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

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 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

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

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 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

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 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 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 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

HM treasury published the Banking Act 2009 (Inter-Bank Payment Systems) (Disclosure and Publication of Specified Information) (Amendment) Regulations 2015. These Regulations widen the remit of information-sharing between the Bank of England and the Payment Systems Regulator, allowing the BoE to share information that it has obtained through its oversight of interbank payment systems with the PSR. The BoE will therefore no longer be limited to only share information with the PSR that is relevant to financial stability. On the same day, HM Treasury also published the Payment Services (Amendment) Regulations 2015. These regulations amend the Payment Services Regulations 2009 and transfer the supervision and enforcement functions on access to payment systems from the Competition Markets Authority to the newly formed PSR. Both regulations enter into force on April 1, 2015, the date on which the PSR becomes fully operational.

View the Regulations and Explanatory Memoranda

View the Regulations and Explanatory Memoranda 2

View the Regulations and Explanatory Memoranda 3

View the Regulations and Explanatory Memoranda 4  

The European Banking Authority published an opinion on the Capital Requirements Regulation provision that deals with eligibility conditions for covered bonds in relation to risk weight preferential treatment, including the assets by which eligible covered bonds can be collateralized. Under the CRR, eligible covered bonds can be collateralized by exposures to institutions that qualify for the credit quality step 1, which must not exceed 15% of the nominal amount of outstanding covered bonds of the issuing institution. Exposures to institutions in the EU with a maturity not exceeding 100 days have no CQS 1 requirement, but must at least qualify for CQS 2. After consulting the EBA, national regulators may partially waive these specifications and allow CQS 2 for up to 10% of the total exposure of the nominal amount of outstanding covered bonds of the issuing institution. This would only apply if significant potential concentration problems in the specific member state are due to the application of the CQS 1 requirement. In December 2014, the Swedish Financial Supervisory Authority submitted a proposal to the EBA for such a waiver. The EBA has assessed the proposal, taking into account factors such as the nature and magnitude of exposures to institutions that covered bonds assume in that jurisdiction. The EBA is of the opinion that sufficient evidence was submitted by the Swedish Regulator to document that the significant potential concentration problem derives from the application of the CQS 1 requirement specified in the CRR. The EBA has stated therefore that the establishment of a partial waiver is justified.

View the EBA opinion.

The EU General Court delivered its judgment on the UK Government’s challenge of the European Central Bank’s CCP location policy set out in the ECB’s Eurosystem Oversight Policy Framework. The EU General Court has annulled the Eurosystem Oversight Policy Framework in so far as it sets a requirement for CCPs involved in the clearing of securities to be located within the Eurozone. The policy’s aim was to prevent CCPs in the European Union but outside the Eurozone from being able to have access to ECB Euro settlement facilities. The outcome is that UK CCPs will have access to Euro settlement facilities with the ECB, as generally required under EMIR, without being forced to relocate their businesses.

View the judgment

The European Banking Authority launched a discussion paper on the future of the internal ratings-based approach under the Capital Requirements Regulation. This is the approach under which certain banks and investment firms with sophisticated risk management systems are allowed to calculate capital requirements based on internally produced parameters. The paper discusses the compromised comparability of capital requirements under the IRB approach due to the framework’s high level of flexibility. The EBA believes that a review of the regulatory framework for the IRB approach is required to ensure a higher level of comparability going forward. Comments on the discussion paper may be submitted until 5 May 2015.

View the discussion paper

The European Banking Authority launched a public consultation on its guidelines on sound remuneration policies. The guidelines specify the criteria for allocation of remuneration components into either fixed or variable remuneration, clarify the way in which the remuneration rules in Capital Requirements Directive should be interpreted by regulators and generally aim to ensure compliance with the bonus cap requirements introduced by CRD. The consultation period ends on June 4, 2015.

View the consultation paper.

The Financial Stability Board and the International Organization of Securities Commissions published for second public consultation Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions. The proposed methodologies for identifying NBNI G-SIFIs take into consideration the responses received to the first consultative document issued in January 2014. These methodologies contain a high-level framework and an operational framework for identifying G-SIFIs that would apply across NBNI financial entities, as well as detailed NBNI sector-specific methodologies for finance companies, market intermediaries, investment funds and asset managers. The proposed methodologies provide for a more supervisory judgment compared to the Global Systemically Important Banks and Global Systemically Important Insurers methodologies to counter limitations in data availability and the range of business models of different types of NBNI G-SIFIs. The consultative document does not propose any specific entities for designation, nor any policy measures that would apply to NBNI G-SIFIs. It is intended that the policy measures will be developed once the methodologies are finalized. Comments should be submitted by May 29, 2015.

View the second public consultation

The UK Government published its response following the consultation to extend the Senior Managers and Certification Regime to UK branches of non-UK firms. The response announces that the Senior Managers and Certification Regime will apply from March 7, 2016 and be extended to apply to UK branches of banks and insurers established outside of the UK. On March 4, 2015, related secondary legislation was enacted which implements the extension and other provisions of the regime more generally. Relevant firms will need to notify the PRA and the FCA by February 8, 2016 of the approved persons who are to be senior managers under the new regime. The regulators consulted on proposed rules for the Senior Managers and Certification Regime in 2014 as it applied to UK banks and insurers but have waited to implement final rules pending the decision on whether the regime would be extended to UK branches.

View the response document

View the secondary legislation part 1

View the secondary legislation part 2

The European Banking Authority issued a press release stating that it will not carry out an EU-wide stress test in 2015, but will instead be preparing for the next exercise in 2016. The EBA will however carry out a transparency exercise in 2015 which will provide data on the balance sheets and portfolios of EU banks.

View the EBA Press Release

The European Banking Authority published final draft regulatory technical standards on benchmarking portfolio assessment standards and assessment sharing procedures under the Capital Requirements Directive, together with final draft implementing technical standards on benchmarking portfolios, templates, definitions and IT solutions. These final drafts specify the framework for EU institutions and national regulators on annual supervisory benchmarking. The EBA simultaneously published its technical advice, for the purposes of the report. All documents have now been submitted to the European Commission for adoption.

View the report.

View the technical advice.

The European Banking Authority launched a consultation on proposed draft Regulatory Technical Standards on the prudential requirements for central securities depositories. The EBA is required to prepare the RTS under the EU Regulation on Settlement and Central Securities Depositories, which aims to increase the safety and efficiency of securities settlement and settlement infrastructures. The EBA is consulting on three proposed draft RTS which cover: (i) capital requirements for CSDs; (ii) the additional risk-based capital surcharge applicable to CSDs carrying out ancillary banking activities; and (iii) the framework and tools for monitoring, measuring, managing and reporting of the credit and liquidity risks related to any ancillary banking activities offered by a CSD. The consultation closes on April 27, 2015. The EBA must submit the draft RTS to the Commission by June 18, 2015.

View the consultation

The Volcker Inter-Agency Group posted a new frequently asked question (“FAQ 13”) clarifying the scope of the marketing restriction under the Solely Outside the US (“SOTUS”) covered fund exemption. FAQ 13 adopts the position that the marketing restriction applies only to the activities of a foreign banking entity (including its affiliates) that seeks to rely on the SOTUS covered fund exemption and does not apply to where the foreign banking entity seeks to invest in a covered fund that is sponsored and marketed by a third party. As defined in the FAQ, “third-party covered fund” means a covered fund in which “the foreign banking entity (including its affiliates) does not sponsor, or serve, directly or indirectly, as the investment manager, investment adviser, commodity pool operator or commodity trading advisor to, the covered fund.” This view is consistent with limiting the extraterritorial application of section 13 to foreign banking entities while seeking to ensure that the risks of covered fund investments by foreign banking entities occur and remain solely outside of the United States.

View the Volcker Rule FAQ

The International Swaps and Derivatives Association published a set of principles for improving regulatory transparency of the global derivatives markets through standardizing, aggregating and sharing data. The principles are: (i) regulatory reporting requirements for derivatives transactions should be harmonized within and across borders; (ii) policy makers should adopt the use of standards to aid improved quality and consistency of compliance with reporting requirements; (iii) market participants and regulators should collaborate to improve consistency in the absence of global standards; (iv) laws and regulations preventing access by authorities to data across borders should be amended or repealed; and (v) reporting progress should be benchmarked to provide incentives to progress reporting.

View the ISDA principles

The European Banking Authority published its opinion on lending-based crowdfunding, recommending that the applicability of existing EU law to the activity be clarified. The EBA considers that such clarification is necessary to avoid regulatory arbitrage across the EU and to ensure a level playing field as EU Member States have adopted different approaches to regulating lending-based crowdfunding. The opinion is addressed to the European Commission, the European Parliament and the EU Council.

View the EBA opinion

The Federal Reserve Board extended until April 3, 2015 the comment period for its proposed rule to implement capital surcharges for global systemically important banks. Comments were originally due by March 2, 2015. The Federal Reserve Board extended the comment period to allow relevant parties more time to analyze the proposed rule and prepare comments. The proposal would establish a methodology to identify if a firm is a G-SIB as well as establish the size of a firm’s risk-based capital surcharge. The rule is expected to strengthen the capital positions of these financial institutions and if finalized as proposed, would be higher than international standards. 

View the The Federal Reserve Board press release

View the The Shearman & Sterling Publication on the G-SIB Surcharge proposed rule

The European Securities and Markets Authority published the results of its peer review of supervision and enforcement of the best execution provisions in the Market in Financial Instruments Directive by national regulators. Investment firms are required to provide best execution for their clients when executing their client’s orders. ESMA’s review found that implementation of the best execution provisions in MiFID I varied across the EU. To address the issue, ESMA recommends several improvements, including: (i) prioritization of best execution by national regulators; (ii) the allocation of supervisory resources; and (iii) the adoption of a proactive approach to monitoring compliance with best execution requirements, including through onsite inspections. ESMA intends to work with national regulators to give effect to the recommendations.

View the peer review

The European Banking Authority published an Opinion addressed to the European Commission on Credit Valuation Adjustment. The Opinion deals with several aspects of the calculation of own funds requirements for CVA risk. Sixteen recommendations are listed in the Opinion, including: (i) clarifying by means of an amendment to the Capital Requirements Regulations that exchange-traded derivatives are included in the scope of CVA risk charge; (ii) harmonising the treatment of securities financing transactions in the EU; and (iii) clarifying the standardised method for CVA. The Opinion was published by the EBA simultaneously alongside a Report and Review on CVA and the application of CVA charges to non-financial counterparties established in a third country under the CRR. The documents have now been submitted for consideration by the European Commission.

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View the Report and Review