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. EBA releases final guidelines on overall recovery capacity for effective crisis management in financial institutions South Korea FIU releases enhanced AML protocols, outlines roles and responsibilities of key personnel in financial institutions ESMA releases comprehensive analysis on suspicious transactions and order reports across Europe EIOPA releases first review of product oversight and governance compliance across European regulators UK FCA to revise social media guidelines for financial product advertising to tackle illegal promotions and improve consumer protection FSB finalizes global regulatory framework for crypto asset activities UAE's SCA opens license applications for virtual asset service providers UK FCA to permanently launch digital sandbox from August 2023 South African Reserve Bank sets target timeframe for implementation of regulatory requirements on the prudential treatment of banks' exposures to crypto assets Bank of France releases further findings from experimental wholesale CBDC work Federal Reserve launches FedNow® Service IOSCO publishes final guidelines for establishing efficient compliance carbon markets New Zealand FMA issues guidance on scenario analysis for New Zealand Climate Disclosures Regime Thai SEC, UN PRI, and AIGCC initiate climate change stewardship training for capital market operators EBA to temporarily gather ESG data from large institutions to develop risk monitoring framework and support sustainable transition strategy APRA and ASIC launch consultation process for new Financial Accountability Regime
Prudential & financial stability
EBA releases final guidelines on overall recovery capacity for effective crisis management in financial institutions
The European Banking Authority (EBA) has released its final Guidelines on overall recovery capacity (ORC) in crisis recovery planning. The ORC seeks to provide a summary of institution's ability to recuperate from a material deterioration in its financial position by implementing suitable recovery options. The EBA’s Guidelines aim to create a coherent framework for determining an institution's ORC in its recovery plans and the subsequent assessment by competent authorities.The framework consists of two sections, with the first one focused on providing institutions with guidance to establish a reliable ORC framework and the second one harmonizing the methods of competent authorities' ORC assessment for a quantitative and qualitative perspective.
AML & CFT
South Korea FIU releases enhanced AML protocols, outlines roles and responsibilities of key personnel in financial institutions
The Korea Financial Intelligence Unit (KoFIU) has announced new measures to bolster anti-money laundering (AML) practices within financial institutions during a meeting with industry groups. The new rules are intended to clarify the responsibilities and roles of key AML personnel, including CEOs, compliance officers, and reporting officers. Specifically, the measures clarify the expectations towards CEOs by defining more clearly the types of activities constitute the “establishment” and “operation” of a company-wide AML system. As for compliance officers, the measures introduce a dedicated supervisory role over their employees. Finally, in relation to reporting officers, the new rules strengthen the professional capacity and autonomy of the reporting officer who is in charge of overseeing the company’s AML activities while at the same time raising the bar for the officers’ profile, requiring two years of AML experience for their appointment.
The European Securities and Markets Authority (ESMA) has issued a report on Suspicious Transactions and Order Reports (STORs), detailing their usage in different jurisdictions and their evolution in the context of market abuse detection and investigation. Metrics examined in the report include the number and sources of STORs received by National Competent Authorities (NCAs), breakdowns by instrument type and violation type, and the inter-authority exchange of STORs within and beyond the European Economic Area. The report primarily covers 2021 and 2022.
Conduct & consumer protection
EIOPA releases first review of product oversight and governance compliance across European regulators
The European Insurance and Occupational Pensions Authority (EIOPA) has issued its first report to review how national insurance regulators across the European Economic Area oversee product oversight and governance (POG) compliance. EIOPA’s study assessed POG supervision in five specific areas: (1) Organization and resources for POG supervision, (2) risk-based approach, (3) setting and communicating supervisory expectations, (4) supervisory methodology and tools, and (5) supervisory activities. The assessment found that while most national competent authorities (NCAs) have aligned their supervision processes with the POG requirements of the Insurance Distribution Directive (IDD) and the POG Delegated Regulation and significant progress has been achieved, there remain substantial differences across NCAs regarding the maturity of POG supervision, with some NCAs still in the process of building out their supervisory POG framework. Although the EIOPA Supervisory Handbook offers guidance on POG supervision, many NCAs reported challenges in supervising the implementation of POG requirements by insurance manufacturers, attributing it to the principle-based nature of the POG Regulation.
UK FCA to revise social media guidelines for financial product advertising to tackle illegal promotions and improve consumer protection
The UK's Financial Conduct Authority (FCA) is planning to establish new social media guidelines to modernise the way financial products are advertised online. The move is intended to reinforce efforts to curb illegal and non-compliant financial promotions. According to Lucy Castledine, Director, Consumer Investments at the FCA, the Authority has observed an increase in advertisements not meeting set guidelines. As a result, the FCA is seeking to inform firms of expected standards when marketing financial products online while also warning against illegal promotions. In addition, the FCA has partnered with the Advertising Standards Authority to educate consumers and influencers about the risks related to financial product promotions. The new social media guidelines come on the heels of the reinforced advertising rules for crypto firms marketing to UK consumers. Under these, the FCA will ban incentives to invest in cryptocurrencies from October 8, 2023, requiring firms to offer clear risk warnings and a 24-hour cooling-off period for first-time investors.
Fintech & ecosystem innovation
FSB finalizes global regulatory framework for crypto asset activities
The Financial Stability Board has released the final version of its global regulatory framework for crypto asset activities. The framework consists of two sets of recommendations, comprising of the (1) high-level recommendations for the regulation, supervision and oversight of crypto-asset activities and markets, and (2) the revised high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” arrangements. Recommendations under (1) address nine specific areas including inter alia regulatory powers and tools, cross-border cooperation, coordination and information sharing, expectations towards crypto-asset issuers and service providers in relation to governance, risk management, disclosure and data management. It also sets out recommendations for authorities for the identification and monitoring of financial stability risks arising from crypto-asset activities. The ten recommendations in relation to global stablecoin arrangements cover similar areas and additional also address redemption rights, stabilisation, and prudential requirements as well as recovery and resolution.
UAE's SCA opens license applications for virtual asset service providers
The Securities and Commodities Authority (SCA) of the UAE has announced that it is now accepting license applications from companies seeking to provide virtual asset services. As per the Cabinet Resolution No. (111) of 2022, businesses dealing in virtual assets except those licensed in Financial Free Zones, are required to obtain a license from the SCA. Companies in Dubai, however, will need a license from the Dubai Virtual Assets Regulatory Authority (VARA), which would then communicate with the SCA. The SCA has warned unlicensed virtual asset service providers of potential penalties which include fines or prosecution. The SCA also advises investors to ensure service providers are licensed prior to engaging in any transactions.
UK FCA to permanently launch digital sandbox from August 2023
The UK Financial Conduct Authority (FCA) has announced that its digital sandbox, the testing environment designed to support firms in the early stages of product development, will become permanently available from August 1, 2023. Previously accessible only temporarily to participants in pilot programs and TechSprints, the permanent Sandbox aims to foster an even broader innovation culture, benefiting both innovators and data providers who can list data, drive traffic, and gain insights about its usage. Past sandbox participants have experienced multiple positive outcomes, including product launches, securing funding, and industry recognition. The permanent Sandbox aligns with new objectives to support economic growth and international competitiveness, by offering a range of tools and initiatives for innovative firms. It features high-quality data sets and APIs, robust data security, a collaborative platform, and an observation deck. Application for the permanent Digital Sandbox opens from August 1, 2023 under multiple themes, with an approval process taking a maximum of 4 weeks.
As part of a broader update on planned regulatory reforms, the South African Reserve Bank has set January 1, 2026 is the proposed target date for the implementation of the requirements for the prudential treatment of banks' exposures to crypto assets as set out under the Basel Committee’s standards issued at the end of 2022.
Payments & currency
Bank of France releases further findings from experimental wholesale CBDC work
The Bank of France has released its findings from the first and second tranches of its experimental programme on wholesale central bank digital currency (MNBC). Findings from the latest experiments demonstrate the operational feasibility of three conceptual models of MNBC issuance on distributed ledger technology (DLT) platforms. The three models - the interoperability model, the distribution model, and the integration model - were tested across different types of DLTs and use cases with focus on two core strategic areas: (1) the tokenization of finance and (2) the improvement of cross-border transactions. The experiments revealed eight strategic and technical lessons, including the importance of international cooperation, energy-efficient design for CBDCs, and the potential for DLT to improve automated market transactions. Overall, the experiments conducted by Bank demonstrate that a tokenized version of central bank currency could enhance the efficiency of cross-border transactions and also augment the conclusiveness and safety of settlements across an extensive range of financial assets, including everything from government bonds to shares in funds, for an expanded pool of participants involved in wholesale operations. In addition to the htree models, the Bank also tested decentralized finance (DeFi) tools and its own DLT, DL3S, n order to assess its capabilities and adaptability to different use cases.
Federal Reserve launches FedNow® Service
The Federal Reserve has successfully launched its new instant payment system, the FedNow® Service. FedNow® enables banks and credit unions of all sizes to conduct instantaneous money transfers for their customers at any time. Operating alongside existing services like Fedwire® and FedACH®, it will provide instant payments capabilities through financial institutions' mobile apps, websites, and other interfaces. During the initial launch period, 35 banks and credit unions along with the U.S. Department of Treasury’s Bureau of Fiscal Service are equipped with instant payment capabilities. Furthermore, 16 service providers are ready to support payment processing for banks and credit unions.
IOSCO publishes final guidelines for establishing efficient compliance carbon markets
The International Organization of Securities Commissions (IOSCO) has released a final report to guide member countries in creating and enhancing Compliance Carbon Markets (CCMs). The report reviews the specific characteristics of CCMs in contrast to traditional financial markets and sets out 12 recommendations relating to primary market and secondary market functioning, addressing aspects such as transparency and predictability of primary market decisions and market structures for primary market as well as market integrity, transparency, and structure. The recommendations are intended to prompt the development of well-regulated CCMs globally and ensuring their integrity and effectiveness. The report also includes initial considerations for cross-border and cross-market connections, which could contribute to a global carbon market for emission allowances
New Zealand FMA issues guidance on scenario analysis for New Zealand Climate Disclosures Regime
The New Zealand Financial Markets Authority (FMA) has published a new information sheet on scenario analysis for climate reporting entities (CREs). The document aims to assist CREs in fulfilling their obligations under the Climate-Related Disclosures (CRD) regime. CREs are required to engage in scenario analysis, constructing hypothetical trajectories to different future climates, to evaluate the resilience of their business models and strategies. Jenika Phipps, FMA Climate Related Disclosures Manager, emphasized the value of scenario analysis in understanding the complexities of climate change and improving organizations' long-term resilience. The information sheet is part of a suite of CRD documents introduced by the FMA. The CRD legislation modifies several acts, including the Financial Markets Conduct Act 2013, and will impact around 200 entities such as large, listed issuers, banks, insurers, and investment fund managers.
Thai SEC, UN PRI, and AIGCC initiate climate change stewardship training for capital market operators
TheThai Securities and Exchange Commission (SEC), in collaboration with the United Nations (UN) Principles for Responsible Investment (PRI) and Asia Investor Group on Climate Change (AIGCC), is championing responsible investment practices by offering a training program focused on climate change engagement for capital market operators. Over 300 attendees participated in the recent webinar, titled "Responsible Investment in Practice: Undertaking Stewardship with a Focus on Climate Change." This training program encourages stewardship through investment in companies that address climate-related risks, aiding the transition towards a low-carbon society in alignment with the Sustainable Development Goals (SDGs), and driving Thailand's sustainable growth. The seminar is part of an ongoing collaboration between SEC, UN, and PRI, and is part of a broader initiative to promote responsible investing practices within the investment industry.
EBA to temporarily gather ESG data from large institutions to develop risk monitoring framework and support sustainable transition strategy
The European Banking Authority (EBA) has announced plans to collect environmental, social, and governance (ESG) data from large-scale listed institutions on a temporary basis. This initiative is intended to aid the EBA in meeting its ESG mandates, including the development of a risk monitoring framework and facilitating the European Commission's sustainable economic transition strategy. The data will be taken from institutions' Pillar 3 quantitative disclosure on ESG risks. The data collection, regulated under Decision EBA/DC/498, will cease once a supervisory reporting framework for ESG risks is set up. The first annual submission is scheduled for 31 December 2023, with the first semi-annual submission due on 30 June 2024. The technical elements involved in this ad-hoc collection have been published on the EBA's website since June 2023.
Other transversal themes
APRA and ASIC launch consultation process for new Financial Accountability Regime
The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have initiated the consultation process for the implementation of the new Financial Accountability Regime (FAR). The FAR, which will replace the Banking Executive Accountability Regime (BEAR), is designed to strengthen the responsibility and accountability framework for regulated entities and their directors and most senior and influential executives and thus contribute to an improved risk and governance culture. The new regime will not only apply to authorized deposit-taking institutions (ADIs), but also to insurance companies, superannuation trustees, and licensed non-operating holding companies. APRA and ASIC are seeking feedback on the proposed regulatory rules until August 17, 2023. They will also be giving in-depth attention to the distinct key functions of insurance and superannuation entities. The FAR will be enacted for ADIs six months after the Financial Accountability Bill 2023 is assented, and 18 months later for insurance and superannuation entities.
Eric Noll has been re-elected as FINRA’s Board Chair. Noll has served as a Public Governor since 2020 and was first elected Chair in August 2022.
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