PwC Regulatory Update

March 2019

PwC 2

Contents

PwC Regulatory Update

3Legislative/Government

developments

7What have

the regulators been up to?

10Industry bodies

12Overseas

developments

17PwC publications

20Contacts

Legislative/Government developments

PwC 4

1. Legislative/Government developments

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

Government responds to Royal Commission recommendations

The Government has released a statement outlining how the Government has

responded to Commissioner’s Hayne’s final report into Misconduct in the

Banking, Superannuation and Financial Service Industry to date.

Source: Treasury

Government consults on “Protecting Your Super” package

The Government has released exposure draft regulations and explanatory

material to implement its Protecting Your Super package, announced in the

2018-19 budget for public consultation.

Source: Treasury

An exposure draft of the Treasury Laws Amendment (Miscellaneous

Amendments) Bill 2019 and the Treasury Laws Amendment (Miscellaneous

Amendments) Regulations 2019 was released by the Government to correct

unintended outcomes relating to the (Fair and Sustainable Superannuation) Bill

2016.

The draft legislation contains provisions to:

• Correct an error in the way that market-linked pensions are valued under the

transfer balance cap when they are commuted or rolled over, resulting in a

nil debit; and

• Ensure that death benefits that include life insurance proceeds are not

subject to tax when they are rolled over to a new superannuation fund.

The draft regulations:

• Fix the valuation of defined benefit pensions under the transfer balance cap

to reflect when pensions are permanently reduced following an initial higher

payment;

• Change the definition of life-expectancy period for innovative income stream

products to account properly for the number of days in a leap year; and

• Maintain the capped defined benefit treatment of market-linked pensions

under the transfer balance cap where they have been rolled over as a result

of a successor fund transfer.

Source: Treasury

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1. Legislative/Government developments (cont’d)

PwC Regulatory Update

Government introduces legislation to modernise business registers in the

House

The Commonwealth Registers Bill 2019 was introduced in the House of

Representatives with the intention of making business data current, accurate

and accessible. The legislation will enable the Australian Business Register and

the business registers administered by ASIC to be moved to a modern registry

platform.

Source: Treasury

New penalties Bill for banking misconduct passes Senate

A draft Bill, Treasury Laws Amendment (Strengthening Corporate and Financial

Sector Penalties) Bill 2018 has been released by the Government to better

protect Australian consumers from corporate and financial sector misconduct.

Source: Treasury

Government strengthens whistleblower protections

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill

2018, has passed through Parliament. The legislation is designed to strengthen

corporate and tax whistleblower protections through the establishment of a

single whistleblower protection regime for the corporate, financial and credit

sectors. The reforms expand whistleblower protections to a broader class of

persons and expand the type of disclosures that can be protected.

Source: Treasury

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

PwC 6

1. Legislative/Government developments (cont’d)

PwC Regulatory Update

Government takes action to combat phoenixing

The Government continues its efforts to combat phoenixing through the

introduction of a package of reforms, which gives regulators additional

enforcement and regulatory powers to detect and disrupt phoenixing activity.

The reforms also give regulators powers to prosecute directors and other

professional advisers who engage in or facilitate phoenixing activity.

Source: Treasury

Other key updates

Responding to Recommendation 4.8 of Commissioner Hayne’s final report, the

Government has released a consultation paper, Insurance Claims Handling,

focussed on removing the exemption of insurance claims handling from the

definition of ‘financial services’ under the Corporations Act.

Source: Treasury

The Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 has

been introduced into Parliament to protect Australians from paying premiums

for insurance they don’t need, want or even know they have. The Bill requires

insurance in superannuation for under 25 year olds and members with low

balance accounts to only be offered on an opt-in basis from 1 October 2019.

Source: Treasury

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

What have the regulators been up to?

PwC 8

2. What have the regulators been up to?

PwC Regulatory Update

ASIC’s response to the Royal Commission final report

ASIC has provided an update on its future actions in response to the final report

of the Royal Commission into Misconduct in the Banking, Superannuation and

Financial Services Industry, which includes:

• Royal Commission related enforcement work, referrals and

recommendations directed at ASIC;

• ASIC extended remit and strengthened powers and penalties;

• ASIC’s broader strategic change program;

• Reforms advocated by ASIC

Source: ASIC

Recent consultation

ASIC has released a consultation paper, CP 309: Update to RG 209: Credit

licensing: Responsible lending conduct, seeking feedback on its proposals to

update its guidance on responsible lending. The proposal aims to update the

guidance to consider:

• ASIC regulatory and enforcement actions, including court decisions;

• Royal Commission into Misconduct in the Banking, Superannuation and

Financial Services Industry;

• Recent and upcoming initiatives such as comprehensive credit reporting and

open banking; and

• Changes in technology.

Submissions are due by 20 May 2019.

Source: ASIC

ASIC and Abu Dhabi Global Market sign agreement

The Registration Authority (RA) of the Abu Dhabi Global Market (ADGM) and

the ASIC have signed an agreement to strengthen collaboration between the

two territories by streamlining company registration and facilitating the

exchange of information, expertise and secondment opportunities in both

jurisdictions.

Source: ASIC

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

ASICAustralian Securities and Investments Commission

RBAReserve Bank of Australia

ASXAustralian Securities Exchange

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2. What have the regulators been up to? (cont’d)

PwC Regulatory Update

ASX releases the fourth edition of its Corporate Governance Principles

and Recommendation

The ASX Corporate Governance Council has released the fourth edition of its

Corporate Governance Principles and Recommendations. The principles and

recommendations are structured around eight central principles to be followed

by a listed entity, which are as follows:

• Clearly highlight the respective roles and responsibilities of its board and

management and regularly review their performance.

• Structure the board to have appropriate size, skills and capacity to discharge

its duties effectively and to add value.

• Instil a culture across the organisation of acting lawfully, ethically and

responsibly.

• Appropriate processes to verify the integrity of its corporate reports.

• Make timely and balanced disclosure of matters that have a material

effect on the price or value of its securities.

• Provide its security holders with appropriate information and facilities to

allow them to exercise their rights as owners.

• Establish a sound risk management framework and periodically review of

the framework.

• Remunerate its directors and executives fairly and responsibly.

It is effective for an entity’s first full financial year commencing on or after 1

January 2020

Source: ASX

The FSC welcomed the fourth edition of the ASX Corporate Governance

Principles and Recommendations and stated that it will promote high standards

of governance in member organisations through its standards and guidance.

Source: FSC

RBA consults on the operations of the Interchange Standards

The RBA has released a consultation paper, The Operation of the Interchange

Standards, and is seeking views from stakeholders on proposed variations to

the standards related to the setting of interchange fees in designated card

schemes and net payments to issuers in those schemes.

Submissions are due by 28 March 2019.

Source: RBA

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

ASICAustralian Securities and Investments Commission

RBAReserve Bank of Australia

ASXAustralian Securities Exchange

Industry bodies

PwC 11

3. Industry bodies

PwC Regulatory Update

COBA makes a submission to APRA on proposal to increase total loss-

absorbing capacity of ADIs

The Customer Owned Banking Association (COBA) has made a submission to

APRA in response to its proposal to increase the total loss-absorbing capacity

(TLAC) of authorised deposit-taking institutions (ADIs). The COBA has urged

APRA to tackle the ‘too big to fail’ problem that provides significant advantage

to major banks over smaller competitors in funding markets.

The key points in COBA’s submission include:

• APRA’s proposed “simple” approach is supported subject to a proportion of

the additional TLAC capital for domestic systemically important banks (D-

SIBs) being Tier 1 capital;

• This proportion should be 1.5% of risk weighted assets, increasing the

minimum Tier 1 capital requirement for D-SIBs from 6% to 7.5%, and;

• APRA should firmly commit to implementation by no later than 2023.

Source: COBA

COBACustomer Owned Banking Association

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

Overseas developments

PwC

4. Overseas developments – Europe

EBA: Recent guidelines

The European Banking Authority (EBA) has

published its final revised guidelines on

outsourcing arrangements setting out specific

provisions for the governance frameworks of all

financial institutions, within the scope of the EBA's

mandate.

Effective from 30 September 2019.

Source: EBA

EBA: Recent guidelines

The EBA is seeking feedback on its proposed

guidelines to clarify the credit risk mitigation

framework (CRM) in the context of the Advanced

Internal Rating-Based Approach (A-IRB).

Submissions are due by 25 May 2019.

Source: EBA

EBA: Recent announcements

The European Insurance and Occupational Pensions

Authority (EIOPA) has issued recommendations for the

insurance sector to minimise the loss to insurance

policyholders and beneficiaries in case of a no

withdrawal agreement between the United Kingdom

and the European Union (EU).

The recommendation provide guidance on the

treatment of UK insurance undertakings and

distributors with regard to cross-border services in the

European Union. The recommendations relate to:

• Authorisation of third country-branches;

• The lapse of authorization;

• The cooperation between the national competent

authorities;

• The communication to policyholders and

beneficiaries to distribution activities.

Source: EIOPA

13

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

PwC

4. Overseas developments – UK

PRA: Recent supervisory statements

The Prudential Regulation Authority (PRA) has

released the following supervisory statements to

deliver the general approach to be taken to

ensure there is a legal framework in place when

the UK leaves the EU:

• PRA approach to interpreting reporting and

disclosure requirements and regulatory

transactions forms (SS2/19) setting out the

approach expected to be followed by firms

when interpreting EU-based references found

in reporting and disclosure requirements and

regulatory transactions forms.

• Non-binding PRA materials (SS1/19) setting

how firms should interpret existing non-binding

PRA regulatory and supervisory materials.

• Depositor and dormant account protection

(SS18/15) setting out the expectations on

deposit-takers with regards to the depositor

protection rules.

PRA: Recent policy statement

The PRA released a policy statement (CP28/18)

in response to consultation paper, PRA fees and

levies: Changes to periodic and transaction fees.

The statement provides final policy on:

• A revised approach to periodic fees for

designated investment firms (DIFs);

• Amending the approach to periodic fees for life

insurers;

• Updating the regulatory transaction fees for

insurers;

• Updating the internal model application fees

for insurers;

• Updating the internal model application and

model maintenance fees for DIFs; and

• Updates to supervisory statement (SS3/16)

Fees: PRA approach and application.

Source: Bank of England

PRA: Recent policy statement

The PRA has released a policy statement

(PS4/19) in response to consultation paper,

Solvency II: Adjusting for the reduction of loss

absorbency where own fund instruments are

taxed on write down. It has also released an

update to the supervisory statement (SS3/15)

Solvency II: The quality of capital instruments.

SS3/15 covers the following topics:

• Prohibition on redemption of instruments within

five years of the date of issue;

• Liability management and capital reduction;

• Principal loss-absorbency mechanism for Tier

1 instruments subject to limitation (‘restricted

Tier 1’), and;

• Additional considerations for instruments

intended to contribute to group own funds.

Source: Bank of England

14

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

PwC

4. Overseas developments – ASIA

Singapore: Recent consultations

The Monetary Authority of Singapore (MAS) has

released a consultation paper, Proposed

Amendments to the Banking Act. These

amendments aim to strengthen the licensing and

regulation of banks and credit card or charge card

licensees, formalise existing supervisory

requirements and clarify other technical and

administrative issues.

Some of the amendments include:

• Expansion of grounds for revocation of bank

licences;

• Revision to requirement for auditors to report

material adverse developments affecting

banks’ financial soundness to MAS;

• Revision to requirement for banks to publish

audited accounts;

• Strengthen the oversight powers of the MAS

over outsourcing arrangements of banks; and

• Streamline outsourcing requirements.

Source: MAS

Singapore: Recent consultations

MAS has released a consultation paper,

Outsourcing by Banks and Merchant Banks,

seeking feedback on proposed changes to the

outsourcing arrangements by governing banks

and merchant banks, including proposed

amendments to the Banking Act. MAS will issue

an Outsourcing Notice to set identical

requirements for banks and merchant banks in

respect of material outsourcing arrangements.

Source: MAS

South Korea: Recent announcements

The Financial Services Commission (FSC) has

proposed its plan to establish an open banking

system to grant fintech firms access to banks’

payment network and overhaul the current

regulatory framework on electronic financial

business. The open banking system would

encourage development of new payment services

and greater competition in the financial sector.

Banks will finalise details about their voluntary

agreement on the open banking system in the first

half of 2019. The FSC will submit its proposal to

amend the Electronic Financial Transaction Act in

the third quarter of 2019.

Source: FSC

15

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

PwC

4. Overseas developments – US

SEC: Recent announcement

The Securities and Exchange Commission (SEC)

is seeking feedback on its proposal to expand the

"test-the-waters" modernisation reform to all

issuers, including investment company issuers.

The rule is currently available to emerging growth

companies (EGCs), and aims to provide

increased flexibility to issuers with respect to their

communications with institutional investors about

contemplated registered securities offerings, as

well as a cost-effective means for evaluating

market interest before incurring the costs

associated with such an offering.

The reform would allow the issuers to determine

market interest in a proposed registered securities

offering or initial public offering prior to the filing of

a registration statement.

Submissions are due by 29 April 2019.

Source: SEC

16

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

PwC publications

PwC

5. PwC publications

PwC HK: Insurance Authority Guideline on

Cybersecurity

Hong Kong's Insurance Authority has issued a

draft guideline on cybersecurity, setting out the

minimum standard of cybersecurity that is

expected of an Authorised Insurer. The final

version will be issued in Q1 of 2019. Authorised

insurers are expected to comply starting from 1

July 2019.

PwC HK has released a report, Insurance

Authority Guideline on Cybersecurity — Are you

ready? The report highlights the key requirements

of the Cybersecurity guideline and how PwC can

help the firms affected by it.

See publication

PwC HK: Insurance trends 2019

PwC HK has released a report, Insurance trends

2019, discussing how digital transformation shifts

from threat to opportunity, as part of PwC’s 22nd

CEO Survey trends series. Some of the key

insights include:

• Leading companies recognise that it takes

more than just technology to drive innovation

and differentiation.

• Companies are envisioning customer needs

beyond traditional insurance and have adopted

a proactive approach to talent development.

• Companies are also defined by their readiness

to embrace new business models, recognition

of data as their organisation’s most critical

asset, and agile approach to execution and

change management.

See publication

PwC US: 3 billion reasons voice can transform

banking

PwC US has released a report, 3 billion reasons

voice can transform banking, discussing how

voice interaction can revolutionise the future of

financial services. The report touches upon the

ways organisations can reap the benefits arising

from opportunities to utilise voice interaction

technology beyond the front-end voice interaction.

For example, voice interaction can be beneficial in

creating value for customers and shareholders

through the rapid shift in consumer behavior and

expectations, the potential for improving loyalty

scores, and the economics of cost savings.

See publication

18

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

PwC

5. PwC publications (cont’d)

PwC US: Digital Intelligence – choose-your-

own-adventure model in financial services

PwC US has released a report, Digital intelligence

- choose-your-own-adventure model in financial

services, analysing the top digital developments

influencing financial services.

The report discusses how financial services firms

should shape consumer behaviour rather than

respond to it. Financial institutions that

appropriately respond will expand revenue

opportunities and build loyalty in a space where

customers can freely switch between financial

providers. Personalisation, convenience, and

voice technologies are all methods that can help

restore strong connections and help firms shape

rather than respond to customer preferences.

See publication

PwC US: FINRA SEC 2019 priorities

The Financial Industry Regulatory Authority

(FINRA) and the Securities and Exchange

Commission (SEC) have recently published their

2019 examination priority letters, highlighting

areas of focus and nuances for broker-dealers to

consider.

PwC US has published a report, bringing out the

ten key points from FINRA and SEC’s 2019

examination priorities. Key points from the report:

• Broker-dealers increasingly using online

platforms to market and distribute securities,

leading to new risks related to suitability

requirements, demanding special attention.

• Broker-dealers needing to demonstrate that

they perform reasonable due diligence in

directing their customer orders to the best

market.

• Broker dealers should review aggregation

limits for compliance with short sale

requirements.

• Digital asset participants need to monitor

associated risks.

See: publication

PwC US: Digital intelligence - time to

transform the transformation office

PwC has released a report, Time to transform the

transformation office, highlighting how

organisations must evolve their capabilities to

help define and drive a new transformation

agenda with potentials for mergers and

technology accelerating the rate of change. Key

points from the report are:

• The ability to leverage emerging technology for

financial services companies is the greatest

differentiator between leaders and laggards.

• Transformation offices’ roles may become

more important as organisations look for these

teams to add value as business partners to

their internal stakeholders by being innovators,

problem solvers and strategic advisors.

• Transforming the business model to drive

growth represents the greatest area of

anticipated investment amongst large

corporations.

See publication

19

PwC Regulatory Update

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

Contacts

PwC 21

6. Contacts

PwC Regulatory Update

Nicole Salimbeni

Partner

Email: nicole.salimbeni@pwc.com

Tel: (02) 8266 1729

Edwina Star

Partner

Email: edwina.star@pwc.com

Tel: (02) 8266 4940

Amrita Jebamoney

Partner

Email: amrita.jebamoney@pwc.com

Tel: (02) 8266 1826

Sarah Hofman

Partner

Email: sarah.hofman@pwc.com

Tel: (02) 8266 2231

Craig Stafford

Partner

Email: craig.stafford@pwc.com

Tel: (02) 8266 3725

Legislative/

Government

developments

Overseas

developments

What have

the regulators

been up to?

PwC

publicationsContacts

Industry

bodies

www.pwc.com.au

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