Global Regulator & Central Bank News Roundup
Volume 40/2023 (October 16 – October 22)

Your weekly summary of key regulatory updates in an objective bite-size format, drawing on official news and press releases from 700+ financial services regulators, central banks as well as global and regional standard setters. For more current updates, visit Regxplora, Regxelerator’s end-to-end automated and AI-powered financial regulatory intelligence platform.

Prudential and financial stability

ECB Publishes Final Report on Banks’ Governance and Management of Counterparty Credit Risk
The European Central Bank (ECB) has released its final report on “Sound practices in counterparty credit risk governance and management,” following a public consultation concluded in July 2023. The report summarizes findings from a targeted review of on the governance and management of counterparty credit risk (CCR) by banks carried out in the second half of 2022, highlighting market sound practices beyond the minimum compliance expectations while also drawing attention to areas that necessitate further improvement. In total, the report sets out 43 sound practices, covering four areas, namely: (1) CCR governance, (2) risk control, management and measurement, (3) stress testing and wrong-way risk, and (4) watchlist and default management process.

Federal Reserve Board Commences Data Collection to Assess Impact of Large Bank Capital Proposal
The Federal Reserve Board (FRB) has initiated a special data collection exercise from banks that will be affected by its major capital proposal revealed earlier this year. The additionally collected data is intended to help further gauge the impact of the new rules and inform their final design. inform the final, designed to clarify the estimated impact of the proposal, will inform any final regulation, and the collected summaries will be made public. The deadline for submission is January 16, 2024. In tandem with the announcement, the Federal Bank Regulatory Agencies have also extended the deadline for the submission of comments on the proposed large bank capital requirements and the Federal Reserve Board’s proposal to modify the capital surcharge for the largest and most complex banks from intitially the end of November to the same date.

AML and CFT

Egmont Group Suspends Rosfinmonitoring’s Membership over Russian Military Aggression against Ukraine
The Egmont Group of Financial Intelligence Units (FIUs) has suspended Rosfinmonitoring, the Financial Intelligence Unit of the Russian Federation, from its membership in response to its stance on the current Russian military aggression against Ukraine. This decision, taken in a virtual meeting on October 18, 2023, has been made in order to protect the Egmont Group’s interests and objectives as well as ensure cohesion in the AML/CFT ecosystem. The current measures will be continuously monitored and maintained for as long as necessary. The decision follows the measures implemented by FIU Heads on December 13, 2022, which include inter alia the revocation of Rosfinmonitoring’s responsibility to host Egmont Group meetings, its formal leadership, advisory, and representative positions within the Group as well as its physical attendance at Egmont Group meetings and project participation privileges.

Cyber and operational resilience

Japan’s FSA Initiates Eighth Delta Wall Cyber Security Exercise for Financial Industry
The Japan Financial Services Authority (FSA) has announced the eight edition of its “Delta Wall” Cyber Security Exercise in the financial sectors. Conducted annually since 2016, the aim of the exercise is to assess participating firms’ strategy and operational execution in respone to specific cyber scenarios including their approach to investigating the cyber attack as well as incident response and restoration efforts. The terminology “Delta Wall” refers to the three perspectives crucial in relation to cybersecurity measures, namely: “self-help”, “mutual help”, and “public assistance”. The exercise is sest to take place over six days from October 19 to October 26, involving 165 financial institutions. Institutions will participate in the exercise on a remote basis.

DFSA’s Threat Intelligence Platform Reaches Milestone of 6.2 Million Compromise Indicators Issued
The Threat Intelligence Platform (TIP) of the Dubai Financial Services Authority (DFSA) has reached a significant milestone of issuing over 6.2 million compromise indicators to users since its inception in 2020, the DFSA at GITEX GLOBAL 2023 Conference as it published the platform’s first report. Launched in conjunction with multiple domestic and international agencies and funded by the DFSA, the TIP aids in improving cyber resiliencein the DIFC and the region more widely, contributingg to the objectives of the UAE National Cybersecurity Strategy and the Dubai Cyber Security Strategy. As of mid-2023, the platform serves over 250 firms and international sharing communities, marking an increase of 53% since 2020. Participation in the platform is voluntary and free of charge.

Fintech and ecosystem innovation

Basel Committee Launches Consultation on Disclosure Standards for Banks’ Cryptoasset Exposures
The Basel Committee on Banking Supervision has published a new consultation regarding the disclosure of banks’ cryptoasset exposures. The consultative document, which follows following the Committee’s final prudential standard from December 2022, proposes standardized disclosure tables and templates. The disclosure would require qualitative and quantitative information by banks on their cryptoasset activities, exposures, and related capital and liquidity requirements. Banks would also need to disclose the accounting classifications of their cryptoasset exposures and cryptoliabilities. The new disclosure rules are intended to come into effect by January 1, 2025. Comments on the proposal can be shared by January 31, 2024.

Australia’s Department of Treasury Seeks Public Feedback on Proposed Regulatory Framework for Digital Asset Platforms
Australia’s Department of Treasury is further advancing its efforts to comprehensively regulate digital assets through the release of a consultation on the proposed regulatory framework for digital asset platforms. The proposed framework would build on the country existing financial services law and mandate digital asset platforms managing aggregate customer assets in excess of AUD 5 million to obtain an Australian Financial Services License, thereby requiring platforms to meet the same general minimum licence obligations as other financial services providers including in relation to governance, consumer protection and market conduct as well as prudential requirements. Beyond these requirements, the platforms would also be mandated to meet further specific obligations, tailored to the unique nature of their business model. These would include standards for platform contracts, for holding tokens, for custody software and when transacting in tokens. Certain activities, such as staking and tokenization, would attract even further requirements. Feedback to the proposal can be provided until 1 December.

EBA and ESMA Advance Detailing of MiCAR With Multiple New Guidelines and Technical Standards
In an effort to further advance the build-out of the detailed regulatory framework under MiCA, the European Supervisory Authorities have published a further set of proposed guidelines and technical standards. This includes two sets of joint guidelines by the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) for the assessment of suitability of management body members, shareholders, and qualifying holding members of asset-referenced tokens (ARTs) issuers and crypto-asset service providers (CASPs). The guidelines set out common criteria for evaluating the appropriate knowledge, skills and experience of members of the management body as well as their good repute, honesty and integrity as well as if they are able to commit sufficient time to perform their duties. In addition to these guidelines, the EBA further released two draft technical standards, focusing on the on the procedure for the approval of white papers of asset-reference tokens issued by credit institutions and on governance arrangements of the remuneration policy under MiCAR. The former seek to harmonise the approval process across by detailing the steps and timeframes to be followed by both credit institutions and relevant authorities while the latter standards detail key governance processes for the creation, execution, and upkeep of the remuneration policy and its core elements by issuers of significant ARTs and significant e-money tokens (EMT). Complementing these, the EBA further issued a draft guideline outlining expected internal governance arrangement for issuers of ARTs. Comments on the latest set of consultation papers can be provided until the second half of January 2024.

Senate Committee Urges Administration to Address the Use of Crypto fo Fund Terrorism Operations
The U.S. Senate Committee on Banking, Housing, and Urban Affairs, under the leadership of Senator Sherrod Brown (D-OH) and Senator Elizabeth Warren (D-MA), along with bipartisan support from over 100 lawmakers, sent a letter to National Security Advisor Jake Sullivan and Brian Nelson, Under Secretary for Terrorism and Financial Intelligence at the Department of the Treasury. The letter addresses the urgent concern surrounding reports of Hamas and Palestinian Islamic Jihad (PIJ) having raised over USD 130 million in cryptocurrencies between between August 2021 and June 2023, thereby effectively sidestepping U.S. sanctions, to finance their operations, including the October 7th, 2023 terrorist attack on Israel. The senators are urging the Biden Administration for a detailed plan to address crypto-financed terrorism, among other things demanding specific answers on the use of cryptocurrency to finance terrorist operations and the Treasury’s plans to tackle the national security threats resulting from the illicit use of cryptocurrency. Related to these concerns, the U.S. Financial Services Committee announced a hearing for Wednesday, October 25, addressing “How America and Its Allies Can Stop Hamas, Hezbollah, and Iran from Evading Sanctions and Financing Terror”.

CFPB Proposes Personal Financial Data Rights Rule to Enable Open Banking
In an effort to further support the shift towards open banking, the Consumer Financial Protection Bureau is proposing a new Personal Financial Data Rights rule. Objective of the rule is to provide consumers with enhanced control over their financial data and to introduce protections against misuse by companies including data hording. Currently, there are inconsistencies in consumer access to their financial data. The proposed rule seeks to resolve this by (1) requiring banks and other relevant providers to make personal financial data available to consumers via dedicated digital interfaces at no charge, (2) equipping consumers with the legal right to grant third parties access to information about their usage of checking and prepaid accounts, credit cards and digital wallets and (3) by enabling consumers to disengage from banks that deliver poor service in favor of better providers.

CVM and FinanceLab Alliance to Drive Innovation and Regulation in Brazil’s Capital Market through new CRIA Initiative
The Brazil Securities Commission (CVM)’s board has announced a technical cooperation agreement with the Brazilian Institute of Digital Finance (FinanceLab). The agreement establishes the groundwork for the deployment of the Center for Regulation and Applied Innovation (CRIA), which will create collective responses to problems faced by the financial sector. Specifically, the CRIA’s objectives will include promoting research on innovation in the capital market, enhancing knowledge of international regulatory experiences relating to the emergence and development of new technologies, as well as aiding the CVM in creating a regulatory framework attuned to novel technologies.

Payments and currency

CPMI Publishes Final ISO 20022 Data Requirement Standards
The Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) has released its final report detailing the harmonized data requirements for the use of the ISO 20022 messaging standard in cross-border payments. Developed in collaboration with the Payments Market Practice Group (PMPG), the report sets out 12 data requirements intended to establish a consistent minimum set of messaging standards to support the more efficient processing of cross-border payments. The data requirements were formulated in response to the current highly inconsistent adoption of ISO 20022, limiting the realization of the full potential and benefits of the standard in improving interoperability of payments systems, a priority under the G20 cross-border roadmap. Following the publication of the new requirements, CPMI will continue its efforts to engage with industry to facilitate their consistent implementation and encouraged market participants to reinforce their preparations to align with the harmonised ISO 20022 data requirements with the expectation to achieve alignment by end-2027 at the latest.

CPMI Initiates Consultation on Interlinking Fast Payment Systems Across Borders with Focus on Governance and Oversight Considerations
In addition to the work in relation to the ISO 20022 Data Requirements, the CPMI has furthermore issued a consultative report pertaining to the interlinking of fast payment systems (FPS) across borders as part of the G20 cross-border payments program. Recognizing FPS interlinking as a viable solution for more efficient cross-border payments, the report highlights the challenges in establishing governance and oversight due to its multi-jurisdictional nature. To that end, it sets out 10 preliminary considerations drawn from global workshops coordinated by the CPMI, with the aim of forming a better understanding of the complexities involved. These insights, along with further stakeholder engagement and feedback on the interim report, will be curated into a final report on the governance and oversight of FPS interlinking arrangements. Feedback to the report can be provided until mid-December.

HKMA Establishes CBDC Research Collaboration with Five Local Universities
The Hong Kong Monetary Authority (HKMA) has formed the Central Bank Digital Currency (CBDC) Expert Group and signed Memorandums of Understanding (MoUs) with five local universities to enhance collaboration in CBDC research. The group, comprised of faculty members from the fields of business, law, computer science, economics, and finance from the Chinese University of Hong Kong, City University of Hong Kong, the Hong Kong Polytechnic University, the Hong Kong University of Science and Technology, and the University of Hong Kong, will assist the HKMA in exploring key policy and technical aspects of CBDC. The collaborative group is envisioned to drive knowledge exchange and a deeper understanding of CBDC and related fintech areas. In addition to local academic institutions, international academicians may also receive invitations to join the group in the future. The group has started to research privacy issues related to CBDC and the feasibility of blockchain technologies on CBDC compatibility.

UAE’s Al Etihad Payments Announces Launch of Aani, an Instant Payments Platform for Digital Transactions
Al Etihad Payments (AEP), a subsidiary of the Central Bank of the UAE (CBUAE), has launched the new instant payments platform Aani. Part of the CBUAE’s Financial Infrastructure Transformation (FIT) program, Aani facilitates secure, instant transactions 24/7 for entities including consumers, businesses, corporations, and governments. Its current key features include immediate money transfer via phone numbers, requests for money, bill splitting, and QR code support. Future updates will introduce real-time direct debit and e-checks. As at launch, eight licensed financial institutions participate in Aani, with the goal of incorporating the remaining financial institutions by the end of 2024. The platform can be accessed both through the participating financial institution’s existing channels as well as a dedicated new app. In addition to the existing features, AEP is also partnering with Magnati, Mashreq/Neo Pay, and Network International to install Aani QR-based payments with merchants with the goal of onboarding multiple thousands of merchants in the months ahead.

ECB Advances to Preparation Stage in Digital Euro Initiative
Following a two-year investigation into the design and distribution models for a digital euro, the European Central Bank (ECB) has declared that it will move forward with the preparation phase for a potential digital euro. This announcement marks the conclusion of the investigative phase. In the preparation phase, the ECB will conduct further analysis, test, and hold consultations to ensure the digital euro meets privacy, quality, security, and usability standards. The bank will also start the selection process for potential service providers to set up a digital euro platform and infrastructure. The ECB has emphasized that the introduction of this phase doesn’t imply a confirmed decision on the issuance of a digital euro. The essential verdict will be made by the Governing Council after the legislative process of the European Union is concluded.

ESG

MAS Proposes Transition Guidelines for Financial Institutions Towards a Net-Zero Economy
The Monetary Authority of Singapore (MAS) has issued consultation papers proposing guidelines for financial institutions (FIs) on transitioning to a net-zero economy. The guidelines, which extend MAS’ existing supervisory guidance, lay out expectations for FIs to have robust transition planning processes to facilitate effective climate change mitigation and adaptation measures. Rather than divestment, the guidelines focus on engagement with customers and investee companies to implement measures that reduce their carbon footprint. FIs are encouraged to adopt a multi-year approach for a comprehensive assessment of climate-related risks, considering environmental risks beyond those related to climate. They should also disclose relevant information on how they are addressing climate-related risks. The three consultation papers, which are differentiated by sector (banks, insurers, asset managers) are open for comments until 18 December 2023.

Austria’s Finance Ministry Establishes First EU Climate Hub
Austria’s Finance Minister Magnus Brunner has announced the establishment of the first Climate Hub in the European Union under the umbrella of Austria’s Ministry of Finance. The hub aims to bundle resources and expertise from the seven sectors of the Ministry, focusing on climatic and energy policy issues, thereby strengthening cost-effective and sustainable business transformation and employment locations. The initiative has set out to ensure Austria’s pioneering role in strategically linking finance and climate. The Climate Hub, staffed by 10-15 employees, will unify knowledge areas such as budget, economic, tax, and digitalization policy, as well as mining and raw materials. The hub’s significant tasks involve the development of national carbon management and transformation strategies, bolstering the hydrogen capacity expansion, and improving carbon markets. Coordination is managed by Dr. José Delgado, the head of the climate team.

OSFI Invites Stakeholder Feedback on New Standardized Climate Scenario Exercise Methodology
The Office of the Superintendent of Financial Institutions (OSFI) has released for public consultation its proposd draft for the methodology for a Standardized Climate Scenario Exercise (SCSE). The SCSE is designed to enhance the understanding of federally regulated financial institutions (FRFIs) about potential exposures to climate-related risks and build capacity for climate scenario analysis. By collecting standardized data, the SCSE will provide a quantitative assessment to compare climate-related risks across FRFIs. The SCSE framework builds upon two prior joint projects with the Bank of Canada assessing climate transition and flood risks. Feedback on the draft methodology can be submitted until December 16, 2023. A second consultation encompassing the draft technical instructions and workbook for the SCSE is scheduled for March 2024.

Brazil Announces Adoption of ISSB Global Baseline
Brazil’s Ministry of Finance and Brazilian Securities and Exchange Commission (CVM) have confirmed that the International Sustainability Standards Board’s (ISSB) IFRS Sustainability Disclosure Standards will be integrated into the country’s regulatory framework. To that end the Brazilian Securities and Exchange Commission (CVM) has issued Resolution 193, which permits Brazilian publicly-held companies, investment funds, and securitization companies to voluntarily adopt sustainability-related financial reporting based on IFRS S1 and S2. This step is aligned with CVM’s Sustainable Finance Action Plan for 2023-2024 and is part of the sustainable transformation agenda instated by the Ministry of Finance.The incorporation, which sets out a journey from voluntary application beginning in 2024 to mandatory use by January 1, 2026, was announced during the IFRS Foundation Trustees’ meeting in Panama City. Both the Brazilian authorities emphasize that ISSB standards would bolster Brazil’s capital markets by enhancing transparency surrounding sustainability-linked risks and opportunities and promoting companies to attract capital and global investments.

Other transversal themes

39th ASEAN Capital Market Forum Concludes With Endoresement of Several Critical Initiatives
The ASEAN Capital Market Forum (ACMF) has held its 39th meeting in Bali, attended by senior executives of ASEAN’s capital market regulators, representatives from the Asian Development Bank (ADB), the ASEAN Secretariat, and representatives from other relevant organizations. The meeting focused on the policy direction and execution of the ACMF Action Plan 2021-2025 to foster the sustainability of regional capital markets. Several guidelines were endorsed at the meeting, including a transition to sustainable finance, a study plan for developing voluntary carbon markets fitting the ASEAN context, and a handbook for offering mutual funds that focus on sustainable investment under the ASEAN CIS framework. Other critical advancements during the meeting included the approval for a project to enhance the capacity of capital market supervision staff as well as the the signature of an agreement to expand cooperation between the ACMF and IFRS Foundation.

Leadership changes

Shigeru Ariizumi Appointed as New IAIS Executive Committee Chair
The International Association of Insurance Supervisors (IAIS) has announced the appointment of Shigeru Ariizumi, Vice Minister for International Affairs at the Financial Services Agency of Japan, as its new Executive Committee Chair. He will replace Vicky Saporta, Executive Director for Prudential Policy at the Bank of England. Saporta steps down following eight years as Chair, during which she spearheaded key reform projects and was a strong advocate for diversity, equity, and inclusion. Ariizumi, who will officially assume the Chair position after the IAIS Annual General Meeting on 9 November 2023, has been a Vice Chair of the Executive Committee since 2021. His term will run through November 2025, with a new Vice Chair to be selected next month.

Claudia Buch Set to Lead ECB Supervisory Board Starting 2024
The European Council has formally appointed Claudia Buch, currently the vice-president of the Deutsche Bundesbank, as the head of the Supervisory Board of the European Central Bank (ECB). Taking over from the previous Chair, Andrea Enria, Buch will hold her new position for five years, starting from 1 January 2024. Her appointment was approved by the European Parliament earlier in October.

International cooperation

SAMA and MAS Sign MoU on Fintech and Innovation
The Saudi Central Bank (SAMA) and the Monetary Authority of Singapore (MAS) have signed a cooperation agreement with focus on fintech and innovation. H.E. Mr. Ayman Al-Sayari, the Governor of SAMA, and H.E. Dr. Vivian Balakrishnan, the Minister for Foreign Affairs of Singapore representing MAS, signed the collaboration agreement in Riyadh. The agreement is intended to deepen collaboration including in particular providing a framework for cooperation between the innovation departments of SAMA and MAS as well as a mechanism for sharing fintech and innovation related matters.