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,
This special edition focuses on the latest evolution following Sunday’s announcement regarding Credit Suisse’s takeover by UBS and provides a snapshot of the global regulatory response since then. In addition, select other developments from last week are summarized including in relation to the failure of Silicon Valley Bank and Signature.
For access to all of last week’s and other ongoing developments, visit the new end-to-end automated and AI-powered regulatory news platform .
Credit Suisse takeover and the global regulatory response
Swiss Government and Authorities announce UBS takeover of Credit Suisse
Following days of discussions and negotiations, on Sunday evening via a joint press conference the Swiss Government alongside the Swiss National Bank (SNB) and FINMA formally announced the takeover of Credit Suisse by UBS as the most effective solution. To assist the takeover while also ensuring that financial stability is maintained, the SNB is providing substantial liquidity assistance including unrestricted access to SNB's existing facilities, a liquidity assistance loan with privileged creditor status of up to CHF 100 billion, and a liquidity assistance loan backed by a federal default guarantee of up to CHF 100 billion. Furthermore, as part of the takeover, there will be a complete write-down of the nominal value of all Additional Tier 1 shares of Credit Suisse in the amount of ~CHF 16 billion with a view to strengthening the banks’ core capital. FINMA in its statement also noted that the resulting increase in UBS’ bank size will also trigger higher capital requirements.
Six central banks join forces to enhance U.S. Dollar liquidity swap line arrangements
On the heels of the formal announcement of the takeover, the Bank of Canada, Bank of England, Bank of Japan, the ECB as well as the U.S. Federal Reserve and Swiss National Bank in a coordinated communication approach announced joint action to improve the standing U.S. dollar liquidity swap line arrangements by increasing the frequency of 7-day maturity operations from weekly to daily starting on Monday, March 20, 2023 through the end of April. The network of swap lines will serve as liquidity backstop and is intended to ease strains in global funding markets and help mitigate the effects of such strains on the supply of credit to households and businesses.
U.S., European and Asian authorities indicate support for takeover, highlight close contact with Swiss Authorities throughout the process
In individual released still on Sunday night and in the morning hours of Monday, authorities across the U.S., Europe including the UK and Asia have voiced their support for the takeover of Credit Suisse by UBS and highlighted that they had been in close contact with Swiss Authorities in the process leading up to the final decision and announcement and will continue to do so as the takeover is executed.
The Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) in their stressed that impact of the takeover on the local market is limited. Specifically, the HKMA pointed out that total assets of Credit Suisse AG, Hong Kong branch, represent less than 0.5% of the total assets of the Hong Kong banking sector, concluding that the banks’ exposure to the local banking sector is not material, while also highlighting that Credit Suisse is not among the top 10 brokers in the stock or derivatives markets. The statements also noted that Credit Suisse operations in Hong Kong will remain open and that customers can access their deposits and banking services. Likewise, The Monetary Authority of Singapore (MAS) concluded in its that “the takeover is not expected to affect the stability of Singapore's banking system”, indicating that Credit Suisse, which primary activities in Singapore comprise private and investment banking, is expected to operate as usual, with no impact on customers. The UK Financial Conduct Authority in its on Sunday night indicated its its readiness to approve the actions in relation to entities which fall under its regulatory and supervisory remit. No further statement confirming the approval has been released just yet. The European Central Bank (ECB), the Single Resolution Board (SRB) and the European Banking Authority (EBA) in a further new released Monday midday also expressed their support for the actions taken. The joint statement notes that the EU resolution framework has established the order in which shareholders and creditors of a troubled bank should bear losses. Common equity instruments are the first ones to be absorbed, with Additional Tier 1 being written down second. This approach will continue to guide the actions of the SRB and ECB in crisis interventions, the statement highlights. The authorities also reassured that “the European banking sector is resilient, with robust levels of capital and liquidity”.
FDIC reaches agreement with Flagstar Bank to assume Signature Bank's deposits and loan portfolios
Late on Sunday, the Federal Deposit Insurance Corporation (FDIC) announced that it had entered into an agreement with Flagstar Bank, National Association, Hicksville, New York to purchase and assume substantially all deposits and certain loan portfolios of Signature Bridge Bank, National Association. The former Signature Bank branches will operate under Flagstar Bank and customers will receive notice when full service banking is available. Deposits will continue to be insured up to the insurance limit and the FDIC received equity appreciation rights in New York Community Bancorp, Inc. common stock up to $300 million. The FDIC statement noted that it estimates the cost of the failure of Signature Bank to its Deposit Insurance Fund to amount to approximately USD 2.5 billion.
Federal Reserve Board announces review of Silicon Valley Bank supervision and regulation in response to failure, with Chair Powell calling for thorough, transparent, and swift investigation
The Federal Reserve Board has announced a review of the supervision and regulation of Silicon Valley Bank, to be released by May 1, in response to its failure. Chair Jerome H. Powell stated that the events demand a thorough, transparent, and swift review and Vice Chair Barr added that the Federal Reserve should have humility and conduct a careful and thorough review of their actions.
EIOPA publishes supervisory statement to address unfair pricing practices
The European Insurance and Occupational Pensions Authority (EIOPA) has published a new supervisory statement with the aim to eliminate unfair pricing practices that lead to consumer detriment. The statement outlines expectations for manufacturers to act in the best interests of customers when it comes to pricing, and warns against ‘price walking’ practices, such as repeated premium increases unrelated to risk or costs, which particularly affect vulnerable customers such as the elderly. Against this backdrop, the statement calls on competent authorities to monitor the adequacy and fairness of manufacturers’ product oversight and governance procedures, sales processes, marketing and communication materials as well as customer complaints related to differential pricing practices and to take.
U.S. CFPB launches inquiry into companies collecting data on personal lives
The U.S. Consumer Financial Protection Bureau (CFPB) has launched an inquiry into companies that track and collect data on people's personal lives. Objective of the inquiry is to develop a better understanding of the scope and breadth of data brokers including their business models and practices and the types of data collected and sold, their impact on consumers, as well as their compliance with federal law. Insights from the information request enable to form a better view on the current state of the industry as well as inform the CFPB’s future work in this area. Information can be submitted until June 13, 2023.
FATF Report highlights global impact of ransomware attacks and Proposes Actions to Disrupt Money Laundering
The FATF has published a new report focused on the global impact of ransomware attacks. The Report sees to improve the global understanding of the financial flows linked to ransomware including the methods that criminals use to carry out ransomware attacks and the approach to laundering payments. Among other things, the report highlights that ransomware-related money laundering nearly exclusively relies on virtual assets. It also notes that ransomware attacks are generally underreported, which in part contributes to the current lack of experience in investigating ransomware-related money laundering. The report lays out several practical actions that countries can implement to counter ransomware-related flows. Besides the implementation of relevant FATF standards, these include inter alia the promotion of financial investigations and asset recovery efforts and the adoption of a multi-disciplinary approach to tackling ransomware which involves coordination across relevant competent authorities, ranging from law enforcement, AML/CFT and cyber-crime authorities, to non-traditional partners such as cyber-security or data protection agencies. Complementary to the proposed actions, the report also provides a list of potential risk indicators, designed to aid authorities and the private sector to detect such financial flows.
U.S. Federal Reserve announces start of FedNow service in July and begins certification of participants for launch
The Federal Reserve Board (FRB) has confirmed that the FedNow Service will start operating in July. As part of its final preparations, the FRB has started the formal certification of participants for launch. Early adopters will complete a customer testing and certification program in preparation for sending live transactions through the system as well as perform final production validation activities to ascertain readiness for launch. The Service will debut with financial institutions of all sizes, the largest processors, and the U.S. Treasury on board. The Service will make available nationwide reach of instant payment services around the clock, with access through the Federal Reserve's FedLine network.
South African Reserve Bank announces launch of new payment platofrm PayShap
The South African Reserve Bank (SARB) has announced the launch of PayShap, a new low-value, real-time rapid payment platform, designed to foster financial inclusion in the country. PayShap is grounded in the existing Rapid Payments Programme and was developed through an industry-led effort, driven by BankservAfrica and the Payments Association of South Africa (PASA). Roll-out of the new platform has commenced and will be carried out through a phased approach with an initial cohort of four banks participating. During the initial roll-out, users may engage in transactions up to a maximum of R3,000.
ESAs and ECB release joint statement on climate-related disclosure for structured finance products
The European Supervisory Authorities (ESAs), in coordination with the European Central Bank, have released a Joint Statement on climate-related disclosure for structured finance products. The statement advocate for the development of disclosure standards for securitized assets by providing harmonized climate-related data requirements, which enable to deliver greater transparency regarding these assets’ exposure to physical or transition climate-related risks. As part of the statement, the Authorities call on issuers, sponsors and originators of securitized assets at EU level to proactively collect high-quality and comprehensive information on climate-related risks during the origination process. “The lack of climate-related data on the assets underlying structured finance products not only poses a problem for properly assessing and addressing climate-related risks but also impedes the classification of products and services as sustainable under the EU Taxonomy Regulation and Sustainable Finance Disclosure Regulation (SFDR)”, the statement notes.
IAIS kicks off public consultation on climate risk supervisory guidance
The International Association of Insurance Supervisors (IAIS) is launching the first part of a public consultation on climate risk supervisory guidance. This consultation outlines proposed changes to the ICP Introduction with a view to positioning climate risk within the global framework for insurance supervision. The consultation also addresses potential changes to the existing supporting material related to governance, risk management and internal controls as covered under ICP 7 and 8. Stakeholders are invited to submit comments by 16 May 2023,
National Association of Insurance Commissioners (NAIC) CEO Mike F. Consedine to step down from role, effective April 30, 2023. A new Acting CEO is planned to be appointed during the NAIC Spring National Meeting.
Swiss National Bank Governing Board member Andréa M. Maechler to step down from her tole to take up role as Deputy General Manager at the Bank for International Settlements
The Central Bank of the UAE and India have entered into a MoU to strengthen cooperation in the area of financial innovation including CBDCs.
The Hong Kong Securities and Futures Commission and the China Securities Regulatory Commission have agreed to further deepen cooperation with a view to promoting the coordinated development of the two capital markets.
© 2023 REGXELERATOR