The European Banking Authority published: (i) revised final draft Implementing Technical Standards on the uniform formats and date for disclosure of values used to identify Global Systemically Important Institutions; (ii) revised final draft Regulatory Technical Standards on the specification of the methodology for the identification of G-SIIs; and (iii) draft revised Guidelines on the further specification of the indicators of global systemic importance and their disclosure under the Capital Requirements Directive IV. 

Read more.

The US Securities and Exchange Commission issued its Office of Compliance Inspections and Examinations’ 2016 priorities. Areas of focus for this year include liquidity controls, public pension advisers, product promotion, and two investment products – exchange-traded funds and variable annuities. The priorities also provide for continuing emphasis on protecting investors in ongoing risk areas such as cybersecurity, microcap fraud, fee selection, and reverse churning. The examination priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, and national securities exchanges. The priorities may be adjusted in light of market conditions, industry developments and ongoing risk assessment activities. OCIE selected the priorities in consultation with certain SEC policy divisions and regional offices, the SEC’s Investor Advocate, and other regulators.

View the SEC press release.

View the SEC examination priorities for 2016.

The Consumer Financial Protection Bureau announced that Mr. David Silberman will serve as Acting Deputy Director beginning the week of January 11, 2106, replacing Meredith Fuchs. Mr. Silberman previously served as Associate Director for Research, Markets, and Regulations. Mr. Silberman will serve as Acting Deputy Director while a search for a replacement is conducted.

View the CFPB press release.

The European Central Bank's Banking Supervision division published its priorities for 2016. Under the Single Supervisory Mechanism Regulation, the ECB is responsible for the direct prudential supervision of the largest Eurozone banks and indirectly responsible for prudentially supervising the smaller Eurozone banks. The priorities, which aim to direct the ECB's supervision of the largest Eurozone banks, are business model and profitability risk, credit risk, capital adequacy, risk governance and data quality and liquidity. The ECB will be implementing initiatives around the priorities during 2016, including thematic reviews and holding dialogue with the banks.
 
View the 2016 SSM Priorities.

The Prudential Regulation Authority and the Financial Conduct Authority published proposed changes to their notification rules and forms under the Senior Managers and Certification Regimes. The regulators are proposing the changes in light of the changes to the regime that have been proposed by the UK Government, including extending the Regime to all financial services firms, removing obligation on a firm to notify the PRA or FCA when it knows or suspects that a senior manager or certified person has failed to comply with the conduct rules and replacing the presumption of responsibility with a duty of responsibility. It remains to be seen whether Parliament will approve those changes proposed by the Government. An amending Order, published in December 2015, stops the above-mentioned notification requirement and the presumption of responsibility from coming into force on March 7, 2016 – the date when the remainder of the new Regime will come into effect. The regulators therefore intend to amend their rules and forms to reflect the position that those provisions of the Regime will not enter into force on March 7, 2016. The PRA has also published an updated Supervisory Statement to take into account the changes. The consultations close on February 8, 2016.
 
View the PRA consultation paper.
 
View the FCA consultation paper.
 
View the PRA's updated Supervisory Statement.

The European Commission published a report on the effect of the revised International Accounting Standard 19 on the volatility of own funds of banks and investment firms. The Capital Requirements Regulation requires the Commission to assess whether the revised IAS 19 and the requirement on firms to deduct defined-benefit pension fund assets from Common Equity Tier 1 items for the purpose of calculating own funds would impact the volatility of the firm's own funds. The Commission has concluded that the potential additional volatility of own funds introduced by the revision of IAS 19 is limited and that the impact due to initial application has been mitigated by the transitional measures included in the CRR. The Commission therefore does not intend to propose amendments to the CRR in this regard.
 
View the report.

The Federal Reserve Bank of New York announced the end of its Mortgage Operations Counterparty Pilot Program on December 31, 2015. The program, first announced in August 2014, was intended to discover ways to expand the range of firms acting as counterparties in the Federal Reserve’s open market operations, and to analyze the extent to which firms beyond the primary dealer community can raise the New York Fed’s operational capacity and resiliency in its monetary policy operations. Three firms participated in the MOC pilot program and began transacting with the Open Market Trading Desk in secondary market outright operations of agency mortgage-backed securities in December 2014. The results of the pilot programs will provide useful inputs in the Desk’s ongoing evaluations of the Federal Reserve’s counterparty framework.

View the New York Fed press release. 

The US Commodity Futures Trading Commission proposed a rule offering an alternative to the requirement for foreign natural persons to provide fingerprints when applying for CFTC registration. The proposal provides that any such person’s registered firm may complete a criminal history background check instead of submitting fingerprints. The proposal generally codifies CFTC Staff Letters 12-49 and 13-29 and would supersede those letters, if adopted. Comments on the proposed rule are due on or before February 11, 2016. 

View the CFTC press release. 

View the proposed rule. 

A European Central Bank Recommendation on dividend distribution policies for Eurozone banks was published in the Official Journal of the European Union. The recommendation is aimed at significant supervised entities (i.e. significant banks) and significant supervised groups (each as defined in the Single Supervisory Mechanism Framework Regulation) as well as national regulators. Under the SSM Regulation, the ECB is responsible for the direct prudential supervision of significant Eurozone banks. The Recommendation states that banks must use conservative and prudent assumptions when establishing dividend policies so that any applicable capital requirements, for example minimum capital requirements or countercyclical capital and systemic buffers, are still met after any distribution. The recommendation also makes suggestions for different categories of banks paying dividends for the 2015 financial year in 2016: (i) banks that satisfy the applicable capital requirements and have reached their fully loaded (i.e. calculated without applying the transitional provisions as set out in the Capital Requirements Regulation) capital ratios as at December 31, 2015 should distribute net profits in dividends conservatively; (ii) banks that satisfy the applicable capital requirements, but have not reached their fully loaded ratios as at December 31, 2015 should distribute net profits in dividends conservatively and in principle should only pay out dividends if a linear path to the required loaded capital requirements is secured; and (iii) banks that do not satisfy the applicable capital requirements should not distribute dividends. The Recommendation also states that should a bank not be able to comply with the ECB's Recommendation due to a legal obligation to pay out dividends, it should contact its supervisory team immediately.

View the Recommendation.

The revised EU Payment Services Directive, known as PSD2, was published in the Official Journal of the European Union. The aims of PSD2, which focuses on electronic payments and payment services within the EU, include making payments between Member States as secure, easy and efficient as those made within a Member State, regulating new types of payment services and payment services providers which are currently unregulated and stimulating competition in the electronic payments market. Member States must transpose PSD2 into their national laws by January 13, 2018 and apply those laws from that date, subject to certain exceptions and transitional measures. PSD2 will appeal the current Payment Services Directive with effect from January 13, 2018.
 
View PSD2.

The European Securities and Markets Authority launched a consultation on proposed Guidelines on transaction reporting, reference data, order record keeping and clock synchronization. ESMA is required to prepare the guidelines under the Markets in Financial Instruments Regulation and the revised Markets in Financial Instruments Directive, together known as MiFID II. The proposed Guidelines are based on ESMA's final draft Regulatory Technical Standards relating to transaction reporting, reference data, order record keeping and clock synchronization which are still due to be endorsed by the European Commission. The proposed Guidelines may therefore need to be amended, depending on the adopted version of the RTS. The proposed Guidelines aim to assist investment firms, approved reporting mechanisms, trading venues and systematic internalizers in complying with the provisions of the RTS, focusing on the preparation of transaction reports and order data records for various scenarios. Responses to the consultation are due by March 23, 2016 and ESMA aims to publish the final Guidelines in the second half of 2016. MiFID II will apply directly across the EU from January 3, 2017.
 
View the consultation paper.

The EU Regulation on the Reporting and Transparency of Securities Financing Transactions and of Reuse, known as the SFTR was published in the Official Journal of the European Union. The aim of the SFTR is to improve the transparency of securities lending, repurchase transactions, reverse repurchase transactions, buy-sell back or sell-buy back transactions and margin lending transactions which will help reduce the likelihood of banks seeking to avoid rules applicable to them by moving certain of their activities to the shadow banking sector. The SFTR requires: (i) all securities financing transactions, subject to certain exceptions for central banks and similar bodies, to be reported to EU recognized trade repositories; (ii) investment funds to disclose their use of SFTs to investors in regular reports and pre-investment documents; and (iii) minimum conditions to be met on the reuse of collateral, such as disclosure of risks and the need to obtain prior consent. The SFTR also makes certain amendments to the European Market Infrastructure Regulation, including inserting provisions through which equivalence decisions for third country trading venues for the purpose of OTC derivatives can be made and adding a number of authorities to the list of authorities to which trade repositories must provide trade reporting information. The SFTR will apply directly across the EU from January 12, 2016 subject to certain exceptions which will apply at a later date, including the reporting obligation (which is being phased in according to counterparty type), the transparency obligations on management companies and Alternative Investment Fund Managers, and the restrictions on rehypothecation.
 
View the Regulation.

The European Securities and Markets Authority published a final report and final Guidelines on cross-selling practices within the meaning of the revised Markets in Financial Instruments Directive. The Guidelines will apply from January 3, 2017 to the national regulators responsible for the conduct of business supervisory oversight of investment firms and credit institutions when providing investment services and to management companies and external Alternative Investment Fund Managers when they provide investment services under the Directive on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities and the Alternative Investment Fund Managers Directive respectively. Initially, ESMA had consulted jointly with the European Banking Authority and European Insurance and Occupational Pensions Authority on joint guidelines for the banking and insurance sectors. However, following feedback received to that consultation, it was decided that ESMA should adopt guidelines solely on the basis of the revised MiFID. Firms should note, however, that the final Guidelines do not affect their obligations to comply with other conduct of business standards that may be applicable to them.

Read more.

The International Organization of Securities Commissions published a report on the mechanisms for trading venues to effectively manage electronic trading risks and plans for business continuity. The report focuses on how trading venues manage technology, in particular, the potential risks that technological innovations pose to the markets. It stems from an IOSCO investigation into causes of the recent market disruptions which sought to identify steps taken by market participants and regulators to address the causes and probe whether the IOSCO High-Level Principles for Business Continuity issued in 2006 should be updated. In addition, IOSCO surveyed trading venues across more than 30 jurisdictions. The report discusses IOSCO's findings based on responses to the survey, makes recommendations to regulators and proposes sound practices for trading venues. IOSCO recommends that regulators should require trading venues to put mechanisms in place to help ensure the resiliency, reliability and integrity of critical systems and should require trading venues to establish, maintain and implement an appropriate business continuity plan.

Read more.

The International Organization for Securities Commissions published a report on market intermediary business continuity and recovery planning. The report sets two standards for regulators of market intermediaries and recommends sound practices for regulators to consider in their supervision of market intermediaries. The IOSCO standards state that regulators should require market intermediaries to create and maintain written business continuity plans and to update the plans in the event of any material change to the intermediaries' operations, structure, business or location and to conduct an annual review of the plan. The IOSCO recommendations on sound practices for regulators of intermediaries cover setting the components of a market intermediary's business continuity plan and addressing the need for data protection and client privacy, in particular, against cyber-attacks. IOSCO recognizes that the sound practices are flexible and may be tailored to the size and needs of a market intermediary.

View the report.

The International Organization of Securities Commissions published its final report on sound practices at large intermediaries relating to the assessment of creditworthiness and the use of external credit ratings. The report analyses responses to the survey conducted by IOSCO and proposes sound practices for regulators of large intermediary firms to consider in supervising such firms. Large intermediary firms may also find the proposed practices useful when they consider implementing their internal credit assessment policies and procedures. The report is intended to enhance the implementation of the Principles for Reducing Reliance on CRA Ratings issued by the Financial Stability Board. The proposed sound practices for regulators include requiring large intermediaries to: (i) establish an independent credit assessment function; (ii) involve senior management in implementing the credit assessment process; (iii) ensure the relevant committees have sufficient information on the credit risks posed to their firms; (iv) establish an appropriate oversight structure to ensure the credit assessment process is properly implemented; (v) avoid exposure to particular credit risks whenever the firm does not have the internal capability to independently and adequately assess the exposure; (vi) incorporate a wide variety of qualitative measures into robust credit assessment processes; and (vii) avoid mechanistically relying on external credit rating agency ratings.

View the report.

The US Securities and Exchange Commission issued (i) an advanced notice of proposed rulemaking, seeking public comment for new requirements for transfer agents and (ii) a concept release on the SEC's broader review of transfer agent regulation. Among other requirements, the ANPR proposes to impose on transfer agents revised registration and annual reporting requirements, and revised requirements relating to the safeguarding of funds and securities, antifraud requirements in connection with the issuance and transfer of restricted securities, and to impose new guidelines relating to cybersecurity and information technology.

The SEC concept release addresses a broader range of other issues and it is possible that the various proposals will be acted on separately by the SEC. Issues addressed in the concept release include the processing of book entry securities, recordkeeping issues, administration of issuer plans, outsourcing, the role of transfer agents to mutual funds, and crowdfunding.Comments on both the ANPR and the concept release must be submitted within 60 days of publication in the Federal Register.

View the SEC ANPR and concept release. 
 

The European Banking Authority published proposed Guidelines on compensation policies and procedures related to the sale and provision of retail banking products and services. The EBA is seeking to address the issues arising out of the recent cases on misconduct and mis-selling by staff in financial institutions where poor remuneration policies and practices have been identified as a root cause. The proposed Guidelines apply to the remuneration paid to staff employed by banks, credit intermediaries, payment institutions and electronic money institutions when selling mortgages, personal loans, deposits, payment accounts, payment services and/or electronic money. The proposed Guidelines set out the design of remuneration policies and practices, including prevention of conflicts of interest, using quantitative and qualitative criteria for determining variable remuneration and how the rights and interests of consumers should be taken into account. The EBA also proposes that remuneration policies and practices should be documented, and that such documentation should be retained for five years, be accessible to staff and made available to national regulators on request. Responsibility for complying with the Guidelines would rest with the management body of a firm. The consultation closes on March 22, 2016.
 
View the consultation paper.

The European Banking Authority published final Guidelines on sound remuneration policies and an Opinion on the application of proportionality to the remuneration provisions in the Capital Requirements Directive. The final Guidelines are applicable to banks and investment firms and cover all staff with particular aspects focusing on staff whose professional activities have a material impact on a firm's risk profile. The Guidelines will apply from January 1, 2017, a year later than originally intended. Therefore, firms do not need to amend their existing compensation practices for the 2016 performance year.  The Guidelines set out detailed requirements for remuneration policies, the related governance arrangements and processes for implementing remuneration policies, updating the guidelines on remuneration policies published by the Committee of European Banking Supervisors to take into account changes introduced by the revised CRD IV, technical standards on the identification of staff and on the instruments which can be used for variable remuneration, the EBA's opinion on the use of allowances and industry developments.

Read more.

The International Organization for Securities Commissions published a statement on addressing the regulation of crowdfunding and a report on its survey conducted on how crowdfunding is regulated in twenty-three IOSCO jurisdictions. The objectives of the statement and the report are to highlight emerging trends and issues in crowdfunding and to enhance IOSCO's understanding of how jurisdictions have adopted regulations on crowdfunding. Crowdfunding provides an alternative capital raising avenue, particularly for small enterprises and start-ups, which is beneficial in supporting economic growth but which may pose risks for investor protection. IOSCO's survey found that most jurisdictions had implemented regulations to address issues on conflicts of interest, data protection and fraud. IOSCO believes that more attention is required on the risk of default or failure of start-ups, potential failure of crowdfunding platforms, illiquidity, money laundering, fraud and terrorist financing as well as the suitability of any particular platform for an investor. IOSCO urges policy makers and regulators to consider the steps taken in some jurisdictions to address the risks of crowdfunding, including the imposition of registration requirements for funding portals, setting disclosure requirements for issuers and funding portals and requiring the appointment of a third party custodian to hold investor assets. In addition, the cross-border risks involved in crowdfunding should either be addressed by restricting cross-border fundraising or implementing a coordinated approach between relevant jurisdictions.

View the statement.

View the survey.

The European Commission launched a consultation which seeks to collect information on how institutional investors, asset managers and other service providers in the investment chain take into account, for the purpose of investment decisions, sustainability information and performance of companies or assets. The consultation is linked to the Commission's Communication on Long-Term Financing of the European Economy as well as the action plan for building a Capital Markets Union. The consultation is open until March 25, 2016.

View the consultation.

The European Banking Authority launched a consultation on proposed Guidelines on stress testing and supervisory stress testing. The proposed Guidelines cover: (i) internal stress testing by firms, providing detailed guidance for firms when designing and conducting a stress testing program; (ii) the assessment of firms' stress testing by national regulators with the aim of ensuring convergence in the context of the supervisory review and evaluation process; and (iii) supervisory stress testing. The proposed Guidelines provide common organizational requirements, methodologies and processes for firms performing internal stress tests as part of their risk management processes and common methodologies for national regulators when conducting supervisory stress tests but do not set methodologies for the EBA's stress testing in cooperation with national regulators. Once finalized, the Guidelines will replace the current guidelines issued by the Committee of European Banking Supervisors. The consultation is open until March 18, 2016. The EBA aims to publish the final Guidelines in Q2 2016 and expects that they will apply from Q4 2016.

View the proposed Guidelines.

The European Banking Authority published an Opinion, dated December 16, 2015, addressed to national regulators and the European Commission on the interaction of Pillar 1, Pillar 2 and combined buffer requirements and restrictions on distributions. The EBA considers that national regulators should ensure that the Common Equity Tier 1 capital that is used for calculation of the maximum distributable amount is limited to the amount not used to meet a firm's Pillar 1 and 2 own funds requirements. Also, national regulators should require firms to disclose MDA-relevant capital requirements. The EBA is also of the view that the Commission should review the MDA provisions of the Capital Requirements Directive, aiming to eliminate inconsistencies in the application of the provisions across the EU and should review the prohibition on distribution, in particular, as it relates to Additional Tier 1 instruments when no profits are made in a given year.

View the Opinion.

The Single Resolution Board announced the first members appointed to its Appeal Panel. The nominated members are: Ms Hélène Vletter Van Dort (Chair), Mr Yves Herinckx (Vice-Chair), Mr Kaarlo Jännäri, Mr Marco Lamandini, Mr Christopher Pleister. Ms Eleni Dendrinou-Louri and Mr Luis Silva Morais have been nominated as alternates to the Appeal Panel. The appointments are for a term of five years, starting on January 1, 2016. The Appeal Panel is established to hear appeals brought by individuals or legal persons, including resolution authorities, against a decision of the SRB that is either addressed, or of direct and individual concern, to that person.

View the announcement.

A Commission Implementing Directive on the procedures and requirements for protection of individuals that report an actual or potential infringement of the Market Abuse Regulation to a national regulator was published in the Official Journal of the European Union. The Implementing Directive sets out the procedures for reporting, record-keeping requirements, measures for the protection of whistle blowers that are working under a contract of employment and arrangements for the protection of personal data of whistle blowers. Member States must transpose the requirements of the Implementing Directive into their national laws by July 3, 2016 and apply the new legislation from that date. The Market Abuse Regulation sets out the EU requirements on insider dealing, the unlawful disclosure of inside information and market manipulation and will apply directly across the EU from July 3, 2016.

View the Implementing Directive.

The European Banking Authority published a report on its analysis and market practice assessment of synthetic securitization in Europe. The report makes recommendations for the European Commission's proposed legislative amendments to the Capital Requirements Regulation and proposed securitization regulation, which provide for the preferential regulatory treatment of simple, transparent and standardized securitizations. The EBA's analysis supports the approach taken by the Commission in its proposed securitization framework, which provides for a different regulatory treatment of on-balance sheet synthetic securitization positions retained by originator banks. The EBA concurs that the proposed framework should not be extended to all synthetic securitizations applicable to all investors across asset types. The EBA recommends that certain criteria be met for eligibility of balance sheet synthetic transactions, including requirements that originator banks should meet to transfer the risk of eligible transactions to public or private investors. In particular, the EBA advises the Commission to consider amending its proposal to include transactions in which private investors provide credit protection in the form of cash. The report follows the EBA's report in July 2015 on a qualifying framework for traditional securitization.

View the report.

View the Commission's proposed securitization framework.

The European Banking Authority published a report, dated December 15, 2015, on the necessity for adding stable funding requirements to the EU regulatory capital requirements framework. The Capital Requirements Regulation requires the EBA to report to the Commission on whether and how it would be appropriate to ensure that banks and investment firms use stable sources of funding and to provide an assessment of the impact of a stable funding requirement on the businesses and risk profiles of firms in the EU, the financial markets, the economy and trade financing, as well as potential methodologies for determining the amount of stable funding available to and required by firms. The mandate was included in the CRR in response to the Basel Committee on Banking Supervision's publication in 2010 of a net stable funding ratio (known as the NSFR) to be put in place by 2018. The NSFR requires firms to maintain a stable funding profile in relation to their assets and off-balance-sheet activities over a period of one year.

Read more.

The Committee on Payments and Market Infrastructures and the Board of the International Organization of Securities Commissions published proposed guidance on the Unique Product Identifier which will allow for the identification of OTC derivatives products that authorities require, or may require in the future, to be reported to trade repositories.  The UPI is made up of an OTC derivatives products classification system and an associated code (i.e. how the UPI will be represented in trade reports). A separate consultation will be launched on the code at a later date. Currently, OTC derivative trades are reported to 20 trade repositories authorized for some asset classes. However, in order to properly mitigate systemic risk and protect against market abuse, it is necessary for data across trade repositories to be aggregated so that national regulators have a comprehensive view of the OTC derivatives markets and trading activity. The CPMI and IOSCO have been tasked by the Financial Stability Board with developing global guidance on the harmonization of data elements reported to trade repositories, including a Unique Transaction Identifier and a UPI. The CPMI and IOSCO are proposing principles and high-level business specifications for the UPI as well as two approaches for the granularity of the UPI classification system. In particular, feedback is sought on potential implementation challenges. The consultation closes on February 24, 2016.

View the consultation paper.

The Basel Committee on Banking Supervision launched a consultation on the identification, assessment and measurement of step-in risk. The proposed framework would form the basis for identifying, assessing and addressing step-in risk that is potentially embedded in banks' relationships with shadow banking entities. The Basel Committee refers to step-in risk as the risk that a bank may provide financial support to an entity that is under financial stress beyond or without any contractual obligations to do so to protect itself from any adverse reputational risk that may result from its connection to the entity. The proposals only apply to unconsolidated entities (i.e. entities that are outside of the regulatory scope of consolidation). The proposed framework includes descriptions of the relationships and indicators that characterize such relationships between banks and shadow banking entities, such as capital ties, sponsorship, provision of financial facilities, decision-making and operational links. The Basel Committee proposes that any step-in risk that is identified could be addressed through prudential measures, such as through quantitative requirements or by bringing the relevant entity within regulatory consolidation. The consultation closes on March 17, 2016.

View the consultation paper.

The International Organization for Securities Commissions published a report on the existing tools available to fund managers for liquidity management in collective investment schemes. The report, which covers the frameworks in 26 jurisdictions, provides a global view of the tools available to fund managers, particular in extreme situations, and the funds to which those tools apply, including the availability of tools in particular jurisdictions, their use and effectiveness and any system-wide implications that the tools pose. The report is part of IOSCO's work on the collection of data about asset management activity. IOSCO is considering developing guidance on liquidity risk management that would go beyond its 2013 Principles of Liquidity Risk Management for Collective Investment Schemes, which would include stress testing.

View the report.

View the IOSCO Principles.

The UK Government launched a consultation on further proposals for implementing the Bank Recovery and Resolution Directive into UK law following the identification of a few changes that the Government believes will clarify and strengthen the UK's transposition of the BRRD. The proposals would amend the Banking Act 2009, the Financial Services and Markets Act 2000 and certain secondary legislation and a draft Order was published with the consultation paper.

Read more.

An amending Order was published which stops certain provisions of the Senior Manager & Certification Regime from coming into effect on March 7, 2016, the date from which the SM&CR becomes effective for banks, building societies, credit unions and investment firms designated by the Prudential Regulation Authority.  The provisions that will not come into effect on March 7, 2016 are: (i) the obligation on firms to notify the PRA or Financial Conduct Authority when it knows or suspects that a senior manager or certified person has failed to comply with the conduct rules; and (ii) the presumption of responsibility for senior managers. Certain changes to the regime have been proposed by the UK Government, including extending the regime to all financial services firms and replacing the presumption of responsibility with a duty of responsibility. It remains to be seen whether Parliament will approve those changes. In the meantime, the PRA advises firms to prepare for implementation of the regime on the basis that the above two provisions will not come into effect in March 2016.

View the Order.

View the PRA's related statement.

The European Securities and Markets Authority published a final report and final guidelines on the assessment of knowledge and competence of individuals providing investment advice or information about financial instruments, investment services or ancillary services to clients on behalf of investment firms. Under the revised Markets in Financial Instruments Directive, an investment firm is required to ensure that individuals giving investment advice or providing information about financial instruments, investment services or ancillary services to clients on its behalf have the necessary knowledge and competence to do so and to satisfy the firm's obligations on suitability, appropriateness and reporting and provision of information to clients. An investment firm may be requested to demonstrate that the requirements are met on request by its national regulator. National regulators must publish the criteria that will be used to assess such knowledge and competence. ESMA's guidelines, which apply to national regulators and investment firms, specify the criteria for the assessment of knowledge and competence, establishing the minimum standards that staff providing the relevant services should meet. The guidelines will come into effect on January 3, 2017.

View the guidelines.

The European Banking Authority published final draft Regulatory Technical Standards on the valuation of derivatives for the purpose of bailing in derivative liabilities. Under the Bank Recovery and Resolution Directive, a resolution authority may bail-in relevant derivative liabilities provided that the authority complies with certain conditions including exercising the bail-in power only upon or after closing out the derivatives and ensuring that derivatives subject to a netting agreement are bailed-in on a net basis following the terms of the netting agreement. Before exercising the bail-in power, a resolution authority is required to ensure that an independent valuation of the assets and liabilities of a firm is carried out. For derivative liabilities, the valuation will determine a value of those derivative liabilities at the moment of exercise of the resolution power. The EBA's final draft RTS provide a methodology for resolution authorities to follow when comparing the destruction in value that would arise from the close-out with the losses that those derivatives would incur in a bail-in, principles for determining the point in time at which the value of a derivative should be established and measures for establishing the value of classes of derivatives. The EBA has submitted the final draft RTS to the European Commission for endorsement. Member states are required to implement the bail-in tool by January 1, 2016.

View the final draft RTS.

The European Banking Authority published final draft Regulatory Technical Standards and final guidelines on the business reorganization plans that a firm that has been recapitalized using the bail-in tool is required to produce. Under the Bank Recovery and Resolution Directive, a firm that has been recapitalized through a bail-in must: (i) produce a reorganization plan that sets out how the firm will be restored to long-term viability; (ii) submit progress reports twice annually throughout the reorganization period. The BRRD requires the EBA to develop RTS on the minimum content of the business reorganization plans and progress reports and to issue guidelines for national regulators and resolution authorities to assess the reorganization plan. The final draft RTS require a business plan to identify and address the cause of the firm's failure, demonstrate that the firm can operate viably in the long-term, address shortcomings in the firm's business model (even if not related to the firm's failure), include financial performance projections with relevant milestones and indicators. The progress report should report on implementation of the reorganization plan and include proposed amendments to the plan, if necessary. The EBA's guidelines provide national regulators and resolution authorities with the means to assess whether the business reorganization plan is credible and realistic and consistent with other business plans prepared by the firm in parallel. Verification by independent entities, such as auditors, should be possible, where necessary.

View the final draft RTS and guidelines.

The European Banking Authority published final draft Regulatory Technical Standards specifying the information on financial contracts that a firm may be required to maintain. The Bank Recovery and Resolution Directive gives resolution authorities the power temporarily to suspend the termination rights of any counterparty to a contract with a firm that is under resolution. Both national regulators and resolution authorities may require a firm to maintain detailed records of financial contracts (generally, these are securities contracts, commodities contracts, futures and forwards contracts, swap agreements, inter-bank borrowing agreements) on whether or not they include suspensory provisions. The EBA's final draft RTS set out the minimum set of information on financial contracts that should be included in the detailed records held by a firm which includes information such as whether a contract includes contractual recognition of resolution powers, information on value and valuation, collateral, termination rights, maturity and netting arrangements. The RTS also prescribe the circumstances in which the requirement to hold such records should be imposed and take a wide approach by including all firms or entities that might be subject to resolution actions. The EBA considers that firms that would be placed into an insolvency procedure need not be included but the European authority does not prohibit national regulators or resolution authorities from imposing similar requirements on such firms, or any other firms.

View the final draft RTS.

The International Organization of Securities Commissions announced it appointed Paul Andrews as its new Secretary General, replacing David Wright from March 2016 for a three-year term.

View the press release.

The European Banking Authority published final draft Regulatory Technical Standards which set out the prudential regime for central securities depositories under the Central Securities Depositories Regulation. A distinction is made in CSDR between CSDs that offer banking-type ancillary services and which are also authorised as credit institutions (i.e. banks) and CSDs that are not permitted to offer ancillary banking services. The final draft RTS cover: (i) the capital requirements applicable to all CSDs; (ii) the additional risk-based capital surcharge which takes into account the risks, including intra-day credit and liquidity risks, that arise from the ancillary banking services of CSDs; and (iii) the framework and tools for monitoring, measuring, managing, reporting and disclosing the above-mentioned credit and liquidity risks. CSDs that carry out ancillary banking services will also need to comply with the Capital Requirements Regulation and the final draft RTS impose stricter requirements than those in CRR in some respects. The final draft RTS have been sent to the European Commission for endorsement. The CSDR, which introduces common standards for settlements across the EU, will apply directly across the EU from January 1, 2023 to transferable securities issued after that date and from January 1, 2025 to all transferable securities.

View the final draft RTS.

The Basel Committee on Banking Supervision published its third progress report on the adoption by banks of its Principles for effective risk data aggregation and risk reporting. The Principles must be implemented by global systemically important banks by January 1, 2016, and aim to strengthen risk data aggregation and risk reporting at banks so that risk management and decision-making practices are improved. The report details the progress that G-SIBs have made in order to comply with the Principles. The Basel Committee recommends that: (i) banks and national regulators should continue to promote understanding of the Principles; (ii) national regulators should conduct more in-depth/specialised examinations on data aggregation requirements to evaluate weaknesses; (iii) banks should clearly articulate risk data aggregation and risk reporting expectations, in line with their risk appetite in both normal and stress periods; (iv) banks should have appropriate governance arrangements in place to oversee manual processes; (v) banks should consider reducing the complexity of their systems to meet the data aggregation requirements; (vi) auditors should undertake an independent assessment of each bank's compliance with the Principles in early 2016, reporting any necessary remedial action to the bank's board; and (vii) banks that are unable to comply by the deadline should agree plans to do so with their national regulator. The Basel Committee also recommends that national regulators apply the Principles to domestic systemically important banks (known as D-SIBs) from three years after they have been identified as such.

View the report.

The European Commission published a proposed Regulation which would amend the Capital Requirements Regulation with regards to exemptions for commodity dealers. The CRR currently exempts commodity dealers from large exposures requirements and own fund requirements until December 31, 2017. That date was set on the basis that the Commission would have conducted a review of the prudential regime applicable to commodity dealers and to investment firms by the end of 2015 and, if appropriate, proposed a legislative regime adapted for the risks profile of commodity dealers and investment firms. The Commissions' review is still in progress. The Commission is therefore proposing that the CRR exemptions are extended until December 31, 2020 to allow time for work in this area to be completed and to avoid the need for relevant firms to temporarily comply with the full CRR requirements in 2018 before being subsequently moved to a tailored regime within two to three years.

View the proposed Regulation.

The Prudential Regulation Authority and the Financial Conduct Authority published their Policy Statements and final rules on the application of the UK Senior Managers and Certification regimes and new Conduct Rules to UK branches of EEA and non-EEA banks and PRA-designated investment firms. The PRA also published a related updated Supervisory Statement. Both of the regulators published near-final rules in August this year, pending legislation being adopted by Parliament which would formally extend the SM&CR to UK branches of such firms. That legislation has now come into force, allowing the regulators to publish their final rules. The PRA's final rules are the same as those published in August except for some minor corrections. The FCA's final rules for UK branches of EEA firms remain unchanged. The rules for UK branches of non-EEA firms have been amended following concerns about the wide extraterritorial reach of the FCA's proposed approach. The FCA will only apply the Certification regime and the Conduct Rules to individuals who perform significant harm functions for branches to individuals who are based in the UK. UK clients will no longer automatically be within scope. The FCA intends to keep the territorial scope of its rules under review and may amend the rules in the future if it considers it necessary to meet its objectives (although not before commencement of the regime in March 2016). The FCA has also confirmed that, in line with legislation, EEA firms that accept deposits or deal in investments as principal under a passport and which have a UK branch are caught by the SM&CR even if the firm undertakes deposit-taking a services passport and other (non-deposit-taking) activities through an establishment passport (i.e. if the UK branch does not undertake deposit-taking or proprietary trading).

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HM Treasury published the Payment Account Regulations together with an explanatory memorandum. The Regulations implement the Payment Accounts Directive which sets common standards for payment service providers across EU Member States. The three main policy objectives of the PAD are: (i) to improve transparency and comparability of payment account fees used on a daily basis for payment transactions (i.e. personal current accounts); (ii) to make it less burdensome for consumers to be able to move their current account from one payment service provider to another; and (iii) to ensure that EU residents have access to banking services and that a sufficient number of accounts that offer basic features are available. The new Regulations cover: (i) the obligations on payment service providers to enable consumers to make informed choices when choosing a payment account; (ii) non-discrimination in the provision of and access to payments accounts; and (iii) switching payments accounts and the facilitation of cross-border account opening for consumers. The Regulations will enter into force on September 18, 2016 except for those provisions related to the obligation of the Financial Conduct Authority to publish a list of the most representative services linked to a payment account and subject to a fee which will come into effect six months after the publication of that list.

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The European Commission published a report on the appropriateness of an extension of the exemption from the Market Abuse Regulation to certain public bodies and central banks of third countries. MAR exempts Member States, members of the European System of Central Banks, ministries and other agencies and special purpose vehicles of one or more Member States or persons acting on their behalf from the application of MAR to transactions, orders or behaviour that are undertaken in pursuit of monetary, exchange rate or public debt management policies. The Commission may extend that exemption to certain public bodies and central banks of third countries after assessing and reporting to the European Parliament and European Council on the appropriateness of such an extension. The Commission intends to extend the exemption under MAR to central banks and debt management offices of Australia, Brazil, Canada, Hong Kong SAR, India, Japan, Mexico, Singapore, South Korea, Switzerland, Turkey and the United States and to the central bank of China.

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The International Swaps and Derivatives Association, Inc., the Managed Funds Association and the Asset Management Group of the Securities Industry and Financial Markets Association announced that 25 buy-side firms had voluntarily committed to clearing their single-name credit default swap trades through central counterparties. Clearing of such trades will be the priority with existing positions being migrated over time. The firms are: AB, Anchorage Capital Group, Apollo Global Management, LLC, AQR Capital Management, LLC, BlackRock Inc., BlueMountain Capital Management, LLC, Brigade Capital Management, Citadel LLC, Claren Road Asset Management, LLC, Cyrus Capital Partners, LP, DCI, LLC., DW Partners, LP, Eaton Vance Management, Field Street Capital Management, LLC, Gracie Asset Management, Hutchin Hill Capital LP, Kingdon Capital Management, LLC, Marathon Asset Management, LP, MKP Capital Management, LLC, Och-Ziff Capital Management Group, PIMCO, Pine River Capital Management, Saba Capital Management, L.P., UBS O’Connor LLC and Zais Group, LLC.

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The Regulation setting out Implementing Technical Standards for currencies with constraints on the availability of liquid assets under the Capital Requirements Regulation was published in the Official Journal of the European Union. The CRR sets out a Liquidity Coverage Requirement which requires firms to hold liquid assets to maintain adequate levels of liquidity buffers to face any possible imbalances between liquidity inflows and outflows. The CRR allows firms to apply derogations where justified needs for liquid assets exist owing to the Liquidity Coverage Requirement, which exceed the availability of those liquid assets in certain currencies. The Regulation identifies the Norwegian Krone as a currency with constraints on the availability of liquid assets. The Regulation enters into force on January 5, 2016.

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The UK Chancellor of the Exchequer, George Osborne, announced that Dame Clara Furse and Richard Sharp had been re-appointed as external members to the Financial Policy Committee at the Bank of England. Their terms of appointment will now run until March 31, 2019.

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The European Banking Authority published final Guidelines on requirements for banks and certain investment firms to have sufficient information about, and to set limits on, their individual and aggregate exposure to shadow banking entities which carry out certain banking-like activities, such as lending, outside a regulated framework. The EBA is mandated to produce the Guidelines under the Capital Requirements Regulation which limits the exposure a firm can have to a single client or group of connected clients (more generally known as limits to large exposures). In order to prepare the Guidelines, the EBA collected data from 148 EU firms on their exposures to shadow banking entities, the results of which are published in a separate report. Both the Report and the Guidelines will help inform the European Commission's report on the appropriateness and impact of imposing such limits, which may be accompanied by a legislative proposal. The EBA Guidelines will apply from January 1, 2017.

View the Guidelines.

View the EBA's report.

The Financial Conduct Authority published proposals for implementing certain aspects of the revised Markets in Financial Instruments Directive, which together with the Markets in Financial Instruments Regulation is known as MiFID II. The revised MiFID must be transposed into the national laws of Member States whereas MiFIR is directly applicable across the EU. MiFID II is currently due to apply from January 3, 2017 although there have been discussions between the European authorities about possibly delaying this date. On the existing timeline, Member States must transpose the revised MiFID into their national laws by July 3, 2016.

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The Payment Systems Regulator published its first annual report on access and governance of payment systems. The report sets out the progress of operators of designated payment systems in achieving more open and flexible direct access to payment systems and making the governance of payment system operators more inclusive and transparent. The report states that operators could do more to enable access for smaller banks and non-bank payment service providers and must ensure that the views of those that rely on payment systems are represented in the decision making of operators. The PSR also reports that progress has been made so far on clearer and fairer requirements for direct access, transparency of payment system operator decisions and better representation of payment systems' users' views.

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The European Banking Authority launched a consultation on proposed draft Regulatory Technical Standards under the Capital Requirements Regulation on the assessment methodology national regulators should use when a firm applies for approval to calculate their own funds requirements using their internal models for one or more risk categories. In particular, the proposed draft RTS cover: (i) the methodology for national regulators to assess whether a firm complies with the requirements to use an Internal Model Approach for market risk; and (ii) the conditions under which national regulators assess the significance of the positions that will be included in the scope of an IMA. The proposed draft RTS are consistent with the RTS on the conditions for assessing materiality of extensions and changes to use market internal models, adopted by the European Commission in June 2015. Comments are due by March 13, 2016.

View the consultation paper.