Your weekly summary of key regulatory updates in an objective bite-size format, drawing on official news and press releases from 400+ financial services regulators, central banks as well as global and regional standard setters,
At a glance - Highlights by topic
Visit Regxelerator’s new end-to-end automated and AI-powered regulatory news platform for ongoing updates. ECB supervised banks show strong CET1 Ratio and rising annualised ROE in Q4 2022 FSB Chair Klaas Knot urges G20 to consider lessons learned from recent banking turmoil U.S. Federal Reserve Board approves UBS Group AG’s acquisition of U.S. Subsidiaries of Credit Suisse Group AG Japan FSA hosts international meeting on virtual assets FSB outlines recommendations to enhance cyber risk reporting ADGM Registration Authority releases consultation paper on its proposed DLT foundations regulations Canadian Securities Administrators provide update on enhanced pre-registration undertakings Ukraine announces plans to implement MiCA New DNB report stresses need for new rules and close cooperation to manage BigTechs Buna Launches First Cross-Border Payment for Iraqi Retirees in Jordan Saudi Arabian Monetary Authority reports electronic payment share increase to 60% GFIN launches Greenwashing TechSprint ESAs propose amendments to SFDR Delegated Regulation to address issues and improve disclosures Egypt Financial Regulatory Authority forms committee to accelerate activation of the carbon market G20 Finance Ministers and Central Bank Governors hold second meeting under India’s presidency in Washington, DC CSA proposes to broaden corporate governance disclosure rules
Prudential & financial stability
ECB supervised banks show strong CET1 Ratio and rising annualised ROE in Q4 2022
The European Central Bank (ECB) has published its supervisory banking statistics for Q4 2022. Latest data indicates that the aggregate Common Equity Tier 1 (CET1) ratio for significant banks supervised by the ECB further increased to 15.27% in Q4 2022, consistent with seasonal patterns observed in the fourth quarters of previous years. The non-performing loans ratio remained at its historical low of 2.28%, with both the stock of NPLs and loans and advances excluding cash balances decreasing to €339 billion and €14,873 billion respectively. Aggregate stage 2 loans also slightly decreased from 9.82% in Q3 2022 down to 9.63%. The liquidity coverage ratio, too, remained stable at 161.46%, while the net stable funding ratio decreased slightly to 125.76%. Finally, the aggregated annualized return on equity also increased from 7.55% in the previous quarter to 7.68%, marking a nearly 1% rise relative to one year ago, driven most notably by higher net interest income
FSB Chair Klaas Knot urges G20 to consider lessons learned from recent banking turmoil
The Financial Stability Board (FSB) has published a letter from its Chair, Klaas Knot, to G20 Finance Ministers and Central Bank Governors ahead of their meeting on 12-13 April. The letter notes that the financial stability outlook has become more challenging due to recent banking-sector turmoil, and that the FSB is working to draw out the lessons and consequent policy priorities, including in collaboration with the Basel Committee on Banking Supervision and other standard setters. “The reforms since the Global Financial Crisis have assisted in making the banking sector as a whole better able to absorb adverse shocks. Still individual institutions can fail, particularly when weaker business models and risk management capabilities are exposed, as they were recently by tighter financial conditions and liquidity challenges. These recent events highlight that we cannot be complacent. The speed of developments in March, the precise nature of the vulnerabilities that crystallised and the associated market reactions provide important lessons for financial authorities, including for bank prudential and resolution frameworks”, Knot stressed in particular.
U.S. Federal Reserve Board approves UBS Group AG’s acquisition of U.S. Subsidiaries of Credit Suisse Group AG
The Federal Reserve Board has approved UBS Group AG's acquisition of the U.S. subsidiaries of Credit Suisse Group AG. UBS has committed to providing the Board with an implementation plan for combining the U.S. business and operations of UBS and Credit Suisse, which will be updated quarterly and address UBS's obligations to comply with enhanced prudential standards, including liquidity standards.
AML & CFT
Japan FSA hosts international meeting on virtual assets
The Japan Financial Services Agency (JFSA) hosted the Financial Action Task Force (FATF) Virtual Assets Contact Group Meeting in Tokyo on April 12th-14th, 2023. Officials from 19 jurisdictions and international organizations attended the meeting, along with approximately 80 private-sector participants from around the world. Meeting participants stressed the need for countries to urgently implement the FATF Standards to effectively regulate and supervise the virtual assets sector, noting that despite the FATF strengthening its Recommendation 15 in October 2018 to address virtual assets, many countries have failed to implement these revised requirements, creating opportunities for criminals and terrorist financiers. Other specific discussion points included emerging sectors such as Decentralized Finance and unhosted wallets as well as growing risks such as thefts and misuses of virtual assets by North Korea. Against the backdrop of the meeting, the FATF announced that it will release a report in June 2023 that will include the progress of implementation of the FATF Standards, measures to promote implementation, and results of monitoring of and exploring responses to emerging sectors.
Cyber & operational resilience
FSB outlines recommendations to enhance cyber risk reporting
The Financial Stability Board (FSB) has published a comprehensive update in relation to its work on achieving greater convergence in cyber incident reporting. At the center of the update is a new report that sets out 16 recommendations to address the issues that currently impede harmonization in cyber incident reporting. The proposed recommendations focus on designing a CIR approach, supervisory activities and collaboration between authorities, industry engagement, and capability development As a complement to the recommendations, the FSB has also shared an update on the development of its FIRE concept, which a common format for incident reporting exchange. Under the concept, information relating to cyber incidents are grouped into five overarching categories: (1) Reporting entity (“Who issued the report and to whom”), (2) Incident (“What happened/is happening?”), (3) Actor (“Whose or what actions led to the incident?”), (4) Impact assessment (“What are the negative effects?”), and (5) Incident disclosure (“What caused the incident and what remedial actions will be taken?”). As part of the update, the FSB has shared the feedback received in response to the proposed concept, laid out the concept’s potential risks, benefits and implementation costs as well as outlined the planned way forward for its implementation. As a third pillar, the FSB has also published an updated version of its cyber lexicon. The lexicon supports international organizations in addressing cybersecurity concerns in the financial sector by standardizing terminology, assessing cyber risk scenarios, facilitating information sharing, and providing guidance on effective practices. The update added new terms and clarified existing definitions.
Fintech & ecosystem innovation
ADGM Registration Authority releases consultation paper on its proposed DLT foundations regulations
The Abu Dhabi Global Market (ADGM) Registration Authority has released for consultation a new paper outlining the proposed Distributed Ledger Technology (DLT) Foundations Regulations 2023. The proposed regulations seek to complement ADGM’s existing foundations regime and cater to the unique characteristics of DLT projects, which increasingly use foundations as a legal given they typically don’t have owners in whose interests they are operated and instead are required to operate in accordance with certain objects or purposes defined in their constitutions. The proposed regime proposes inter alia that DLT foundations shall have a legal personality, are allowed to conduct any activity that is not unlawful and must have a minimum initial asset value of USD 25,000. Furthermore, a DLT foundation must put a dedicated charter in place that among other things specifies the foundation’s beneficiaries (if applicable) and details concerning token buy back rights as well as the distribution of any income / assets and the means of doing so.
Canadian Securities Administrators provide update on enhanced pre-registration undertakings
The Canadian Securities Administrators (CSA) have announced that certain unregistered crypto asset trading platforms have filed an enhanced pre-registration undertaking with their principal regulator. Pre-registration undertakings that have been reviewed are available on the CSA’s website, and pre-registration undertakings for other crypto asset trading platforms remain under review. The update comes just two months after the publication of CSA Staff Notice 21-332, which laid out enhanced expectations of crypto asset trading platforms (CTPs) operating in Canada. The added expectations build on the previously introduced pre-registration undertaking and include inter alia enhanced expectations regarding the custody and segregation of crypto assets held on behalf of Canadian clients, a prohibition on offering margin, credit, or other forms of leverage to any Canadian client, as well as the requirement to seek prior written consent of the CSA when intending to permit clients to purchase or deposit stablecoins or proprietary tokens.
The Ukraine National Commission on Securities has announced that it has started the process of drafting a law on virtual assets, which implements the EU Markets in Crypto-Assets regulation. The proposed law is expected to be released for public consultation in the near future.
De Nederlandsche Bank has released a new report discussing the role of BigTech firms in the financial sector including their relationship with existing financial institutions and lays out considerations for the adjustment of the regulatory and supervisory framework to respond to their growing role in the market.
Payments & currency
Buna Launches First Cross-Border Payment for Iraqi Retirees in Jordan
Buna, the cross-border payment system operated by the Arab Regional Payments Clearing and Settlement Organization (ARPCSO), has successfully launched the first cross-border payment for the pensions of Iraqi retirees residing in the Kingdom of Jordan. The transaction was conducted in Jordanian dinar and marks the beginning of settlement operations in the Jordanian dinar. The Central Banks of Iraq, Jordan and Egypt and the Arab Monetary Fund (AMF) first announced the joint initiative to launch cross-border payment services for pensioners in the Arab region using Buna in late 2022, which seeks to enable a faster and more efficient disbursement of pension payments to Iraqi pensioners residing in either Jordan or Egypt and aligns with the G20 agenda to improve cross-border payments.
Saudi Arabian Monetary Authority reports electronic payment share increase to 60%
The Saudi Arabian Monetary Authority (SAMA) has reported that it has achieved its goal of increasing the share of electronic payments in the retail sector to 60% by 2022, surpassing the target set out by Saudi Vision 2030's Financial Sector Development Program. This was made possible by an improvement in the payments infrastructure, development of existing systems, and introduction of new systems and services. PoS transactions and Mada card online transactions both saw significant increases in 2022. SAMA seeks to further increase the electronic payment share to 70% by 2025 through reducing reliance on cash and creating synergies among government and private sectors.
GFIN launches Greenwashing TechSprint
14 members of the Global Financial Innovations Network (GFIN) have joined up to organize a Greenwashing TechSprint. Goal of the TechSprint is to create a tool or solution that can help regulators and the market to tackle the risks of greenwashing in financial services with focus on two specific problem statements:
How can technology, including AI and machine learning, enable regulators/supervisors to verify that ESG/sustainability-related product claims to retail consumers are accurate and complete? How can technology help to monitor, collate and identify examples of greenwashing from financial services firms’ websites, social media platforms and other
documentation or data which can also be shared across jurisdictions? Applications will be open from April 17 to May 15. The event will subsequently commence on June 5 and run for 3 months, with a showcase day in September.
ESAs propose amendments to SFDR Delegated Regulation to address issues and improve disclosures
The European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have published a Consultation Paper proposing amendments to the Delegated Regulation of the Sustainable Finance Disclosure Regulation (SFDR). The proposed changes aim to address issues that have emerged since the introduction of SFDR and include extending the list of universal social indicators for the disclosure of the principal adverse impacts of investment decisions, refining the content of other indicators, and adding product disclosures regarding decarbonisation targets. The ESAs are also proposing technical revisions to the SFDR Delegated Regulation, such as improving the disclosures on how sustainable investments “do not significantly harm” the environment and society, and simplifying pre-contractual and periodic disclosure templates for financial products. The ESAs are seeking feedback on the amendments until 4 July 2023, and will organise a joint public hearing and targeted consumer testing during the consultation period.
Egypt Financial Regulatory Authority forms committee to accelerate activation of the carbon market
The Financial Regulatory Authority of Egypt has announced that it has formed a dedicated committee to supervise and control carbon emission reduction units to accelerate the activation of the carbon market. Composed of representatives from the Financial Regulatory Authority, the Ministry of Environment, and the Egyptian Exchange, as well as experienced members from entities operating in the carbon market, the committee will prepare the criteria for selecting verification and certification bodies, rules to avoid conflicts of interest, and guidelines for the standards of integrity and credibility of carbon reduction certificates. Additionally, it will also coordinate with concerned authorities to establish an Egyptian registry for carbon reduction certificates. The Chairman of the Financial Regulatory Authority stated that this committee is intended to coordinate and integrate efforts in order to accelerate the activation of the carbon market, thereby prompting companies to reduce their carbon emissions.
The Dubai Financial Services Authority has published a markets brief, on ESG and climate change related disclosures. Specifically, the brief sets out information for issuers and reporting entities on prospectus disclosure requirements and continuing disclosure obligations that are relevant when considering environmental, social and governance and climate change related matters.
Other transversal themes
G20 Finance Ministers and Central Bank Governors hold second meeting under India’s presidency in Washington, DC
The 2nd Meeting of G20 Finance Ministers and Central Bank Governors (FMCBG) was held on 12-13 April 2023 in Washington, DC, under the Indian G20 Presidency. The meeting was chaired by India's Finance Minister, Nirmala Sitharaman, and Governor of the Reserve Bank of India (RBI), Shaktikanta Das. It saw participation from G20 members, 13 invitee countries, and various international and regional organizations. The meeting was organized in three sessions covering the Global Economy, International Financial Architecture, Sustainable Finance, Financial Sector, Financial Inclusion, and International Taxation. The goal was to discuss the progress made by the G20 Finance Track on the deliverables tasked to them, and to seek guidance on the way forward. Discussions included the key challenges to the global economic outlook, the implementation of recommendations of the Independent Panel of MDBs’ Capital Adequacy Frameworks (CAF), the debt agenda, mobilisation of resources for climate change, the role of the G20 in scaling up social impact investment instruments, and the development of the 2023 Financial Inclusion Action Plan (FIAP). On the margins of the G20 FMCBG sessions, a meeting of the Global Sovereign Debt Roundtable (GSDR) was held, and a G20 Finance and Central Bank Deputies meeting with the major MDBs was held to discuss the status of implementation of recommendations of the G20 Independent Panel of MDBs’ CAF. The progress achieved during the 2nd G20 FMCBG meeting will inform the discussions during the 3rd G20 FMCBG meeting in July 2023 in Gandhinagar, India, and the Leaders’ Summit in New Delhi on September 8-9, 2023.
CSA proposes to broaden corporate governance disclosure rules
The Canadian Securities Administrators (CSA) is proposing amendments to corporate governance disclosure rules and policy relating to the director nomination process, board renewal and diversity. The proposed changes would require disclosure on aspects of diversity beyond the representation of women, while retaining the current disclosure requirements with respect to women, as well as enhance the existing corporate governance guidelines relating to the director nomination process and introduce guidelines regarding board renewal and diversity. Among other things, issuers would be required to specify their chosen diversity objectives and the approach towards measuring progress against objectives while also explain what mechanisms they have determined to achieve the articulated diversity objectives. Objectives of the proposal are inter alia to increase transparency about diversity on boards and in executive officer positions as well as to provide investors with better information regarding how issuers incorporate diversity into strategic decisions. Comments on the proposal can be submitted until July 12, 2023.
Olli Rehn, Governor of Suomen Pankki – Finlands Bank, has been elected as First Vice-Chair of the European Systemic Risk Board (ESRB) for a five-year term, replacing Stefan Ingves, Governor of Sveriges Riksbank. Concurrently to his appointment, Christian Kettel Thomsen was elected as a member of the ESRB Steering Committee.
Charles-Antoine St. Jean has been appointed as the inaugural Chair of the Canadian Sustainability Standards Board.
Clay Shira has been appointed as the Executive Commission of the Financial Institutions Commission of the Republic of Palau.
The Bank of England and the Commodity Futures Trading Commission have announced to further strengthen their cooperation and mutual understanding in the supervision of cross-border central counterparties, building on the existing MoU established in 2020. The measure comes as the Bank of England has responsibility for recognising and supervising non-UK CCPs following the UK’s withdrawal from the EU.
The Taiwan Financial Services Commission and the New York State Department of Financial Services of entered into a MoU to strengthen financial cooperation and information sharing including in relation to emerging financial issues such as Fintech.
© 2023 REGXELERATOR