Global Regulator & Central Bank News Roundup

Volume 08/2024 (February 19 – February 25)

 

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
 
ECB Publishes Revised Guide to Internal Models
Following consultation, the European Central Bank (ECB) has released its final revised Guide to internal models. The guide sets out the rules that banks must abide by when using internal models to calculate their risk-weighted assets. Key updates to the key guide include (1) the integration of considerations for material climate-related and environmental risks within internal models; (2) guidance on the adoption of a standardized approach for calculating risk-weighted assets; (3) guidance on the shift towards a unified definition of bulk sales of non-performing loans; and (4) an updated methodology for assessing default risk in trading book positions.

 


AML & CFT
 
FATF Plenary Concludes with Key Updates on Beneficial Ownership and Virtual Asset Supervision
The Financial Action Task Force (FATF) concluded its fifth Plenary under the Presidency of T. Raja Kumar of Singapore. Key outcomes include: (1) The introduction of new risk-based guidance for implementing Recommendation 25, aimed at enhancing the transparency of beneficial ownership and legal arrangements to prevent misuse by criminals and terrorists; (2) proposed revisions to Recommendation 16 and its Interpretive Note on wire transfers to adapt to evolving payment systems and ensure technology neutrality; (3) finalization of the FATF’s assessment methodology to protect non-profit organizations from terrorist financing abuse, reflecting recent revisions to FATF Standards; and (4) an agreement to publish an overview of the steps that FATF and FATF-Style Regional Bodies member jurisdictions with the most materially important virtual asset activity, based on trading volume and user base, have taken to regulate and supervise virtual asset service providers. The FATF also announced key updates to its list of high-risk jurisdictions and those under increased monitoring, with Kenya and Namibia added to the list requiring strategic improvements in their AML/CFT regimes, while Barbados, Gibraltar, Uganda, and the United Arab Emirates were removed following successful on-site visits. Finally, the Plenary also appointed Ms. Elisa de Anda Madrazoof Mexico as the next FATF President for a two-year term starting July 2024.

 

Frankfurt Selected as Host City for EU’s New Anti-Money Laundering Authority Set to Launch in 2025
The European Council has announced that Frankfurt has been chosen as the location for the European Union’s new anti-money laundering authority (AMLA), set to commence operations in mid-2025 with over 400 staff members. The new AMLA forms a critical part in the reform of the EU’s anti-money laundering framework and will be equipped with both direct and indirect supervisory powers over supervised entities, as well as the powers to impose sanctions and measures. The process for selecting AMLA’s seat involved public hearings and assessments of nine member states’ applications, with the agreement reached through an informal inter-institutional meeting where both representatives from the European Council and the European Parliament voted based on a set of jointly established selection criteria. Federal Minister of Finance, Christian Lindner, emphasized the German government’s commitment to strengthening Frankfurt as a financial center and its dedication to combating financial crime at a European level. The Federal Government, the State of Hesse, and the City of Frankfurt have committed financial support totaling 10 million euros, with plans to double this amount considering the staffing needs of the new authority.

 


Cyber & operational resilience
 
European Commission Adopts Key Delegated Acts Under DORA and MiCA
The European Commission has announced the adoption of two key Delegated Acts under the Regulation on Operational Resilience (DORA) and four Delegated Acts under the Regulation on Markets in Crypto-Assets (MiCA). The former includes the Delegated Regulations that detail criteria for the designation of ICT third-party service providers as critical for financial entities and specify the amount of the oversight fees to be charged by the Lead Overseer to critical ICT third-party service providers. The adopted Delegated Acts under MiCA encompass the criteria for classifying asset-referenced tokens and e-money tokens as significant, the procedural rules for the exercise of the power to impose fines or periodic penalty payments by the European Banking Authority (EBA) on these issuers along with the criteria and factors to be taken into account by the European Supervisory Authorities in relation to their intervention powers, and the fees to be charged to issuers by the EBA. As a next step, the Delegated Acts will be subject to review by the European Parliament and the Council and thereafter will become applicable.

 

EBA Seeks Feedback on Revised Operational Risk Business Indicator Framework and Amendments to Operational Risk Pillar 3 and Supervisory Reporting Requirements
The European Banking Authority (EBA) has initiated the consultation process on the new framework for the operational risk business indicator, which is at the core of the operational risk capital requirements calculation. The consultation consists of two sets of draft Regulatory Technical Standards (RTS) and one Implementing Technical Standard (ITS). The draft RTS on the specification on the BI items aim to specify the components of the BI, providing a detailed list of items for each component, aligned with previous EBA Policy Advice on Basel III Reform, and addressing amendments to accounting standards as well as clarifying exclusions from the BI. The second draft RTS focuses on adjustments to the BI in scenarios such as mergers, acquisitions, and disposals, outlining conditions for excluding BI items related to disposed entities or activities and specifying methodologies for using historical data or alternative approaches post-operation. The ITS seeks to map BI items to their corresponding entries in financial reporting (FINREP) where feasible.
Alongside this consultation, the EBA has also launched the public consultation on two draft ITS aimed at amending Pillar 3 disclosures and supervisory reporting requirements for operational risk. The amendments implement the new Capital Requirements Regulation and disclosure requirements that are linked to the introduction of the revised framework for the calculation of own funds requirements for operational risk and seek to consolidate the reporting and disclosure requirements for operational risk and the broader Pillar 3 disclosure under one document. Feedback to the consultation papers can be submitted until 21 May and 30 April, respectively. A virtual public hearing has been scheduled for 20 March.

 


Conduct & consumer protection
 
EU Council Endorses Amendments to MiFIR and MiFID II Enhancing Market Data Transparency and Investor Access
The European Council has adopted significant amendments to the EU’s trading regulations, specifically the Markets in Financial Instruments Regulation (MiFIR) and the Markets in Financial Instruments Directive (MiFID II), aimed at enhancing market data transparency and ensuring equitable access to market information for investors. These modifications are designed to consolidate market data at the EU level through the establishment of ‘consolidated tapes’, centralized data feeds for various asset types, to provide investors with real-time access to comprehensive transaction information across the EU. This initiative is expected to facilitate informed decision-making by both professional and retail investors by offering immediate insights into prices, volumes, and transaction timings. Additionally, the new regulations introduce a general prohibition on the practice of ‘payment for order flow’ (PFOF), with a transitional exemption allowed for member states where PFOF is already in practice, mandating its complete phase-out by 30 June 2026. Finally, the amendments also encompass new rules concerning commodity derivatives.

 

OSC Report Highlights Risks of Manipulative Digital Engagement Practices in Online Investing Platforms
The Ontario Securities Commission (OSC) has released a report focusing on digital engagement practices on online investing platforms, particularly “dark patterns,” and their impact on investors. Specifically, the report, titled “Digital Engagement Practices: Dark Patterns in Retail Investing,” identifies how certain design choices, known as dark patterns, can manipulate or mislead users into making decisions beneficial to the business but potentially harmful to the investor. Such practices can include hidden fees, obtaining personal information without informed consent, and making it difficult for users to withdraw funds or close accounts. The report discusses responses from regulators in Canada, the U.S., and the EU to these emerging concerns. Additionally, it explores other digital engagement practices like dark nudges, sludge, and targeted advertising. The research builds on the OSC’s previous findings on digital engagement practices and gamification, emphasizing the negative impact these can have on retail investor behavior.

 


Fintech & ecosystem innovation
 
Jordan Securities Commission and Central Bank of Jordan Launch JoRegBox to Enhance FinTech Ecosystem Integration
The Jordan Securities Commission (JSC) and the Central Bank of Jordan have announced a new partnership aimed at fostering integration and cooperation within the financial technology (FinTech) ecosystem through the establishment of the country’s first regulatory lab, JoRegBox. JoRegBox, which will operate under a cohort system, is intended to support the digital transformation of the financial sector in line with the Economic Modernization Vision 2033 and its Executive Program for 2023-2025 and the Central Bank’s FinTech and Innovation Vision for 2023 and to serve as a platform for promoting innovative financial solutions, enhancing financial inclusion, as well as improving the efficiency and customer experience of financial services. The lab’s operation is supported by the German Agency for International Cooperation (GIZ) through technical assistance, capacity building, and the development of tools and methodologies based on international best practices.

 


Payments & currency
 
ECB Clarifies Digital Euro’s Role as Payment Method, Not Investment, to Alleviate Bank Deposit Concerns
In a new blog article, the European Central Bank (ECB) has addressed continued concerns regarding the potential impact of a digital euro on bank deposits. ECB Executive Board member Piero Cipollone, along with Ulrich Bindseil and Jürgen Schaaf, emphasized that the digital euro is intended as a means of payment rather than an investment vehicle. Notably, they highlight that the ECB has proposed several key measures such as holding limits for digital euro accounts, a prohibition on interest accrual on digital euro holdings, and the prevention of merchants from holding digital euros with a view to discouraging the use of digital euro as a store of value and mitigating the risk of bank disintermediation. They furthermore note the importance of considering the total volume of central bank money in circulation, including banknotes, along with the competitive landscape with new financial technologies and stablecoins in discussions about the impact of a digital euro on bank funding.

 


ESG
 
ASEAN Taxonomy Board Launches Version 2 of Sustainable Finance Framework
The ASEAN Taxonomy Board (ATB) has released the ASEAN Taxonomy for Sustainable Finance Version 2, which has been revised based on stakeholder feedback from a consultation concluded in November 2023. The updated version, which has been effective from 19 February 2024, includes several notable updates aimed at enhancing clarity for users and supporting the ASEAN’s transition to sustainable finance. These include the incorporation of improvements in clarity for definitions and usability, including updated definitions and criteria for environmental objectives and essential criteria under the foundation framework, updated guiding principles for all environmental objectives, the inclusion of a list of so-called red activities and grandfathering rules for green bonds and other financial instruments to support the ASEAN region’s decarbonization efforts. Additionally, the taxonomy also finalizes criteria for coal phase out and introduces future technical screening criteria for the energy sector, alongside streamlined Do No Significant Harm (DNSH) guiding principles and criteria for specific environmental objectives.

 

Hong Kong Green and Sustainable Finance Cross-Agency Steering Group Launches New Web Portal to Enhance Sustainability Reporting
The Green and Sustainable Finance Cross-Agency Steering Group has launched an updated version of its official website with a view to establishing a comprehensive hub for green and sustainable finance information accessible to different stakeholder groups. The updated website features significant enhancements including a Sustainability disclosure e-Portal, which has digitalized the Climate and Environmental Risk Questionnaire for Non-listed companies to facilitate easier sustainability reporting, especially for small and medium-sized enterprises. Additionally, in collaboration with the Hong Kong University of Science and Technology, the Steering Group has introduced tools for the calculation and estimation of greenhouse gas (GHG) emissions, designed to aid both enterprises in calculating their emissions based on actual activities and financial institutions in estimating GHG emissions linked to their investments or loans. The website also centralizes sustainability-related data, regulations, news, events, and opportunities for training and internships, with improved browsing and search functionalities. This initiative is part of the Steering Group’s ongoing efforts to support Hong Kong’s decarbonization objectives and its development as a regional and global hub for green and sustainable finance.

 


Other transversal themes
 
South Korea FSS Announces Enhancements to DART System to Improve Foreign Investor Access
The Financial Supervisory Service (FSS) of South Korea has announced its initiative to enhance the accessibility of the Korean financial markets for foreign investors through a phased expansion of English disclosures. The initiative includes the improvement of its electronic disclosure system, DART, and the introduction of English Open DART. The enhancements to the DART system will enable automatic translation of fixed information in statutory disclosures, such as business reports, allowing users to access disclosure information in real-time. Additionally, the system will be upgraded to facilitate easier data search, including a quick search function and the ability to search by company or report name. A separate section for public offering information will also be established, featuring a public offering bulletin board and calendar. The establishment of English Open DART aims to provide a dedicated service for analyzing and utilizing key disclosure data, with plans to open 83 types of disclosure data through the development of an English API and webpage, accompanied by a video guideline. The FSS anticipates that these improvements will not only broaden the range of information available to foreign investors but also enhance their ability to collect and analyze data in real-time.

 

UK Pensions Regulator Announces Organizational Changes to Enhance Workplace Pensions Supervision
The Pensions Regulator (TPR) has announced significant organizational changes to adapt its oversight of the evolving workplace pensions market, aiming to ensure the delivery of good outcomes for savers while enhancing regulatory effectiveness. Recognizing the shift towards a market dominated by fewer, larger pension schemes, TPR is introducing three new regulatory functions starting from April: Regulatory Compliance, Market Oversight, and Strategy, Policy and Analysis. These functions are designed to protect pension savers’ interests, enhance market performance, and foster innovation, respectively, supported by Operations, Digital, Data and Technology, and People functions. TPR’s Chair, Sarah Smart, highlighted the transition from a fragmented pensions landscape to one characterized by larger schemes, necessitating a change in regulatory approach to safeguard savers’ futures. The pensions market has seen a notable transformation over the past decade, with automatic enrolment and the rise of master trusts, which now account for 90% of defined contribution memberships, significantly altering the pensions landscape. TPR will be recruiting for the three new Executive Director roles, which will be Board-level appointments, with interim appointments from within TPR starting in April 2024.

 

CSA Issues Enhanced Guidance for Conducting Virtual Shareholder Meetings in Canada
The Canadian Securities Administrators (CSA) have issued updated guidance for reporting issuers on conducting virtual shareholder meetings, building on initial advice from February 2022. The guidance comes in response to amendments in certain Canadian corporate statutes post-COVID-19, which now explicitly allow for virtual shareholder meetings, outlining specific requirements for their execution. Despite these changes, stakeholders have voiced concerns regarding the challenges virtual-only meetings pose for shareholder participation and interaction with management. The CSA’s updated guidance aims to address these concerns by emphasizing the importance of clear and comprehensive disclosure in management information circulars and associated proxy materials. This includes detailed information on the registration, authentication, and voting processes for shareholders, as well as how shareholder participation will be managed during the meeting. The CSA also encourages reporting issuers to adopt practices that ensure shareholder participation in virtual meetings is as effective as it would be in person. This includes simplifying registration processes, allowing shareholders to make motions or raise points of order, facilitating direct feedback to management, and ensuring that any virtual meeting platform used supports full shareholder participation. Additionally, the CSA recommends that issuers review their corporate legislation and organizing documents when planning their meetings and consider holding hybrid meetings to allow for both in-person and virtual attendance.

 

U.S. SEC Further Strengthens Ethics Rules Governing Staff Securities Trading
The U.S. Securities and Exchange Commission (SEC), in collaboration with the Office of Government Ethics, has announced the adoption of amendments to its ethics rules, aimed at enhancing and modernizing the ethics compliance program for its employees, their spouses, and minor children. These amendments build upon the SEC’s existing ethics requirements, which mandate preclearance of securities transactions and adherence to minimum holding periods among other restrictions. Notably, the updated rules extend prohibitions to include investments in financial industry sector funds by SEC employees due to potential conflicts of interest. Additionally, the amendments introduce an automated electronic system for reporting securities transactions and holdings by allowing financial institutions to directly transmit relevant data to the SEC. This system is expected to improve real-time detection and remediation of violations, streamline reporting processes, and provide a reliable source for compliance monitoring. Furthermore, the amendments optimize resource use by exempting diversified mutual funds from certain requirements due to their lower associated ethics risks, while mutual funds focusing on specific sectors or regions remain regulated under these rules. This initiative reflects the SEC’s commitment to maintaining public trust through rigorous ethics compliance among its personnel.

 


Cross-border cooperation
 
CBCG Cooperates with Bank of Italy to Advance Cloud Computing Integration
The Central Bank of Montenegro (CBCG) has initiated bilateral cooperation with the Bank of Italy on cloud computing as part of the IPA regional project titled “Programme for Strengthening the Central Bank Capacities in the Western Balkans with a view to the Integration to the European System of Central Banks – Phase II”. The collaboration commenced with a two-day visit from the Bank of Italy’s experts to Podgorica, marking the first of three planned bilateral visits aimed at integrating cloud solutions to modernize the CBCG’s information system and bring it in line with the technical and security standards of the European Union’s central banking system. During the visit, the Bank of Italy’s experts shared insights on modern technological solutions for implementing cloud technologies and services within their information system. Conversely, CBCG representatives outlined the unique aspects of their information system and current legislation to the Bank of Italy, facilitating a discussion on the optimal approaches for adopting cloud-based technologies.

 


Leadership changes & appointments
 
Moroccan CMA CEO Re-appointed for Third Term as IOSCO’s AMERC Chair
The Moroccan Capital Market Authority has announced the re-election of Ms. Nezha HAYAT, its Chairperson and CEO, as Chair of the Africa and Middle East Regional Committee (AMERC) of the International Organization of Securities Commissions (IOSCO) for a third consecutive term. The AMERC serves as a platform for financial market regulators from the Africa and Middle East region, comprising 28 regular and 14 associate members, to discuss and promote capital market development issues specific to the region.

 

Werner Liedtke Appointed as Interim Commissioner of Canada’s Financial Consumer Agency
The Department of Finance Canada has announced the appointment of Werner Liedtke as the interim Commissioner of the Financial Consumer Agency of Canada (FCAC), succeeding Judith Robertson. The FCAC, established in 2001, contributes to safeguarding the rights and interests of consumers of federally regulated financial products and services, enhancing financial literacy, and supervising the compliance of financial institutions with consumer protection measures. Liedtke is expected to serve in the role until a permanent Commissioner is appointed.

 

BCRP Names Paul Castillo as New General Manager
The Central Bank of Peru has announced the appointment of Paul Castillo Bardález as the new general manager, effective April 1. Castillo, who has a 28-year tenure at the Central Bank, has held several key positions within the institution, including manager of Monetary Operations and Financial Stability, manager of Monetary Policy, deputy manager of Monetary Policy Design, head of the Real Sector Policy Department, and specialist in various other departments. Castillo succeeds Eduardo Torres Llosa who served in the position from March 2022.