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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

 

Financial credit institutions

(27/02/2020) Spanish Government – Real Decreto 309/2020 sobre el régimen jurídico de los establecimientos financieros de crédito por el que se modifica el Reglamento del Registro Mercantil, y el Real Decreto 84/2015 por el que se desarrolla la Ley 10/2014 de ordenación, supervisión y solvencia de entidades de crédito
The Spanish Government has published the Royal Decree 309/2020 the legal regime for FCIs with the aim to develop a legal regime for FCIs that is clear, comprehensible and adapted to the needs of the business, but at the same time equivalent in soundness to the established for credit institutions. In particular, this Royal Decree will improve the protection of the financial client and competition in the provision of loans, while maintaining the prudential standards that should define such activity.

Data & AI

(21/02/2020) EC – European strategy for data / White paper on Artificial Intelligence / B2G Expert Group Report: Towards a European strategy on business-to-government datasharing for the public interest / Commission Report on safety and liability implications of AI, the Internet of Things and Robotics
The European Commission (EC) has published the European strategy for data with the aim of setting up a European data space, a single market for data, to unlock unused data, allowing it to flow freely within the EU and across sectors for the benefit of businesses, researchers and public administrations. The EC has also published the White paper on AI with the objective of mobilising resources along the entire value chain and creating the right incentives to accelerate deployment of AI, including by smaller and medium-sized enterprises.

MREL

(19/02/2020) EBA – Quantitative MREL Report
The European Banking Authority (EBA) has published its first Quantitative MREL Report with the objective of providing information on the increased resilience of the European banking system through improved loss-absorbing capacity and in particular: i) to provide an update on the progress of authorities in setting resolution strategies and MREL across the EU; ii) to report on the levels at which the requirements are set; and iii) to monitor the build-up of resources against these requirements.

Risk Buffer

(14/02/2020) EBA – Consultation Paper (CP) on Draft Guidelines (GL) on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer
The European Banking Authority (EBA) has published a CP on draft GL on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer with the objective of setting a common framework to harmonise the design of the subsets of sectoral exposures to which a systemic risk buffer (SyRB) may be applied, thus facilitating a common approach throughout the EU.

AML/FT

(07/02/2020) EBA – Consultation Paper (CP) on Draft Guidelines (GL) on customer due diligence (CDD) and the considering factors when assessing the money laundering (ML) and terrorist financing (TF) risk associated with individual business relationships and occasional transactions
The European Banking Authority (EBA) has published a Consultation Paper (CP) on Draft Guidelines (GL) on customer due diligence (CDD) and the considering factors when assessing AML/CFT risk associated with individual business relationships and occasional transactions with the objective to promote the development of a common understanding of what the risk-based approach to AML/CFT entails and how it should be applied. These publication updates the 2017 ESA’s GL on ML/TF risk assessments, CDD measures, TF risk factors and new guidance on emerging risks. In particular, this GL is divided into two parts: General GL (e.g. risk assessments, assessing ML/TF risk or record-keeping) and Sector specific GL (e.g. correspondent banks, retail banks or electronic money issuers).

CIR

(07/02/2020) BoS – Circular 1/2020 por la que se modifican disposiciones relativas a la Central de Información de Riesgos
The Bank of Spain (BoS) has issued the Circular 1/2020 amending provisions relating to the Central Credit Register, with the aim of improving the consistency of the information collected through the CIR and clarifying the information to be submitted for certain transactions, reorganizing the way the information is presented in some modules and introducing some additional dimensions.

Volcker Rule

(06/02/2020) Fed/OCC/FDIC/SEC/CFTC – Proposed Rulemaking to simplify and tailor compliance requirements relating to the Volcker Rule
The Fed, the OCC, the FDIC, the SEC and the CFT (the agencies) have published a Proposed rulemaking on revisions to prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds, which is intended to improve and streamline the covered fund provisions and provide clarity to banking entities so that they can offer financial services and engage in other permissible activities in a manner that is consistent with the requirements of the Volcker Rule.

Internal models

(05/02/2020) EBA – 2019 Report on the consistency's assessment of internal model outcomes / LDP and HDP results
The EBA has published two reports on the consistency of RWAs, a Report on the results from the 2019 market risk benchmarking exercise as well as a Report on the results from the 2019 low-default and high-default portfolios (HDPs and LDPs) credit risk benchmarking. In particular, the objective of the market risk report is to assess the level of variability observed in risk-weighted assets (RWAs) for market risk produced by banks’ internal models whereas the HDPs and LDPs report assesses not only the overall level of variability in RWAs but also examine and highlight the different drivers of the dispersion observed.

 

 

 

Other publications of interest

 

Climate risk

(27/02/2020) IAIS – Issues Paper on the Implementation of the TCFD Recommendations
The International Association of Insurances Supervisors (IAIS) has published a Issues Paper on the Implementation of the Recommendations of the Task Force on Climate-related Financial Disclosures (TFCD). The goal is to establishing a framework for climate-related disclosures for the insurance sector that is directly and indirectly affected by the climate risk. In order to achieve it, this paper provides a set of practices that can be implemented with limited direct regulatory intervention considering the diversity of supervisory frameworks across jurisdictions. In addition, the paper sets out a range of options for supervisory approaches, based on case studies describing supervisory practices in twelve jurisdictions.

Sustainability

(27/02/2020) BoE – COP 26 Private Finance Agenda
The Bank of England (BoE) has published the COP 26 Private Finance Agenda with the objective of helping private finance support the whole economy transition to net zero. In particular, this Agenda aims to make climate change a relevant factor in every financial decision, so that each company, bank, insurer and investor will need to adjust their business models for a low carbon world, achieving net zero.

FinTech issues

(25/02/2020) BIS – IFC Report on central banks and FinTech data issues
The Bank for International Settlements (BIS) has published a Report made by the Irving Fisher Committee (IFC) on central banks and FinTech data issues with the objective of shedding light on a set of issues that FinTech give rise on central banks. In particular, the main findings of this Report are: i) Fintech is developing in the majority of jurisdictions, through different channels; ii) there is a significant need for FinTech data among central bank users; iii) FinTech creates important data gaps; iv) to close these gaps, it is key that FinTech entities be adequately covered in the statistical reporting perimeter; v) official business classification systems should be revisited; vi) half of the central banks have launched initiatives to close data gaps, and vii) there is a demand for stronger international coordination.

TRV

(19/02/2020) ESMA – Report on Trends, Risks and Vulnerabilities
The European Securities and Market Authority (ESMA) has published a Report on Trends, Risks and Vulnerabilities (TRV). The purpose of this Report is to inform about the European economic situation through risk assessment in different key areas such as securities markets, consumers, asset management, infrastructures and services, financial innovation and sustainable finance among others. ESMA identifies continued high risks and a weaker economic outlook as markets remain highly sensitive to geopolitical events like Brexit. Definitely, the risk outlook is stable, however risks are high, particularly in the securities markets and for retail investors and consumer.

€STR

(19/02/2020) ECB – Report on the transfer of liquidity from EONIA’s cash and derivatives products to the €STR
The European Central Bank (ECB) has published a Report on the transfer of liquidity from EONIA’s cash and derivatives products to the €STR with the aim of supplementing a previous report from the working group on the impact of the transition from EONIA to the €STR on cash and derivatives products (published in August 2019) and provides clarifications around specific topics that have been discussed since then. In this new report, the working group recommends a seamless transition from EONIA to €STR products and also highlights that contracts referenced to EONIA with maturities beyond 3 January 2022 would entail significant risks. Therefore, market participants should replace EONIA products with €STR products and reduce their EONIA-linked legacy exposures as soon as possible.

2021 EU budget

(18/02/2020) Council of the EU – Guidelines on 2021 EU budget
The Council of the EU has published the Guidelines on 2021 EU budget with the goal of setting its priorities for the 2021 EU budget. The Guidelines contents a number of conclusions that will be forwarded to the European Parliament and the Commission, as well as to the other institutions. Among these conclusions highlight that the budgetary procedure for 2021 will be the first in the new programming period 2021-2027 and will play an important role in the development and delivery of the Union's objectives and priorities.

E-commerce

(18/02/2020) Council of the EU – Requirements for payment service providers / VAT cooperation amendments  
The Council of EU has adopted new rules for exchange of VAT payment data with the aim of facilitating the detection of text fraud in cross-border e-commerce transactions and also allowing Member States (MS) to collect, in a harmonised way, the records of the payment service providers. These new rules consists of two legislative texts, one amending the VAT directive putting in place requirements on payment service providers to keep records of cross-border payments related to e-commerce, and the other one amending the regulation on administrative cooperation in the area of VAT. In this way, the texts complement the VAT regulatory framework for e-commerce coming into force in January 2021 which introduced new VAT obligations for online marketplaces and simplified VAT compliance rules for online businesses.

MREL

(17/02/2020) SRB – Proposal to public consultation on changes to MREL policy under the 2019 Banking Package
The Single Resolution Board (SRB) has launched a public consultation on changes to its Minimum Requirement for Own Funds and Eligible Liabilities (MREL) policy under the 2019 Banking Package with the aim of receiving responses and suggestions from a full range of stakeholders. The SRB has published a proposal that covers the implementation of provisions related to MREL requirements for G-SIIs, changes to the quality of MREL and changes to the calibration of MREL, including introducing MREL based on the leverage ratio, among others. The consultation will be open until 12.00 Brussels time on 6 March 2020.

DGSD

(11/02/2020) EBA – Proposals to improve the current DGSD legal framework
The EBA has published its third and final Opinion addressed to the European Commission (EC) on the implementation of the Deposit Guarantee Schemes Directive (DGSD) in the EU. The Opinion focuses on deposit guarantee schemes (DGSs) funding and uses of DGS funds and proposes a number of changes to the EU legal framework, aimed at strengthening depositor protection, enhancing financial stability and reinforcing financial resilience of DGSs. In its Opinion, the EBA assesses 33 different topics related to DGS funding and uses of DGS funds and sets out 23 proposals on how to improve current EU legal framework, in particular, the EBA calls for the need to clarify what funds count towards DGS’s available financial means and the use of DGS funds for failure prevention.

SupTech

(11/02/2020) EIOPA – Supervisory technology strategy
The European Insurance and Occupational Pensions Authority (EIOPA) has published its supervisory technology (SupTech) strategy with the aim of delivering innovative and efficient supervisory solutions that will support a more effective, flexible and responsive supervisory system. The strategy covers both prudential and conduct of business supervision, policy and interaction with entities, for insurance and occupational pensions sectors. Furthermore, the strategy will focus on improving data collection, data analytics and cooperation among NCAs and EIOPA.

Stress test

(06/02/2020) Fed/OCC - 2020 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule
The Fed and the OCC have published the 2020 Supervisory Scenarios for Annual Stress Tests required under the Dodd-Frank Act Stress Testing Rules (DFAST) and the Capital Plan Rule. The goal is to ensure that large bank holding companies operating in the USA will be able to lend to households and businesses even in a severe recession. This publication describes the two supervisory scenarios, baseline and severely adverse, that the Fed will use in its supervisory stress tests this year.

ECB economic bulletin

(06/02/2020) ECB – Economic Bulletin / Statistics
The European Central Bank (ECB) has published an update on economic and monetary developments in the euro area based on the last Governing Council meeting in early December. The expected scenario in the euro area is a moderate economic growth with stabilization signs. This bulletin focuses on 5 different economic areas: (i) external environment, (ii) financial developments, (iii) economic activity, (iv) prices and costs and (v) money and credit. In addition, the ECB also includes in the publication the statistics used in the economic survey.

CRA

(05/02/2020) OCC – CRA performance evaluations: January 2020
The OCC has published a list of Community Reinvestment Act (CRA) performance evaluations for January 2020. The list contains only  national banks, federal savings associations, and insured federal branches of foreign banks that have received ratings. Of the 28 evaluations made public this month, 7 are rated satisfactory, and 21 are rated outstanding.

IOSCO Work programme

(31/01/2020) IOSCO – Work Program for 2020
The International Organization of Securities Commissions (IOSCO) has published its Work Program for 2020 which provides an update on the initiatives that IOSCO is undertaking in relation to the existing priority issues. These priorities issues are: cryptoassets, artificial intelligence and machine learning, passive investing and index providers, retail distribution and digitalization and market fragmentation. In addition to these, a new priority issue is found, namely the rising levels of corporate debt and the potential resulting risks in capital markets. This WP also provides an overview of the work that IOSCO will be initiating with regard to the new priority.

MiFID II

(31/01/2020) ESMA – MiFID II: Data for the systematic internaliser calculations for equity, equity-like instruments and bonds
The European Securities and Markets Authorities (ESMA) has published the total number of trades and total volume over the period July-December 2019 for the systematic internaliser calculations for equity, equity-like instruments and bonds. In particular, the results are published only for instruments for which trading venues submitted data for at least 95% of all trading days over the 6-month observation period. The data publications also incorporate OTC trading to the extent it has been reported to ESMA.

Brexit

(31/01/2020) ESMA – Update on governance and reporting obligations following the UK’s withdrawal from the European Union
The ESMA has published a statement that clarifies issues relating to ESMA’s governance and the reporting obligations for UK entities from 1 February 2020 following the UK’s withdrawal from the EU. In particular, in the Withdrawal Agreement it is stipulated that: UK Financial Conduct Authority (FCA) will no longer be a member of ESMA’s Board of Supervisors and EU law will continue to apply to the UK, as if it were a Member State, during the transition period from 1 February 2020 to 31 December 2020. During this period the rights and obligations for UK entities under EU law will also continue to apply and the ESMA will continue to directly supervise registered UK’s Credit Rating Agencies, Trade Repositories and Securitisation Repositories.

MiFID II & MiFIR

(31/01/2020) ESMA – Consultation Paper Draft technical standards on the provision of investment services and activities in the Union by third-country firms under MiFID II and MiFIR
The ESMA has published the CP Draft technical standards on the provision of investment services and activities in the Union by third-country firms under MiFID II and MiFIR with the aim of receiving comments from the stakeholders.

Financial information

(31/01/2020) SEC – Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information
The Securities and Exchange Commission (SEC) has published the Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information which goal is to propose an amendment to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. This discussion highlights especially the description of the proposed amendments and the economic analysis of the elimination of duplicative disclosures to modernize and enhance MD&A disclosures for the benefit of investors. In addition, comments may be submitted to this document by stakeholders in the following 60 days after its publication.

 

 

© 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.