The SEC proposed rule and form amendments that would require certain registrants to include a hyperlink to exhibits in their filings, thereby making it easier to locate documents attached to company filings. The proposed amendments would require registrants that file registration statements and periodic and current reports that are subject to the exhibit requirements under Item 601 of Regulation S-K, or that file on Forms F-10 or 20-F, to include a hyperlink to each exhibit listed in the exhibit index of the filings. The public comment period will remain open for 45 days following publication in the Federal Register.

View the proposed rule.

The US CFTC extended the comment period to September 20, 2016, on its proposed amendments to Regulation 4.22 with respect to the annual report that each commodity pool operator registered or required to be registered with the CFTC must distribute for each commodity pool that it operates.

View proposed amendments.

The US Department of Treasury, the US Federal Reserve Board, the US FDIC, the US OCC and the National Credit Union Administration released a joint fact sheet on foreign correspondent banking that sets forth supervisory and enforcement processes with respect to anti-money laundering and sanctions in the area of correspondent banking. Among other things, the fact sheet notes that while US depository institutions that maintain correspondent accounts for foreign financial institutions (FFIs) are not required to conduct due diligence on an FFI’s customers, US depository institutions must establish appropriate, specific and risk-based due diligence policies, procedures and processes that are reasonably designed to assess and manage the risks inherent with these relationships. The release further provides that while the regulators are not adopting a zero tolerance philosophy that mandates the strict imposition of formal enforcement action regardless of the facts and circumstances of the situation, the regulators are taking the threats posed by criminals, money-launderers and terrorist financers very seriously and continue to use their authorities to safeguard the US financial system against abuse.

View fact sheet.

The SEC adopted amendments to a rule that requires security-based swap data repositories to make data available to regulators and other authorities, allowing them to share information and more effectively oversee the security-based swap market.

The Dodd-Frank Act establishes provisions for regulators to access security-based swap data from data repositories. Building on a proposal from September 2015, the final rule amendments implement these provisions and, among other things: (i) require either a memorandum of understanding or other arrangement between the SEC and the recipient of the data to address the confidentiality of the security-based swap data provided to the recipient; (ii) identify the five prudential regulators named in the statute, as well as the Federal Reserve banks and the Office of Financial Research, as being eligible to access data; and (iii) address factors that the SEC may consider in determining whether to permit other entities to access data.

View The final rule.

The Basel Committee on Banking Supervision published a report to the G20 leaders, providing an update on implementation of the Basel III regulatory reforms since the Basel Committee’s last progress report in November 2015. The Basel Committee concluded that the Basel III capital and liquidity standards have generally been transposed into domestic regulations within the time frame set by the Committee. Since the last report, key components such as the risk-based capital standards and the Liquidity Coverage Ratio have now been enforced by all member jurisdictions, while the global systematically important banks framework has been enforced by all member jurisdictions that are home jurisdictions to G-SIBs. The Basel Committee highlighted the ongoing efforts of member jurisdictions to adopt other Basel III standards such as the leverage ratio and the Net Stable Funding Ratio. 

Read more.

The US Federal Reserve Board issued a notice that it had adopted the “ORSOM” rating system for its review of FMIs over which the Federal Reserve Board has jurisdiction, including financial market utilities designated as systemically important by the Financial Stability Oversight Council. The ORSOM system judges FMIs on five categories which the Federal Reserve Board noted highlight the issues FMIs face: Organization, Risk management, Settlement, Operational risk and IT, and Market support, access and transparency. The Federal Reserve Board’s notice also specifies particular regulations and guidance that would be examined under each ORSOM category. The rating scale runs from 1, strong, to 5, unsatisfactory, in each category, with the FMI receiving a 1-5 aggregate overall rating as well.

View The Federal Reserve Board’s release.

The Financial Stability Board published its eleventh progress report on the implementation of reforms by standard-setting bodies, national and regional authorities and market participants to the over-the-counter derivatives market as agreed by the G20. Such reforms include the trade reporting of OTC derivatives, central clearing of standardized OTC derivatives and higher capital and minimum margin requirements for non-centrally cleared derivatives. The FSB concluded that the progress of implementing reforms is continuing, but that regulators have noted challenges to implementation.

Read more.

The US Financial Crimes Enforcement Network issued a notice of proposed rulemaking pursuant to Section 326 of the USA PATRIOT Act that would lay out minimum standards for anti-money laundering programs and remove the AML program exemption for banks that lack a Federal functional regulator. The proposed rule would amend 31 CFR Chapter X to broaden the application of the AML requirements, customer identification programs and beneficial ownership requirements to cover all banks, not just those subject to regulation by a Federal functional regulator, including, but not limited to, private banks, non-federally insured credit unions and certain trust companies. Comments must be submitted to FinCEN by October 24, 2016.

View FinCEN’s release.

The SEC published a final rule adopting amendments to Form ADV and several rules under the Investment Advisers Act of 1940 aimed at enhancing disclosure of information by investment advisers. The amendments will require investment advisers to provide additional information about various aspects of their businesses, including separately managed account business, branch operations, and their use of social media. The amendments will also facilitate streamlined registration and reporting by groups of funds and require advisers to maintain additional records related to adviser performance information. The amendments will become effective 60 days after their publication in the Federal Register, and advisers will be required to comply with the amended rules on October 1, 2017.

View the SEC’s final rule.

The SEC issued a request for comment on Subpart 400 of Regulation S-K, which requires certain disclosures about management, certain security holders and corporate governance of the disclosing firm. The request is part of a broader initiative to improve the disclosure requirements of Regulation S-K. The review will also inform the study mandated by the Fixing America’s Surface Transportation Act which requires the SEC to study Regulation S-K requirements in order to best modernize and simplify the substance of the disclosure requirements as well as the manner of the presentation of disclosed information. Input may include comments on existing requirements as well as potential disclosure issues that commenters believe Regulation S-K should address. The comment period is open for 60 days after the publication of the release in the Federal Register.

The SEC’s request for comment.

The International Organization of Securities Commissions published a final report outlining good practices on fees and expenses for collective investment schemes. The report is aimed only at CISs whose shares or units are permitted to be sold to retail investors. IOSCO states that appropriate information about fees and expenses should be available so that an investor can take them into account when making an investment decision rather than relying purely on past performance. IOSCO’s Committee on Investment Management reviewed existing practices with respect to fees and expenses in collective investment schemes in 2004 and again in 2015, with good practices published as a result of the review in 2004. The latter review reflected a wider range of regulatory approaches towards markets at different stages of maturity, as well as taking account more recent developments in its member jurisdictions, in light of the natural evolution of best practices since the 2004 report as regulators adapted their approach.  

Read more.

The Organization for Economic Co-operation and Development published a progress report on the implementation of the G20/OECD Principles of Corporate Governance. The Principles were endorsed by G20 Leaders at their summit in Antalya on November 15-16, 2015 and are one of the Key Standards for Sound Financial Systems adopted by the Financial Stability Board. The progress report provides an update on the main developments that have helped jurisdictions to implement the Principles, including translations of the Principles into languages other than the official languages of the OECD. It also discusses the review and update of the methodology used by the OECD to assess the implementation of the Principles, as well as containing information on the FSB peer review of the implementation of the relevant Principles. The review will assess how FSB member jurisdictions have implemented the Principles for publicly listed financial institutions, such as banks, insurers, asset managers and financial holding companies.  The final version of the Methodology is expected to be adopted in November 2016. The OECD intends to continue with its thematic peer reviews and the next peer review is expected to launch in the first half of 2017. 

View the progress report.

A Commission Delegated Regulation on the valuation of derivatives for the purpose of bailing-in derivative liabilities in the form of Regulatory Technical Standards was published in the Official Journal of the European Union. The final RTS do not differ substantively from the RTS adopted by the European Commission on May 23, 2016. The Bank Recovery and Resolution Directive provides that a resolution authority may bail-in relevant derivative liabilities provided that the authority complies with certain conditions, including exercising the bail-in power only upon or after closing out the derivatives and ensuring that derivatives subject to a netting agreement are bailed-in on a net basis following the terms of the netting agreement. Before exercising the bail-in power, a resolution authority is required to ensure that an independent valuation of the assets and liabilities of a firm is carried out. For derivative liabilities, the valuation will determine the value of those derivative liabilities at the moment of exercise of the resolution power. The RTS provide a methodology for resolution authorities to follow when comparing the destruction in value that would arise from the close-out with the losses that those derivatives would incur in a bail-in, principles for determining the point in time at which the value of a derivative should be established and measures for establishing the value of classes of derivatives. The RTS entered into force on September 12, 2016.
 
View the RTS on the Valuation of Derivatives for Bail-in. 

A Commission Delegated Regulation outlining the Regulatory Technical Standards on the elements of a business reorganization plan and the minimum contents for reporting progress in the implementation of the plan was published in the Official Journal of the European Union. The final RTS do not differ substantively from the RTS adopted by the European Commission on May 10, 2016. The final RTS supplement the requirements set out in the Bank Recovery and Resolution Directive which require a firm that has been bailed in to submit a plan to the resolution authority on how the firm, or parts of it, might be restored to long-term viability within a reasonable timescale.

Read more.

The US FDIC released the Summer 2016 issue of its publication, Supervisory Insights. The magazine contains two original articles and the regular “Regulatory and Supervisory Roundup” which provides summaries of recently released regulations and supervisory guidance. An article entitled “De Novo Banks: Economic Trends and Supervisory Framework,” lays out trends the FDIC staff has observed in de novo formation, the FDIC application review process and steps the FDIC takes to supervise and support new banking institutions. Another article entitled, “Matters Requiring Board Attention (MRBA)” provides a survey of trends among issues appearing in the MRBA section of examination reports. The article notes several specific trends: first, examinations resulting in MRBAs have declined since 2011, second, there have been relative increases in credit concentration risk management and liquidity management-related MRBAs, and third, corporate governance and IT practices are additional areas of increasing concern.

View Summer 2016 Supervisory Insights.
 

 

The OCC issued a notice of proposed rulemaking that would require OCC-supervised subsidiaries, branches and agencies of US and foreign global systemically important banking organizations to amend certain qualified financial contracts to prohibit the immediate termination of such contracts and the exercise of certain other default rights by counterparties if the firm enters bankruptcy or a special resolution proceeding. Covered QFCs are defined to include swaps, derivatives, repurchase, reverse repurchase and securities lending and borrowing transactions. Under the proposed rule, any covered QFC would be required to include a contractual stay-and-transfer provision analogous to the stay-and-transfer provision provided for in Title II of the Dodd-Frank Act that supports the orderly resolution of financial firms in their contracts. Moreover, the proposed rule would also limit the default rights of a counterparty in the event of the insolvency of the G-SIB or its affiliates. Comments must be submitted to the OCC by October 18, 2016.

The proposed rule is largely analogous to a proposed rule issued by the Federal Reserve Board on May 3, 2016 and provides a substantively parallel rule for OCC-regulated institutions within a G-SIB group.

View the notice of proposed rulemaking.

The International Organization of Securities Commissions published a report outlining a proposed set of good practices on the voluntary termination of investment funds. The decision to terminate an investment fund can have a significant impact on investors, in terms of the costs associated with such an action or the ability of investors to redeem their holdings during the termination process. Therefore, IOSCO’s objective is to develop a set of good practices for the termination of collective investment schemes and other fund structures such as commodity, real estate and hedge funds, which take into account investors’ interests during the termination process. 

Read more.

The Committee on Payments and Market Infrastructures and the Board of the International Organization of Securities Commissions published a second report on proposed guidance for a harmonized Unique Product Identifier. The purpose of the UPI is to uniquely identify OTC derivatives products that regulators require, or may require in the future, to be reported to trade repositories. The UPI system will assign a code to each OTC derivative product which maps to a set of data elements describing the product in a corresponding reference database. Currently, OTC derivative trades can be reported to one of the six trade repositories currently authorized in the EU. However, in order to properly mitigate systemic risk and protect against market abuse, it is necessary for data across trade repositories to be aggregated and for reporting fields to be harmonized so that national regulators have a comprehensive view of the OTC derivatives markets and trading activity. The first consultation focused on the reference database (or classification system). The focus of this second consultation is on the possible form, content and granularity of reference data assigned to each OTC derivative product.
 
Comments on the proposals are due by September 30, 2016, with publication of final guidance expected around the end of 2016.

View the second consultative report.

View the first consultative report.

The Financial Stability Board published a progress report on its CCP workplan. The progress report provides an update on implementation of a workplan agreed on by the FSB, the Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructure and the International Organization of Securities Commissions (the Group) in April 2015. The workplan focuses on the resilience, recovery planning and resolvability of CCPs and coordinating the roles of each organization in achieving a new international framework for CCPs.

Read more.

The CFTC issued a final report on the de minimis exception from the definition of a “swap dealer” under CFTC Regulation 1.3(ggg). The exception currently applies to a person whose swap dealing activities are less than an aggregate gross notional amount of $8 billion over the prior 12-month period. Unless the CFTC takes action, the $8 billion threshold will be reduced on December 31, 2017 to $3 billion. While CFTC staff did not ultimately issue a recommendation, they noted the advantages and disadvantages of implementing, delaying or changing the $3 billion threshold, creating different threshold for various asset classes or creating a multi-factor test for determining the de minimis exception.

CFTC Commissioner J. Christopher Giancarlo issued a statement upon release of the report expressing disappointment that the staff did not recommend eliminating or delaying the transition to a $3 billion threshold. He noted that market participants now have to prepare for the implementation of the lower threshold and at the same time urged the Commission to keep the registration threshold at $8 billion.

View CFTC Report.

View Commissioner Giancarlo's statement.

The Federal Reserve Bank of New York named Michael Held executive vice president, head of the Legal Group and general counsel, effective August 15, 2016. He will also serve on the New York Fed’s Management Committee. As head of the Legal Group, Mr. Held will oversee the day-to-day operations of the group, which include Legal, Bank Applications, Compliance, the Corporate Secretary’s Office, Federal Reserve Law Enforcement Unit and Records Management.

View The New York Fed press release.

The UK Prudential Regulation Authority published an open letter to all firms subject to the Capital Requirements Regulation reminding firms of the requirement in the PRA Rulebook to have in place a policy promoting diversity on the management body. The letter follows a report by the European Banking Authority on Benchmarking Diversity Practices published on July 8, 2016. The PRA cited the report which highlighted that, of UK firms surveyed, only 15% had a policy to promote diversity on their management body. The PRA is also interested in how firms have promoted diversity among Senior Managers.

View the letter.

View the General Organisational Requirements.

View the EBA Report. 

A Commission Implementing Regulation establishing a list of critical benchmarks used in financial markets under the Benchmark Regulation was published in the Official Journal of the European Union. The Benchmark Regulation provides for different categories of benchmarks depending on the risks involved, imposing additional requirements on benchmarks considered to be critical, including the power of national regulators to mandate, under certain conditions, contributions to or the administration of a critical benchmark. The Commission Implementing Regulation stipulates that the Euro Interbank Offered Rate is a critical benchmark on the basis that it is important for credit loans and mortgages in the EU. EURIBOR is the first benchmark to be listed. The Commission Implementing Regulation entered into force on August 13, 2016. For the most part, the Benchmark Regulation will apply from January 1, 2018. Certain provisions, giving powers to the European Securities and Markets Authority to prepare draft technical standards and to the Commission to adopt delegated legislation, applied from June 30, 2016.

View the Commission Implementing Regulation.

The European Banking Authority published a consultation paper on draft Regulatory Technical Standards specifying the requirements of strong customer authentication and secure communication under the revised Payment Services Directive (known as PSD2). PSD2, which will apply from January 13, 2018, requires payment service providers to apply strong customer authentication measures where the payer: (i) accesses its payment account online; (ii) initiates an electronic payment transaction; and (iii) carries out any action through a remote channel which may imply a risk of payment fraud or other abuses.  

Read more.

The European Banking Authority published an Opinion on the Commission’s proposed amendments to the Fourth Anti-Money Laundering Directive and its application to virtual currencies. The Commission is proposing to bring custodian wallet providers (CWPs) and virtual currency exchange platforms (VCEPs) within the scope of the 4MLD so that they would, among other things, have to apply customer due diligence controls when exchanging virtual currencies for real currencies, and put in place policies and procedures to detect, prevent and report money laundering and terrorist financing. 

Read more.

The White House Council of Economic Advisers released a report analyzing the impact of regulations issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act on community banks, defined generally as banks with assets less than $10 billion. The report disputed claims that increased regulations have negatively impacted smaller-size institutions, noting areas where community banks have remained strong since the Dodd-Frank Act. The report also describes certain long-standing structural challenges that precede the Dodd-Frank Act which community banks have continued to face, and noted the “importance of implementing Dodd-Frank in a way that allows community banks to compete on a level playing field.” In response, Republicans on the US House of Representatives Financial Services Committee published a blog post countering the assertions in the White House report, and posted statements from various community bankers and other small financial services operators commenting on the negative ways in which Dodd-Frank Act reforms have impacted their respective institutions.

View text of the White House Report.

View the HFSC blog post.

The US NIST issued a request for information regarding current and future cybersecurity initiatives in the digital economy in connection with its directive to support the Commission on Enhancing National Cybersecurity. The Commission will ultimately make recommendations on actions that can be taken to strengthen cybersecurity in both the public and private sectors. NIST is seeking information on current trends, progress being made, short-term initiatives and perceived long-term challenges in respect of several topics relating to cybersecurity as the Commission formulates recommendations intended to “increase the protection and resilience of the digital ecosystem.” Topics on which the Commission is soliciting information include: critical infrastructure cybersecurity, cybersecurity research and development, international markets and the internet of things. Comments were due on September 9, 2016.

View NIST Request for Comment.

The CFTC issued proposed amendments to CFTC Regulation 3.3 concerning chief compliance officers of futures commission merchants, swap dealers and major swap participants. The proposed amendments would codify existing no-action relief (CFTC Staff Letter 15-15) regarding when such registrants must furnish their CCO annual report to the CFTC, clarify filing requirements for registrants located in a jurisdiction for which the CFTC has issued a comparability determination and delegate to the Director of the Division of Swap Dealer and Intermediary Oversight authority to grant extensions to the CCO annual report filing deadline. Comments on the proposed amendments were due by September 12, 2016.

View Proposed Amendments.

View CFTC Staff Letter.

The UK Competition and Markets Authority published its final report on its market investigation into the supply of retail banking services to personal current account customers and small and medium-sized enterprises (SMEs) in the UK. The report outlines its findings and a proposed package of remedies. The CMA aims to implement all elements of the package by the end of September 2018.  

Read more.

The CFTC approved an exemption for Federal Reserve Banks that maintain customer accounts for certain derivatives clearing organizations from liability under the Commodity Exchange Act. The exemption allows the Federal Reserve Banks to hold customer funds of DCOs designated by the FSOC as systemically important without being subject to liability under the CEA and also exempts the Federal Reserve Banks from private rights of action that could otherwise be brought under the CEA.

View CFTC Press Release which includes Links to Exemption.

The CFTC’s Division of Clearing and Risk issued an interpretative letter where CFTC staff stated that it would be inconsistent with CFTC regulations for a DCO to accept or hold initial margin in the form of, or to invest funds belonging to the DCO, its clearing members or clearing members’ customers in, certain prime and government money market funds that have authority to suspend redemptions. However, government MMFs that do not adopt such redemption restrictions would remain acceptable for margin collateral and investments.

The CFTC’s Division of Swap Dealer and Intermediary Oversight issued a related no-action letter. Although an FCM will generally not be permitted to invest segregated customer funds (including an FCM’s own funds held in a segregated account) in such prime and government MMFs, the letter allows such investments if they are limited to the amount of funds the FCM holds in excess of the firm’s targeted residual interest. The letter also addresses the treatment of permitted MMF investments by an FCM under Rule 1.25.

View CFTC Press Release including links to interpretative and no-action letters.

The OCC released a second notice soliciting comments on the expansion of the Bank Secrecy Act/Anti-Money Laundering Risk Assessment System to all OCC-supervised institutions. As noted in the original OCC proposal, published on January 4, 2016, the current information collection system applies only to community banks. Pursuant to the notice, the OCC continues to seek comments on, among other items, the accuracy of the OCC’s estimate of the burden of the collection of information, and ways to enhance the quality and utility of the information to be collected, and ways to minimize the burden of the collection on respondents, including through the use of automated collection technologies. Comments on the MLR System were due by September 7, 2016.

View text of the OCC notice.

The Financial Stability Board launched its thematic peer review regarding the implementation of the G20/Organisation for Economic Co-Operation and Development (OECD) Principles of Corporate Governance. These Principles have been designated as one of the FSB’s key standards for sound financial systems. The Principles cover governance frameworks, disclosure and transparency, rights and equitable treatment of shareholders, key ownership functions and responsibilities. The objective of the peer review, as outlined in the terms of reference, is to understand and assess how FSB member jurisdictions have applied the principles to publicly listed regulated financial institutions (banks, insurers, asset managers and financial holding companies). The FSB is seeking feedback on, for example, the design of corporate governance frameworks and whether they promote transparent and fair markets, the protection of shareholders rights and how corporate governance structures can facilitate equitable treatment for all shareholders. The review is limited to those Principles which apply to listed regulated financial institutions, but it is hoped that it may allow for a more in-depth analysis of particular topics which are relevant for the FSB's broader remit.

The feedback is due by September 9, 2016 with a final report expected to be published in early 2017.

View the FSB terms of reference.

View the G20/OECD Principles of Corporate Governance.

The CFTC issued a Final Response to the United States District Court for the District of Columbia Remand Order in Securities Industry and Financial Markets Association, et al. v. United States Commodity Futures Trading Commission, which was a challenge by industry groups to the CFTC’s guidance as to the application of certain requirements to cross-border swaps transactions. In a decision issued on September 16, 2014, the District Court denied the plaintiffs’ demand that the CFTC be enjoined from enforcing extraterritorially Title VII of the Dodd-Frank Act and related regulations, and upheld the CFTC’s 2013 cross-border guidance. The District Court did direct the CFTC to further explain and consider the costs and benefits of certain rules.

Read more.
 

The European Banking Authority published an amended version of its implementing technical standards on benchmarking of internal approaches under the Capital Requirements Directive IV. The ITS have been amended to assist regulators in their 2017 benchmarking assessment of internal approaches for credit risk and market risk. The 2016 exercise covered credit risk for so-called high-default portfolios (small and medium enterprises and retail) and market risk portfolios. The 2017 exercise will focus on low-default portfolios. The EBA noted that it intends to update the ITS annually to ensure the quality of future benchmarking exercises. The amended ITS have been published as a package of documents with consolidated instructions, templates and annexes. The amended ITS have been submitted to the European Commission but as of yet have not been adopted.

View the amended ITS. 

View the amended draft benchmarking package.

The Prudential Regulation Authority published a statement inviting firms to apply for a temporary modification of the application of the Leverage Ratio, Public Disclosure and Reporting Leverage Ratio parts of the PRA Rulebook to them. The modification is available to firms that are currently subject to the UK leverage ratio framework.  The statement follows a recommendation in July from the Financial Policy Committee of the Bank of England on the composition of the total exposure measure for the purposes of the leverage ratio, which stated that when applying its rules on the leverage ratio, the PRA should consider allowing firms to exclude from the calculation of the total exposure measure those assets constituting claims on central banks where they are matched by deposits accepted by the firm that are denominated in the same currency and of identical or longer maturity. 

Read more.

The OCC announced the selection of Peggy Sherry to be the agency’s Deputy Chief Financial Officer. In this role, Sherry will oversee the planning and execution of the agency’s annual operating budget and will be responsible for the oversight of the OCC’s financial systems, internal and financial controls program, travel policy and operations and agency records management functions as well as the OCC’s Office of Management’s compliance and strategic planning functions. She assumes these duties in September, succeeding Gary Crane, who is retiring.

View OCC press release.

The US Federal Reserve Board and the FDIC announced that for 38 firms, the deadlines to submit resolution plans will be extended from December 31, 2016 to December 31, 2017. The firms include 36 domestic bank holding companies and foreign banking organizations, as well as two nonbank financial companies designated by the Financial Stability Oversight Council. The agencies expect to provide feedback on the firms’ December 2015 plans for use in their December 2017 submissions. This extension will allow the firms additional time to incorporate feedback and guidance into their next plan submissions.

View the list of firms subject to the extension.

The US Federal Reserve Board, the FDIC and the OCC issued frequently asked questions (FAQs) regarding the process for how financial institutions they regulate may begin to submit self-assessments of their diversity policies and practices starting with year-end 2015. Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the federal financial regulatory agencies to develop standards for assessing the diversity policies and practices of its regulated institutions, which became effective on June 10, 2015. The standards provide a framework for regulated institutions to assess and establish or strengthen their diversity policies and practices. Financial institutions are strongly encouraged to disclose on their websites their diversity policies and practices, as well as information related to their self-assessments, to maximize transparency, and to provide their policies, practices and self-assessment information to their primary federal financial regulator.

View FAQs.

The Financial Conduct Authority published a policy statement on changes to the FCA Handbook to implement the Payment Accounts Regulations 2015 (PAR). The policy statement summarizes feedback from its consultation on the implementation of the PAR in March of this year and contains the subsequent final changes to the FCA Handbook and the finalized non-Handbook guidance. 

Changes to the Handbook and Guidance touch on various issues. Minor amendments have been made to the Guidance to provide clarity on the definition of a “payment account” in the Handbook and the scope of the PAR provisions on packaged accounts has been clarified. Amendments have also been made in relation to the regulatory reporting requirements. For example, the total number of refusals of switching and basic bank account applications would now need to be reported (rather than the proportion of total applications refused). The reporting deadline has also been extended to two months (instead of one month) after the end of the reporting period.

Changes to the Handbook and Guidance will come into effect on September 18, 2016, which is the same day as the date on which the Payment Account Regulations provisions on packaged accounts, switching and basic bank accounts enter into force.

View the policy statement.

Te US Federal Reserve Board, FDIC, OCC, Federal Housing Finance Agency and Farm Credit Administration announced a final rule exempting from the agencies’ margin requirements certain non-cleared swaps with commercial end users, small banks, savings associations, Farm Credit System institutions and credit unions with $10 billion or less in total assets. Certain non-cleared swaps with certain treasury affiliates, certain financial cooperatives and captive finance companies also are exempted. In all cases, the non-cleared swaps must hedge or mitigate commercial risk of these counterparties and satisfy the applicable requirements for an exemption from mandatory clearing.

The exemptions were first adopted by interim final rule published in the Federal Register in November 2015. The final rule adopts the earlier interim final rule as final without change. The agencies established initial and variation margin requirements for non-cleared swaps, as required by the Dodd-Frank Act, in a separate rulemaking published in November 2015.

View Final Rule.

The US Federal Reserve Board invited comment on an interim final rule adjusting the Federal Reserve Board’s maximum civil money penalties, as required by law.

In November 2015, a law was passed that requires all federal agencies to adjust their maximum civil money penalty limits annually, rather than every four years, as previously required. Additionally, the law sets forth the adjustment formula for federal agencies. The Federal Register notice details the civil money penalty adjustments made by the Federal Reserve Board.

The interim final rule became effective on August 1, 2016, and will apply to those penalties assessed after this date. The Federal Reserve Board was accepting comments until August 30, 2016.

View interim final rule.

The Federal Reserve Bank of New York announced that Denise Scott, executive vice president for programs at the Local Initiatives Support Corporation (LISC), has been appointed a Class C director of the New York Fed by the Federal Reserve Board. Starting August 1st, Scott will be filling the remainder of Dr. Marc Tessier-Lavigne’s term, which expires on December 31, 2016. Scott will be eligible for reappointment at that time.

View The New York Fed press release.

The US FDIC requested comments on updates to its guidelines for institutions to appeal certain material supervisory determinations, as well as comments on draft guidance regarding third-party lending. The two items are part of a package issued by the FDIC to improve the transparency and clarity of the FDIC’s supervisory policies and practices, and to ensure that institutions have clear and fair avenues to pursue when there are differences of opinion regarding supervisory matters.

Read more.
 

The US Federal Reserve Board, the FDIC and the OCC released the results of the Shared National Credit (SNC) review. The review showed that the level of adversely rated assets remained higher than in previous periods of economic expansion, raising the concern that future losses and problem loans could rise considerably in the next credit cycle. The elevated level of risk observed during the recent SNC examination stems from the high inherent risk in the leveraged loan portfolio and growing credit risk in the oil and gas portfolio.

Read more.

The Prudential Regulation Authority published a consultation paper on its proposed approach to the implementation of the systemic risk buffer. The consultation paper is relevant to ring-fenced bodies under the Financial Services and Markets Act 2000 and large building societies that hold more than £25 billion in deposits (where one or more of the accountholders is a small business) and shares (excluding deferred shares). These are jointly referred to as “SRB institutions”. The UK Independent Commission on Banking recommended that UK systematically important SRB institutions be held to a higher capital standard. In addition to these recommendations, the UK legislation implementing the systematic risk buffer requires that the PRA apply the Financial Policy Committee framework as of January 1, 2019. The PRA’s proposals outline the scope of the framework, the capital implications of the SRB and the PRA’s approach to applying the SRB. 

The PRA has proposed that: (i) it will, in the exercise of sound supervisory judgement, only deviate from the SRB rates derived from the FPC framework in exceptional cases; (ii) for building societies in scope of the framework, the applicable basis of the framework will be the group consolidated basis for building societies that are the parents of consolidation groups and the individual basis for all others; (iii) the initial SRB rates will be set and announced by the PRA in early 2019 and will apply three months after being set; and (iv) following the application of the initial SRB rates, rates will be set and announced annually and will apply in the second year following the calendar year in which they were set.

Responses to the proposals are due by October 28, 2016.

View the PRA update. 

View the consultation paper.

View the FPC framework and associated consultation paper.

The Financial Conduct Authority published final rules on financial crime reporting, which will introduce obligations for banks, large investment firms, building societies, mortgage lenders, large electronic money institutions, certain large consumer credit firms, life insurers and retail investment and mortgage intermediaries. Relevant firms will be required to provide details annually on, among other things, the jurisdictions and types of customers as well as the number of suspicious activity reports to the FCA. The reporting obligation will only apply to a firm's business that is subject to the Money Laundering Regulations 2007. The FCA is introducing the new requirement so that it can adopt a more risk-sensitive supervisory approach. Due to the feedback it received to its consultation on the implementation timeline, the FCA has extended the remittance deadline by 60 days so that firms with an accounting year end of December 31 will need to submit the data by late March the following year. The FCA is also allowing firms to complete the first Financial Crime Report on a best endeavors basis. 

View the FCA's Policy Statement and final Rules.

The Financial Conduct Authority published a second consultation paper on implementation of the Markets in Financial Instruments Directive II and the associated proposed changes to the FCA Handbook. The first consultation paper, published on December 15, 2015, related to issues associated with the FCA’s regulation of the secondary trading of financial instruments. The proposals in the second consultation paper are relevant to many different firms, including investment banks, inter-dealer brokers, stockbrokers, investment advisers, corporate finance firms, trading venues, investment managers and prospective Data Reporting Services Providers. The Consultation Paper includes full implementation of relevant parts of MiFID II, consistent with FCA pronouncements that roll-out of MiFID II will not be affected by the Brexit vote.

Read more.

The European Banking Authority published the results of the EU-wide stress test. The stress test covered 51 EEA banks and assessed the resilience of the EEA banking sector to adverse financial conditions. Unlike the stress tests conducted in 2011 and 2014, the 2016 stress test did not aim to identify possible capital shortfalls, as the EBA considers that after five years of continuous capital raising in the EU banking sector, the crisis type of stress test appears to be less relevant. It is intended instead that supervisors will use the 2016 results to assess banks’ forward looking capital planning. The results of the stress test will be used by national regulators in their Supervisory Review Process to assess each bank's capital planning going forward.  

View the stress test documentation.

The Federal Reserve Board published a proposal to extend for three years, with revision, the Capital Assessments and Stress Testing information collection applicable to bank holding companies with total consolidated assets of $50 billion or more and US intermediate holding companies established by foreign banking organizations. The Federal Reserve Board proposed revising the FR Y-14A, Q and M schedules to expand the chief financial officer attestation reporting requirement applicable to US BHCs subject to the Large Institution Supervision Coordinating Committee (LISCC) framework to US IHC respondents on a phased-in basis beginning with reports as of December 31, 2017. The CFO-attestation requirement was finalized for US BHCs earlier this year and implementation is required on a phased-in basis for reports as of December 31, 2016.

The proposal also provides for revisions to the FR Y-14A that include data on the supplementary leverage ratio as well as to include information on material operational risks included in loss projections, operational risk scenarios and updated documentation requirements to align with SR Letter 15-18. Comments were due by September 26, 2016.

View Federal Reserve Board Proposal.