Latest news of financial regulation
The Basel Committee and IOSCO issue revisions to implementation of margin requirements for non-centrally cleared derivatives
18 March 2015
The BCBS and the IOSCO released revisions to the framework for margin requirements for non-centrally cleared derivatives. Relative to the 2013 framework, the revisions delay the beginning of the phase-in period for collecting and posting initial margin on non-centrally cleared trades from 1 December 2015 to 1 September 2016. The revisions also institute a six-month phase-in of the requirement to exchange variation margin, beginning 1 September 2016.
Prudential Regulation Authority consults on extending the Senior Managers Regime to UK branches of non-EEA banks
16 March 2015
The Prudential Regulation Authority (PRA) published proposals for extending the new Senior Managers Regime to include UK branches of banks based outside the European Economic Area (EEA).
Inter alia, the PRA proposes that (i) branches of non EEA banks with a dedicated Chief Financial Officer, Chief Risk Officer or Head of Internal Audit will also need to have these individuals approved as senior managers for the branch and (ii) the PRA will apply all of its Conduct Rules to Senior Managers in branches of non EEA banks, and apply a narrower set of individual Conduct Rules to branch employees within the PRA’s Certification Regime.
Consultation will run until 25 May 2015.
News & articles
16 March 2015
HM Treasury consulted on recognised clearing houses. Given the ongoing broader reforms and developments in financial markets, the government is aware that there are, and may continue to be, market innovations in clearing. For example, clearing systems are being proposed which seek to operate some form of multilateral netting of transaction exposures, possibly without the involvement of a central counterparty, and financial markets are also seeing new services and providers emerging.
Consultation will run until 8 May 2015.
11 March 2015
The EIOPA published the final reports, which contain the Advices to the European Commission (EC) regarding the full equivalence assessments of Bermuda, Japan and Switzerland.
The reports will allow the EC to take fully-informed decisions in 2015 in relation to these third countries’ regimes.
The Solvency II equivalence criteria are based on the overarching principles of Solvency II and include requirements relating to the system of governance, professional secrecy and the exchange of information, effective risk management, solvency, and powers and responsibilities of supervisory authorities.
16 March 2015
The EBA published an update to its periodic risk dashboard summarising the main risks and vulnerabilities in the EU banking sector on the basis of the evolution of Key Risk Indicators from 55 banks for the third quarter of 2014.
The EBA dashboard confirms the positive trend of EU banks’ capital positions, with the Common Equity Tier 1 (CET1) ratio reaching 12.1 per cent in Q3 2014 (11.8 per cent in Q2). This is the highest level since 2009 and it was driven by an increase in retained earnings and capital issuances that outpaced a more modest growth of RWAs. The levels of non-performing loans remained stable, but still generally very high, despite divergences across banks, thus stressing the need for continuous monitoring of credit quality, accompanied by consistent transparency of banks' exposures.
BCBS publishes reports assessing the implementation of the Basel risk-based capital framework and the liquidity coverage ratio for Hong Kong SAR and Mexico
16 March 2015
BCBS published reports assessing the implementation of the Basel risk-based capital framework and the liquidity coverage ratio for Hong Kong SAR and Mexico. These form part of a series of reports on Basel Committee members' implementation of Basel standards under the Committee's Regulatory Consistency Assessment Programme (RCAP).
Overall, the Assessment Team finds the prudential regulations in Hong Kong SAR compliant with the standards prescribed under the Basel framework. Twelve of the 13 components of this review are assessed as compliant while one component, the Pillar 3 disclosure requirements, is assessed as largely compliant with Basel standards.
Overall, the implementation of risk-based capital standards in Mexico is found to be “compliant” with the Basel standards. Twelve out of 14 components are assessed as “compliant”, while the countercyclical buffer and Pillar 3 are considered “largely compliant”.
11 Marzo 2015
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) announced that they are undertaking a review of stress testing by central counterparties (CCPs). The Principles for Financial Market Infrastructures(PFMI), published by the CPMI and IOSCO in 2012, require CCPs to carry out rigorous stress testing to determine the financial resources they need to manage both credit and liquidity risk, including a wide range of stress scenarios covering a variety of extreme but plausible market conditions.
10 March 2015
The European Systemic Risk Board (ESRB) published a report on the regulatory treatment of sovereign exposures in the books of banks and insurance corporations. These exposures have been seen by many as a source of fragility in the recent and prolonged episodes of financial stress, while others have seen them as a factor of crisis mitigation. According to the ESRB, the current regulatory framework of sovereign exposures needs to be re-examined at a global level.
The report describes the regulatory treatment of sovereign exposures in the European Union, analyses the incentives that it may create, provides data measuring those exposures and offers analytical explanations of recent developments.
News & articles
European Parliament adopts regulation capping interchange fees and improving competition for card-based payments
10 March 2015
The European Parliament adopted regulation capping interchange fees and improving competition for card-based payments. The rules when implemented could lead to a reduction of about €6 billion annually in hidden fees for consumer cards. The “Regulation on Interchange Fees for Card-based Payment Transactions”, which largely follows a Commission proposal from July 2013, will also give more freedom of choice to retailers, enhance transparency for card transactions, and pave the way for innovative payment technologies to be rolled out.
After Parliament’s vote, the rules will need to be officially endorsed by the Council of Ministers before they can take effect, six months after the legislation enters into force.
European Parliament adopts regulation supporting a new investment framework designed to attract investors who want to put their money towards long-term investments in companies
10 march 2015
The European Parliament adopted regulation supporting a new investment framework designed to attract investors who want to put their money towards long-term investments in companies and projects. These private European Long-Term Investment Funds (ELTIFs) aim to boost the finance available to companies in search for long-term capital for projects relating to energy, transport but also social housing, schools and hospitals.
After the full House votes on these rules, which have been already been informally approved by the member states, the rules must be officially endorsed by the Council and they should apply 6 months after their entry into force.
09 March 2015
The ESMA published a revised opinion on its draft Regulatory Technical Standard (RTS) on the clearing obligation for Interest Rate Swaps (IRS).
The ESMA regulation gives the opportunity to consider the amendments and provide further input where the draft RTS can benefit from the technical input from the Authority. There are some points among the changes that the European Commission (EC or Commission) intends to introduce that ESMA considers should be reviewed or improved and that are discussed below. They have been reflected in the second version of the draft RTS submitted to the Commission with this opinion (Annex I).
09 March 2015
The EBA launched a public consultation on its draft Regulatory Technical Standards (RTS) on the content of "Business Reorganisation Plans and Progress Reports" and Guidelines on the assessment of these plans. The RTS and the Guidelines have been developed within the framework established by the Bank Recovery and Resolution Directive (BRRD) which sets procedures for the recovery and resolution of credit institutions, investment firms and related entities across the EU.
The consultation runs until 9 June 2015.
05 March 2015
The Federal Reserve released results of supervisory bank stress tests. This is the fifth round of stress tests led by the Federal Reserve since 2009 and the third round required by the Dodd-Frank Act. The 31 firms tested represent more than 80 percent of domestic banking assets. The Federal Reserve uses its own independent projections of losses and incomes for each firm. The quantitative results from the Dodd-Frank stress tests are one component of the Federal Reserve's analysis during the Comprehensive Capital Analysis and Review (CCAR), which is an annual exercise to evaluate the capital planning processes and capital adequacy of large financial institutions. CCAR results will be released on Wednesday, March 11.
News & Articles
Big Banks Pass Muster in Latest Stress Tests (The New York Times)
06 March 2015
The EBA issued advice to the European Commission on the resolution framework for EU banks, covering the definition of critical functions and core business lines, as well as rules for the exclusion of liabilities from the application of the bail-in tool.The EBA advice on critical functions is based on its work on rules for recovery planning and on a comparative analysis of the recovery plans of 27 European cross-border banking groups which identified key strengths and weaknesses in banks' approaches.
06 March 2015
The EBA launched a public consultation on draft Regulatory Technical Standards (RTS) on detailed records of financial contracts of institutions or relevant entities. These RTS have been developed within the framework established by the Bank Recovery and Resolution Directive (BRRD) which sets procedures for the recovery and resolution of credit institutions, investment firms and related entities across the EU Single Market.
This consultation runs until 6 June 2015.
EBA, EIOPA and ESMA consult on draft technical standards on the credit quality steps for ECAIs credit assessments
06 March 2015
The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) launched a consultation on draft Implementing Technical Standards (ITS) on the allocation of External Credit Assessment Institution (ECAIs) to an objective scale of credit quality steps under Solvency II.
The ITS contains a table assigning the appropriate Credit Quality Steps to the rating categories of ECAIs.The overall objective of this ITS is to reach consistency between the banking and the insurance framework in this area.The public consultation will end on 10 April 2015.
05 March 2015
The ESMA and the Reserve Bank of Australia (RBA) concluded a Memorandum of Understanding (MoU) that will allow RBA to have access to data held in European Trade repositories according to its mandate.
The MoU is effective as of 18 February 2015.
04 March 2015
The EBA launched a discussion paper on the regulatory measures needed to ensure a robust and clear framework for Internal Ratings Based (IRB) models. The discussion paper seeks stakeholders' feedback on both how to implement the necessary measures in a consistent way and how to bring forward future changes to the current approach. In addition, an overview of the regulatory measures that are under way is provided.
The consultation will run until 5 May 2015.
04 March 2015
The EBA launched a three-month public consultation on its Guidelines on sound remuneration policies. These draft Guidelines set out the governance process for implementing sound remuneration policies across the EU, as well as the specific criteria for mapping all remuneration components into either fixed or variable pay.
Consultation will run until 4 June 2015.
03 March 2015
At a global level
The BCBS published the results of its latest Basel III monitoring exercise.
The results of the monitoring exercise assume that the final Basel III package is fully in force, based on data as of 30 June 2014.
A total of 224 banks participated in the current study, comprising 98 large internationally active banks ("Group 1 banks", defined as internationally active banks that have Tier 1 capital of more than €3 billion) and 126 Group 2 banks (ie representative of all other banks).
Data as of 30 June 2014 show that all large internationally active banks now meet the Basel III risk-based capital minimum requirements. Moreover, capital shortfalls relative to the higher target levels have been further reduced. For example, at the Common Equity Tier 1 (CET1) target level of 7.0% (plus the surcharges on global systemically important banks - G-SIBs - as applicable), the aggregate shortfall for Group 1 banks is €3.9 billion, compared to €15.1 billion on 31 December 2013 and €485.6 billion on 30 June 2011. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks for the six-month period ending 30 June 2014 was €210.1 billion.
At a European level
The EBA published its seventh report of the Basel III monitoring exercise on the European banking system.
Results show that theCommon Equity Tier 1 capital ratio (CET1)of the largest internationally-active European banks (Group 1 banks) would be on average10.8% compared to a ratio of 11.7%under the current implementation of the regulation. None of the Group 1 banks would face aCET1 capital shortfall to achieve the minimum requirement of 4.5%, while they would be short of EUR 2.8 billion to reach the 7.0% level (minimum CET1 of 4.5% + capital conservation buffer of 2.5%). The shortfall figure remains the same when the surcharge for global systemically important banks (G-SIBs) is considered.
- Last Update: Friday 17 April 2015, 12:43.