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Global Regulator & Central Bank News Roundup (Vol. 42/2022)

November 21 - November 27
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
(Expand topics via arrow and/or click on topic to skip directly to sections)

FSB publishes 2021 G-SIB list
BCBS warns of interconnections between banks and non-bank financial institutions in latest newsletter
Bank of Namibia forms cybersecurity council
National Bank of Ukraine outlines measures to prepare for prolonged blackouts
EIOPA consults on methodologies for the cyber component under the insurance stress testing framework
EBA issues final guidelines on the use of remote customer onboarding
HKMA hosts third edition of its AML Regtech Lab
New FCA study raises concerns over consumer impact of trading apps with gamification features
FTX implosion continues to attract global regulatory attention
Belgium FSMA issues new communication on classification of crypto assets
New BIS paper examines CBDC in Africa
Bank of Japan confirms plans to continue CBDC testing
State Bank of Vietnam and the Bank of Thailand launch cross-border payment linkage
UK FCA announces plans for the development of a Code of Conduct for ESG data and ratings providers
Danish FSA carries out thematic study on disclosure of the link between remuneration and sustainability risk
Bank of France joins the UN PRI Initiative
Central Bank of Kuwait shifts focus under regulatory sandbox to sustainable offerings
New BIS FSI study provides stocktake and recommendations on authorities capacity development frameworks
UK FCA proposes synthetic LIBOR rates until end of Q3 2024 for use in certain legacy contracts

Prudential & financial stability

FSB publishes 2021 G-SIB list
The Financial Stability Board (FSB) has published its 2022 list of global systemically important banks (G-SIBs). Consistent with prior years, the number of designated G-SIBs remains at 30 with JP Morgan Chase continuing to lead as the most systematically important bank and being subject to a 2.5% capital buffer, the second highest under the G-SIB framework.
The next highest bucket this year is made up of Citigroup, HSBC and the Bank of America. The latter moved up one level while BNP Paribas, previously also in this bucket, move down by one level. As a complement to the FSB’s release, the Bank for International Settlements has disclosed in support of the renewed assessment.
BCBS warns of interconnections between banks and non-bank financial institutions in latest newsletter
The Basel Committee on Banking Supervision in its latest newsletter has expressed concerns over the interconnections between banks and non-bank financial institutions (NBFIs) amid continued growth of and banks’ rising exposure to the sector. The newsletter was released on the back of findings from a horizon scanning exercise on banks' NBFI activities. Out of banks’ various exposures to NBFIs, the Committee classified the exposure to highly leveraged counterparties involving derivatives and securities financing transactions of highest risk, given opaque concentration risks and the risk of sudden market stresses that can result from margin calls and fire sales of assets. The Committee furthermore called out several shortcomings in banks’ risk management practices vis-à-vis NBFIs which came to forefront in the context of the recent Archegos Capital Management collapse including deficiencies with respect to governance and risk management frameworks, the collection of information on clients' positions and exposures as part of due diligence, limit frameworks and margining practices.
Cyber & operational resilience

Bank of Namibia forms cybersecurity council
The Bank of Namibia has announced the formation of a dedicated financial services cybersecurity council. The council was formed with the objective to offer a vehicle for the banking and non-banking financial sector to foster dialogue and cooperation on cybersecurity-related issues and response strategies as well as support the continued build-out of financial institutions’ cybersecurity capabilities. The Council includes heads of financial institutions and deputy governors and is supported by several working groups comprised of information security specialists from both the regulatory bodies and relevant organizations from the private sector including critical financial market infrastructures, financial sector associations, commercial banks and non-banking financial entities.
National Bank of Ukraine outlines measures to prepare for prolonged blackouts
Against the backdrop of the destruction of Ukraine’s energy infrastructure by Russia amid the continued war, the National Bank of Ukraine in a new statement has outlined the measures it is taking in cooperation with the banking sector to ensure readiness for potentially extended power blackouts and the impact on banking operations including customer-facing services. To that end over 1000 bank branches of systemically important banks have been designated to continue to provide services to clients in the event of prolonged power outages. As part of the preparations, the branches in question are equipped with additional staff, cash register equipment, ATMs and cash. Furthermore, as the statement notes, the “banks will design operating schedules for on-duty branches in a way that can transform them into shelters, locally known as invincibility points, that can temporarily provide refuge for anyone needing it“.
EIOPA consults on methodologies for the cyber component under the insurance stress testing framework
The European Insurance and Occupational Pensions Authority (EIOPA) has published for consultation a new discussion paper setting out the proposed methodological principles for the cyber risk component under the insurance stress testing framework. The paper addresses cyber from two perspectives, namely (1) insurance firms’ own resilience vis-à-vis cyber events and (2) cyber underwriting risk, i.e. the capability of an insurance undertaking to manage the impact of an adverse cyber scenario on its underwritten business. For both aspects, the paper sets out theoretical and practical considerations which form the basis for potential future insurance stress tests with a focus on cyber.
AML & CFT

EBA issues final guidelines on the use of remote customer onboarding
The European Banking Authority has issued the final version of its guidelines on the use of remote customer onboarding solutions. The guidelines provide a common EU standard for credit and financial institutions when carrying out the initial customer due diligence process in the context of new customer onboarding using remote channels and tools either themselves or via third party providers by setting out expectations for assessing the adequacy and reliability of such tools. Expectations cover seven specific areas: (1) Internal policies and procedures, (2) acquisition of information about the customers, (3) verification of document authenticity and integrity, (4) matching customer identity as part of the verification process, (5) reliance on third parties and outsourcing, (6) information and communication technology and security risk management, and (7) Compliance with these guidelines where credit and financial institutions use trust services and national identification processes.
Among other things, institutions are required to implement dedicated policies and procedures for onboarding customers remotely including details on the information needed to identify the customer, the types of documents, data, or information the institution will use to verify the customer’s identity and the process for verifying the information. When considering the adoption of a new onboarding solution, institutions should furthermore carry out a pre-implementation assessment and, once implemented, monitor on an ongoing basis the effectiveness of the solution. As part of the verification process, institutions must have appropriate processes and controls in place to ensure that reproductions where these are accepted in lieu of original documents are reliable and ensure that the solution allows to establish if there is a match between the visible information of the natural person and the documentation.
Other highlights
The Hong Kong Monetary Authority has hosted the third edition of its AML Regtech Lab, investigating the use of network analytics by banks to combat fraud risk and reduce losses from scams using mule account networks.
Market conduct & consumer protection

New FCA study raises concerns over consumer impact of trading apps with gamification features
The UK Financial Conduct Authority (FCA) has released the findings of new research, warning that stock trading apps with certain design features such as gamification pose a risk to consumer outcomes. The research, which involved a survey of over 3,000 app users across four trading apps and in-depth qualitative interviews with a sample of 20 users, showed that trading apps with design features that are considered concerning – such as frequent notifications with latest market news, celebratory messages, and other gamification features – are associated with suboptimal investment decisions and behavior. This may include consumers making investments beyond their risk appetite or exhibiting behaviors similar to problem-gambling as well as high frequency trading. On the back of the findings, the FCA called on “all firms that offer stock trading to consumers to review and, where appropriate, make improvements to their products”.
Fintech & ecosystem innovation

Latest regulatory responses to the FTX implosion
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Bahamas
The Bahamas Attorney General & Minister of Legal Affairs, Senator The Hon. L. Ryan Pinder, gives a national address to discuss the government’s response and position with respect to the FTX collapse, providing account of the events and circumstances that led to the FTX collapse. The address was preceded by two statements by the Bahamas Securities Commission earlier in the week. This included the information that it obtained a right of indemnity and right to be reimbursed for expenses reasonably incurred by the Commission in connection with the regulatory action taken to safeguard the digital assets of FTX Digital Markets Ltd. As well as response to “intemperate and inaccurate allegations lodged” by the new FTX Trading Ltd. CEO in the context of the motion to transfer the venue of the Chapter 15 proceedings of FTX Digital Markets Ltd.
Singapore
The Monetary Authority of Singapore released a statement to address the misconceptions in the wake of FTX collapse. It stressed that as FTX was not licensed in Singapore, it had limited powers to protect local consumers and noted that relative to Binance, FTX was not placed on the investor alert list as it did not explicitly solicit Singapore-based customers. The MAS also reiterated its position regarding the high volatility and risks involved in cryptocurrency, stating that “dealing in any cryptocurrency, on any platform, is hazardous”.
Türkiye
The Turkish Financial Crimes Investigation Board (MASAK) has announced that it launched an investigation into FTX and Sam Bankman-Fried on November 14. Based on the interim findings of the investigation, the Board concluded that there are sufficient grounds to suspect that criminal actions, including improper safeguarding of customer funds and market supply and demand manipulation have led to the FTX collapse, and initiated the process for seizing FTX assets.
United Kingdom
In a conference speech, Deputy Governor Sir Jon Cunliffe shared his perspective on factors that have contributed to the FTX implosion, stressing shortcomings with respect to organization, governance and internal controls as some of the main themes. He further calls for continuing to bring crypto activities and entities within regulation in order to ensure consumer protection, protect financial stability and foster innovation “within a framework that manages risks to existing standards”.
Canada
In a dedicated press release, the Canadian Securities Administrators called on investors to be cautious of the risks involved in crypto asset trading and stressed that while crypto asset trading platforms operating in Canada are required to register with securities regulators, “registration cannot eliminate all risks associated with crypto asset trading platforms“.
Bahamas
Recent developments
The Bahamas Attorney General & Minister of Legal Affairs, Senator The Hon. L. Ryan Pinder, gives a national address to discuss the government’s response and position with respect to the FTX collapse, providing account of the events and circumstances that led to the FTX collapse. The address was preceded by two statements by the Bahamas Securities Commission earlier in the week. This included the information that it obtained a right of indemnity and right to be reimbursed for expenses reasonably incurred by the Commission in connection with the regulatory action taken to safeguard the digital assets of FTX Digital Markets Ltd. As well as response to “intemperate and inaccurate allegations lodged” by the new FTX Trading Ltd. CEO in the context of the motion to transfer the venue of the Chapter 15 proceedings of FTX Digital Markets Ltd.
Link

Other highlights
The Belgium Financial Services and Markets Authority has issued a new communication outlining the most common cases where crypto assets may fall within the scope of the prospectus rules and/or the MiFID conduct of business rules.
Payments & currency

New BIS paper examines CBDC in Africa
The Bank for International Settlements (BIS) has released a new paper providing an overview of CBDC in Africa. Drawing on a survey of 43 central banks including 19 from Africa, the paper shares insights on motivations and concerns as well as considerations for CBDC design in Africa in contrast to other emerging and developing jurisdictions. Overall, the paper confirms that while there remains a strong focus on CBDCs, efforts of most African central banks are in an early research and analysis stage. Survey responses identify considerations around the provision of cash in digital form as an alternative means of payment, financial inclusion and more effective monetary policy as the key motivations for a potential CBDC issuance in Africa. Concerns by African central banks, on the other hand, center most dominantly around cyber risks, bank disintermediation, a low adoption and the operational burden associated with a CBDC issuance. As for the specific CBDC design considerations, there remains significant levels of indecision across most areas, reflecting the nascent stage of African central banks’ CBDC efforts.
Other highlights
The Executive Director of the Bank of Japan delivered opening remarks at the fourth meeting of the Liaison and Coordination Committee on CBDC, reiterating its plans to move forward with the technical experiments to test the feasibility of a potential CBDC and explorations into institutional arrangements that build on the proof of concept delivered under Phase 2 of its CBDC work to date in order to ensure readiness if and when a decision is made to issue a CBDC.
The State Bank of Vietnam and the Bank of Thailand have officially launched their QR code-based cross-border payment linkage.
ESG

UK FCA announces plans for the development of a Code of Conduct for ESG data and ratings providers
A voluntary Code of Conduct for ESG data and providers will be developed under the leadership of an independent industry-led group, the UK Financial Conduct Authority (FCA) announced in a new statement. The measure is intended to foster greater confidence into the market for ESG data and ratings providers amid current concerns over reliability and the transparency of the associated methodologies. The group will be co-chaired by the global investment manager M&G, Moody’s, the London Stock Exchange Group as well as Slaughter and May and the secretariat provided by the International Capital Market Association and the International Regulatory Strategy Group. Members of the group will include investors, ESG data and ratings providers, and rated entities while the FCA, the Bank of England and other relevant financial regulators and government departments will assume an observer role.
Danish FSA carries out thematic study on disclosure of the link between remuneration and sustainability risk
The Danish Finanstilsynet (FSA) has released the results of a thematic review into the compliance of six pension companies and life insurance undertakings with article 5 of the Sustainable Finance Disclosure Regulation, investigating the disclosure of the link between remuneration and the integration of sustainability risk in the investment and advisory. Article 5 requires firms to include information in their remuneration policies on the relation between the undertaking’s integration of sustainability risks and the undertaking’s granting of variable remuneration and to publish the information on their websites. Findings from the review highlighted shortcomings in current disclosure practices, with four of the six reviewed entities having received orders for insufficient disclosures. Notably, while undertakings commonly report whether there is a connection in place, details on how the remuneration policy is consistent with the undertaking’s integration of sustainability risks frequently is lacking. To foster improved practices, the FSA has published its expectations for good practice alongside the findings.
Other highlights
The Bank of France joins the United Nations Principle for Responsible Investment (PRI) Initiative to signal its commitment to comply with global standards under the umbrella of its responsible investment strategy and to establish itself as a leader among central banks in this area.
The Central Bank of Kuwait has announced its intention to shift the focus under its regulatory sandbox to sustainable fintech offerings in line with its latest efforts to promote social and climate-related goals. The announcement comes just a week after publishing ESG guidelines directed at local banks.
Other transversal themes
New BIS FSI study provides stocktake and recommendations on authorities’ capacity development frameworks
A new study released by the Bank for International Settlement Financial Stability Institute discusses supervisory capacity development at financial supervisory authorities. Drawing on survey responses and interviews with 26 authorities, the paper provides a stocktake authorities’ practices for capacity development amid new demands on skills and capabilities that arise from the rapidly changing financial sector transformation. Feedback from authorities highlights a gradual shift in skill and capability requirements. While traditional financial capabilities remain a core focus, increasing emphasis is being placed on cyber security, data science and information technology alongside softer skills such as communication, leadership and teamwork. Against this backdrop, the paper summarizes observed practices and trends along several dimensions of capacity development frameworks including the level of skills, delivery modalities, incentives and learning cultures and combines this with recommendations for good practices and stylized frameworks for authorities to draw on as they evolve their practices.
UK FCA proposes synthetic LIBOR rates until end of Q3 2024 for use in certain legacy contracts
As part of its LIBOR wind-down efforts, the UK Financial Conduct Authority (FCA) has launched a further consultation under which it proposes the continued publication of a synthetic USD LIBOR. Specifically, the proposal foresees that the LIBOR’s administrator, ICE Benchmark Administration Limited (IBA), will continue to publish the 1-, 3-, and 6-month US dollar LIBOR settings on a synthetic basis after it will be last published on a panel-bank basis on June 2023 until the end of Q3 2024 for use in certain legacy contracts. The proposal follows from industry feedback received in response to consultations earlier in the year. As for other rates, the FCA has reiterated its position that publication of the Yen LIBOR will permanently stop with the end of 2022 while the Sterling LIBOR will also continue to be published under a synthetic methodology with a target end date of Q1 2023 for the 1- and 6-month rates and a new proposed end date of Q1 2024 for the 3-month sterling LIBOR.
Leadership changes
Susanna Grufman assumes role as acting director general for the Swedish Finansinspektionen succeeding Erik Thedéen who moves on to become the Riksbank’s new Governor.
International cooperation
The Superintendencia Financiera de Colombia officially joins the International Association of Insurance Supervisors cooperation and information exchange agreement. As of November 2022 the Multilateral Memorandum of Understanding includes 80 signatories.
© 2022 REGXELERATOR

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