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Global Regulator & Central Bank News Roundup (Vol. 32/2023)

August 21 - August 27 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,

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At a glance - Highlights by topic

Visit Regxelerator’s end-to-end automated and AI-powered regulatory intelligence platform

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for ongoing updates

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Prudential & financial stability⁠

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Swiss National Bank Restructures Data Disclosure Following UBS Group's Acquisition of Credit Suisse Group AG

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AML & CFT⁠

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Labuan IBFC Launches First Anti-Money Laundering and Counter Terrorism Financing Compliance Platform to strengthen AML/CFT compliance

FinCEN and IRS CI Note Rise in Payroll Tax Evasion, Workers' Compensation Fraud in Construction Industry

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Fintech & ecosystem innovation⁠

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MAS Completes Regulatory Framework for Stablecoins, Setting Stricter Requirements for Issuers in Singapore

AFSA Seeks Market Feedback on Proposed AIFC Stablecoin Framework

UK FCA Details Expectations For UK Cryptoasset Businesses’ Compliance with the Travel Rule

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Payments & currency⁠

UK FCA Granted Enhanced Powers to Safeguard Cash Services Amidst Digital Shift Under Financial Services & Markets Act 2023

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ESG⁠

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Taiwan FSC Issues Roadmap for Taiwan Listed Firms to Align with International Sustainability Disclosure Standards by 2026

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Other transversal themes⁠

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FSB Launches Thematic Peer Review on MMF Reforms, Urges Stakeholder Feedback to Address Sector Vulnerabilities

Indonesia's OJK Issues New Regulation to Strengthen Capital Market Amid Unstable Conditions

Saudi Arabian Monetary Authority announces formation of new Insurance Authority

FDIC's 2023 Risk Review Explores Current Economic Climate, Banking Industry Conditions, and New Focus on Crypto-Asset Risk

Federal and State Regulatory Agencies Pledge Support to Financial Institutions Adversely Affected by Hawaii Wildfires

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Prudential & financial stability

EBA Updates Systemic Importance Indicators for EU's Major Financial Institutions, Aiding in Identification of Globally Significant Institutions and Promoting Market Transparency

The European Banking Authority (EBA) has released its latest update on the 13 systemic importance indicators for the top 32 financial institutions in the EU with leverage ratio exposure surpassing EUR 200 billion. This annual update introduces data reflecting the Banking Union and the Single Resolution Mechanism entities. The purpose of this updated data is to aid competent authorities in determining which banks qualify as global systemically important institutions (G-SIIs), as per the guidelines set by the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB).

Key insights from the end-2022 data include:

An addition of two institutions to this year's publication

An overall 0.7% increase in total exposures to EUR 21,135 billion

Over-the-counter derivatives and payments activity rising by 12% and 10.9%, marking the highest levels since 2013

Growth of intra-financial system liabilities and cross-jurisdictional liabilities by 5.9% and 5.2% respectively, with the latter achieving its highest value since 2013

Declines in Level 3 assets (34.2%), underwriting activity (20%), and assets under custody (12.6%) between 2021 and the end of 2022

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Major Overhaul of the FINMA Insurance Supervision Ordinance Commences Following Legislative Updates; Public Consultation Underway until November 2023

The Swiss Financial Market Supervisory Authority (FINMA) is overhauling its Insurance Supervision Ordinance and several related circulars for insurers, following updates to the Insurance Supervision Act and the Insurance Supervision Ordinance. These changes, which were introduced by the Swiss parliament and the Federal Council in 2022 and 2023 respectively and are scheduled to come into effect on 1st January 2024, necessitate amendments to the FINMA Insurance Supervision Ordinance (ISO-FINMA) and various associated circulars. The updates relate among other things to provisions regarding the Swiss Solvency Test (SST), tied assets, and technical provisions, along with amendments regarding the implementation of the transparency rules for life insurance companies, technical issues concerning the supervision of insurance intermediaries and the tasks of the responsible actuary and the group actuary function. FINMA has initiated a public consultation, running until 22nd November 2023, to gather inputs on the revisions.

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AML & CFT

FINMA Releases Guidelines on Money Laundering Risk Analysis, Addressing Recurrent Weaknesses Identified in Banking Sector Reviews

The Swiss Financial Market Supervisory Authority (FINMA) has published guidelines on money laundering risk analysis, following recurrent identification of weaknesses in this area during on-site reviews. The publication is designed to provide transparent insights derived from FINMA's supervisory practices. The necessity for this guidance was underlined following an extensive review of more than thirty banks' money laundering risk analyses in spring 2023, wherein it was discovered that many did not meet the necessary requirements. Shortcomings included an inadequate definition of money laundering risk tolerance and a lack of various structural elements required for effective risk analysis. The risk analysis serves as a vital tool for financial intermediaries and banks in managing strategic decisions, identifying and mitigating money laundering risks, and determining relevant risk criteria for their activities.

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Fintech & ecosystem innovation

CGDFS Report Highlights Risks and Regulatory Principles for Cryptoassets in Emerging Economies, Citing Stability Concern

The Consultative Group of Directors of Financial Stability (CGDFS) has published a new a report with focus on the potential financial stability risks posed by cryptoassets in emerging market economies (EMEs). Cryptoasset use in these economies has steadily increased due to their appeal as alternative investment and savings tools, or as a hedge against volatile domestic currencies. However, this trend has raised concerns for financial authorities, particularly regarding their capacity to effectively monitor cryptoasset markets and evaluate associated risks. The report investigates how vulnerabilities intrinsic to the nature, structure, composition, and function of cryptoasset markets could translate into financial stability threats in conventional financial markets. This includes market, liquidity, credit, and operational risks, as well as risks related to bank disintermediation and capital flows. According to the report, risk catalysts within EMEs can enhance these transmission channels, augmenting countries' susceptibility to financial instability. The study identifies three primary catalysts - the economic and financial landscape, the level of technological penetration, and the national regulatory stance – as well as outlines several principles for the regulation and supervision of cryptoasset markets in EMEs.

Access the report summary here.⁠

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HKMA Releases Report on Bond Tokenisation and Future Strategies for Hong Kong's Market Following Successful Tokenised Green Bond Issuance

In a new report titled “Bond Tokenisation in Hong Kong”, the Hong Kong Monetary Authority (HKMA) has summarized the insights from the Hong Kong Government’s first tokenized green bond offering earlier this year. Specifically, with the aid of the HKMA, the Government in February issued a HKD 800 million tokenised green bond, the first of its kind worldwide. This issuance leveraged distributed ledger technology across multiple stages including primary issuance, secondary trading settlement, and coupon payment. The report, while detailing this tokenised bond, provides guidance on several aspects of such transactions in Hong Kong, from technological considerations to deal structuring. Furthermore, the report also identifies growth areas to foster tokenisation in the bond market more broadly, such as tackling fragmentation across systems and platforms, deriving more use cases, and enhancing Hong Kong's legal and regulatory framework. The HKMA, in partnership with the Government, intends to collaborate with the industry for further tokenised issuance(s) to progress this development.

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Dubai’s VARA Amends Custody Services Rulebook to Include Staking Services for VASPs, Streamlining Virtual Asset Management in Dubai

The Dubai Virtual Assets Regulatory Authority (VARA) has updated its Custody Services Rulebook, now allowing Virtual Asset Service Providers (VASPs) to offer staking services to customers under their Custody Services. This new service can be provided through the same legal entity without needing a separate license for Virtual Asset Management and Investment Services, however, additional licensing and supervision fees will apply.

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GARFIN Opens Registration for Virtual Asset Businesses

The Grenada Authority for the Regulation of Financial Institutions (GARFIN) in a new notice has indicated that it is now accepting applications for the registration of Virtual Asset Businesses. Excluded from this, however, are business applications relating to cryptocurrency including bitcoin. In Grenada the Virtual Asset Business Act came into law in July 2021 and designated the Grenada Authority for the Regulation of Financial Institutions as the competent authority. The Act was developed pursuant to a

model bill⁠

by the Eastern Caribbean Central Bank that was created to provide for a coherent regulatory framework for the registration and licensing of virtual asset businesses in the eight member countries of the Eastern Caribbean Currency Union.

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Payments & currency

Reserve Bank of Australia and Digital Finance Cooperative Research Centre Conclude Joint CBDC Project, Identifying Potential Benefits and Challenges for Future Implementation

The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) have concluded their joint research project on potential applications of a central bank digital currency (CBDC) in Australia. The project, which involved the RBA issuing a limited-scale pilot CBDC usable by select industry entities, demonstrated the potential of a CBDC in providing innovative payment and settlement services to businesses and households. While highlighting various CBDC applications that could improve payment systems, the project also identified several legal, regulatory, technical, and operational challenges warranting further exploration. Assistant Governor (Financial System) at the RBA, Brad Jones, and CEO of the DFCRC, Dr. Andreas Furche, noted the value of the project's insights, and the need for further research into the role of tokenised asset markets and programmable payments.

Access the report summary here.⁠

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Bank Indonesia, Bank Negara Malaysia, and Bank of Thailand Ink MoUs to Bolster Use of Local Currencies in Cross-Border Transactions

On 25 August 2023, Bank Indonesia (BI), Bank Negara Malaysia (BNM), and the Bank of Thailand (BOT) signed three bilateral Memorandum of Understanding (MoUs) aimed at promoting the use of local currencies in bilateral transactions. The signing took place in Jakarta, Indonesia, during the ASEAN Finance Ministers and Central Bank Governors Meeting. With the ambition of boosting cross-border economic activities, improving regional financial market stability, and encouraging local currency markets, the MoUs expand the scope of eligible cross-border transactions. The framework, which will be progressively implemented, provides synergy with cross-border payment initiatives for more efficient local currency settlements. These MoUs replace the local currency settlement frameworks that the three central banks signed previously on 27 August 2015 and 23 December 2016.

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State Bank of Vietnam Joins ASEAN's Regional Payment Connectivity Initiative To Enhance Cross-Border Payments

The State Bank of Vietnam (SBV) has officially joined the Regional Payment Connectivity (RPC) initiative, an expansion of a pre-existing memorandum of understanding (MOU) on cooperation created by the central banks of Indonesia, Malaysia, Philippines, Singapore, and Thailand. The SBV formalized its inclusion during the 10th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting in Jakarta and witnessed by the five original member banks. This move is aimed at enhancing cross-border payments in the ASEAN region, intended to be faster, more affordable, transparent, and inclusive. It also stands as a measure to support post-pandemic economic activities and boost small and medium-sized enterprise growth, while increasing trade and remittances. This partnership could eventually be extended to neighboring economies beyond the ASEAN.

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ESG

Survey Reveals Progress and Preparedness of Regulated Entities for New Zealand Climate Standards and Climate-Related Risk Management

The Reserve Bank of New Zealand has shared the findings of a new survey conducted among regulated entities, including banks and insurers, in relation to the maturity of their climate-related risk management and readiness for the forthcoming mandatory New Zealand Climate Standards disclosure regime, which is scheduled to be implemented by early 2024. Comprising 29 responses from the total 41 regulated entities, the survey data indicated a unanimous acknowledgment of vulnerability toward climate-related risks, an increase in climate change discussions within governance bodies, and a growing influence of such risks on business decisions compared to the first survey in 2019. However, only three entities affirmed having fully integrated climate-related risk management into their routine business risk practices. Additionally, while no entity considered itself at risk of non-compliance with the new disclosure regime, a majority admitted the need for significant work on their initial climate statements. These findings will guide both industry and regulators in future endeavors surrounding the management and disclosure of climate-related risks.

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Bangko Sentral ng Pilipinas Joins UN-Backed Global Responsible Investment Network with Commitment Integrate ESG Factors

The Bangko Sentral ng Pilipinas (BSP) has become a signatory to the Principles for Responsible Investment (PRI), supported by the United Nations. The PRI is a global network composed of public and private institutions committed to embedding environmental, social, and governance (ESG) considerations in their investment practices. Established in 2005, signing the PRI implies a commitment to integrate ESG factors into institutional policies, provided it aligns with fiduciary duties. Becoming a PRI signatory complements the BSP's membership with the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and aligns with its 11-point Sustainable Central Banking (SCB) Strategy. This move is expected to promote the BSP's sustainability agenda, enable a deeper understanding of responsible investing, and facilitate the integration of ESG factors into its investment process.

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Indonesia's OJK Publishes Regulation to Govern Carbon Trading through Carbon Exchanges

Indonesia’s Financial Services Authority (OJK) has issued Regulation Number 14 of 2023, setting out the guidelines for carbon trading through carbon exchanges. The new regulation, dubbed POJK Bursa Karbon, seeks to aid in implementing climate change control programs via the reduction of greenhouse gas emissions. The POJK specifies that carbon units are considered securities and should be registered with the National Registry System for Climate Change Control and the Carbon Exchange Operator. Moreover, in order to carry out carbon trading, market operators must obtain a business license as a carbon exchange operator from the OJK, which requires them among other things to adhere to minimum paid-up capital requirements and certain expectations for governance and stakeholder capabilities.

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Other transversal themes

CPMI-IOSCO Releases Comprehensive Report Exploring Central Counterparties' Practices for Handling Non-Default Losses

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have released a new report with focus on non-default losses (NDLs) at central counterparties (CCPs). NDLs refer to losses that are caused by matters other than the default of clearing members, such as investment risks or cyber-attack, which can jeopardize a CCP's operations if not properly managed. The report, which follows a discussion paper released in 2022, emphasizes the need for CCPs to develop policies, procedures and plans to address such losses alongside a robust risk management framework and offers a detailed overview of CCPs’ current practices. Given the variety of practices used to deal with NDLs and the inconsistency of these practices across the industry, CPMI and IOSCO plan further engagement with stakeholders and a public consultation. The aim is to provide further guidance and possibly make recommendations to improve NDL management.

Access the report summary here.⁠

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At a glance - Highlights by topic

Prudential & financial stability

AML & CFT

Fintech & ecosystem innovation

Payments & currency

ESG

Other transversal themes

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