Regulatory alerts for the quarter
We have an ongoing regulatory watch systemManagement 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).
Relevant publications
Sustainability Standards Board
(03/11/2021) IFRS – IFRS Foundation announces International Sustainability Standards Board, consolidation with CDSB and VRF / and publication of prototype disclosure requirements
The IFRS have approved the amendments to the Constitution required to establish the International Sustainability Standards Board (ISSB) within the Foundation's governance structure to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors' information needs. Furthermore, the IFRS will consolidate the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF). Finally it has also published the prototypes for climate disclosure requirements and general sustainability disclosure requirements developed by the Technical Readiness Working Group (TRWG).
Operational Guidance on separability
(26/10/2021) SRB – Operational Guidance for Banks on separability for transfer tools
The Single Resolution Board (SRB) has published the Operational Guidance on Separability. This guidance provides more detail to banks on how to concretely deliver the relevant information and analysis, namely through an analytical document known as the separability analysis report (SAR), and an operational document, the transfer playbook.
Banking Package 2021
(27/10/2021) EC – Text of the proposal to amend the Capital Requirements Regulation / Text of the proposal to amend the Capital Requirements Directive / Text of the proposal to amend the Capital Requirements Regulation ("daisy chain" proposal)
The European Commission (EC) has published the Banking Package 2021, which is the last phase of the final implementation of Basel III in the EU. This package is composed of three proposals that complete the reform of banking regulation, and introduce changes to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV). They also present a separate legislative proposal to amend the CRD in the area of resolution, also known as the daisy chain proposal.
Principles on outsourcing
(27/10/2021) IOSCO – Final Report on Principles Outsourcing
The International Organization of Securities Commissions (IOSCO) has published the final report on principles on Outsourcing which comprise a set of fundamental precepts and seven principles. These Principles are intended to be technology-neutral and provide regulated entities with sufficient flexibility to implement them according to the nature and size of their business model. On the other hand, the report also addresses the impact of COVID-19 on outsourcing and operational resilience.
IRB
(20/10/2021) PRA – Policy Statement 23/21 on the identification of the nature, severity and duration of an economic downturn
The Prudential Regulation Authority (PRA) has published the Policy Statement (PS) 23/21 which provides feedback to responses to Consultation Paper (CP) 7/21 on the identification of the nature, severity, and duration of an economic downturn for the purposes of Internal Ratings Based (IRB) models, which sets out the Prudential Regulation Authority's (PRA) proposed approach to implementing new requirements relating to the specification of the nature, severity, and duration of an economic downturn in the internal ratings based (IRB) approach to credit risk.
Work Programme
(19/10/2021) EC – 2022 Work Programme
The European Commission (EC) has adopted the 2021 Work Programme which is designed to make Europe greener, fairer, more digital and more resilient. The programme will be implemented on the basis of six policy priorities around which 42 legislative initiatives are developed.
Stress-Test
(18/10/2021) ECB – Climate risk stress test - Methodology
The European Central Bank (ECB) has published the Climate risk stress test methodology which outlines the main characteristics of the 2022 climate risk stress test and provides banks with guidance on how to conduct the exercise.
Work Programme
(06/10/2021) EBA – 2022 Annual Work Programme
The European Banking Authority (EBA) has published the 2022 work programme setting out the activities and priorities for the coming year. The EBA’s work in 2022 will largely be a continuation of work carried out in 2021. Further developing a relevant environmental, social and governance (ESG) framework for banks, and ensuring the monitoring of the impact of COVID-19 on their balance sheets.
Other publications of interest
EMIR
(04/11/2021) EBA - EBA consults on draft technical standards on Initial Margin Model Validation under EMIR
The European Banking Authority (EBA) has launched a public consultation on its draft Regulatory Technical Standards (RTS) on Initial Margin Model Validation (IMMV) under the European Markets Infrastructure Regulation (EMIR). The consultation paper sets out the supervisory procedures for initial and ongoing validation of IMMV, which will be used to determine the level of margin requirements for uncleared over the counter (OTC) derivatives. Comments to this consultation can be sent before 4 February 2022.
FCA ESG priorities
(03/11/2021) FCA - A strategy for positive change: our ESG priorities
The Financial Conduct Authority (FCA) has published the environmental, social and governance (ESG) strategy which sets out the priorities in this aspect and the actions that the FCA expects to take to deliver these. The aim of the strategy is to support the financial sector in driving positive change, including the transition to net zero.
Sustainability Disclosure Requirements
(03/11/2021) FCA - DP21/4: Sustainability Disclosure Requirements (SDR) and investment labels
The Financial Conduct Authority (FCA) has published the Discussion Paper 21/4 on Sustainability Disclosure Requirements (SDR) and investment labels with the aim of seeking initial views on new sustainability disclosure requirements for asset managers and FCA-regulated asset owners, as well as a new classification and labelling system for sustainable investment products. Comments to this paper can be sent before 7 January 2022.
EIOPA risk dashboard
(03/11/2021) EIOPA - Risk Dashboard: European insurers' risk levels remain broadly stable
The European Insurance and Occupational Pensions Authority (EIOPA) has published its Risk Dashboard based on Solvency II data from the second quarter of 2021. The results show that insurers' exposures to macro risks remain at a high level while all other risk categories, such as profitability and solvency risks, stay at medium levels.
Climate change
(02/11/2021) MINECO – Real Decreto de desarrollo del artículo 32 de la Ley 7/2021, de 20 de mayo, de cambio climático y transición energética
The Ministry of Economic Affairs and Digital Transformation (MINECO) has launched a public consultation to gather comments to help specify the content of the reports provided for in Article 32 of Law 7/2021 on climate change and energy transition. The main objectives are: i) to specify the content of the climate change and energy transition reports; ii) to establish a regulatory framework that takes into account the specificities of climate risks; iii) to generate a financial and business reporting framework. Comments can be sent before 15 November.
Asset managers
(02/11/2021) IOSCO – Setting regulatory and supervisory expectations for asset managers is fundamental to address greenwashing concerns
The International Organization of Securities Commissions (IOSCO) has published a report with recommendations to asset managers in the asset management industry. The report covers five areas: i) asset manager practices, policies, procedures and disclosure; ii) product disclosure; iii) supervision and enforcement; iv) terminology; and v) financial and investor education.
Climate change
(28/10/2021) PRA – Adaptation Report 2021 - Climate-related financial risk management and the role of capital requirements
The Prudential Regulation Authority (PRA) has published a climate change adaptation report which examines the risks posed by climate change to PRA regulated firms; the progress they have made in their management of these risks; what the PRA's response to these risks has been; and the PRA's supervisory strategy from 2022.
PSD2
(28/10/2021) EBA – EBA consults on the amendment to its technical standards on strong customer authentication and secure communication in relation to the 90-day exemption for account access
The European Banking Authority (EBA) has published a consultation on the amendment of Regulatory Technical Standards (RTS) on strong customer authentication and secure communication (SCA&CSC) under the Payment Services Directive (PSD2) with regard to 90-day exemption from SCA for account access. Comments can be submitted by November 25, 2021.
Investment recommendations
(28/10/2021) ESMA – ESMA addresses investment recommendations made on social media platforms
The European Securities and Markets Authority (ESMA) has published a Public Statement on investment recommendations made on social media. ESMA makes clear what investment recommendations are, how to post them on social media platforms and what the consequences of possible breaches of the EU Market Abuse Regulation can be.
Real Estate
(27/10/2021) FDIC – Real Estate Lending Standards
The Federal Deposit Insurance Corporation (FDIC) has published a final rule amending the Real Estate Lending Standards to incorporate consideration of the community bank leverage ratio (CBLR) rule. The final rule is effective on November 26, 2021.
FTBR
(22/10/2021) EBA – EBA publishes final draft technical standards on the alternative standardised approach for market risk as part of its FRTB roadmap
The European Banking Authority (EBA) has published its final draft of the regulatory technical standards (RTS) on gross-jump-to-default (JTD) and risk add-on (RRAO). This final draft sets out the technical specifications for the implementation of these two elements of the alternative standardised approach for market risk. The final draft on JTD sets out the main inputs that own funds need to calculate default risk requirements. The final draft on RRAO specifies its scope and contains a list of instruments that bear residual risks and the list of risks that by their nature are not residual.
Taxonomy product disclosures
(22/10/2021) ESAs – ESAs propose new rules for taxonomy-related product disclosures
The European Supervisory Authorities (ESAs) delivered to the EC their Final Report with draft Regulatory Technical Standards (RTS) regarding taxonomy-related sustainability disclosures with the aim of modifying the RTS on ESG risk disclosure standards published in February, adapting them to the new features introduced by the SFDR taxonomy regulation. The report contains proposals for products under Articles 5 and 6 of the Taxonomy Regulation and for pre-contractual and periodic disclosures.
NPL
(21/10/2021) PRA – PS24/21 | CP10/21 - Implementation of Basel standards: Non-performing loan securitisations
The Prudential Regulation Authority (PRA) has published the Policy Statement (PS) 24/21 on non-performing loan (NPL) securitisations. It provides feedback to the responses to the Consultation Paper published in June 2021 which set out the PRA's proposed rules in respect of the implementation of prudential standards agreed by the Basel Committee on Banking Supervision (BCBS) for NPL securitisations.
Stress test
(19/10/2021) BoE – Bank of England launches first public CCP supervisory stress test
The Bank of England (BoE) has launched its supervisory stress test (SST) of UK central counterparties (CCPs), which will be conducted in 2021-22 and will cover the clearing services of all UK CCPs. The supervisory stress test will explore credit and liquidity resilience. The credit component will test the sufficiency of CCPs' resources to withstand a combination of market stress scenarios and clearing member defaults. The liquidity component will test the ability of CCPs to service all relevant cash requirements.
Investment firms
(19/10/2021) EBA – EBA publishes final draft regulatory technical standards on disclosure of investment policy by investment firms
The European Banking Authority (EBA) has published final draft regulatory technical standards (RTS) on disclosure of investment firms' investment policy. The draft RTS put forward comparable disclosures that should help stakeholders understand investment firms' influence over the companies in which they have voting rights and the impact of investment firms' policies on aspects such as the governance or management of those companies.
Supervision plan
(15/10/2021) OCC – OCC Releases Bank Supervision Operating Plan for Fiscal Year 2022
The Office of the Comptroller of the Currency (OCC) has released its fiscal year (FY) 2022 bank supervision operating plan, which provides the basis for policy initiatives and supervisory strategies applied to individual national banks, federal savings associations, federal branches, federal agencies and technology service providers.
EBA risk dashboard
(07/10/2021) EBA – EBA Risk Dashboard Q12021
The European Banking Authority (EBA) has published the second quarter Risk Dashboard of 2021. In this quarter, banks’ return on equity (RoE) remained at levels similar to Q1. While the non-performing loan (NPL) ratio declined, Furthermore, cyber and information and communication technology (ICT) related risks remained high.
IORPs
(07/10/2021) EIOPA – Opinion on the supervisory reporting of costs and charges of IORPs / Opinion on the supervision of risk assessment by IORPs providing DC schemes
The European Insurance and Occupational Pensions Authority (EIOPA) has published two Opinions on the supervisory reporting of costs and charges by Institutions for Occupational Retirement Provisions (IORPs) and the risk assessment of IORPs that provide defined contribution (DC) schemes. The first one, provides a classification of costs to be reported to national supervisors and introduces a practical guidance for supervisors and IORPs. The second, fosters consistent supervisory practices by providing guidance on risk management.
Regulatory news from previous periods or FYs can be found in the Quarterly Regulatory Reports, section for current year reports, or the Annual Regulatory Reports section for previous year reports.
