Management Solutions compiles new regulations published in recent weeks by different regulatory and supervisory authorities (with a focus on the financial industry).
(25/08/2020) FSB – FSB publishes Key Attributes Assessment Methodology for the Insurance Sector
The Financial Stability Board (FSB) has published a Key Attributes Assessment Methodology for Financial Institutions with respect to the Insurance Sector. The methodology sets out essential criteria to guide the assessment of the compliance of a jurisdiction’s insurance resolution framework with the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions with respect to the insurance sector. The Key Attributes constitute a standard framework for resolution regimes for all types of financial institutions. Implementation of the Key Attributes allows authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss from solvency support, while maintaining continuity of their vital economic functions.
(06/08/2020) BCBS – Principles for operational resilience
The Basel Committee on Banking Supervision (BCBS) has published the consultative document on Principles for operational resilience, which aims at improving the ability of banks to deliver critical operations through disruption. This 7 principles also aim to strengthen the ability of banks to withstand events which could cause significant operational failures or wide-scale disruptions in financial markets, such as pandemics, cyber incidents, technology failures or natural disasters. Each of the principles intends to cover one of the following areas: i) governance; ii) operational risk management; iii) business continuity planning and testing; iv) mapping interconnections and interdependencies; v) third-party dependency management; vi) incident management; and vii) information and communication technology (ICT), including cyber security.
(25/08/2020) IASB – International Accounting Standards Board to issue Interest Rate Benchmark Reform - Phase 2
The International Accounting Standards Board (IASB) has published the Phase 2 of the Interest Rate Benchmark Reform, which amends 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 document 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.
EBA / ESMA
(31/07/2020) EBA/ESMA – EBA and ESMA launch consultation to revise joint guidelines for assesing the suitability of members of the management body
The European Banking Authority (EBA) and the European Supervisory Market Authority (ESMA) have launched a public consultation on their revised joint guidelines for assesing the suitability of members of the management body. This review reflects the amendments introduced by CRD V and the Investment Firms Directive (IFD) in relation to the assessment of the suitability of members of the management body. The draft joint guidelines clarify that the knowledge, experience and skill requirements are important aspects in the fit and proper assessment of members of the management body and key function holders as they contribute to identifying, managing and mitigating money laundering and financing of terrorism risks (AML/CFT). The draft joint guidelines also take into account the recovery and resolution framework introduced by the BRRD and provide further guidance in this regard (e.g. competent authorities and resolution authorities should specify the procedures applicable to the exchange of information regarding suitability assessments of members of the management body and their the replacement).
(03/08/2020) EBA – EBA publishes final draft technical standards on disclosure and reporting on MREL and TLAC
The EBA has published its final draft Implementing Technical Standards (ITS) on disclosure and reporting on the G-SII requirement for Total Loss-Absorbing Capacity (TLAC) and the minimum requirements for own funds and eligible liabilities (MREL). This is the first time that the EBA has developed disclosure and reporting requirements in this area, thus expanding the scope of the existing Pillar 3 and supervisory reporting frameworks in the EU. The ITS seek to maximise the consistency and comparability of disclosures under these ITS with the templates and definitions included in the relevant Pillar 3 standards of the BCBS, in order to reinforce market discipline.
(31/07/2020) EBA – EBA launches consultation to revise its guidelines on internal governance
The EBA has launched a public consultation to revise its guidelines on internal governance. This review takes into account the amendments introduced by the CRD V and the IFD in relation to credit institutions’ sound and effective governance arrangements. These guidelines clarify that identifying, managing and mitigating AML/CFT risk is part of sound internal governance arrangements and credit institutions’ risk management framework. These draft guidelines further specify and reinforce the framework regarding loans to members of the management body and their related parties as these loans may constitute a specific source of actual or potential conflict of interest.
(10/08/2020) SRB – Operational Guidance on Bail-in Playbooks / Bail-in Data Instructions / Bail-in Data Explanatory Note / Q&A for publication of bail-in guidance
The Single Resolution Board (SRB) has published a new set of documents to give operational guidance to banks on the implementation of the bail-in tool. The documents include guidance on bail-in playbooks and instructions for bail-in data sets, which are accompanied by an explanatory note. The documents are not a new set of SRB policies, but rather a guide to help banks ensure the required preparation for bail-in application during the resolution planning phase. The documents cover topics such as the identification of instruments, internal and external execution processes, and the provision of bail-in data points.
(14/08/2020) EIOPA – EIOPA finalises the regulation of the pan-European Personal Pension Product (PEPP) Draft RTS / Draft ITS / Technical advice on supervisory reporting / Technical advice on criteria for EIOPA’s product intervention powers
The European Insurance and Occupational Pensions Authority (EIOPA) has delivered to the European Commission a set of draft Regulatory Technical Standards (RTS) and ITS and its advice on Delegated Acts to implement the framework for the design and delivery of the Pan-European Personal Pension Product (PEPP). EIOPA’s proposed legal instruments follow the objective to unlock the potential of the European personal pension market by setting the right incentives for the creation of PEPPs, as portable, simple and cost-efficient products. The regulatory provisions include clear and enforceable quality criteria for PEPP to be followed by providers and so to ensure that European consumers will be offered high-quality, safe, transparent and simple PEPPs.
(31/07/2020) PRA – Consultation Paper 12/20 on updates to CRD V
The Prudential Regulation Authority (PRA) has published consultation paper 12/20 that sets out proposed changes to the PRA’s proposed rules, supervisory statements and statements of policy in order to implement elements of the CRD V. This regulation clarifies the application of supervisory requirements and guidance under Pillar 2, adjusts requirements applied to remuneration policies, requires the establishment of intermediate parent undertakings and updates the governance requirements applied to firms.
EU financial markets
(12/08/2020) ESMA – Trends, Risks and Vulnerabilities (TRV) Report of 2020
The ESMA has published its second Trends, Risks and Vulnerabilities (TRV) Report of 2020 which analyses the impact of COVID-19 on financial markets during the first half of 2020 and highlights the risk of a potential decoupling of financial market performance and underlying economic activity, which raises the question of the sustainability of the current market rebound. The TRV also highlights specific risks for financial stability and investors in relation to Collateralised Loan Obligations (CLOs) model risk, EU fund industry interconnectedness and spill overs, research unbundling and closet index funds costs and performance.
MiFID II / MiFIR
(01/09/2020) ESMA – ESMA publishes call for evidence in the context of the reviews of transparency requirements for equity and non-equity instruments
The ESMA has published a call for evidence in the context of its intention to review Commission Delegated Regulation (EU) No 2017/587 and 2017/583 which contain the main implementing measures in respect of the MiFID II/MiFIR transparency regime for equity and non-equity instruments. The purpose of this exercise is to gather input and views on practical issues related to the application of both regulations that market participants have identified since the application of MiFID II/ MiFIR. The ESMA would also like to receive feedback on any technical issue and policy gap that market participants have encountered at implementation level, as well as unclear provisions. The ESMA will consider the feedback to this call for evidence to prepare the consultation paper for the review of this regulation, which will follow in 2021.
(26/08/2020) Fed/FDIC/OCC – Final Rule on the CBLR Transition Adjustments / Final Rule on the Definition of Eligible Retained Income in the Capital Rule / Final Rule on the Revised CECL Transition in the Capital Rule
The Federal Reserve (Fed), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have issued three final rules: i) a final rule that temporarily modifies the community bank leverage ratio, as required by the Coronavirus Aid, Relief, and Economic Security (CARES) Act; ii) a final rule that makes more gradual the automatic restrictions on distributions if a banking organization’s capital levels decline below certain levels; and iii) a final rule that allows institutions that adopt the current expected credit losses (CECL) accounting standard in 2020 to mitigate the estimated effects of CECL on regulatory capital for two years.
(14/08/2020) EBA – EBA updates its work programme for 2020 in light of the COVID-19 pandemic
The EBA has updated its annual work programme for 2020 to reflect all the changes brought in by the COVID-19 pandemic to its activities. The updated work programme aims to alleviate the burden on banks and to limit to the minimum the interaction with the industry. For this reason, the EBA only launched new consultations which were considered critical, postponed the publication of final technical standards depending on their degree of finalisation and expected time of implementation, and put on hold data collections normally used for ad-hoc analyses. Attached is the presentation of the Work Programmes updating the EBA section (changes marked in green for easy identification).
(11/08/2020) EBA – EBA publishes guidance on impact of CRR adjustments in response to the COVID‐19 pandemic on supervisory reporting and disclosure / EBA provides clarity on the implementation of the reporting and disclosure framework in the context of COVID-19 measures
The EBA has published a revised version of its Implementing Technical Standards (ITS) on supervisory reporting and two sets of Guidelines on disclosures and supervisory reporting requirements. These products provide clarifications on the application of certain adjustments on institutions’ disclosures and supervisory reporting introduced in the CRR in response to the COVID-19. Furthermore, the EBA has also published some frequently asked questions related to the implementation of its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
(12/08/2020) EBA – EBA consults on the use of RegTech solutions and ways to support the uptake of RegTech across the EU
The EBA has launched a RegTech industry survey to invite all relevant stakeholders, such as financial institutions and information and communications technology (ICT) third party providers, to share their views and experience on the use of RegTech solutions. RegTech means any range of applications of technology-enabled innovation for regulatory, compliance and reporting requirements implemented by a regulated institution. The aim of the survey is to better understand the ongoing activity in this area, raise awareness on RegTech within the regulatory and supervisory community, and inform any relevant future policy discussion. The EBA is also seeking ways to facilitate the adoption and scale up of RegTech solutions across the EU whilst acknowledging and looking to address the underlying risks.
(12/08/2020) EBA – EBA consults on Guidelines on criteria for the use of data inputs in the expected shortfall risk measure under the Internal Model Approach
The EBA has launched a consultation on draft Guidelines on criteria for the use of data inputs in the risk-measurement model referred to in CRR under the Internal Model Approach (IMA) for market risk. In particular, these Guidelines clarify that the data used to compute the expected shortfall risk measure should be: i) accurate; ii) appropriate; iii) frequently updated; and iv) complete and overall consistent in its use in the expected shortfall risk measure.
(10/08/2020) Fed – Federal Reserve Board announces individual large bank capital requirements, which will be effective on October 1
The Fed has announced individual large bank capital requirements which will be effective on October 1. Under its framework for large banks capital requirements are in part determined by stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs. The Fed provides a table that sets for each bank: i) the Minimum Common Equity Tier 1 (CET1) Capital Ratio; ii) the Stress Capital Buffer; iii) the GSIB Surcharge; and iv) the CET1 Capital Requirement.
(06/08/2020) BCBS – Revisions to the principles for the sound management of operational risk
The BCBS has published a proposal to modify the principles for the sound management of operational risk, first published in 2003 . This proposal contains changes that will: i) align the principles with the recently finalised Basel III operational risk framework; ii) update the guidance where needed in the areas of change management and information and communication technologies; and iii) enhance the overall clarity of the principles.
(31/07/2020) EIOPA – EIOPA launches its Solvency II Single Rulebook
The European Insurance and Occupational Pensions Authority (EIOPA) has launched its first Single Rulebook which is an online tool focused on Solvency II that further promotes the consistent implementation of the regulatory framework for insurance supervision. The main benefit of the Single Rulebook is that enables the navigation across different legal acts such as the Directive, Delegated and Implementing Regulation, as well as EIOPA Guidelines, Recommendations, Opinions and Supervisory Standards. This aim of this tool is to improve the understanding of the applicable rules, and at the same time to promote the European internal market.
© 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.