Regulatory Changes, Financial Markets – Week 51

The ever-changing world of finance is significantly influenced by regulatory reforms and staying tuned in is crucial for success. Keep yourself abreast of the most recent regulatory changes that are influencing the financial market. Below are some essential updates from various regions worldwide:

 

1. Authority for the Financial Markets (AFM), Netherlands 🔗

The Dutch Authority for the Financial Markets (AFM) has welcomed the targeted consultation initiated by the European Commission to explore potential improvements to the Sustainable Finance Disclosure Regulation (SFDR). AFM supports the proposal for introducing sustainability product classifications but suggests some modifications. The consultation focuses on assessing whether the SFDR contributes to increased transparency regarding sustainability, whether the information is useful for investors, and if it effectively addresses greenwashing. The European Commission’s proposal includes establishing sustainable financial product classifications to replace the current distinctions under Articles 8 or 9 of the SFDR. AFM supports this proposal with the aim of better aligning current legislation with investors’ perceptions and experiences, facilitating sustainable investment decision-making, and introducing minimum disclosure requirements for all financial products, irrespective of their sustainability features. 🔗

 

2. The Australian Securities and Investments Commission (ASIC) 🔗

The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA), the Australian financial regulatory bodies, have jointly issued a letter to life insurers and friendly societies (life companies) addressing concerns raised in December 2022 regarding industry practices related to premium increases in the life insurance sector. The letter, resulting from a joint review, highlights regulatory expectations and areas of focus for life companies in future premium increases, as well as in the realms of disclosure, marketing materials, and product design. The collaborative communication underscores the commitment to ensuring fair and transparent practices within the Australian life insurance industry, with a focus on protecting consumers and promoting industry compliance with regulatory standards. 🔗

 

3. BIS (Bank for International Settlements) 

 

A. Basel Committee consults on targeted adjustments to tighten its standard on banks’ exposures to cryptoassets 🔗

The Basel Committee on Banking Supervision has released a consultative document proposing targeted adjustments to its standard on banks’ exposures to cryptoassets. The adjustments primarily focus on tightening criteria for stablecoins to receive preferential regulatory treatment. Following reviews conducted in 2023, the proposed updates elaborate on requirements related to the composition of reserve assets backing stablecoins, including credit quality, maturity, and liquidity. These criteria will determine the eligibility of stablecoins for inclusion in the Group 1b category of cryptoassets, providing them with preferential regulatory treatment. The proposals also introduce requirements for banks to conduct due diligence on stablecoins, ensuring a comprehensive understanding of stabilization mechanisms and their effectiveness. The consultation period is open for comments until March 28, 2024. 🔗

B. Basel Committee consults on targeted adjustments to its standard on interest rate risk in the banking book. 🔗

The Basel Committee on Banking Supervision has released a consultative document proposing targeted adjustments to its 2016 standard on interest rate risk in the banking book (IRRBB). The proposed adjustments are designed to fulfill the committee’s commitment to periodically update the calibration of interest rate shock factors used in the standard. These changes are separate from the ongoing analytical work on interest rate risk initiated after the banking turmoil in March 2023. The IRRBB standard mandates banks to calculate interest rate risk measures for their banking book exposures based on specified interest rate shocks. The proposed adjustments include updates to the calibration of specified interest rate shocks and changes to the methodology used for shock calculations. The committee invites stakeholders to provide comments on the proposed amendments by March 28, 2024. 🔗

 

4. Bank of England (BOE) 🔗

The Prudential Regulation Authority (PRA) has released a near-final policy statement, PS17/23, offering feedback on responses to chapters of Consultation Paper (CP) 16/22 regarding the implementation of Basel 3.1 standards. Covering areas such as scope, market risk, credit valuation adjustment, operational risk, and more, the document reflects stakeholder support with adjustments made based on feedback. Notable changes include eliminating firms’ ability to use the market risk internal model for sovereign exposures’ default risk and introducing a transitional arrangement in the credit valuation adjustment risk framework. The PRA emphasizes its accountability framework, aligning with statutory objectives, regulatory principles, and international competitiveness considerations. The implementation date is now set for July 1, 2025, with a 4.5-year transitional period. 🔗

 

5. Central Bank of the Bahamas (CBB) 🔗

The Central Bank of The Bahamas has officially released the Digital Assets Guidelines 2023, effective as of December 12th, 2023. These guidelines are designed for Supervised Financial Institutions (SFIs) and offer a comprehensive framework outlining the Central Bank’s expectations for engagement in digital asset activities. SFIs are encouraged to adopt a risk-based approach aligned with their Board-approved risk appetite and available resources. The guidelines emphasize the prompt identification, measurement, and mitigation of risks associated with digital assets. The Central Bank’s response to industry comments and questions received during the consultation period is also available on their website. 🔗

 

6. Central Bank of Ireland (CBI) 🔗

The Central Bank of Ireland has concluded its twelve-week public consultation on the enhanced Administrative Sanctions Procedure (ASP), issuing a Feedback Statement and consolidated Guidelines. The ASP is a key tool for the Central Bank in conducting investigations and inquiries, allowing it to impose administrative sanctions for breaches of financial services legislation. The consultation, launched on June 22 and concluded on September 14, 2023, outlined the Central Bank’s proposed approach to changes introduced by the Central Bank (Individual Accountability Framework) Act 2023 and additional adjustments based on the bank’s experience with the ASP over the past decade. The new ASP Guidelines, effective from December 13, 2023, provide increased transparency and clarity for subjects of enforcement actions. 🔗

 

7. Commodity Futures Trading Commission (CFTC), USA

 

A. Public Comment on Proposed Rule to Amend Capital and Financial Reporting Requirements 🔗

The Commodity Futures Trading Commission (CFTC) has opened a 60-day public comment period on a proposed rule aimed at amending the capital and financial reporting requirements for Swap Dealers (SDs) and Major Swap Participants (MSPs). The proposal seeks to formalize the staff interpretation outlined in CFTC Staff Letter No. 21-15, pertaining to the tangible net worth capital approach for capital calculation under CFTC Regulation 23.101. It also addresses the no-action position in CFTC Staff Letter No. 21-18, extended by CFTC Staff Letter No. 23-11, concerning alternate financial reporting requirements for SDs subject to the capital requirements of a prudential regulator. The amendments aim to enhance compliance with the CFTC’s financial reporting obligations and minimum capital requirements, streamlining the process for SDs and MSPs. 🔗

 

B. CFTC Approves Proposed Amendments to Regulations Regarding Real-Time Public Reporting and Swap Data Recordkeeping and Reporting Requirements 🔗

The Commodity Futures Trading Commission (CFTC) has given its approval for a proposed rule that aims to amend CFTC regulations concerning real-time public reporting and swap data recordkeeping and reporting. These amendments are part of the CFTC’s ongoing efforts to achieve international data harmonization and ensure the receipt of accurate, comprehensive, and high-quality data on swap transactions. The proposed changes to Parts 43 and 45 introduce the implementation of a Unique Product Identifier and product classification system (UPI) for the Other Commodity asset class. While the UPI was initially designated for the Interest Rate, Credit, Foreign Exchange, and Equity asset classes, these revisions permit its extension to the Other Commodity asset class in the future, aligning with CFTC regulations. The proposed amendments also include modifications to appendices A and 1 of Parts 43 and 45, respectively, introducing specific data elements to enhance international harmonization and improve data quality, accuracy, and standardization. The proposed rule is subject to a 60-day comment period after its publication in the Federal Register. 🔗

 

8. Commission de Surveillance du Secteur Financier (CSSF), Luxembourg 🔗

CSSF Regulation No. 23-05, issued on November 30, 2023, by the Financial Sector Supervisory Commission in Luxembourg, outlines measures related to systemically important institutions in compliance with national and European financial regulations. The regulation details the census of globally systemically important institutions and other systemically important establishments, providing a methodology for their identification. Seven establishments in Luxembourg are designated as other systemically important institutions, each assigned specific buffer rates. The regulation emphasizes adherence to EU directives and guidelines, demonstrating Luxembourg’s commitment to maintaining financial stability through robust supervision and regulatory frameworks. 🔗

 

9. Department of Justice (DOJ), USA 🔗

Department of Justice issued guidelines addressing the process for companies, subject to reporting requirements in Section 13 or 15(d) of the Securities Exchange Act of 1934, or U.S. Government agencies in collaboration with such companies, to request authorization from the Department for delaying cyber incident disclosures mandated by the U.S. Securities and Exchange Commission under Item 1.05 of Form 8-K. The guidelines specify that a company may postpone the disclosure if the Attorney General or their authorized representatives determine that such disclosure presents a substantial risk to national security or public safety. In cases where a registrant perceives that the required disclosure may pose such risks, the registrant is advised to promptly contact the FBI, either directly or through another U.S. Government agency, following the reporting instructions outlined on the FBI’s website. These guidelines aim to balance the imperative of cybersecurity incident reporting with the need to safeguard national security and public safety. 🔗

 

10. European Banking Authority (EBA) 🔗

European Banking Authority (EBA) released an updated list of validation rules within its Implementing Technical Standards (ITS) on supervisory reporting. This revised list specifically identifies rules that have been deactivated due to either inaccuracies or issues related to information technology. Competent Authorities across the European Union are duly notified that data submitted in adherence to these ITS should not undergo formal validation against the set of rules that have been deactivated. This announcement reflects the EBA’s ongoing commitment to maintaining the integrity and accuracy of supervisory reporting standards while addressing and rectifying issues promptly to ensure the reliability of the regulatory framework. 🔗

 

11. EIOPA (European Insurance and Occupational Pensions Authority) 

 

A. EIOPA consults on its methodology for setting value-for-money benchmarks 🔗

The European Insurance and Occupational Pensions Authority (EIOPA) has initiated a public consultation on its proposed methodology for establishing value-for-money benchmarks for unit-linked and hybrid insurance products. This effort, separate from the benchmarks proposed by the European Commission under the Retail Investment Strategy, is part of EIOPA’s toolkit developed to equip supervisors with risk-based tools to identify insurance products that may not deliver fair value for money. The Consultation Paper outlines a three-step approach, involving the categorization of products based on policyholders’ needs, the identification of indicators for value-for-money benchmarks, and data collection and benchmark calibration. EIOPA encourages stakeholders to provide feedback on the proposals by March 15, 2024, through an online survey. 🔗

B. EIOPA consults on the prudential treatment of sustainability risks 🔗

The European Insurance and Occupational Pensions Authority (EIOPA) has initiated a consultation on the prudential treatment of sustainability risks, marking the second phase in its approach mandated by the Solvency II Directive. This directive requires EIOPA to assess whether a dedicated prudential treatment of assets or activities associated substantially with environmental or social objectives, or harm to such objectives, would be justified. EIOPA’s commitment to addressing sustainability risks reflects the increasing relevance of such risks for insurers’ investment and underwriting activities. The consultation, which follows a risk- and evidence-based approach, invites stakeholders to provide feedback by March 22, 2024, via the EU Survey, with an online event scheduled for February 7, 2024, to address stakeholder questions. 🔗

 

12. ESMA (European Securities and Markets Authority)

 

A. Draft guidelines for supervision of corporate sustainability information 🔗

The European Securities and Markets Authority (ESMA) has opened a consultation on draft guidelines for the enforcement of sustainability information, with a deadline for comments by March 15, 2024. The draft guidelines aim to ensure that national competent authorities supervise listed companies’ sustainability information consistently under the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards, and Article 8 of the Taxonomy Regulation. The guidelines also strive to establish consistency and robust approaches in the supervision of both sustainability and financial information of listed companies, fostering increased connectivity between the two types of reporting. The consultation is relevant to listed companies obligated to publish sustainability information under the CSRD and Article 8 of the Taxonomy Regulation, as well as investors, users of sustainability information, auditors, and independent assurance service providers. 🔗

B. Technical advice regarding potential changes to CSDR penalty mechanism 🔗

The European Securities and Markets Authority (ESMA) has released a Consultation Paper on Technical Advice to the European Commission concerning potential changes to the Central Securities Depositories Regulation (CSDR) penalty mechanism. The consultation, open until February 29, 2024, aims to gather evidence and stakeholder input on the effectiveness of the existing penalty mechanism in deterring settlement fails and promoting their prompt resolution. Additionally, ESMA seeks feedback on preliminary proposals related to alternative parameters when the official interest rate is unavailable, the treatment of historical reference data for late matching fail penalties calculation, and alternative methods for computing cash penalties, including progressive penalty rates. 🔗

C. Q&A on the European Crowdfunding Service Providers for Business Regulation (ECSPR) 🔗

ESMA issued a document that provides an overview of the European Crowdfunding Service Providers for Business Regulation (ECSPR), which came into effect on November 10, 2020. Its purpose is to promote common supervisory approaches and practices in the application of the ECSPR by addressing questions from the public, market participants, and competent authorities. The document serves as a practical convergence tool under Article 29(2) of the ESMA Regulation. It contains a question and answer (Q&A) mechanism to facilitate understanding without undergoing formal consultation. The answers provided by the European Commission, pursuant to Article 16b(5) of Regulation 2010/1095, clarify existing legislation without introducing additional requirements. 🔗

D. ESMA34-1592494965-554: Public statement on Guidelines on funds’ names 🔗

ESMA (European Securities and Markets Authority) has provided an update on the guidelines concerning the use of ESG (Environmental, Social, and Governance) or sustainability-related terms in funds’ names. Recognizing the marketing impact of fund names, ESMA aims to ensure that such terms are substantiated by evidence of sustainability characteristics or objectives reflected consistently in a fund’s investment objectives and policy. Following a consultation launched in November 2022 and considering 125 responses, ESMA has made amendments to the guidelines, including removing the proposed 50% threshold for sustainable investments and introducing adjustments for transition-related terms. ESMA plans to adopt the guidelines after the reviews of the AIFMD and UCITS Directive, with the guidelines applying three months after publication on ESMA’s website. 🔗

E. ESMA81-168987738-671: Report on sanctions imposed under the Benchmarks Regulation in 2022 🔗

ESMA (European Securities and Markets Authority) has published its annual report on administrative sanctions, measures, and criminal sanctions imposed under the Benchmarks Regulation in 2022. In 2022, two administrative sanctions and measures were imposed by two National Competent Authorities (NCAs) for infringements of the Benchmarks Regulation on a supervised entity (user of benchmarks) and a supervised contributor. The report provides an overview of the regulatory framework, details on sanctions imposed by NCAs, and concluding observations. The publication aims to enhance transparency, act as a deterrent, and promote compliance with the Benchmarks Regulation. The report highlights that the Benchmarks Regulation is multifaceted, imposing obligations on various market participants beyond benchmark administrators. 🔗

 

13. European Commission

 

 A. Delegated regulation – C(2023)8706 🔗 

The European Commission has issued a delegated regulation supplementing Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMs) with regulatory technical standards (RTS) specifying the information to be notified regarding the cross-border activities of AIFMs. The regulation aims to standardize the transmission of notifications for cross-border marketing and management activities of AIFs across the European Union. The information to be communicated includes details about the AIFM, its activities, business strategy, controls over delegation arrangements, and information on the AIFs it intends to manage. The regulation also covers the notification of changes to the provided information and the termination of a branch in another Member State. The regulation will enter into force 20 days after its publication in the Official Journal of the European Union and will apply three months after that date. 🔗

B. Delegated regulation – C(2023)8703 🔗 

The European Commission has issued a delegated regulation supplementing Directive 2009/65/EC on undertakings for collective investment in transferable securities (UCITS). It establishes regulatory technical standards for the information that management companies must provide when engaging in cross-border activities within the European Union. The regulation outlines detailed requirements for notifications to competent authorities, covering aspects such as the organizational structure of branches, information about responsible individuals, and changes to previously submitted data. The aim is to standardize and enhance communication between management companies and national competent authorities, ensuring consistency and efficiency in the cross-border marketing and management activities of UCITS across the EU. The regulation emphasizes the importance of data such as the International Securities Identification Number (ISIN) and Legal Entity Identifier (LEI) for unique identification, and it respects fundamental rights, including data protection regulations. 🔗

C. Implementing regulation – C(2023)8700 🔗

European Commission has issued an implementing regulation which pertains to the application of Directive 2009/65/EC concerning undertakings for collective investment in transferable securities (UCITS). The regulation establishes implementing technical standards regarding the form and content of information to be notified in the context of cross-border activities of UCITS and UCITS management companies. It also addresses the exchange of information between competent authorities and introduces amendments to Regulation (EU) No 584/2010. The regulation emphasizes the need for smooth, fast, and reliable administrative procedures, specifying and harmonizing the exchange of information through electronic means. The document outlines templates, procedures, and standards to facilitate efficient communication between management companies and national competent authorities across EU member states. 🔗

D. Delegated regulation – C(2023)8602 🔗 

The European Commission has issued a delegated regulation which addresses amendments to Delegated Regulation (EU) 2015/63 concerning the calculation of eligible liabilities and the transitional regime in the context of the Single Resolution Mechanism (SRM) for credit institutions within the European Union. The changes are prompted by the amendments introduced by Directive (EU) 2019/879, which altered the definition of “eligible liabilities” and the calculation of the minimum requirement for own funds and eligible liabilities (MREL). The Regulation adjusts references and formulas in Delegated Regulation (EU) 2015/63 to align with the updated Directive 2014/59/EU. Additionally, the transitional regime allowing smaller institutions to contribute to national resolution funds with a lump sum is extended until the end of 2024, ensuring equal treatment with the SRF. The Regulation also includes provisions for the year 2024, allowing derogations from certain notification and information deadlines to accommodate the legislative changes effectively. 🔗

E. Commission Delegated Regulation (EU) C(2023) 8579 🔗

The European Commission has issued a Delegated Regulation supplementing Regulation (EU) 2017/2402 concerning securitization transactions. This update, dated 13.12.2023, focuses on regulatory technical standards specifying performance-related triggers and calibration criteria. The regulation empowers the European Banking Authority (EBA) to propose draft standards, subject to the Commission’s endorsement within three months. The Delegated Regulation outlines the mandatory backward-looking triggers related to defaulted exposures and cumulative losses, an additional backward-looking trigger tied to the detachment point of the most senior protected tranche, and a forward-looking trigger associated with concentration risk and credit quality deterioration. Specific rules are provided for measuring triggers in cases involving replenishment or predefined build-up periods. The regulation emphasizes the need for prudent criteria calibration by testing triggers in a back-loaded loss distribution scenario. A transitional regime is established for outstanding securitizations, and the regulation is based on draft standards developed in consultation with the EBA and stakeholders. 🔗

 

14. Financial Conduct Authority (FCA) – PS23/18: Smarter Regulatory Framework: The Insurance Distribution Directive Feedback to CP23/19 and Final Rules 🔗

In CP23/19, the Financial Conduct Authority (FCA) proposed changes to various sourcebooks to replace provisions of retained EU law (REUL) listed in the consultation, which were to be repealed as part of the Treasury’s Smarter Regulatory Framework (SRF) review. This policy statement summarizes the feedback received on the proposals and outlines the FCA’s response. The changes, currently intended to be effective from April 5, 2024, are relevant to all firms involved in insurance activities. The context involves the repeal of delegated acts of the Insurance Distribution Directive (IDD) as part of the Treasury’s SRF review. The FCA consulted on amendments to sourcebooks to ensure continuity of the regulatory regime for insurance-related activities. The proposals involve replacing replicated provisions with rules and guidance, maintaining consistency, and making minor amendments to align with Handbook style drafting. The FCA received positive feedback on the proposed changes and is proceeding with the instrument without material alterations. The changes are expected to provide continuity in the regulatory regime, ensuring current standards are maintained, and will be effective upon the repeal of REUL. The FCA will monitor implementation through ongoing supervision and feedback channels. 🔗

 

15. IE (Irish Government’s central portal for government services and information) Circular 22/2023: Requirements for Appropriation Accounts 2023 🔗

Circular 22/2023 mandates that all government departments, offices, and vote holders prepare appropriation accounts for the year ending December 31, 2023, and subsequent years following specified accounting policies outlined in Section A, with changes and clarifications detailed in the circular. The format of the appropriation accounts should be consistent with the respective estimate presentation, and notes to the accounts cover aspects like Operating Cost Statement, Statement of Financial Position, Vote Expenditure, Receipts, Staffing and Remuneration, and Miscellaneous. Notable changes include the separation of intangible assets in the Statement of Financial Position, amendments to the Statement of Accounting Policies and Principles, and adjustments to the format of the Operating Cost Statement. Departments are required to submit external documentation by February 26, 2024, and those with appropriations under €100 million are encouraged to submit accounts by March 11, 2024, with reasons for any delays. 🔗

 

16. UK Government (GOV.UK)

 

A. VAT treatment of fund management: consultation 🔗

The UK government has concluded its consultation on the VAT treatment of fund management services, with a total of 37 written responses received from various stakeholders, including suppliers and recipients of fund management services, law firms, and trade associations. In response to industry feedback, the government intends to retain a list-based approach for Items 9 and 10 of Group 5 Sch. 9 of the Value Added Tax Act 1994. Stakeholders generally supported this approach, emphasizing its potential to enhance clarity and minimize interpretative challenges. The government’s objective is to improve the legal foundation of the VAT treatment of fund management services without altering existing policies. The outcome reflects a commitment to providing clarity, certainty, and simplicity in the application of VAT rules to fund management. 🔗

B. EM on reporting requirements in EU legislation (COM(2023)639) 🔗

The Department for Business and Trade has published an explanatory memorandum (EM) on the European Commission’s proposal for a directive amending several directives related to reporting requirements in the fields of food, outdoor noise, patients’ rights, and radio equipment. The memorandum, submitted by Kevin Hollinrake MP, Parliamentary Under Secretary of State, outlines the implications for Northern Ireland and the responsibilities of multiple government departments. The proposed changes, addressing redundant reporting obligations and streamlining requirements, aim to rationalize legislation without affecting policy objectives. The memorandum highlights the reduction in direct requirements on Member States, with a positive impact on businesses. It confirms compliance with the Windsor Framework Agreement and notes no financial implications for the UK. No consultations or impact assessments have been conducted for this proposal. 🔗

C. Non-investment Asset Valuation – Exposure Draft 23 (01) 🔗

HM Treasury have opened a public consultation on proposals for adaptations and interpretations of international accounting standards concerning the measurement of assets. The consultation focuses on changes to the Financial Reporting Manual (FReM) related to International Accounting Standard 16 Property Plant and Equipment (IAS 16) and adaptations of International Accounting Standard 38 Intangibles (IAS 38) for the valuation of non-investment assets. The document outlines proposed changes, the rationale behind them, and invites comments from interested parties. The consultation period closes at 11:59 pm on 16 February 2024. The details and exposure draft document can be accessed on the HM Treasury website. 🔗

D. 2023 No. 1399 : The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 🔗

The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 have been issued by the Treasury and are set to come into force on 4th January 2024. These regulations, made under the authority of the Banking Act 2009, Electronic Money Regulations 2011, and Payment Services Regulations 2017, introduce amendments to the Payment and Electronic Money Institution Insolvency Regulations 2021. The changes encompass various aspects, including the extension of the regulations to Northern Ireland, amendments to definitions, and modifications related to special administrations in England and Wales, Scotland, and Northern Ireland. The regulations have undergone consultation and parliamentary approval. 🔗

 

17. Information Commissioner’s Office (ICO)

 

A. ICO consultation on draft employment practices – recruitment and selection 🔗

The Information Commissioner’s Office (ICO) has initiated a public consultation on the draft guidance regarding employment practices, specifically focusing on recruitment and selection, as part of an online resource with topic-specific guidance on employment practices and data protection. The draft guidance is designed to offer practical insights into compliance with data protection laws during recruitment exercises and promote good practices. The ICO is inviting feedback from various stakeholders, including employers, professional associations, recruitment agencies, and others involved in employment practices. The consultation, which started on December 12, 2023, will remain open until March 5, 2024. Responses can be submitted through a Smart Survey or a downloadable Word document via email or post. The ICO is particularly interested in views on an impact assessment summary associated with the guidance. 🔗

B. ICO consultation on draft employment practices – keeping employment records 🔗

The Information Commissioner’s Office (ICO) has opened a public consultation on the draft guidance concerning employment practices, specifically focusing on keeping employment records. As part of an online resource on employment practices and data protection, the ICO is releasing drafts of various topic areas and plans to augment the resource over time. The draft guidance provides practical insights on complying with data protection laws when maintaining records about workers and aims to promote good practices. The ICO encourages feedback from stakeholders, including employers, professional associations, recruitment agencies, and others involved in employment practices. The consultation, which began on December 12, 2023, will remain open until March 5, 2024. Responses can be submitted through a Smart Survey or a downloadable Word document via email or post. 🔗

 

18. INREV (Investors in Non-Listed Real Estate Vehicles) 🔗

 On December 6, 2023, INREV submitted a detailed response to the European Commission’s SFDR (Sustainable Finance Disclosure Regulation) consultation, advocating for the adoption of a labeling system that would better facilitate transition strategies and support sustainability initiatives within the real estate asset class. This industry-aligned response follows the recent publication by the Financial Conduct Authority (FCA) detailing the UK’s SDR (Sustainable Disclosure Regulation) regulations, which introduces a ‘sustainability improver’ label for transition funds. 🔗

 

19. Insurance Regulatory and Development Authority of India (IRDAI) 🔗

The Insurance Regulatory and Development Authority of India (IRDAI) issued an Exposure Draft on December 12, 2023, regarding the proposed Insurance Products Regulations for 2023. The draft follows the IRDAI’s order from July 29, 2022, instructing councils to establish a Regulation Review Committee (RRC) to enhance the ease of doing business and simplify regulations. The RRC, with representatives from various stakeholder groups, recommended the new regulations, intending to replace several existing ones, including those related to micro-insurance, annuities, health insurance, and unit-linked insurance products. The draft aims to facilitate insurers in responding quickly to market needs, promoting ease of business, enhancing insurance penetration, and ensuring good governance and policyholder protection. Stakeholders are invited to provide comments and suggestions on the proposed regulations by January 3, 2023. 🔗

 

20. Reserve Bank of New Zealand (RBNZ)

 

A. LVR restrictions have added to resilience | Loan-to-value ratio restrictions, Macroprudential policy 🔗

The Reserve Bank of New Zealand’s recent bulletin reflects on a decade of employing macroprudential policies, specifically highlighting the effectiveness of loan-to-value ratio (LVR) restrictions on new mortgage lending in bolstering the financial system’s resilience. Introduced in 2013 to counter higher-risk lending and the vulnerability of banks to housing-related risks, LVR restrictions have worked in conjunction with other prudential measures, strengthening household equity positions and reducing potential losses for the financial system. With housing-related risks a major concern for the Reserve Bank, the bulletin underscores the positive impact of these policies, emphasizing the importance of having tools like LVR restrictions to address debt-servicing risks, especially evident during the COVID-19 pandemic. 🔗

B. Major banks compliant with RBNZ Outsourcing Policy 🔗

The Reserve Bank of New Zealand has announced that the country’s largest banks are now compliant with the Outsourcing Policy (BS11), a significant achievement aimed at managing risks associated with outsourcing certain functions to third-party providers. BS11 ensures that major New Zealand banks, which are subsidiaries of offshore banking groups, can maintain operations even in the unlikely event of separation from their parent or the failure of a service provider. The policy covers common outsourced activities such as IT processing, accounting, and call centres. The banks covered by BS11 include ANZ, ASB, BNZ, Kiwibank, and Westpac. 🔗

 

21. US Securities and Exchange Commission (SEC)

 

A. Standards for Covered Clearing Agencies for U.S. Treasury Securities and Application of the Broker-Dealer Customer Protection Rule With Respect to U.S. Treasury Securities 🔗

The Securities and Exchange Commission (SEC) has announced the adoption of final rules under the Securities Exchange Act of 1934, amending standards for covered clearing agencies dealing with U.S. Treasury securities. The rules now require covered clearing agencies to establish policies and procedures ensuring that every direct participant submits eligible secondary market transactions in U.S. Treasury securities for clearance and settlement. Additionally, amendments to the Covered Clearing Agency Standards focus on enhancing risk management. The broker-dealer customer protection rule has been amended to allow the inclusion of margin required and on deposit with covered clearing agencies for U.S. Treasury securities as a debit in reserve formulas for customer accounts and proprietary accounts of broker-dealers, subject to certain conditions. 🔗

B. SEC Adopts Rules to Improve Risk Management in Clearance and Settlement and Facilitate Additional Central Clearing for the U.S. Treasury Market 🔗

The Securities and Exchange Commission (SEC) has announced the adoption of rule changes aimed at improving risk management practices for central counterparties in the U.S. Treasury market and facilitating additional clearing of U.S. Treasury securities transactions. The rule changes focus on enhancing customer clearing, broadening the scope of cleared transactions, and addressing system-wide risks in the Treasury market. SEC Chair Gary Gensler highlighted the significance of these changes in making the Treasury market more efficient, competitive, and resilient. The amendments will be implemented in two phases, with the initial changes required by March 31, 2025, and the clearing requirements phased in over subsequent deadlines, with full compliance expected by June 30, 2026. 🔗

 

22. UK Parliament 🔗

The Financial Conduct Authority (FCA) is proposing new rules to ensure reasonable access to cash for personal and business customers across the UK, following new powers granted by the Financial Services and Markets Act 2023. Despite the growing trend toward digital payments, the FCA acknowledges the importance of cash for over 3 million consumers, particularly vulnerable individuals and small businesses. The proposed rules, applicable to firms designated by Her Majesty’s Treasury (HMT), include assessments of cash access when making service changes, responses to local requests for addressing gaps, delivery of additional cash services to fill identified gaps, and prevention of cash facility closures without ensuring alternative services are available. The FCA aims to balance innovation in payments with the preservation of cash access for those who need or prefer it, and the consultation on these rules is open until February 8, 2024, with the expectation of finalizing them by Q3 2024. 🔗