The “Regulatory Reform” newsletter is the monthly initiative aimed at updating the Finance and Risk community with the most recent regulatory changes impacting Banks and Capital Markets firms. We update our comprehensive regulatory database every month by tracking more than 40 regulatory and industry bodies covering North America, Europe and Asia Pacific. Every month, we will highlight approximately 10 regulations shortlisted on the basis of geography, of coverage and anticipated business impacts. Our summaries highlight the risks covered and business processes affected by the regulatory reforms. This newsletter is planned to supplement the existing newsletter “Regulatory Insights” which provides a deeper analysis of business implications and Accenture’s point of view on a single or much smaller set of regulatory changes.

Edition Highlights:

  • The European Securities and Markets Authority consults on the European Single Electronic Format, assessing current electronic reporting and exploring avenues for establishing a European Single Electronic Format.
  • The European Banking Authority consults on harmonizing the definition of default as this will bring consistency to the way European Union banks apply regulatory requirements to their capital positions.
  • The Securities and Exchange Commission proposes a new rule on access to data obtained by security-based swap data repositories and that is exempt from indemnification requirement.

Current coverage period: Through September 30, 2015

Note: Anticipated business impact for covered regulations is shown using the following rating legend:       (*Low) (** Medium) (*** High)

CURRENT REGULATIONS:

Hong Kong Monetary Authority (HKMA)(**):
Consultation paper on introducing mandatory clearing and expanding mandatory reporting
Publication Date: Sep 30th 2015

Risks Covered: Counterparty Credit Risk, Systemic Risk
Business Processes Impacted: Clearing and Settlement – Exchange Traded and OTC, Audit, Legal and Compliance
The Hong Kong Monetary Authority and the Securities and Futures Commission jointly issued a consultation paper on introducing the first phase of mandatory clearing and the second phase of mandatory reporting under the new over-the-counters derivatives regime. The first phase of mandatory clearing aims to mandate the clearing of certain standardized interest rate swaps entered into between major dealers. The second phase of mandatory reporting aims to expand the existing reporting regime.1

European Commission (EC)(***):
Call for Evidence – EU Regulatory Framework for Financial Services
Publication Date: Sep 30th 2015

Risks Covered: Audit, Legal and Compliance, Risk Management and Stress Testing
Business Processes Impacted: Compliance Risk, Operational Risk
The European Commission is looking for empirical evidence to develop a clearer understanding of the interaction of the individual rules and cumulative impact of the legislation as a whole including potential overlaps, inconsistencies and gaps. It will also help inform the individual reviews and provide a basis for concrete and coherent action where required. The Commission requested feedback on: (a) Rules affecting the ability of the economy to finance itself and growth; (b) Unnecessary regulatory burdens; (c) Interactions, inconsistencies and gaps; (d) Rules giving rise to unintended consequences.2

Financial Conduct Authority (FCA)(**):
Consumer credit – feedback on CP15/6 and final rules and guidance
Publication Date: Sep 28th 2015
Risks Covered: Credit Risk, Compliance Risk
Business Processes Impacted: Audit, Legal and Compliance
The Financial Conduct Authority reports on the main issues arising from their earlier consultation paper titled “Consumer credit – proposed changes to rules and guidance.” The FCA’s response touches on areas including credit broking, lending, financial promotions, and debt. The document also includes the final rules and guidance.3

European Securities and Markets Authority (ESMA)(***):
Consultation Paper on the Regulatory Technical Standards on the European Single Electronic Format
Publication Date: Sep 25th 2015

Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance, Reporting
The European Securities and Markets Authority (ESMA) launched its public consultation on its regulatory technical standards on the European Single Electronic Format (ESEF). The amended Transparency Directive requires issuers listed on regulated markets to prepare their annual financial reports in an ESEF as of January 1, 2020 with the objective of making submissions easier for issuers and facilitating accessibility, analysis and comparability for investors and regulators. The consultation paper includes an assessment of current electronic reporting and explores ways forward with regard to establishing an ESEF.4

European Banking Authority (EBA)(**):
Guidelines on the application of the definition of default under Article 178 of Regulation (EU) 575/2013
Publication Date: Sep 22nd 2015
Risks Covered: Operational Risk, Credit Risk, Compliance Risk
Business Processes Impacted: Audit, Legal and Compliance, Risk
Management and Stress Testing

The European Banking Authority is seeking consultation on its draft guidelines specifying how to apply the definition of default across the European Union (EU) prudential framework. This will in turn improve consistency in the way EU banks apply regulatory requirements to their capital positions. A detailed clarification of the definition of default and its application is provided in these guidelines, which cover key aspects, such as the days past due criterion for default identification, indications of unlikeliness to pay, conditions for the return to non-default status, treatment of the definition of default in external data, application of the default definition in a banking group and specific aspects related to retail exposures.5

Financial Conduct Authority (FCA)(**):
Ring-fencing: Guidance on the FCA’s approach to the implementation of ring-fencing and ring-fencing transfer schemes
Publication Date: Sep 18th 2015

Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance
The Financial Conduct Authority outlines its proposed approach to the implementation of ring-fencing and ring-fencing transfer schemes (RFTSs). It also clarifies the approach for “authorisation applications” or other regulatory transactions submitted by firms for the implementation of ring-fencing. This consultation is intended to assess the potential risks posed by the ring-fencing to FCA’s objectives. Also referenced is the Prudential Regulation Authority’s draft statement of policy setting out its approach to RFTS.6

Prudential Regulation Authority (PRA)(**):
The implementation of ring-fencing: the PRA’s approach to ring-fencing transfer schemes
Publication Date: Sep 18th 2015
Risks Covered: Compliance Risk, Operational Risk
Business Processes Impacted: Audit, Legal and Compliance, Risk
Management and Stress Testing

The Prudential Regulation Authority (PRA) seeks views on a draft statement of policy setting out its approach to ring-fencing transfer schemes. The purpose of the draft statement is to set out the PRA’s approach in reference to these matters, which are: (a) the nomination/approval of the scheme report’s author (Financial Services and Markets Act (FSMA) section 109A(2)); (b) approval of the form of the scheme report (FSMA section 109A(3)); and (c) consent to an application to the court for an order sanctioning a ring-fencing transfer scheme (FSMA section 107(2A)).7

Securities and Exchange Commission (SEC)(***):
Access to Data Obtained by Security-Based Swap Data Repositories and Exemption from Indemnification Requirement
Publication Date: Sep 4th 2015
Risks Covered: Counterparty Credit Risk, Systemic Risk
Business Processes Impacted: Audit, Legal and Compliance, Data Quality Management
The Securities and Exchange Commission is proposing amendments to rule 13n-4 under the Securities Exchange Act of 1934 (“Exchange Act”) as it relates to regulatory access to security-based swap data held by security-based swap data repositories. The proposed amendments would implement the conditional Exchange Act requirement that security-based swap data repositories have data available to regulators and other authorities. It would also set forth a conditional exemption from the statutory indemnification requirement associated with that regulatory access provision.8

Australian Prudential Regulation Authority (APRA)(*):
Prudential Standard APS 110 – Capital Adequacy
Publication Date: Sep 2nd 2015
Risks Covered: Credit Risk, Operational Risk, Market Risk
Business Processes Impacted: Capital Adequacy and Capital Planning, Risk Management and Stress Testing, Audit, Legal and Compliance
The Australian Prudential Regulation Authority (APRA) has proposed amendments related to the countercyclical capital buffer requirements which commence on January 1, 2016. Regulator proposes minor amendments to APS 110 to clarify the requirements. The proposed changes are consistent with, and do not alter APRA’s policy intent in relation to the countercyclical capital buffer requirements.9

Bank for International Settlements (BIS), Committee on Payments and Market Infrastructures, International Organization Of Securities Commissions (IOSCO)(***):
Harmonisation of key OTC derivatives data elements (other than UTI and UPI) – first batch
Publication Date: Sep 2nd 2015

Risks Covered: Systemic Risk, Compliance Risk
Business Processes Impacted: Clearing and Settlement – Exchange Traded and OTC, Audit, Legal and Compliance
The International Organization of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures (CPMI) have released this consultative report. The purpose is to help provide guidance to authorities on definitions for a first series of important data elements that are key to the globally consistent and meaningful aggregation of data on over-the-counter transactions, other than the Unique Transaction Identifier (UTI) and the Unique Product Identifier (UPI).10

FORTHCOMING REGULATIONS:

European Banking Authority (EBA)
EBA Work Program 2016
EBA published its detailed work program for 2016. It presents the regulatory agency’s activities and undertakings for the next year, categorized under eight strategic areas and 34 activities, including its objectives and targeted outcomes. In addition, the EBA also published a multi-year work program (2016-2018), highlighting the key areas of work in the coming years.11

European Central Bank (ECB)
The Future of Europe’s Financial Market Infrastructure: The Eurosystem’s Vision 2020
The Eurosystem’s Vision 2020 sets out the next steps on the journey to a consolidated Eurosystem market infrastructure. Areas of particular focus include exploring the synergies between TARGET2 and T2S (TARGET2-Securities), analyzing new service avenues arising from bringing these infrastructures closer, and TARGET2 enhancements for instant payments.12

Visit www.accenture.com/RegulatoryCompliance for latest insights on regulatory remediation and compliance transformation.

Footnotes:

  1. Consultation paper on introducing mandatory clearing and expanding mandatory reporting,” Hong Kong Monetary Authority, September 2015. Access at: http://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2015/20150930e7a1.pdf
  1. “Call for Evidence, EU Regulatory Framework for Financial Services,” European Commission. Access at: http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-review/docs/consultation-document_en.pdf
  1. “Consumer credit – feedback on CP15/6 and final rules and guidance,” Financial Conduct Authority, September 2015. Access at: http://www.fca.org.uk/static/documents/policy-statements/ps15-23.pdf
  1. “Consultation Paper on the Regulatory Technical Standards on the European Single Electronic Format (ESEF),” European Securities and Markets Authority, September 25, 2015. Access at: https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-1463_esma_consultation_paper_on_esef.pdf
  1. “Guidelines on the application of the definition of default under Article 178 of Regulation (EU) 575/2013,” Consultation Paper, European Banking Authority, September 22, 2015, Access at: http://www.eba.europa.eu/documents/10180/1198203/EBA-CP-2015-15+%28CP+on+GL+on+the+application+of+the+definition+of+default%29.pdf
  1. “Ring-fencing: Guidance on the FCA’s approach to the implementation of ring-fencing and ring-fencing transfer schemes,” Guidance consultation 15/5, Financial Conduct Authority, September 2015. Access at: http://www.fca.org.uk/static/documents/guidance-consultations/gc15-05.pdf
  1. ”The implementation of ring-fencing: the PRA’s approach to ring-fencing transfer schemes,” Consultation paper CP33/15, Prudential Regulation Authority, September 18, 2015. Access at: http://www.bankofengland.co.uk/pra/Documents/publications/cp/2015/cp3315.pdf
  1. “Access to Data Obtained by Security-Based Swap Data Repositories and Exemption from Indemnification Requirements,” Proposed rule, 17 CFR Part 240, Securities and Exchange Commission. Access at: https://www.sec.gov/rules/proposed/2015/34-75845.pdf
  1. “Prudential Standard APS 110, Capital Adequacy,” Australian Prudential Regulation Authority, September 2015. Access at: http://www.apra.gov.au/adi/Documents/150902-Draft-APS-110-September-2015.pdf
  1. “Harmonisation of key OTC derivatives data elements (other than UTI and UPI) – first batch,” Consultation report, Bank for International Settlements and International Organization of Securities Commissions, September 2015. Access at: http://www.bis.org/cpmi/publ/d132.pdf
  1. “EBA publishes work programme for 2016,” European Banking Authority, October 16, 2015. Access at: http://www.eba.europa.eu/-/eba-publishes-work-programme-for-2016
  1. “The future of Europe’s financial market infrastructure: the Eurosystem’s Vision 2020,” Speech by Yves Mersch, member of the Executive Board of the ECB, European Central Bank, October 14, 2015

DISCLAIMER: This blog is intended for general informational purposes only, does not take into account the reader’s specific circumstances, may not reflect the most current developments, and is not intended to provide advice on specific circumstances. Accenture disclaims, to the fullest extent permitted by applicable law, all liability for the accuracy and completeness of the information in this blog and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professional.

About Accenture

Copyright © 2016 Accenture All Rights Reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Submit a Comment

Your email address will not be published. Required fields are marked *