuses on those staff identified as potential higher profile risk-takers and so avoiding create further administrative burden. Furthermore, this Opinion supports the convergence of national supervisory practices and contribute to a smooth functioning of the internal market.

Retail investments

(06/04/2020) ESMA – Annual Statistical Report Performance and Costs of Retail Investment Products in the EU
The European Securities and Markets Authority (ESMA) has published its second annual statistical report on cost and performance of retail investment products in the EU. In particular, this report highlights the following: i) Due to COVID-19 there are more volatile returns in the average fund; ii) fund costs remained broadly stable; iii) retail investors continue to have more costs that institutional investors; iv) higher risks entail higher costs; v) active funds had higher costs than passive funds, and vi) there is limited comparability across Member States.

Accounting regulation

(02/04/2020) ESMA – 2019 Report on enforcement of corporate disclosure
The ESMA has published the 2019 Annual Report on enforcement and regulatory activities related to corporate reporting within the European Economic Area (EEA) in order to harmonize the enforcement of the application of the new accounting standards IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases. This report presents the 2019 activities of ESMA and of European accounting enforcers. In 2020, ESMA will undertake other activities to promote supervisory convergence and will continue developing high quality accounting standards, like the review of IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements.

Cross-border funds distribution

(31/03/2020) ESMA – Consultation on standardised information to facilitate cross-border funds distribution
The ESMA has published a Consultation Paper (CP) which aims is to seek the view of external stakeholders on the draft ITS that specify the information to be communicated, as well as the standard forms, templates and procedures for communication of the information by the NCAs which is necessary for the creation and maintenance of the central database on cross-border marketing of AIFs and UCITS.

CCP regulation

(30/03/2020) ESMA – Draft Regulatory Technical Standards for CCP Colleges
The ESMA has published a Final Report containing draft RTS for central counterparty (CCP) colleges under the European Markets Infrastructure Regulation (EMIR) 2.2 with the purpose of amending i) voting procedures; ii) the procedures for setting the agenda of college meetings; iii) review and evaluation of the arrangements, strategies, processes and mechanisms implemented by the CCP and the risks to which the CCP is exposed; iv) the minimum timeframes for the assessment of the relevant documentation by the college members; and v) the modalities of communication between college members.

Financial education

(30/03/2020) EBA – Financial Education Report 2019/20
The EBA has published the Financial Education Report (FER) 2019/2020 with the aim of reviewing and coordinating financial literacy and education initiatives by the NCAs. This report focuses mainly on: i) initiatives in respect of products and services that fall within the scope of action of the EBA’s consumer protection mandate; ii) on financial education initiatives related to Financial Technology (FinTech), as set out in the EBA FinTech Roadmap, looking at digital financial literacy, crypto-assets, cybersecurity and disclosure to consumers via digital means; and, iii) providing a general overview of the policy context and the key trends in financial education and financial literacy initiatives.

Credit rating

(30/03/2020) ESMA – Call for evidence on credit rating information and data
The ESMA has published a Call for evidence on the availability and use of credit rating information and data in order to gather information on the specific uses of credit ratings as well as how the users of credit ratings are currently accessing this information. Stakeholders’ feedback to this call for evidence will enable ESMA to map the principal activities undertaken by various types of users of credit ratings.

© GMS Management Solutions, S.L., 2020. All rights reserved. The information contained on this publication is of a general nature and does not constitute a professional opinion or an advisory service. The data used in this publication come from public sources. GMS Management Solutions, SL assumes no liability for the veracity or accuracy of such data.