Global Regulator & Central Bank News Roundup (Vol. 19/2023)
Global Regulator & Central Bank News Roundup (Vol. 19/2023)
May 15 - May 21 2023
At a glance - Highlights by topic
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Conduct & consumer protection
European Supervisory Authorities release interactive factsheet to help consumers understand financial impact of inflation and interest rates
The European Supervisory Authorities (ESAs) have released an interactive factsheet to help consumers understand how recent increases in inflation and interest rates can affect their finances. The factsheet outlines both five general points for consumers to consider when handling finances in a context of inflation and rising interest rates, such as budgeting, understanding fees, and seeking advice to adapt financial plans, as well as provides industry-specific advice in relation to banking, investment as well as insurance and pension products. The ESAs are working with national supervisory authorities to translate the factsheet into all EU languages and promote it across the EU. This initiative is part of the ESAs' mandate to promote transparency, simplicity and fairness in the market for consumer financial products and services.
Fintech & ecosystem innovation
BIS FSI publishes new paper on the evolving regulatory landscape for crypto, tokens and DLT
The Bank for International Settlement’s (BIS) Financial Stability Institute (FSI) in a new paper provides an overview of the policy measures taken by 19 jurisdictions to address the risks associated with activities that incorporate cryptoassets and distributed ledger technology (DLT). For the purpose of the overview, the paper introduces several classifications of cryptoassets by (1) the nature of activity, (2) the approach to their management and (3) their type. Under (1) three categories of cryptoasset activities are distinguished: (a) those related to the issuance of cryptoassets; (b) those related to the operation of a DLT infrastructure, and (c) those related to the provision of services related to cryptoassets. (2) introduces a differentiation between centrally versus community-managed cryptoassets. Against this backdrop, the paper offers deep dive into policy measures under three groupings: policy measures into policy measures in relation to risks posed by centrally managed cryptoasset activities, policy measures in relation to risks posed by community-managed cryptoasset activities and policy measures policy measures in relation to risks posed by users’ direct exposures to cryptoassets and related activities. Jurisdictions under review include inter alia Hong Kong, Japan, Singapore, the United Arab Emirates (financial free zones), the U.S., UK as well as the EU (with focus on the Markets in Crypto Act).
Thai SEC strengthens oversight of ICO portals with new guidelines
The Thai Securities and Exchange Commission (SEC) has released the final version of its new guidelines on the supervision of ICO portals and related digital token offerings. Goal of the new guidelines is to ensure clearer, more appropriate, and more effective oversight in line with financial advisory standards, thereby addressing conflicts of interest, improving efficiency, and enhancing customer access to digital token offerings. Among other things, the guidelines prohibit ICO portals from providing services to digital token issuers with conflicting interests, such as shared shareholdings or personnel overlap. The guidelines also specify expectations in relation to outsourcing, providing that while ICO portals are allowed to outsource certain tasks provided that this is governed by robust outsourcing policies and procedures, core responsibilities such as project screening must be performed internally. Finally, the guidelines also encompass monitoring the operations of ICO portals post-approval and require notification to the SEC in the event of any changes to their characteristics or duties.
National Bank of Georgia implements to new measures to advance Open Banking
The National Bank of Georgia (NBG) has announced a set of new measures to advance the development of Open Banking in the country. This includes the launch of a new technical sandbox in collaboration with the International Finance Corporation (IFC). The sandbox will be launched on the Open Banking platform of the TESOBE international company, which provides access to the catalog of 400 banking APIs and localized test data, along with the opportunity to communicate with over 11,000 fintech developers. It will provide participants the opportunity to study two pre-selected Open Banking Application Programming Interfaces (APIs) in a test environment and use them to create innovative financial products for consumers. In parallel to these efforts, the National Bank has also approved on inclusion in open banking. These will enable non-banking institutions to engage in open banking as providers of access to account information and payment initiation services.
OSC TestLab report highlights challenges and opportunities for RegTech Innovation in Ontario’s capital markets
The Ontario Securities Commission (OSC) has released its first report on its TestLab. The TestLab was inaugurated in 2021 and is designed to enable group testing of innovative solutions linked to problem statements that are intended to address specific issues and opportunities in Ontario’s Capital markets. Focus of the first round of testing, which was carried out between June and December 2022 was on solutiosn that could enable registrants to make product information more accessible as well as enhance information sharing and client interactions. Over a six month period between June and December 2022, seven businesses tested RegTech solutions with over 100 testers, including investment advisors and investors. To that end, the report highlights the challenges and opportunities for businesses and regulatory technology (RegTech) providers trying to innovate in the capital markets while also outlining the next steps that the OSC Innovation Office will take in furtherance of RegTech innovation in Ontario.
Payments & currency
Federal Reserve Bank of New York and MAS release findings from Cedar x Ubin+ experiment on the enhancement of cross-border payments and settlements
The Federal Reserve Bank of New York's New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) have jointly published a research report on the Cedar x Ubin+ experiment, which investigated the potential of distributed ledger technology (DLT) to enhance cross-border wholesale payments and settlements involving multiple currencies. The experiment, conducted in a controlled environment using simulated wholesale central bank digital currencies, built upon the previous phases of NYIC's Project Cedar and MAS' Ubin+ initiative. Findings from the experiment demonstrated that DLT has the capacity to improve cross-border multi-currency payments and settlements. It successfully addressed key challenges related to network interoperability and autonomy, settlement certainty, and transaction speed. By interlinking distinct central bank currency ledgers, the experiment allowed for secure payments across multiple ledgers without relying on a central clearing authority or a shared central network. Settlements were executed atomically, ensuring successful transactions across the cross-currency payment chains and mitigating counterparty risks. Moreover, end-to-end settlement was achieved in under thirty seconds on average, enabling near real-time notification of payment success. Besides these insights, the research also highlighted areas for future exploration, including the scalability of the network solution to handle larger transaction volumes, potentially increasing the number of settled payments per second. Additionally, the involvement of additional currencies supported by corresponding central bank ledgers could be considered.
ESG
South Africa FSCA releases inaugural Programme of Work to foster sustainable financial system in South Africa:
As part of its contribution towards the countries carbon neutrality and broader sustainability goals, the South African Financial Sector Conduct Authority (FSCA) has published its introductory Statement on Sustainable Finance and Programme of Work. The Programme seeks to ensure that the FSCA’s regulatory and supervisory frameworks can enable achievement of sustainability goals from a market conduct and consumer protection perspective and advance key objectives including enabling and promoting capital flows in support of sustainability objectives, making it easier for market players to conduct due diligence and empowering retail consumers to navigate the sustainable finance market effectively and safely. To that end, the Programme consists of five specific pillars: (1) Taxonomy development, (2) Disclosure, reporting and assurance, (3) Market development, (4) Active Ownership, and (5) Empowering retail investors and consumers through financial education. The FSCA plans to hold a series of public workshops and stakeholder engagements over the coming months in order to better understand stakeholder perspectives on the topics and further specify details of the Work Programme.
Other transversal themes
EIOPA’s Risk Dashboard for Q4 2022 highlights macro and market risks as continued principal concerns for European insurance sector
EIOPA has released its latest risk dashboard for the European insurance sector based on data from Q4 2022. Overall, the risk levels in the European insurance sector have remained relatively stable. The analysis shows that macro and market risks continue to be the primary concerns for insurers with both risks rated as high. Despite slight improvements in global GDP growth forecasts and low unemployment rates, consumer prices have remained at higher level and fiscal balances have deteriorated. High market risk is driven by increased volatility in bond and equity markets
Liquidity and funding risks as well as market perceptions of insurance stocks, while both still rated medium, show an upward trend. As for liquidity and funding risks, this is due to decreased cash holdings and higher lapse rates. As for insurance stocks, a mixed picture emerges with life insurance stocks outperforming the market while non-life insurance stocks have underperformed.
Credit risks, profitability and solvency risks as well as interlinkage and imbalance risks persist at a medium level. In relation to profitability and solvency specifically, life insurers have reported an increase in their Solvency Capital Requirement (SCR) ratio, while non-life insurers experienced a slight decrease. Return on assets and return to premiums have shown improvement, but the net combined ratio for non-life insurers has deteriorated.
ESG-related risks and digitalization/cyber risks are also at a medium level with insurers exhibiting a slight increase in exposure to climate-relevant assets while experiencing a decrease in the frequency of cyber incidents.
SEC proposes rule changes to enhance resilience and recovery of clearing agencies
The SEC has proposed rule changes with a view to enhancing the resilience and recovery of covered clearing agencies (CCAs). The proposal comprises of three proposed changes. This encompasses an amendment that mandates an ongoing intraday exposure monitoring system for CCAs, capable of initiating margin calls as warranted by risk levels or market volatility as well as a further amendment to specify procedures for the use of alternative data sources or risk-based margin systems when third-party input is unreliable or unavailable. Additionally, a new rule is proposed that would set out the necessary content for a CCA's recovery and wind-down plan (RWP). Among other things, this would mandate CCAs to identify critical services, scenarios that may potentially prevent the CCA from being able to provide its critical services, and to identify and describe the rules, policies, procedures, and any other tools the CCA would use in a recovery or orderly wind-down and how these would enable a timely implementation of the RWPs.
Leadership change and appointments
The European Securities and Markets Authority has newly appointed Armi Taipale of Finanssivalvonta as well as reappointed Vasiliki Lazarakou of the Hellenic Capital Market Commission and Jos Heuvelman of the Dutch Authority for the Financial Markets to its management Board.
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