Global Regulator & Central Bank News Roundup

Volume 04/2024 (January 22 – January 28)

 

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 generative AI-powered financial regulatory intelligence platform. Sign up here to receive the roundup via email.
 


Themes covered in this edition
 

 


Prudential & financial stability
 
EBA Issues Heatmap on EU Banks’ Interest Rate Risk Management
The European Banking Authority (EBA) has released a heatmap that outlines the findings from its examination of the implementation of interest rate risk in the banking book (IRRBB) standards within the EU. This heatmap highlights policy areas that warrant additional scrutiny and outlines planned actions over short to medium and long-term horizons. The EBA’s scrutiny, following the October 2022 regulatory package on IRRBB, encompasses a comprehensive review, including the evaluation of specific elements of the EBA Guidelines on IRRBB such as the 5-year repricing maturity cap for non-maturity deposits (NMDs). It also assesses the overall management of interest rate risk from a prudential standpoint, focusing on changes in modeling assumptions and hedging strategies by institutions, as well as the impact of rising interest rates on capital instrument valuations and other accounting or liquidity matters that are closely linked with IRRBB. The heatmap is divided into three sections detailing the EU’s regulatory framework for IRRBB, the EBA’s scrutiny plans and progress to date, and the main areas identified for further scrutiny with corresponding actions and timelines.

 

UK Pension Regulator Issues New Guidance for Pension Trustees on Private Market Investment Strategies
The Pensions Regulator (TPR) has released new guidance for pension scheme trustees on investing in private market assets, emphasizing the potential for these investments to enhance and protect saver benefits as part of a diversified portfolio. This guidance aligns with the Government’s Mansion House reforms aimed at facilitating the financial services sector to unlock capital for UK industries, thereby boosting saver returns and supporting economic growth. TPR underscores the importance of trustees acting in savers’ best interests, which includes a thorough consideration of all investment options. Trustees are encouraged to possess or acquire the necessary knowledge and understanding to collaborate with advisers on private market investments and to set objectives for investment advice that improve member outcomes. The guidance suggests that trustees lacking the skills or resources to manage a diversified portfolio should consider altering their governance model or pursuing consolidation. Minister for Pensions, Paul Maynard, has endorsed the guidance, noting its role in diversifying portfolios and enhancing saver outcomes. Louise Davey, Interim Director of Regulatory Policy, Analysis and Advice at TPR, highlighted that innovation and new fund structures, such as the Long Term Asset Fund, are creating more opportunities for defined contribution schemes to invest in private markets. TPR’s guidance is designed to shift the focus from cost to value for DC schemes, acknowledging that while private market investments may incur higher costs, they can yield a positive net impact on value delivered to savers.

 

BMA Publishes Analysis and Stress Testing Outcomes for Bermuda’s Long-term Insurance Sector
The Bermuda Monetary Authority (BMA) has released a comprehensive report detailing the Bermuda long-term insurance market’s analysis and stress testing results. The report follows the BMA’s targeted enhancements to the regulatory and supervisory regime for long-term insurers, which include the prior approval of all long-term block reinsurance transactions, tailored asset reporting, and improvements to the technical provisions and Bermuda Solvency Capital Requirement (BSCR) framework, set to be effective from 31 March 2024. The latest report provides a macroprudential overview of Bermuda’s long-term insurance sector. Data showed a modest growth in assets and a slight decline in gross written premium for 2022 as well as confirmed the sector’s robust solvency position, with a median solvency ratio of 261%, indicating resilience to adverse financial market conditions as per stress test results. A pilot liquidity study highlighted the sector’s varied approaches to liquidity risk management, with all companies demonstrating adequate liquidity under stress testing scenarios. Future reports will expand on these findings and incorporate additional data and insights, including new liquidity stress test scenarios.

 

Virgin Islands Ministry of Finance Establishes Deposit Insurance Corporation to Enhance Banking System Stability
The Ministry of Finance has announced the establishment of the Virgin Islands Deposit Insurance Corporation (VIDIC), aimed at bolstering financial security for depositors in the Territory. The inaugural board meeting of VIDIC took place on January 16th, 2024, marking the operational commencement of the corporation. VIDIC’s core objectives include deposit protection, enhancing financial stability, raising public awareness and education on financial safety, and collaborating with financial institutions to maintain high standards of financial security. The Board of Directors, chaired by Mr. Ian S. Smith and comprising Mr. David Walker, Mr. Kenneth Baker, Mrs. Sherri Ortiz-Fahie, and Mr. Phillip Fahie, is tasked with steering the strategic direction of VIDIC.

 


AML & CFT
 
HKMA Seeks Public Feedback on Enhanced Information Sharing to Combat Financial Crime
The Hong Kong Monetary Authority (HKMA) has launched a public consultation on a proposal to enhance information sharing among Authorized Institutions (AIs) to bolster the prevention and detection of financial crime. Recognizing the global rise in financial crime, particularly digital fraud, and its potential to erode public trust in digital financial services, the HKMA is considering legislative amendments that would allow AIs to legally share customer account information. This initiative aims to expedite the sharing process, thereby improving the use of technology and analytics in identifying and disrupting fraudulent activities and mule account networks. The proposal aligns with similar measures in other international financial centers and includes provisions to ensure data privacy and customer confidentiality. HKMA’s Chief Executive, Mr. Eddie Yue, emphasized the urgency of addressing the increased exploitation of information gaps by criminals to transfer and conceal illicit funds. The consultation period is open until 29 March 2024.

 

Cayman Islands Excluded from EU’s AML/CFT Deficient Jurisdictions List Following CFATF Evaluation
The Caribbean Financial Action Task Force (CFATF) has reported that the Cayman Islands will be officially removed from the European Union’s list of jurisdictions with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) deficiencies, effective 7 February. This development follows the European Commission’s assessment, which recognized the Cayman Islands’ efforts to strengthen its AML/CFT regime and address technical deficiencies in alignment with the Financial Action Task Force’s (FATF) action plans. The EU’s Delegated Act also acknowledged improvements in Jordan’s AML/CFT regime, leading to its removal from the list.

 


Conduct & consumer protection
 
AFI Global Prepares to Launch Arab Region Financial Inclusion Policy Initiative
AFI Global is set to enhance cooperation on financial inclusion within the Arab region through the upcoming launch of the Arab Region Financial Inclusion Policy Initiative (ARFIPI). This initiative will facilitate knowledge sharing and peer support among AFI members to bolster the success of national financial inclusion strategies and foster the development of harmonized regional policies. The Expert Group on Financial Inclusion Policy (EGFIP), which serves as ARFIPI’s implementing body, convened for the first time to outline a roadmap for the year 2024. Dr. Eliki Boletawa, AFI’s Head of Policy Programs and Regional Initiatives, emphasized the significance of ARFIPI in advancing cross-border collaboration and amplifying regional perspectives on financial inclusion. As of its inception, ARFIPI includes seven AFI member institutions: the Central Bank of Mauritania, Bank Al Maghrib, Central Bank of Tunisia, Central Bank of Egypt, Central Bank of Jordan, Jordan Payments Clearing Company, and Palestine Monetary Authority.

 

EIOPA Examines Consumer Protection and Financial Resilience in Face of Rising Living Costs
The European Insurance and Occupational Pensions Authority (EIOPA) has published its Consumer Trends Report 2023, which delves into the financial well-being of consumers in light of the current cost-of-living crisis and assesses the fairness of treatment across consumer demographics. The report, supported by data including a Eurobarometer survey, indicates that a third of EU consumers are experiencing increased insurance premiums and higher deductibles, leading some to forgo coverage and become underinsured. There is a noted decrease in consumer confidence regarding a financially secure retirement, with a 3 percentage point drop from the previous year. The report also identifies a gender gap in financial confidence and instances of unfair treatment based on personal characteristics, contributing to financial exclusion. Concerns persist over the value for money of certain unit-linked and hybrid insurance products, with a third of consumers skeptical about the value offered by insurance-based investment products.

The report also observes a surge in online insurance purchases, though this trend is uneven across member states and concentrated in non-life products. Despite better disclosures and financial literacy efforts, only 42% of EU consumers feel confident about their retirement funds, suggesting a need for tools like pension tracking dashboards. The growing consumer interest in sustainable insurance and pension products calls for substantiated and non-misleading company claims. Issues of mis-selling and cross-selling, particularly in credit and payment protection insurance, continue to be reported by national supervisors.

 

SEC Adopts New Regulatory Framework for SPACS
The U.S. Securities and Exchange Commission (SEC) has adopted the final rules to enhance investor protections and disclosure requirements in initial public offerings (IPOs) by special purpose acquisition companies (SPACs) and subsequent business combination transactions, known as de-SPAC transactions. Initially proposed on March 30, 2022, the rules come in response to the complexity and potential risks associated with SPACs and aim to align their regulatory treatment more closely with traditional IPOs. Key provisions under the new rules encompass additional disclosures regarding SPAC sponsors, sponsor compensation, conflicts of interest, dilution, and the target company and the requirement for target companies in certain de-SPAC transactions to co-register with the SPAC, thus sharing the responsibility for the accuracy and completeness of disclosures in the registration statement. The SEC also adopted Rule 145a, which deems any business combination of a reporting shell company with another entity that is not a shell company as an offer or sale under the Securities Act, rendering financial statement requirements applicable to such transactions in line with traditional IPOs. Finally, the SEC has also redefined the regulatory treatment of projections in de-SPAC transactions, aligning it with traditional IPOs under the Private Securities Litigation Reform Act of 1995 (PSLRA). This includes the adoption of a “blank check company” definition that excludes such companies, including SPACs, from the safe harbor for forward-looking statements provided under the PSLRA. Additionally, for de-SPAC transactions specifically, the final rules require detailed disclosure of all material bases and assumptions underlying projections.

 

CFPB Seeks to Curtail “Junk Fees” with Proposed Rule on Real-Time Transaction Charges
The Consumer Financial Protection Bureau (CFPB) has proposed a new rule aimed at preventing banks, credit unions, and certain peer-to-peer payment companies from charging non-sufficient funds (NSF) fees on transactions that are declined in real-time, such as debit card purchases, ATM withdrawals, and certain peer-to-peer payments. The initiative forms part of the CFPB’s broader effort to eliminate what it considers “junk fees” and to encourage financial institutions to compete by offering better products rather than relying on fees for declined transactions, which often cost little to process. The proposed rule would deem such fees unlawful under the Consumer Financial Protection Act. The CFPB’s actions follow its ongoing scrutiny of junk fees, which has already led to many financial institutions reducing or eliminating NSF fees, with an anticipated consumer savings of $2 billion annually. The Bureau has also taken enforcement actions against unlawful NSF fees, including a July 2023 order for Bank of America to pay over $100 million for improper fee practices and supervisory actions resulting in $120 million in refunds to consumers for illegal fees. Comments on the proposed rule are invited until March 25, 2024.

 


Fintech & ecosystem innovation
 
BIS Bulletin No. 84 Explores Central Banks’ Use of AI and Machine Learning Technologies
The Bank for International Settlements (BIS) Bulletin No. 84, authored by Douglas Kiarelly Godoy de Araujo, Sebastian Doerr, Leonardo Gambacorta, and Bruno Tissot, discusses the adoption and integration of artificial intelligence (AI) and machine learning techniques by central banks. The bulletin highlights that central banks have been pioneers in utilizing these technologies for various functions such as statistics, macroeconomic analysis, payment systems oversight, and supervision, achieving significant success. It acknowledges the potential benefits that AI offers in supporting central bank mandates but also identifies the dual nature of the technology, presenting both general and central bank-specific challenges. The bulletin emphasizes the importance of collaboration among central banks, suggesting that knowledge-sharing and pooling expertise are key strategies for maintaining a leading edge in AI developments.

 

CFTC Seeks Public Input on AI-Related Risks in Derivatives Markets
The Commodity Futures Trading Commission (CFTC) has issued a request for comment (RFC) to gather insights on the utilization and potential risks of artificial intelligence (AI) within the derivatives markets it oversees. The RFC aligns with the Biden Administration’s directives for AI development, focusing on promoting responsible innovation and understanding AI applications and associated risks. The RFC invites comments on defining AI and its applications in various areas such as trading, risk management, compliance, and customer interactions. It also seeks input on AI-related risks, including market manipulation, governance, and privacy concerns. The feedback will inform the CFTC’s consideration of potential future actions, including new regulations or amendments to existing guidance. Feedback can be provided until April 24.

Alongside this, The CFTC’s Office of Customer Education and Outreach (OCEO) has also issued a customer advisory to alert the public about the risks associated with Artificial Intelligence (AI) scams in the trading sector. The advisory emphasizes that AI cannot guarantee high returns or predict market movements and warns investors against fraudulent claims made by scammers using AI technology, such as trading bots and trade signal algorithms. It highlights the ease with which fraudsters can spread misinformation through social media and influencers, and provides guidance on how to identify and avoid potential scams. The advisory also includes a case study of Cornelius Johannes Steynberg, who defrauded investors of over $1.7 billion in bitcoin through a Ponzi scheme disguised as a commodity pool with a proprietary bot trading program.

 


Payments & money
 
Bank of Japan and Ministries Establish Liaison Council for CBDC Development
The Ministry of Finance in Japan has announced the establishment of the “Liaison Council on CBDC (Central Bank Digital Currency) and Related Ministries and Agencies and the Bank of Japan”. The new Council is tasked with organizing the system design for Japan’s anticipated CBDC.Mmanaged by the Financial Bureau of the Ministry of Finance and chaired by the Ministry of Finance Director-General of Financial Affairs, the Council is comprised of members from key ministries such as the Cabinet Office, National Police Agency, Financial Services Agency, Consumer Affairs Agency, and the Digital Agency, among others. It also includes observers from the Fair Trade Commission and the Personal Information Protection Committee. While the Council will primarily operate in the form of private meetings, key meeting materials and minutes are planned to be published on the Ministry of Finance’s website.

 

Bank of England and HM Treasury Issue Joint Statement on Progress of Digital Pound Consultation
The Bank of England and HM Treasury have jointly published a response to the consultation on the potential introduction of a central bank digital currency (CBDC), known as a digital pound, which was initially proposed in a February 2023 consultation paper. The response outlines that no final decision has been made regarding the adoption of a digital pound, but the design phase will continue to explore its feasibility and potential design choices, focusing on how it could be integrated into the UK economy to enhance choice, convenience, and innovation in everyday payments. Feedback from various industries and organizations has been largely supportive, but concerns about access to cash, privacy, and control over personal funds were noted. To address these concerns, the response confirms that primary legislation would be introduced to ensure user privacy and control, with neither the Bank nor the Government having access to personal data. Users would retain freedom in spending their digital pounds, and further public consultation would precede any legislative action. The commitment to maintaining access to cash was reiterated, with the Financial Conduct Authority (FCA) expected to implement a new regulatory framework to protect cash access by summer 2024. The digital pound, if introduced, would be a stable, non-interest-bearing claim on the Bank of England, intended for everyday transactions rather than savings, with initial holding restrictions. The next steps include a decision on whether to proceed with building a digital pound, followed by a timetable for further consultation and potential launch.

 


ESG
 
NGFS Issues Technical Guidance on the Purpose and Use of the NGFS Scenarios
The Network for Greening the Financial System (NGFS) has released a new Technical Document titled “NGFS scenarios: Purpose, use cases and guidance on where institutional adaptations are required,” which provides a focused overview of the purposes, practical applications, and necessary adaptations for users of the NGFS climate scenarios. The NGFS climate scenarios, introduced in 2020 and continually refined, have been a critical tool assisting central banks, supervisors, and financial actors in understanding potential outcomes of climate change and transition. The scenarios underscore that an orderly transition to net-zero emissions by 2050 minimizes climate-related risks, guiding policymakers and financial institutions in their climate strategies and risk management practices. Combining transition and physical risks with macro-financial developments, the scenarios are globally applicable yet require user-specific tailoring to address limitations and/or accommodate for specific aspects such in relation to unaccounted societal impacts, tipping points, and financial sector dynamics. Serving as a complementary framework to other models like those from the IPCC and IEA, the NGFS scenarios offer detailed granularity for financial risk analysis, focusing on long-term economic and sectoral impacts. Despite their comprehensive nature, the NGFS acknowledges highlights that the scenarios represent a limited selection of possible futures and stresses the need for continuous refinement, particularly in capturing short-term impacts and evolving climate risks.

 

Norwegian Finanstilsynet Commissioned to Review Options for Regulatory Framework for ESG Rating Agencies
The Department of Finance in Norway has tasked Finanstilsynet with the examination of potential new regulations concerning ESG ratings. The initiative follows the proposal by the European Commission on 13 June 2023 to regulate ESG rating providers, aiming to improve the reliability and comparability of ESG ratings, clarify the methodologies used as well as overall strengthen expectations towards the organization of the providers’ activities. Specifically, the proposed EU regulation, which is yet to be finalized, includes provisions to manage conflicts of interest and a simplified framework for small and medium-sized ESG rating providers, with oversight by the European Securities Regulatory Authority (ESMA). The regulation is expected to be relevant to the European Economic Area (EEA). Finanstilsynet is required to deliver a report on the implementation of these regulations in Norway by November 2024.

 


Other transversal themes
 
BIS Innovation Hub Sets 2024 Agenda with Six New Projects in Cyber Security, CBDCs, and Green Finance
The Bank for International Settlements (BIS) Innovation Hub has shared details on its 2024 work programme. Building on 12 completed projects in 2023, the programme foresees six new projects in 2024 with a continued strong focus on cyber security, CBDC, climate risk and green finance, tokenization as well as data and analytics among other things. These include the Project Symbiosis, led by the Hong Kong Centre, which will leverage AI and big data for supply chain disclosure, specifically targeting Scope 3 emissions; Project NGFS Data Directory 2.0 by the Singapore Centre for the development of a data platform for climate-related financial analysis; Project Promissa, which will explore the tokenization of promissory notes collaboration with the Swiss National Bank and the World Bank Group; and Project Hertha at the London Centre, which will use network analytics to identify financial crime patterns. Beyond these, the Innovation Hub will initiate second phase of Project Leap at the Eurosystem Centre, focused on quantum-proofing payment systems as well as continue its efforts under Project Aurum under Hong Kong’s leadership to study privacy in CBDC payments.

 

FSB Announces 2024 Agenda Focusing on Resolution Regimes, NBFI Resilience, and Cross-Border Payment Systems
The Financial Stability Board (FSB) has outlined its 2024 work programme. Key initiatives under its 2024 agenda encompass the completion of resolution reforms including the full implementation of the Key Attributes of Effective Resolution Regimes for Financial Institutions in light of the March 2023 banking turmoil, the finalization of resources to support the resolution of central counterparties (CCPs) and the publication of the list of insurers subject to resolution planning standards. The resilience of non-bank financial intermediation (NBFI) will also remain a priority, with the FSB working alongside standard-setting bodies to explore policy recommendations for non-bank financial leverage, improve liquidity preparedness, and assess the resilience of repo markets. Likewise, the FSB will maintain its focus on advancing the initiatives under the G20 roadmap for enhancing cross-border payments as well as addressing the risks of digital innovation and climate risks. Specific focus points for 2024 in these areas include the interoperability in data frameworks related to cross-border payments and the regulation and supervision of banks and non-banks providing cross-border payment services, the implementation of the global regulatory and supervisory framework for crypto-asset activities and markets as well as global stablecoin arrangements, a G20 report on developments in AI and their potential implications for financial stability, as well as a stocktake of regulatory and supervisory initiatives related to the identification and assessment of nature-related financial risks.

 

IAIS Outlines 2024 Priorities
The International Association of Insurance Supervisors (IAIS) has released its 2024 Roadmap, which details the key deliverables for the year and aligns with the final year of the current five-year Strategic Plan (2020-2024). A significant milestone in 2024 will be the adoption of the global Insurance Capital Standard (ICS) as a prescribed capital requirement for Internationally Active Insurance Groups (IAIGs) in December, marking the end of a 13-year development process that included data collection, analysis, and global participation. The IAIS Secretary General, Jonathan Dixon, emphasized the ICS’s role in providing a unified framework for supervisory discussions on IAIGs’ solvency. The IAIS will also publish a comprehensive application paper on climate risk, reflecting its commitment to addressing climate-related risks in the insurance sector. More broadly, the 2024 workplan continues to focus on strategic themes such as digital innovation, diversity, equity and inclusion, financial inclusion, operational resilience, cyber risk, and protection gaps. The upcoming Strategic Plan for 2025-2029, to be published later in the year, will shift towards effective implementation of IAIS standards while adapting to emerging challenges like climate risk and digital innovation.

 

IOSCO Consults on Policy Considerations for OTC Derivatives Post Trade Risk Reduction Services
The IOSCO has published a consultation report on Post Trade Risk Reduction Services (PTRRS), addressing policy considerations and risks linked to the use of and offering of PTRRS with over-the-counter (OTC) derivatives trades. The report discusses the benefits of PTRRS, such as post-trade operational efficiencies and reduced systemic risk, while also drawing attention to associated challenges such as service provider concentration, transparency over the use of algorithms, and due diligence by users of PTRRs. To that end, the IOSCO is looking to solicit feedback from market participants on a proposed set of sound practices as well as additional insights on evolving risks, challenges faced and opportunities for improvement. Comments on the consultation report can be provided until April 1.

 


Leadership changes & appointments
 
FINMA Appoints Stefan Walter as CEO
The Swiss Financial Market Supervisory Authority FINMA has announced the appointment of Stefan Walter as its new CEO, effective from 1 April 2024, following the Federal Council’s ratification. Walter, a German national with extensive experience in financial regulation, will succeed Urban Angehrn and interim CEO Birgit Rutishauser. His previous roles include Director General at the European Central Bank, where he oversaw the supervision of systemic banks and horizontal risk supervision, and Secretary General of the Basel Committee on Banking Supervision, where he was instrumental in coordinating regulatory reforms during the global financial crisis.

 

Sophie Thevenoux Takes Helm of Monaco’s Financial Security Authority
Sophie Thevenoux has been appointed as the head of Monaco’s Autorité de Marchés Financiers (AMSF), an independent administrative authority recently established to continue the fight against money laundering, terrorist financing, proliferation of weapons of mass destruction, and corruption, succeeding the SICCFIN. Thevenoux, who will assume her role on January 29, brings her recognized expertise and extensive experience in economic and financial matters to the AMSF during its launch phase. A new Director is currently being recruited and is expected to take over in the upcoming spring. Thevenoux has held significant positions within the Monegasque Administration, including at the Directorate of Budget and Treasury from 1995 to 2005, and later at the Department of Finance and Economy, eventually becoming the Minister of Finance and Economy of the Principality in 2009.

 


Cross-border cooperation
 
HKMA and PBoC Announce Joint Policy Measures to Strengthen Hong Kong-Mainland Financial Integration
The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have jointly announced a suite of six policy measures aimed at strengthening financial cooperation between Hong Kong and Mainland China. These measures include the expansion of eligible collateral for the HKMA’s RMB Liquidity Facility to encompass RMB bonds issued onshore by China’s Ministry of Finance and policy banks, and the opening of the onshore repurchase agreement (repo) market to all foreign institutional investors with access to the China Interbank Bond Market. Additionally, amendments to the Implementation Arrangements for the Cross-boundary Wealth Management Connect Pilot Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) have been released. Finally, the measures also introduce facilitative steps for remittances by Hong Kong and Macao residents for property purchases in the GBA Mainland cities, promote collaboration on cross-boundary credit referencing to aid corporate financing, and expand the cross-boundary e-CNY pilots in Hong Kong.