Management Solutions compiles new regulations published in recent weeks by different regulatory and supervisory authorities (with a focus on the financial industry).
(23/03/2018) BCBS – Consultative document on revisions to the minimum capital requirements for market risk
The BCBS has published a Consultative document on revisions to the minimum capital requirements for market risk which aims at addressing those issues that have been identified in the course of monitoring the implementation and impact of the standard published in 2016. In particular, amendments are proposed to the following aspects: i) standardised approach, ii) internal models approach, iii) scope of market risk capital requirements; and iv) simplified alternative to the standardised approach.
(22/03/2018) BCBS – Technical Amendment on Pillar 3 disclosure requirements: regulatory treatment of accounting provisions
The BCBS has issued a Technical Amendment on Pillar 3 disclosure requirements in order to provide users with disclosures that fully reflect any transitional effects for the impact of expected credit loss (ECL) accounting on regulatory capital, as well as to provide further information on the allocation of accounting provisions in the regulatory categories of general provisions and specific provisions for standardised exposures during the interim period. In particular, this document introduces amendments to two templates (KM2 and CR1) and one table (CRB) of the Pillar 3 standard.
(16/03/2018) EBA – Roadmap on FinTech / Q&A on FinTech Roadmap
The EBA has published a Roadmap on FinTech setting out its priorities for 2018/2019 as well as the establishment of a FinTech Knowledge Hub to enhance knowledge sharing and foster technological neutrality in regulatory and supervisory approaches. In particular, these priorities focused on: i) authorisation and regulatory perimeter issues relating to FinTech; ii) impact on incumbent institutions’ business models and prudential risks and opportunities arising from the use of FinTech; iii) cybersecurity; iv) consumer protection; and v) anti-money laundering and countering the financing terrorism (AML/CTF).
(15/03/2018) ECB – Addendum to the ECB Guidance to banks on non-performing loans: supervisory expectations for prudential provisioning of non-performing exposures
The ECB has published the final Addendum to the ECB Guidance to banks on NPLs, specifying quantitative supervisory expectations concerning the minimum levels of prudential provisions expected for non-performing exposures (NPEs). In particular, this Addendum aims at avoiding an excessive build-up of non-covered aged NPEs on banks’ balance sheets in the future, which would require supervisory measures.
NPL / AMC / Recovery of collateral
(14/03/2018) EC – Proposal for a Regulation on amending the CRR as regards minimum loss coverage for non-performing exposures / Proposal for a Directive on credit servicers, credit purchasers and the recovery of collateral / Blueprint on the set-up of national asset management companies (AMCs) / Second progress report on the reduction of non-performing loans (NPLs)
The European Commission (EC) has published a comprehensive package of measures to tackle NPLs in Europe. In particular, this package sets out a comprehensive approach with a mix of complementary policy actions focused on: i) ensuring banks set aside funds to cover the risks associated with loans issued in the future that may become non-performing; ii) facilitating debt recovery; iii) encouraging the development of secondary markets where banks can sell their NPLs to credit servicers and investors; and iv) assisting Member States in the restructuring of banks, by providing non-binding guidance (i.e. a blueprint) for establishing Asset Management Companies (AMCs) or other measures dealing with NPLs.
(12/03/2018) FSB – Supplementary Guidance to the Principles and Standards on Sound Compensation Practices
The FSB has now published the Supplementary Guidance to the FSB Principles and Standards on Sound Compensation Practices that provides firms and supervisors with a framework to consider how compensation practices and tools can be used to reduce misconduct risk and address misconduct incidents. In particular, this document sets out 8 recommendations on better practice regarding the following aspects: i) governance of compensation and misconduct risk; ii) effective alignment of compensation with misconduct risk; and iii) supervision of compensation and misconduct risk.
Non-performing exposures and forbearance exposures
(09/03/2018) EBA – Consultation Paper on Draft Guidelines on management of non-performing and forborne exposures
The EBA has now published a Consultation Paper (CP) on Guidelines (GL) on management of NPEs and forborne exposures (FBE) which specifies sound risk management practices for credit institutions for managing NPE and FBE; sets out requirements on processes to recognise NPEs and FBEs, as well as a forbearance granting process with a focus on the viability of forbearance measures; establishes requirements for competent authorities' (CA) assessment of credit institutions' NPE management activity as part of the SREP; and asks for views on the threshold for assessing high NPE banks whose NPL ratio is 5% or above.
(06/03/2018) BCBS/EBA – Basel III Monitoring Report / CRD IV – CRR Monitoring exercise
The BCBS has published the results of its latest Basel III monitoring report. In parallel with this report, the EBA has conducted its thirteenth report of the CRD IV - CRR / Basel III monitoring exercise on the European banking system. In particular, these exercises allow gathering aggregate data on capital, leverage ratio (LR), liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).
ICAAP and ILAAP
(05/03/2018) ECB – Draft Guide to the internal capital adequacy assessment process (ICAAP) / Draft Guide to the internal liquidity adequacy assessment process (ILAAP) / FAQ
The ECB has launched a public consultation on its Draft Guide to the ICAAP and on its Draft Guide to the ILAAP with the aim at developing a more detailed set of supervisory expectations regarding these two processes. In particular, these Draft Guides include seven principles for the ICAAP and seven principles for the ILAAP, which are defined in parallel taking into account each risk’s specifications, regarding several aspects such as internal governance, management, continuity of the institutions, and material risks. These Draft Guides are relevant for any credit institution which is considered to be a significant supervised entity according to the SSM Framework Regulation.
(01/03/2018) EIOPA – Second and final set of advice to the European Commission on specific items in the Solvency II Delegated Regulation / Annex to section 6: Natural catastrophe risks - Zonal Calibration / Frequently Asked Questions (FAQs)
The EIOPA has published the Second and final set of advice to the European Commission on specific items in the Solvency II Delegated Regulation, which covers, among other aspects, the recalibration of standard parameters of premium and reserve risks, volume measure for premium risk, recalibration of mortality and longevity risks, man-made catastrophe risk, natural catastrophe risk, interest rate risk, market risk concentration, unrated debt, unlisted equity, simplification of the look-through approach, risk margin, capital instruments only eligible as tier 1 up to 20% of total tier 1, etc.
(27/02/2018) BCBS – Consultative document on Pillar 3 disclosure requirements – updated framework
The BCBS has issued a Consultative document on Pillar 3 disclosure requirements that sets out proposals from the third phase of the Pillar 3 review. In particular, these proposals include new or revised requirements arising from the Basel III reform as well as new disclosure requirements on asset encumbrance and on capital distribution constraints (CDC).
Exposures to central governments
(22/03/2018) EBA – List of EU regional governments and local authorities treated as exposures to central governments
The EBA has published an updated list of regional governments and local authorities that may be treated as central governments for the calculation of capital requirements, in accordance with the CRR. In particular, compared to the last published version, the list includes changes to the regional governments and local authorities in Finland.
(22/03/2018) ECB – Economic Bulletin, Issue 2/2018
The ECB has published the Economic Bulletin 2/2018 which provides a comprehensive analysis of the economic and monetary developments, including an evaluation of macroeconomic projections by Eurosystem experts. In particular, this document covers the following aspects: i) external environment, ii) financial developments, iii) economic activity, iv) prices and costs, v) money and credit, and vi) fiscal developments.
(21/03/2018) EIOPA – Solvency II tools with macroprudential impact
The EIOPA has published a document on Solvency II tools with macroprudential impact, which is the second in a series of papers with the aim of contributing to the debate on systemic risk and macroprudential policy. In particular, this document identifies, classifies, and provides a preliminary assessment of the tools or measures already existing within the Solvency II framework (e.g. volatility adjustment, transitional measure on technical provisions, or prohibit or restrict certain types of financial activities), which could mitigate any of the systemic risk sources that were identified in the first document of the series.
Credit risk mitigation
(19/03/2018) EBA – Report on CRM framework
The EBA has published a Report on credit risk mitigation framework (CRM), which assesses the current framework as part of its work on the review of the IRB approach. In particular, this Report clarifies the application to the different credit risk approaches of the provisions currently laid down in the CRR regarding CRM. Further, this document provides a quantitative overview of the institutions' use of the CRM framework, as well as a series of policy proposals for the consideration of the European Commission, with a view to ensuring a proper and harmonised application of the current CRR and CRM framework provisions.
(15/03/2018) FSB – Survey on financing and regulation over the life cycle of infrastructure projects: Survey / Instructions for completing the survey / Background note
The FSB has launched a voluntary survey on the trends, drivers, and potential effects of regulatory reforms on infrastructure financing, and invites relevant institutions and firms that are actively involved in infrastructure financing by providing investments and sponsorship, insurance against financial and non-financial risks and advice on transactions to participate. In particular, the aim of the survey is at assessing the effects of the G20 regulatory reforms on financial intermediation, carried out under the FSB’s evaluation framework.
(15/03/2018) ESAs – Final Report on Big Data / Big Data Factsheet
The European Supervisory Authorities (ESAs) have published a Final Report on Big Data analysing its impact on consumers and financial firms. Overall, the ESAs have found that while the development of Big Data poses some potential risks to financial services consumers, the benefits of this innovation currently outweigh these. In particular, this Report shows that the Big Data’s are related to, among others, more tailored products and services, improvements on fraud analytics, or on the efficiency of organisational internal procedures.
Complex financial instruments
(15/03/2018) CNMV – Circular 1/2018, sobre advertencias relativas a instrumentos financieros considerados especialmente complejos
The CNMV has published the Circular 1/2018 establishing new warnings on financial instruments considered especially complex. In particular, this Circular establishes three standardised warnings: i) particular complexity warning (e.g. on binary options and CFD, convertible debt or OTC derivatives); ii) warning on equity or liability instruments within the scope of the bail-in tool; and iii) warning about significant differences with respect to the instrument’s value (e.g. certain fixed income instruments, structured contracts and OTC derivatives).
(12/03/2018) BCBS – RCAP Handbook for Jurisdictional Assessments / RCAP summary of post-assessment follow-up actions as of end-December 2017
The BCBS has published, under the Regulatory Consistency Assessment Programme (RCAP), the Handbook for jurisdictional assessments, which contains guidance and principles for RCAP assessment teams, assessed jurisdictions and experts; and describes the process and methodologies used by the BCBS to assess the completeness and consistency of domestic prudential regulations with the Basel framework. In particular, the Handbook includes specific guidance on the assessment of the NSFR and large exposures framework.
(07/03/2018) IOSCO – Consultation report on mechanisms used by trading venues to manage extreme volatility and preserve orderly trading
The International Organization of Securities Commissions (IOSCO) has published a consultation report on mechanisms used by trading venues to manage extreme volatility and preserve orderly trading. In particular, this report includes eight recommendations to assist trading venues when considering the implementation, operation, and monitoring of volatility control mechanisms (e.g. control mechanisms should be appropriately calibrated and monitored).
(06/02/2018) FSB – Correspondent Banking Data Report – Update
The FSB has published a Report with updated data on correspondent banking using data provided by SWIFT in order to address the decline in correspondent banking relationships. In particular, this Report shows the effects of this decline in terms of its impact on the volume and value of payments, impact on the length of payments chains, and impact on concentration in correspondent banking.
Funds transfer in USA
(06/03/2018) Fed – Proposed Rule on Regulation J on collection of checks and other items by federal reserve banks ad funds transfers through Fedwire
The Fed has published a proposed rule on amendments to Regulation J on collection of checks and other items by Federal Reserve banks ad funds transfers through Fedwire, with the aim at simplifying it and making it conform more closely with Regulation CC on availability of funds and collection of checks. In particular, this proposal rule removes obsolete provisions, and improves consistency between Regulation J and Regulation CC, among other aspects.
(05/03/2018) FSB – Global Shadow Banking Monitoring Report 2017
The FSB has published the Global Shadow Banking Monitoring Report 2017, which presents the results of the annual monitoring exercise that assesses global trends and risks in the shadow banking system (e.g. maturity/liquidity mismatches, leverage, etc.).
(02/03/2018) ECB – List of supervised entities
The ECB has published the annual list of supervised entities. This list displays the significant, a total of 118 (part A), and less significant credit institutions (part B) which are supervised by the ECB. The list is compiled on the basis of significance decisions adopted and notified by the ECB that refer to events that became effective up to 1 January 2018.
Data point model
(01/03/2018) EBA – New DPM data dictionary tools
The EBA has established the tools to access its data point model (DPM), which compiles the harmonised data requirements included in its technical standards and guidelines. In particular, the role of this data dictionary is to enable the harmonisation of the banking regulatory framework by providing a clear interpretation of data exchange requirements, and includes a query tool, a navigation tool, a table with data categorization and a database.
(01/03/2018) EBA – Financial Education Report
The EBA has published its first Report on financial education, covering the years 2017/18 which is based on a repository of more than 80 financial education initiatives carried out by the national authorities supervising banking products and services across the 28 EU Member States. In particular, this report presents a general view of the most common approaches used by the national authorities and focuses on four key characteristics of the related initiatives: subject matter, format, target group and type of output produced.
(01/03/2018) ESMA – Validation Rules regarding the European Markets Infrastructure Regulation (EMIR)
The ESMA has updated its validation rules regarding the European Markets Infrastructure Regulation (EMIR), for the reports submitted under the revised technical standards. In particular this update allows for the reporting of exchange-traded derivatives in products for which the effective date may be earlier than the date of execution; and clarifies how the identification of the product should be validated in the reports submitted on or after 3 January 2018.
(27/02/2018) FCA – Policy Statement 18/4. Credit card market study: persistent debt and earlier intervention
The Financial Conduct Authority (FCA) has published the Policy Statement (PS) 18/4 that responds to the feedback received to Consultative Paper (CP) 17/43 on credit card market study. In particular, this PS includes final measures to address persistent credit card debt and to require credit card firms to use the data available to them to identify customers at risk of financial difficulties
(27/02/2018) CNMV – Guía Técnica sobre operaciones vinculadas de las instituciones de inversión colectiva (IIC) y operaciones equiparables realizadas por sociedades gestoras de IIC
The CNMV has published a Technical Guide on related transactions of Collective Investment Institutions (ICC) and comparable operations carried out by its managing companies, which contains criteria on what should be considered as ‘related parties’ and ‘related transactions’, as well as the treatment that the different kind of related transactions must have. In particular, those transactions subject to prior authorisation, and those whose nature could be considered as irrelevant, may be subject of ex-post controls.
© GMS Management Solutions, S.L., 2018. 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.