The European Commission established a task force to prepare and conduct negotiations with the United Kingdom. The Task Force will assist the Commission on all strategic, operational, legal and financial issues related to the negotiations. Sabine Weyand, currently Deputy Director-General in the Commission's trade department (DG TRADE) will become the Deputy Chief Negotiator as of 1 October 2016.  The announcement follows the appointment of Michel Barnier as Chief Negotiator on July 27, 2016. Mr. Barnier will commence his role from October 1, 2016. The Commission noted that once the UK triggers the process to leave the EU, Mr. Barnier will then make the necessary contacts with the UK authorities. 

View the press release.

You might like to view our Brexit resource page, which is available here. 

The OCC issued a proposed rule setting forth a framework for placing uninsured national banks regulated by the OCC into receivership.  While the National Bank Act and Federal Deposit Insurance Act specify the Federal Deposit Insurance Corporation as receiver for insured banks and savings associations, the law grants the Comptroller of the Currency broad authority to choose a receiver for uninsured national banks. The proposal would not apply to federal savings associations, all of which are insured, or to uninsured US branch offices of foreign banks.

The proposed rule describes:  (i) the appointment of a receiver and required federal notice; (ii) the process for submitting claims against the receivership; (iii) the order of priorities for payment of administrative expenses and claims; (iv) the powers and duties of the receiver; (v) the payment of dividends on claims; (vi) the sources of funds for payments and claims; and (vii) the status of fiduciary and custodial assets and accounts.

While the OCC has not appointed a receiver for an uninsured national bank in many years, the agency believes that clarifying the framework, process and authority promotes the orderly resolution of such institutions if required and contributes to the broader stability of the federal banking system.

All uninsured national banks are currently trust banks.  However, the OCC noted that it retains discretion to grant new charters for uninsured banks, and the OCC specifically stated that an uninsured federal bank charter may be an appropriate entity for delivering banking procedures in a new way in light of technological innovations in financial services.

The deadline to submit comments on the proposed rule is November 14, 2016.

View the proposed rule.


 

Implementing Technical Standards listing the main indices and recognized exchanges for the use of eligible collateral in accordance with the Capital Requirements Regulation was published in the Official Journal of the European Union.
 
The CRR states that equities or convertible bonds included in a main index may be used by institutions as eligible collateral for credit risk mitigation purposes. One of the eligibility criteria for collateral is that it should be sufficiently liquid. To be considered as main indices for the purposes of the CRR, equity indices should consist mainly of equities that can reasonably be expected to be realizable when an institution needs to liquidate them. Equity indices listed include STOXX Asia/Pacific 600, TSX60, Hang Seng Mainland 100 Index (China), FTSE Europe Index, S&P BMI France, Nikkei 300 and the OMXS60. The convertible bond indices listed as main indices are Exane ECI-Europe, Jefferies JACI Global and Thomson Reuters Global Convertible. 

Read more.

The New York State Department of Financial Services proposed regulations requiring banks, insurance companies and other NYDFS-regulated institutions to promptly adopt a cybersecurity program and setting forth certain minimum standards with respect to such program. As part of the establishment of a cybersecurity program, each covered entity would be required to, among other things, adopt a written cybersecurity policy, designate a chief information security officer responsible for implementing, overseeing and enforcing its new program and policy and have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to, or held by, third-parties.  Institutions would also be required to comply with additional requirements in order to protect the confidentiality, integrity and availability of information systems.  The proposed regulations would also require senior management of covered entities to file an annual certification confirming compliance with the regulations, beginning in January 2018.

The NYDFS notes that while these regulatory minimum standards are warranted, it is not the intention that such standards be overly prescriptive so that cybersecurity programs can match the relevant risks and keep pace with technological advances. The proposed regulations are subject to a 45-day notice and public comment period before their final issuance.

View proposed regulations.

As part of the inaugural Marketplace Lending Policy Summit 2016, US Comptroller of the Currency Thomas J. Curry discussed marketplace lending’s risks and associated policy questions. Of note, Comptroller Curry addressed the OCC’s work around responsible innovation and feedback it has received to date on potentially granting federal banking charters to fintech firms.  Curry noted that if the OCC does decide to grant limited-purpose charters in this area, the institutions who receive the charters will be held to the same strict standards of safety, soundness and fairness that other federally chartered institutions must meet.

View Comptroller Curry's remarks.

The Bank of England announced the departure of Minouche Shafik, Deputy Governor for Markets and Banking. Ms. Shafik will relinquish her position in February 2017, taking up the role of Director at the London School of Economics in September 2017. Ms. Shafik's successor has not yet been named. 

View the news release.

The Financial Conduct Authority published a consultation paper on proposed updates to the current appropriate qualification examination standards.  Individuals within regulated firms that, for example, advise on securities, derivatives or retail investment products, are required to have appropriate qualifications. The FCA will seek to amend the appropriate exams standards to ensure that exam content is current and reflects the knowledge that the FCA considers necessary for individuals to perform their roles competently. The proposed changes do not alter the FCA's policy on appropriate qualification requirements, introduce new appropriate qualification requirements or change the level of achievement required to meet the FCA rules on appropriate qualifications. The FCA is also proposing amendments to the Training and Competence Sourcebook of its Handbook to clarify how to read and use the appropriate qualification tables as well as seeking views on a standalone equity release qualification which relates to the UK mortgage market and the provision of advice on alternative sale and lease back arrangement (home reversions) accounts. Responses to the consultation are due by December 13, 2016.
 
View the consultation paper.

The European Central Bank published proposed draft Guidance on non-performing loans. The proposed Guidance addresses the main aspects of strategy, governance and operations for resolving NPLs. Once finalized, the Guidance will apply to all Eurozone Significant Institutions supervised by the ECB in the Single Supervisory Mechanism as well as their international subsidiaries. Eurozone banks will be expected to apply the Guidance proportionately with those banks that have a high level of NPLs taking greater actions. The ECB Banking Supervision emphasizes that an NPL strategy should outline the bank’s approach and objectives regarding the effective management and ultimate reduction of NPL stocks in a clear, credible and feasible manner for each relevant portfolio. The ECB also published the results of a survey which it undertook with eight national supervisory authorities. The survey assesses the legal and supervisory practices of eight of the Eurozone countries. The ECB considers that some of those countries should revise and strengthen the legal framework on NPLs. Responses to the consultation are due by November 15, 2016.
 
View the draft Guidance and related information.
 
View the draft Guidance. 

The European Commission published a Communication calling for implementation of the Capital Markets Union to be accelerated. The CMU is part of the third pillar of the Commission Investment Plan for Europe. The CMU Action Plan was published in September 2015.  It outlined a program for implementation by 2019 and set out changes to strengthen EU capital markets. The Commission stated that due to the changing political context in the EU, it would be taking forward priority areas to complete the CMU and undertaking a mid-term review in 2017.  Priorities include proposals to reduce differences in European insolvency regimes, the removal of withholding tax barriers, simplification of the EU personal pension products, improving the use of European savings and increasing the performance of the EU economy.  The Commission called for European Parliament and Member States to do everything within their power to deliver the measures proposed under the CMU Action Plan as soon as possible.

View the Commission press release.

View the Communication.

View the Action Plan.

The US Federal Financial Institutions Examination Council issued a revised Information Security booklet, which is part of the FFIEC’s IT Examination Handbook. The Information Security booklet summarizes the factors necessary to an effective information security program. The booklet sets forth updated guidelines for examiners evaluating the adequacy of information security programs of financial institutions and describes the following aspects of effective information security operations, which include (i) effective threat identification, assessment and monitoring and (ii) incident identification assessment and response. In addition, the booklet discusses assurance reports (addressing IT system design and operation) and testing of information security programs as methods to assess and achieve the effectiveness of such programs.

View FFIEC's IT Handbook.

The European Banking Authority published a report analyzing the core funding ratio across the EU. The report comes in response to a call for advice from the European Commission to explore the possibilities of the core funding ratio as a potential alternative metric for the assessment of EU banks’ funding risk, taking into account proportionality. 

Read more.

The U.S. Commodity Futures Trading Commission approved a final rule instituting system safeguards testing requirements for designated contract markets, swap execution facilities, swap data repositories and derivatives clearing organizations. In addition, the CFTC also issued a comparability determination for certain of Japan’s margin requirements for uncleared swaps. The CFTC’s determination would permit substituted compliance with Japan’s uncleared swap margin rules in place of the uncleared swap margin provisions of Title VII of the Dodd-Frank Act.

View full text of CFTC final rule on system safeguards testing requirements.

View full text CFTC comparability determination.

On September 8, 2016, the US Board of Governors of the Federal Reserve System, the US Federal Deposit Insurance Corporation and the OCC jointly issued, pursuant to a requirement under Section 620 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a study on the scope of permissible activities and investments engaged in by banking entities, and the associated risks of those activities. The banking entities covered in the study include insured depository institutions and any company that controls an insured depository institution or is treated as a bank holding company.

The report recommends changes to mitigate risks associated with banking activities, including (i) repealing the authority of financial holding companies to engage in merchant banking and commodities activities, (ii) reviewing certain activities to determine whether changes in regulations are needed and (iii) clarifying certain prudential rules and regulations.  If enacted, the Federal Reserve Board’s recommendations relating to merchant banking and commodities activities would significantly restrict the permissible activities of FHCs established under the Gramm-Leach-Bliley Act in 1999.  The Federal Reserve Board also recommended the repeal of exemptions available to owners of industrial loan companies and grandfathered savings and loans.

View the text of the Report.
 

The Federal Reserve Board issued a policy statement setting forth the framework for setting the Countercyclical Capital Buffer for private-sector credit exposures in the United States. The CCyB is a macroprudential tool that is intended to assist banking organizations in absorbing shocks associated with fluctuations in credit conditions. As a general matter, the CCyB applies to large internationally active banking organizations that are subject to the advanced approaches capital rules (i.e., those with more than $250 billion in assets or $10 billion in on-balance-sheet foreign exposures), and to any depository institution subsidiary of such banking organizations. The policy statement describes the types of financial system vulnerabilities and other factors that the Federal Reserve Board may take into account as it evaluates settings for the buffer, which may include: leverage in the nonfinancial and financial sectors, maturity and liquidity transformation in the financial sector and asset valuation pressures.  However, the range of indicators and models that may be considered will likely change over time. Once activated, the CCyB imposes heightened capital requirements on such covered institutions, which heightened requirements may be removed or reduced by the Federal Reserve Board upon determination that financial conditions that led to the activation of the CCyB have abated or lessened. In addition, the policy statement notes that the Federal Reserve Board will provide notice and seek comment from the public on the proposed level of the CCyB as part of making any final determination to change the CCyB.

View Federal Reserve Board policy statement.

The US Board of Governors of the Federal Reserve System adopted revisions to the FR Y-9C reporting form, a standardized financial statement for consolidated bank holding companies. The Federal Reserve Board revised the FR Y-9C to, among other things, delete existing data items, increase existing thresholds for certain data items, and clarify certain instructional items. The changes were originally proposed to take effect on March 31, 2016.  In response to comments, the Federal Reserve Board is generally delaying the effective date for implementation for certain changes to September 30, 2016, while others will become effective March 31, 2017.

View the text of adopting release

A Commission Delegated Regulation amending the Regulatory Technical Standards specifying the methodology for the identification by national regulators of global systemically important institutions and the definition of subcategories of GSIIs was published in the Official Journal of the European Union. The RTS specify quantifiable indicators forming the five categories to be used when measuring the systemic significance of a bank. The RTS is based on international standards developed by the Basel Committee on Banking Supervision to assess global systemically important banks and on the higher loss absorbency requirement. This methodology is regularly updated. The Amending Regulation updates the reporting templates and reporting instructions for the data collection for 2016 as well as the current values of the indicators that are to be determined.
 
The Amending Regulation entered into force on September 9, 2016. 
 
View the Regulation.

View the original RTS.

As it indicated it would do in the Joint Report on Banking Activities and Investments, the OCC issued a proposed rule that would prohibit national banks and federal savings associations from dealing and investing in industrial or commercial metal. If finalized, the prohibition would cover metal, including alloy, in a physical form primarily suited to industrial or commercial use (including, for example: copper cathodes, aluminum T-bars and gold jewelry).  The proposal states that such metals do not constitute “exchange, coin, and bullion” under 12 USC 24(Seventh), nor would buying or selling such metals for the purpose of dealing or investing in that metal be part of or incidental to the business of banking.  By operation of various federal laws, the prohibition would also apply to FDIC-insured state banks and to US branches and agencies of foreign banks.  Comments must be submitted 60 days from the date of the proposed rule’s publication in the Federal Register.

View Text of OCC Proposed Rule

The Joint Committee of the European Supervisory Authorities published an Opinion on the European Commission's proposed amendments to the final draft Regulatory Technical Standards on risk mitigation techniques for uncleared OTC derivatives under the European Markets Infrastructure Regulation. The Joint Committee is made up of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The Opinion includes a revised version of the final draft RTS.

Read more.

US Federal Reserve Bank Presidents Esther George (Kansas City) and Dr. Jeffrey Lacker (Richmond) testified before the US House of Representatives Financial Services Subcommittee on Monetary Policy and Trade, in a hearing entitled “Federal Reserve Districts: Governance, Monetary Policy, and Economic Performance.” Addressing the appearance of conflicts of interest arising from the presence of bankers on Reserve Bank boards of directors, President George noted that the Federal Reserve Board in Washington, D.C. is ultimately responsible for bank supervision and that Reserve Bank directors do not participate of bank supervisory matters.  President Lacker noted that Reserve Bank directors have no formal role in crafting banking regulations.  Each president also addressed the structure of the Federal Reserve System in the context of the role played by monetary policy in the economy.

View Details regarding the hearing.

The G20 Leaders published the Communiqué from the Hangzhou Summit. The G20 Leaders reiterated their commitment to finalizing the remaining elements of the financial sector reform agenda, including, for example, finalization of Basel III by the end of 2016, full implementation of the OTC derivatives reforms and removing legal and regulatory obstacles to the reporting of OTC derivatives trades, developing effective cross-border resolution regimes and implementing the total loss absorbing capacity (TLAC) standard. The G20 Leaders also noted the importance of monitoring emerging systemic risks including those derived from shadow banking and asset management. For the continued protection of the global financial system, and with a focus on anti-money laundering, counter terrorism and tax evasion, the G20 have asked the Financial Action Task Force and the Global Forum to prepare initial proposals by October 2016 to improve implementation of transparency standards in the international financial system, including the collection of beneficial ownership information of legal persons and legal arrangements and international information sharing arrangements.

View the Communiqué.

The US CFTC requested public comment on proposed amendments to the Whistleblower Rules found in Part 165 of the CFTC’s regulations. The amendments would improve the process for reviewing whistleblower claims and clarify staff authority to administer the whistleblower program. The proposal would also strengthen the CFTC’s authority to protect whistleblowers from retaliation through CFTC enforcement action under the Commodity Exchange Act.

The amendments would also make changes to eligibility requirements, the award claims process (and review of that process), whistleblower identifying information and the treatment of employer confidentiality provisions. Comments to the proposed amendments were due on September 29, 2016.

View proposed Whistleblower Rule Amendments.

The Financial Stability Board published a second progress report on its workplan to reduce misconduct risk. The workplan was first agreed in May 2015 and the FSB published its first progress report in November 2015. The workplan involves: (i) reviewing the effectiveness of reforms to compensation tools in reducing the risk of misconduct; (ii) examining whether the global standards of conduct in the fixed income, commodities and currency (FICC) markets need to be improved; and (iii) reforming the major financial benchmarks. The FSB's second progress report sets out the progress made to date as well as the expected dates for finalization of some of the work. By the end of 2016, the International Organization of Securities Commissions will publish final guidance for benchmark administrators on the content of the statements of compliance that administrators will be conducting a follow-up review of WM/Reuters 4 pm London Closing Spot Rate. The report also noted current reforms to the key IBOR benchmarks with a final report to be released in the course of 2017. Other items that are in the pipeline include publishing recommendations on the application of regulatory compensation tools to reduce misconduct risk by the end of 2017 and a wide-ranging FX Global Code for the wholesale foreign exchange market is expected to be finalized by May 2017. 

View the progress report.

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.  

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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. 

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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.