The European Banking Authority has published a final report and final revised draft Implementing Technical Standards on resolution reporting requirements. The EBA proposes to replace the existing ITS with the revised ITS to reflect the evolution in the policy and practices applied by authorities in the development of resolution plans for financial institutions. The new framework is proposed to become operational in 2019 when resolution authorities collect information as of December 31, 2018.

The revised draft ITS set out the procedures and a minimum set of standard templates for use by institutions when providing information to resolution authorities that is needed to draw up and implement resolution plans. The power of resolution authorities to apply simplified obligations or to require further information from a firm is specifically provided for in the revised draft ITS, in line with the EU Bank Recovery and Resolution Directive. In addition, the revised draft ITS specify the information required from groups and from individual entities. Furthermore, the revised draft ITS set the frequency, reference dates and remittance dates and the format for submission of information.

The EBA confirms that the final draft revised ITS take into account comments received during consultation and provides a summary of the main changes that have been made.

Read more. 

The U.S. Department of the Treasury announced that John E. Smith will be stepping down as director of the U.S. Office of Foreign Assets Control in early May 2018.  Mr. Smith’s 11-year career with OFAC includes serving as Acting Director/Director of OFAC since February 2015, and previously serving as OFAC’s Deputy Director and as an Associate Director.  OFAC Deputy Director Andrea M. Gacki will serve as Acting Director upon Mr. Smith’s departure.

View the full text of the Treasury Department announcement.

The U.K. Competition and Markets Authority has published a working paper seeking views on its initial analysis on trustee engagement with investment consultancy and fiduciary management service providers. This is the fourth working paper in the CMA's Investment Consultants Market Investigation in which it is assessing the supply and acquisition of investment consultancy services and fiduciary management services. The working paper should be read alongside the Issues Statement on the investigation, published in September 2017. The intention to publish a series of working papers on aspects of the investigation was outlined in a progress report in February 2018. The first working paper, relating to information on fees and quality, was published on March 1, 2018. The second working paper, on asset manager product recommendations, was published on March 22, 2018. The third working paper was published on March 29, 2018 and covered competition issues that may arise when firms offer both investment consultancy and fiduciary management services. This working paper builds on the CMA's second working paper, analyzing the information available to pension trustees on the fees and quality of investment consultants and fiduciary managers.

Read more. 

The Joint Committee of the European Supervisory Authorities has published a report on risks and vulnerabilities in the EU financial system. The ESAs are the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority. The ESAs make recommendations for policy actions by the ESAs, national regulators and financial institutions. A summary of the risks and recommendations contained in the report is set out below.

• To combat cyber risks, the ESAs recommend that financial institutions should continue to improve IT systems, explore risks in the context of information security and take steps to resolve risks surrounding connectivity and outsourcing to third-party providers. The ESAs will continue to keep these risks under review. ESMA is launching a supervisory project on cloud computing outsourcing and will continue work to address supervisory convergence. The EBA is developing guidelines on the management of information and communication technology risks. EIOPA is conducting a qualitative exercise on cyber risk with national regulators and the industry.

Read more. 

The U.S. Board of Governors of the Federal Reserve System and U.S. Office of the Comptroller of the Currency published a joint notice of proposed rulemaking and request for comment that would modify the calculation of the enhanced supplementary leverage ratio for U.S. global systemically important bank holding companies and certain of their insured depository institutions subsidiaries regulated by the Federal Reserve Board and OCC.

Read more.

The U.S. Federal Financial Institutions Examination Council members released a joint statement with respect to cyber insurance and its role in risk management.  FFIEC members include the U.S. Board of Governors of the Federal Reserve System, the U.S. Office of the Comptroller of the Currency and the U.S. Federal Deposit Insurance Corporation. The statement and corresponding press release note that the frequency, sophistication and severity of cybersecurity incidents are increasing. As a result, general insurance policies may not provide adequate coverage in the event of a cybersecurity event and cyber insurance options are increasing and evolving in response to these factors.  The statement highlights that cyber insurance options vary greatly, and can be in the form of either a standalone policy or an endorsement to an existing insurance policy.  The statement cautions, however, that cyber insurance should be viewed as a risk mitigation tool and not as an alternative to sound internal controls, policies and procedures to guard against cybersecurity events.  The statement notes that institutions, in considering cyber insurance, should assess their existing cybersecurity risk framework to determine the potential impact and magnitude of residual risk.  In weighing cost and benefits of cyber insurance, the statement suggests that institutions should consider involving multiple stakeholders in the decision-making process, perform adequate due diligence to fully understand available policies and coverage options and incorporate cyber insurance into their annual budgeting processes.

View full text of the FFIEC statement.

The U.S. Board of Governors of the Federal Reserve System and U.S. Office of the Comptroller of the Currency published a joint notice of proposed rulemaking and request for comment that would modify the calculation of the enhanced supplementary leverage ratio for U.S. global systemically important bank holding companies and certain of their insured depository institutions subsidiaries regulated by the Federal Reserve Board and OCC.

Read more.

The U.S. Board of Governors of the Federal Reserve System published a notice of proposed rulemaking and request for comment intended to integrate its capital and stress rules and thereby simplify the capital regime applicable to bank holding companies with $50 billion or more in total consolidated assets and to the U.S. intermediate holding companies of foreign banking organizations.

Read more.

The European Central Bank has launched a consultation on draft "cyber resilience oversight expectations" for financial market infrastructures.

The CROE use, as a basis, the Guidance on Cyber Resilience for Financial Market Infrastructures that was published jointly in June 2016 by the Committee on Payments and Market Infrastructures and the Board of the International Organization of Securities Commissions. FMIs were required to implement immediately that Guidance, which was supplemental to the Principles for Financial Market Infrastructures published in 2012 by IOSCO and the Committee on Payment and Settlement Systems. The PFMIs were adopted by the Governing Council of the ECB in June 2013. In developing the CROE, the ECB also took into account existing international guidance documents, in particular the Cyber Security Framework published by the U.S. National Institute of Standards and Technology, the ISO/IEC 27002 good practice standard for information security, the COBIT 5 framework for the governance and management of enterprise IT, the Information Security Forum's Standard of Good Practice for Information Security and the U.S. Federal Financial Institutions Examination Council's Cybersecurity Assessment Tools.

Read more.

The European Banking Authority has published a report entitled "Benchmarking of remuneration practices at the European Union level and data on high earners." The report sets out the EBA's analysis of the compensation data provided to it by national regulators for 2016, which the EBA has compared with data from 2015 and 2014. The Capital Requirements Directive requires the EBA to benchmark remuneration trends in credit institutions and investment firms at EU level and to publish aggregated data on high earners earning EUR 1 million or more per financial year. National regulators are required to collect the relevant information from credit institutions and investment firms and to submit it to the EBA.

The analysis shows a slight decrease in 2016 in the number of high earners paid EUR 1 million or more. There was also a significant decrease in the number of identified staff subject to a cap on the ratio of fixed to variable compensation, although the EBA notes that this was due to a significant reduction by two banks of their numbers of identified staff. The EBA also notes that the supervisory framework for compensation practices is still not sufficiently harmonized, with significant differences among Member States and among institutions in the application of deferral and payout in instruments.

Read more.

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have published a Framework for the supervisory stress testing of CCPs, following a joint consultation launched in June 2017.

In April 2015 the CPMI and IOSCO were asked by the G20 to develop, in conjunction with the Financial Stability Board and the Basel Committee on Banking Supervision, a "CCP workplan" for identifying and addressing remaining gaps and potential financial stability risks related to CCPs that are systemic across multiple jurisdictions and for helping to enhance their resolvability.

Read more.

The European Securities and Markets Authority has published a letter from its Chair, Steven Maijoor, to the European Commission seeking clarification on how to interpret the ancillary activity exemption under the revised Markets in Financial Instruments Directive.

MiFID II exempts non-financial entities that deal on own account, or provide investment services to clients, in commodity derivatives from having to obtain authorization as an investment firm under MiFID II provided that, among other things, this activity is ancillary to their main business. The provisions of MiFID II are supplemented by a Commission Delegated Regulation setting out the Regulatory Technical Standard on the criteria to establish when an activity is considered to be ancillary to the main business. The wording of both MiFID II and the RTS suggest that the tests for whether activity is ancillary should be carried out at the level of the entity's group. However, some drafting amendments that were introduced by the Commission have led to uncertainty as to whether the tests should be carried out at the level of the entity rather than at group level.

ESMA states that it would not be appropriate for it to address this uncertainty through its usual Questions and Answers and invites the Commission to provide further guidance on the interpretation and implementation of the ancillary activity criteria, in particular on the level at which the tests should be applied.

View the ESMA letter.

View the Commission Delegated Regulation (2017/592).

The Financial Conduct Authority has published its Business Plan for 2018/19 which sets out its key priorities for the coming year. The FCA confirms that it will continue to focus on issues relating to the U.K.'s withdrawal from the EU by working with the Government, ensuring appropriate transition measures for EEA firms, working towards operational readiness and cooperating at international level.

The FCA divides the remainder of its priorities into cross-sector priorities and sector priorities. There are seven cross-sector priorities: firms' culture and governance; financial crime and anti-money laundering; data security, resilience and outsourcing; innovation, big data, technology and competition; treatment of existing customers; long-term savings, pensions and intergenerational differences; and high-cost credit. There are seven sector priority areas: wholesale financial markets; investment management; retail lending; pensions and retirement income; retail investments; retail banking; and general insurance and protection. The FCA also published Sector Views for each of these sectors which provide an FCA view of how each sector was performing as of mid-2017.

Read more. 

The Committee on Payments and Market Infrastructures and the Board of the International Organization of Securities Commissions have published final Technical Guidance on the harmonization of critical OTC derivatives data reported to trade repositories. The Technical Guidance does not cover the Unique Transaction Identifier and Unique Product Identifier. The Financial Stability Board identified the development of a UTI, UPI and other key data elements as critical for a mechanism to produce and share global aggregated derivatives reporting data. The Technical Guidance sets out the definition, format and allowable values of critical elements that would facilitate consistent aggregation of reported data at global level. It does not specify which data elements must be reported because those requirements are set by the relevant authorities in each jurisdiction. The Guidance is for national authorities to use and it is not intended to function as a set of rules for market participants.

View the Technical Guidance.

The Financial Conduct Authority has published a discussion paper on its proposed approach to using ex post impact evaluation to assess the impact of its work on consumers, firms and markets. The consultation paper sets out what the FCA means by ex post impact evaluation, why it is important to the FCA, the scope of ex post impact evaluations, how the FCA will select which work to evaluate, how such evaluations will be conducted and the key challenges involved in ex post impact evaluations. The FCA is seeking feedback on its proposed approach.

Responses to the discussion paper should be submitted by July 9, 2018.

View the discussion paper. 

The Prudential Regulation Authority has published its Business Plan for 2018/19 which sets out its strategic goals and workplan to deliver those goals. The PRA also published a consultation paper on its fees and levies for 2018/19 alongside the Business Plan as well as a report to the Prudential Regulation Committee on the adequacy of PRA resources and independence of PRA functions.

Read a summary of the PRA's goals and workplan.

The European Commission has published a report on the effects of the EU regulatory capital framework on the economic cycle. The Capital Requirements Regulation requires the Commission to assess periodically whether risk-sensitive regulatory requirements contained in the CRR and the Capital Requirements Directive create unintended procyclical effects and to consider whether it would be appropriate to implement any remedies. The report is addressed to the European Parliament and the Council of the European Union and was prepared in cooperation with the European Banking Authority, the European Systemic Risk Board and Member States.

The Commission analyzed whether capital ratio requirements are procyclical and, if so, if they have an impact of the level of capital held by banks. The Commission has concluded that there is only weak evidence of any procyclical effects resulting from the requirements in CRR and CRD. The EU regulatory framework already provides various tools that deal with procyclical effects, such as the capital conservation buffer, the countercyclical capital buffer, the leverage ratio and risk weight adjustments for specific exposures. The Commission does not consider that any major changes to the EU framework are required at this time.

View the report.

The Financial Conduct Authority has published a statement confirming the regulatory requirements applicable to firms engaged in cryptocurrency derivatives. The FCA does not regulate cryptocurrencies, provided that they do not form part of other regulated services or products. However, the FCA states that cryptocurrency derivatives may be categorized as financial instruments under the revised Markets in Financial Instruments Directive II and that firms carrying out regulated activities in cryptocurrency derivatives should comply with the FCA's Handbook rules as well as the directly applicable EU provisions. The FCA points out that dealing in, arranging transactions in, advising on or providing other services that are regulated activities in relation to derivatives that reference cryptocurrencies or tokens issued through an Initial Coin Offering will require FCA authorization.

View the FCA's statement.

The Financial Conduct Authority has published a Policy Statement and final rules relating to strengthening the governance arrangements of U.K. authorized fund managers. The need to enhance these arrangements was identified by the FCA in the Asset Management Market Study launched in 2015. The final AMMS report was published in June 2017 and set out remedies the FCA intended to implement to address identified issues. At the same time, the FCA published a consultation paper on the first set of proposals.

The Policy Statement sets out the FCA's response to the feedback on its proposals and the final rules and guidance. The new rules and guidance applies to U.K. AFMs in relation to their management of authorized funds (that is, authorized open-ended collective investment schemes). The rules will apply either on April 1, 2019 or on September 30, 2019, depending on the lead time that the FCA considers the industry needs to implement the required changes.

Read more for a summary of the FCA's decision on the various consultation points. 

The Financial Conduct Authority has published a second consultation paper on remedies arising out of the Asset Management Market Study. This consultation concerns improving disclosure by authorized fund managers to their investors and should be read with the Policy Statement, final rules and revised guidance on enhanced governance arrangements for U.K. AFMs, which were published alongside the consultation paper. The FCA is proposing:

• new guidance on how AFMs should make fund objectives and investment policies clear and more useful for investors;
• new rules requiring managers to be clear about why (or why not) a benchmark has been used and how investors should assess the performance of the fund;
• new rules requiring AFMs that use benchmarks to use and reference them consistently across marketing materials;
• new rules requiring that where managers present past performance they must do so in an appropriate and consistent manner; and
• amending the performance fee rules to require that performance fees be calculated on performance net of other fees.

The proposed rules would apply to AFMs in respect of their management of authorized funds. Responses to the consultation should be submitted by July 5, 2018.

View the second consultation on remedies arising from the AMMS.

View details of the Policy Statement and final rules.

View the AMMS final report and the first consultation paper.

The International Organization of Securities Commissions has published a final report on regulatory reporting and public transparency in the secondary corporate bond markets. The report discusses the importance to robust capital markets of making information accessible to regulators and the public via regulatory reporting requirements and pre- and post-trade transparency requirements respectively. The report discusses the approach taken in various jurisdictions to impose these requirements before setting out seven recommendations for national regulators.

The recommendations update IOSCO's 2004 report, "Transparency of Corporate Bond Markets," which discussed the then-existing transparency arrangements for corporate bond markets, as well as the regulatory regimes that were in place in member jurisdictions and set out Core Measures for national regulators to consider to ensure adequate transparency and regulatory reporting arrangements. The recommendations also take into account IOSCO's 2017 report, "Examination of the Liquidity of the Secondary Corporate Bond Markets," which set out the findings of an evidence-based examination of the state of secondary corporate bond markets from 2004 until approximately 2015 and provided a detailed overview and discussion of the markets and how they had evolved since 2004.

Read more.

The Federal Reserve Bank of New York announced that John C. Williams has been named its president and chief executive officer.  Mr. Williams currently serves as the president and chief executive officer of the Federal Reserve Bank of San Francisco, a position he has held since 2011.  Mr. Williams joined the Federal Reserve Bank of San Francisco in 2002, and prior to his appointment as president, served as executive vice president and director of research.  Mr. Williams has also served as a senior economist at the White House Council of Economic Advisers.  Mr. Williams will begin as president and chief executive officer on June 18, 2018, succeeding current president William C. Dudley, who is retiring.

View Tte full text of the Federal Reserve Bank of New York announcement.

The U.S. Federal Reserve Bank of New York, in conjunction with the U.S. Office of Financial Research, introduced three new reference rates.  These three rates, the Secured Overnight Financing Rate, the Broad General Collateral Rate and the Tri-Party General Collateral Rate, are based upon overnight repurchase agreement transactions collateralized by Treasury Securities.  The Federal Reserve Bank of New York has previously published indicative historical data for these three new rates.  In connection with the production of these new rates, the Federal Reserve Bank of New York indicated that it plans to update its International Organization of Securities Commissions statement of compliance during the second quarter of 2018 to include these rates.

View the FRB of NY's announcement.

The U.S. Department of the Treasury issued recommendations to the U.S. Office of the Comptroller of the Currency, U.S. Board of Governors of the Federal Reserve System and the U.S. Federal Deposit Insurance Corporation regarding the modernization of the Community Reinvestment Act.  The report is a follow-up to Treasury’s 2017 report to the President entitled A Financial System That Creates Economic Opportunities: Banks and Credit Unions.

Read more.

The U.S. Financial Crimes Enforcement Network released answers to 37 frequently asked questions regarding its final rule on Customer Due Diligence Requirements for Financial Institutions, which was published in the Federal Register on May 11, 2016 and amended on September 29, 2017.  This is the second series of FAQs FinCEN has released.  The FAQs cover various topics in connection with the requirement that financial institutions obtain beneficial ownership information for legal entity customers, including the beneficial ownership threshold and its interaction with other AML program obligations, collection and verification of identifying information, particularly for legal entity customers with complex ownership structures and the definition of “legal entity customer,” including the treatment of foreign financial institutions.  The FAQs also provide guidance regarding the beneficial ownership certification requirement, including when a single customer opens multiple accounts and in respect of product or service renewals, obligations to update beneficial ownership information and requirements to understand the nature and purpose of the customer relationship.

View FinCEN FAQs.

The European Securities and Markets Authority has published its final report on its technical advice to the European Commission to supplement the provisions of the Prospectus Regulation with delegated legislation. The Prospectus Regulation entered into force on July 20, 2017 and certain provisions took effect directly across the EU on July 20, 2017. It will further take effect partly on July 21, 2018 with the remainder of its provisions taking effect on July 21, 2019. The Prospectus Regulation is a major part of the European Commission's drive towards EU Capital Markets Union. It will repeal and replace the existing Prospectus Directive as well as its supplemental Regulation on the form and content of a prospectus.

ESMA was mandated by the European Commission to provide technical advice on possible delegated acts on the format and content of the prospectus, the content, format and sequence of the EU Growth Prospectus (a new type of prospectus for small and medium-sized enterprises and in certain cases non-SMEs for small issuances) and scrutiny and approval of the prospectus. ESMA consulted on its draft technical advice in three consultations launched in July 2017. ESMA has made a number of amendments to its technical advice, based on feedback received on the consultations.

Read more.

The U.S. Consumer Financial Protection Bureau published its semi-annual report.  The report, which is mandated by the Dodd-Frank Act, highlights and summarizes various topics the CFPB is working on, including a list of rules, orders and initiatives to be undertaken in the upcoming period.  The report notes upcoming proposed and final rules, including reconsideration of certain aspects of Regulation C (Home Mortgage Disclosure), finalization of amendments to Regulation P (Annual Privacy Notice Requirements Under the Gramm-Leach-Bliley Act), and finalizing an amendment to Regulation Z (Federal Mortgage Disclosure Requirements under the Truth in Lending Act).  In his introductory letter to the report, CFPB Acting Director Mick Mulvaney was critical of past actions by the CFPB, contending that the CFPB was too powerful and subject to very little oversight.  Acting Director Mulvaney noted that the CFPB “will continue to execute the law, but will no longer go beyond its statutory mandate.”  In addition, Acting Director Mulvaney requested Congress enact four changes in order to promote and establish CFPB accountability: funding the CFPB through the congressional appropriations process; requiring congressional approval of major CFPB rules; ensuring that the CFPB Director is accountable to the President in the exercise of executive authority; and creating an independent Inspector General for the CFPB.

View the CFPB report.

The U.S. Office of the Comptroller of the Currency, U.S. Board of Governors of the Federal Reserve System and the U.S. Federal Deposit Insurance Corporation issued a final rule that exempts commercial real estate transactions of $500,000 or less from the appraisal requirements promulgated under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.  The final rule raises the threshold from $250,000 to $500,000, for which appraisals are not required in connection with commercial real estate transactions.  The agencies originally proposed to increase the threshold to $400,000, but they determined that an increase to $500,000 would not pose a threat to the safety and soundness of financial institutions, and would result in a material reduction in the compliance-related regulatory burden for financial institutions.  For purposes of the final rule, “commercial real estate transaction” is defined as “a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property.” The final rule clarifies that construction loans of $500,000 or less secured by a single 1-to-4 family residential property are not exempted from the appraisal requirement.  In lieu of an appraisal, financial institutions are required to obtain an evaluation of the collateral that is sufficient to support the institution’s decision to engage in the transaction and consistent with safe and sound business practices.  The final rule took effect on April 9, 2018.

View full text of final rule.

The U.S. Board of Governors of the Federal Reserve System announced that it is undertaking a study that will begin this month with respect to fraud in the U.S. payments system.  The study will identify causes and contributing factors to fraud in the U.S. payments system, such as payment security vulnerabilities, and will measure the costs associated with such fraud.  The study was commissioned as part of the Federal Reserve Board’s Next Steps in the Payment Improvement Journey paper that was released last year.  A global management consulting firm will conduct the study, which is expected to last up to six months.  The study is intended to provide data to assist the Federal Reserve with its collaboration with the payments system industry with respect to the security of the payments system.

View the full text of the Federal Reserve Board announcement.

The U.K. Competition and Markets Authority has published the third in a series of working papers on specific aspects of its market investigation into the supply and acquisition of investment consultancy services and fiduciary management services. The working paper should be read alongside the Issues Statement on the investigation, which was published in September 2017. The intention to publish a series of working papers on aspects of the investigation was outlined in a progress report in February 2018. The first working paper, relating to information on fees and quality, was published on March 1, 2018. The second working paper on asset manager product recommendations was published on March 22, 2018.

The third working paper provides the CMA's initial analysis of competition issues arising when firms offer both investment consultancy and fiduciary management services, in particular, where customers receiving investment consultancy services are directed towards a firm's fiduciary management services. The CMA is concerned that customers may not always receive the solution or deal that is in their best interests. In addition, conflicts of interest may arise between the firm and its clients. The CMA is of the view that it is not clear whether existing regulation fully addresses these potential conflicts of interest.

Read more. 

Outgoing U.S. Federal Deposit Insurance Corporation Vice Chairman Thomas M. Hoenig discussed the importance of attaining meaningful regulatory relief without undermining the safety and soundness of the financial system.  Citing a few historical examples, Vice Chairman Hoenig discussed the similarities among past crises, as well as the deregulatory attitude that has followed these crises once the economy begins to recover.  Vice Chairman Hoenig noted that with a strong regulatory foundation, including strong capital and constraints on the reliance on government bail-outs, a number of costly administrative rules could be minimized or eliminated.

Read more.

The European Commission has published a proposed Regulation to amend the Regulation on cross-border payments in the EU. The Regulation on cross-border payments provides, among other things, that charges for cross-border euro payments within the Eurozone must be the same as charges for domestic euro payments. Member States outside of the Eurozone were given the option to extend the application of the Regulation to their domestic currency. Only Sweden opted to do so.

The proposed amending Regulation extends the scope of the fee cap provisions to EU Member States outside of the Eurozone for euro-denominated payments. A payment service providers' charges for cross-border euro payments will be required to be the same as that charged by the PSP for a domestic payment of the same value in the official currency of the customer's Member State. Cross-border transactions in currencies other than the euro are outside of the scope of the fee cap proposals. The proposals aim to put an end to the high cost of intra-EU cross-border transactions in euro.

Read more. 

The European Central Bank has begun a consultation on the first chapter of a proposed guide to internal models. The Capital Requirements Regulation requires the ECB to assess and grant permission for banks directly supervised by the ECB to use internal models for credit risk, counterparty credit risk and market risk. The ECB's proposed guide aims to set out how the ECB intends to approach the assessment of whether a firm meets the necessary requirements for the permission to be granted.

The consultation covers only the first chapter of the proposed guide. This chapter is on general topics comprising overarching principles for internal models, implementation of the internal ratings-based approach, internal model governance, internal validation and audit, model use and change management as well as third-party involvement. The ECB intends to consult on model-specific chapters, including for credit, market and counterparty credit risks, at a later date.

The consultation closes on May 25, 2018.

View the consultation paper.

The European Securities and Markets Authority has published final Guidelines on Internalized Settlement Reporting under the Central Securities Depositories Regulation. The CSDR, which introduces common standards for settlements across the EU, will apply directly across the EU from January 1, 2023 to transferable securities issued after that date and, from January 1, 2025, to all transferable securities. The CSDR requires settlement internalizers to report the aggregated volume and value of all securities transactions that they settle outside of securities settlement systems to their national regulator on a quarterly basis. Settlement internalizers are firms that execute transfer orders on behalf of clients or on own account other than through a securities settlement system. National regulators must, without delay, transmit the information received from settlement internalizers to ESMA and inform ESMA of any resulting potential risk. Regulatory Technical Standards on internal settlement (Commission Delegated Regulation (EU) 2017/391) provide the content of internalized settlement reporting and Implementing Technical Standards (Commission Implementing Regulation (EU) 2017/393) provide the templates and procedures for reporting and transmission of the information.

The Guidelines on Internalized Settlement Reporting aim to ensure the consistent application of the requirements under CSDR and the related technical standards. The Guidelines set out the scope of data to be reported to national regulators and the entities responsible for reporting the information. The Guidelines also provide the process for submission of information by national regulators to ESMA.

The Guidelines will apply to national regulators and to settlement internalizers from the date that they are published on ESMA's website in the official languages of the EU.

View the final Guidelines on reporting internalized settlement.

The European Banking Authority has published proposals to extend the Joint Committee Guidelines on complaints-handling for the securities and banking sectors to the new institutions established under the revised Payment Service Directive and the Mortgage Credit Directive. The Joint Committee's Guidelines on complaints-handing for the securities and banking sectors, published in June 2014, apply to national regulators responsible for supervising complaints-handling by credit institutions, investment firms, certain fund managers, payment institutions and electronic money institutions where complaints are made by natural or legal persons about the regulated activities carried out by these entities.

The MCD, which has applied since March 2016, covers non-bank creditors. Similarly, PSD2, in application since January 2018, introduced two new providers of payment services - payment initiation service providers and account information service providers. Complaints-handling by these entities do not currently fall within the scope of the Guidelines.

The EBA is proposing to extend the scope of the existing Guidelines to these entities to ensure that consumers receive the same level of protection when they interact with these new entities as when they interact with in-scope regulated entities. The extended Guidelines would only apply to security-related complaints for account information services provided by account information service providers under PSD2. The EBA proposes that national regulators should apply the extended Guidelines on a proportionate basis, taking into account the nature, scale and complexity of the business of each entity as well as the nature and range of services they offer.

The consultation closes on May 27, 2018.

View the consultation paper.

View the existing Guidelines.

Following the announcement on March 19, 2018 that a transitional period for Brexit had been agreed between the U.K. and the EU, the U.K. regulators have published statements setting out their expectations regarding firms' preparations for the U.K.'s withdrawal from the EU. The agreed transitional period is from March 29, 2019 until December 31, 2020 and EU law will remain applicable in the U.K. during that time. Both the Financial Conduct Authority and the Bank of England have stated that, subject to the ratification of the transitional agreement, firms carrying on regulated activities in the U.K. through an EU passport can plan to continue doing so during the implementation period on the same basis as they do now and that U.K. authorization would only be needed by the end of that period.

The BoE has also confirmed its approach to the authorization and supervision of international banks, designated investment firms and insurers. The Prudential Regulation Authority has published "Dear CEO&" letters addressed to the CEOs and branch managers of banks, insurers and designated investment firms that undertake cross-border activities between the U.K. and the rest of the EU, together with updated Policy Statements and Supervisory Statements on the PRA's approach to the branch authorization and supervision of EEA banks, insurers and designated investment firms. Following consideration of feedback to the PRA's consultation on updating its approach to branch authorization and supervision, the PRA confirms that it has not made any significant changes to the versions it consulted on, except that the threshold for liabilities protected by the Financial Services Compensation Scheme has been increased from £200 million to £500 million. The PRA's new approach for banks, investment firms and insurers comes into effect on March 29, 2018.

Read more. 

The European Securities and Markets Authority has confirmed that it will use its product intervention powers under the Markets in Financial Instruments Regulation to prohibit the marketing, distribution and sale of binary options to retail investors. It will also impose a number of restrictions on the marketing, distribution and sale of Contracts for Difference to retail investors. Both CFDs and binary options have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products.

Read more.

The European Securities and Markets Authority has published finalized Guidelines on position calculation by trade repositories under the European Market Infrastructure Regulation. ESMA consulted on a draft version of the Guidelines at the end of 2017. 

EMIR requires that derivatives contracts are reported to a trade repository by the parties to the contract or by the CCP. Reporting parties do not have to report their trades to the same trade repositories. Instead, trade repositories must take steps to reconcile records among one another.  Trade repositories are required to calculate the positions by class of derivatives and the reporting entity, based on the reports received. Trade repositories are also required to publish aggregate positions by class of derivatives.

ESMA has introduced new Guidelines to provide a framework for trade repositories to provide the relevant calculations in a common format and follow a consistent methodology and timeline. This will promote the provision to relevant authorities with more consistent and harmonized position data in relation to derivatives and higher standards as regards the data that is made available to authorities.

Read more

The European Securities and Markets Authority has opened a consultation on proposed supplementary guidance on the application of the endorsement regime under the EU Credit Rating Agencies Regulation. The CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may only use credit ratings for certain regulatory purposes where such ratings have been issued by CRAs established in the EU and registered with ESMA. Credit ratings issued in a third country may only be used for such regulatory purposes in the EU under an endorsement regime or an equivalence/certification regime. Endorsement allows credit ratings issued by a third-country CRA and endorsed by an EU CRA to be used for regulatory purposes in the EU. The equivalence/certification regime allows credit ratings issued by a third-country CRA in relation to a third-country entity or financial instrument to be used in the EU for regulatory purposes - it does not cover ratings issued by a third-country CRA for an EU entity or a financial instrument issued in the EU. However, the equivalence regime requires an affirmative assessment by ESMA and the Commission as to the legal regime for credit ratings agency in the third country.

In November 2017, ESMA published an updated version of the Guidelines on the endorsement regime, which clarified that ESMA expects an endorsing CRA to verify, and be able to demonstrate, that the third-country CRA has established internal requirements which are at least as stringent as the corresponding requirements in the relevant provisions of the CRA Regulation, or that the third-country CRA fulfills the endorsement requirements under the CRA Regulation.

Read more. 

The Financial Conduct Authority has launched a consultation on adding a proposed chapter on insider dealing and market manipulation to its Financial Crime Guide. The Financial Crime Guide is not part of the FCA's rules but it is a guide to assist firms in implementing the regulator's rules. A firm that does not comply with the Guide is not necessarily deemed by the FCA to be in breach of the rules. However, the FCA expects firms to use the guide to inform their financial crime systems and controls.

The FCA is proposing to add a new chapter on insider dealing and market manipulation to the Financial Crime Guide. The EU Market Abuse Regulation, which applies directly across the EU, requires firms arranging or executing transactions to establish and maintain effective arrangements, systems and controls to detect and report suspicious transactions. The FCA emphasizes that the U.K. rules extend these obligations under MAR and require firms to also counter the risk of financial crime. The FCA explains that this 'countering' obligation extends to insider dealing and market manipulation.

The consultation paper also covers other minor amendments proposed by the FCA, including updating the Guide to reflect the introduction of the Money Laundering Regulations 2017 and removing outdated references on Sanctions.

Responses to the consultation are due by June 28, 2018. The FCA intends the final revised Guide to come into effect on October 1, 2018

View the consultation paper.

View the existing Financial Crime Guide.

Federal Reserve Bank of New York President William Dudley spoke at the U.S. Chamber of Commerce regarding the role incentives play in ensuring a resilient and robust financial system.  In his remarks, President Dudley noted the considerable progress that has been made since the financial crisis in creating a more robust and resilient financial system, including with respect to the safety and soundness of, and to the resolution process for, systemically important financial institutions.

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The European Money Markets Institute has published a consultation paper seeking views from stakeholders on a hybrid determination methodology for the Euro Interbank Offered Rate (Euribor). EMMI is the administrator for Euribor, a major euro interest reference rate for unsecured interbank short-term lending and borrowing. Euribor was classed as a critical benchmark of systemic importance for financial stability by the European Commission in 2016.

Euribor is currently determined using a survey approach entailing the collection of quotes from contributing panel banks active in the euro money markets, supplemented by expert judgement. In line with the Financial Stability Board's 2014 report, "Reforming Major Interest Rate Benchmarks", EMMI has been working towards a methodology which will strengthen Euribor by underpinning it, to the greatest extent possible, with real transaction data. In 2016, EMMI proposed a new determination methodology for Euribor that was fully anchored in real transactions. However, viability testing of the proposed methodology revealed that a seamless transition from a quote-based to a fully transaction-based methodology was not feasible.

EMMI is now proposing a three-level "hybrid" methodology, under which the calculation of Euribor at particular defined tenors is supported by euro money market transaction data from contributing panel banks whenever available and relies on other related market pricing sources or banks' own appreciation of their funding costs when necessary.

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The European Securities and Markets Authority has published a final report and final draft amending Regulatory Technical Standards to amend the RTS on the equity transparency obligations of trading venues and investment firms (Commission Delegated Regulation (EU) 2017/587, known as RTS 1). The Markets for Financial Instruments Regulation requires Systematic Internalisers to make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent of 10% of the standard market size for the quoted instrument; (ii) include both a bid and offer price; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity".

ESMA considers that this concept needs to be further elaborated and consulted on proposed amendments last year. ESMA has not made any changes to its proposal.  The final draft amending RTS provide that the quotes of an SI can only adequately reflect prevailing market conditions when the quotes reflect the minimum price increments ('tick sizes') quoted for a financial instrument on a trading venue.

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A Commission Delegated Regulation has been published in the Official Journal of the European Union. The Delegated Regulation supplements the Regulation on European Long-Term Investment Funds, setting out Regulatory Technical Standards to specify the criteria for establishing the circumstances in which the use of financial derivative instruments solely serves hedging purposes, the circumstances in which the life of a ELTIF is considered sufficient in length and the criteria to be used for certain elements of the itemized schedule for the orderly disposal of the ELTIF assets and the facilities available to retail investors.

The Delegated Regulation will enter into force on April 12, 2018.

View the Commission Delegated Regulation ((EU) 2018/480).

The Financial Stability Board has launched a survey seeking feedback from financial institutions and other reporting entities on legal barriers that prevent or hinder them from reporting full transaction information on over-the-counter derivatives trades to Trade Repositories.

Legal barriers that can prevent full trade reporting include blocking laws, client confidentiality laws, data protection laws and related requirements or restrictions. Trade reporting is an important component of the comprehensive reforms of OTC derivatives markets agreed by the G20 in 2009.  A thematic peer review of derivative trade reporting conducted by the FSB in 2015 revealed a number of legal barriers to trade reporting. These barriers can hamper national regulators in carrying out their regulatory obligations, such as monitoring and analyzing systemic risk and market activity. The FSB has previously published progress reports in 2016 and 2017 setting out steps FSB member jurisdictions have taken and are planning to take. FSB member jurisdictions have committed to take action to remove legal barriers by June 2018.

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The European Central Bank has published finalized versions of its guides “Guide to Assessments of Licence Applications” and “Guide to Assessments of FinTech Credit Institution Licence Applications”, following consideration of the responses to consultations on draft versions of the guides, which the ECB ran between September and November 2017.

The ECB has been exclusively competent, since November 2013, to authorize all Eurozone credit institutions and credit institutions established in any other EU Member States that participate in the Single Supervisory Mechanism via close cooperation arrangements.

The ECB exercises its competence in close cooperation with the relevant national regulators. The ECB has developed the Guides, which are not legally binding, to promote awareness and enhance the transparency of the assessment criteria and processes for establishing a credit institution within the SSM. These should serve as practical tools to support applicants and all other entities involved in the process of bank authorization to ensure a smooth and effective procedure and assessment.

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The European Securities and Markets Authority has published two consultation papers relating to the regulation of EU securitization repositories under the Securitization Regulation (also known as the STS Regulation). The first consultation paper proposes draft technical standards on applications for registration of a securitization repository and draft Guidelines on data portability between securitization repositories. The second consultation paper consults on draft advice to the European Commission on supervisory fees payable by securitization repositories.

The Securitization Regulation requires, among other things, securitization special purpose entities, originators and sponsors of a securitization to make certain information available via a securitization repository to holders of a securitization position, to national regulators and, upon request, to potential investors. ESMA will register and supervise securitization repositories, as it does trade repositories under the European Market Infrastructure Regulation and the Securities Financing Transactions Regulation. Unlike EMIR and SFTR, the Securitization Regulation does not contemplate non-EU firms as securitization repositories.

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The Financial Action Task Force has launched an online private sector survey on correspondent banking and the usefulness of its 2016 Guidance on correspondent banking services. The Guidance was published in response to increased concerns about so-called "de-risking," whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The FATF considers that de-risking is inconsistent with FATF Recommendations, that it has negatively impacted correspondent banking and that it may result in financial transactions being directed into less regulated areas, which would reduce transparency and increase exposure to money laundering and terrorist financing risks.

The FATF wants to assess whether its Guidance is helping to address the de-risking issues. The survey is intended to track their understanding of adoption and usefulness of the guidance.

The survey is open until April 16, 2018.

View the survey.

View the 2016 Guidance on correspondent banking. 

The U.S. Federal Financial Institutions Examination Council announced an            update regarding its Examination Modernization Project.  The project initially grew out of the regulatory review process undertaken pursuant to the Economic Growth and Regulatory Paperwork Reduction Act, and is intended to identify potential improvements that can be made in the efficiency and efficacy of the community financial institutions safety and soundness examination processes.  The project has focused primarily on leveraging improved technology to streamline and simplify the examination process for community financial institutions.  As part of the project, the FFIEC has identified four key areas where the supervisory burden can potentially be reduced, including, better communication throughout the examination process, using technology to move examination tasks offsite, tailoring examinations based upon risk and improving electronic file transfer systems. While the FFIEC will first focus on these four areas, the Examination Modernization Project is envisioned as a long-term process, and the FFIEC will continue to identify new parts of the examination process that could benefit from further improvement.  To facilitate improvements in the first key area regarding transparency, the U.S. federal financial regulatory agencies have committed to issue reinforcing and clarifying guidance to examination staff about the importance of being transparent and communicative throughout the examination process.

View full tex of FFIEC press release.

HM Treasury has published a document entitled "FinTech Sector Strategy: Securing the Future of U.K. FinTech" to coincide with the U.K. government's second International Fintech Conference.

The Strategy Paper provides an overview of the work already conducted by successive U.K. governments to support the FinTech sector by promoting competition and removing barriers to entry. Drawing on the findings of the 2017 "UK FinTech Census," which set out a comprehensive review of the sector and the challenges it faces, the government has identified further action it might take to remove barriers to entry and growth faced by FinTech firms. These further actions focus on reducing the cost of regulatory compliance, ensuring access to skilled talent, improving FinTech firms' access to equity finance, improving the take-up of new FinTech services, increasing competition and providing access to new markets.

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