Regulatory Insight - Moody's Analytics · BANKS NEWSLETTER MAY 2015 Managing Editor Managing Director, regulatory framework; (iii) monitoring and assessing implementation of the Basel

BANKS NEWSLETTER

MAY 2015

ENTERPRISE RISK SOLUTIONS

Regulatory Insight

Key Developments at a Glance

The Chairman of the Basel Committee on Banking Supervision (BCBS) gave a speech on the planned work in 2015 and 2016. Four broad themes govern their work: (i) policy development; (ii) ensuring an adequate balance between simplicity, comparability, and risk sensitivity across the regulatory framework; (iii) monitoring and assessing implementation of the Basel framework; and (iv) improving the effectiveness of supervision.

The Financial Stability Board (FSB) published their Thematic Review on Supervisory Frameworks and Approaches for Systematically Important Banks (SIBs). This review, conducted in cooperation with the BCBS, assesses progress towards enhancing supervisory frameworks and approaches for SIBs.

KEY DEVELOPMENTS PER REGION

> EUROPE: The European Banking Association (EBA) published guidelines on triggers for resolution, updated guidelines on interest rate risk arising from non-trading activities, and updated its DPM and XBRL taxonomy for remittance of supervisory reporting of funding plans and supervisory benchmarking. The Bundesbank published Ana Credit

The European Central Bank (ECB) published Regulation 2015/730 concerning statistics on holdings of securities. An ECB vice president Financial

The Joint Committee of the three European Supervisory Authorities (ESAs) published a report detailing its recommendations on securitization. Prudential Regulation Authority International

The BOE published statements on Ring-Fencing and its 2015 Stress Tests, along with a consultation on impediments to resolvability.

> AMERICAS: The U.S. A Progress Report on the Resolution of Systemically Important Financial Institutions The U.S. FED proposed rules on Pillar 2 (Supervisory Review Process) and Liquidity Coverage Ratio (LCR), and provided a statement on implementation of securitization risk-based capital rules. The U.S.

Systemic Risk: The Dynamics under Central Clearing The U.S. Financial Stability Oversight Council published its 2015

Annual Report. The International Monetary Fund (IMF) published a 2015 Article IV Consolation and a Selected Issues Paper on Peru.

> ASIA PACIFIC: The Monetary Authority of Singapore published a framework for domestic SIBs. The Reserve Bank of New Zealand issued Loan to Value Ratio (LVR) restrictions and its Financial Stability Report. The China Banking Regulatory Commission released its 2014 Annual Report.

response paper on Basel III disclosure requirements.

> MIDDLE EAST/AFRICA: The Central Bank of Bahrain published Amendments to module PD (Public Disclosure). The IMF published a Selected Issues Report on Morocco.

Managing Editor

Pierre-Etienne Chabanel Managing Director, Regulatory & Compliance Solutions

Contact Us

Americas +1.212.553.1653 [email protected]

Europe +44.20.7772.5454 [email protected]

Asia-Pacific (Excluding Japan) +85.2.3551.3077 [email protected]

Japan +81.3.5408.4100 [email protected]

Sign Up

Subscribe at www.moodysanalytics.com/regulatoryinsight to automatically receive your monthly copy.

http://www.moodysanalytics.com/regulatoryinsight


2 MAY 2015

Table of Contents

International 3

Europe 9 European Union 9 Germany 21 Luxembourg 22 Netherlands 22 Switzerland 23 United Kingdom 23

Middle East & Africa 25 Bahrain 25 Morocco 26 Sub-Saharan Africa 27

Americas 27 United States of America 27 Brazil 30 Peru 31

Asia Pacific 32 Australia 32 China 33 India 33 Korea 34 Mongolia 34 New Zealand 35 Singapore 37 Thailand 37

Glossary 39


3 MAY 2015

International

Key Developments

Thematic Review on Supervisory Frameworks and Approaches for SIBs

- FSB

May 26, 2015

Type of Information: Report

The FSB published a thematic review on supervisory frameworks and approaches for systemically important banks (SIBs).

This review was conducted in close collaboration with BCBS and assesses progress toward enhancing supervisory frameworks and approaches for SIBs after the financial crisis, particularly for global systemically important banks (G-SIBs). Increasing supervisory effectiveness is a key pillar of the FSB policy framework for reducing the moral hazard of systemically important financial institutions (SIFIs).

The peer review found that national authorities have taken significant steps to enhance supervisory effectiveness within their institutional frameworks. Authorities are using a broader and more sophisticated range of supervisory tools. The scope of supervision has also been expanded to incorporate macro-prudential and resolvability considerations. Corporate governance and the development of recovery and resolution plans are common areas of focus across many jurisdictions.

These findings are also reflected in the feedback from 13 G-SIBs that were surveyed as part of the peer review. The G-SIBs noted an increase in supervisory intensity, particularly on capital and liquidity, and many highlighted an increase in the number and depth of supervisory reviews and data requests. Supervisory actions in response to findings were also noted as having strengthened. More work, however, is needed to further improve and assess supervisory effectiveness. A key finding from the review is the importance of strengthening cross-border supervisory cooperation and building the mutual trust that is needed in good times, but even more so in difficult times. Effectiveness could also be strengthened by establishing and implementing clear and transparent supervisory strategies and priorities.

Drawing from the review findings, the report sets out several recommendations targeting areas where more work is needed. It recommends that supervisory authorities:

» Clearly define their supervisory strategy and priorities, establish a formal process for evaluating supervisory effectiveness against the stated strategy and priorities, and make further progress in attracting and retaining skilled supervisory resources

» Further strengthen their engagement with banks, particularly at the board level and with senior management, with the objective of informing supervisory risk assessments through enhanced understanding of G-

» Press banks to improve their information technology and management information systems to provide robus sk on an enterprise-wide basis

» Continue to ensure that data requests are effectively targeted and evaluated for purpose and intent, including via coordination between home and host authorities.

The report also includes recommendations addressed to the standard-setting bodies:

» BCBS should assist supervisors in establishing effective supervisory strategies and risk appetite frameworks.

» FSB will work with the standard-setting bodies to explore ways to promote the objective of achieving rigorous coordinated assessments of risks facing G-SIFIs through supervisory colleges.

» FSB and BCBS will cooperate to develop ways to foster greater cross-border supervisory cooperation and coordination.

Link: Press Release

Keywords: G-SIB, SIFI, Thematic Review

http://www.financialstabilityboard.org/2015/05/fsb-publishes-peer-review-on-supervisory-frameworks-and-approaches-for-systemically-important-banks-sibs/


4 MAY 2015

Update on Disclosure Initiative

- IAS B

May 20, 2015

Type of Information: Statement

The Disclosure Initiative is a portfolio of projects designed to improve how information is presented and disclosed in financial reports. This update highlights the recent and upcoming activities in the Disclosure Initiative including:

» Materiality

º Exposure Draft of the proposed Practice Statement

º Aligning the definition and additional paragraphs for IAS 1

» Principles of Disclosure project

º Aggregation of information

º Content of the notes

º Drafting of disclosure requirements

º Review of IAS8

º Disclosure of accounting policies

º Presentation on the face or in the notes

At its June 2015 meeting, the IASB will discuss the following topics as part of its Proposed amendments to IAS 7 Statement of Cash Flows project:

» A summary of the feedback received for the Exposure Draft (proposed amendments to IAS 7)

» An analysis on amendments arising from the Disclosure Initiative

» A summary of the due process steps and a request for permission to ballot

In June 2015, as part of its Principles of Disclosure project, the IASB will discuss the following topics:

» Review of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: transitional provisions;

» Non-IFRS information

» Comparability

Link: IFRS Homepage

Keywords: Disclosure Initiative, IAS 7, IAS 8

http://www.ifrs.org/


5 MAY 2015

Stefan Ingves on the Current and Upcoming Work of the Basel Committee

- BCBS

May 18, 2015

Type of Information: Speech

Stefan Ingves, the BCBS Chairman, spoke about the current and upcoming work of the Basel Committee, at the 8th Meeting of the Regional Consultative Group for Europe in Berlin. The planned work, during 2015 and 2016, can be grouped into four broad themes:

» Focusing on policy development

» Ensuring an adequate balance between simplicity, comparability, and risk sensitivity across the regulatory framework

» Monitoring and assessing implementation of the Basel framework

» Improving the effectiveness of supervision

Mr. Ingves mainly focused on the Committee's policy development agenda and its work on balancing simplicity, comparability, and risk sensitivity. The main components of Basel III have been addressed while the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) have been finalized. For these parts of the Basel framework, the focus is now on implementation. Most aspects related to the risk-weighted capital ratio have also been finalized while the calibration of the leverage ratio will be finalized soon.

So why do I say that most aspects of the risk-weighted framework have been finalized?Chairman. On the one hand, the Committee's completed reforms related to the risk-weighted framework have addressed some of the major fault lines of the pre-crisis regulatory framework, including the level and quality of bank capital. He highlighted that the fundamental architecture of the risk-weighted framework has remained same following the crisis, with continued a high degree of reliance on internally modeled approaches to determine capital requirements. The methods used to measure risk-weighted assets (RWAs) are also essentially the same as the pre-crisis Basel II framework

The Basel Committee is focusing its policy work on these two areas by:

» Conducting a "strategic" review of the capital framework and the extent to which it adequately balances simplicity, comparability, and risk sensitivity.

» Revising the risk-weighted approaches across the framework (for credit risk, market risk, and operational risk). The covers revisions to the standardized approaches as well as the internal model-based approaches.

The Basel Committee finalized its consultation on the review of the standardized approach for credit risk, which began last December, and is now processing the large number of comment letters (more than 160) received. The revisions proposed by the Committee are intended to increase risk sensitivity, without adding undue complexity, and to enhance comparability of capital requirements across banks and across jurisdictions. The revisions are also intended to strengthen the link between the standardized approach and the internal ratings-based (IRB) approach.

The Committee has been working on a major overhaul of the market risk framework since 2009. It has already undertaken three public consultations and a second comprehensive quantitative impact study is ongoing, with the goal to finalize the standard by around the end of this year. The Committee also proposed revisions to the standardized approach for measuring operational risk capital requirements. The revised standardized approach is proposed to replace three current non-model-based approaches. The consultation closed in January this year and the Committee is reviewing the comments received.

He mentioned that the revised standardized approaches for credit, market, and operational risk will also form the basis for a new capital floor. Capital floors make for a more level playing field between banks using a standardized approach and banks using internal models for regulatory capital purposes. Floors are not a new phenomenon in the capital framework the current Basel framework was introduced with a floor based on the Basel I framework. Clearly, having a floor based on Basel I is not a tenable long-term solution. Moreover, a standardized approach floor serves to:

» Promote market confidence in the measurement of RWAs by reducing their variation across banks

» Increase horizontal equity in risk-weighted capital requirements

Link: Speech

Keywords: Basel III, RWA, Standardized Approach Capital Floors

http://www.bis.org/speeches/sp150518.htm


6 MAY 2015

Ninth Review of Data Standards Initiatives

- IMF

May 15, 2015


The IMF published a report on the ninth review of its data standards initiatives.

The ninth review highlighted the contrast between the progress of countries with more advanced dissemination practices Special Data Dissemination Standard (SDDS) and SDDS Plus and the slower pace of progress under the General Data Dissemination System (GDDS). Directors welcomed the launch of the SDDS Plus, which is the third and the highest tier of data standards, with an initial cluster of eight adherents. A number of Directors supported more flexibility in the terms for compliance with all the data requirements, including by lengthening the transition or changing it to a rolling five-year period. Although the implementation still at an early stage, Directors did not envisage further changes to the SDDS Plus at this time. They agreed that the highest priority is to promote adherence by economies with systemically important financial sectors.

The Data Standards Initiatives were first launched after the financial crisis of 1994 95 on realization that data deficiencies and lack of transparency can contribute to market turmoil. Over time, the initiatives have proved valuable to the international community as demonstrated by near universal acceptance by IMF members; the willingness of many to commit voluntarily to observe high standards of data dissemination; and the recent establishment of SDDS Plus in 2012 to complement the G-20 Data Gaps Initiative (DGI).

By the end of April 2015, there were 112 participants in the GDDS, 64 subscribers of the SDDS, and eight adherents to the SDDS Plus. The SDDS Plus was launched in November 2014. The first cluster of countriesincluding France, Germany, Italy, the Netherlands, Portugal, Spain, Sweden, and the U.S. met the requirements in February 2015 and their metadata as well as links to their respective national summary data pages are posted on the Dissemination Standards Bulletin Board.

Links: Press Release, Report, Dissemination Standards Bulletin Board

Keywords: DGI, GDDS, SDDS Plus

Update on Basel III Monitoring

- BCBS

May 12, 2015


BCBS is monitoring the impact of Basel III global regulatory framework for more resilient banks and banking systems, Basel III leverage ratio framework and disclosure requirements, Basel III LCR and liquidity risk monitoring tools, and Basel III NSFR on a sample of banks. The exercise will be repeated semi-annually, with end-December and end-June reporting dates.

The current version (for the collection of December 2014 data) includes:

» Basel III monitoring workbook (version 3.0.2 updated in March 2015)

» Instructions for Basel III monitoring for banks providing data for the trading book (February 2015)

» Instructions for Basel III monitoring for banks not providing data for the trading book (February 2015)

» FAQ on Basel III monitoring (April 02, 2015)

» Code for calculating capital charges under the proposed standardized approach for market risk for banks completing the trading book part of the exercise (May 09, 2015)

Links: Basel III Monitoring Update, Code for Calculation of Capital Charges

Keywords: Basel III, Monitoring, QIS 2015

http://www.imf.org/external/np/sec/pr/2015/pr15223.htm

http://www.imf.org/external/np/pp/eng/2015/040615.pdf

http://dsbb.imf.org/Pages/SDDS/Home.aspx?sp=y

http://www.bis.org/bcbs/qis/index.htm

http://www.bis.org/bcbs/qis/tbg.zip


7 MAY 2015

Handbook on Securities Statistics

- BIS/ECB/IMF

May 12, 2015


The BIS, ECB, and the IMF jointly released the Handbook on Securities Statistics. The joint handbook assists in the production of internationally comparable securities statistics, covers the conceptual framework for statistics on debt and equity securities, and presents a set of detailed tables using the concepts and guidelines.

The importance of securities markets in intermediating financial flows, both domestically and internationally, underscores the need for relevant, coherent, and internationally comparable statistics. This need was recognized by the G-20 Data Gaps Initiative, launched in the aftermath of the 2007 08 global financial crisis with the support of the G-20 finance ministers and central bank governors and the IMF's International Monetary and Financial Committee.

Good securities data, along with monetary and financial statistics, provide important indications on the level of diversification of financial intermediation. The handbook supports this analysis and:

» Strengthens the collection of securities data through conceptual advice and guidance to harmonize the presentation of securities statistics

» Describes the main features of debt and equity securities as well as the institutional units and sectors as issuers and holders of securities

» Discusses the statistical recording rules to be applied

» Is the first publication of its kind dealing exclusively with the conceptual framework for the compilation and presentation of securities statistics

In addition to the close cooperation among the BIS, the ECB, and the IMF, this handbook also addresses comments by experts from national central banks, national statistical agencies, and international organizations. The handbook, which is expected to be widely applied, is intended to encourage harmonization of the international securities statistics that support global economic, financial, and macro-prudential analyses.

Link: Press Release

Keywords: Data Gaps Initiative, Metadata, Securities Statistics

Sound Practices at Large Intermediaries: Alternatives to the Use of Credit Ratings to Assess Credit-Worthiness

- IOSCO

May 07, 2015


IOSCO published for public comment a consultation report on sound practices at large intermediaries discussing alternatives to the use of credit ratings to assess creditworthiness.

on the Regulation of Market Intermediaries (Committee or C3) on assessment of creditworthiness by large market intermediaries. It also proposes a number of sound practices that:

» Regulators could consider as part of their oversight of market intermediaries

» Large market intermediaries may find useful in the development and implementation of effective alternative methods for the assessment of creditworthiness

Sound practices consist of practices that regulators could consider. Such practices would not be reflected in the methodology for the implementation of the IOSCO Objectives and Principles of Securities Regulation as they do not represent a standard that IOSCO members are necessarily expected to implement or be assessed against. The sound practices are focused on large intermediaries, although the smaller intermediaries may also wish to consider implementing some of the sound practices.

The final report will be prepared after consideration of comments received from the public in response to this consultation report. The comments are requested by July 08, 2015.

Comments Due Date: July 08, 2015

Link: Consultation Report

Keywords: Credit Ratings, CRA, Sound Practices

http://www.bis.org/publ/othp23.htm

https://www.iosco.org/library/pubdocs/pdf/IOSCOPD486.pdf


8 MAY 2015

Release of Report Titled Islamic Finance for Asia: Development, Prospects, and Inclusive Growth

- IFSB

May 05, 2015


The ADB and the IFSB announced the launch of a joint ADB-Development, Prospects, and Inclusive Growth. The publication was launched by Stephen Groff, the ADB Vice President, during an ADB- Can Contribute to Sustainable Growth

; the discussion took place on May 04, 2015 in Baku, Azerbaijan, during the ADB Annual Meeting 2015. This report:

» Is a useful resource for better understanding the Islamic financial services industry in Asia

» Is a valuable reference for jurisdictions in other regions that aim to understand, introduce, and develop Islamic finance

» potential source for financing infrastructure projects, diversifying public debt management, and improving the supply of high-quality liquid instruments

This publication is a summary compilation of the presentations and conference papers presented at a Conference on Islamic Finance for Asia: Development, Prospects and Inclusive Growth and a Roundtable Session for Regulators, jointly organized by ADB and IFSB in November 2013. The authors of various chapterswho were also the speakers in the Conference and Roundtable have summarized the views presented in various sessions of these events, with focus on:

» Growth and development of Islamic finance in Asia

» Legal and regulatory issues

» Financial inclusion

» Role of

» Implementation of global prudential standards

» Initiatives undertaken by governments and the public sector

» The way forward for Islamic finance in Asia

Links: Press Release, Report

Keywords: Islamic Banking

Approach to Assessing Macro-Prudential and Capital Flow Management Measures

- IMF

April 30, 2015


The IMF report:

» assessing macro-prudential and capital flow management measures

» Compares approaches of the IMF and Organization for Economic Co-operation and Development

» Suggests ways to move forward on the treatment of such measures

The G-20 Finance Ministers and Governors, at the February 09 10, 2015 meeting in Istanbul, asked the IMF and OECD, with input from the BIS and FSB, to assess whether further work is needed on their respective approaches to the macro-prudential and capital flow management measures, taking into account their individual mandates.

Link: Report

Keywords: Systemic Risk

http://www.ifsb.org/preess_full.php?id=297&submit=more

http://www.ifsb.org/docs/May%202015_IFSB-ADB%20Islamic%20Finance%20for%20Asia-Devt,%20Prospects%20and%20Inclusive%20Growth.pdf

http://www.imf.org/external/np/pp/eng/2015/041015.pdf


9 MAY 2015

Europe

European Union

Key Developments

Monetary Policy and the European Recovery: A Speech by Vítor Constâncio, Vice-President of the ECB

- ECB

May 30 , 2015


Vítor Constâncio, Vice-President of the ECB, spoke about monetary policy and recovery in Europe, at the XXXI Reunión Círculo de Economía in Barcelona.

The ECB Vice-President said that an effective macro-prudential policy requires policy interventions in a timely and bold manner, significantly affecting the normal behavior of financial markets or financial institutions. This poses challenges. First, should there be a need for policy intervention measures need to be admittedly intrusive, going well beyond the new capital and liquidity regulatory framework. Secondly, the macro-prudential toolkit that has been legislated including the one entrusted to the ECB/SSM is centered on banks. Instruments would need to address other financial activities and institutions, notably those pertaining to the shadow banking sector. This growing sector is posing new potential risks, albeit in an incipient way, as identified in the ECB Financial Stability Review.

Regarding the instrument toolkit at its disposal, the ECB may use all macro -prudential instruments laid down in the European legislation CRD IV/CRR, in the sense that it may top-up specific macro-prudential measures if it considers actions by national designated authorities as insufficient to mitigate systemic risks. It covers capital instruments, such as the countercyclical capital buffer, the systemic risk buffer, capital surcharges of systemically important institutions, as well as liquidity instruments, such as the liquidity coverage ratio. In addition, the ECB can also increase risk weights on real estate exposures or set higher limits on large exposures.

In a single currency area, macro-prudential policies are particularly important to deal with sectorial and regional risks that cannot be accounted for by a common monetary policy, said Mr. Constâncio. Measures such as the caps on loan-to-value (LTV) or debt-to-income (DTI) ratios are suitable instruments to address these developments. In this context, recent research suggests that exposure-based measures, such as LTV and DTI could be more efficient than capital-based measures. On the other hand, they may generate important cross-border spill-overs and leakages, and moreover, are now solely in the remit of national authorities. Implementing them will therefore require co-ordination and the ECB will play an active role to facilitate this in the euro area.

Currently, the tools of macro-prudential policy are mostly focused on the banking sector while important risks are emerging from the steadily growing shadow banking sector. The sector is engaged in maturity transformation and, while mostly funded via equity, shadow banks are also subject to the short-term redemption risk. If they experience substantial redemptions, they may, like banks, be forced to promptly sell assets to fulfil their obligations, which may give rise to fire sales. This is particularly worrisome, since 98% of the almost 95,000 non-money market investment funds operating in the euro area in 2014 are open-ended,

of liquid assets has dropped in recent years thereby increasing the illiquidity risks.

In this context, it is necessary to intensify the supervision of systemically important non-bank institutions The U.S. FED has been given the competence to place non-bank financial institutions within the supervised perimeter. Some shadow banks grew too-big-to-fail and hence, should be subject to the same surveillance as Global Systemically Important Banks (G-SIBs). In fact, the Financial Stability Board (FSB) is preparing a methodology for identifying Global Systemically Important Non-bank Financial Institutions (G-SINFIs).

Regarding the asset management industry that is the main component of the shadow banking sector, direct measures such as additional liquidity requirements, guided stress tests, minimum and time-varying load and redemption fees should be part of the macro-prudential toolbox. Well defined limits to leverage, especially synthetic leverage which is built-up with derivatives, should also be introduced, accompanied by harmonized methods to calculate it.

Countercyclical haircuts could limit volatility and leverage in financial markets more effectively than the minimum haircut requirements recently recommended by the FSB to be applied to repos and other securities financing transactions. Another important FSB work stream focuses on re-hypothecation and re-use of

tends to disappear in times of stress. I would encourage further work in order to fully assess the effects of these tools and how best to apply them in practice.

Link: Speech

Keywords: G-SINFI, Macro-Prudential Policy, Shadow Banking

http://www.ecb.europa.eu/press/key/date/2015/html/sp150530.en.html


10 MAY 2015

Updates to Single Rulebook Q&A: Published as Final Q&A in May 2015

- EBA

May 29 , 2015

Type of Information: Q&A

The updates for this month include 3 answers dated May 29, 2014; 2 answers dated May 22, 2015; and 7 answers dated May 08, 2015.

The overall objective of the Questions and Answers (Q&A) tool is to ensure consistent and effective application of the new regulatory framework across the Single Market. Institutions, supervisors, and other stakeholders can use the Single Rulebook Q&A tool for submitting questions on Capital Requirements Directive (CRD) IV, Capital Requirements Regulation (CRR), and the related technical standards developed by the EBA and adopted by the EC.

Link: Q&A

Keywords: CRD IV, CRR, Single Rulebook

Decision Identifying Credit Institutions That are Subject to a Comprehensive Assessment

- ECB

May 29, 2015


Decision 2015/839) identifying credit institutions that are subject to comprehensive assessment was published in the Official Journal of the European Union. It states that the ECB should undertake a comprehensive assessment comparable in terms of scope and depth to the one undertaken in 2014 of the credit institutions not covered by the previous assessment that have become significant.

Article 1 addresses entities subject to the comprehensive assessment:

» The entities listed in the Annex shall be subject to the comprehensive assessment.

» Novo Banco, SA shall only be subject to the stress test part of the comprehensive assessment.

» The credit institutions identified in the Annex as subject to the comprehensive assessment shall submit all information of relevance to this assessment requested by the ECB.

The effective date for this decision is May 06, 2015.

Link: Decision 2015/839

Keywords: Comprehensive Assessment, SSM, Stress Testing

Update to Monitoring of Additional Tier 1 Capital Instruments

- EBA

May 29, 2015


EBA published an update of its first report on the monitoring of Additional Tier 1 (AT1) capital instruments issued by EU institutions and released on October 07, 2014.

This update is partly based on the review of new AT1 issuances and includes some final conclusions of the EBA on issues previously flagged as being under investigation. The EBA expects to gather further insight on the basis of future issuances.

This report was finalized following a public hearing held on May 18.

Link: Press Release

Keywords: AT1, CET1, CRR

Fostering Transparency in Derivatives Market

- ESMA

May 29, 2015


The derivatives markets are becoming more transparent through the public availability of harmonized aggregate data reported to the six trade repositories registered with ESMA under the EMIR. The publicly available data allows market participants to monitor the extent, dynamics, and trends of derivatives trading in the EU, including identifying what was traded on and off-venue.

EMIR requires trade repositories to publish a breakdown of:

» The aggregate open positions per derivative class

» Aggregate transactions volumes per derivative class

» Aggregate values per derivative class

Since February 2014, when derivatives reporting began in Europe, the six European trade repositories have received more than 16 billion submissions, with average weekly submissions over 300 million. All trade repositories started publishing aggregate data after February 2014; however, the overall aggregation of publicly available data across trade repositories remained problematic due to different data granularity, level of consistency, presentation structure and formats chosen by trade repositories. To foster market transparency, ESMA, which supervises the six European trade repositories, asked for the implementation of different measures to improve the quality, harmonization, and access to data aggregates.

From April 2015, harmonized public data is available and updated weekly by all trade repositories. The information available includes open positions and trade volumes and values are broken down by derivative class, type, and trade type, which enables aggregation and comparison of data across trade repositories.

Link: News Release

Keywords: Derivatives, EMIR, Trade Repository

http://www.eba.europa.eu/single-rule-book-qa

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:JOL_2015_132_R_0013&from=EN

http://www.eba.europa.eu/-/eba-updates-its-monitoring-of-additional-tier-1-capital-instruments

http://www.esma.europa.eu/news/ESMA-fosters-derivatives-market-transparency?t=326&o=home


11 MAY 2015

First Steps in the Review of EMIR, the European Derivatives Regulation: A Speech by Jonathan Hill,

- EC

May 29, 2015


Jonathan Hill, European Commissioner for financial stability, financial services and capital markets union, spoke at the EMIR public hearing in Brussels about the first steps in the review of EMIR.

EMIR is an ambitious regulation, introducing new requirements in areas previously unregulated at the It requires all derivatives transactions to be reported; puts in place requirements for CCPs; and requires central clearing of standardized derivatives. For non-cleared transactions it works to ensure that there are incentives to manage risks and encourage central clearing.

Trade reporting has been underway since February last year, and ESMA and EU regulators have now received about 10 billion reports to six authorized trade repositories at a daily rate of nearly 60 million. We need to check whether the data we are receiving is enabling us to monitor markets effectively. Having too much or the wrong information can sometimes be as bad as having none. It will also be important for us to understand how this fits with the other reports that will be required under the securities financing regulation and MiFID II and that we avoid duplication.

All 17 EU CCPs are now authorized or in the process of obtaining authorization. ESMA recently recognized 10 non-EU CCPs across Japan, Hong Kong, Singapore, and Australia. There is still work to do with the 31 non-EU CCPs awaiting recognition but we are well aware of the importance of this and are focused on getting there as quickly as is possible.

The process of getting the first clearing obligations adopted by the Commission is about to begin. Clearing obligations and margin requirements for trades not centrally cleared which were at the heart of the G-20 commitments are still not fully in place. This means the first clearing rules for certain interest rate products might be in place as soon as April of next year, although a longer phase-in was provided for different types of counterparties for whom implementation is less straightforward, including a three-year delay for nonfinancial end-users. Non-financial firms make up a significant part of the OTC derivatives markets; however, EMIR recognizes that this does not necessarily make them systemic.

The necessary extension of the transitional relief for EU pension funds from central clearing will also soon be implemented, providing another two years to look at possible solutions to the challenges that pension funds face when clearing. With respect to margin for non-cleared trades, the ESAs are set to deliver draft requirements within the next few months. While this has taken longer than expected, an unprecedented degree of consistency in standards has been achieved globally. This should smooth the operation of global markets and reduce the risks of regulatory arbitrage. These are expected to track the internationally agreed timetable, beginning late next year, but again with a staggered phase-in for smaller counterparties.

With regard to this review resulting in an EMIR II, h this is by no means yet certain. We are not planning a change to the fundamental objectives of the Regulation. EMIR is a key component of our post-crisis reform agenda. But it does make sense to step back and ask ourselves whether we managed to get everything exactly right to see whether there have been unintended consequences. So I would urge you all to respond to the public consultation which will close on August 13th. And, as always, please put forward solutions as well as problems.

Link: Press Release

Keywords: EMIR, EMIR II, MiFID II

http://europa.eu/rapid/press-release_SPEECH-15-5080_en.pdf


12 MAY 2015

Guidelines on Contributions and Payment Commitments to Deposit Guarantee Scheme

- EBA

May 28, 2015

Type of Information: Regulation

Regulatory Status: Final Rule

EBA published its final guidelines on contributions to deposit guarantee schemes (DGSs) and on payment commitments. Both guidelines will help ensure consistent application of the new funding mechanisms provided for in the new Deposit Guarantee Schemes Directive (DGSD).

The objective of the DGSD is to increase the resilience of DGSs and improve depositors' access to compensation. All DGSs in Europe will now have to be pre-financed by credit institutions. Depositors will be compensated quicker and in case of failure at a branch of a bank established in a different Member State, will benefit from the assistance of their own local DGS acting as a one-stop-shop.

The EBA guidelines on risk-based contributions set forward methods for calculating ex-ante contributions to DGSs that are adjusted to the risk profile of each credit institution, thus promoting risk discipline and addressing moral hazard. Under these guidelines, calculation methods will include a set of core indicators capturing the main dimensions of the risk profile of credit institutions.

Obligatory indicators will thus cover aspects such as capital, liquidity, asset quality, business model, and asset encumbrance. These obligatory indicators will represent 75% of the risk assessment, thus leaving some framed flexibility to the DGSs and designated authorities to determine the remaining 25%. This flexibility will allow DGSs and designated authorities to take into account the specificities of credit institutions, while respecting a number of safeguards so as to ensure harmonization and comparability across the Single Market.

In line with the DGSD, the guidelines on payment commitments further specify the option for DGSs to authorize credit institutions to contribute, up to 30% of the required contributions, in the form of secured commitments to pay upon request. Under these guidelines, credit institutions will be able to make payment commitments by concluding two types of arrangements: a Payment Commitment Arrangement formalizing the commitment, the amount and the rights of the DGS to claim the funds; and a Financial Collateral Arrangement, fully compliant with EU law on financial collateralization, which ensures that the DGS access to funding is properly guaranteed by low-risk assets that can be quickly mobilized in case the institution does not meet its commitment.

The guidelines provide for criteria on the eligibility and management of collateral. Assets will be eligible for collateral only if they are of sufficiently low risk. The guidelines also provide that DGSs should limit their exposure to debt, whether public or private, the value of which is highly correlated to events where the DGS would have to use its funds, and therefore might have to call in the payment commitment. Collateral will be subject to regular marking to market and precautionary haircuts in order to cater for possible losses at the point of failure.

The guidelines also introduce principles ensuring that the prudential treatment of payment commitments does not encourage pro-cyclicality by incentivizing payment commitments over cash contributions. Accordingly, unless payment commitments are fully reflected on balance sheets and profit and loss accounts, supervisory authorities should assess, within their supervisory review and evaluation process, the risks to which the capital and liquidity positions of a credit institution would be exposed should the DGS call this institution to pay its commitment in cash. In the latter case, supervisory authorities should seek to mitigate that risk by requiring additional capital or liquidity requirements.

Comments Due Date: N/A

Effective Date: December 31, 2015

First Reporting Date: N/A

Link: Press Release

Keywords: DGSD, Payment Commitment, Risk-Based Contribution

http://www.eba.europa.eu/-/eba-publishes-guidelines-on-contributions-and-payment-commitments-to-deposit-guarantee-scheme


13 MAY 2015

Release of Financial Stability Review

- ECB

May 28, 2015


The ECB issued its Financial Stability Review report. In addition to its usual overview of the current developments relevant for euro area financial stability, this Review includes eight boxes and three special

al stability analysis and basis for macro-prudential policy-making.

» The first special feature presents a framework for evaluating cross-border spillover channels stemming from implemented macro-prudential measures.

» The second examines the main drivers of -specific, industry-specific, macroeconomic, and various structural factors.

» The third outlines issues related to non-performing exposures in the euro area banking system and their prospective resolution.

The Financial Stability Review (FSR) assesses developments relevant for financial stability, in addition to identifying and prioritizing main risks and vulnerabilities for the euro area financial sector. The FSR also plays an important role -prudential and micro-prudential tasks. With the establishment of the Single Supervisory Mechanism (SSM), the ECB was entrusted with the macro-prudential tasks and tools provided for under EU law. The FSR, by providing a financial system-wide assessment of risks and

-prudential policy MPP analysis.

Although -prudential and micro-prudential realms rely primarily on banking sector instruments, the FSR continues to focus on risks and vulnerabilities of the financial system at large, including in addition to banks shadow banking activities, including non-bank financial intermediaries, financial markets, and market infrastructures.

Link: Financial Stability Review

Keywords: FSR, Macro-Prudential Policy, SSM

Guidelines on Triggers for Resolution

- EBA

May 26, 2015



The EBA published its final guidelines on the triggers for resolution. The guidelines address circumstances under which an failing or likely to fail

The guidelines aim to promote convergence of EU supervisory and resolution practices in relation to how resolution should be triggered. These guidelines have been developed according to Article 32(6) of the Bank Recovery and Resolution Directive (BRRD), which mandates the EBA to specify the circumstances under which an institution shall be considered as failing or likely to fail.

These guidelines complement the EBA guidelines on early intervention triggers and the guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP). The three guidelines together provide a sound guidance for supervisory practice in the EU banking sectors and link ongoing supervision, early intervention, and resolution.


Effective Date: January 01, 2016


Links: Press Release, Final Guidelines

Keywords: BRRD, Resolution Triggers, RRP

http://www.ecb.europa.eu/pub/pdf/other/financialstabilityreview201505.en.pdf

http://www.eba.europa.eu/-/eba-publishes-guidelines-on-triggers-for-resolution

http://www.eba.europa.eu/regulation-and-policy/single-rulebook/interactive-single-rulebook/-/interactive-single-rulebook/toc/2602/article-id/2728


14 MAY 2015

Guidelines on Interest Rate Risk Arising from Non-Trading Activities

- EBA

May 22, 2015



EBA published an updated version of the Committee of European Banking Supervisors (CEBS) guidelines on technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process, on October 03, 2006. The guidance provided in these updated guidelines applies to the interest rate risk in banking book (IRRBB), one of the Pillar 2 risks specified in the CRD IV.

The guidelines are structured into two major sections:

» The first section is an updated version of the original CEBS text and provides enhanced high-level guidance on the management of IRRBB.

» The second section provides additional details for the management of IRRBB, namely some key technical aspects that should be considered and specifies the high-level guidance. It also clarifies how institutions should take these aspects into account when assessing IRRBB in their Internal Capital Adequacy Assessment Process (ICAAP).

This detailed guidance focuses thematically on five areas of interest risk assessment and control: scenarios and stress testing, measurement assumptions, methods for measuring interest rate risk, governance and identification of interest rate risk, and calculation and allocation of capital to interest rate risk.




Link: Press Release

Keywords: CRD IV, IRRBB, Stress Testing

Public Consultation on the EU Regulation No. 648/2012 on OTC Derivatives, Central Counterparties, and Trade Repositories

- EC

May 21, 2015


The EC is mandated to conduct a review of Regulation (EU) No. 648/2012 on OTC derivatives, central counterparties, and trade repositories (EMIR) in accordance with Article 85(1).

This consultation aims to obtain feedback from stakeholders on their experiences in the implementation of EMIR to date. Feedback received as part of the consultation will provide important guidance to the Commission services in preparing their final report. The comments are due by August 13, 2015.

Link: Consultation Overview

Keywords: CCP, EMIR, Trade Repository

Call for Modification of the UCITS Directive

- ESMA

May 21, 2015


In its opinion to the EU institutions on the impact of European Market Infrastructure Regulation (EMIR) on Undertakings for Collective Investments in Transferable Securities (UCITS), ESMA proposed a modification of the UCITS Directive to take into account the clearing obligations for certain types of over-the-counter (OTC) financial derivative transactions under EMIR.

Under EMIR, certain OTC financial derivative transactions are subject to the clearing obligation. Therefore, the questions arises about:

» How the limits on counterparty risk in OTC financial derivative transactions that are centrally cleared should be calculated by UCITS

» Whether UCITS should apply the same rules to both OTC financial derivative transactions that are centrally cleared and exchange-trade derivatives (ETDs)

ESMA believes that the UCITS Directive should no longer distinguish between OTC financial derivative transactions and ETDs. Instead, the distinction should be between cleared and non-cleared OTC financial derivative transactions. For OTC financial derivative transactions that are not centrally cleared, ESMA believes that there is no need to modify the UCITS Directive and the current counterparty risk limits of Article 52 of the UCITS Directive should continue to apply.

Link: Press Release

Keywords: EMIR, ETD, UCITS

http://www.eba.europa.eu/-/eba-updates-guidelines-on-interest-rate-risk-arising-from-non-trading-activities

http://ec.europa.eu/finance/consultations/2015/emir-revision/index_en.htm

http://www.esma.europa.eu/news/Press-Release-ESMA-calls-modification-UCITS-Directive?t=326&o=home


15 MAY 2015

Upcoming Initiatives for the Regulation of Retail Payments

- EBA

May 21, 2015


The EBA announced that it is getting ready to develop requirements that will harmonize regulatory and supervisory practices to ensure secure, easy, and efficient payment services throughout the EU.

The EBA will do so by fulfilling mandates under the upcoming revised Payments Services Directive (PSD2) and the Interchange Fee Regulation (IFR). It also issued final guidelines for the security of internet payments; the guidelines will be applicable from August 01, 2015 and will apply until the PSD2 requirements come into force in 2018 19.

Links: Press Release, Guidelines for Security of Internet Payments

Keywords: IFR, PSD2, Retail Payments

Issuance of Guidance on Implementation of Resolution Tools

- EBA

May 20, 2015


The EBA published three sets of final guidelines for facilitating the implementation of resolution tools in the banking sector throughout the EU:

» sale of business tool and the guidelines asset separation tool describe how constraints to resolution tools, resulting from competition and transparency requirements, should be interpreted

» The guidelines on necessary services defi critical services, under resolution

These guidelines, which stem from the EU BRRD, foster convergence on resolution matters by giving detailed guidance to EU Resolution Authorities on the circumstances they should assess when taking the resolution decisions. The guidelines will apply from August 01, 2015.

Link: Press Release

Keywords: BRRD, Resolution Tools

Updated List of Closely Correlated Currencies

- EBA

May 13, 2015


EBA updated its list of closely correlated currencies. Currencies are considered to be closely correlated if they meet the criteria set out in Article 354 of the CRR.

This list was earlier published in December 2013 as part of the implementing technical standards (ITS) that were drafted for the purposes of calculating the capital requirements for foreign-exchange risk according to the standardized rules. The list was updated according to the procedure and methodology laid down in the ITS.

Links: News Release, Updated List, Draft ITS (December 2013)

Keywords: Correlated Currencies, CRR, ITS

Consultation on the Valuation of Derivatives in Resolution

- EBA

May 13, 2015


Regulatory Status: Proposed Rule

EBA launched a public consultation on its draft regulatory technical standards (RTS) defining the valuation of derivative liabilities for the purpose of bail-in in resolution. These standards have been developed within the framework of the BRRD, which sets procedures for the recovery and resolution of credit institutions across the EU.

The draft RTS provide EU resolution authorities with a methodology for the valuation of derivative liabilities of credit institutions placed under resolution and ensure that the discipline brought in by the new bail-in tool can be effectively extended to these liabilities too.

Comments Due Date: August 13, 2015

Effective Date: N/A


Link: News Release

Keywords: Bail-in, BRRD, Valuation Derivatives

Updated Q&A on the Application of Alternative Investment Fund Managers Directive

- ESMA

May 12, 2015

Type of Information: Q&A

ESMA published updated Q&A on the application of the Alternative Investment Fund Managers Directive (AIFMD). The update includes new questions and answers on reporting and calculation of leverage.

The content of this document is aimed at competent authorities under AIFMD to ensure that their actions are converging along the lines of the responses adopted by ESMA. The answers are also intended to help Alternative Investment Fund Managers by providing clarity regarding the content of the AIFMD rules, rather than creating an extra layer of requirements. The date each question was last amended is included after each question for ease of reference.

Link: News Release, Q&A

Keywords: AIFMD, Leverage, Regulatory Reporting

http://www.eba.europa.eu/-/eba-outlines-its-upcoming-initiatives-for-the-regulation-of-retail-payments

http://www.eba.europa.eu/-/eba-issues-guidelines-to-strengthen-requirements-for-the-security-of-internet-payments-across-the-eu

http://www.eba.europa.eu/-/eba-issues-guidance-on-the-implementation-of-resolution-tools

http://www.eba.europa.eu/-/eba-updates-list-of-closely-correlated-currencies

http://www.eba.europa.eu/documents/10180/529426/ITS+Annex+1+updated.pdf

http://www.eba.europa.eu/regulation-and-policy/market-risk/draft-implementing-technical-standards-its-on-closely-correlated-currencies

http://www.eba.europa.eu/-/eba-consults-on-the-valuation-of-derivatives-in-resolution

http://www.esma.europa.eu/news/ESMA-publishes-updates-QAs-AIFMD-application-0?t=326&o=home%20

http://www.esma.europa.eu/system/files/2015-850_qa_aifmd_may_2015_update.pdf


16 MAY 2015

Report on Recommendations for Securitization

- ESAs

May 12, 2015


The Joint Committee of the three European Supervisory Authorities (ESAs) published a report detailing its findings and recommendations regarding the disclosure requirements and obligations relating to due diligence, supervisory reporting, and retention rules in existing EU law on Structured Finance Instruments (SFIs).

In this report, the Joint Committee is making a series of recommendations, which should be considered in light of further work on the transparency requirements of SFIs and the EC public consultation on securitization. The report states that these recommendations should not be introduced in isolation and should take into account the already existing requirements for disclosure, due diligence, and reporting for comparable instruments. The main recommendations of the report are as follows:

» Due diligence requirements should be harmonized within the EU

» Standardized investor reports should reflect the dynamics of SFIs and be stored in a centralized public space

» All type of investors should be empowered to effectively conduct their own stress tests

» A harmonized due diligence and disclosure framework should be complemented with a comprehensive regime for supervision and enforcement

Links: Press Release, EC Consultation on Securitization

Keywords: Disclosures, Securitization, SFI, Systemic Risk, Stress Testing

Consultation on Technical Standards on Specialized Lending Exposures

- EBA

May 12, 2015



The EBA launched a consultation on regulatory technical standards (RTS) on specialized lending exposures.

The proposed RTS define four classes of specialized lending: project finance, real estate, object finance, and commodities finance. For each of these four classes, the draft RTS specify a list of factors that institutions shall take into account and propose two options on how these factors should be combined to determine the risk weight assigned to the specialized lending exposure. The approach followed in these RTS is in line with the Basel framework, which uses the so-called supervisory slotting criteria approach, under which specialized lending exposures are classified into categories depending on the underlying credit risk.

Specialized lending is a type of exposure toward an entity specifically created to finance or operate physical assets, where the primary source of income and repayment of the obligation lies directly with the assets being financed.


Effective Date: N/A


Link: News Release

Keywords: RTS, Specialized Lending, Supervisory Slotting Criteria

http://www.esma.europa.eu/news/Press-Release-Joint-Committee-ESAs-publishes-its-recommendations-securitisation?t=326&o=home

http://ec.europa.eu/finance/consultations/2015/securitisation/index_en.htm

http://www.eba.europa.eu/-/eba-consults-on-technical-standards-on-specialised-lending-exposures


17 MAY 2015

Reinforcing Financial Stability in the Euro Area, A Speech by Vítor Constâncio of ECB

- ECB

May 11, 2015


Mr. Vítor Constâncio, Vice-President of the ECB, spoke about reinforcing financial stability in the euro area, at the Official Monetary and Financial Institutions Forum City Lecture in London.

He believes the growing size and the associated risks arising from non-bank entities and activities indicate that efforts are needed to strengthen the supervisory framework for this sector. Entities and activities outside the regulatory perimeter will require enhanced oversight and supervision. The relevant needs for achieving this are as follows:

» A monitoring framework beyond banking. More information is needed, along with the development of a monitoring framework for the rest of the financial system. Gaps remain with respect to synthetic leverage created by derivatives as well as securities lending and financing transactions in the shadow banking sector. Targeted data collection projects have been initiated to fill these gaps, including derivatives reporting under EMIR and further reporting requirements of securities transactions under MiFID. Another angle to address risks in the non-bank sector is to shed further light on and monitor certain activities that give rise to stability concerns, notably in the derivatives, repo, and securities financing markets. Risks in these markets may also be created by entities domiciled in jurisdictions outside the euro area, which may otherwise escape the monitoring perimeter.

» Creation and development of macro-prudential tools in non-bank sector. Europe has a successful investment fund regulation, said Mr. Constâncio. However, this regulation is largely geared toward protecting investors, instead of containing risks for financial stability. Some of the instruments available to managers of investment funds must be turned into macro-prudential tools specifically, additional liquidity requirements, guided stress tests, minimum and time-varying load, and redemption fees. Well-defined limits to leverage, especially synthetic leverage built-up with derivatives, should also be introduced. In general, it is necessary to intensify the oversight of systemically important non-bank institutions, as is the case in the U.S. work on developing a common methodology to identify systemically significant non-bank and non-insurers (NBNI) is the first step in this direction. Addressing systemic risks in the asset management industry is another area in which the FSB is working.

» Strengthening of regulatory and institutional base in Europe. A strengthened regulatory and institutional base in Europe will ensure the efficient application of macro-prudential measures. The legal and institutional base would need to be changed to implement the policies required to address the risks from non-banks and an enhanced role for ESMA will have to be considered. He also highlighted the need to establish a legal base to bring systemically important non-banks within the perimeter of enhanced supervision in Europe. In the U.S., non-bank SIFIs (designated by the U.S. FSOC) have been brought under

enhanced prudential supervision, while non-bank SIFI designation is being evaluated for some large asset managers. It is important for competent authorities in Europe to be equipped with similar powers, believes the ECB Vice President.

Links: Media Release: ECB, Speech: BIS

Keywords: NBNI, Shadow Banking, Systemic Risk, Stress Testing

Final Guidelines on Triggers for Use of Early Intervention Measures

- EBA

May 08, 2015



The EBA published its final guidelines on the triggers for use of early intervention measures for recovery and resolution of banks.

The triggers are largely based on the outcomes of the SREP, particularly, on the scores resulting from the assessment conducted by the competent authorities in accordance with the EBA guidelines on common procedures and methodologies for the SREP. The guidelines:

» Clarify the conditions for application of early intervention measures provided for in the BRRD

» Provide competent authorities with a set of triggers that should prompt the decision on the application of early intervention measures

» Recognize that early intervention measures can also be triggered on the basis of other circumstances

These circumstances might not be immediately factored into the outcomes of the SREP assessment and may include significant events or material deterioration or anomalies in the key indicators monitored by competent authorities, as part of the SREP. However, the guidelines do not establish any quantitative thresholds for indicators that could be perceived as new capital or liquidity requirements.




Link: News Release

Keywords: BRRD, Early Intervention Measures, SREP

https://www.ecb.europa.eu/press/key/date/2015/html/sp150508.en.html

http://www.bis.org/review/r150511d.pdf

http://www.eba.europa.eu/-/eba-publishes-its-final-guidelines-on-triggers-for-the-use-of-early-intervention-measures


18 MAY 2015

Updates to DPM and XBRL Taxonomy for Remittance of Supervisory Reporting of Funding Plans and Supervisory Benchmarking

- EBA

May 08, 2015



The EBA published an update to the XBRL taxonomy to be used by competent authorities for the remittance of data under the EBA ITS on supervisory reporting. The updated taxonomy incorporates corrections to the funding plans and supervisory benchmarking reporting structures and specifies how separate variants of the reports shall be used for the remittance of individual and consolidated data.

Other published documents are as follows:

» Description of the architecture of the XBRL taxonomy

» The data point model (DPM), of which the taxonomy is a standardized technical implementation, including both a database and document representations, along with a description of the formal modeling approach on which the DPM is based

» Additional guidance for the COREP reporting of own funds modules under 2.3/2.3.1

The remittance of reports for funding plans and supervisory benchmarking is to use the new taxonomy set (2.3.1), which is related to the March 2015 framework release. This is a slight incremental modification of the previously published 2.3 taxonomy, affecting only the funding plans and supervisory benchmarking reports. Therefore, the remittance of COREP, including additional liquidity monitoring metrics, FINREP, and asset encumbrance for reference dates of June 30, 2015 onward will continue using the report structures as defined in the 2.3 taxonomy (which are also included in this 2.3.1 package).


Effective Date: June 30, 2015


Link: News Release

Keywords: DPM, Regulatory Reporting, XBRL

Revitalizing Securitization for Small and Medium-Sized Enterprises in Europe

- IMF

May 07, 2015


The IMF published its report on the revitalization of securitization for the small and medium-size enterprises (SMEs) in Europe.

The report highlights that SMEs account for a disproportionate share of output and employment in Europe but are still highly dependent on bank finance, which dried up or became prohibitively expensive during the crisis. Broader access to alternative, long-term finance through securitization would limit their exposure to banking sector difficulties and thus help revive credit.

This report also examines various impediments to the development of a well-functioning and liquid securitization market in Europe and proposes a comprehensive multi-faceted strategy to support its development through regulatory reforms and infrastructure development, along with targeted and time-bound official sector support. This would require:

» Greater regulatory differentiation between securities of different quality and underlying asset structures

» Harmonized national enforcement and insolvency frameworks and standardized reporting requirements

» Greater capacity of EU authorities to support new issuance

These measures would be underpinned by a pan-European definition of high-quality securitization (HQS) comprising simple, transparent, and efficient asset structures receiving preferential regulatory treatment.

Link: Report

Keywords: HQS, Securitization, SME

http://www.eba.europa.eu/-/eba-publishes-updated-dpm-and-xbrl-taxonomy-for-remittance-of-supervisory-reporting-of-funding-plans-and-supervisory-benchmarking

http://www.imf.org/external/pubs/ft/sdn/2015/sdn1507.pdf


19 MAY 2015

Amendments to Regulation on Statistics on Holdings of Securities

- ECB

May 07, 2015



The ECB issued a final rule (Regulation 2015/730) amending Regulation (EU) No. 1011/2012 with regard to statistics on holdings of securities (ECB/2012/24; ECB/2015/18).

The main amendments are the result of the European System of National and Regional Accounts requiring the assets and liabilities of institutional units to be reported in the country of residence. To minimize the reporting burden, if national central banks derive data required to be reported by insurance corporations from data collected under Directive 2009/138/EC, the holdings of securities of branches of insurance corporations whose head offices are resident in the European Economic Area may be aggregated with those of the head offices. If this is the case, limited information on branches of insurance corporations should be collected for the purpose of monitoring their size.


Effective Date: May 27, 2015


Link: Final Rule

Keywords: Regulatory Reporting, Securities, Statistics

Consultation on Draft Technical Standards on the Mapping of Credit Assessments for Securitization Positions

- EBA

May 07, 2015



The EBA launched a consultation on draft ITS on the mapping of External Credit Assessment Institutions' (ECAIs) credit assessments for securitization positions.

These draft ITS mapping between credit ratings and credit-quality steps that shall determine the allocation of appropriate risk-weights to credit ratings issued by ECAIs on securitizations, where the standardized approach or the IRB approach for securitizations are used.

In the short term, these draft ITS propose to maintain the current mapping in place for all ECAIs. The proposed mapping is motivated by the outcome of an impact analysis as well as by qualitative considerations. The EBA is also considering development of a securitization-specific systematic mapping methodology fully based on securitization ratings' historical performance, as it is the case for the ECAI mapping on non-securitization exposures under the standardized approach. However, the EBA deems that some caution is needed for the time being due to a number of factors, including the representativeness of the data used and the ongoing review of the regulatory framework for capital requirements on securitizations at both the international and EU levels.

Furthermore, these draft ITS include a proposal that the overall approach to the mapping of securitization ratings be reviewed by 2018 and that the performance of issued securitization ratings be constantly monitored to assess, at any time, the appropriateness of a specific mapping table.


Effective Date: N/A


Link: Press Release

Keywords: Credit Assessment, CRR


http://www.eba.europa.eu/-/eba-consults-on-draft-technical-standards-on-the-mapping-of-ecais-credit-assessments-for-securitisation-positions


20 MAY 2015

Issuance of Final Guidance on Recovery Indicators

- EBA

May 06, 2015



EBA published its final guidelines on indicators for the recovery and resolution plans (RRPs) of credit institutions and investment firms across the EU. These provide the minimum list of qualitative and quantitative indicators that institutions should include in their recovery plans and will function as triggers for the recovery plans, as prescrib BRRD.

The minimum list that institutions should include in their plans comprises both qualitative and quantitative indicators grouped into different categories such as capital, liquidity, profitability, and asset quality. Where relevant to the characteristics of the specific institutions, macroeconomic and market-based indicators are also included. These indicators will serve to identify the points at which appropriate recovery measures should be considered.

On top of the minimum list of indicators, the EBA guidelines provide a list of additional indicators institutions may want to use. The task of assessing recovery plans and their recovery indicators will be for the supervisory authorities, as they have to ensure that credit institutions have put in place appropriate arrangements for the regular monitoring of the indicators.

These guidelines are addressed to competent authorities. Following the publication of the English version, the EBA will make available, in due course, the translations of the guidelines in all EU languages. Within two months from the publication of the translated guidelines, competent authorities shall confirm to the EBA their compliance status, which will be disclosed on the EBA website.


Effective Date: July 31, 2015


Link: Press Release

Keywords: BRRD, Recovery Indicators, RRP

Report on Risks and Vulnerabilities in the EU Financial System

- ESAs

May 05, 2015


The Joint Committee of the ESAs published its fifth report on risks and vulnerabilities in the EU financial system.

The report highlights that, in the past six months, risks affecting the EU financial system have further intensified. The EU s economic performance improved slightly in early 2015, although the financial sector, in general, continues to be affected by a combination of factors such as low investment demand, economic uncertainty in the Eurozone and its neighboring countries, a global economic slowdown, and a low-interest-rate environment.

Additional supervisory measures are recommended. Bank regulators should continue to assess business model viability and promote consistency in the risk-weighting of asset-liability and risk management deserve further attention in the transition to Solvency II. Restructuring in financial entities business models should be monitored. Legislative measures, such as for European Long Term Investment, Venture Capital, and Social Entrepreneurship Funds, are fostering new forms of market-based funding. However, further promotion of sound and innovative business models could assuming adequate risk regulation and supervision deliver additional stimulus. With regard to the operational risks, the report recommends inclusion of misconduct costs in future stress tests and indicates that further progress toward benchmark reforms would be desirable.

Link: News Release

Keywords: Risk and Vulnerability Report, Systemic Risk, Stress Testing

http://www.eba.europa.eu/-/eba-issues-final-guidance-on-recovery-indicators

http://www.eba.europa.eu/-/esas-main-risks-to-eu-financial-market-stability-have-intensified


21 MAY 2015

Germany

Key Developments

What Six months of European Banking Supervision Means for Less Significant Institutions? A Speech by Dr. Andreas Dombret of Bundesbank

- Bundesbank

May 26, 2015


Dr. Andreas Dombret of the Deutsche Bundesbank spoke in Frankfurt about a new age of banking supervision that began a little over six months ago.

On November 04, 2014, the SSM the first pillar of the banking union was established for banks in Europe. On that day, the ECB assumed responsibility for directly supervising the 123 largest banks in the euro area. Therefore, it now supervises over 85% of the euro-area banking sector, measured by total assets.

However, the situation is different if we look not at total assets but at the number of institutions. In terms of the number of institutions, only around 3½% of the European banking sector is being supervised directly by the ECB. National authorities continue to supervise all other institutions. This means some 3,400 banks in total, including 1,600 German banks. Not banks. Their primary points of contact will still be the Bundesbank and BaFin. Off-site supervision will continue to be ffices.

Direct communication with the ECB will be restricted to exceptional cases; for instance, cases relating to issuing or revoking banking licenses, or examining the acquisition of qualifying participating interests. Apart from all that, the ECB will receive information on every less significant institution (LSI) in the annual reports produced by national supervisors. This approach upholds the principle of subsidiarity, which I believe to be the sensible and correct approach. For instance, most smaller banks apply regional, relatively low-risk business models that do not necessarily require European supervision. Nonetheless, smaller banks, too, are affected by the SSM. In future, these institutions are also to be supervised under harmonized European standards.

In the context of risks, size matters. If a small bank fails, the implications for the financial system are much less severe than if a bigger bank fails. guarantee by the state that they will be rescued. Supervisors should address these differences in their requirements. The principle of proportionality needs to be upheld. However, smaller banks should not assume that the direct impact of the SSM on them will remain contained. A change in the structure of supervision will also have indirect effects across the banking landscape. This indicates the need for greater harmonization across all areas of the banking sector and calls for the review of supervisory options and national discretions, said Dr. Dombret.

The ECB and the national supervisors have just begun their review of national options and discretions. European supervisory legislation still offers some 150 options from which supervisors can choose. At the national level, these options are being exercised in several ways. Sometimes, it does not make sense to interpret rules against the background of national special features. Therefore, these options must be carefully reviewed and the options reflecting the peculiarities of various banks and markets should be kept while all others should be allowed to expire.

In addition, further harmonization is needed in the area of accounting standards also. In mid-March, the ECB adopted a new regulation on prudential reporting requirements for financial data. This regulation applies to all institutions not covered by the already harmonized reporting requirements for IFRS institutions. Therefore, all institutions that prepare their financial statements under German Generally Accepted Accounting Principles (GAAP) must submit their prudential returns on the basis of the ECB regulation by June 2017. The ECB must generally also accept national accounting standards within the context of the SSM. Against this background, all will be done to ensure that German accounting standards continue to apply barring any changes to the relevant legislation.

Links: Speech, Regulation on Prudential Reporting Requirements

Keywords: LSI, Regulatory Reporting, SSM

Bundesbank AnaCredit Webpage

- Bundesbank

May 20, 2015


In late summer 2015, the ECB is expected to issue the Analytical Credit Dataset (AnaCredit) regulation announced in the ECB Decision 2014/6.

The Bundesbank set up a dedicated webpage containing the latest information about AnaCredit (in German only). The webpage is intended to facilitate learning about the impact of this new regulation and to engage in a dialog with the German banking sector regarding design and implementation issues.

Links: AnaCredit Webpage (to original language material), ECB Decision 2014/6

Keywords: AnaCredit, Statistics

http://www.bis.org/review/r150526b.pdf


http://www.bundesbank.de/Navigation/DE/Service/Meldewesen/Bankenstatistik/AnaCredit/AnaCredit.html

https://www.ecb.europa.eu/ecb/legal/pdf/oj_jol_2014_104_r_0008_en_txt.pdf


22 MAY 2015

Luxembourg

Key Developments

Updated Reporting Requirements for Credit Institutions

- CSSF

May 06, 2015


CSSF issued an update (Circular 115/613) on reporting obligations applicable to credit institutions. The appendix contains changes to the CSSF circular 14/593 in track changes.

The circular is available in French language only.

Link (to original language material): Statement

Keywords: CRR, Regulatory Reporting

Netherlands

Key Developments

CRD IV: Interim Profits

- DNB

May 19, 2015


According to the CRR, an institution may request prior permission to include interim or year-end profits in CET1 capital by submitting a request to that effect to DNB. The institution must submit this request no later than 28 calendar days after the reporting reference date. DNB will then decide within 35 calendar days after the reporting reference date whether interim profits are permitted to be included in CET1.

As a general rule, interim or year-end profits are not included in the CET1 capital. However, to be allowed to include such interim profits, an institution can request prior permission from the competent authority. In line with article CRR.26.2, institutions are only allowed to include interim or year-end profits in CET1 capital, if the following three conditions are met:

» Those interim or year-end profits are verified (at least reviewed, hence a comfort letter is not allowed) by the external auditor (CRR.26.2.a)

» Any foreseeable charges or dividends are deducted from those interim or year-end profits (CRR.26.2.b)

» DNB granted prior permission to include interim or year-end profits (CRR.26.2.last sub-paragraph)

Links: Factsheet, CRR Article 26

Keywords: CET1, CRR, Interim Profit

http://www.cssf.lu/fileadmin/files/Lois_reglements/Circulaires/Hors_blanchiment_terrorisme/cssf15_613.pdf

http://www.toezicht.dnb.nl/2/50-233310.jsp

http://www.eba.europa.eu/regulation-and-policy/single-rulebook/interactive-single-rulebook/-/interactive-single-rulebook/toc/504/article-id/556


23 MAY 2015

Switzerland

Key Developments

Staff Report for the 2015 Article IV Consultation

- IMF

May 27, 2015


The IMF published its staff report in the context of the 2015 Article IV consultation with Switzerland.

The report highlights that the financial sector reform agenda should be completed. The Swiss authorities have made important progress in this regard and further steps are planned. Specific priorities, as laid out in the last

tios of the two large

external auditors, overhauling deposit insurance, and containing housing- and mortgage-related risks.

Sw G-SIBs have continued their strategic adjustments and their balance sheets appear strong by many metrics. Both banks have met the 10% minimum CET1 capital ratio required under the Swiss Too-Big-To-Fail legislation, well in advance of the 2019 deadline. These banks are in line with or comfortably above the average ratio for other G-SIBs. Both banks are above the LCR minimum of 100%, effective in 2015 in Switzerland, and had, based on a not-yet-final methodology, estimated NSFR above 100% as of spring 2014. The NSFR is not yet part of the Swiss regulation but is planned to be introduced in 2016.

However, there are still important areas for further improvement, as

» the current regulatory minima. However, their ratios remain low by international standards.

» The authorities should also vigilantly challenge risk-weights from IRB disclosure requirements regarding capital-weights.

» Continued action is needed to improve the resolvability of the G-SIBs through strengthened cross-border coordination and further restructuring.

» The authorities must also continue to proactively address operational risks by intense supervision of risk- management practices and provisioning

Link: Staff Report

Keywords: Article IV Consultation, FSAP, G-SIB

United Kingdom

Key Developments

The Implementation of Ring-Fencing: Legal Structure, Governance and the Continuity of Services and Facilities

- BOE

May 27, 2015


The PRA issued the policy statement to implement the ring-fencing of core UK financial services and activities. The policy statement provides feedback on the responses received to Consultation Paper 19/14 published in October 2014 and the amendments to the draft rules and supervisory statements included in this consultation. The policy statement covers three areas:

» Legal structure arrangements of banking groups subject to ring-fencing

» Governance arrangements of ring-fenced bodies

» Arrangements to ensure continuity of services and facilities to ring-fenced bodies

The government stated its intention for ring-fencing to take effect from January 01, 2019. The PRA intends to undertake a further consultation during 2015 and to publish final rules and supervisory statements covering the policy proposed in its two consultations during 2016 H1, to provide firms with sufficient time for implementation.

Links: News Update, Policy Statement 10/15

Keywords: Financial Reform, Ring Fencing

http://www.imf.org/external/pubs/ft/scr/2015/cr15132.pdf

http://www.bankofengland.co.uk/pra/Pages/publications/ps/2015/ps1015.aspx

http://www.bankofengland.co.uk/pra/Pages/supervision/structuralreform/default.aspx


24 MAY 2015

Additional Guidance on Stress Testing

- BOE

May 26, 2015


The BOE published the key elements of the 2015 stress test and accompanying guidance on March 30, 2015. Additional guidance on the traded risk, structured finance scenario, and methodology were published on May 26 2015. The results of the 2015 stress test will be published in Q4 2015.

The bank continues to build its own stress-testing capabilities and expects banks and building societies to do the same. More broadly, the design of the overall stress-testing framework will evolve over time. The BOE intends to publish an update of its medium-term vision for stress testing during 2015.

Link: Stress Testing Overview

Keywords: Stress Testing, Traded Risk

Consultation on Power to Direct Institutions to Address Impediments to Resolvability

- BOE

May 22, 2015



The BOE launched a consultation on its proposed policy for exercising its power to direct institutions to address impediments to resolvability under section 3A of the Banking Act 2009, as amended following transposition of the BRRD (2014/59/EU). The proposed Statement of Policy explains the general approach to and process for using the power of direction, describes the context of this new power, and includes a non-exhaustive list of examples of how the power could be applied.

The BOE prepares resolution plans for all institutions within scope of the special resolution regime. Resolution planning aims to develop a set of actions that would be taken by the BOE and relevant stakeholders (including other UK and overseas authorities) in the event that an institution fails; it includes:

» Gathering information to facilitate resolution

» Conducting resolvability assessments

» Developing resolution strategies

» Enhancing resolvability

Resolvability assessments and the actions flowing from them are therefore a key part of resolution planning on business as usual basis, before an institution actually encounters distress. BOE will work with institutions to

ensure that any impediments that are identified through resolvability assessments are addressed. Where necessary, this could involve the use of the BO


Effective Date: August 22, 2015


Link: Overview of Consultation

Keywords: Resolvability Assessments, RRP

Supervising International Banks: The Branch Return

- PRA

April 30, 2015



This policy statement (PS8/15) is addressed to all PRA-supervised firms operating in the UK, which are not UK-headquartered firms, and to firms looking to operate in the UK in the future. It follows up on the proposal to introduce a twice-yearly Branch Return, which would provide information about the UK activities of these firms. It provides an update on the development of the Branch Return and a finalized rule.

The firm must provide the PRA with information in accordance with the Branch Return Form. The information must be provided as at June 30 and December 31 each year and, by electronic means, within 30 days of the date to which the information relates.




Links: PS8/15, Branch Return Form

Keywords: Branch Return, PS8/15

http://www.bankofengland.co.uk/financialstability/Pages/fpc/stresstest.aspx

http://www.bankofengland.co.uk/financialstability/Pages/role/risk_reduction/srr/cp/may15.aspx

http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps815.pdf

http://www.bankofengland.co.uk/pra/documents/crdiv/branchreturntemplate.xls


25 MAY 2015

The PRA Rulebook: Part 3

- PRA

April 30, 2015



This consultation paper (CP17/15) sets out proposals to redraft certain modules of the PRA Handbook. It is the third in a planned series of consultations aimed at reshaping the handbook material inherited from the FSA to create a rulebook, containing only PRA rules. The PRA Rulebook will appear on a new online website in 2015 and, until then, will appear on the existing Handbook site in the PDF form.

The proposals in this paper are relevant to all PRA firms. The paper seeks views on the following key points:

» Replacing the rules in chapter 13 (Exercise of passport rights by UK firms) of the Supervision manual (SUP) of the Handbook with a

» Replacing the rules set out in SUP 16.12 (Integrated Regulatory Reporting) and SUP 16.16 (Prudent Valuation Reporting) with a new Rulebook Part Regulatory Reporting and the guidance in the Annexes to SUP 16 wi Guidelines for completing regulatory reports

» Replacing the rules and policy in chapters 4 to 9 of SYSC (as they apply to UK branches of banks, building societies and investment firms incorporated outside the Internal governance of third country branches and one supervisory statement Internal governance of third country branches

» Replacing the rules and guidance in chapter 20 (Reverse stress testing) of SYSC including chapter 15 in the Internal capital adequacy assessment part and updating t The Internal capital adequacy assessment process and the supervisory review and evaluation process that was consulted on in CP1/15

Comments Due Date: June 30, 2015

Effective Date: N/A


Link: Summary of Consultation

Keywords: CP17/15, PRA Rulebook

Middle East & Africa

Bahrain

Key Developments

Proposed Amendments to the Operational Risk Management Module for Banks

- CBB

May 20, 2015



CBB is proposing some amendments to the Operational Risk Management Module, Volumes 1 and 2. The bank is specifically proposing the amendments to "Outsourcing" Chapter OM-3, by introducing rules related to outsourcing of services containing customers' information.

All retail banks are required to fill the attached "List of Outsourced Services Containing Customer Information" table as of April 30, 2015.


Effective Date: N/A


Links: Notification, Proposed Operational Risk Management Module, Proposed Customer Information Template

Keywords: Basel III, Operational Risk, Outsourcing

http://www.bankofengland.co.uk/pra/Pages/publications/cp/2015/cp1715.aspx

http://www.cbb.gov.bh/assets/Consultations/Consultationletter_AmendmentstoModuleOM_RetailBanks_20May2015.pdf

http://www.cbb.gov.bh/assets/Consultations/Vol%201_OM_Consultation_ATMOutsourcing_May2015.pdf

http://www.cbb.gov.bh/assets/Consultations/Outsourcing%20template_Consultation_May2015.docx


26 MAY 2015

Amendment to Public Disclosure Module

- CBB

May 20, 2015



The CBB issued the final version of Public Disclosure Module and Appendices after taking into consideration the feedback received from banks. Earlier, on December 11, 2014, CBB had issued a consultation on this module in, respect of the Basel III composition of capital disclosure requirements.

All Bahraini conventional bank licensees must comply with these additional disclosures effective from June 30, 2015 results. The amendments to this module will be incorporated into Rulebook Volume 1 in the July 2015 Rulebook update.




Links: Notification, Feedback to Consultation, Final Public Disclosure Module, Appendices to Public Disclosure Module

Keywords: Basel III, Disclosures, Regulatory Capital

Proposed Amendments to the High-Level Controls Module for All Islamic Bank Licensees

- CBB

May 06, 2015



The CBB is issuing a consultation document to align High-Level Controls Module of Volume 2 with the following international standards:

» Principles for enhancing corporate governance issued by the BCBS in October 2010

» Guiding principles on corporate governance for institutions offering only Islamic financial services issued by the IFSB in December 2006

» Compliance function in banks issued by the BCBS in April 2005

The CBB requests all Islamic bank licensees to pro nil comments on this proposed amendment. Comments should be confined to the new highlighted text in the module. This consultation does not concern the existing rulebook text.


Effective Date: N/A


Links: Cover Letter to Module, Revised Module

Keywords: Governance, Islamic Banking

Morocco

Key Developments

Selected Issues Paper for the

- IMF

May 08, 2015


The IMF published its selected issues paper on Morocco. This paper presents an overview of the cross-border expansion of Moroccan banks in Sub-Saharan Africa, discusses policies to minimize possible negative spillovers, and evaluates ways to address the main supervisory challenges.

Over the past decade, the three largest Moroccan banks Attijariwafa, Banque Marocaine du Commerce Extérieur, and Banque Centrale Populaire expanded their operations internationally. At the end of 2013, these banks were present in 10 European and 22 African countries, including member countries of the West African Economic and Monetary Union and the Central African Economic and Monetary Union, Tunisia, Mauritania, and some Anglophone African countries. These banks now have a total of 40 subsidiaries and 14 branches.

This expansion in Sub-Saharan Africa increases supervisory challenges. Bank-Al-Maghrib (BAM), the central bank of the Kingdom of Morocco, implements high supervisory standards, (for example, IFRS accounting and Basel II/III standards, consolidated supervision, appropriate NPLs reporting benchmarks, threshold limiting international exposure to about 25% of the total assets of the banking group). However, compliance with high international supervisory standards varies widely among African host countries and is generally lower than in the rest of the world. These differences in standards pose major challenges with respect to consolidated supervision, differences in accounting and data standards, and home-host coordination, among other issues.

Link: Report

Keywords: Cross Border Oversight, Pan African Banks, Sub-Saharan Africa

http://www.cbb.gov.bh/assets/Consultations/Coverletter_AmendmentPDModule_20May2015.pdf

http://www.cbb.gov.bh/assets/Consultations/FeedbackStatement_B3_PD_Vol1_final_May2015.pdf

http://www.cbb.gov.bh/assets/Consultations/Vol%201_PD_May%202015.pdf

http://www.cbb.gov.bh/assets/Consultations/Vol%201_%20PD%20Appendices%201-4_May%202015.pdf

http://www.cbb.gov.bh/assets/Consultations/Consultation_cover_letter_Module_HC_Volume_2.pdf

http://www.cbb.gov.bh/assets/Consultations/Consultation_Module%20HC_Vol_2.pdf



27 MAY 2015

Sub-Saharan Africa

Key Developments

Opportunities and Challenges for Cross-Border Oversight

- IMF

May 01, 2015


This IMF paper takes stock of the development of pan-African banking groups; identifies regulatory, supervisory, and resolution gaps; and suggests how the IMF can help the authorities address the related challenges.

Pan African banks are expanding rapidly across the continent, creating cross-border networks and establishing a systemic presence in the banking sectors of many countries in Sub-Saharan Africa. The report highlights that these banking groups are:

» Fostering financial development and economic integration

» Stimulating competition and efficiency

» Introducing product innovation and modern management and information systems

» Bringing higher skills and expertise to host countries

The rise of Pan African banks presents new challenges for both regulators and supervisors. As networks expand, new channels for transmission of macro-financial risks and spillovers across home and host countries may emerge. To ensure that the gains from cross-border banking are sustained and to avoid raising financial stability risks, enhanced cross-border cooperation on regulatory and supervisory oversight is needed, particularly to support effective supervision on a consolidated basis. The report also summarizes financial sector supervisory standards in Sub-Saharan Africa and Morocco.

Link: Report

Keywords: Cross Border Oversight, Pan African Banks

Americas

United States of America

Key Developments

Proposal to Approve the Extension for Three Years, Without Revision, of Report on Basel II Interagency Pillar 2 Supervisory Guidance

- FED

May 29, 2015



The proposed Pillar 2 Guidance (OMB control number: 7100 0320; FR 4199) sets the expectation that respondents maintain certain documentation as described in paragraphs 37, 41, 43, and 46 of this portion of the guidance.

The reporting frequency is annual, with the estimated number of respondents being 13. The reporters include state member banks and bank holding companies (BHCs).

Comments Due Date: July 27, 2015

Effective Date: N/A


Links: Proposed Rule, Pillar 2 Supervisory Guidance: Final Rule, Supporting Statement: Basel II Interagency Supervisory Guidance

Keywords: Basel II, ICAAP, Pillar 2

http://www.imf.org/external/pubs/ft/dp/2015/afr1503.pdf

http://www.gpo.gov/fdsys/pkg/FR-2015-05-28/pdf/2015-12738.pdf

http://www.gpo.gov/fdsys/pkg/FR-2008-07-31/pdf/E8-17555.pdf

http://www.federalreserve.gov/reportforms/formsreview/FR4199_20070808_omb.pdf


28 MAY 2015

Liquidity Coverage Ratio in Regulation WW: Treatment of U.S. Municipal Securities as High-Quality Liquid Assets

- FED

May 28, 2015



The FED is inviting public comment on a proposed rule (FED 12 CFR Part 249) that would amend its LCR requirement to include certain U.S. municipal securities as high-quality liquid assets (HQLA).

The proposed rule would include as level 2B liquid assets under the LCR general obligation securities of a public sector entity that meet the same criteria as corporate debt securities that are included as level 2B liquid assets, subject to limits that are intended to address the unique structure of the U.S. municipal securities market.

The proposed rule would apply to all Board-regulated institutions that are subject to the LCR, including:

» BHCs, certain SLHCs, and state member banks that have USD 250 billion or more in total consolidated assets or USD 10 billion or more in on-balance sheet foreign exposure

» State member banks with USD 10 billion or more in total consolidated assets that are consolidated subsidiaries of BHCs described earlier

» Nonbank financial companies (NBFCs), designated by the FSOC for FED supervision, to which the FED has applied the LCR by rule or order

The proposed rule would also permit BHCs and certain SLHCs, with USD 50 billion or more in total consolidated assets, which LCR, to rely on the proposed expanded definition of HQLA.


Effective Date: N/A


Link: Proposed Rule

Keywords: Basel III, HQLA, LCR

Annual Report for 2015

- FSOC

May 19, 2015


The FSOC approved its fifth annual report, which provides a consolidated and unified view of the key challenges facing the financial system and offers a road map of the its key priorities for the upcoming year.

The report reveals that the FSOC voted to approve charters for five interagency staff committees of the Council: the Systemic Risk Committee; the Data Committee; the Financial Market Utilities Committee; the Nonbank Financial Companies Designations Committee; and the Regulation and Resolution Committee Data Quality, Collection, and Sharing.

The report also discussed progress of the global Legal Entity Identifier (LEI) project in 2014. In the U.S., more regulatory reporting forms are now requiring the use of the LEI, although critical gaps remain in the scope and quality of available data. For example, regulators and market participants lack comprehensive data on repo and securities lending markets. However, regulatory and supervisory efforts to improve visibility and transparency in various markets, such as bilateral repo, are ongoing.

Links: Press Release, Annual Report

Keywords: Annual Report, LEI

Supervisory Guidance for Implementation of the Simplified Supervisory Formula Approach for Securitization Exposures under the Advanced Approaches Risk-Based Capital Rule

- FED

May 18, 2015


The Basel Coordination Committee issued its guidance (BCC 15-1) summarizing the supervisory expectations for determining when a banking organization may use the Simplified Supervisory Formula Approach (SSFA) rather than the Supervisory Formula Approach (SFA) in the face of data limitations. The determining factors are materiality of securitization exposures with respect to a given asset class and whether a banking organization is an investing or originating bank.

be commensurate with the complexity, risk profile, trend, and size of the aggregate securitization exposures in relation to regulatory capital of the banking organization. For example, a growing portfolio of securitization exposures (backed by a given asset class) that aggregates to 3% 4% of tier 1 capital may be considered as material.

Links: Statement, Basel Coordination Committee Bulletins

Keywords: Basel III, BCC 15-1, SSFA

http://www.gpo.gov/fdsys/pkg/FR-2015-05-28/pdf/2015-12850.pdf

http://www.treasury.gov/press-center/press-releases/Pages/jl10055.aspx

http://www.treasury.gov/initiatives/fsoc/studies-reports/Pages/2015-Annual-Report.aspx

http://www.federalreserve.gov/bankinforeg/basel/files/bcc1501.pdf

http://www.federalreserve.gov/bankinforeg/basel/basel-coordination-committee-bulletins.htm


29 MAY 2015

FDIC Chairman Speaks About Progress Toward Resolution of Systemically Important Financial Institutions

- FDIC

May 12, 2015


Martin J. Gruenberg, the Chairman of FDIC, spoke about the FDIC progress in developing a framework, under the Dodd-Frank Act, for the orderly failure of a large, complex, systemically important financial institution while avoiding the taxpayer bailouts and the market breakdowns that took place during the recent financial crisis.

The Dodd-Frank Act established a framework designed to avoid the position that policymakers and taxpayers were in during the fall of 2008. Under the framework, bankruptcy is the statutory first option. Title I of the Dodd-Frank Act requires the largest bank holding companies and designated non-bank financial companies (NBFCs) These living wills must demonstrate that the firm could be resolved under bankruptcy without severe adverse consequences for the financial system or the U.S. economy.

Regarding the living will process, in August of last year, the FDIC and the FED delivered individual letters to the largest financial firms regarding their sec said the FDIC Chairman. In these letters, the agencies jointly identified common shortcomings of the plans, including the use of assumptions the agencies regarded as unrealistic or inadequately supported. The agencies directed the firms to demonstrate, in their 2015 plans, a significant progress toward addressing all the shortcomings identified in the letters.

However, as a backstop, for circumstances in which an orderly bankruptcy process might not be possible, Title II of Dodd-Frank Act provides the Orderly Liquidation Authority (OLA). This public resolution authority allows the FDIC to manage the orderly failure of the firm. The OLA provides the FDIC with several authorities not all of which are available under bankruptcy that are broadly similar to those the FDIC has to resolve banks, including the authority to:

» Establish a bridge financial company

» Stay the termination of certain financial contracts (commonly referred to as qualified financial contracts)

» Provide temporary liquidity that may not otherwise be available

» Convert debt to equity

» Coordinate with domestic and foreign authorities in advance of a resolution to better address any cross-border impediments

With regard to the qualified financial contracts, in November of last year, the ISDA issued a protocol that ends the automatic termination of covered derivative contracts in the event of a bankruptcy or public resolution of a systemic financial institution. Eighteen of the largest global financial institutions, which collectively represent a majority of the swaps market, voluntarily agreed to adhere to the protocol. The FED is expected to engage in rulemaking to codify compliance with the protocol.

The FDIC Chairman also discussed the importance of cross-border coordination between the U.S. and the UK, including their cooperation in the area of Single Resolution Mechanism.

Link: Speech

Keywords: Dodd-Frank Act, Living Will, OLA

https://www.fdic.gov/news/news/speeches/spmay1215.pdf


30 MAY 2015

Hidden Illiquidity with Multiple Central Counterparties

- OFR

May 07, 2015

Type of Information: Research

convex margin requirements, which create an incentive for a swaps dealer to split its positions across multiple central counterparties (CCPs), effectively hiding potential liquidation costs from each CCP.

The focus is on the systemic risks in markets cleared by multiple CCPs. Each CCP charges margins based on the potential impact from the default of a clearing member and subsequent liquidation of a large position. Swaps dealers can split their positions among multiple CCPs, thus effectively hiding potential liquidation costs. To compensate, each CCP needs to set higher margin requirements than it would in isolation.

In a model with two CCPs, the authors define equilibrium as a pair of margin schedules through which both CCPs allocation of trades. In the case of linear price impact, the authors show that a necessary and sufficient condition for the existence of equilibrium is that the two CCPs agree on liquidity costs. CCPs with lower perceived liquidation costs can drive competitors out of the market.

Link: Working Paper

Keywords: CCP, Clearing, Systemic Risk

Systemic Risk: The Dynamics under Central Clearing

- OFR

May 07, 2015

Type of Information: Research

Systemic Risk: The Dynamics under Central Clearing

This paper develops a model for concentration risks that clearing members pose to central counterparties. Over time, larger clearing members crowd out smaller clearing members. Systemic risk is created because high clearing member concentration results in relatively lower lending, higher cost of capital, and increasingly costly hedging. To address this risk, the paper proposes a self-funding systemic risk charge.

Link: Working Paper

Keywords: CCP, Clearing, Systemic Risk

Brazil

Key Developments

Staff Report and Selected Issues Report in Context of the 2014 Article IV Consultation

- IMF

May 12, 2015


The IMF published its staff report and selected issues report in the context of the 2014 Article IV consultation with Brazil.

The report reveals that total and tier 1 capital ratios in the country remain well above the regulatory minimum at 16.5% and 13.1%, respectively, in the third quarter of 2014; this is broadly in line with fully-loaded Basel III basis. IN addition, banks are well-provisioned (170% of nonperforming loans) and liquidity risk for the overall system is low.

Liquidity risk is assessed bas an index introduced under Basel III. It relates the volume of liquid assets available to the institution to stressed cash flow (disbursement 30 days out in the stress scenario). As of September 2014, the liquidity index has been 190%. The LCR will be implemented in October 2015 as a regulation.

The authorities started to phase-in the implementation of Basel III capital requirement from October 2013. Brazilian banks have progressed well toward the full-fledged implementation of Basel III, which according to

% of regulatory capital in the system until 2019. The authorities noted that progress has been made since the 2013 Article IV consultation, including the introduction of a new framework for Emergency Liquidity Assistance and the approval of the updated bylaws of the deposit insurance fund.

Links: Staff Report, Selected Issues Report

Keywords: Article IV Consultation, Basel III, LCR

http://financialresearch.gov/working-papers/files/OFRwp-2015-07_Hidden-Illiquidity-with-Multiple-Central-Counterparties.pdf

http://financialresearch.gov/working-papers/files/OFRwp-2015-08_Systemic-Risk-The-Dynamics-under-Central-Clearing.pdf




31 MAY 2015

Peru

Key Developments

Staff Report and Selected Issues Report for the 2015 Article IV Consultation

- IMF

May 27, 2015


The IMF published its staff report and selected issues report in the context of the 2014 Article IV consultation with Peru.

The authorities concurred that the financial system remained stable, with no evidence of imminent systemic risks. The stress tests showed that the financial system would remain resilient to tail risks of weak economic activity and large exchange-rate depreciation. The authorities also underlined that the legal framework for bank resolution was in line with the best practices and that they continue to strengthen supervisory and regulatory standards in line with FSAP recommendations and Basel III principles.

The Superintendence of Banks, Insurance, and Pension Funds (SBS) rightly identifies foreign exchange credit risk and potential over-indebtedness of the large informal sector, including households and micro- and small-

d has built safeguard mechanisms by putting in place regulatory requirements above international standards.

The report also includes an Appendix macro-financial stability assessment. The regulatory requirements against foreign exchange credit risk include :

» A minimum package of management measures to identify, assess, and mitigate foreign exchange credit risk

» Additional provisions if, in the opinion of the supervisor, the management measures adopted prove insufficient

» Additional capital requirement for operations subject to foreign exchange credit risk

To build buffers against potential over-indebtedness of households and micro and small enterprises, the SBS requires lower loan-to-value ratios and higher risk weighting of assets held by these clients.

Links: Staff Report, Selected Issues Report

Keywords: Article IV Consultation, Basel III, LCR

Amendment to Liquidity Coverage Ratio Handbook of Accounting for Business Financial System

- SBS

May 05, 2015



The SBS issued updates to the implementation of LCR in Peru.

The amendment incorporate corporate bonds issued by non-financial sector companies as high-quality liquid assets (HQLA). These qualify for access to securities repurchase agreements of the Central Reserve Bank of Peru, with a factor of 50%.

All documents are in Spanish language.


Effective Date: N/A


Links (to original language material): Update, LCR Implementation

Keywords: Basel III, LCR



https://intranet1.sbs.gob.pe/PortalSBS/preproyectos/download.asp?F=3248HLYEUETWHC4EEHPJER18YECIKKOGIXB.PDF

https://intranet1.sbs.gob.pe/PortalSBS/preproyectos/download.asp?F=3248HLYEUETWHC4EEHPJER18YECIKKOGIXA.PDF


32 MAY 2015

Asia Pacific

Australia

Key Developments

Basel III Disclosure Requirements About Leverage Ratio, Liquidity Coverage Ratio, Identification of Potential Global Systemically Important Banks, and Other Minor Amendments

- APRA

May 08, 2015



APRA released a response to submissions during the consultation period, along with final versions of the Prudential Standard APS 110 Capital Adequacy (APS 110) and the Prudential Standard APS 330 Public Disclosure (APS 330), which incorporate new disclosure requirements for authorized deposit-taking institutions. These requirements are based on revisions to the BCBS disclosure framework:

» Leverage ratio disclosures. An authorized deposit-taking institution with approval from APRA to adopt an internal model approach for credit risk under the risk-based capital adequacy framework will be required to disclose certain quantitative and qualitative information about its leverage ratio, calculated in accordance with a consistent methodology (as set out in a new Attachment D to Prudential Standard APS 110).

» LCR disclosures. The LCR came into effect on January 01, revised liquidity framework. Under th LCR authorized deposit-taking

must demonstrate that they can withstand a short-term (30-day) severe liquidity stress scenario. APRA is requiring locally incorporated LCR authorized deposit-taking institutions (that is, excluding foreign bank branches) to disclose specified information about their LCR and to provide sufficient qualitative description, to enable market participants to gain a broad picture of their liquidity risk profile.

» Disclosures for the identification of potential G-SIBs. Under the international framework for addressing the risks posed by G-SIBs, a large sample of international banks report a set of 12 indicators that the Basel Committee uses to identify those banks that are systemically important on a global scale. The framework also provides for banks above a certain size (those with a leverage ratio exposure measure above EUR 200 billion) to disclose these indicators. APRA intends to publish the list of authorized deposit-taking institutions that will be subject to the G-SIB disclosure requirements on its website. Although they are not identified as G-SIBs, the four largest Australian authorized deposit-taking institutions Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation are currently captured by the size requirement and as such they will be identified as the ADIs required to disclose the 12 indicators used in the G-SIB identification methodology. APRA will not be requiring disclosure in relation to balance dates occurring prior to July 01, 2015.

The two prudential standards also incorporate a number of minor amendments to rectify minor deviations from the Basel framework identified during the Basel Commit Consistency Assessment Program (RCAP) review of Australia.


Effective Date: July 01, 2015


Links: Media Release, Prudential Standards and Response to Consultation

Keywords: Basel III, Regulatory Disclosures, RCAP

http://www.apra.gov.au/MediaReleases/Pages/15_09.aspx

http://www.apra.gov.au/adi/Pages/May-2015-Response-disclosure-leverage-ratio-LCR-G-SIBs.aspx


33 MAY 2015

China

Key Developments

Annual Report 2014

- CBRC

May 14, 2015


CBRC released its annual report for the ninth consecutive year 2006. The report contains a comprehensive review of the actions taken in 2014 to promote banking reform and development to support economic adjustment and transformation.

The banking system of governance reform is progressing well, with the historic breakthrough of private capital into the banking sector. Five private banks have been approved, with four slated to open. In addition, more than 100 small and medium private capital institutions accounted for more than 50% of the commercial banks, some of which have 100% private capital while rural cooperative financial institutions accounted for more than 90% of private capital and rural banks accounted for more than 72% of private capital; Opened private holding of non-banking financial institutions 43, including six new in 2014. A total of 47 institutions in the inter-bank market and exchange market successfully issued credit asset-backed securities ABS worth 2,820 billion yuan.

By the end of 2014, China's total banking financial institutions consisted of 4,091 legal entities, with total assets of 172.3 trillion yuan (an increase of 13.9%); total liabilities of 160 trillion yuan (an increase of 13.3%); and non-performing loan balance of 1.43 trillion yuan. The NPL ratio remained at a low level of 1.60%. Risks in the resilience of the banking sector further improved. By the end of 2014, commercial banks' capital adequacy ratio was 13.18%, up 0.99 percentage points over the beginning while the loan loss reserve balance was 1.96 trillion yuan, with 232.1% provision coverage.

In 2015, the CBRC will adhere to initiative to adapt to the new economic development and comprehensively promote banking reform; it will focus on promoting the implementation of financial law and strengthening the comprehensive financial risk management and the ability to enhance the service of the real economy.

Links (to original language material): Press Release, Annual Reports

Keywords: ABS, Annual Report, Banking Reform

India

Key Developments

Basel III Framework on Liquidity Standards: Draft Guidelines for Net Stable Funding Ratio

- RBI

May 28, 2015



The draft guidelines are based on the final rules text on NSFR published by the BCBS in October 2014; these take into account the Indian conditions.

The NSFR will be applicable to Indian banks, both at the solo and the consolidated levels. For the foreign banks operating as branches in India, the framework would be applicable on standalone basis (that is, for Indian operations only).

Banks are required to meet the NSFR requirement on an ongoing basis and they should have the required systems in place for such calculation and monitoring. The NSFR as at the end of each quarter, starting from December 2017, should be reported to the RBI (Department of Banking Supervision, CO) in the prescribed format (Appendix BLR 7) within 15 days from the end of the quarter.

Comments Due Date: March 26, 2015



Link: NSFR Guidlines (rbidocs.rbi.org.in/rdocs/Content/PDFs/DGNSFR2805201585E99C16412944D58D4A0CC629D24C97.PDF)

Keywords: Basel III, Liquidity Risk, NSFR

http://www.cbrc.gov.cn/chinese/home/docView/1BC57D62CAF346458A12C8563B42AF28.html

http://www.cbrc.gov.cn/showannual.do


34 MAY 2015

Korea

Key Developments


- IMF

May 22, 2015


The IMF published its staff report in the context of the 2015 Article IV Consultation with the Republic of Korea.

The report discusses macro-prudential tools and capital flow management measures in the country. The Korean authorities have a number of relevant tools such as Limits on mortgage lending, including loan-to-value (LTV) and debt-to-income (DTI) ratios, which were introduced in the last decade in response to sharp increases in house price growth. These have been adjusted several times since then as financial stability risks related to housing market conditions change but are currently significantly tighter than when introduced. In line with this policy, the authorities in mid-2014 took a modest step toward unwinding the earlier tightening of slowdown in housing-related lending growth by non-bank financial institutions.

hich were introduced when the Lehman

loan-to- gn exchange funding. The FSAP determined that together these measures succeeded in increasing financial sector resilience by reducing exposure to liquidity shocks, reducing maturity mismatches caused by short-term foreign exchange borrowing to finance derivatives purchases, and more generally lengthening the maturity of

aimed at addressing systemic financial sector stability.

Link: Report

Keywords: Article IV Consultation, FSAP, Macro-Prudential Policy

Mongolia

Key Developments


- IMF

April 30, 2015


The IMF published its staff report in the context of the 2015 Article IV consultation with Mongolia. The report reveals that the Bank of Mongolia (BOM) is taking action to strengthen the banking sector, enhance banking system safety, proactively address potential systemic risks, and ensure financial stability.

The BOM rec on enhancing systemic oversight and crisis preparedness capabilities in February 2015. The BOM has already started implementing the recommended actions provided by the technical assistance by reflecting them in its medium-term strategy on banking supervision, including phasing in measures to:

» Ensure better risky loan recognition

» Improve provisioning and capital buffers

» Improve risk weights

These actions will be implemented progressively. To strengthen the banking system, during 2015 17, the BOM intends to:

» Increase loan-loss provisions

» Tighten requirements for recognition of nonperforming loans

» Increase the minimum paid-in capital of banks

» Raise the tier 1 capital adequacy ratio (CAR) to 10.5% for systemically important banks

» Incorporate

» Increase sectorial risk-weights

» Impose additional capital requirements on banks with higher risk profiles

Link: Report

Keywords: CAR, Systemic Risk, Technical Assistance




35 MAY 2015

New Zealand

Key Developments

Financial Stability Report

- RBNZ

May 13, 2015


RBNZ published its bi-annual financial stability report, which assesses the soundness and efficiency of the financial system in New Zealand.

The report reveals that the financial system in the country is sound and operating effectively while supporting growth in the economy. Bank capital, liquidity, and funding buffers remain above the required minima while asset quality and underlying profitability are strong. Regulatory changes over the recent years have helped to improve prudential standards for banks, non-bank deposit takers (NBDTs), and insurers.

With the financial system facing significant and increasing risks, it is critical that banks maintain their capital and liquidity buffers and apply prudent lending standards. Banks should ensure that any new capital instruments continue to maintain loss-bearing capacity, in view of the significant risks the sector faces. RBNZ plans to review the current bank capital requirements, in light of the global and domestic changes affecting the banking system in recent years.

The Reserve Bank continues to make improvements to its financial oversight regime. Good progress has been made on the stock-take of registered bank and NBDT regulations, with public consultation on specific proposals expected to take place in the second half of 2015. RBNZ also expects to consult with banks later in the year on a best practice guide for the conduct of stress tests, following a review of the models and processes used by the major banks late last year.

Link: Financial Stability Report

Keyword: Financial Stability Report, NBDT, Stress Testing

Announcement of New Loan-to-Value Ratio Restrictions on Auckland Housing

- RBNZ

May 13, 2015


In response to the growing housing market risk in Auckland, RBNZ proposed changes to the loan-to-value ratio (LTV) policy. The changes will be effective from October 01, 2015 and will:

» Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30%

» Increase the existing speed limit for high LTV borrowing outside of Auckland from 10% to 15%, to reflect the more subdued housing market conditions outside of Auckland

» Retain the existing 10% speed limit for loans to owner-occupiers in Auckland at LTVs of greater than 80%

Deputy Governor, Grant Spencer, said that RBNZ will issue a consultation paper in late May, providing further details and seeking feedback on the new LTV proposals. He also said that in line with the existing LTV policy and measures:

» The proposed LTV restrictions will not apply to loans to construct new houses or apartments, considering the importance of encouraging residential construction activity in Auckland

» RBNZ is establishing a new asset class for bank loans to residential property investors and banks will be expected to hold more capital against this asset class to reflect the higher risks inherent in such lending

» The Reserve Bank decided, after a lengthy consultation process, that a residential property investor loan will be defined as any retail mortgage secured on a residential property that is not owner-occupied

Later this month, RBNZ will release a summary of submissions received in response to the consultation and will provide details on the implementation of the new asset class, including on the proposed capital treatment of residential investor loans. The new asset class will take effect from October 01, 2015 for new lending, with a further phase-in period of nine months for the reclassification of existing loans.

Link: News Release

Keyword: LTV

http://www.rbnz.govt.nz/financial_stability/financial_stability_report/

http://www.rbnz.govt.nz/news/2015/fsr-13-may-2015.html


36 MAY 2015

Completion of Licensing of Non-Bank Deposit Takers

- RBNZ

May 01, 2015


The RBNZ completed the licensing of non-bank deposit takers (NBDTs), with licenses issued to 31 entities.

censing puts in place another measure to help maintain the stability of Licensed NBDTs are required to meet prudential requirements that cover credit ratings, governance, risk management, capital, related-party exposures, liquidity, and suitable directors and senior officers.

Finance companies that raise funds from the public, along with most building societies and credit unions, were required to get a license from the Reserve Bank no later than May 01, 2015. The legal definition of an NDBT excludes most kinds of managed investment schemes and entities that fund themselves solely through non-public sources: for example, the entities raising funds solely from related parties, or from corporate or wholesale sources.

Links: News Release, Public Register of NBDTs

Keywords: NBDT, Prudential Requirements

A Primer on New Capital

Markets

- RBNZ

May 01, 2015


The RBNZ published a report on the capital markets in New Zealand. The report:

» Describes the functioning of financial markets and the real economy

» Describes the instruments and players involved

» Analyzes a unique dataset to provide some detail on the size of both the bond and equity markets, which together comprise local capital markets

» Summarizes regulatory and policy initiatives since the publication of a report from the Capital Markets Taskforce in 2009

Link: Report

Keywords: Capital Markets

http://www.rbnz.govt.nz/news/2015/licensing-of-nbdts-complete.html

http://www.rbnz.govt.nz/regulation_and_supervision/non-bank_deposit_takers/register/index.html

http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2015/2015may78-3.pdf


37 MAY 2015

Singapore

Key Developments

Framework for Domestic Systemically Important Banks in Singapore

- MAS

April 30, 2015


MAS published its framework for identifying and supervising domestic systemically important banks (D-SIBs) in Singapore, along with the inaugural list of D-SIBs.

All banks in Singapore will be assessed for their systemic importance annually based on their size, interconnectedness, substitutability, and complexity. The framework builds on existing supervisory impact assessment methodology. It is aligned with the principles set out by the BCBS for determining D-SIBs.

MAS will apply additional supervisory measures on the banks designated as D-SIBs. It designated the following banking groups as D-SIBs:

» DBS Bank

» Oversea-Chinese Banking Corporation

» United Overseas Bank

» Citibank

» Malayan Banking Berhad

» Standard Chartered Bank

» The Hong Kong and Shanghai Banking Corporation

Banks that have a significant retail presence in Singapore will be required to locally incorporate their retail operations. Locally incorporated D-SIBs will need to meet higher capital requirements: a minimum Common Equity Tier 1 (CET1) capital adequacy ratio (CAR) of 6.5%, tier 1 CAR of 8%, and total CAR of 10%, compared with the Basel III minimum requirements of 4.5%, 6%, and 8%, respectively.

Other measures such as recovery and resolution planning, LCR requirements, and enhanced disclosures will

affected banks to comply with the requirements that are currently not in effect, such as the local incorporation requirement.

Links: Media Release (mas.gov.sg/News-and-Publications/Media-Releases/2015/MAS-Publishes-Framework-for-Domestic-

Systemically-Important-Banks-in-Singapore.aspx), Response to Proposed Framework (mas.gov.sg/~/media/MAS/News

%20and%20Publications/Consultation%20Papers/2015%20Apr%2030%20Response%20to%20Feedback%20on%20DSIB

%20Framework_Public%20Consult.pdf)

Keywords: D-SIB, Basel III

Thailand

Key Developments

Liquidity Coverage Ratio

- BOT

May 29, 2015



The BOT published the LCR requirements in Thai language.




Link (to original language material): LCR Requirements

Keywords: Basel III, LCR

https://www.bot.or.th/Thai/FinancialInstitutions/Publications/LCR_Docs/LCR.pdf


38 MAY 2015


- IMF

May 07, 2015


The IMF published its staff report in the context of the 2015 Article IV consultation with Thailand.

The report reveals that the financial sector in Thailand is large, with assets nearly 359% of the GDP. Commercial banks assets account for 128% of GDP, which is higher than in Indonesia and the Philippines. Growth in non-commercial banks financial assets has outpaced that of the commercial bank assets since 2008.

Consequently, while commercial bank credit-to-GDP ratio increased from 99% in 2007 to 128% in 2013, total financial institution credit rose from 154% of GDP to 197% in the same period. Non-commercial-banks, including specialized financial institutions and non-bank financial institutions (NBFIs), provided almost 60% of the household loans. Salient points with regard to the regulation of commercial and non-commercial banking segments are as follows:

» Regulation of commercial banks. Commercial banks weathered the global financial crisis and political turmoil well. Banks appear to be well-capitalized, liquid, and profitable. Basel III regulations on capital have been implemented. However, liquidity risks have risen, as seen in the high loan-to-deposit ratio and higher reliance on wholesale funding.

» Regulation of non-commercial banks. Specialized financial institutions and NBFIs represent a large and growing segment of the financial sector. Specialized financial institutions are interconnected with commercial banks via interbank loans and exposure to the same customers. Staff welcomes the

plan to extend the supervisory and regulatory mandate to specialized financial institutions and encourages them to adopt an operational plan swiftly.

Link: Report

Keywords: Article IV Consultation, NBFI, Specialized Financial Institutions



39 MAY 2015

Glossary

ABS Asset-Backed Securities

ADB Asian Development Bank

AIFMD Alternative Investment Fund Managers Directive

AnaCredit

Analytical Credit Dataset of ECB

APRA Australian Prudential Regulation Authority

AT1 Additional Tier 1

BAM Bank-Al-Maghrib

BCB Banco Central do Brasil, the Central Bank of Brazil

BCBS Basel Committee on Banking Supervision

BCC 15-1 Basel Coordination Committee's Guidance on Implementation of Simplified Supervisory Formula Approach for Securitization Exposures

BCP Basel Core Principles

BEEDS Bank of England Electronic Submissions Portal

BIS Bank for International Settlements

BNM Bank Negara Malaysia

BOE Bank of England

BOM Bank of Mongolia

BOT Bank of Thailand

BRRD Bank Recovery and Resolution Directive

CAR Capital Adequacy Ratio

CBB Central Bank of Bahrain

CBRC China Banking Regulatory Commission

CCP Central Counterparty

CEBS Committee of European Banking Supervisors

CET1 Common Equity Tier 1

CRA Credit Rating Agency

CRD IV EU Capital Requirements Directive IV

CRR Capital Requirements Regulation EU

CSSF Commission de Surveillance du Secteur Financier

D-SIB Domestic Systemically Important Bank

DGI Data Gaps Initiative

DGSD Deposit Guarantee Schemes Directive

DNB De Nederlandsche Bank, central bank of the Netherlands

DPM Data Point Model

EBA European Banking Authority

EC European Commission

ECAI External Credit Assessment Institutions

ECB European Central Bank

EMIR European Market Infrastructure Regulation

ESAs European Supervisory Authorities

ESMA European Securities and Monetary Authority

ETD Exchange-Traded Derivative

EU European Union

FDIC Federal Deposit Insurance Corporation

FED Board of Governors of the Federal Reserve System

FSA Financial Services Authority

FSAP Financial Sector Assessment Program

FSB Financial Stability Board

FSOC Financial Stability Oversight Council

FSR Financial Stability Review

G-20 Group of Twenty Countries

G-SIB Global Systemically Important Bank

G-SIFI Global Systemically Important Financial Institution

G-SINFIs Global Systemically Important Non-bank Financial Institutions

GDDS General Data Dissemination System

HQLA High-Quality Liquid Assets

HQS High-Quality Securitization

IAS International Accounting Standard

IASB International Accounting Standards Board ICAAP Internal Capital Adequacy Assessment Process

IFR Interchange Fee Regulation

IFRS International Financial Reporting Standards

IFSB Islamic Financial Services Board

IMF International Monetary Fund

IOSCO International Organization of Securities Commissions

IRB Internal Ratings-Based

IRRBB Interest Rate Risk in Banking Book

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

LCR Liquidity Coverage Ratio

LEI Legal Entity Identifier

LSI Less Significant Institution

LTV Loan-to-Value Ratio

MAS Monetary Authority of Singapore

MiFID Markets in Financial Instruments Directive

NBDT Non-bank Deposit Taker

NBFI Non-Bank Financial Institution

NBFC Non-Bank Financial Company

NBNI Non-Bank Non-Insurer

NSFR Net Stable Funding Ratio

OECD Organization for Economic Co-operation and Development

OFR Office of Financial Research

OLA Orderly Liquidation Authority

PRA Prudential Regulation Authority

PSD2 Payments Services Directive

Q&A Questions and Answers

QIS Quantitative Impact Study

RBI Reserve Bank of India

RBNZ Reserve Bank of New Zealand

RCAP Regulatory Consistency Assessment Program

RRP Recovery and Resolution Plan

RTS Regulatory Technical Standards

RWA Risk-Weighted Asset

SBS Superintendence of Banks, Insurance, and Pension Funds

SDDS Special Data Dissemination Standard

SFI Structured Finance Instrument

SIFI Systemically Important Financial Institution

SME Small and Medium-Size Enterprise

SREP Supervisory Review and Evaluation Process

SSFA Simplified Supervisory Formula Approach

SSM Single Supervisory Mechanism

UCITS Undertakings for Collective Investment in Transferable Securities

XBRL eXtensible Business Reporting Language

40 MAY 2015


© Copyright 2015 Analytics, Inc., and/or its licensors and affiliates (together, "MOODY'S). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR

btfrom sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided

r, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, liability to any person or entity for (a) any loss

or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication,

publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without f or inability to use, any such information. The credit

ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE

as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of uers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated

Corporation (MCO) and its wholly-owned credit rating agency subsidi rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly

www.moodys.com Corporate Governance

Credit Monitor, CreditEdge, CreditEdge Plus, CreditMark, DealAnalyzer, EDFCalc, Private FiiskAnalyst, RiskFrontier, Expected Default

Frequen nalytics, Inc.