Gallery
Share
Explore

Global Regulator & Central Bank News Roundup (Vol. 16/2023)

April 24 - April 30 2023
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


info
Visit Regxelerator’s new end-to-end automated and AI-powered regulatory news platform
Regxplora
⁠
for ongoing updates.

⁠
Prudential & financial stability
⁠
⁠
U.S. Federal Reserve releases review of Silicon Valley’s bank failure
U.S. FDIC internal review finds poor management was primary cause of Signature Bank’s failure
ESAs issue spring 2023 Joint Committee Report, urging vigilance in the face of mounting risks
⁠
Cyber & operational resilience
⁠
⁠
OSFI releases final third-party risk management Guideline
⁠
Conduct & consumer protection
⁠
⁠
EBA publishes 8th Edition of its consumer trends report, identifying fraud in retail payments and over-indebtedness as key issues facing EU consumers
U.S. Federal Agencies join forces to strengthen enforcement of laws and regulations on automated systems including AI
⁠
Fintech & ecosystem innovation
⁠
⁠
Dubai FSA proposes targeted amendments to its crypto regime
Bahamas Securities Commission invites comments on updated DARE Bill 2023
⁠
Payments & currency
⁠
⁠
ECB publishes third progress report on Digital Euro, outlining additional design and distribution options
Ripple and CBCG cooperate to launch Montenegro's first CBDC
⁠
ESG
⁠
⁠
NGFS holds 2023 annual plenary meeting, outreach session, and workshop in Singapore
IAIS commits to closing natural catastrophe protection gaps in 2023
ECB and EIOPA outline policy options to promote climate catastrophe insurance in EU to address uninsured losses
⁠
Other transversal themes
⁠
⁠
FSB urges market participants to complete transition of USD LIBOR-Linked contracts by June 2023

⁠

Prudential & financial stability


U.S. Federal Reserve releases review of Silicon Valley’s bank failure
The Federal Reserve Board has released the results of a review of the supervision and regulation of Silicon Valley Bank, led by Vice Chair for Supervision Michael S. Barr. The review concluded that four factors have contributed to the Bank’s failure, namely:
Silicon Valley Bank's board of directors and management failed to manage their risks.
Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity.
When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough.
The Board's tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.
Based on the findings, the report makes several recommendations to strengthen the Federal Reserve’s supervision and regulation.
⁠
Link
⁠
⁠
⁠
U.S. FDIC internal review finds poor management was primary cause of Signature Bank’s failure
The Federal Deposit Insurance Corporation (FDIC) has released its internal review evaluating the agency's supervision of Signature Bank, New York, from 2017 until its failure in March 2023. The review identified poor management as the root cause of the bank's failure, noting that “[Signature Bank’s] board of directors and management pursued rapid, unrestrained growth without developing and maintaining adequate risk management practices and controls appropriate for the size, complexity and risk profile of the institution, [...] did not prioritize good corporate governance practices, did not always heed FDIC examiner concerns, and was not always responsive or timely in addressing FDIC supervisory recommendations. The report also found that the FDIC could have escalated supervisory actions sooner, as well as could have been more forward-looking and forceful in its supervision. It also indicates that the FDIC experienced resource challenges with examination staff that affected the timeliness and quality of the bank's examinations. To take account of the lessons learned, the report sets out several recommendations for consideration and further study in relation to the FDIC examination guidance, processes and resources. Complementary to the FDIC review, the New York State Department of Financial Services also published the
results of its own internal review
⁠
into the supervisory process and events leading to the closure of Signature Bank in a dedicated report.
⁠
Link
⁠
⁠
⁠
ESAs issue spring 2023 Joint Committee Report, urging vigilance in the face of mounting risks
The European Supervisory Authorities (ESAs) have issued their Spring 2023 Joint Committee Report on risks and vulnerabilities in the EU financial system. Despite the challenging macro environment and recent market pressure in the banking sector, the report finds that the EU financial markets remain broadly stable. However, the ESAs are calling on national supervisors, financial institutions and market participants to remain vigilant in the face of mounting risks, such as high inflation, tighter financial conditions, continued geopolitical tensions, environmental threats and cyberattacks, as well as the market uncertainty created through the recent failures of Signature Bank and Silicon Valley Bank in the U.S. as well as the emergency merger of Credit Suisse with UBS. To mitigate these risks, the ESAs advise financial institutions and supervisors among other things (1) to maintain a strong focus on loan loss provisioning amid the potential for a deterioration in asset quality, (2) to evaluate the impact of policy rate increases and sudden rises in risk premia in the context of liquidity and broader risk management, and (3) to continue to assess the impact of inflation risk, in particular as it relates to asset valuation and quality. Furthermore, the ESAs also call on financial institutions and supervisors to strengthen their focus on risk management capabilities and disclosures for ESG risks given their increasing potential as a source of financial risk.
⁠
Link
⁠
⁠
⁠

Cyber & operational resilience


OSFI releases final third-party risk management Guideline
The Office of the Superintendent of Financial Institutions (OSFI) has released its final Third-Party Risk Management Guideline, which sets out risk management expectations for Federally Regulated Financial Institutions (FRFIs). The Guideline emphasizes governance and risk management programs and sets out the following six new expected outcomes associated with effective third-party risk management:
Governance and accountability structures are clear with comprehensive risk management strategies and frameworks in place.
Risks posed by third parties are identified and assessed.
Risks posed by third parties are managed and mitigated within the FRFI’s risk appetite framework.
Third party performance is monitored and assessed, and risks and incidents are proactively addressed.
The FRFI’s third-party risk management program allows the FRFI to identify and manage a range of third-party relationships on an ongoing basis.
Technology and cyber operations carried out by third parties are transparent, reliable and secure.
The Guideline was finalized through extensive consultation with industry, third-party providers and other relevant members of the public. The Guideline applies to all FRFIs, excluding foreign bank branches and foreign insurance company branches.
⁠
Link
⁠
⁠
⁠

Conduct & consumer protection


EBA publishes 8th Edition of its consumer trends report, identifying fraud in retail payments and over-indebtedness as key issues facing EU consumers
The European Banking Authority (EBA) has published its 8th edition of the Consumer Trends Report for 2022/23, which outlines trends observed for products and services under the EBA's consumer protection mandate, including in relation to mortgages, consumer credit, payment services, and electronic money, based on information from the 27 EU Member States as well as consumer and industry association and several other bodies. The Report identifies two key issues facing consumers in the EU: fraud in retail payments and over-indebtedness and arrears. Specifically, as payment services continue to grow – with a significant increase in digital payment transactions - fraudsters are exploiting the digitalization trend with methods such as phishing, vishing, SIM swapping, ID spoofing, manipulation, spyware, and smishing, particularly targeting credit card transactions and credit transfers. These fraud techniques are particularly prevalent in credit card transactions and credit transfers. In relation to over-indebtedness and arrears, the report is finds that this is primarily driven by inflation, increased cost of living, and demand for credit facilities as well as further exacerbated by poor creditworthiness assessment procedures in some financial institutions.
⁠
Link
⁠
⁠
⁠
U.S. Federal Agencies join forces to strengthen enforcement of laws and regulations on automated systems including AI
Four U.S. Federal Agencies, including the Consumer Financial Protection Bureau (CFBP) and the Civil Rights Division of the United States Department of Justice, have issued a joint statement outlining their commitment to enforce laws and regulations regarding automated systems, including those marketed as AI. The statement comes in the face of concerns over potentially harmful uses of automated systems. Key concerns center around the potential discrimination that is caused by these tools or systems and the implications for fair consumer decisions. “As social media platforms, banks, landlords, employers, and other businesses that choose to rely on artificial intelligence, algorithms and other data tools to automate decision-making and to conduct business, we stand ready to hold accountable those entities that fail to address the discriminatory outcomes that too often result,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division commented on the release. As part of the release, the CFPB has also announced the planned publication of a dedicated white paper on the current chatbot market, offerings insights into the market’s evolution and deployment by financial institutions, the technology’s limitations as well as its potential harm on financial consumers.
⁠
Link
⁠
⁠
⁠

Fintech & ecosystem innovation


Dubai FSA proposes targeted amendments to its crypto regime
The Dubai Financial Services Authority (DFSA) has released DFSA has released a new consultation paper, proposal several amendments to its regulatory regimes for money services, crowdfunding and crypto tokens. Among the key changes in relation to crypto tokens is the proposal for restrictions on the referral of clients by Authorized Firms to non-DIFC firms. The proposed restriction foresees limiting the referral of clients to non-DIFC businesses that offer access to Crypto products and services to firms that are subject to substantially equivalent requirements as found in the DFSA Crypto Token regime. To that end, a DFSA Authorized Firm would be required to ascertain that the firm in question is subject to equivalent requirements and keep a record of how it has carried out such an assessment. The proposal comes on the back of observations that Authorized Firms have been referring their clients to non-DIFC crypto providers, which has given rise to the risk that clients are referred to providers that do not adequate consumer protection. In addition to this change, the DFSA is also clarifying the application of its recognized token regimes to so-called wrapper tokens, stating that these forms of tokens would also be subject to recognition requirements.
⁠
Link
⁠
⁠
⁠
Bahamas Securities Commission invites comments on updated DARE Bill 2023
The Securities Commission of The Bahamas has launched the consultation for its updated Digital Assets and Registered Exchanges (DARE) Bill 2023. Key amendments under the updated Bill include inter alia an expansion of digital asset business activities covered to include among other things the provision of digital assets derivative services, DLT network node services, and staking services, the introduction of a new and comprehensive regulatory framework for stablecoins as well as the establishment of a voluntary registration regime for persons who issue digital assets from outside of The Bahamas to persons outside of The Bahamas or otherwise not in scope of the issuer requirements under the DARE Bill 2023. In addition, the updated Bill also strengthens requirements in relation to financial and reporting as well as in relation to custody of digital assets and custodial wallet services. Following the consultation period, the updated Bill is planned to enter into force by the end of Q2 2023.
⁠
Link
⁠
⁠
⁠

Payments & currency


ECB publishes third progress report on Digital Euro, outlining additional design and distribution options
The European Central Bank (ECB) has published its third progress report on the digital euro. The latest report outlines additional design and distribution options for the digital euro. Among other things, the report stipulates that the digital euro would initially only be available to euro area residents, merchants and governments, and non-residents with an account with a euro area-based payment services provider while in further releases consumers from selected third countries could also gain access, depending on accessibility rules to be set out in the legislative framework for a digital euro. Beyond that, the potential provision of cross-currency functionalities with other central bank digital currencies outside the euro area might also be explored. The report further proposes for the digital euro to be distributed via existing banking apps or an app provided by the Eurosystem whereby supervised intermediaries – e.g. banks distributing digital euro – would be need to offer a set of mandatory core services to end-users and could supplement these with additional services such as conditional payments or the ability to split person-to-person payments among multiple parties. Besides the design considerations, the report also features insights from a commissioned focus group study into people’s preferences for specific features of a potential digital wallet. The findings of the report will feed into the decision on the future of the digital euro project, which is scheduled for fall this year.
⁠
Link
⁠
⁠
⁠
Ripple and CBCG cooperate to launch Montenegro's first CBDC
The Central Bank of Montenegro (CBCG) and Ripple held an educational workshop to discuss CBDCs and blockchain technologies, with participation of representatives from Montenegro's Government, financial institutions, the IT community and universities. Ripple and CBCG have agreed to cooperate to develop a strategy and implement a pilot program for launching the country’s first digital currency – a CBDC or national stablecoin. The workshop was the first step in the cooperation defined by the MoU and a continuation of CBCG’s strategic approach to financial education.
⁠
Link
⁠
⁠
⁠

ESG


NGFS holds 2023 annual plenary meeting, outreach session, and workshop in Singapore
The Network for Greening the Financial System (NGFS) held its 2023 annual plenary meeting, an outreach plenary session for members from Asia and the Pacific, and a workshop in Singapore on 25 and 26 April 2023. These events brought together more than 200 representatives from the NGFS membership and aimed to update them on the work progress of the NGFS and discuss emerging issues and next steps. The NGFS also released its 2022 annual report and revised its Charter. Revisions to the charter include among other things a clarification of the NGFS’ commitment with stakeholders as its membership base grows. The NGFS is now comprised of 125 central banks and supervisors and 19 observers, representing five continents and responsible for the supervision of all global systemically important banks and 80% of the internationally active insurance groups. Latest member additions to the Network include the State Bank of Pakistan, the Central Bank of Libya, the Central Bank of Barbados and Bank of Uganda.
⁠
Link
⁠
⁠
⁠
ECB and EIOPA outline policy options to promote climate catastrophe insurance in EU to address uninsured losses
The European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) have published a joint discussion paper outlining policy options to promote climate catastrophe insurance in the European Union. Currently, only about one-quarter of all climate-related catastrophe losses in the EU are insured, and this gap is expected to widen as natural disasters become more frequent and severe. The lack of insurance can affect the economy and financial stability, as uninsured losses slow economic recovery and increase banks' exposures to credit risk. To that end, the report sets out several possible response options. suggest that recommend that insurers should design their policies to encourage households and firms to reduce risks, e.g. by granting discounts for implementing effective mitigation or adaptation measures. To support the overall supply of insurance, the use of catastrophe bonds could be increased to pass on part of the risk to capital market investors. Such measures could be complemented with the establishment of public-private partnerships, designed to provide additional coverage either via direct insurance or by indemnifying a private (re)insurer against extraordinary events, as well as an EU-wide public scheme for natural disaster insurance that would ensure that sufficient funds are made available to European countries for reconstruction following rare, large-scale climate-related catastrophes.
⁠
Link
⁠
⁠
⁠
IAIS commits to closing natural catastrophe protection gaps in 2023:
The International Association of Insurance Supervisors (IAIS) has released a new statement to emphasize its commitment to support insurance supervisors in addressing natural catastrophe protection gaps. Recognizing the increasing importance of building and improving resilience against natural disasters and the critical contribution of insurance including reinsurance in managing the financial impact of natural disasters, the IAIS will publish a report that analyzes the various types of initiatives undertaken by insurance supervisors and good practices to address natural catastrophe protection gaps, leveraging examples and insights from IAIS members, the insurance industry, international organisations and other relevant stakeholders. In parallel to this effort, it will furthermore continue to facilitate information exchange with members and other stakeholders on the topic as well as seek out opportunities for engagement on existing initiatives such as the Global Shield against Climate Risks as well as for collaboration with global organizations including the Access to Insurance Initiative (A2ii), Insurance Development Forum (IDF), OECD and World Bank.
⁠
Link
⁠
⁠
⁠

Other transversal themes


FSB urges market participants to complete transition of USD LIBOR-Linked contracts by June 2023,
The Financial Stability Board (FSB) has issued a statement to encourage market participants to complete the transition of any remaining US Dollar (USD) LIBOR-linked contracts by the end of June 2023. The FSB stresses the importance of transitioning to robust reference rates, such as the Secured Overnight Financing Rate (SOFR), to support a sustainable transition and promote financial stability. The FSB also notes that the US Federal Reserve Board has enacted legislation to replace references to USD LIBOR with a SOFR-based benchmark replacement in contracts under U.S. law. To deal with outstanding legacy contracts (with the exception of cleared derivatives) that are not covered under the U.S. law, the UK FCA will require continued publication of the 1-, 3- and 6-month USD LIBOR settings using a synthetic methodology. The FSB stressed however that the synthetic LIBOR provides only a short-term, temporary bridge to alternative robust reference rates and that market participants should not rely on it in place of actively transitioning legacy contracts.
The FSB’s statement was further reiterated by a dedicated
statement
⁠
released by U.S. federal financial regulatory agencies. The statement advised banks to have taken all necessary steps to prepare for an orderly transition away from LIBOR by this date, including negotiating replacement alternative rates for all LIBOR-referencing financial contracts and conducting due diligence to ensure that alternative rate selections are appropriate for the banks' products, risk profiles, risk management capabilities, customer and funding needs, and operational capabilities.
⁠
Link
⁠
⁠
⁠

International cooperation

The Japan Financial Services Agency and the Bangladesh Securities and Exchange Commission have signed a cooperation agreement to exchange financial market information and to establish and implement on-going experience and expertise exchange programs.
⁠
Link
⁠
⁠
⁠
© 2023 REGXELERATOR

At a glance - Highlights by topic
Prudential & financial stability
Cyber & operational resilience
Conduct & consumer protection
Fintech & ecosystem innovation
Payments & currency
ESG
Other transversal themes
International cooperation
Gallery
Share
 
Want to print your doc?
This is not the way.
Try clicking the ⋯ next to your doc name or using a keyboard shortcut (
CtrlP
) instead.