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:

Securities and Exchange Commission (SEC):
Fund of Funds Arrangements
Publication Date: October 7th 2020

Risks Covered: Liquidity Risk
Business Processes Impacted: Funding & Liquidity Management
The regulator is adopting a new rule under the Investment Company Act of 1940 to streamline and enhance the regulatory framework applicable to funds that invest in other funds. The Commission is adopting related amendments to rule 12d1-1 under the Act and to Form N-CEN.1

Securities and Exchange Commission (SEC):
FASB Issues Proposed Changes for 2021 US GAAP Financial Reporting Taxonomy
Publication Date: October 8th 2020

Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The agency has issued proposed technical and other conforming improvements for the 2021 U.S. GAAP financial reporting taxonomy and the related release notes for public comment.2

Federal Reserve (The Fed):
ISDA IBOR Fallback Protocol and IBOR Fallback Supplement
Publication Date: October 9th 2020
Risks Covered: Interest Rate Risk (non-trading book)
Business Processes Impacted: Business Continuity Management
The Protocol facilitates the transition away from LIBOR by providing derivatives market participants with new fallbacks for legacy and new derivative contracts.3

Bank of England (BoE):
Fintech AI Public-Private Forum
Publication Date: October 12th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Information Technology
The purpose of the forum is to promote dialogue between the public and private sectors for a better understanding of the use and impact of AI in financial services, which will contribute to the Bank’s goal of promoting the safe implementation of this technology.4

European Securities and Markets Authority (ESMA):
ESMA Updates Statements on the Impact of Brexit on MiFID II/MiFIR and the Benchmarks Regulation
Publication Date: October 1st 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The authority has revised the following statements on its approach to the application of key provisions of MiFID II/MiFIR and the Benchmark Regulation (BMR): (i) The Impact of Brexit on MiFID II/MiFIR; and (ii) The Impact of Brexit on the BMR.5

European Insurance and Occupational Pensions Authority (EIOPA):
Start of a European-wide comparative study on diversification in internal models
Publication Date: October 2nd 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Lending & Investment
The agency has launched a European-wide comparative study on diversification in internal models, which aims to: (i) understand the current approaches in the market;  (ii) facilitate a better understanding of modelling dependencies, aggregation and resulting diversification benefits; and  (iii) improve quality and convergence of supervision on diversification in internal models.6

European Commission (EC):
Commission Regulation (EU) 2020/1434 of 9 October 2020 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 16
Publication Date: October 12th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has published an amendments with regards to International Financial Reporting Standard 16.7

Insurance Europe (IE):
Response to EC consultation on establishment of an EU Green Bond Standard
Publication Date: October 7th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The agency supports the proposed components of the EU Green Bond Standard (EU GBS) and welcomes the fact that it is built on market best practices. However, the agency also states that the EU GBS should facilitate investors’ trust in the green bond market by ensuring that covered projects are aligned with the EU Taxonomy through to the maturity and investors are provided with sufficient transparency and access to reliable/usable information.8

International Swaps and Derivatives Association (ISDA); Futures Industry Association (FIA):
FIA and ISDA respond to BoE CCP operational resilience paper
Publication Date: October 2nd 2020
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
In the joint feedback, the Associations have determined that clearing participants are the commercial entities that are ultimately dependent on these business services, and that FMIs are linked directly and indirectly. This can affect which services are important and determine the impact tolerances.9

Fitch Ratings:
Corporates’ ESG Risk Driven by Policy, not Physical Changes
Publication Date: October 15th 2020
Risks Covered: Climate Risk
Business Processes Impacted: Business Continuity Management
The Fitch Ratings says that corporates’ credit profiles are far more vulnerable to sudden changes in ESG-related policies and regulation than to the actual physical effects of climate change. Corporate entities can mitigate physical risks by sufficient investments or relocation of productive capacity.10

Office of the Comptroller of the Currency (OCC); Federal Reserve (The Fed); Federal Deposit Insurance Corporation (FDIC):
Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements
Publication Date: October 20th 2020
Risks Covered: Liquidity Risk
Business Processes Impacted: Funding & Liquidity Management
The multiple agencies are adopting a final rule to implement the Net Stable Funding Ratio (NSFR) to maintain minimum amounts of stable funding to support their assets, commitments, and derivatives exposures over a one-year time horizon. This is effective July 1, 2021.11

Financial Conduct Authority (FCA):
Extending the implementation deadlines for the Certification Regime and Conduct Rules
Publication Date: October 28th 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Reporting
The agency has issued a policy statement announcing that its proposal to extend the deadline for solo-regulated firms to have undertaken the first assessment of the fitness and propriety of their Certified staff has been approved by the Treasury. Accordingly, the deadline has been extended from 9 December 2020 until 31 March 2021.12

Financial Conduct Authority (FCA):
Money Laundering Regulations
Publication Date: October 20th 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Fraud and Financial Crime
The agency has announced changes to the Financial Crime Guide (FCG) which reflect amendments to the Money Laundering Regulations (MLRs) entered into force on 1 October 2020.13

HM Treasury (HMT):
Financial Services Bill introduced today
Publication Date: October 21st 2020
Risks Covered: Conduct Risk
Business Processes Impacted: Consumer/Investor Protection
The Treasury has announced the introduction of the Financial Services Bill to Parliament. The Bill aims to ensure high regulatory standards and consumer protections in the wake of the UK’s withdrawal from the EU.14

Hong Kong Monetary Authority (HKMA):
Customer Protection in respect of Reform of Interest Rate Benchmarks
Publication Date: October 21st 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
The authority has reminded Authorised Institutions (AIs) to ensure customers’ interests are protected following discontinuation of the London Interbank Offered Rate (LIBOR) after the end of 2021.15

International Swaps and Derivatives Association (ISDA):
ISDA Launches New Legal Papers on Smart Contracts and DLT
Publication Date: October 21st 2020
Risks Covered: Compliance Risk
Business Processes Impacted: Information Technology
The agency has announced that in collaboration with R3, Clifford Chance, Jones Day, Linklaters and McCann FitzGerald, it has published four new whitepapers that analyze the legal issues related to using smart derivatives contracts on distributed ledger technology (DLT).16

International Swaps and Derivatives Association (ISDA):
ISDA Launches IBOR Fallbacks Supplement and Protocol

Publication Date: October 23rd 2020
Risks Covered: Systemic Risk
Business Processes Impacted: Audit, Legal & Compliance
The agency has launched the IBOR Fallbacks Supplement and IBOR Fallbacks Protocol which is a significant step in the reduction of the systemic impact of a key interbank offered rate (IBOR) becoming unavailable while market participants are still exposed to that rate. The changes will come into effect on January 25, 2021.17

U.S. Food and Drug Administration (FDA):
FDA, Homeland Security Agencies Take Additional Action to Prevent Import of Illegal and Harmful Medical Products Through International Mail Facilities

Publication Date: October 30th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Consumer/Investor Protection
As a core part of collaborative effort, CBP and ICE-HSI will continue to collaborate with the FDA in joint operations at the IMFs to target illicit opioids, including fentanyl and other unapproved or unlawful drugs, medical devices and dietary supplements regulated under the Federal Food, Drug, and Cosmetic Act.18

UK Medicines and Healthcare Products Regulatory Agency (MHRA):
Brexit and COVID-19: Changes to the Regulation of Medicines
Publication Date: October 20th 2020
Risks Covered: Operational Risk
Business Processes Impacted: Business Continuity Management
The agency has published guidance on the new rules that will govern the regulation of medical devices and in vitro diagnostic medical devices placed on the market in England, Wales and Scotland after the BREXIT transition period (different rules will apply to Northern Ireland).19

Consumer Financial Protection Bureau (CFPB):
CFPB’s clear rules of the road for debt collector communications lead to stronger consumer rights
Publication Date: October 30th 2020
Risks Covered: Credit Risk
Business Processes Impacted: Consumer/Investor Protection
The agency has issued a final rule to implement the FDCPA, in a sea change for consumer privacy and debt collection. The Final Rule is the most significant development affecting the debt collection industry since the FDCPA came into law 43 years ago.20

FORTHCOMING REGULATIONS:

Financial Conduct Authority (FCA)
Money Laundering Regulations

The agency has announced that changes to the Financial Crime Guide (FCG) which reflect amendments to the Money Laundering Regulations (MLRs) entered into force on 1 October 2020.21

European Commission (EC)
Financial services – EU regulatory framework for crypto-assets

The agency has announced that the feedback period is open for its proposed response to the emergence of crypto-assets such as bitcoin, and the effect these will have on financial assets. Feedback should be submitted by 30 November 2020.22

European Insurance and Occupational Pensions Authority (EIOPA)
Consultation on the draft Opinion on the supervision of the use of climate change risk scenarios in ORSA

Following the publication of the Opinion on Sustainability within Solvency II, this draft opinion sets out EIOPA’s expectations to national competent authorities (NCAs) on the supervision of the integration of climate change risk scenarios by insurers in their ORSA, implementing a risk-based and proportionate approach, with the aim to enhance supervisory convergence across Europe. Comments were to be submitted by 5 January 2021.23

European Commission (EC)
Financial services – improving resilience against cyberattacks (new rules)

The agency has announced that the feedback period is open for updates it is proposing to its rules to ensure financial sector information and communications technology (ICT) can withstand security threats and monitor third party ICT providers. The EC is considering amendments to its existing rules, particularly in the Network and Information Security (NIS) Directive, and a new law on digital and operational resilience for financial services. Feedback should be submitted by 30 November 2020.24

Insurance Europe (IE)
Comments on the revision of the European Long-Term Investment Funds Regulation
The agency supports the changes to the ELTIF framework that has the objective of making it more attractive for institutional investors. In particular, it recommends that in order to make ELTIF more attractive to investors, certain key improvements are needed.25

Insurance Europe (IE)
Response to ESAs survey on templates for Environmental and/or Social financial products under SFDR

The agency has published a response to the European Supervisory Authorities (ESAs) survey regarding Environmental and/or Social financial products templates under the Sustainable Finance Disclosure Regulation..26

European Commission (EC)
Commission delegated regulation (EU) amending delegated regulation (EU) 2018/1229 concerning the regulatory technical standards on settlement discipline, as regards its entry into force

The agency has postponed the date of entry into force of the Commission Delegated Regulation (EU) 2018/1229 concerning the regulatory technical standards on settlement discipline from 1 February 2021 to 1 February 2022.27

U.S. Food and Drug Administration (FDA)
Public Meeting – Using Patient Preference Information in Medical Device Regulatory Decisions: Benefit-Risk and Beyond
The FDA, along with the International Society for Pharmacoeconomics and Outcomes Research (ISPOR), is announcing the public meeting entitled “Using Patient Preference Information in Medical Device Regulatory Decisions: Benefit-Risk and Beyond”. The purpose of the public meeting was to discuss and explore potential applications, challenges, and opportunities of using Patient Preference Information.28

Footnotes:

  1. “New rule to streamline and enhance regulatory framework to funds that invest in other funds,” Securities and Exchange Commission (SEC), October 7, 2020. Access at: Fund of Funds Arrangements.
  2. “Proposed improvement for US GAAP financial reporting taxonomy,” Securities and Exchange Commission (SEC), October 8, 2020. Access at: FASB Issues Proposed Changes for 2021 US GAAP Financial Reporting Taxonomy.
  3. “Transition away from LIBOR,” Federal Reserve (The Fed), October 9, 2020. Access at: ISDA IBOR Fallback Protocol and IBOR Fallback Supplement.
  4. “Dialogue between public and private sectors for AI impact in FS,” Bank of England (BoE), October 12, 2020. Access at: Fintech AI Public-Private Forum.
  1. “Impact of Brexit on MiFID and benchmarks regulation,” European Securities and Markets Authority (ESMA), October 1, 2020. Access at: ESMA Updates Statements on the Impact of Brexit on MiFID II/MiFIR and the Benchmarks Regulation.
  2. “Started EU wide study on diversification in internal models,” European Insurance and Occupational Pensions Authority (EIOPA), October 2, 2020. Access at: Start of a European-wide comparative study on diversification in internal models.
  1. “Amendments to IFRS 16,” European Commission, October 12, 2020. Access at: Commission Regulation (EU) 2020/1434 of 9 October 2020 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 16.
  1. “Supports EU GBS in the green bond market,” Insurance Europe, October 7, 2020. Access at: Response to EC consultation on establishment of an EU Green Bond Standard.
  1. “Feedback on CCP operational resilience paper,” International Swaps and Derivatives Association (ISDA); Futures Industry Association (FIA), October 2, 2020. Access at: FIA and ISDA respond to BoE CCP operational resilience paper.
  2. “Corporate credit profiles in ESG related policies and regulation,” Fitch Ratings, October 15, 2020. Access at: Corporates’ ESG Risk Driven by Policy, not Physical Changes.
  3. “Final rule on NSFR,” Office of the Comptroller of the Currency (OCC); Federal Reserve (The Fed); Federal Deposit Insurance Corporation (FDIC), October 20, 2020. Access at: Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements.
  4. “Extend the deadline for solo-regulated firms,” Financial Conduct Authority (FCA), October 28, 2020. Access at: Extending the implementation deadlines for the Certification Regime and Conduct Rules.
  5. “Changes to the financial crime guide on MLRs,” Financial Conduct Authority (FCA), October 20, 2020. Access at: Money Laundering Regulations.
  6. “Introduced financial services bill to parliament,” HM Treasury (HMT), October 21, 2020. Access at: Financial Services Bill introduced today.
  7. “To ensure customers’ interests are protected in discontinuation of LIBOR,” Hong Kong Monetary Authority, October 21, 2020. Access at: Customer Protection in respect of Reform of Interest Rate Benchmarks.
  8. “Published 4 new whitepapers on DLT,” International Swaps and Derivatives Association (ISDA), October 21, 2020. Access at: ISDA Launches New Legal Papers on Smart Contracts and DLT.
  9. “IBOR fallbacks supplement and IBOR fallbacks protocol,” International Swaps and Derivatives Association (ISDA), October 23, 2020. Access at: ISDA Launches IBOR Fallbacks Supplement and Protocol.
  10. “To prevent import of illegal and harmful medical products,” US Food and Drug Administration, October 30, 2020. Access at: FDA, Homeland Security Agencies Take Additional Action to Prevent Import of Illegal and Harmful Medical Products Through International Mail Facilities.
  11. “New rules on medical devices post BREXIT,” UK Medicines and Healthcare Products Regulatory Agency (MHRA), October 30, 2020. Access at: Brexit and COVID-19: Changes to the Regulation of Medicines.
  12. “Final rule on FDCPA,” Consumer Financial Protection Bureau (CFPB), October 30, 2020. Access at: CFPB’s clear rules of the road for debt collector communications lead to stronger consumer rights.
  1. “FCG changes with relates to MLRs,” Financial Conduct Authority (FCA), October 20, 2020. Access at: Money Laundering Regulations.
  2. “Effect of crypto-assets on financial assets,” European Commission, October 2, 2020. Access at: Financial services – EU regulatory framework for crypto-assets.
  3. “Seeking opinion on sustainability within Solvency II,” European Insurance and Occupational Pensions Authority (EIOPA), October 5, 2020. Access at: Consultation on the draft Opinion on the supervision of the use of climate change risk scenarios in ORSA.
  4. “Feedback is open for updates on ICT providers,” European Commission (EC), October 2, 2020. Access at: Financial services – improving resilience against cyberattacks (new rules).
  5. “Changes to ELTIF framework,” Insurance Europe, October 19, 2020. Access at: Comments on the revision of the European Long-Term Investment Funds Regulation. 
  1. “Response regarding ES financial products under SFDR,” Insurance Europe, October 20, 2020. Access at: Response to ESAs survey on templates for Environmental and/or Social financial products under SFDR.
  2. “Delay in date of entry on settlement discipline,” European Commission (EC), October 23, 2020. Access at: Commission delegated regulation (EU) amending delegated regulation (EU) 2018/1229 concerning the regulatory technical standards on settlement discipline, as regards its entry into force.
  3. “Public meeting on using patient preference information in medical device regulatory decisions,” US Food and Drug Administration, September 29, 2020. Access at: General Insurance value measures reporting and publication

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