Management Solutions compiles new regulations published by regulators of the financial services industry on a global level (BCBS, FSB), a supranational one (with a focus on Europe), and on some local geographies (USA, UK and Spain).
Diversity and inclusion
The Financial Conduct Authority (FCA) has published the Consultation Paper (CP) on Diversity and inclusion on company boards and executive committees with the aim to increase transparency by establishing better, comparable information on this aspect.
The European Insurance and Occupational Pensions Authority (EIOPA) has published a consultation on the amendments of supervisory reporting and disclosure requirements under Solvency II. These proposed amendments involve changes to the EC Implementing Regulations published in 2015 on reporting and disclosure.
Regulation for Financial Institutions
(09/07/2021) BoS - Proyecto de Circular a los establecimientos financieros de crédito, sobre liquidez, normas prudenciales y obligaciones de información, y que modifica a la Circular 1/2009 y la Circular 3/2019
The Banco de España (BdE) has launched the public consultation of the draft circular to financial credit institutions, on liquidity, prudential rules and reporting obligations, with the aim of completing the regulation of financial credit institutions with regard to liquidity and solvency reporting obligations.
The European Commission (EC) has published the Delegated Act supplementing Article 8 of the Taxonomy Regulation specifying the content, methodology and presentation of information to be disclosed by large financial and non-financial companies on the share of their business, investments or lending activities that are aligned with the EU Taxonomy. In addition to the Delegated Act, the EC has published a proposal for an EU green bond standard that will create a high quality voluntary standard for bonds financing sustainable investments. Finally, the EC has published a new sustainable finance strategy that sets out several initiatives to tackle climate change.
(02/07/2021) Draft final report on joint EBA and ESMA Guidelines on the assessment of suitability / Draft final report on Guidelines on internal governance under CRD / Draft final report on Guidelines on remuneration policies under CRD.
The European Banking Authority (EBA) has published its revised Guidelines on remuneration policies which takes into account the amendments introduced by the fifth Capital Requirements Directive (CRD V) in relation to gender-neutral remuneration policies. Furthermore, the EBA has published its revised Guidelines on internal governance and Guidelines on the assessment of the suitability of members of the management body and key function holders.
Other publications of interest
Financial holding companies
The Prudential Regulation Authority (PRA) has published a Policy Statement (PS) on financial holding companies. This document contains a number of changes to various parts of the PRA Rulebook, which do not create new prudential requirements but are intended to ensure that the Rulebook is applied at the correct level within the banking group. The PS also contains supervisory measures and the imposition of penalties and their amount in relation to financial holding companies.
(07/09/2021) PRA – Solvency II: Definition of an insurance holding company
The Prudential Regulation Authority (PRA) has published a Consultation Paper (CP) which sets out the PRA's approach to interpreting and applying the definition of an insurance holding company. The purpose of the CP is to distinguishing an insurance holding company from a mixed-activity insurance holding company. The comments to this paper can be sent before 6 December 2021.
The Bank of Spain (BoS) has carried out the annual review of the designations and other systemically important institutions (O-SIIS) for 2022, establishing their associated capital buffers. The BoS has proceeded to designate four banks as O-SIIs with effect from 2022: Banco Santander, S.A; Banco Bilbao Vizcaya Argentaria, S.A; CaixaBank, S.A; Banco de Sabadell, S.A. These macro-prudential requirements aim to correct the possible competitive advantage that these institutions may have in the financing market due to their systemic relevance and to adapt their risk taking. In addition, the capital buffers help to strengthen the solvency of these institutions and to mitigate the adverse effects that they may have on the financial system at the global or national level.
The European Banking Authority (EBA) has published its final Guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate EU parent undertakings (IPU) as laid down in the Capital Requirements Directive (CRD). The Guidelines specify how third country groups should calculate and monitor the total value of their assets in the Union in order to ensure timely application of the IPU requirement.
(28/07/2021) ESMA – ESMA published MIFID II/MIFIR annual review report on RTS 2
The European Securities and Markets Authority (ESMA) has published the MiFID II/MiFIR Annual Review Report in which the ESMA analyses whether it is appropriate to move to the following stage of the phase-in for the transparency requirements for both the average daily number of trades threshold used for the quarterly liquidity assessment of bonds, and for the pre-trade size specific to the instrument threshold for bonds.
The International Accounting Standards Board (IASB) has proposed a amendment to the transition requirements in IFRS 17 on insurance contracts for entities that first apply IFRS 17 and IFRS 9 at the same time from 2023. This proposed amendment would enable these insurers to address temporary accounting mismatches on initial application of the new Standards.
(26/07/2021) IASB – IASB proposes reduced disclosure requirements for subsidiaries
The IASB has proposed a new IFRS Standard that would permit eligible subsidiaries to apply IFRS Standards with a reduced set of disclosure requirements. The proposed Standard would be available to subsidiaries without public accountability, companies that are not financial institutions or listed on a stock exchange.
(26/07/2021) EBA – EBA consults on technical standards to identify shadow banking entities
The EBA has launched a public consultation on draft regulatory technical standards (RTS) setting out criteria for the identification of shadow banking entities for the purposes of reporting large exposures. Comments to this consultation can be sent until 26 October 2021.
The Prudential Regulation Authority (PRA) has published a Policy Statement (PS) that provides feedback to responses to Consultation Paper (CP) 2/21 on the PRA's approach to branch and subsidiary supervision. It also contains the PRA's final Supervisory Statement (SS) 5/21 which will replace SS1/18 on this topic.
(26/07/2021) PRA – PS21/9: Implementation of Investment Firms Prudential Regime
The Financial Conduct Authority (FCA) has published a PS on the UK Investment Firm Prudential Regime (IFPR), a single prudential regime for all FCA investment firms that simplifies the current aproach. The IFPR will shift the focus of prudential requirements and expectations away from the risks that firms face, to address the harm that firms can pose to consumers and markets.
(23/07/2021) EIOPA – Consultation on Supervisory Statement on supervision of run-off undertakings
The EIOPA has published for consultation a supervisory statement to ensure that a high-quality and convergent supervision is applied to run-off undertakings or portfolios that are subject to Solvency II regulation. Comments to the consultation can be sent before 17 October 2021.
(23/07/2021) BCE – ECB decides not to extend dividend recommendation beyond September 2021
The European Central Bank (ECB) has decided not to extend beyond September 2021 its recommendation that all banks limit dividends that it first addressed to banks in March 2020. Instead, supervisors will assess the capital and distribution plans of each bank as part of the regular supervisory process. This will mean that the next decisions to pay dividends should take place in the fourth quarter of 2021.
Proportionality assessment methodology
(22/07/2021) EBA – EBA launches discussion paper on proportionality assessment methodology
The EBA has launched a Discussion Paper aiming at gathering some preliminary input on how to standardise the proportionality assessment methodology for credit institutions and investment firms. The proportionality assessment methodology entails two separate steps: the definition of four different classifications for credit institutions and investment firms and the definition of the metrics applicable to the different categorisations. Comments to this paper can be sent before 22 October 2021.
The Prudential Regulation Authority (PRA) has published the Policy Statement (PS) 18/21 which provides feedback to the responses to the Consultation Paper (CP) on Remuneration and correction to the definition of higher paid material risk taker. This PS includes amendments to the remuneration part of the PRA Rulebook and it will take effect from Friday 23 July 2021.
(21/07/2021) EBA – Methodological guide to mystery shopping
The European Banking Authority (EBA) has published a methodological guide to mystery shopping (MS). The guide sets out in seven steps how MS activities can be conceived and carried out. In particular, how NCAs can use the guide as a complement to other existing supervisory tools, and how to adapt such activities to the particular circumstances, goals and MS powers conferred on an NCA under national law and/or EU law.
(20/07/2021) BCBS – G-SIB assessment methodology review process
The Basel Committee on Banking Supervision has issued for consultation a proposal for a technical amendment to the Basel Framework. The amendment relates to the process used by the Committee to review the global systemically important banks (G-SIB) assessment methodology. The Committee plans to replace the existing three year review cycle with a process of ongoing monitoring and review.
The PRA has published the Consultation Paper (CP) 21/23 in relation to the Packaged Retail and Insurance based Investment Products (PRIIPs) disclosure regime. The main aim of the CP is to address the lack of clarity on the PRIIPs scope, misleading performance scenarios and risk indicators.
(19/07/2021) ESMA – Guidelines on certain aspects of the MIFID II remuneration requirements
The European Securities and Markets Authority (ESMA) has launched a consultation on draft ESMA guidelines on certain aspects of the MiFID II remuneration requirements. The purpose of these draft guidelines is to enhance clarity and foster convergence in the implementation of the new remuneration requirements, replacing the existing ESMA guidelines on the same topic, issued in 2013.
(19/07/2021) EIOPA - Supervisory statement on the ORSA in the context of COVID-19
The European Insurance and Occupational Pensions Authority (EIOPA) has published the supervisory statement on Own Risk and Solvency Assessment (ORSA) in the context of COVID-19 pandemic. With the aim to foster supervisory convergence, EIOPA in this supervisory statement focuses on the supervision of the internal processes of undertakings that are necessary for having a good quality ORSA in place.
The Prudential Regulation Authority (PRA) has published the statement on recalculation of the Transitional Measure on Technical Provisions (TMTP) which provides an update on the PRA's approach to the recalculation on the TMTP, relevant to PRA-regulated insurance firms.
The European Banking Authority (EBA) has launched a public consultation on amendments to its Implementing Technical Standards (ITS) on currencies with constraints on the availability of liquid assets in the context of the liquidity coverage ratio (LCR). The proposed amendments remove the Norwegian Krone (NOK) from the list, with the result that no currency will be recognised as having constraints on the availability of liquid assets. The consultation runs until 16 October 2021.
(14/07/2021) FCA – CP 21/22 on LIBOR transition and the derivatives trading obligation (DTO)
The FCA has published the Consultation Paper (CP) 21/22 on LIBOR transition and the derivatives trading obligation. This CP focuses on the classes of swaps that are affected or likely to be affected by the LIBOR transition to decide where the DTO should apply.
(14/07/2021) EIOPA – Consultation Paper on the revision of the Guidelines on contact boundaries of insurance and reinsurance contracts/Consultation Paper on the revision of the Guidelines on Valuation of Technical Provisions
The European Insurance and Occupational Pensions Authority (EIOPA) launched two consultations on the revision of the Solvency II Guidelines on contract boundaries and the valuation of technical provisions. The first Guidelines focuses on the unbundling of an insurance and reinsurance contract and the assessment whether a financial guarantee or a cover has a discernible effect on the economics of the contract. The second Guidelines, specify that where contracts with material options and guarantees exist, undertakings are expected to use a valuation method that captures the time value of these contracts.
(13/07/2021) Fed/FDIC/OCC – Agencies request comment on proposed risk management guidance for third-party relationships
The Federal Reserve Board (Fed), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have requested public comment on proposed guidance designed to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology-focused entities.
The European Banking Authority (EBA) has published the final Guidelines clarifying the requirements that the data inputs used to determine the scenarios of future shocks applied to modellable risk factors should meet. The final Guidelines set out criteria in relation to the accuracy, appropriateness, frequency for updating and completeness of the data inputs used by institutions for their modellable risk factors.
The EIOPA has launched two consultations on the development of pension tracking services and pension dashboards. The two consultations are a response to the European Commission's request for technical advice and are part of the implementation of the Capital Markets Union action plan. The proposals will help citizens in their retirement planning and supporting the Member States in identifying emerging gaps in their pension systems.
(12/07/2021) Platform on Sustainable Finance – Draft report on a social taxonomy/ public consultation report on Taxonomy extension options linked to environmental objectives
The Sustainable Finance Platform has published two drafts of official advice to the European Commission on the extension of the Climate Taxonomy Regulation to social objectives and the extension options linked to environmental objectives. This advice will feed in to Commission's report on potential extension of taxonomy framework to be adopted by the end of 2021.
The European Securities and Markets Authority (ESMA) has launched seven public consultations to gather stakeholder feedback on how to implement its central counterparty (CCP) recovery mandates. ESMA's recommendations support the development of CCP recovery plans that are aimed at safeguarding financial soundness of CCPs without the need for public financial support in crisis situations.
(12/07/2021) EIOPA - Opinion on the use of risk mitigation techniques by insurance undertakings
The EIOPA has published an Opinion on the use of risk mitigation techniques by insurance undertakings. Since the implementation of Solvency II new risk mitigation techniques such as new reinsurance structures have appeared in the European market and some existing ones started to gain more relevance. The Opinion therefore addresses the use of risk mitigation techniques and includes a set of recommendations addressed to national competent authorities (NCAs) to ensure convergent supervision.
The EIOPA has published the statement on supervisory practices and expectations in case of breach of the Solvency Capital Requirement (SCR). With this supervisory statement EIOPA aims to foster supervisory convergence in the situations where insurance and reinsurance undertakings breach their capital requirement, in particular addressing the recovery plan required.
The ESMA has launched a consultation on the review of the regulatory technical standards (RTS) specifying classes of derivatives subject to the clearing (CO) and trading obligations (DTO). The overall aim of this consultation is to amend the scope of both the CO and the DTO to accompany the benchmark transition for OTC derivatives.
(09/07/2021) ESMA - ESMA consults on the review of transparency reguirement under MIFIR
The ESMA has launched a Consultation Paper on the review of the regulatory technical standards transparency requirements under the Markets in Financial Instruments Regulation (MiFIR). This Consultation Paper reflects the findings and recommendations of various MiFID review reports published by ESMA in 2019 and 2020.
(08/07/2021) EIOPA – Report on non-life underwriting and pricing of climate change / Methodological paper for integrating climate change in underwriting risk capital charge of the Solvency II standard formula
The European Insurance and Occupational Pensions Authority (EIOPA) has published the Report on non-life underwriting and pricing in light of climate change which investigates the opportunity for (re)insurers, as risk managers and underwriters, to contribute to climate adaptation and mitigation. The EIOPA has also published a Methodological paper which proposes steps which support the need to formalise an approach to re-assess and, where needed, recalibrate parameters for the natural catastrophe risk module of the Solvency II standard formula.
The European Central Bank (ECB) Governing Council has approved its new monetary policy strategy. The new strategy adopts symmetric 2% inflation target over medium term and confirms that Harmonised Index of Consumer Prices (HICP) remains appropriate price measure but recommends the inclusion of home ownership prices over time. Furthermore, the Governing Council has published a climate action plan which includes climate change considerations in monetary policy operations in the areas of disclosure, risk assessment, collateral framework and corporate sector asset purchases.
(08/07/2021) PRA - CP11/21 – Review of Solvency II: Reporting (Phase 1)
The Prudential Regulation Authority (PRA) has published the Consultation Paper (CP) 11/21 which sets out the PRA's proposed changes to the Solvency II reporting requirements and expectations. The main changes affect to: i) Solvency II Quantitative Reporting Templates (QRTs); ii) to the minimum capital requirements (MCR) reporting frequency. Comments to this consultation can be sent before 8 October 2021.
(06/07/2021) BCBS - Early lessons from the Covid-19 pandemic on the Basel reforms
The Basel Committee on Banking Supervision (BCBS) has published an interim evaluation report assessing the impact of the implemented Basel reforms in light of the COVID-19 pandemic. The report provides a preliminary assessment of whether the reforms implemented to date have functioned as intended. In particular, the Committee's main conclusions are in relation to: i) the overall resilience of the banking system during the pandemic; ii) liquidity buffers; or iii) the impact of the leverage ratio on financial intermediation.
The EIOPA has published its Financial Stability Report that addresses key financial stability risks in the European insurance and pension sector. The EIOPA emphasizes that with the COVID-19 pandemic, increased unemployment and corporate credit downgrades have a negative impact on both insurance and pension sectors.
This PRA has published the Policy Statement (PS) which provides feedback to responses to the Consultation Paper (CP) 14/20 on Internal Ratings Based UK mortgage risk weights. In particular, the PRA will not introduce the proposed 7% minimum risk weight expectation on individual UK mortgage exposures.
The EBA has published final draft regulatory technical standards (RTS) and Implementing Technical Standards (ITS) on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms. These draft standards provide a solid framework for cooperation in the supervision of investment firm groups through colleges of supervisors and for information exchange for investment firms operating within the EU through branches or the free provision of services.
(05/07/2021) PRA - CP15/21 – Designating investment firms
The PRA has published the CP 15/21 which sets out the PRA's proposals to make minor changes to its policy on designating investment firms. This includes a proposal to increase the base capital resources requirement for PRA-designated investment firms.
(02/07/2021) BdE - El Banco de España determina que siguen concurriendo circunstancias macroeconómicas excepcionales que justifican la exclusión temporal de determinadas exposiciones frente a los bancos centrales del Eurosistema de la exposición total (denominador) de la ratio de apalancamiento
The Executive Commission of the Bank of Spain has determined that exceptional macroeconomic circumstances continue to exist, which justify that less significant Spanish credit institutions may exclude from the total exposure (denominator) of the leverage ratio certain exposures to Eurosystem central banks. In particular, they may exclude: i) coins and banknotes that are legal tender in the central bank's jurisdiction, and ii) assets representing claims on the central bank.
(01/07/2021) EBA - EBA confirms quality of unsolicited credit assessments
The EBA has published a revised Decision confirming the quality of unsolicited credit assessments assigned by certain External Credit Assessment Institutions (ECAIs) for calculating institutions' capital requirements. The revised Decision, which reflects the recognition of two additional ECAIs and the de-registering of three ECAIs.
The Basel Committee on Banking Supervision (BCBS) for consultation two technical amendments to the chapter of the Basel Framework in relation which sets out the standard on minimum haircut floors for securities financing transactions (SFTs). The technical amendments address an interpretative issue relating to collateral upgrade transactions and correct for a misstatement of the formula used to calculate haircut floors for netting sets of STFs.
Climate change impact on finance
The European Central Bank (ECB) and the European Systemic Risk Board (ESRB) have published a joint report that takes a closer look at how a broadened set of climate change drivers affect global firms and financial firms in the EU. It maps out prospective financial stability risks and contributes by further developing the analytical basis for more targeted and effective policy action.
Regime for investment firms
The EBA published an Opinion to ease the implementation of the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD), which entered into force on June 26. The present Opinion provides clarity to both investment firms and their supervisors in the specific cases, where uncertainty about the relevant classification, and subsequent need for application for an authorisation as a credit institution, arises in the absence of the technical standards.
Macroeconomic outlook reports