The US Consumer Financial Protection Bureau announced that it is considering proposing rules that would require lenders to ensure that consumers can repay their loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts in ways that pile up excessive fees. The consumer protections being considered would apply to payday loans, vehicle title loans, deposit advance products and certain high-cost installment loans and open-end loans. The CFPB published an outline of the proposals under consideration in preparation for convening a Small Business Review Panel to gather feedback from small lenders, which is the next step in the rulemaking process.

View a fact sheet summarizing the proposals under consideration.

View an outline of the proposals under consideration.

The US Securities and Exchange Commission proposed rule amendments to require broker- dealers trading in off-exchange venues to become members of a national securities association. The amendments would seek to heighten regulatory oversight of active proprietary trading firms. The proposed amendments to Rule 15b9-1 under the Exchange Act of 1934 would narrow the current exemption available to certain broker-dealers from membership of a national securities association if the broker-dealer is a member of a national securities exchange, carries no customer accounts and has annual gross income of no more than $1,000 that is derived from securities transactions effected otherwise than on a national securities exchange of which it is a member. The exemption was originally tailored to exchange specialists and other floor members that might need to utilize limited hedging or other off-exchange activities secondary to their floor-based business. The proposed amendments would also update the exemption that permits off-exchange transactions necessary to comply with the regulatory requirements preventing trade-throughs. The public comment period on the proposed rule amendment will last 60 days following its publication in the Federal Register.
 

View the proposed rule.

The SEC adopted final rules to allow smaller companies better access to capital and provide investors with more investment choices. The new rules update and expand Regulation A, an existing exemption from registration for smaller issuers of securities and will enable smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements. The rules are mandated by Title IV of the Jumpstart Our Business Startups Act and will attempt to provide investors with more investment choices, especially among smaller companies. The rules will be effective 60 days after publication in the Federal Register.

View the Final Rules.

The UK Payment Systems Regulator published the regulatory framework for payment systems in the UK which sets out the PSR’s approach to regulation of payment systems and related industry, work programme regulatory tools and guiding principles. The new PSR is fully operational as of April 1, 2015. Two market reviews were announced alongside the publication of the regulatory framework. The first review is into the ownership and competitiveness of payment systems infrastructure which will look into the ownership of a small number of banks of both BACS, Faster Payments Services and LINK payment systems and the central infrastructure for those systems, VocalLink. The second review is into the supply of indirect access to payment systems which is provided only by Barclays, HSBC, Lloyds and RBS. The PSR is seeking comments on the scope of the reviews with a view to finalizing the terms of reference for each review by the end of May at which time more detailed timetables will be available.

View the regulatory framework.

UK legislation was enacted which gives the Bank of England's Financial Policy Committee power to issue directions to the Prudential Regulation Authority and the Financial Conduct Authority for certain macro-prudential measures. The FPC will be able to give a direction to (i) specify a minimum leverage ratio for UK banks and PRA-designated UK investment firms; (ii) require UK banks and PRA-designated UK investment firms for which the PRA sets a strategic risk buffer to also maintain an additional leverage ratio specified by the FPC; (iii) require globally systemically important institutions to hold sufficient Tier 1 capital to satisfy an additional leverage ratio specified by the FPC; and (iv) require UK banks and PRA-designated UK investment firms to hold sufficient capital to maintain a countercyclical leverage buffer. The legislation comes into force on April 6, 2015, except for the power of direction for firms required to hold a strategic risk buffer which comes into force on January 1, 2019.

View the legislation.

The Single Resolution Board announced its priorities for 2015 following its first plenary meeting. The SRB is part of the Single Resolution Mechanism in the Eurozone and will have the powers of a resolution authority under the Banking Recovery and Resolution Directive. The SRM is part of the Banking Union and therefore the SRB will only have powers over Eurozone banks or banks in those Member States that opt into the Banking Union. The SRB’s priorities in 2015 will be to (i) establish cooperation with key stakeholders and international partners; (ii) set standards for credible resolution plans; and (iii) focus on resolution planning, including at an international level, to address obstacles to resolution. The SRB will have full powers by 2016 to carry out its resolution powers.

View the SRB announcement.

The International Organization of Securities Commissions published its revised Code of Conduct Fundamentals for Credit Rating Agencies as part of a report on the issue. IOSCO consulted in 2012 on revisions to the Code to take into account the number of credit rating agencies that have become subject to supervision by national or regional authorities since the recent financial crisis. The updated Code (i) aims to enhance provisions on protecting the integrity of the credit rating process, managing conflicts of interest, providing transparency and safeguarding non-public information; (ii) adds measures on governance, training and risk management; and (iii) adds new definitions for key terms and revising existing definitions and terminology. The revised Code of Conduct Fundamentals for Credit Rating Agencies is intended to synchronize with the national and regional frameworks for supervision and oversight of credit rating agencies whilst remaining the international standard for credit rating agency self-governance.
 

View the revised Code.

A Commission Delegated Regulation was published in the Official Journal of the European Journal, which amends the Delegated Regulation on own funds requirements for investment firms based on fixed overheads. Under the Capital Requirements Regulation certain investment firms are able to use an alternative method based on a quarter of their fixed costs to calculate their total capital requirement. The amending Regulations insert into the Delegated Regulation the methodology for investment firms to calculate fixed overheads. The amending Regulations come into force on April 14, 2015.
 

View the amending Regulations.

The Financial Conduct Authority published its business plan for 2015/2016 which indicates upcoming focus areas for the regulator and announces upcoming priorities. Key issues include: (i) conflicts of interest in dark pools; (ii) investor charges in asset management; (iii) the wholesale market study into competition in investment and corporate banking; (iv) poor culture and controls which threaten market integrity; and (v) systems and controls for financial crime.
 

View the FCA business plan.

The European Securities and Markets Authority launched a consultation on proposed guidelines for the assessment of whether debt instruments and structured deposits are complex or not. Under the revised Markets in Financial Instruments Directive II, investment firms are able to provide reception, transmission and execution of orders for clients without carrying out the appropriateness test subject to certain conditions being met, including that the services do not relate to financial instruments that are (i) bonds, other forms of securitized debt and money market instruments incorporating a structure which makes it difficult for a client to understand the risk involved; or (ii) structured deposits incorporating a structure which makes it difficult for a client to understand the risk or return or the cost of exiting the product before term. ESMA is required to develop, by January 3, 2016, guidelines for the assessment of such instruments to help firms and national regulators classify correctly MiFID debt instruments and structured deposits as either complex or non-complex.

View ESMA’s consultation paper.

The Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation announced the completion of reviews of annual resolution plans or “living wills” submitted in 2014 by three foreign banking organizations and gave feedback letters to each bank. The FBOs included BNP Paribas, HSBC Holdings plc and The Royal Bank of Scotland Group plc.

The FDIC announced that the living wills were “not credible” and that 2015 plans would be required to demonstrate significant progress. Common shortcomings identified across the FBOs included: (i) unrealistic assumptions about behavior of various parties (i.e., customers, counterparties, investors, or regulators); and (ii) insufficient analysis on the inter-connectedness between banks. The Federal Reserve Board and the FDIC will expect that the annual plans submitted by the three banks on or before December 31, 2015, demonstrate that the banks are making significant progress to address the shortcomings identified, and are taking actions to improve their resolvability under the US Bankruptcy Code.

View the press release.

The Prudential Regulation Authority published its policy statement and first set of final rules on strengthening individual accountability in banking and insurance. The policy statement implements the new Senior Managers Regime and Certification Regime for UK banks and certain investment firms as well as the Senior Insurance Managers Regime under Solvency II. The new SMR is created to support a change in culture for individuals who are subject to regulatory approval and requires firms to assign a variety of responsibilities to those individuals as well as assess their fitness and propriety regularly. The new Certification Regime will require relevant firms to assess the fitness and propriety of certain individuals of the firm who could cause significant harm to the institution or its customers. The rules include the Prescribed Responsibilities of Senior Managers and the scope of the PRA’s Certification Regime. Separately, the PRA and the Financial Conduct Authority are jointly consulting on proposed plans for extending and tailoring the SMR, Certification Regime and Conduct Rules to UK branches of non-EEA institutions, and this consultation is open until May 25, 2015. The new Senior Managers and Certification Regime will apply from March 7, 2016.

View the policy statement

The European Securities and Markets Authority published a final report including guidelines on the periodic information that is to be submitted by Credit Rating Agencies to ESMA in the context of ESMA’s ongoing supervision. The guidelines detail the kind of information that CRAs should regularly submit to ESMA on a quarterly, semi-annual and annual basis, so that ESMA can carry out its ongoing supervision of CRAs consistently. This includes information related to: (i) financial revenues and costs; (ii) staff turnover, vacancies and key promotions; and (iii) board minutes, court, arbitration and other dispute resolution proceedings. The guidelines will enter into force two months after they have been published on ESMA’s website.

View the guidelines

The UK Government published a report on managing and mitigating cyber security risks with cyber insurance. The report details how insurers and insurance can play a role in reducing cyber security risks. The report notes that there is a lack of awareness that insurance is available for cyber risk and recommends that firms review their cyber risk management to include a board-level assessment for cyber risk, and draw up recovery plans and use stress testing to confirm financial resilience against cyber threats. The report also gives details of its new industry supported scheme, Cyber Essentials, which was developed as part of the UK’s National Cyber Security Program and guides businesses in protecting themselves against cyber threats.

View the report

The Code of Conduct for the Members of the Supervisory Board of the European Central Bank was published in the Official Journal of the European Union. The code includes the basic principles that members of the board are to abide by, as well as rules on conflicts of interest, private financial transactions and wealth declarations. This follows on from the ECB’s new prudential supervisory role for banks in the Eurozone under the Single Supervisory Mechanism. The ECB assumed this new role in November 2014, and the SSM creates a new system of financial supervision, under which the ECB directly supervises 120 significant banking groups, and sets and monitors supervisory standards for other Eurozone banks by working more closely with national regulators. The code entered into force on March 21, 2015.

View the code of conduct

HM Treasury and the Financial Conduct Authority issued a joint consultation on the Implementation of the Transparency Amending Directive that entered into force on November 26, 2013 and which amends the Transparency Directive, the Transparency Directive Implementing Directive and the Prospectus Directive. The directives aim to harmonize the information disclosure requirements of companies, and the consultation sets out the proposed amendments to be implemented by HM Treasury to the Financial Services and Markets Act and by the FCA to the FCA’s Disclosure and Transparency Rules, including: (i) the extension of the deadline to publish half-yearly reports and the period of time for which financial reports are publicly available; and (ii) changes to the definition of an issuer. The Transparency Amending Directive must be implemented by EU Member States before November 26, 2015. Comments on the consultation may be submitted until May 20, 2015.

View the consultation paper

The European Securities and Markets Authority issued a call for evidence on the disclosure obligations required for Structured Finance Instruments under the Credit Ratings Agency Regulations and extending those requirements to private and bilateral SFI transactions. The call for evidence seeks to gather information on whether ESMA should make a distinction between private and bilateral transactions when considering the extension of the requirements, and if so, how the two terms should be defined. ESMA will then seek to ascertain whether the disclosure requirements can be used in their entirety for both private and bilateral SFI transactions or whether any additional issues should be taken into account to adapt the requirements to each type of transaction. An extension of the disclosure requirements would then be phased in for private and bilateral transactions. ESMA will analyze the evidence it has received to revise the current Regulatory Technical Standards under the Credit Ratings Agency Regulations. Comments on the consultation may be submitted until May 20, 2015.

View the call for evidence

The Department for Business Innovation & Skills published guidance for employers and prescribed persons regarding whistleblowing. The documents lay out various policies and procedures for employers regarding whistleblowing. A prescribed person is an organization or individual that a worker may approach outside their workplace to report suspected or known wrongdoing. The Prescribed Persons Order 2014 sets out a list of over 60 such organizations and individuals that have been designated as prescribed persons because they have an authoritative or oversight relationship with the sector, often as a regulatory body.

View the guidance for employers and the code of practice

View the guidance for prescribed persons

The European Banking Authority launched a consultation and published draft guidelines on setting limits on exposures to shadow banking entities which carry out activities outside of the regulated framework under the Capital Requirements Regulation. The guidelines set out the approaches that institutions should take to develop internal policies for monitoring and setting limits on individual and aggregate levels. The Principal Approach and the Fallback Approach for setting limits on exposures are set out in the guidelines. The Principal Approach proposes that institutions set an aggregate limit to exposures to the shadow banking sector in relation to the institution’s eligible capital. If an institution is not able to apply the Principal Approach, due to, for example, holding insufficient information about the activities of shadow banking entities, the Fallback Approach should be used which would mean that a limit of 25% of the institution’s eligible capital would be applied to its aggregate exposures to shadow banking entities. In addition, institutions would set tighter limits to individual exposures and should take into account matters such as the financial situation and regulatory status of the shadow banking entity, and whether the entity is vulnerable to asset price or credit quality volatility. The draft guidelines also set out the proposed definitions that are to be used for terms that have not been defined or sufficiently defined in the CRR, such as “shadow banking entities”, “exposures to shadow banking entities”, “excluded undertakings” and “credit intermediation activities.” Comments on the consultation may be submitted until June 19, 2015.

View the consultation paper and guidelines

The Comptroller of the Currency discussed the Office of the Comptroller of the Currency’s approach to adapting regulatory and supervisory expectations to the size and complexity of supervised institutions. His remarks were part of testimony before the US Senate Committee on Banking, Housing and Urban Affairs. His testimony provides a brief overview of the key provisions of Section 165 of Dodd-Frank Act as they apply to bank holding companies and how the OCC’s supervisory and regulatory tools complement and support the objectives of these provisions. He also describes that the OCC has tailored its supervisory programs into three distinct portfolios—community banks, midsize banks, and large banks.

View the oral statement

View the written testimony

HM Treasury published a report detailing the outcome of its consultation on the criteria for the designation of payments for oversight by the Payment Systems Regulator. HM Treasury is responsible for designating the payment systems that will be subject to regulation and proposals in its consultation suggested the designation of seven payment systems: Bacs, CHAPS, Faster Payment Service, LINK, Cheque and Credit Clearing, Northern Ireland Cheque Clearing, MasterCard and Visa. HM Treasury confirms in its outcome report that only those seven payment systems will be subject to regulation at this stage.

View the report

The International Organization of Securities Commissions and the Basel Committee on Banking Supervision published a revised version of their policy framework regarding minimum standards for margin requirements for non-centrally cleared derivatives. The new framework contains several substantive changes from the previous policy framework published by the Basel Committee and IOSCO in September 2013. The framework consists of key principles aimed to ensure harmonization across jurisdictions. The requirements apply to financial firms and systemically important non-financial entities (“covered entities”), the definitions for which are left to national regulation. The Basel Committee and IOSCO have no power to impose any mandatory requirements on regulatory authorities, but rather serve as a reference for national regulators as they adopt their respective margin regimes. The main revisions pertain to the phase in period for posting and collecting initial margin which has been delayed from December 1, 2015 to September 1, 2016. Additionally, the phase-in period for required variation margin, originally set to begin on December 1, 2015, will now begin on September 1, 2016 for covered entities belonging to a group whose aggregate month-end average notional amount of non-centrally cleared derivatives exceeds €3 trillion and March 1, 2017 for all other covered entities. There has currently been no formal statement from US or EU regulatory authorities regarding delay to implementation.

View the revised policy framework

View the summary of key revisions to the September 2013 policy framework

HM Treasury published a policy paper on competition and choice in banking, announcing a set of processes that aim to improve competition in the banking sector. The proposed plans include: (i) launching the “midata” initiative, which will allow bank customers to access their current account transaction data in a format that can be used to assess which account is best for them; (ii) applying legislation to prevent anti-money laundering relating to UK digital currency exchanges; and (iii) delivering an open standard for Application Programming Interfaces in UK banking, a framework making it easier for customers to determine if they can get a better deal with a different bank.

View the policy paper

HM Treasury published a report detailing the outcome to its call for evidence on the benefits of open data and data sharing in banking. The report specifies the actions that will be taken by the government to deliver an open standard for APIs. APIs will allow different pieces of software to interact with each other, making it easier for customers or fintech companies on behalf of customers to determine if customers can, for example, get a better deal with a different bank elsewhere. The report states that the government aims to set out a detailed framework for an open API standard by the end of 2015.

View the report

The European Securities and Markets Authority published a report reviewing how national regulators across the EU have implemented its guidelines on automated trading. The guidelines aim to increase levels of supervision on automated trading activities. ESMA’s review found that the majority of EU national regulators have integrated the guidelines into their supervisory practices. However, the report also identified areas for improvement such as the need for regulators to: (i) increase their IT expertise; (ii) allow sufficient resources to be available so that proper supervision can take place; and (iii) coordinate between themselves so that ring fencing programs can be set up to prevent cyber-attacks.

View the report

HM Treasury published a report detailing the outcome to its call for information on digital currencies. The report states that UK Government intends to improve standards and clarity around digital payments, and the initiatives that it will undertake will include: (i) applying anti-money laundering regulations to digital currency exchanges; (ii) developing a set of standards to enhance consumer protection; and (iii) ensuring that law enforcement bodies are able to prosecute criminal activity and confiscate digital currency funds where transactions are carried out for criminal purposes.

View the report

The European Banking Authority published its final draft Implementing Technical Standards on supervisory reporting to amend the current ITS on supervisory reporting for institutions under the Capital Requirements Regulations. The draft ITS include minor amendments to several templates that are to be used by financial institutions in the supervisory reporting process as well as corrections to clerical errors and legal references. The ITS set out the standards that financial institutions must meet for the purposes of supervisory reporting.

View the final draft ITS and annexes

The Agency for the Cooperation of Energy Regulators published the European register of market participants on its designated portal together with its list of standard contracts and the fourth edition of ACER’s Q&As on the Regulation on Energy Market Integrity and Transparency. This is further to ACER finalizing its preparatory work on supporting documentation under REMIT, the EU Regulation that aims to prevent market manipulation and trading on inside information in the wholesale energy market, and more generally improves integrity in this market. On March 20, 2015, ACER also published a recommendation to the European Commission on wholesale energy derivative contracts that must be physically settled under Markets in Financial Instruments Directive II. ACER’s recommendation states that wholesale energy products that must be physically settled and that are in the scope of REMIT include futures, options on futures, options on swaps and any other type of derivative that must be physically settled. ACER also proposes, amongst other recommendations, that the Commission clarifies in its delegated acts that a wholesale energy derivative contract traded on an Organized Trading Facility must be physically settled if it cannot be settled in cash.

View the ACER’s designated REMIT portal, Q&As and recommendation.
 

The US Consumer Financial Protection Bureau announced a public inquiry on the status of the credit card market and the impact of credit card protections on consumers and issuers, including issues such as credit card terms, the use of consumer disclosures, credit card debt collection practices and rewards programs. This inquiry is being conducted pursuant to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which required that the CFPB conduct a review of the consumer credit market every two years. To assist with its inquiry, the CFPB is seeking public comment and information in connection with the credit card market and the impact that various credit card regulations have had on consumers. The CFPB will publish a public report of its findings with Congress on the state of the consumer credit card market. Results of the inquiry will also inform future CFPB regulations on the consumer credit card market.

View the CFPB Request for Information

HM Treasury published the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2015 together with a corresponding explanatory memorandum. The Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to create a new type of regulated activity of advising on the conversion or transfer of pension benefits which are safeguarded benefits. Safeguarded benefits are defined to mean any benefits other than money purchase benefits and cash balance benefits. This means that the activity cannot generally be carried on in the UK except by an authorised person or pursuant to an exemption. Concurrently, HM Treasury published the Financial Services and Markets Act 2000 (Regulated Activities) (Transitional Provisions) Order 2015, which makes transitional provision in connection with this new regulated activity. This instrument provides that advisors previously permitted to advise on an equivalent class of transfer are automatically authorised to advise under the new activity. Both Orders enter into force on April 6, 2015.

View the Orders and explanatory memoranda

View the Orders and explanatory memoranda 2

View the Orders and explanatory memoranda 3

View the Orders and explanatory memoranda 4

The US Commodity Futures Trading Commission approved a final rule amending CFTC Regulation 1.22 by removing December 31, 2018 as the automatic termination date of the phased-in compliance period for the Residual Interest Deadline for Futures Commission Merchants. Regulation 1.22 concerns the posting of collateral. In the event that a customer’s account has insufficient margin, an FCM must commit its own capital—often referred to as “residual interest” — to make up the difference. Previously, the Residual Interest Deadline was set at 6pm Eastern Standard Time and would automatically occur, without any CFTC action or opportunity for public input. In November 2014, the CFTC proposed to amend the rule so that the Residual Interest Deadline would not occur earlier than 6pm without an affirmative CFTC action and an opportunity for public comment. The current action by the CFTC is to finalize this change.

View the Final Rule

The Financial Conduct Authority published its guidance consultation on risks to customers from performance management at firms. This report is aimed at trade associations as well as all financial firms that deal with retail customers directly. The report discusses performance management practices and acknowledges that poorly executed performance management can lead to mis-selling for various reasons, including pressure to meet individual targets and corporate objectives. The report recommends that firms manage these risks, and identifies poor practices that can create undue 3 pressure on staff. The guidance recommends that controls should be put in place to mitigate the increased risk of misselling adequately. Comments on the consultation may be submitted until May 15, 2015.

View the guidance consultation

The European Banking Authority updated its periodic risk dashboard setting out the principal risks and vulnerabilities in the EU banking sector. The dashboard analyses the evolution of risk indicators among a sample of 55 banks across the EU. The dashboard shows that the capital position trends of EU banks are positive and that CET 1 ratios are at their highest levels since 2009. It also shows that levels of profitability tend to be unstable but that balance sheet structures are shifting towards lower loan-to-deposit ratios, and therefore less debt.

View the risk dashboard

The US Board of Governors of the Federal Reserve System announced a proposal requiring banking organizations to include their existing Legal Entity Identifiers on certain regulatory reporting forms as of June 30, 2015. The LEI is a unique reference code that enables easier identification of a firm’s legal entities. Comments on the proposal are requested within 60 days of publication in the Federal Register.

View the Proposal

The Prudential Regulation Authority and Financial Conduct Authority jointly published a consultation paper on strengthening accountability in banking, setting out the PRA and FCA’s proposed plans for extending and tailoring the Senior Manager’s Regime, Certification Regime and Conduct Rules to UK branches of nonEEA institutions. The proposals include: (i) incoming non-EEA branches to have their most senior individual approved by the PRA; (ii) senior managers of incoming branches to be subject to a set of PRA responsibilities which reflect areas subject to UK regulation; and (iii) for the scope of the PRA’s certification regime for incoming non-EEA branches to be identical to that of UK firms. The new Senior Managers and Certification Regime will apply from March 7, 2016. Comments on the consultation may be submitted until May 25, 2015.

View the consultation

The Financial Conduct Authority published a press release relating to its November 2014 consultation paper on the Payment Systems Regulator, which is the new UK regulator that will regulate the largest UK payment systems. The press release states that any of the directions mentioned in the consultation that were to come into force on April 1, 2015 will not come into force until April 30, 2015. This is so that stakeholders have more time to consider the FCA’s final directions and views that are to be published in the FCA’s PSR policy statement before the end of March 2015.

View the FCA press release

HM Treasury published its revised “Banking Act 2009 Special Resolution Regime Code of Practice”. The Code aims to encourage financial stability by resolving institutions such as banks, building societies and certain investment firms that are failing, and protecting depositors, taxpayers and the wider economy from the consequences of such failure. The Code has been amended to take into account the provisions of the Bank Recovery and Resolution Directive, and provides guidance on how special resolution tools are to be used by the relevant resolution authority. Section 1 of the Code sets out guidance relating to banking institutions whose failure has become highly likely, and includes: (i) five stabilization options including transfers of business to private sector purchasers or bridge entities; (ii) the bank’s insolvency procedure, facilitating prompt payouts to depositors via the Financial Services Compensation Scheme; and (iii) the bank administrative procedure, where a partial transfer of the business of a failing institution takes place. Section 2 of the Code deals with the Special Resolution Regime for CCPs, which are outside the scope of the BRRD. This section sets out guidance on how the relevant resolution authority can apply stabilization powers to CCPs, including powers to transfer: (i) some or all of the business of a CCP to a commercial purchaser or to a bridge CCP; and (ii) the ownership of the CCP to any person.

View the SRR code of practice

The Board of Governors of the Federal Reserve System recently released results for the Dodd-Frank Annual Stress Tests for the 31 largest bank-holding companies. This is the third round of stress tests required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to the press release, all of the largest US-based bank holding companies have passed the test and have been building capital levels at a sufficient level to withstand severe recession and financial market volatility. The quantitative results from these tests are one part of the Federal Reserve Board’s annual exercise to evaluate the capital planning and adequacy of large financial institutions. Comprehensive Capital Analysis and Review results will be released on March 11, 2015.

View the Federal Reserve Board press release

View the 2015 Supervisory Stress Test Methodology and Results

The US Board of Governors of the Federal Reserve System announced that it has not objected to the capital plans of 28 bank holding companies participating in the Comprehensive Capital Analysis and Review. However, Bank of America Corporation is required to submit a new capital plan to address weaknesses in its capital planning processes. The Federal Reserve Board did object to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA due to qualitative concerns. There were no objections based on quantitative grounds. Goldman Sachs Group, Inc., JPMorgan Chase & Co., and Morgan Stanley needed to submit adjusted capital actions to meet the minimum post-stress minimum capital requirements.

View the Federal Reserve Board press release

View the CCAR results 

The International Organization of Securities Commissions and Committee on Payments and Market Infrastructures jointly announced that they have begun a review of CCP stress testing. The aim of the review is to identify how the Principles for Financial Market Infrastructures standards published jointly by IOSCO and the CPMI in 2012 are being implemented, and whether any further guidance is needed.

View the joint press release

The Bank of England published its annual report on the supervision of Financial Market Infrastructures which sets out the way in which the BoE has exercised its responsibilities in relation to recognized payment systems, CCPs and securities settlement systems over the past year. The report discusses the progress that has been achieved on issues including: (i) credit and liquidity risk; (ii) recovery and resolution; (iii) operational risk management; (iv) governance; and (v) disclosure. The report lists the forward-looking priorities that the bank intends to focus on in the next year, such as: (i) assessing the UK CCPs’ stress-testing practices; (ii) evaluating proposals on CCP recovery and resolution that may extend to other types of FMI; (iii) addressing the root causes of excess operational risk; and (iv) improving resilience against cyber-attacks.

View the report

The European Banking Authority published a revised list of validation rules for submitting supervisory reporting data. The rules detail the standards and formats that are to be used for submissions of data by national regulators under the Capital Requirements Directive IV. The revised list displays the rules that have been deactivated due to technical issues or incorrectness.

View the EBA press release and updated validation rules

The US Commodity Futures Trading Commission requested public comment on the US District Court of DC’s remand order in Securities Industry and Financial Markets Association, et al. v. CFTC (“Cross-Border Litigation”). The CFTC release expands on its consideration of costs and benefits of 10 swaps rules regarding the treatment of overseas swaps subject to the order and requests comment on the application of the costs and benefits of the rules in the context of extraterritoriality. In Cross-Border Litigation, three trade associations challenged the CFTC’s 2013 Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations and requested the court to release 14 swap regulations in terms of overseas applications issued in July 2013. On September 16, 2014, the court granted summary judgment in favor of the CFTC and denied the plaintiffs relief; however it required the CFTC to supplement the 10 swaps regulations with a detailed analysis of associated costs and benefits. Comments are due by May 11, 2015.

View the CFTC press release

View the CFTC request for comment

The FCA published an updated timetable relating to the implementation of the Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation. The timetable sets out the key dates for the implementation and transposition of the Directive and Regulation into domestic law. The deadline for transposing MiFID II into domestic law is July 3, 2016. MiFID II and MiFIR enter into force on January 3, 2017. The FCA aims to publish its main consultation paper on the implementation of MIFID II and MIFIR in December 2015. The final rules are to be published in June 2016.

View the FCA’s timetable

The European Securities and Markets Authority published a revised opinion on its draft RTS on the clearing obligation for interest rate swaps. ESMA has revised its original opinion to take account of the notification it received from the European Commission that the Commission intended to adopt the draft RTS with amendments. The opinion annexes revised RTS which clarify certain points and propose further revisions to the Commission’s amendments, including that: (i) for a period of three years, financial counterparties will be able to apply for the intragroup transaction exemption for their transactions with any third-country entity in the absence of decisions on equivalence; and (ii) the €8 billion clearing obligation threshold applies at individual fund level when the counterparties are UCITS or alternative investment funds.

View the ESMA’s opinion

The European Banking Authority published a consultation paper on draft Regulatory Technical Standards and Guidelines on business reorganization plans under the Bank Recovery and Resolution Directive. Under the BRRD, a financial institution that has been resolved by a resolution authority must prepare a business reorganization plan that sets out the measures the financial institution will take to restore its viability and operability. The draft RTS set out the minimum requirements that must be included in the institution’s business reorganization plan, such as the identification of the causes of failure and financial performance projections. The Guidelines set out the criteria that resolution authorities must take into account when assessing and approving business reorganization plans, such as assessing the credibility and strategies of those plans. Comments on the consultation paper may be submitted until June 9, 2015.

View the consultation paper

The EBA published three sets of technical advice to the European Commission on the resolution framework for EU banks and a related comparative analysis of the recovery plans of 27 European cross-border banking groups. The technical advice covers (i) the definition of critical functions and core business lines; (ii) the deferral of ex-post contributions to the resolution fund; and (iii) rules for the exclusion of liabilities from the application of the bail-in tool for which the EBA states that resolution authorities should assess each case for suitability for exemption to avoid motivating bank structures for the purpose. The technical advice will assist the European Commission to prepare secondary legislation on these issues that are required under the Banking Recovery and Resolution Directive.

View the EBA documents

The European Banking Authority launched a consultation on proposed Regulatory Technical Standards on the detailed records of financial contracts that banks and relevant investment firms will need to maintain. Under the Bank Recovery and Resolution Directive, resolution authorities may temporarily suspend the termination rights of any party to a contract with a firm that is under resolution. The proposed draft RTS set out the minimum information on financial contracts which a firm will be obliged to keep detailed information of. Member states would be able to impose additional requirements if appropriate. The consultation closes on June 6, 2015.

View the consultation paper

The UK Government announced that the legislation to implement the bank ring-fencing regime has been enacted. The Banking Reform Pensions Regulations, enacted on March 4, 2015, will require a ring-fenced bank to ensure that it cannot be liable for the pension liabilities of other group entities by giving powers to the trustees of a ring-fenced bank’s pension scheme to amend the pension scheme, with the consent of employers of the scheme, to achieve ring-fencing of the bank. A ring-fenced bank will be able to seek a court order for release from a shared liability arrangement if the terms of the release cannot be agreed by the parties to the arrangement. The Prudential Regulation Authority, responsible for making the detailed rules applicable to ring-fenced banks, will continue to put those rules in place. The Government expects the ring-fencing regime to be in place by 2019, however, ring-fenced banks have until 2021 to separate their pension schemes.

View the Announcement.

View the Legislation.

The US Commodity Futures Trading Commission reopened comment periods for two position limit draft rulemakings for an additional 30 days, in order to accommodate questions and comments that may have arisen from the Energy and Environmental Markets Advisory Committee meeting, which took place on February 26, 2015. The original positional limits proposed rule was overturned in September 2012 based on the US district judge of Washington’s determination that the CFTC was not able to prove the rule was “necessary to diminish, eliminate, or prevent” excessive speculation. The comment period for the two rulemakings will now close on March 28, 2015.

View the notice in the Federal Register