The European Banking Authority has published for consultation draft Recommendations on outsourcings by financial institutions to cloud service providers.

The EBA has identified the need for specific guidance for outsourcing to cloud service providers to address uncertainty regarding supervisory expectations in this area. The draft Recommendations build on the existing outsourcing guidelines by the Committee of European Banking Supervisors, published in 2006, which the EBA intends to update in due course.

The draft Recommendations address five key areas: the security of data and systems, location of data and data processing, access and audit rights, chain outsourcing, and contingency plans and exit strategies. The draft Recommendations would apply to banks and investment firms subject to the Capital Requirements Directive as well as and national regulators. The EBA will consider whether to extend the applicability of the draft Recommendations to other regulated firms.

The consultation closes on August 18, 2017.

View the Recommendations.

View the CEBS Guidelines.

The European Central Bank has published a final Guide on fitness and propriety assessments for the suitability of members of the management body and key function holders in significant banks. The final Guide differs from the consultation version published in January, with several clarifications being made, including a requirement that fit and proper assessments are confidential. The ECB Guide is based on six Principles, namely: the primary responsibility of banks in carrying out due diligence and assessments, the role of the ECB as a "gatekeeper", the harmonization of assessments across the euro area, proportionality and case-by-case assessment, due process and fairness, and interaction with ongoing supervision. The Guide sets out the five assessment criteria against which the fitness and propriety of members of the management body is assessed: experience, reputation, conflicts of interest and independence of mind, time commitment and collective suitability. The Guide provides information on the purpose, scope and type of interviews conducted by the ECB of appointees. The Guide highlights how a decision is taken by the ECB after every fit and proper assessment and the various types of decisions that may be taken. The Guide also notes that under the Single Supervisory Mechanism Regulation, the ECB has the power to remove, at any time, members from the management body of a significant supervised entity who do not fulfill the fit and proper requirements.

View the ECB Guidance.

The Prudential Regulation Authority has published a Policy Statement on strengthening individual accountability in banking. The Policy Statement provides the PRA's final policy on a number of issues. Among other things, the PRA has made modifications to the final rules, such as simplifying the draft definition of the new Chief Operations Senior Management Function and narrowing the new Prescribed Responsibility accompanying the Chief Operations SMF to focus on responsibility for the firm's performance of its obligations relating to outsourcing.

Read more.

On May 12, 2017, President Trump re-nominated Brian Quintenz to serve as CFTC Commissioner for the remainder of a five-year term expiring April 13, 2020. Mr. Quintenz was previously nominated by President Obama but his nomination was not confirmed by the Senate.

View press release.
 

The European Banking Authority has published final Guidelines on banks' credit risk management practices and accounting for expected credit losses. These final Guidelines are a result of a consultation that ended on October 26, 2016, and build on the related Guidance by the Basel Committee on Banking Supervision, published in December 2015. The Guidelines will apply at the start of the first accounting period beginning on or after January 1, 2018.

Many banks in the EU apply the International Financial Reporting Standards. IFRS 9, which will apply for accounting periods beginning January 1, 2018, will require the measurement of impairment loss allowances to be based on an expected credit loss accounting model rather than on an incurred loss accounting model. The use of an ECL accounting model involves some discretion in its application. The Guidelines set out supervisory expectations for credit institutions related to sound credit risk practices associated with implementing and applying an ECL accounting model.

These Guidelines should be read in conjunction with the provisions of the Capital Requirements Regulation and the Capital Requirements Directive IV as well as the relevant technical standards.

View the final Guidelines.

View the Consultation Paper.

View the Basel Committee Guidance.

President Trump signed a Cybersecurity Executive Order, focused on (i) improving the government’s cybersecurity, including through measures such as requiring government agencies to follow the NIST Cybersecurity Framework; (ii) engaging the federal government to help better protect critical US infrastructure owners, including the financial services industry; and (iii) working with other countries to enhance cybersecurity defenses, and requiring US agencies (such as the State Department, Treasury Department, Department of Defense and Department of Homeland Security) to develop strategic policy options to deter adversaries.

View text of the executive order.

The European Banking Authority has published final Guidelines on the assessment of the Information and Communication Technology (ICT) risk in the context of the Supervisory Review and Evaluation Process (SREP). These final Guidelines are a result of a consultation that ended on January 6, 2017. The Guidelines will apply to national EU regulators and aim to promote common procedures and methodologies for their assessment of ICT risk. The Guidelines will apply from January 1, 2018.

Read more.

President Trump nominated David Kautter to serve as Assistant Secretary of the Treasury for Tax Policy.  Mr. Kautter currently serves as Partner-in-Charge of the Washington National Tax practice for RSM, an audit, tax and consulting services firm.

View press release.

Acting Chairman of the US Commodity Futures Trading Commission, Christopher Giancarlo, gave a speech at the International Swaps and Derivatives Association 32nd Annual Meeting in Lisbon calling for regulators in both the U.S. and abroad to “recalibrate bank capital requirements to better balance systemic risk concerns with healthy economic growth."  In the speech, Acting Chairman Giancarlo stated that global swap market reforms have failed to adequately address whether the amount of bank capital that has been taken out of trading markets because of bank capital requirements has been calibrated to the amount of capital needed in the global markets to "support overall market health and durability”. In addition, Acting Chairman Giancarlo spoke in support of moving the CFTC to a more flexible, outcomes-based approach for cross-border equivalence and substituted compliance.

View text of the speech.

The US Securities and Exchange Commission announced the appointment of William H. Hinman as director of the Division of Corporation Finance.

View press release.
 

The Joint Money Laundering Steering Group has published and opened up for consultation its proposed revisions to Parts II and III of its Guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry. This follows on from the recent consultation on Part I, which closed on April 28, 2017. The proposed revisions will align the JMLSG Guidance with the proposed Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, on which the Government recently consulted. The draft Regulations are intended to implement into UK laws the EU Fourth Money Laundering Directive and are due to take effect by June 26, 2017 at the same time as 4MLD.

Read more.

On May 8, 2017, the US Financial Stability Oversight Council issued a readout of its meeting in which FSOC discussed efforts to assess the efficacy of the Volcker Rule. Reportedly, at the closed-door meeting, Treasury Secretary Mnuchin directed the various agencies with oversight over the Volcker Rule to re-examine the scope of permissible activities under the rule.

View text of the FSOC readout.

The European Banking Authority has launched a public consultation on draft Regulatory Technical Standards, further specifying the eligibility criteria to determine whether firms should be subject to simplified obligations when drafting their recovery and resolution plans. The Bank Recovery and Resolution Directive permits national regulators to apply simplified recovery obligations, including simpler requirements as to the contents and details of resolution plans, and less frequency in their updates. Simplified obligations may be applied by authorities based on their assessment of a firm based on the size of the firm, interconnectedness, scope and complexity of its activities, risk profile, legal status, nature of business and shareholding structure.

The draft RTS set out the quantitative and qualitative factors to be considered depending on the type of firm (credit institution, investment firm, firms that are part of a group, promotional banks and credit institutions subject to an orderly winding up process). According to the draft RTS, the authorities should approach the criteria in two stages: (i) they should select firms which could potentially benefit from simplified obligations based on quantitative criteria; and (ii) if the first stage is satisfied, they should verify whether firms meet the qualitative criteria. The consultation will close on August 8, 2017.

View the Consultation Paper.

The European Banking Authority has launched a consultation on draft Guidelines on security measures for operational and security risks under the revised Payment Services Directive (known as PSD2). PSD2, which will apply from January 13, 2018, requires Payment Service Providers (PSPs) to establish a framework with appropriate mitigation measures and control mechanisms to manage operational and security risks, relating to the payment services they provide. The framework must include effective incident management procedures, including for the detection and classification of major operational and security incidents. A PSP is required to report to its national regulator annually, providing an updated and comprehensive assessment of the operational and security risks relating to the payment services they provide and on the adequacy of the mitigation measures implemented in response to those risks. The draft Guidelines aim to define those requirements and will apply to PSPs and national regulators responsible for monitoring the implementation of the requirements by PSPs.

Read more.

The European Commission has published a legislative proposal to amend the European Market Infrastructure Regulation. This proposal is the result of an extensive assessment of EMIR between 2015 and 2016. The proposal covers a wide-range of areas within EMIR, including reporting requirements, non-financial counterparties, exemptions and trade repositories.

Read more.

The Payment System Operator Delivery Group, an independently chaired body set up by the Payment Systems Regulator and the Bank of England, has published a recommended Delivery Plan for the consolidation of the operators of three payment system operators: Bacs Payment Schemes Ltd, Cheque and Credit Clearing Company and the Faster Payments Scheme Ltd. The proposed consolidation was one of the recommendations made in the Payments Strategy Forum's November 2016 report, which sets out a wide-ranging strategy for reforming the UK retail payments industry. The Delivery Plan includes a Strategic Framework (including company purpose and strategic objectives) for the new PSO, the proposed design of the PSO (including setting the company up as a company limited by guarantee), a funding model for setting up the consolidated PSO and for its ongoing operation and a target implementation timeline which also sets out a transitional scheme to ensure continuity of services.

The Delivery Plan now needs to be reviewed and agreed by the boards of the three operators as well as their members. If agreed, the aim is for the consolidation to be mostly completed by the end of 2017.

View the delivery plan.

The Financial Conduct Authority has published a Policy Statement introducing final rules on whistleblowing requirements for UK branches of overseas (EEA and third country) banks. The Policy Statement follows a consultation in September 2016 on a proposed approach for extending aspects of the Prudential Regulation Authority and FCA regime to require banks and insurers to introduce whistleblowing procedures internally. The proposals are broadly being implemented as consulted upon, with one minor change being the introduction of guidance reminding branches they may continue to have concurrent reporting obligations to their home state regulators. The rules will come into force on September 7, 2017.

View the Policy Statement.

The Financial Conduct Authority has published a Policy Statement on applying conduct rules in the Code of Conduct sourcebook to non-executive directors in the banking and insurance sectors. In-scope NEDs are those who do not hold Senior Management Functions and therefore are not subject to regulatory pre-approval under the Senior Managers & Certification Regime, the Prudential Regulation Authority's Senior Insurance Managers Regime, or the FCA's revised Approved Persons Regime.

The Policy Statement follows a Consultation in September 2016, which proposed that NEDs would be subject to the five FCA Individual Conduct rules on acting with integrity, acting with due skill, care and diligence, cooperating with the FCA and other regulators, having regard for customer interests and observing proper standards of market conduct. In addition, NEDs would be subject to the Senior Conduct rule requiring individuals to disclose any information of which the FCA or PRA would reasonably expect notice. The remaining Senior Conduct rules will not apply to a NED unless they are also a senior conduct rules staff member. The new rules will come into force on July 3, 2017.

View the Policy Statement.

The Financial Conduct Authority has published a Policy Statement containing final Handbook text and guidance on the requirements for remuneration policies that apply to firms subject to the Capital Requirements Directive IV. Such firms are required to comply with the FCA's Remuneration Code. The FCA consulted on these from September to November 2016. The final rules are broadly as consulted upon, with minor changes to clarify the status of "retention awards" as being different from "guaranteed variable remuneration".

The FCA has aligned its Handbook provisions to comply with the European Banking Authority Guidelines on Sound Remuneration Policies, which came into force on January 1, 2017. The FCA has also published new non-Handbook guidance to address frequently asked questions on remuneration. The Prudential Regulation Authority further published a Policy Statement and final consolidated Supervisory Statement on its expectations on remuneration on April 12, 2017, which aims to bring its approach in line with the EBA Guidelines.

View the Policy Statement.

View the FCA Guidance.

View the EBA Guidance.

The Financial Conduct Authority has published a Policy Statement and final Guidance on how it will enforce the "duty of responsibility". The "duty of responsibility" came into force to replace the much-criticised so-called "presumption of guilt" for UK senior managers on May 10, 2016. The new duty applies to persons performing senior management functions at UK banks, building societies, credit unions, investment firms designated by the Prudential Regulation Authority and incoming branches of overseas firms. Under this duty, the FCA and the PRA can take enforcement action against Senior Managers if they are responsible for the management of any activities in their firm in relation to which their firm contravenes a regulatory requirement and they do not take such steps as a person in their position could reasonably be expected to take to avoid the contravention occurring or continuing. The burden of proof lies with the regulators to prove a contravention. The Guidance applied from May 3, 2017.

View the Policy Statement.

The European Commission has adopted a Recommendation for a Council Decision authorizing the Commission to open Article 50 negotiations with the United Kingdom. This Recommendation includes a draft negotiation directive in the Annex, which covers the first phase of the negotiations and prioritizes matters which have been identified as important to ensure an orderly withdrawal.

View the Recommendation.

View the draft negotiation directive.

The European Council has published Guidelines outlining the proposed framework and stances for its negotiations with the UK under Article 50 of the Treaty on the European Union and setting out the overall positions and principles that the EU will seek. The UK gave notification of its intention to leave the EU on March 29, 2017.

View the Guidelines.

View the related European Commission press release.

A Commission Delegated Regulation on the contributions to the Single Resolution Fund has been published in the Official Journal of the European Union. The Single Resolution Mechanism and the SRF provide for the resolution of credit institutions and certain investment firms established in Member States within the Eurozone or in Member States that participate in the Banking Union. The SRF will support resolution measures for those banks and investment firms and will be financed by bank levies raised at national level. Ex ante contributions by those firms must be made to ensure that the SRF reaches a level of one percent of the protected deposits of all banks within the Banking Union within eight years. The Delegated Regulation sets out the criteria for the calculation of ex ante contributions and the circumstances and conditions under which the payment of extraordinary ex post contributions may be partially or entirely deferred. The Delegated Regulation enters into force on May 19, 2017.

View the Delegated Regulation.

An amending Commission Delegated Regulation extending the deadline for compliance with clearing obligations for certain counterparties dealing with OTC derivatives has been published in the Official Journal of the European Union.

Read more.

The Prudential Regulation Authority has published a second Policy Statement and final rules implementing certain aspects of the Markets in Financial Instruments legislative package.

Read more.

US House of Representatives Financial Services Committee Chairman Jeb Hensarling (R-TX) introduced a modified version of the financial regulatory reform legislation that he introduced in the last Congress.  Among other things, the new CHOICE 2.0 includes certain stress test reforms

Read more.

The European Securities and Markets Authority has published an opinion addressed to national regulators on points of convergence for Market Abuse Regulation-accepted market practices for liquidity contracts.

Read more.

The UK Government has published a consultation on the UK's future legal framework for imposing and implementing financial sanctions upon Brexit. The UK currently adopts sanctions through EU legislation, which is effective via the European Communities Act 1972.

Read more.

President Trump issued two new directives to Treasury Secretary Mnuchin, aimed at revising federal regulations. The directives ordered Secretary Mnuchin to conduct reviews of and report back within 180 days regarding the FDIC’s Orderly Liquidation Authority, which was granted to the US Federal Deposit Insurance Corporation under Dodd-Frank, and the ability of the US Financial Stability Oversight Council to designate nonbank financial firms as systematically important financial institutions and subject to Federal Reserve oversight. Contemporaneously, the President also issued an Executive Order directing Secretary Mnuchin to examine whether any significant tax rules issued on or after January 1, 2016 would impose an undue financial burden on US taxpayers, add undue complexity to the Federal tax laws, or cause the Internal Revenue Service to exceed its statutory authority.

 

US Federal Reserve Board Governor Jerome Powell gave a speech at the Global Finance Forum assessing the “core reforms” of the post-crisis financial regulatory framework. Although Governor Powell generally defended such reforms, he acknowledged that some aspects of the framework could be better tailored and less burdensome, in particular with respect to regulations that have been applied to small and medium-sized institutions.  In addition, Governor Powell acknowledged that the post-crisis framework was, in many cases, excessively complex, and called for, among other things, a reassessment of the Federal Reserve’s supervisory expectations of the boards of directors of banking firms.

View text of the speech.

The US Government Accountability Office released the first in a series of planned reports on fintech. In the report, the GAO describes the general regulatory framework for oversight over four subsectors of fintech, including marketplace lending, mobile payments, digital wealth management and distributed ledger technology. The report also found that the regulation of each subsector depends on the extent to which the firms provide a regulated service and the format in which such services are provided.

View the GAO report.

President Trump nominated former New Jersey Congressman Scott Garrett to be President of the Export-Import Bank for a term of four years expiring January 20, 2021.  The President also nominated former Congressman Spencer Bachus of Alabama to be a Member of the Ex-Im Bank’s Board of Directors for a term of four years expiring January 20, 2019.

View the White House press release.

The US OCC announced that its Office of Innovation will host two days of office hours for national banks, federal savings associations (FSAs) and fintech companies to discuss the OCC’s perspective on responsible innovation. This initial round of meetings will be held in the OCC’s San Francisco Field Office on May 16 and 17, 2017. The OCC anticipates holding office hours in other designated cities at a later date.

The OCC’s Acting Chief Innovation Officer Beth Knickerbocker noted that the office hours are an opportunity for attendees to have candid discussions with OCC staff regarding financial technology, new products or services, partnering with a bank or fintech company or other matters related to financial innovation. OCC staff will provide feedback and respond to questions during the one-hour meetings. The OCC expects to meet with up to fifteen companies over the two-day period.

View more information regarding the meetings.

US FDIC Vice Chairman Thomas M. Hoenig delivered remarks regarding the semi-annual report of the Global Capital Index released that day.

Read more.

The Payment Systems Regulator has opened a consultation on its proposed approach to monitoring and enforcing the revised Payment Services Directive. The UK Government has separately consulted on draft Payment Services Regulations 2017 which will implement the revised Payment Services Directive into national laws and replace the existing Payment Services Regulations 2009 and new FCA rules are also subject to consultation. PSD2 will repeal the current Payment Services Directive with effect from January 13, 2018. Member States must adopt, publish and apply implementing laws from that date, subject to certain exceptions and transitional measures.

Read more.

The European Central Bank has published a Guideline and Recommendation to harmonize the way in which Euro member state national regulators of "less significant" banks exercise discretions available to them under the Capital Requirements Regulation and Capital Requirements Directive. This follows a public consultation on the draft Guideline and Recommendation, which was launched on November 3, 2016 and ended on January 5, 2017. The ECB has already harmonized the application of options and discretions for the banks that it directly prudentially supervises under the Single Supervisory Mechanism.

Read more.

The Financial Conduct Authority has launched a consultation on changes to its rules resulting from implementation of the draft Payment Services Regulations 2017. The UK Government has separately consulted on draft Payment Services Regulations 2017 which will implement the revised Payment Services Directive into national laws and replace the existing Payment Services Regulations 2009.

Read more.

The US CFTC announced that N. Charles Thornton III has been named the CFTC’s Director of the Office of Legislative Affairs. Mr. Thornton will assume his duties on April 17, 2017.

View the CFTC press release.

The Prudential Regulation Authority has published a Policy Statement and final consolidated Supervisory Statement on its expectations on remuneration. In the latter part of 2016, the PRA consulted on its proposed changes to its guidance to bring this into line with the European Banking Authority's Guidelines on Sound Remuneration Policies which applied from January 1, 2017. The remuneration rules and guidance apply to banks, building societies and investment firms, including UK branches of non-EEA headquartered firms. The PRA has introduced a consolidated Supervisory Statement on remuneration by amalgamating the existing statements on proportionality, the application of malus to variable remuneration and other existing measures. The new Supervisory Statement covers the PRA's expectations on proportionality, material risk takers, the application of malus and clawback to variable remuneration, governing body/remuneration committees, risk management and control functions, remuneration and capital, risk adjustment (including long-term incentive plans), personal investment strategies, remuneration structures (including guaranteed variable remuneration, buy-outs and retention awards), deferral and breaches of the remuneration rules.

View the PRA's Policy Statement.

View the consolidated Supervisory Statement.

View the PRA's original consultation paper.

The Financial Conduct Authority has published a discussion paper on distributed ledger technology (DLT). The FCA is seeking to start a dialogue on the potential for future development of DLT in the markets it regulates. The FCA describes DLT systems (such as Blockchain and Ethereum) as rapidly developing technology which offer exciting potential to support the needs of consumers and the market. However, it notes that DLT may also present new challenges and potential risks, such as how regulated firms allocate responsibilities for systems shared among them.

In the discussion paper, the FCA discusses the risks and opportunities of DLT in relation to a number of specific areas, as follows:

• governance and technology resilience;
• DLT and distributed data;
• recordkeeping and auditability;
• smart contracts; and
• the use of digital currencies to deliver financial services.

The FCA generally takes a 'technology neutral' approach to regulating financial services. However, it is considering whether there is anything distinctive about DLT which would require it to take a different approach in order to support innovation in line with the FCA's competition objective. The discussion paper is aimed at both users and providers of DLT solutions in the sectors supervised by the FCA. Comments on the Discussion Paper are due by July 17, 2017.

View the Discussion Paper and related webpage.

View the online response form.

The European Securities and Markets Authority has published an Opinion addressed to EU national regulators on the portfolio margining requirements for CCPs under the European Market Infrastructure Regulation. The Regulatory Technical Standards on portfolio margining that supplement the European Market Infrastructure Regulation provide that a CCP can offset or reduce the required margin across instruments, which it clears if the price risk of one instrument is significantly and reliably correlated to the price risk of other financial instruments. In those cases, a CCP may apply portfolio margining. European legislation provides certainty over the requirements only to a limited degree because there is no indication as to which instrument or product can be considered the same or which elements are needed for an instrument or product to be considered the same. ESMA's Opinion aims to provide clarification as to when two contracts can or cannot be considered the same instrument for the purpose of portfolio-margining, referencing all asset classes. In addition, ESMA confirms that CCPs have to limit the reduction in margin requirement when conducting portfolio-margining across different instruments.

View ESMA's Opinion.

The European Banking Authority has published a final report and final draft Implementing Technical Standards amending the existing ITS on supervisory reporting. The ITS on supervisory reporting collate the prudential reporting requirements of banks under the Capital Requirements Regulation, related technical standards and other financial information required by national regulators. The ITS on supervisory reporting are updated when prudential or supervisory requirements change. The EBA consulted on the amending ITS at the end of 2016.

Read more.

The European Commission has published a consultation paper on conflicts of law rules for securities ownership, addressing so-called third party effects of transactions in securities and claims. The consultation relates to the Commission's Capital Markets Union and the objective of creating a single market for capital by facilitating cross-border investment.

Read more.

The Prudential Regulation Authority has published a letter to CEOs and branch managers of all banks, insurers and designated investment firms undertaking cross-border activities between the UK and the remainder of the EU, including branches of EU firms operating in the UK, concerning the need for contingency planning for the UK's withdrawal from the EU. The PRA has requested that each firm provides, by July 14, 2017, written confirmation that it has considered its contingency plans, a short summary of the plans, assurance that the plans address an appropriately wide range of scenarios and whether any new authorization or regulatory engagement is required. EU branches operating in the UK which have significant retail or SME transactional deposits should consider, among other things, whether they need to convert their operation into a UK subsidiary. The Financial Policy Committee will be overseeing the plans to mitigate any risks to financial stability.

View the letter.

The European Securities and Markets Authority has issued a Supervisory Briefing, providing guidance to sectoral national regulators on the application of certain requirements to use smaller credit rating agencies under the Credit Rating Agencies Regulation. The CRA Regulation aims to create more competition in the EU credit ratings industry and includes requirements for issuers and related third parties regarding the appointment of multiple credit rating agencies to an issuance or entity. In particular, there is a double credit rating requirement for structured finance instruments, and, where this double credit rating requirement applies, issuers or related third parties must consider appointing at least one smaller CRA with no more than a 10% market share. Where it is decided that a smaller CRA will not be appointed, that decision must be documented.

The purpose of the guidance is to promote a common supervisory approach and enforcement of these requirements. The guidance clarifies which issuers and related third parties are within the scope of the requirements and provides a standard form to be used for documenting a decision not to appoint a smaller CRA. The Supervisory Briefing is not binding on regulators or market participants.

View the Supervisory Briefing.

The European Securities and Markets Authority has published Guidelines on the calibration of circuit breakers and the publication of trading halts under the revised Markets in Financial Instruments Directive. MiFID II requires regulated markets temporarily to halt or constrain trading if there is a significant price movement in a financial instrument (equity, equity-like and debt instruments) on that market or a related market in a short period. Regulated markets must also, in exceptional cases, cancel, vary or correct any transaction. ESMA is required to develop guidelines on the calibration of those trading halts, taking into account the liquidity of the different asset classes and sub-classes, the nature of the market model and types of users. The Final Guidelines outline further details on the parameters that trading venues should consider when calibrating their circuit breakers. ESMA emphasizes that consideration should be given not only to trading halts, but also order price collars. Trading venues should also immediately make public details of the activation of a trading halt, the type of trading halt, the trading phase in which it was triggered, the eventual extension and the end of the halt. National regulators have until two months from date of publication in all EU official languages to advise ESMA of whether or not they intend to comply with the final Guidelines.

View the Guidelines.

Daniel Tarullo’s resignation from the US Federal Reserve Board became effective, and he was succeeded by Governor Powell as the Chairman of the Board of Governors’ Committee on Supervision and Regulation. In a speech given on April 4, 2017, Mr. Tarullo reviewed the Federal Reserve’s development of the capital regulation and stress testing regime in the period since the financial crisis, and expressed support for strong capital requirements and strict supervisory stress testing, as well as for raising the $50 billion asset threshold as the trigger for application of enhanced prudential standards under Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, stating that “the time may be coming when the qualitative objection in CCAR should be phased out." In contrast, Mr. Tarullo criticized the Volcker Rule, citing it as an area where “the case for change has become fairly strong."

View full text of the speech.

The Joint Committee of the European Supervisory Authorities has published a consultation on proposed guidelines on preventing terrorist financing and money laundering in electronic fund transfers under the EU Wire Transfer Regulation. The Wire Transfer Regulation, which is applicable from June 26, 2017, requires payment service providers, among other things, to have effective procedures to detect transfers of funds that lack the required information on the payer and the payee and to determine whether to execute, reject or suspend a transfer of funds that lacks that information. The proposed guidelines aim to assist payment service providers in complying with these obligations under the Wire Transfer Regulation. The guidelines will set out the factors that payment service providers should consider when establishing and implementing procedures to detect and manage transfers of funds which do not have the required payer and payee information. They will also specify what a payment service provider should do to manage the risk of money laundering or terrorist financing where that information is missing or incomplete. The proposed guidelines are also intended to assist national regulators to assess the adequacy of a payment service provider's procedures.

View the consultation paper.

The European Banking Authority has published final Guidelines on the interrelationship between the provisions of the Bank Recovery and Resolution Directive setting out the sequence of write down and conversion and the provisions of the Capital Requirements Regulation and the Capital Requirements Directive. The BRRD establishes the sequence for a resolution authority to apply bail-in to an entity under resolution. That sequence is: Common Equity Tier 1, Additional Tier 1 instruments, Tier 2 instruments, other subordinated debt in accordance with the normal insolvency hierarchy and other eligible liabilities in accordance with the normal insolvency hierarchy.

Read more. 

The European Banking Authority has published final Guidelines on the treatment of shareholders in bail-in under the Bank Recovery and Resolution Directive. The Guidelines are addressed to national resolution authorities and aim to clarify how valuation information should inform the determination of the terms of bail-in.

The Guidelines set out the circumstances in which it would be appropriate for a resolution authority, when implementing a bail-in or write down of capital instruments, to either: (i) cancel existing shares or other instruments of ownership or transfer of them to bailed-in creditors, and/or (ii) dilute existing shareholders and holders of other instruments of ownership as a result of the conversion of relevant capital instruments or eligible liabilities to equity.

Read more.