Global Regulator & Central Bank News Roundup
Volume 41/2023 (October 23 – October 29)
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.
Themes covered in this edition
- Prudential & financial stability
- AML & CFT
- Conduct & consumer protection
- Fintech & ecosystem innovation
- Payments & currency
- Other transversal themes
- International cooperation
Prudential and financial stability
House Financial Services Committee Chairs Call for GAO Examination of U.S. Regulators’ Influence in Basel III Endgame Proposal
The Chairmen of the House Financial Services Committee and Financial Institutions and Monetary Policy Subcommittee, Patrick McHenry and Andy Barr, have submitted a letter to the Government Accountability Office (GAO). The letter requests the GAO to scrutinize the influence of U.S. federal banking agencies in the work of the Basel Committee on Banking Supervision toward the recent Basel III Endgame proposal, which seeks to significantly elevate capital requirements for U.S. financial institutions. The chairmen express concern over the lack of transparency and accountability in how international governance bodies influence U.S. regulatory frameworks, emphasizing the need for clarity on the role U.S. regulators played in shaping these international capital standards. The letter sent to the GAO outlines specific areas for examination, including a comprehensive review of the material proposals and concerns submitted by U.S. federal banking agencies during the Basel III Endgame development process. The evaluation should prioritize proposals and concerns that did not receive adequate responses from the Basel Committee, as well as scrutinize the evidence supporting specific Basel III Endgame requirements and the calibration of various risk-related measures.
AML and CFT
FATF Concludes Fourth Plenary Under the Presidency of T. Raja Kumar of Singapore
The fourth Plenary of the Financial Action Task Force (FATF) under Singaporean President T. Raja Kumar concluded after intensive deliberations in Paris, with broad participation from the FATF’s Global Network, including over 200 jurisdictions and international observers. Key agreements reached during the Plenary include inter alia the publication of a new report on Crowdfunding for Terrorism Financing, the adoption of reports on Illicit Financial Flows from Cyber-Enabled Fraud and the Misuse of Citizenship and Residency by Investment Programmes and the release of the public consultation report on the FATF’s updated Risk-Based Guidance on Recommendation 25 on Beneficial Ownership and Transparency of Legal Arrangements. With respect to the FATF Framework, Members agreed to revisions to FATF Recommendation 8 with a view to providing more clarity over measures applicable to Non-Profit Organizations as well as amendments intended to strengthen asset recovery, which was further supported by the release of a report with recommendations to strengthen Asset Recovery Networks (ARINs) in tackling transnational money laundering. The Plenary also agreed on work on countries’ criminalisation of terrorism financing under Recommendation 5. Besides that, other critical developments included the official addition of Indonesia as the FATF’s 40th member, the removal of four countries – Albania, Cayman Islands, Jordan and Panama – from its increased monitoring following successful on-site visits, and the update of the FATF’s methodology for mutual evaluations.
APG Publishes New Report on the Effective Implementation of FATF Guidelines for Non-Profit Organizations in the Asia-Pacific Region
The Asia-Pacific Group on Money Laundering (APG) and the Global Center on Cooperative Security have jointly published a report entitled “Implementation of FATF Recommendation 8 and Immediate Outcome 10 – Successes, Challenges, and Lessons Learned from the Asia Pacific Region.” The report aims to aid APG members and Non-Profit Organizations (NPOs) in implementing best practices on the Financial Action Task Force’s Recommendation 8, which pertains to the prevention of financing terrorism through NPOs. The analysis given in the report takes into account the specific needs of the Asia/Pacific region, providing guidance on where additional support and development may be required.
Conduct and consumer protection
MAS and IMDA Seek Feedback on Proposed Shared Responsibility Framework for Phishing Scams
The Monetary Authority of Singapore (MAS) and the Infocomm Media Development Authority (IMDA) have jointly released a consultation paper, proposing a Shared Responsibility Framework (SRF) to tackle phishing scams. The proposed framework assigns specific duties to financial institutions (FIs) and telecommunication companies (Telcos) to mitigate these scams, and mandates compensation for affected scam victims in cases of duty breaches. Building upon previous work by the Payments Council, the SRF extends its purview beyond financial institutions (FIs) to include telecommunication companies (Telcos), recognizing their vital roles in safeguarding financial transactions and communications infrastructure. It assigns specific duties to FIs and Telcos to mitigate phishing scams, and mandates compensation for affected scam victims in cases of breaches to these duties. In scope of the framework are digitally-enabled scams with a specific focus on scams where consumers are deceived into revealing their account credentials to scammers impersonating legitimate entities, thereby leading to unauthorized transactions. Malware-enabled scams, on the other hand, are not in scope. The framework proposes “waterfall approach” for loss attribution, prioritizing FIs due to their custodial role over consumer funds, followed by Telcos. Fulfillment of prescribed duties exempts these entities from payout obligations, with the consumer bearing the full loss. Feedback to the consultation can be provided until 20 December.
U.S. Federal Agencies Publish Final Rule to Strengthen and Modernize the Community Reinvestment Act
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) have collaboratively issued the final rule to revamp and strengthen the regulations underpinning the Community Reinvestment Act (CRA). The CRA, established in 1977, mandates federal banking agencies to assess a bank’s efforts in fulfilling the credit needs of its entire community, including low- and moderate-income neighborhoods. The revised regulations aim to better align with the CRA’s foundational goal of motivating banks to serve the credit needs of their local communities, accommodating shifts in the banking landscape such as the rise of mobile and online banking. The rule introduces a more consistent and clear application of CRA regulations, tailors performance standards, data collection, and reporting to consider variations in bank size and business model, enhances transparency and public involvement, underscores the synergy between CRA and fair lending responsibilities, and ensures uniform regulatory treatment across banks governed by all three agencies. Among other things, this is achieved by applying four new performance tests to evaluate the CRA performance of large banks; bringing clarity to community development activities, including updating their definitions, establishing a process for banks to confirm the eligibility of an activity for community development consideration, and creating a publicly available list of qualifying activities; and updating data collection, maintenance, and reporting requirements for large banks through a tailored approach. The final rule is set to take effect on April 1, 2024, with a phased compliance timeline stretching to January 1, 2027.
Fintech and ecosystem innovation
FCA Highlights Common Issues in Crypto Marketing Following Introduction of New Regime
The Financial Conduct Authority (FCA) has issued a new statement to highlight issues observed in cryptoasset promotions since the new legislation, effective from 8th October, brought cryptoasset promotions under their oversight. Three primary issues identified were: (1) Promotions exaggerating the ‘safety’, ‘security’, or simplicity of crypto services without adequately addressing risks; (2) Risk warnings that are inconspicuous due to font size, coloring, or positioning; (3) Firms’ failure to offer sufficient risk-related information about promoted products. In the statement, the FCA emphasized that authorized firms must adhere to their regulatory duties when approving cryptoasset financial promotions. To support its efforts, the FCA is actively collaborating with social media platforms, app stores, search engines and domain name registrars to eliminate or block illicit promotions as well as engaging with payments firms to reduce UK consumer exposure to entities issuing unlawful promotions. In total, the FCA has issued 221 alerts regarding firms potentially illegally promoting cryptoassets since inception of the new regime.
Norway’s Finanstilsynet Proposes Implementation of DLT Regulation, Encouraging Innovation in Market Solutions
The Norwegian Ministry of Finance has announced the consultation on the proposal by Norway’s Finanstilsynet for the implementation of the DLT Regulation (EU 2022/858) into Norwegian law. The proposal, which seeks to support the development and testing of decentralized register technology (DLT) market solutions, would allow market infrastructure entities like central securities repositories and multilateral trading facilities to develop and evaluate DLT-centric business models on a temporary basis by granting exemptions from some current laws that could hinder testing as well as provides new guidelines specifically tailored to DLT. The DLT Regulation applies specifically to financial instruments issued, moved, or stored using decentralized technology, with a focus on three types of market infrastructures: DLT multilateral trading facilities, DLT settlement systems, and DLT trading and settlement systems.
Brazil’s National Treasury Launches Web3 Hackathon on Tokenization
Brazil’s National Treasury Secretariat (STN), hte Federal Data Processing Service (Serpro), and the National School of Public Administration (Enap) have announced a dedicated Web3 Hackathon under the theme “Tokenization of the National Treasury”. The event focuses on the education and creation of blockchain solutions under consideration of the challenges and opportunities within the National Treasury. Specifically, the hackathon addresses five challenges addressing the retail segment (government to citizens), the institutional segment (government to government and government to businesses) and solutions related to the technological infrastructure. Example challenges include the development of technologies for use cases using tokenized public securities for applications in Treasury primary and secondary markets and use cases for the automation of monitoring, control and online pricing of public securities. Interested participants can register until November 16 for the event, with the development of the solutions set to take place from November 21 to December 4 and the award ceremeny to be held on December 11.
Payments and currency
BIS Innovation Hub Publishes Latest Report on Project Polaris
The BIS Innovation Hub has published the fourth report of Project Polaris, providing a high-level guide to the design of offline payments with Central Bank Digital Currency (CBDC). The report, built upon a series of workshops conducted with 12 solution vendors and 6 observing central banks, is intended to aid central banks in understanding of the requirements and design choices associated with CBDC offline payments. Besides providing an overview of the current solution and technology landscape as well as design choices, the report covers several other core aspects of offline payments including inter alia in relation to resilience, inclusion, privacy, risk management, and device security. It reiterates that the availability of offline payments with CBDC is a critical feature and that the design of the offline capability must be carried out through the lens of the whole CBDC design solution. Despite this criticality, the report also notes that currently the maturity of offline CBDC solutions is still at a nascent stage with “very few are in a live environment working at scale”.
Riksbank Urges Legislative Measures for Cash Inclusion and Digital Currency Preparedness
The Riksbank has submitted a response to the Payment Inquiry’s report on state payments, calling for urgent political actions to reinforce cash’s legal standing, pave the way for an e-krona, and boost financial and digital inclusion. The bank stresses the state’s role, including its own, in actively participating in the payment system, advocating for stricter and clearer proposals from the Inquiry. Emphasizing its duty to uphold a stable and efficient financial system, the Riksbank highlights the necessity of accessible payment methods for the public, even during crises. Governor Erik Thedéen underlines the need to strengthen cash usage and broaden access to payment accounts for individuals and businesses and recommends immediate legislative actions to strengthen cash’s position in order to prevent digital and financial exclusion and maintaine national preparedness. To that end, the Riksbank suggests requiring banks to accept consumer cash deposits and mandating cash acceptance by retailers for essential goods, with possible exemptions for smaller enterprises. Addressing digital currency, the Riksbank calls for immediate legislative groundwork for a potential e-krona, highlighting the urgency due to ongoing digitalization and European initiatives on a digital euro. In addition, it highlights the need to modernize the Swedish payments market in other areas, too, such as with a view to facilitating cross-border payments in Swedish kronor.
GFANZ Introduces Latin America & Caribbean Network to Drive Climate Finance in the Region.
The Glasgow Financial Alliance for Net Zero (GFANZ) has announced the creation of its Latin America & Caribbean Network. The initiative was unveiled during the United Nations Latin America and Caribbean Climate Week and will engage directly with financial institutions and policymakers to leverage the advantages presented by the net-zero transition in the region. Despite Latin America and the Caribbean contributing less than 10% of global greenhouse gas emissions, the regions are particularly vulnerable to climate change effects. The network aims to boost climate finance in the region by aiding financial institutions in planning for the transition to net-zero, implementing climate targets, building capacity, and lobbying policymakers for the acceleration of capital mobilization. The function of this network will be steered by a senior Advisory Board composed of leading climate and finance figures from the region. The network’s activities will be led by a senior member of the GFANZ Secretariat, Alan Gómez, who will take up the role of the Network’s Managing Director, while the Advisory board will be chaired by Patricia Espinosa Cantellano alongside Vice-Chair Joaquim Levy.
ASIFMA Releases Report on Upscaling Carbon Markets in APAC
The Asia Securities Industry & Financial Markets Association (ASIFMA), in association with its member firm King & Wood Mallesons, has released a new report titled “Upscaling Carbon Markets Across APAC.” The report seeks to guide governments, regulators, and market actors on the key considerations for the development of compliance carbon markets (CCMs) and voluntary carbon markets (VCMs) in the Asia Pacific region by offering new insights on carbon market development from an APAC perspective and proposing recommendations to support the integrity and decarbonization capacity of carbon markets in the region. To that end, the report discusses the status and role of the APAC carbon markets and offers specific recommendations with respect to ambition and planning, principles and policies, legal and regulatory classification, systems and infrastructure, regulation and oversight, as well as emissions data integrity, carbon credit quality, and market protection.
Malaysia’s JC3 Unveils Five Key Initiatives to Accelerate Transition to Low-Carbon Practices
Malaysia’s Joint Committee on Climate Change (JC3) has unveiled five key initiatives aiming to fast-track the transition of businesses and farmers towards low-carbon practices. The new measures were presented at the JC3 Journey to Zero Conference and underscore JC3’s push for prompt climate action, highlighting the financial industry’s crucial role in driving a sustainable future for Malaysia. The five schemes include the greening of industrial parks and supply chains, creating a RM1 billion portfolio guarantee scheme for Environmental, Social, and Governance (ESG) financing, launching a one-stop online portal for small and medium enterprises (SMEs), and initiating the Green AgriTech program to foster sustainable agricultural practices. The JC3 also published the 2023 Climate Data Catalogue containing the latest data needs and sources on its website.
U.S. Agencies Issue Final Principles for Climate-Related Financial Risk Management for Largest Financial Institution
The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve Board (FRB) have released their final guidance on the management of climate-related financial risks for large financial institutions with over $100 billion in total consolidated assets. The principles are designed to equip large institutions with a comprehensive framework for understanding and managing climate-related financial risks, ensuring consistency across the sector and promoting robust risk management practices.The final guidance outlines high-level principles across six key areas: (1) governance; (2) policies, procedures, and limits; (3) strategic planning; (4) risk management; (5) data, risk measurement, and reporting; and (6) scenario analysis. Additionally, it provides insights on integrating climate-related financial risk considerations into the management of traditional risk categories. Substantially, the final guidance closely mirrors the inital proposals made by the Agencies in December 2021, April 2022, and December 2022, yet includes specific adjustments based on feedback received during the consultation process. The changes are intended to offer further clarity on the applicability of the guidance to large foreign banking organizations, define the roles of boards of directors and management more explicitly, and eliminate a reference to compensation practices from the Board’s initial proposal. Importantly, the final guidance does not discourage or prohibit large financial institutions from offering banking services to any particular class or type of customer, as long as they comply with existing laws and regulations.
Dominican Republic Launches Public Consultation on Green Taxonomy
The Dominican Republic’s Superintendency of the Securities Market (SIMV) and the Ministry of Environment and Natural Resources (MMARN) have initiated a public consultation on the “Green Taxonomy Project of the Dominican Republic”. Developed with the International Finance Corporation (IFC) and the Green Taxonomy Monitoring Committee, the project seeks to foster a green, social, and sustainable financial market in the Dominican Republic with the taxonomy serving as an identification system for economic activities and assets that considerably aid in meeting environmental goals aligned with the nation’s commitments, strategies, and policies. The taxonomy covers nine economic sectors and is structured around six specific environment objectives including: (1) climate change mitigation, (2) climate change adaptation, (3) water and water resources, (4) ecosystems and biodiversity, (5) the prevention of pollution, and (6) the circular economy. The taxonomy design also encompasses social safeguards to prevent negative societal effects arising from any activities. The consultation period on the draft taxonomy will run until end of December.
Other transversal themes
European Supervisory Authorities Issue Joint Criteria for Enhancing Supervisory Independence
The European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA) jointly published criteria for supervisory independence. Building on the individual reports published by each Authority in 2021, the joint independence criteria are structured around four fundamental principles: (1) Operational ndependence ensures that supervisory authorities function without undue external influence, possessing sufficient legal authority and operational resources, (2) Personal independence establishes transparent procedures for the appointment, selection, and removal of governing body members, and mandates high ethical standards for both staff and leadership, (3) financial Independence requires supervisory authorities to have adequate financial resources to effectively execute their mandates, and (4) accountability and transparency mandates that supervisory authorities operate in a transparent and accountable manner. The new criteria are intnended to serve as a tool for supervisory authorities to strengthen their independence and are planned to form the basis for a joint assessment of supervisory independence by European Supervisory Authorities at a point in the future.
EU-UK Financial Regulatory Forum Holds Inaugural Meeting
The Joint EU-UK Financial Regulatory Forum held its inaugural meeting in London on October 19 under co-chairmanship by the Director General for Financial Services on behalf of HM Treasury (HMT) and the European Commission Director General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) and attendance by representatives from the UK Authorities, the UK Mission to the European Union (UKMis), the European Central Bank (ECB), as well as the European Supervisory Authorities and the Single Resolution Board. Meeting participants discussed the intended modus operandi of the Forum including the exchange of perspectives on topics under its remit. Beyond this, the initial discussions centered on vulnerabilities in non-bank financial intermediation, work related to the implementation of the Basel III standards as well as Solvency II reforms as well as key efforts pertaining to cryptoassets, stablecoins and central bank digital currencies and in relation to sustainable finance with focus on progress in taxonomy implementation and interoperability of standards. The Forum’s next meeting is scheduled to take place in Brussels in spring 2024. The Forum’s work is anchored in a joint MoU which was signed earlier this year in June and which establishes a framework for bilateral regulatory cooperation in the area of financial services between the European Union and the United Kingdom, with a view to preserving financial stability, market integrity, and protecting investors and consumers, while allowing for transparent dialogue, exchange of views on regulatory developments, and addressing potential cross-border implementation issues.
ASIC Joins IAIS MMoU
The Australian Securities & Investments Commission (ASIC) has become a member of the International Association of Insurance Supervisors (IAIS) Multilateral Memorandum of Understanding (MMoU). The MMoU is designed as a a global framework of compliance and confidentiality to allow for open cooperation and exchange between insurance supervisors, which supports financial stability and sound supervision of cross-border insurance operations.
Insurance Authority and ICAC Strengthen Collaboration to Combat Corruption in Hong Kong’s Insurance Industry
The Hong Kong Insurance Authority (IA) and the Independent Commission Against Corruption (ICAC) have signed a MoU to deepen their collaboration against corruption within Hong Kong’s insurance industry. The MoU provides a comprehensive framework for handling corruption-related crimes, detailing processes for case referral, joint investigations, information exchange, and expert assistance provision.
ESMA Signs MoU with Indonesia Financial Services Authority and Recognizes PT Kliring Penjaminan Efek Indonesia as Tier 1 CCP under EMIR Regulation
The European Securities and Markets Authority (ESMA) has signed a MoU with the Indonesia Financial Services Authority (OJK) and updated its list of recognized third-country central counterparties (CCPs) under the European Markets Infrastructure Regulation (EMIR) with the recognition of PT Kliring Penjaminan Efek Indonesia as a Tier 1 third-country CCP. With this addition, ESMA has concluded 25 such cooperative arrangements under EMIR with non-EU authorities across 21 countries globally.
CFTC and French AMF Establish MOU to Supervise Cross-Border Firms
The Commodity Futures Trading Commission (CFTC) and the French Autorité des marchés financiers (AMF) have entered into a MoU to formalize the exchange of information, cooperation, and supervision of certain cross-border regulated firms operating in the US and France. This includes procedures for the examination of French swap dealers currently registered with the CFTC.