This newsletter covers some of the more recent regulatory changes impacting Banking, Capital Markets, Insurance, Energy, Utilities, Life Sciences, Communications & Media and Software & Platforms firms. We track more than 100 regulatory and industry bodies across North America, Europe and Asia Pacific. The shortlisted entries highlight the risks covered and business processes affected by the regulatory reforms.

CURRENT REGULATIONS:

European Central Bank (ECB):
Eurosystem agrees on common stance for climate change-related sustainable investments in non-monetary policy portfolios
Publication Date: February 4th 2021

Risks Covered: Climate Risk
Business Processes Impacted: Lending & Investment
The agency has announced that an agreement has been reached by the Euro-system on common stance for climate change-related sustainable and responsible investment principles for euro-denominated non-monetary policy portfolios.1

Office of the Comptroller of the Currency (OCC), Department of the Treasury (DoT); Board of Governors of the Federal Reserve System (The Fed); and Federal Deposit Insurance Corporation (FDIC):
Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements
Publication Date: February 11th 2021

Risks Covered: Liquidity Risk
Business Processes Impacted: Funding & Liquidity Management
The final rule establishes a quantitative metric, the NSFR, to measure the stability of the funding profile of certain large banking organizations and requires these banking organizations to maintain minimum amounts of stable funding to support their assets, commitments, and derivatives exposures over a one-year time horizon.2

Federal Energy Regulatory Commission (FERC), Department of Energy (DoE):
Cybersecurity Incentives
Publication Date: February 5th 2021
Risks Covered: Cybersecurity Risk
Business Processes Impacted: Business Continuity Management
The Commission is proposing to revise its regulations to establish rules for incentive-based rate treatments for voluntary cybersecurity investments by a public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and rates or practices affecting or pertaining to such rates for the purpose of ensuring the reliability of the Bulk-Power System.3

KBC:
KBC takes stricter line on fossil fuels
Publication Date: February 15th 2021
Risks Covered: Climate Risk
Business Processes Impacted: Finance & Performance Management
The KBC has tightened its policy on fossil fuels as of 1 April 2021. Persistently strong signals from society that the use and exploitation of fossil fuels is highly damaging for our planet’s future have prompted the bank-insurer to switch up a gear.4

Environmental Protection Agency (EPA):
Air Plan Approval; Virginia; Negative Declarations Certification for the 2008 Ozone National Ambient Air Quality Standard Including the 2016 Oil and Natural Gas Control Techniques Guidelines
Publication Date: February 10th 2021
Risks Covered: Compliance Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has approved a portion of a state implementation plan (SIP) revision submitted by the Commonwealth of Virginia. The agency is approving these revisions to the Virginia SIP in accordance with the requirements of the Clean Air Act (CAA.5

Financial Industry Regulatory Authority (FINRA):
2021 Report on FINRA’s Examination and Risk Monitoring Program
Publication Date: February 1st 2021
Risks Covered: Operations Risk
Business Processes Impacted: Finance & Performance Management
The agency has published its report on FINRA’s Risk Monitoring and Examination Activities, which is designed to inform member firms’ compliance programs by providing annual insights from FINRA’s ongoing regulatory operations.6

European Securities and Markets Authority (ESMA):
Calls for Legislative Action on ESG Ratings and Assessment Tools
Publication Date: January 29th 2021
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has expressed concerns about unregulated and unsupervised ESG ratings and other assessment tools, and highlighted the need to match the growth in demand for these products with appropriate regulatory requirements to confirm  their quality and reliability.7

Monetary Authority of Macau; China Banking and Insurance Regulatory Commission (CBIRC); Securities and Futures Commission (SFC); China Securities Regulatory Commission; State Administration of Foreign Exchange (SAFE); People’s Bank of China; Hong Kong Monetary Authority (HKMA):
Regulators Sign Cross-boundary Agreement
Publication Date: February 5th 2021
Risks Covered: Interest Cross Border Risk
Business Processes Impacted: Risk Management & Stress Testing
The PBC has signed MoU with the CBIRC, CSRC, SAFE, HKMA, SFC and AMCM on establishing a cross-boundary Wealth Management Connect pilot scheme in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA).8

HM Treasury (UK) (HMT):
Implementation of the Investment Firms Prudential Regime and Basel 3 standards consultation
Publication Date: February 4th 2021
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
Seeking views on the UK’s approach to the implementation of the Investment Firms Prudential Regime and the remaining Basel 3 standards.9

European Central Bank (ECB):
Model-based risk analysis during the pandemic: introducing ECB-BASIR
Publication Date: February 4th 2021
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The ECB‑BASIR is an extension of the ECB-BASE model which addresses specific features of the COVID-19 crisis by combining a standard pandemic susceptible-infected-recovered (SIR) model with a semi-structural large-scale macroeconomic model.10

Central Bank of Ireland (CBI):
CP138 – Consultation on Cross-Industry Guidance on Outsourcing
Publication Date: February 26th 2021
Risks Covered: Outsourcing Risk
Business Processes Impacted: Business Continuity Management
The agency has issued consultation paper on cross industry guidance on outsourcing. The discussion paper set out the Central Bank’s minimum supervisory expectations in relation to the governance, risk management and business continuity measures that should be applied by regulated firms in the management of outsourcing risk.11

Financial Conduct Authority (UK):
Dear CEO letter: Transforming data collection – an update on progress and plans for 2021
Publication Date: February 23rd 2021
Risks Covered: Data Security Risk
Business Processes Impacted: Data Quality Management
The Bank of England and the authority (FCA) have been working together on projects looking at the future of data collection.12

Financial Conduct Authority (UK):
Guidance for firms on the fair treatment of vulnerable customers
Publication Date: February 23rd 2021
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has published Guidance for firms on the fair treatment of vulnerable customers.13

European Commission (EC):
HFC greenhouse gases – Registration requirements updated
Publication Date: February 18th 2021
Risks Covered: Climate Risk
Business Processes Impacted: Risk Management & Stress Testing
This initiative amending Implementing Regulation (EU) 2019/661 requires non-EU undertakings to provide their economic operators registration and identification (EORI) number in ‘the registry’, the Commission’s IT tool managing the allocation of quotas for hydrofluorocarbons (HFCs).14

Federal Deposit Insurance Corporation (FDIC):
Assessments, Amendments To Address the Temporary Deposit Insurance Assessment Effects of the Optional Regulatory Capital Transitions for Implementing the Current Expected Credit Losses Methodology
Publication Date: February 25th 2021
Risks Covered: Compliance Risk
Business Processes Impacted: Capital Adequacy & Capital Planning
The agency is adopting amendments to the risk-based deposit insurance assessment system applicable to all large insured depository institutions (IDIs), including highly complex IDIs, to address the temporary deposit insurance assessment effects resulting from certain optional regulatory capital transition provisions relating to the implementation of the current expected credit losses (CECL) methodology.15

Federal Deposit Insurance Corporation (FDIC):
Texas Bankers: Guidance to Help Financial Institutions and Facilitate Recovery in Areas Affected by Severe Winter Storms
Publication Date: February 22nd 2021
Risks Covered: Climate Risk
Business Processes Impacted: Finance & Performance Management
The agency has announced a series of steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Texas affected by severe winter storms.16

Insurance Europe (IE):
Position on the European Commission proposal for a Digital Operational Resilience Act
Publication Date: February 22nd 2021
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has shared views on the European Commission’s proposal for a Digital Operational Resilience Act.17

European Central Bank (ECB):
Opinion on a proposal for a regulation on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (CON/2021/4)
Publication Date: February 19th 2021
Risks Covered: Cyber Security Risk
Business Processes Impacted: Information Technology
The bank opinion on a proposal for a regulation on Markets in Crypto-assets.18

HM Treasury (UK) (HMT):
Supporting the wind-down of critical benchmarks
Publication Date: February 15th 2021
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The Treasury is seeking views on the case for additional legal protections for parties affected by the wind-down of a critical benchmark.19

European Central Bank (ECB):
Credit underwriting standards: A challenge for smaller banks
Publication Date: February 17th 2021
Risks Covered: Credit Risk
Business Processes Impacted: Reporting
The agency has published a paper on the challenges that banks face in managing credit risk.20

FORTHCOMING REGULATIONS:

HM Treasury (HMT)
Buy-now-pay-later products to be regulated
The Treasury announced that interest-free buy-now-pay-later credit agreements would  be regulated by the agency in order to protect consumers under plans announced by the government. Providers would be subject to FCA rules and would need to carry out affordability checks before lending and verify customers are treated fairly, particularly those who are vulnerable or struggling with repayments.21

Office of the Comptroller of the Currency (OCC)
Libor Transition: Self-Assessment Tool for Banks
The agency has issued a bulletin providing a self-assessment tool for banks to evaluate their preparedness for the expected cessation of the Libor.22

Insurance Europe (IE)                                 
Response to EC consultation on proposals for a Data Governance Act
The agency has published its response to a consultation by the commission on its proposals for a Data Governance Act, welcoming the overall objective of creating a single market for data, where data from public bodies, business and citizens can be used safely and fairly for the common good.23

Insurance Europe (IE)
Response to ENISA consultation on the EUCS
In its feedback, the regulator agrees in principle with the establishment of a neutral certification scheme for cloud services, but also calls for consistency with all European Union initiatives regarding these cloud services.24

European Commission (EC)
Review of the crisis management and deposit insurance framework
The agency aims to make the framework more efficient, flexible and coherent for handling the resolution or insolvency of EU bank failures monitor depositors receive equal treatment give depositors more protection, including by possibly creating a common depositor protection mechanism.25

European Commission (EC)
Assessment of the results and impacts of energy efficiency related market surveillance projects
The European Commission’s Energy Agency (EASME) is seeking a contractor to carry out an evaluation of the results and impacts of energy efficiency related market surveillance projects implemented under the IEE-II and H2020 programmes.26

Monetary Authority of Singapore (MAS)
Consultation Paper on Proposed Revisions to Enterprise Risk Management, Investment and Public Disclosure Requirements for Insurers
The consultation paper sets out MAS’ proposals to enhance the current requirements relating to enterprise risk management, investment risk management and public disclosure practices for insurers.27

European Commission (EC)
A fair & competitive digital economy – digital levy
The EU needs a modern, stable regulatory and tax framework to respond to the developments and challenges of the digital economy. While we should promote and encourage digitalisation as it can increase productivity and benefit consumers, digital companies should also contribute their fair share to society. This initiative aims to introduce a digital tax to address the issue of fair taxation of the digital economy.28

Footnotes:

  1. “Agreement on climate change-related sustainable and responsible investment principles,” European Central Bank (ECB), February 4, 2021. Access at: Eurosystem agrees on common stance for climate change-related sustainable investments in non-monetary policy portfolios.
  2. “Rule to measure the stability of the funding profile of certain LBOs,” Office of the Comptroller of the Currency (OCC), Department of the Treasury (DoT); Board of Governors of the Federal Reserve System (The Fed); and Federal Deposit Insurance Corporation (FDIC), February 11, 2021. Access at: Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements.
  3. “Revised rules for incentive based rate treatments for cybersecurity investments,” Federal Energy Regulatory Commission (FERC), Department of Energy (DoE), February 5, 2021. Access at: Cybersecurity Incentives.
  4. “Policy on fossil fuels,” KBC, February 15, 2021. Access at: KBC takes stricter line on fossil fuels.
  5. “Approved a portion of SIP revision,” Environmental Protection Agency (EPA), February 10, 2021. Access at: Air Plan Approval; Virginia; Negative Declarations Certification for the 2008 Ozone National Ambient Air Quality Standard Including the 2016 Oil and Natural Gas Control Techniques Guidelines.
  6. “Report on risk monitoring and examination activities,” Financial Industry Regulatory Authority (FINRA), February 1, 2021. Access at: 2021 Report on FINRA’s Examination and Risk Monitoring Program.
  7. “Opinion on ESG ratings,” European Securities and Markets Authority (ESMA), January 29, 2021. Access at: Calls for Legislative Action on ESG Ratings and Assessment Tools.
  8. “Signed MoU to establish cross-boundary wealth management connect pilot scheme,” Monetary Authority of Macau; China Banking and Insurance Regulatory Commission (CBIRC); Securities and Futures Commission (SFC); China Securities Regulatory Commission; State Administration of Foreign Exchange (SAFE); People’s Bank of China; Hong Kong Monetary Authority (HKMA), February 5, 2021. Access at: Regulators Sign Cross-boundary Agreement.
  9. “Implementation of Basel 3 standards,” HM Treasury (UK) (HMT), February 4, 2021. Access at: Implementation of the Investment Firms Prudential Regime and Basel 3 standards consultation.
  10. “Extension of ECB-BASE model,” European Central Bank (ECB), February 4, 2021. Access at: Model-based risk analysis during the pandemic: introducing ECB-BASIR.
  11. “Paper on cross industry guidance on outsourcing,” Central Bank of Ireland (CBI), February 26, 2021. Access at: CP138 – Consultation on Cross-Industry Guidance on Outsourcing.
  12. “Future of data collection,” Financial Conduct Authority (FCA), February 23, 2021. Access at: Dear CEO letter: Transforming data collection – an update on progress and plans for 2021.
  13. “Guidance on fair treatment of vulnerable customers,” Financial Conduct Authority (UK), February 23, 2021. Access at: Guidance for firms on the fair treatment of vulnerable customers.
  14. “Registration requirements for greenhouse gases,” European Commission (EC), February 18, 2021. Access at: HFC greenhouse gases – Registration requirements updated.
  15. “Amendments to the CECL methodology,” Federal Deposit Insurance Corporation (FDIC), February 25, 2021. Access at: Assessments, Amendments To Address the Temporary Deposit Insurance Assessment Effects of the Optional Regulatory Capital Transitions for Implementing the Current Expected Credit Losses Methodology.
  16. “Guidance to financial firms in areas of Texas,” Federal Deposit Insurance Corporation (FDIC), February 22, 2021. Access at: Texas Bankers: Guidance to Help Financial Institutions and Facilitate Recovery in Areas Affected by Severe Winter Storms.
  17. “Digital operational resilience act,” Insurance Europe (IE), February 22, 2021. Access at: Position on the European Commission proposal for a Digital Operational Resilience Act.
  18. “Regulation on markets in crypto-assets,” European Central Bank (ECB), February 19, 2021. Access at: Opinion on a proposal for a regulation on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (CON/2021/4).
  19. “Legal protections on winddown of a critical benchmark,” HM Treasury (UK) (HMT), February 15, 2021. Access at: Supporting the wind-down of critical benchmarks.
  20. “Managing credit risk,” European Central Bank (ECB), February 17, 2021. Access at: Credit underwriting standards: A challenge for smaller banks.
  21. “Interest free buy now pay later credit agreements,” HM Treasury (HMT), February 2, 2021. Access at: Buy-now-pay-later products to be regulated.
  22. “Expected cessation of the libor,” Office of the Comptroller of the Currency (OCC), February 10, 2021. Access at: Libor Transition: Self-Assessment Tool for Banks.
  23. “Response on data governance act,” Insurance Europe (IE), February 8, 2021. Access at: Response to EC consultation on proposals for a Data Governance Act.
  24. “Neutral certification scheme for cloud services,” Insurance Europe (IE), February 5, 2021. Access at: Response to ENISA consultation on the EUCS.
  25. “Framework for EU bank failures,” European Commission (EC), January 26, 2021. Access at: Review of the crisis management and deposit insurance framework.
  26. “To carry out evaluation of the results for energy efficiency related market surveillance projects,” European Commission (EC), January 9, 2021. Access at: Assessment of the results and impacts of energy efficiency related market surveillance projects.
  27. “Enhance the current requirements relating to enterprise risk management,” Monetary Authority of Singapore (MAS), February 19, 2021. Access at: Consultation Paper on Proposed Revisions to Enterprise Risk Management, Investment and Public Disclosure Requirements for Insurers.
  28. “Digital tax to address the issue of fair taxation of the digital economy, February 8, 2021. Access at: A fair & competitive digital economy – digital levy.

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