19 June – 23 June 2017

Regulatory and Legislative Developments from Across the Globe

Global

Basel Committee Publishes Report on Countercyclical Capital Buffer Implementation

The Basel Committee on Banking Supervision has published a report that examines how a range of jurisdictions have implemented their countercyclical capital buffer (CCyB) policies. The Committee's review highlights the importance of the implementation imperative of the Basel standards and helps to clarify implementation of domestic CCyB policies. It also outlines some issues that were identified in the context of the cross-jurisdiction comparisons, which could be further discussed over the medium term as experience with the CCyB policy is gained.

Press Release

BIS Releases Working Paper on Macroprudential Policy

The Bank for International Settlements Monetary and Economic Department released a working paper entitled " Macroprudential Policy and Bank Risk." This paper investigates the effects of macroprudential policies on bank risk through a large panel of banks operating in 61 advanced and emerging market economies.

Working Paper

BIS Releases Working Paper on Liquidity

The Bank for International Settlements Monetary and Economic Department released a working paper entitled "The Shifting Drivers of Global Liquidity." The paper notes that the post-crisis period has seen a considerable shift in the composition and drivers of international bank lending and international bond issuance, the two main components of global liquidity.

Working Paper

FSB Releases Consultative Document on Compensation Practices

The Financial Stability Board (FSB) today published for public consultation draft supplementary guidance to the FSB Principles and Standards on Sound Compensation Practices regarding the use of compensation tools to address misconduct. The proposed guidance has been developed in collaboration with the standard-setting bodies and it supplements the Principles and Standards that note that compensation should be adjusted for all types of risk. Once finalized, the guidance will provide firms and supervisors with a framework to consider how compensation practices and tools, such as in-year bonus adjustments, malus and clawback, can be used to reduce misconduct risk and address misconduct incidents.

Press Release

IOSCO Releases Final Report on Order Routing Incentives

The Board of the International Organization of Securities Commissions (IOSCO) published its final report on order routing incentives, which provides an overview of the practices used by market regulators regarding incentives for order routing that may influence how intermediaries treat their clients. The report examines the regulatory conduct requirements for brokers or firms to manage conflicts of interest associated with routing orders and obtaining best execution. It assesses how these requirements interact with market practices in different jurisdictions to shape order routing incentives and how these incentives influence the behavior of intermediaries towards their clients.

Press Release

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NORTH AMERICA

Federal Reserve Board Releases Results of Supervisory Bank Stress Tests

The Federal Reserve Board of Governors has released the results of its supervisory stress tests. The results show that the largest bank holding companies have strong capital levels and retain their ability to lend to households and businesses during a severe recession. The 34 bank holding companies tested--generally those with $50 billion or more in total consolidated assets--represent more than 75 percent of the assets of all domestic bank holding companies.

Press Release

Steven Mnuchin Speaks on Foreign Investment and Domestic Economic Policies

Treasury Secretary Steven T. Mnuchin delivered a speech on foreign investment and domestic economic policies at the SelectUSA Investment Summit in Washington D.C.

Speech

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Europe

EBA Launches 2016 CVA Risk Monitoring Exercise

The European Banking Authority (EBA) announced it has put on hold its draft Guidelines on the treatment of CVA risk under SREP until further notice, due to continued developments in the CVA risk framework at international level. However, monitoring work continues with the EBAs 2016 credit valuation adjustment (CVA) risk monitoring exercise, which was launched today. The exercise fits into the EBA mandate to monitor the own funds requirements for CVA risk and follows on from policy recommendation No 4 of the CVA Report. The EBA expects institutions to complete the exercise by September 14, 2017.

Press Release

EBA Publishes Draft Amending Technical Standards on CVA Proxy Spread

The European Banking Authority (EBA) published its draft amending Regulatory Technical Standards (RTS) on credit valuation adjustment (CVA) proxy spread. These RTS propose limited amendments to the Commission Delegated Regulation (EU) No 526/2014 for determining proxy spread and limited smaller portfolios for credit valuation adjustment risk, based on two policy recommendations contained in the EBA's CVA report, published on 25 February 2015. Through the proposed amendments the EBA expects to ensure a more adequate calculation of own funds requirements for CVA risk.

Press Release

EBA Publishes Discussion Paper on the Treatment of Structural FX

The European Banking Authority (EBA) has launched a discussion paper on the application of the structural FX provision. The paper outlines the rationale behind the treatment of structural positions as well as broader issues related to the structural FX concept, such as the actual nature of FX risk, considering both the accounting and regulatory perspectives. It also examines in greater detail the potential inconsistencies in the articulation of the FX requirements, both in the current Capital Requirements Regulation (CRR) as well as in the CRR2 proposal for institutions applying the standardized and internal model approaches.

Press Release

ECB Publishes ELA Agreement

The European Central Bank (ECB) has published the text of the Emergency Liquidity Assistance (ELA) agreement following a decision by its Governing Council to increase transparency regarding ELA. The rules and procedures applying to the provision of ELA are laid down in the ELA agreement, which also sets out the Governing Council’s role in the provision of ELA by national central banks (NCBs).

Press Release

ESMA Releases Consultation Paper on Derivatives Trading Under MiFIR

The European Securities and Markets Authority (ESMA) has published a consultation paper regarding its draft technical standards specifying the trading obligation for derivatives under the Markets in Financial Instruments Regulation (MiFIR). MiFIR, which implements parts of the MiFID II framework, outlines the process for determining which derivatives should be traded on-venue.

Press Release

Bank of England Releases Quarterly Bulletin

The Bank of England released its Quarterly Bulletin for Q2 2017, which features articles entitled "An Improved Model for Understanding Equity Prices" and "Peering Into the Present: the Bank’s Approach to GDP Nowcasting."

Quarterly Bulletin

PRA Releases Consultation Paper on Recovery Planning

The Prudential Regulation Authority released a consultation paper on recovery planning. The PRA proposes a new supervisory statement on recovery planning that would supersede SS18/13 ‘Recovery Planning’ and that sets out additional expectations of firms. Comments are due by September 21, 2017.

Press Release

PRA Releases Consultation Paper on EBA Counterparty Credit Risk Guidelines

The Prudential Regulation Authority released a consultation paper on compliance with the EBA's Guidelines on Disclosure: Composition of Collateral for Exposures to Counterparty Credit Risk. Comments are due by August 21, 2017.

Press Release

Mark Carney Speaks on Brexit

Bank of England Governor Mark Carney delivered a speech entitled "A Fine Balance” in London on June 20, 2017. Carney argued that in Brexit negotiations, policymakers can and should build on current models to develop a new form of regulatory and supervisory cooperation.

Speech

James Proudman Speaks on Ring-Fencing

Bank of England Executive Director of UK Deposit Takers Supervision, Prudential Regulation Authority, James Proudman, delivered a speech entitled "Putting Up a Fence" before the British Bankers' Association at Pinners Hall in London, United Kingdom.

Speech

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Asia-Pacific

ASIC and JFSA Agree to Cooperate on FinTech

The Financial Services Agency of Japan ('JFSA') and Australian Securities and Investments Commission ('ASIC') today announced the completion of a framework for cooperation to promote innovation in financial services in Japan and Australia. This framework recognizes the global nature of innovation in financial services. It will enable JFSA and ASIC to refer innovative fintech businesses to each other for advice and support via JFSA's FinTech Support Desk and ASIC's Innovation Hub.

Press Release

HKMA Delays Implementation of New Minimum Capital Requirements for Market Risk

The Hong Kong Monetary Authority (HKMA) has announced that it will not implement the Fundamental Review of the Trading Book (FRTB) market risk framework before January 2020. The HKMA notes that a number of practical implementation questions have arisen given the complexity of the new standards, making them difficult to implement in accordance with the original timeline from the Basel Committee on Banking Supervision.

Letter

SC Introduces Clearing as a New Regulated Activity

The Securities Commission Malaysia (SC) has introduced amendments to its regulatory framework to include clearing for securities and derivatives as a new regulated activity. This framework will decouple clearing and trading functions into two distinct regulated activities, allowing intermediaries to specialize in their niche services. The entrance of new stand-alone execution and clearing intermediaries, including foreign owned entities, will transform the competitive dynamics of the capital market, and enhance cost efficiency for trading and clearing activities.

Press Release

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GFMA & GFMA - Affiliate News & Events

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