The UK Competition and Markets Authority announced that it appointed Dr. Michael Grenfell to its board as the new Executive Director for Enforcement.

View the press release.

The Financial Stability Board announced a peer review on the implementation of its shadow banking framework, excluding money market funds. The review will assess the extent to which FSB‑member jurisdictions have adequately assessed shadow banking entities based on the economic functions that they undertake, adopted tools to mitigate any identified financial stability risks, implemented reporting requirements for public disclosure by shadow banking entities of certain risks and implemented arrangements, systems and processes for authorities to collect and analyze information about the risks that shadow banking entities pose. Questionnaires will be provided to FSB members for completion and to feed back into the review report, which will be published in early 2016. The FSB is also inviting financial market participants and stakeholders to comment by July 24, 2015, on means of updating the regulatory perimeter, types of information needed to assess shadow banking risks, methods for enhancing transparency of shadow bank entities’ risks and the design of policy tools to mitigate financial stability risks posed by shadow banking entities.

View the terms of reference for the peer review.

The European Securities and Markets Authority published a final report on the interoperability arrangements between EU‑based CCPs. The report is required under the European Market Infrastructure Regulation. Interoperability arrangements made between two or more CCPs enable a counterparty using one CCP to execute a trade with a counterparty that chooses to use a different CCP. The report, which describes current interoperability arrangements for different product types such as equities and government bonds recommends that the interoperability provisions in EMIR (which are currently limited to transferable securities and money‑market instruments only) are not yet extended to OTC derivatives, given the additional complexities involved in an interoperability arrangement between CCPs clearing OTC derivative contracts. The report does, however, recommend that the interoperability provisions in EMIR be extended to Exchange‑Traded Derivatives, as one interoperability arrangement already exists (between LCH.Clearnet Ltd and Oslo Clearing), as is the general framework for assessing the risk involved as a result. This proposal will next be considered by the European Commission and may prove to be controversial.

View the final report.

The Basel Committee on Banking Supervision published a report on the impact and accountability of banking supervision. The report analyzes how global supervisors define and evaluate the impact of their policies and actions and discusses: (i) supervisory trends and their development over time since the financial crisis; (ii) the objectives of supervision and how these are transformed into supervisory actions; (iii) developments in how to measure the impact of supervision through quality assurance mechanisms and feedback loops within the supervisory process; and (iv) internal and external accountability arrangements in the wake of the financial crisis.

View the consultation paper.

The European Securities and Markets Authority published Q&As on anti‑money laundering and terrorist financing in investment‑based crowdfunding platforms. The Q&As aim to encourage common supervisory approaches and consistent application of anti‑money laundering and terrorist financing rules to investment‑based crowdfunding platforms. The Q&As deal with questions related to the treatment of investment‑based crowdfunding under the Anti‑Money Laundering Directive, the differences in risk profiles of platforms operating inside or outside a regulatory regime or within the scope of MiFID, and how to mitigate risks.

View the Q&As.

The Basel Committee on Banking Supervision announced a review of the Credit Valuation Adjustment Risk Framework. The objectives of the review include ensuring that all important drivers of CVA risk and CVA hedges are covered in the Basel regulatory capital standard. Further, the review will align the capital standard with the fair value measurement of CVA employed under a number of accounting regimes and ensure consistency with the proposed revisions to the market risk framework under the Basel Committee’s Fundamental Review of the Trading Book.

View the consultation paper.

The Bank of England published a Policy Statement on the Financial Policy Committee’s powers over leverage ratio tools. The BoE was given powers of direction over leverage ratio requirements and buffers for banks, building societies and Prudental Regulation Authority‑regulated investment firms in April this year. The FPC intends to direct the PRA to apply: (i) a minimum leverage requirement immediately to UK Global Systemically Important Banks and other major domestic UK banks and building societies, and from 2018 (subject to a review in 2017) to all banks, building societies and PRA‑regulated investment firms; (ii) a supplementary leverage ratio buffer of 35% of corresponding risk‑weighted systemic buffer rates to UK G‑SIBs, phased in from 2016, and to domestically systemically important banks, building societies and PRA‑regulated investment firms from 2019; and (iii) a countercyclical leverage ratio buffer of 35% of a firm’s institution‑specific countercyclical capital buffer rate which will apply immediately to UK G‑SIBs and other major domestic UK banks and building societies and from 2018 (subject to a review in 2017) to all banks, building societies and PRA‑regulated investment firms, including any ring‑fenced banks, large building societies and any other banks that become subject to a systemic risk‑weighted capital buffer. The FPC cannot direct the means by which or the time within which the PRA must implement a direction but the PRA is now expected to take the proposals forwards. The implementation of the UK leverage ratio framework for G‑SIBs and other major domestic UK banks and building societies is ahead of the internationally agreed standards which are expected to introduce a minimum leverage ratio requirement by January 1, 2018. A consultation paper on implementation of the FPC’s direction is due to be published on July 10, 2015.

View the Policy Statement.

The Bank of England published its Financial Stability Report which identifies the main current risks in the UK financial system. The report sets out recommendations made by the Financial Policy Committee on Additional Tier 1 capital for the purposes of the minimum leverage ratio requirement. The report recommends to the Prudential Regulation Authority that AT1 capital should be counted towards Tier 1 capital only if the relevant capital instrument specifies a trigger event that occurs when the Common Equity Tier 1 capital ratio of the institution falls below 7%. The report also directs the BoE, PRA and Financial Conduct Authority to work with firms to complete cyber‑attack resilience assessments (also known as CBEST tests), adopt cyber‑resilience action plans and establish arrangements for CBEST tests to become regular cyber resilience assessments within the UK financial system. The report also refers to recommendations on the new UK leverage ratio framework which are discussed in further detail below.

View the report.

On June 25, 2015, the Federal Reserve Board issued a supervisory letter implementing changes to the "name check" process for banking applications. Under the previous process, a name check was conducted on all proposed officers and/or new principle shareholders of a supervised financial institution involved in an application under consideration by the Federal Reserve Board. The new name check process will only be conducted for individuals that will become principal shareholders or one of the top two policymakers of the organization upon consummation of the process. In the case of a group acting in concert, name checks generally will be initiated on all individual group members with five percent or greater individual ownership interests. A completed name check will remain current for five years; individuals and companies with current name checks will generally not be rechecked unless circumstances indicate otherwise. In addition, the Federal Reserve Board will obtain credit bureau reports in certain limited situations to supplement and corroborate financial information provided in the application process. The guidance is applicable to all financial institutions supervised by the Federal Reserve Board, including those with $10 billion or less in consolidated assets.

View the Federal Reserve Board supervisory letter.

The Federal Financial Institutions Examination Council – an interagency body composed of the US Board of Governors of the Federal Reserve System, the FDIC, the US National Credit Union Administration, the US Office of the Comptroller of the Currency, and the US Consumer Financial Protection Bureau – announced its release of a Cybersecurity Assessment Tool. The tool, together with other resources made available by the FFIEC to financial institutions, is available for all financial institutions regardless of asset size and is intended to aid senior management and boards of directors of financial institutions to assess cybersecurity risk and preparedness.
 

View the Federal Reserve Board press release.

View the cybersecurity assessment tool.
 

The European Securities and Markets Authority published final draft implementing technical standards and Regulatory Technical Standards on requirements for: (i) the authorization of investment firms, including template forms; (ii) requirements for passport notification, including template forms and procedures; (iii) information for registration with ESMA of third country firms; (iv) the format of information to be provided by third country firms to their EU clients on the submission of disputes to the jurisdiction of a court or arbitral tribunal in a Member State; and (v) cooperation between national regulators including the exchange of information. ESMA is required to prepare the ITS and RTS under the Markets in Financial Instruments Regulation and Directive, which will apply from January 3, 2017. ESMA will provide the remaining technical standards to the European Commission before the end of 2015. 

View the report.

The European Securities and Markets Authority published proposed draft Regulatory Technical Standards on the buy‑in process, including the timeframe for delivery of financial instruments which ESMA is required to prepare under the EU Central Securities Depositories Regulation. The CSDR came into force on September 17, 2014. ESMA consulted in December 2014 on the buy‑in process, noting that there is currently no uniform approach to buy‑in by central securities depositories, CCPs and trading venues. Feedback to the consultation suggested that buy‑in should be executed by a bank or execution dealer that was not connected to the parties in the failed transaction. The current consultation therefore focuses on which entity should be responsible for operating the buy‑in process for OTC transactions that are not centrally cleared. ESMA seeks feedback on three proposed options: trading level execution, trading level with fall‑back option execution and CSD participant level execution. Responses to the proposals are due by August 6, 2015. ESMA must provide all of the final draft RTS under the CSD to the European Commission by the end of September 2015.

View the consultation paper.

The Board of the International Organization of Securities Commissions approved a project specification for its Committee 6 on Credit Rating Agencies. The goal of the project is to help the Board gain an improved understanding of the credit rating industry as well as CRA products other than those that are disclosed to subscribers, such as private ratings, confidential ratings, scoring and other tools that can be used for risk assessments. The collected data will aid discussions between C6 members, issuers and users of other CRA products and other parties.

View the questionnaire.

View the press release.

The Payment Systems Regulator published the final terms of reference for its market review into the ownership and competitiveness of the UK payments system infrastructure. The review aims to ascertain whether current infrastructure services are effective for service users and able to support new developments and innovations. The review focuses in particular on interbank payment systems BACS, FPS and Link, and is based around the seven following questions: (i) whether there is effective competition in the provision of infrastructure services in interbank payments; (ii) whether current ownership arrangements of infrastructure providers affect competition; (iii) whether there are any barriers to effective competition; (iv) what the likelihood is of entry or expansion in respect of provision of infrastructure services; (v) whether there are any efficiencies resulting from the present ownership arrangements; (vi) how demand affects competition in the provision of infrastructure services; and (vii) what the benefits of greater levels of competition might be. The review will aim to address any concerns identified with a view to publishing new directions, recommendations or guidance if necessary, as well as encouraging further industry initiatives and self-regulation if needed. The PSR welcomes views on the key questions outlined in the terms of reference and aims to publish its final report in the second quarter of 2016.

View the terms of reference.

The Board of Supervisors of the European Securities and Markets Authority has appointed the following individuals as chairs of its standing committees: (i) Lourdes Centeno to chair the Review Panel; (ii) Hannelore Lausch to chair the Corporate Reporting Standing Committee; (iii) David Lawton to chair the Market Data Standing Committee; (iv) Elizabeth Roegele to chair the Secondary Markets Standing Committee; (v) Jean-Paul Servais to chair the Financial Innovation Standing Committee; and (vi) Martin Wheatley to chair the Investor Protection and Intermediaries Standing Committee. 

View the press release.

The International Organization of Securities Commissions published proposed recommendations and statements of practice on fees and expenses of investment funds. The recommendations and statements of practice are intended to update the 2004 report on International Regulatory Standards on Fees and Expenses which provided a set of international standards of best practice for collective investment schemes and regulators to consider. The proposed recommendations and statements of practice cover issues such as types of permitted fees and expenses, performance-related fees, disclosure of fees and expenses, transaction costs and hard and soft commissions on transactions. The report is aimed at funds whose shares or units may be sold to retail investors and includes open-ended funds, closed-ended funds whose shares are traded in the securities market, unit investment trusts and contractual models. The proposals are open for comment until September 23, 2015. 

View the report.

The Financial Conduct Authority issued an interactive discussion paper to start a debate and encourage firms to deliver smarter communications to consumers in more effective ways. The discussion paper states that for a market to perform well, engaged and informed consumers are needed. The FCA recognizes that some methods of communication can overwhelm, confuse and even deter consumers from making effective choices about financial products and services. The FCA is committed to ensuring that firms operate with due regard for their consumers, that communications are not misleading and that communications are transmitted in a clear and fair way. The FCA also published research alongside the discussion paper. Responses to the discussion paper are due by September 25, 2015.

View the discussion paper and research.

The European Systemic Risk Board published a report on misconduct risk in the banking sector. The report analyses misconduct risk in the banking sector from a macroprudential angle and makes the following recommendations: (i) prudential and conduct regulators should continue to impose requirements on banks that limit the opportunities for misconduct; (ii) coordination and transparency between regulators at an international level should be improved, including preparation of a set of principles for authorities to follow where action against a bank in one jurisdiction may have systemic implications in another jurisdiction; (iii) extension of the legal entity identifier scheme to a wider range of counterparties so that banks can determine which entities are subject to financial sanctions; (iv) the European Supervisory Review and Evaluation Process taking into account the systemic impact of potential misconduct; and (v) inclusion of potential misconduct risks in future EU-wide stress tests. 

View the report.

The Payment Systems Regulator issued a call for input on card payment systems. The PSR seeks views on issues related to payment systems in the UK and in particular on interbank payment systems. The PSR is interested in hearing about the impact of new EU regulations which introduce new rules and implement caps on interchange fees, and the effect that these regulations might have on the way in which the UK card payment systems operate. The call for input also wishes to obtain views on general trends within card payment systems and gather information on how the interests of service users are considered in decision making. Responses to the call for input are due before July 31, 2015. 

View the call for input.

The Prudential Regulation Authority and the Financial Conduct Authority launched a consultation on proposals to reform the Credit Unions Sourcebook in the Handbook. The PRA intends to replace the current Credit Unions Sourcebook that was inherited from the Financial Services Authority with a new Credit Unions Rulebook in the PRA Rulebook which will focus on the safety and soundness of credit unions and will reflect the now broader range of financial services offered by credit unions. The FCA intends to replicate many of the provisions of the Credit Unions Sourcebook. The consultation closes on September 30, 2015. 

View the consultation.

The Monetary Authority of Singapore released its Consultation Paper on Proposed Enhancements to Resolution Regime for Financial Institutions in Singapore.  In the paper, MAS proposed enhancements to the resolution regime in Singapore by strengthening its powers to resolve distressed institutions while maintaining continuity of their critical economic functions. Among other topics, the policy proposals cover: (i) recovery and resolution planning; (ii) temporary stays and suspensions; (iii) statutory bail-in powers; (iv) cross-border recognition of resolution actions; (v) creditor safeguards; and (vi) resolution funding. The proposed policy changes will be introduced primarily through amendments to the MAS Act, supported by the necessary regulations. MAS will also consult on the legislative amendments, after considering the feedback received on the policy proposals in this consultation.  The submission deadline for comments on the proposal is July 22, 2015.

View the consultation paper.

The final guidelines on periodic information to be submitted by Credit Rating Agencies to the European Securities and Markets Authority were published on June 23, 2015. The guidelines apply to CRAs registered in the EU, but not to certified CRAs. They set out the information that CRAs should submit to ESMA on a quarterly, semi-annual and annual basis, including for the calculation by ESMA of supervisory fees and CRA market share. The guidelines will apply from August 23, 2015.

View the final guidelines.

The European Banking Authority published its final draft Implementing Technical Standards under the Capital Requirements Regulation, amending the existing ITS on supervisory reporting on the Liquidity Coverage Ratio. The final draft ITS make significant changes to the existing LCR reporting templates and a large number of new data items need to be introduced further to the requirements of the LCR delegated regulation published in the Official Journal of the European Union in January 2015. The changes include new templates and instructions for banks on capturing and reporting all necessary LCR items. The new templates cover liquid assets, outflows, inflows, collateral swaps and calculation of the LCR. The new instructions will only apply to banks – investment firms will continue to use current instructions and templates, at least for now. 

View the ITS.

The Prudential Regulation Authority and Financial Conduct Authority issued a joint Policy Statement on new remuneration rules to strengthen the alignment of risk and reward,. The changes to the PRA Rulebook and FCA Handbook will apply to banks, building societies, PRA designated investment firms as well as UK branches of non-EEA headquartered firms. The new rules apply to all Material Risk Takers and Senior Managers covered by the incoming Senior Managers Regime which takes effect next year. The changes include: (i) extending deferral periods for Senior Managers to no less than seven years, with no vesting period prior to the third anniversary of the award and vesting no faster than on a pro-rata basis; (ii) extending deferral periods for all other MRTs to no less than five years, with vesting no faster than pro-rata from one year (PRA only requirement); (iii) clarifying that the rule that no variable remuneration should be paid to the management body of a firm which receives exceptional government support unless justified applies to all discretionary payments but would not apply to firms receiving emergency liquidity assistance; (iv) a new FCA rule requiring firms to apply clawback where there is misconduct or risk management failures up to seven years from the date of a variable remuneration award (the PRA implemented the same rule from January 1, 2015); and (v) extending the clawback period by up to three years, in addition to the seven years for PRA-designated Senior Managers where there are outstanding internal or regulatory investigations at the end of the normal seven-year clawback period. The final rules on clawback and deferrals will apply to variable remuneration awarded for performance periods beginning on or after January 1, 2016. The remainder of the new rules will apply from July 1, 2015.

View the Policy Statement.

The US Commodity Futures Trading Commission’s Division of Market Oversight published an updated Guidebook and Appendices for Part 20 Reports, providing guidance and instructions for the submission of large swaps trader reports to the CFTC in accordance with Part 20 of the CFTC regulations. Among other things, the Part 20 Guidebook includes instructions on reporting formats and record layouts for submitting position reports and examples for converting swaps into futures equivalent units as required under Part 20.

View the CFTC Guidebook for Part 20 Reports.

The Basel Committee on Banking Supervision released final Net Stable Funding Ratio disclosure standards. The NSFR was introduced by the Basel Committee to reduce funding risk over a period of one year by requiring banks to fund their activities with sufficiently stable sources to mitigate the risk of future funding stress. The NSFR and the Liquidity Coverage Ratio are intended to increase a bank's resilience to liquidity shocks, ensure more stable funding and enhance liquidity risk management. Similar to the LCR disclosure framework, the goal of the NSFR disclosure standards is to improve transparency of funding requirements and reduce uncertainty in the markets as the NSFR is implemented. The NSFR disclosure requirements are applicable to internationally active banks on a consolidated basis although jurisdictions may choose to apply the requirements to other banks. Banks will be required to publish their NSFR disclosures at the same time as they publish their financial statements, either within those statements or linked to their websites. Banks will also need to make archived disclosures publicly available on their websites for a retention period to be determined by national regulators. The NSFR disclosure requirements will be adopted in parallel to the NSFR and banks will be required to comply with the new disclosure requirements from the date of the first reporting period after January 1, 2018.

View the press release.

View the final standards.

The Federal Reserve Board announced that Brian F. Madigan will become the new secretary of the Federal Open Market Committee and deputy director of the Federal Reserve Board’s Division of Monetary Affairs.

View the Federal Reserve Board press release.

An Amending Regulation which amends the Regulatory Technical Standards on assessing the materiality of extensions and changes of internal approaches when calculating own funds requirements for market risk was published in the Official Journal of the European Union. The Amending Regulation adds standards to the original RTS on the conditions for assessing materiality of extensions and changes to Internal Model approaches used for the calculation of own funds requirements for market risk. The amendments mean that all of the provisions regulating extensions and changes to internal approaches are set out in a single legal text. The original RTS only included provisions for the Internal Rating Based Approach and the Advanced Measurement Approaches used for calculating capital requirements for credit and operational risk. The Amending Regulation enters into force on July 9, 2015.

View the Amending Regulation.

The European Supervisory Authorities published their second consultation on draft regulatory technical standards on risk mitigation techniques for OTC derivatives not cleared by a CCP. Under the European Market Infrastructure Regulation, counterparties to uncleared OTC derivative transactions are required to implement risk mitigation techniques to reduce counterparty credit risk. This second consultation follows the proposals published in April 2014 and seeks to address the issue of how the requirements would impact firms subject to differing requirements across jurisdictions. The second consultation seeks feedback on a narrower set of issues, including: (i) the treatment of non-financial counterparties established outside of the EU; (ii) the timing of calculation, call and delivery of initial and variation margin; (iii) unintended consequences that might arise due to the design or implementation of initial margin models; (iv) the requirements for trading relationship documentation; (v) the treatment of FX mismatch between collateral and OTC derivatives; (vi) whether allowing cash posted as initial margin to be re-invested will alleviate concerns that the ban on rehypothecation would result in a de facto ban of cash as initial margin; (vii) whether replacing the requirement to obtain legal opinions on the segregation of initial margin with a requirement for counterparties to conduct an internal assessment of the reliability and enforceability of agreements in each jurisdiction is sufficient to ease the burden on counterparties; and (viii) the revised regime for units in UCITS as eligible collateral. Responses to the consultation are due by July 10, 2015. The revised international timeline would apply.

View the Consultation paper.

The Board of Governors of the Federal Reserve System adopted a final rule amending Regulation D (Reserve Requirements of Depository Institutions), changing the calculation of interest payments on certain balances maintained by eligible institutions at Federal Reserve Banks. In contrast to the previous rule, which based interest payments on the average rate over the two-week reserve maintenance period, the final rule bases interest payments on a daily rate. The amendment is intended to enhance the effectiveness of changes in such rates of interest in moving the Federal funds rate into the target range established by the Federal Open Market Committee, especially when changes in those rates do not coincide with the beginning of a maintenance period. The amendments to Regulation D will be effective July 23, 2015.

View text of amended Regulation D.

The European Securities and Markets Authority published a letter, dated June 17, 2015, from it to the European Commission that informs the Commission that ESMA will be providing the technical standards due under the Central Securities Depositories Regulation in September 2015. The original due date for delivery of the technical standards was June 18, 2015. The delay to delivery of the standards is due to the European Commission’s Legal Services undertaking an early review of the standards to ensure conformity and consistency of EU legislation. There is not expected to be a delay in adoption by the European Commission of the technical standards under CSDR. The CSDR introduces common standards for settlements across the EU, such as the harmonization of the rules governing central securities depositories which operate the infrastructures enabling settlement, and the timing of securities settlement in the EU. The CSDR 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. Certain provisions will only apply from the date of entry into force of the relevant delegated act adopted by the Commission under the CSDR.

View ESMA's letter.

The Council of the European Union and the European Parliament announced that they had reached agreement on the text of the proposed Regulation on Reporting and Transparency of Securities Financing Transactions, known as SFTR. 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, once finalized, will require: (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 politically agreed SFTR must be technically finalized before the official legal text can be adopted by the European Parliament, which is currently scheduled for October 2015.

View the European Council's press release.

View the European Parliament's press release.

The International Organization of Securities Commissions published a report on credible deterrence in the enforcement of securities regulation. With the objective of promoting awareness of deterrence, the report sets out the following as factors that may lead to credible deterrence of misconduct in the securities and investment markets if adopted by regulators: (i) legal certainty of the consequence of misconduct; (ii) detecting misconduct by being well connected and getting the right information; (iii) co-operation and collaboration between regulatory authorities; (iv) bold and resolute enforcement in investigations and prosecution of misconduct; (v) strong punishments which ensure that there is no profit from misconduct; (vi) promoting public understanding; and (vii) good regulatory governance.

View the report.

A regulation which amends the regulatory technical standards for own funds requirements was published in the Official Journal of the European Union. The amending regulation aims to ensure a harmonized approach across the EU to the deduction from own funds items of indirect and synthetic holdings in firms' own funds instruments and indirect and synthetic holdings in financial sector entities. The amending regulation adds provisions to the original RTS which: (i) explain what intermediate entities mean for the purpose of deducting holdings in financial sector entities held indirectly through intermediate entities; (ii) expand upon the different investments which should be considered as synthetic holdings and the amount to be deducted from Common Equity Tier 1 items in each case; (iii) set out the calculation for firms to determine the percentage held indirectly in a financial sector entity; (iv) include criteria required for indices to be qualify as broad market indices; and (v) explain the calculation of minority interests. The amending regulation enters into force on July 7, 2015.

View the amending regulation.

The Financial Conduct Authority issued a call for input, asking two specific questions on digital and mobile solutions for financial services, so that it may obtain market views on: (i) specific UK or EU rules and policies that may currently restrict the development of new and innovative products; and (ii) rules and policies that should be introduced to facilitate innovation in this field. The FCA is asking for specific examples, taking into account both UK and EU perspectives. The call for input also provides a summary on the FCA’s considerations related to the digital and mobile space to date, such as the demand for the regulation of digital currencies and concerns about regulatory requirements creating lengthy customer terms and conditions that are deemed not to be appropriate for digital and mobile solutions. Responses to the Call for input are due by September 7, 2015.

View the call for input.

The International Organization for Securities Commissions issued a press release further to its recent annual conference, reporting that important organization and policy issues have been discussed, including IOSCO’s strategic direction to 2020 as well as its action plans. IOSCO aims to reinforce its position as a global reference for securities regulation and aims to implement 43 new initiatives encompassing six priority areas: (i) research and risk identification; (ii) standard setting and developing guidance; (iii) implementation monitoring; (iv) capacity building; (v) co-operation and information exchange; and (vi) collaboration and engagement with other international organizations.

View the press release.

The US Federal Deposit Insurance Corporation approved a Notice of Proposed Rulemaking and request for comment on proposed refinements to the deposit insurance assessment system for small insured depository institutions that have been federally insured for at least five years (referred to as “established small banks”). The FDIC is proposing to refine the deposit insurance assessment system by: (i) revising the financial ratios method so that it would be based on a statistical model estimating the probability of failure over three years; (ii) updating the financial measures used in the financial ratios method consistent with the statistical model; and (iii) eliminating risk categories for established small banks and using the financial ratios method to determine assessment rates for all such banks (subject to minimum or maximum initial assessment rates based upon a bank’s composite rating). The FDIC proposes that the refinements would become operative the quarter after the reserve ratio of the Deposit Insurance Fund reaches 1.15 percent. and that a final rule would go into effect the quarter after a final rule is adopted; however, as stated above, the proposed amendments would not become operative until the quarter after the DIF reserve ratio reaches 1.15 percent.
 

View the FDIC press release.

View the Noticed of Proposed Rulemaking.

The FDIC proposed an amendment to the methods used by the FDIC in assessing small banks for deposit insurance. Under the proposal, only banks with less than $10 billion in assets that have been insured by the FDIC for at least five years would be affected. Specifically, the FDIC will (i) revise the financial ratios method to be based on a statistical model estimating the probability of failure over three years; (ii) update the financial measures used in the financial ratios method to be consistent with the statistical model; and (iii) eliminate risk categories for established small banks and use the financial ratios method to determine assessment rates for all such banks. As the proposal seeks to be revenue neutral, the aggregate assessment revenue collected from small banks affected by the revisions is expected to remain approximately the same as it would have been otherwise. To assist banks in understanding the potential effect of the proposed rule and in estimating assessment rates under the proposal, the FDIC has published an online assessment calculator. Comments on the proposal are due within 60 days from publication of the proposed rule in the Federal Register.

View the notice of proposed rulemaking.

View the proposed assessment calculator.

View statement by FDIC Chairman, Martin J. Gruenberg.

The Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued final revisions to the regulatory capital rules adopted in July 2013. The final rule is applicable to large, international banking organizations that calculate their regulatory capital ratios using the advanced approaches rule (generally, institutions with more than $250 billion in total consolidated assets or more than $10 billion in total on-balance sheet foreign exposures). The final rule substantially adopts the changes to the rule as proposed on December 18, 2014, and corrects and updates certain aspects of the advanced approaches rule, including the calculation requirements for risk-weighted assets for banking organizations using the advanced approaches method. The revisions also enhance the consistency of the advanced approaches rule with international capital standards. The final rule will be effective October 1, 2015.

View the final rule.

The Federal Reserve Board issued a public statement regarding AIG and the recently issued United States Court of Federal Claims decision in Starr International Company, Inc. v. The United States. In its statement, the Federal Reserve Board stated that its actions during the bailout of AIG during the financial crisis were “legal, proper and effective.” In the decision, the United States Court of Federal Claims found in favor of Starr International Company, Inc. on a portion of its claim against the United States under the Fifth Amendment, but ultimately did not award any damages. The opinion strongly criticized many of the US government’s actions with respect to the assistance it provided AIG in 2008 and the years following. Ultimately, the Court held that no damages were available to the shareholders, because they were in fact in a better position than they would have been had the US government not intervened and AIG had filed for bankruptcy.

View Federal Reserve Board press release.

The European Banking Authority published two final draft Implementing Technical Standards under the Capital Requirements Regulation on the leverage ratio for EU firms with regards to disclosure and supervisory reporting. These include amendments and updates to templates used for supervisory reporting and instructions to update the leverage ratio disclosure and reporting framework. The final draft ITS on reporting aim to encourage the harmonization of reporting and disclosure of the leverage ratio across the European Union, as consistent reporting requirements in all member states facilitate the comparability of data as well as cross-border supervision. The final draft ITS will enter into force following their publication in the Official Journal of the European Union.

View final draft ITS.

View final draft ITS 2.

The Financial Conduct Authority published its Policy Statement and final rules on the restrictions on the retail distribution of contingent convertible securities, known as CoCos, and mutual society shares. The FCA announced a temporary ban on the retail distribution of CoCos, which entered into force on October 1, 2014. The final permanent rules restricting distribution of CoCos to retail clients will come into effect on October 1, 2015 and the rules on mutual society shares will come into effect on July 1, 2015.

View the FCA's Policy Statement.

The US Securities and Exchange Commission announced that it is seeking public comment on the listing and trading of new, novel or complex exchange-traded products (“ETPs”). Specifically, the request deals with key issues that arise when market participants seek an exemption in order to trade a new ETP or when a securities exchange is looking to establish standards for the listing of new ETPs. ETPs have become an important investment vehicle to market participants. Given the significant increase in the number and complexity of new products, the SEC has determined that broad public input is necessary regarding certain issues, including arbitrage mechanisms and market pricing for ETPs, legal exemptions and other regulatory positions related to the trading of ETPs and securities exchange listing standards for ETPs. The request also solicits comment on how market professionals sell ETPs, especially to retail investors, and on investors’ understanding of the nature and use of ETPs. The public comment period will remain open for 60 days following publication of the comment request in the Federal Register.

View the press release.

View the request for comment.

The US federal agencies responsible for implementing the Volcker Rule (the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission) issued two new Volcker Rule Frequently Asked Questions. The FAQs provide guidance regarding the application of covered funds exclusions to foreign public funds and joint ventures.

FAQ 14 generally provides that foreign public funds sponsored by banking entities will not themselves be treated as banking entities even if controlled by a foreign banking entity though means other than share ownership. FAQ 15 generally emphasizes that joint ventures must be engaged in business activities, as opposed to investing in securities or other financial instruments, in order to be exempt as a joint venture.

View FAQ 14.

View FAQ 15.

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions published the second report on Level 1 assessments of implementation monitoring of the Principles for Financial Market Infrastructures. Level 1 assessments are based on self-assessments by individual jurisdictions on how they have adopted the PFMIs through legislation, regulations and other policies. The PFMIs are international standards for payment, clearing and settlement systems and trade repositories aimed at ensuring that such
infrastructure is robust and able to withstand financial stability shocks. Level 1 assessments will next be undertaken in 2016.

View the report.

The Bank of England announced an Open Forum, that will take place in autumn this year, to assess the financial regulatory reforms affecting the Fixed Income, Currency and Commodities markets that are already implemented or in train. Alongside the announcement, the Bank published a paper detailing its analysis of the short fallings of the FICC market, issues with its own frameworks and operating procedures, measures to rectify those failings and the difficulties that remain. Further details of the Open Forum will be published in due course. In the meantime, stakeholders are invited to register their interest in attending the event through the Bank of England’s website.

View the announcement.

View the related document.

The final report of the UK Fair and Effective Markets Review was published. The report includes an analysis of the causes of recent misconduct in the Fixed Income, Currency and Commodities markets, an evaluation of the impact of related reforms that have been implemented or are otherwise in progress and recommendations to enhance the fairness of the FICC markets. The recommendations will need to be implemented by public authorities and market participants domestically although several will require international discussions and coordination to implement. The recommendations to be implemented domestically include: (i) extending the UK criminal sanctions regime for market abuse by including a wider range of FICC markets, lengthening the maximum sentence from seven to ten year’s imprisonment and creating a regime for spot FX (the latter would be a civil and criminal regime for market abuse); (ii) extending certain elements of the Senior Managers and Certification regimes to a wider range of regulated firms that participate in the FICC markets; (iii) establishing a new FICC Market Standards Board; (iv) improving awareness of the application of competition law to the FICC markets; (v) developing new training and qualification standards; (vi) and requiring regulatory references for individuals. Recommendations requiring international coordination include:
(i) developing globally agreed common standards for trading practices in FICC markets; (ii) agreeing a single global FX code; (iii) considering how to ensure benchmark administrators publish consistent self-assessments; and (iv) examining means to improve the alignment of remuneration and conduct risk. A report on implementation progress will be published by June 2016.

View the final report.

The US Consumer Financial Protection Bureau published a rule that for the first time permits CFPB oversight over larger non-bank auto finance companies. The agency’s Supervisory and Examination Manual has also been updated to guide examiners who are monitoring compliance by auto finance companies with federal consumer financial laws (e.g., the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibition on unfair, deceptive or abusive acts or practices).

The final rule extends the CFPB’s current oversight of auto financing at the largest banks and credit unions to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases in a year. The final rule also defines additional automobile leasing activities for coverage by certain consumer protections of the Dodd-Frank Act. While the CFPB has finalized the rule largely as proposed in September 2014, the final rule broadens the category of transactions involving asset-backed securities that are not counted toward the 10,000 transaction threshold and slightly modifies the definition of refinancing for the purpose of the threshold. 

The CFPB rule will take effect 60 days after publication in the Federal Register.

View the CFPB press release.

View the Final Rule.

View the Examination Procedures for Auto Finance.

The European Banking Authority published technical advice on the target level and initial period for contributions to the Single Resolution Fund under the Single Resolution Mechanism. The EBA’s advice was requested by the European Commission to assist it in developing legislation which specifies criteria for: (i) the spreading out in time of the contributions to the SRF; (ii) determining the number of years by which the initial period for reaching the target level can be extended; and (iii) establishing the annual contribution when the available financial means of the SRF falls below its target level after the initial period. The SRM and the SRF provide for the resolution of credit institutions and certain investment firms established in Member States within the Eurozone or in Member States that participate in the Banking Union. The SRF will support resolution measures for those banks and investment firms and will be financed by bank levies raised at national level. Ex ante contributions by those firms must be made to ensure that the SRF reaches a level of one per cent of the protected deposits of all banks within the Banking Union within eight years. The SRM and SRF are due to come into effect from January 1, 2016.

View the EBA's advice.

Several US federal financial regulatory agencies (including the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency and the Securities and Exchange Commission) issued a final interagency policy statement creating joint standards to assess the diversity policies and practices of entities they regulate, as required by Section 342 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. 

Similar to the proposed standards, the final standards provide regulated entities with a framework for strengthening their
diversity policies and practices. This framework includes an organizational commitment to diversity, workforce and employment practices, procurement and business practices and practices to promote transparency of organizational diversity and inclusion within the entities’ US operations. 

The final interagency policy statement is effective on publication in the Federal Register.

View the press release.

View the interagency policy statement.