Global Regulator & Central Bank News Roundup

Volume 09/2024 (February 26 – March 3)


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
Basel Committee Advances Banking Supervision with Core Principles Revision and Measures to Address G-SIB Window-Dressing Practices
During its recent meeting in Madrid the Basel Committee on Banking Supervision (BCBS) has advanced several critical matters. Notably, the Committee has approved revisions to the Basel Core Principles for effective banking supervision to reflect supervisory insights and banking system changes since the last update in 2012, which are due to be published after the International Conference of Banking Supervisors in April 2024. Additionally, it has continued to address the issue of window-dressing by some banks within the global systemically important banks (G-SIBs) framework. This practice, which involves banks temporarily reducing their systemic footprint to influence G-SIB scores, undermines regulatory objectives and financial market operations. To combat this, the Committee plans to consult on measures to reduce window-dressing behavior and will publish a consultation paper alongside a working paper summarizing empirical analyses on this issue. The Committee also discussed climate-related financial risks, agreeing to publish a discussion paper on the use of climate scenario analysis by banks and supervisors. Finally, the Committee also reviewed the implementation status of Basel III reforms, noting progress but also uneven implementation across members. It reaffirmed its expectation for full and consistent implementation of all Basel III aspects as soon as possible and approved a work plan for jurisdictional assessments under its Regulatory Consistency Assessment Programme.


FSB Peer Review Proposes Enhancements to Swiss Too-Big-To-Fail Regime for G-SIBs in Five Areas
The Financial Stability Board (FSB) has released a peer review of Switzerland, focusing on the country’s implementation of too-big-to-fail (TBTF) reforms for global systemically important banks (G-SIBs). This review, which was scoped prior to the UBS-Credit Suisse merger, evaluated Switzerland’s progress in enhancing supervisory oversight, prudential measures, and the resolution regime for G-SIBs since the FSB’s issuance of the Key Attributes of Effective Resolution Regimes for Financial Institutions in 2011. While acknowledging significant advancements in establishing an effective TBTF regime, including through the introduction of requirements that exceed international minimum capital and liquidity standards, and a more resource-intensive supervision of G-SIBs, the review identifies several areas for further improvement to strengthen the framework. Key recommendations cove five areas and encompass inter alia increasing the resources of the Swiss Financial Market Supervisory Authority (FINMA) for supervision, enhancing supervisory framework and early intervention powers, strengthening resolution planning and placing enhanced emphasis on the credibility and feasibility of banks’ recovery plans, clarifying non-viability criteria as well as further advancing the framework for liquidity support for recovery and resolution. The changes are considered of particular importance in light of the UBS-Credit Suisse merger and the associated risks.


South Korea FSC Implements Stressed Debt Service Ratio Requirements for Home-backed Mortgage Loans
The South Korea Financial Services Commission (FSC) has announced the implementation of the stressed debt service ratio (DSR) rule for home-backed mortgage loans issued by banks, effective February 26. Under the new rule, an additional stress rate of 0.38 percent will be imposed when calculating a borrower’s DSR, thereby lowering the maximum mortgage amount a borrower can take out by a magnitude of two to four percent. The stress rate seeks to account for potential increases in future interest rates and mitigate potential shocks to borrower. While initially focused on home-backed mortgage loans, the measure is planned to be further extended in the second half of 2024 to credit loans from banks and home mortgage loans from non-banks, with plans to apply it to all types of household loans subject to the DSR rule by 2025. The FSC expects that the initiative will enhance lenders’ assessment of borrowers’ repayment capabilities from a mid- to long-term perspective and heighten consumer awareness regarding the risks associated with long-term interest rate fluctuations.


FATF Seeks Stakeholder Input on Enhancing Payment Transparency
The Financial Action Task Force (FATF) has launched a public consultation with a view to implementing potential updates to its Recommendation 16 (R.16) on Payment Transparency and the associated Interpretive Note (INR.16) and glossary of specific terms to ensure they align with evolving payment business models and messaging standards. The initiative is driven by the need to maintain technology-neutral FATF Standards that adhere to the principle of ‘same activity, same risk, same rules’, with the ultimate goal of facilitating cross-border payments that are faster, cheaper, more transparent, and inclusive while ensuring safety and security and aligns with the objectives outlined in the G20 Priority Action Plan. Areas in focus include inter alia transparency requirements on exemption for purchase of goods and services using cards, Improving the content and quality of basic originator and beneficiary information in payment messages, obligations on beneficiary financial institutions to check alignment of beneficiary information in payment messages and the definition of payment chain and conditions for net settlement. Responses to the consultation can be provided until early May.


FMSB Issues Transparency Draft for New Client Onboarding Standard to Enhance KYC and AML Compliance
The Financial Markets Standards Board (FMSB) has released a transparency draft proposing a new standard for documentation requirements and processes for obtaining documents during the client onboarding and review processes under UK KYC and AML regulations. The proposed standard establishes core principles for selecting data points and sourcing evidence and setting out universally acceptable data points, sources, and documents to meet the required credibility level. Objective of the standard is to improve efficiency and client experience by harmonizing documentation requirements, thereby facilitating faster KYC processes and providing the foundation for future digitalization and automation. It is intended for use in circumstances where UK regulations are triggered, independent of the client’s jurisdictions, and set to apply to all client industries. Comments on the proposals can be submitted until early May.


Swiss Federal Department of Finance Report Highlights Increasing AML/CFT Risks in Crypto Sector
In a new report by the interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMF), the Swiss Federal Department of Finance has highlighted an increase in money laundering and terrorist financing risks associated with cryptocurrencies . The report highlights the growing integration of virtual assets (VAs) into the financial system, with a notable increase in financial intermediaries in Switzerland offering VA services. This integration has led to a blurring of lines between traditional financial services and the virtual asset sector, with cryptocurrencies increasingly being exploited for illicit activities including theft, fraud, and transnational crimes. The CGMF report points out a significant rise in suspicious activity reports (SARs) related to virtual assets, with nearly 14% of all SARs in 2022 being VA-related and associated loss amounts reaching into the double-digit millions in Switzerland. To mitigate these risks, the report proposes several action steps including addressing data and knowledge gaps within the virtual asset sector, encouraging proactive reporting of suspicious activities by financial intermediaries involved in VA transactions, ensuring adequate resources are allocated to combat these risks, and enhancing international cooperation to counter the misuse of virtual assets effectively.


Conduct & consumer protection
EU Council Approves Amendments to AIFM Directive and UCITS Framework To Enhance Capital Market Integration and Investor Protection
The European Council has announced the adoption of new regulations aimed at enhancing the European capital markets and bolstering investor protection within the EU. These regulations amend the directive governing alternative investment fund managers, which includes managers of hedge funds, private equity funds, private debt funds, real estate funds, and other alternative investment funds. Additionally, the directive updates the framework for undertakings for collective investment in transferable securities (UCITS), which are EU-harmonized retail investment funds like unit trusts and investment companies. The amendments are designed to improve the integration of asset management markets in Europe by enhancing liquidity management tools for fund managers, introducing an EU framework for loan-originating funds with added requirements to mitigate financial stability risks and ensure investor protection, and implementing enhanced rules for delegation by investment managers to third parties with reinforced supervision. The amendments are part of the capital markets union (CMU) package presented by the Commission in November 2021.


OeNB Introduces Financial Literacy App “Meiki” for 9-12 Year-Olds
The Austrian National Bank (OeNB) has launched a new financial education app named “Meiki” aimed at enhancing financial literacy among 9- to 12-year-olds, in line with the financial and economic competence goals of the new curriculum for primary and secondary education. The new app, designed for both students and teachers, incorporates gamification to make learning about financial topics such as managing income and expenses, classifying wishes and needs, consumer behavior, forms of payment, and understanding inflation engaging through a variety of game types. “Meiki” also features a savings goal function to support the curriculum’s emphasis on responsible money management and saving. To aid teachers in integrating this digital tool into their lessons, the OeNB provides accompanying analog materials such as worksheets and a workbook available for download or order. Additionally, a class high score function is designed to track students’ progress and foster motivation.


Fintech & ecosystem innovation
U.S. Treasury Recoups $375M in FY2023 Through AI-Enhanced Fraud Detection Measures
In a new press release, the U.S. Department of the Treasury has announced the recovery of over $375 million in fiscal year 2023 through the implementation of an enhanced fraud detection process that leverages artificial intelligence (AI). The initiative, led by the Treasury’s Office of Payment Integrity (OPI) within the Bureau of the Fiscal Service, was introduced in response to a 385% increase in check fraud nationwide since the pandemic. By utilizing AI, the Treasury has been able to strengthen and expedite the process of identifying and recovering potentially fraudulent payments from financial institutions, thereby safeguarding taxpayer dollars and ensuring the integrity of payments such as social security benefits and tax refunds. The initiative comes in response to significant increases in Suspicious Activity Reports (SARs) related to check fraud with more than 350,000 SARs filed in 2021—a 23% increase from 2020—and more than 680,000 SARs filed in 2022.


CVM Joins MCTI and Finep’s AI Solutions for Government Program to Enhance Regulatory Efficiency
The Brazilian Securities and Exchange Commission (CVM) has announced its participation in the launch of the Artificial Intelligence (AI) Solutions for the Government – 3rd Bidding Round, an initiative aimed at providing economic grants to startups for developing AI solutions to address challenges identified by federal public entities, including the CVM itself. The initiative, which is supported by several key organizations, including the Ministry of Science, Technology and Innovation (MCTI) and the Ministry of Management and Innovation in Public Services (MGISP), seeks to invest over R$ 20 million in AI solutions. Since its launch in 2022, the program has resulted in over 90 project registrations. The CVM specifically highlighted two technological challenges for which it seeks AI solutions: improving the efficiency of issuer record analysis and identifying non-explicit links between people or institutions. Startups interested in these challenges can submit their proposals until April 11.


Payments & currency
Reserve Bank of India Fosters Cross-Border Payments Connectivity with Nepal and Mauritius
The Reserve Bank of India (RBI) has announced two new initiatives aimed at fostering cross-border payments connectivity. This includes the signing and exchange of Terms of Reference with the Nepal Rastra Bank (NRB) for the integration of their respective fast payment systems, the Unified Payments Interface (UPI) of India and the National Payments Interface (NPI) of Nepal, which seeks to facilitate instant, low-cost cross-border remittances between the two countries. The Terms of Reference set the foundation for interlinking UPI and NPI, with a formal launch date for the commencement of operations to be announced in the future. Additionally, the RBI has launched RuPay cards and Unified Payments Interface (UPI) connectivity between India and Mauritius, as well as UPI connectivity between India and Sri Lanka. This initiative facilitates the issuance of RuPay cards by banks in Mauritius under the MauCAS card scheme, marking Mauritius as the first country outside Asia to adopt RuPay technology. The cards are usable at ATMs and PoS terminals in both Mauritius and India. Similarly, Indian travelers can make QR code-based payments in Sri Lanka using their UPI apps.


EU Council Ratifies Regulation to Enhance Instant Euro Payments and Financial Sector Autonomy
The European Council has announced the adoption of new regulation on instant payments aimed at universally enabling instant payments in euros for both consumers and businesses within the European Union (EU) and the European Economic Area (EEA) and enhancing the strategic autonomy of the European economic and financial sector by mitigating the current over-reliance on financial institutions and infrastructures based outside of the EU. The new regulation requires that instant payments in euros are executed within ten seconds at any time, including outside of regular business hours, within the same country or to another EU member state and mandates payment service providers such as banks to offer the service of sending and receiving instant payments in euro at charges not higher than those for standard credit transfers. The regulation also grants access for payment and e-money institutions (PIEMIs) to payment systems, with appropriate safeguards to ensure no additional risk to the system. Finally, the regulation also introduces new security measures in an effort to preempt mistakes or fraud by requiring instant payment providers to verify the match between the beneficiary’s International Bank Account Number (IBAN) and name. The new regulations are set to come into force after a transition period.


Hong Kong SFC Publishes Prototype Green Fintech Map
The Hong Kong Securities and Futures Commission (SFC), in collaboration with Cyberport and Invest Hong Kong (InvestHK), has released the Prototype Hong Kong Green Fintech Map as part of its Green and Sustainable Finance Cross-Agency Steering Group’s initiative. The map serves as a comprehensive directory of over 50 Green Fintech firms based in Hong Kong, detailing their offerings across five key areas: ESG data and analytics, ESG disclosures and regulatory reporting, climate risk modeling and assessment, green digital finance and investments, and carbon credit trading and analytics. Launched during the Hong Kong Green Week, the initiative aims to facilitate the integration of green finance and Fintech to support the transition towards a green economy and encourage early adoption of technological solutions in finance, aiding in regulatory compliance, investment decisions, and new product development. The map is accessible on the Steering Group’s website.


Bank Negara Malaysia and Securities Commission Malaysia Outline 2024 Climate Change Strategy at 12th Joint Committee on Climate Change Meeting
Malaysia’s Joint Committee on Climate Change (JC3) has held its 12th meeting, focusing on the review of ongoing work and the alignment on priorities and action plans for the year ahead. Overall, the JC3 plans to continue its collaboration with the government, financial industry, and partners to support a just and orderly economic transition. The committee’s focus will be on increasing financial flows for climate transition and adaptation, building resilience against climate-related risks, and integrating broader considerations of nature and environmental risks into financial institutions’ climate strategies. JC3 will also support the financial industry’s development of credible transition plans, including publishing a JC3 Transition Finance Framework. The committee acknowledged the need to expand public-private partnerships and blended finance structures to mobilize capital. The Greening Value Chain (GVC) pilot program’s success has led to plans for its expansion among government-linked companies (GLCs) and public listed companies. JC3 also plans to implement a new pilot program focusing on Greening Industrial Parks (GIP) to support green infrastructure financing. Finally, the committee will continue supporting SMEs’ transition by providing access to finance, capacity building, practical tools, and a one-stop information portal on climate transition.


EIOPA Explores Consumer Hesitancy in NatCat Insurance Uptake, Proposes Behavioural Interventions
The European Insurance and Occupational Pensions Authority (EIOPA) has released a revised Staff Paper focusing on the demand-side factors that contribute to the low uptake of natural catastrophe (NatCat) insurance in Europe, highlighting a significant protection gap with only about a quarter of NatCat losses being insured. The paper identifies several consumer barriers to purchasing NatCat insurance, such as a focus on premiums over product usefulness, unclear terms and conditions, previous negative insurance experiences, misperceptions about catastrophe likelihood, expectations of state intervention, and perceived complexity in obtaining insurance. To address these issues, EIOPA proposes solutions based on behavioural research, including raising risk awareness through public tools and teachable moments, promoting standardized product comparisons, simplifying the purchasing process with digital options, and offering incentives for risk mitigation. The paper builds on EIOPA’s previous research on supply-side limitations and is part of broader efforts with the European Central Bank to enhance NatCat insurance uptake through policy proposals and a natural catastrophe dashboard that tracks country-level data on various perils.


Other transversal themes
European Commission Reports Progress on Streamlining EU Financial Services Reporting Requirements
The European Commission has published a report detailing the progress of its strategy on supervisory data in EU financial services, indicating that efforts to streamline supervisory reporting requirements and enhance their consistency are on track. Initiated in December 2021, the strategy aims to establish a system that ensures the delivery of accurate, consistent, and timely data to supervisory authorities at both EU and national levels, thereby reducing the reporting burden on financial institutions. The strategy’s implementation is a collaborative long-term project involving the European Supervisory Authorities (ESAs), other European authorities, and industry experts. Since inception, several critical milestones have been achieved, including proposed improvements in sectoral reporting frameworks (e.g., banking package, bank crisis management proposal), mandates for further integration of reporting and data standardization across sectors issued to ESAs, progress in data sharing, and the application of new technologies. Additionally, in October 2023, a set of proposals was adopted to facilitate data sharing between financial sector authorities and minimize redundant reporting.


ECCB Announces Planned Creation of New Regional Regulatory Body for ECCU Non-Bank Financial Institutions
The Eastern Caribbean Central Bank (ECCB) has announced plans to establish a Regional Standards Setting Body, responsible for the regulation of non-bank financial institutions within the Eastern Caribbean Currency Union (ECCU) including credit unions, insurance companies, and development banks. The establishment of this body is expected to bridge the gap between national and regional regulation and supervision, reduce compliance costs for institutions, ensure uniform application of regulations to prevent regulatory arbitrage, as well as contribute to a single financial space in the ECCU more broadly. Detailed timelines for the establishment of thew new body have not yet been shared. As a next step in process, the ECCB is looking to actively engage with member countries and stakeholders to inform the detailed design of the body.


Leadership changes & appointments
OECD Names Alvaro Santos Pereira as Incoming Chief Economist
The OECD has announced the appointment of Alvaro Santos Pereira as its next Chief Economist, effective from 1 June 2024. Pereira joined the OECD in March 2014 as the Director of Country Studies in the Economics Department in which he oversaw the peer review process for the OECD’s Economic Surveys, identifying challenges and developing recommendations to enhance the long-term economic performance of Member and Partner countries. Previously, he served as the OECD’s Chief Economist on two occasions, with his most recent term spanning from July 2022 to May 2023, before taking on his current position as Director of the Policy Studies branch of the Economics Department in October 2023. In his forthcoming role, Pereira will lead economic analysis and policy advice aimed at supporting Member countries to navigate post-COVID-19 economic recovery and address challenges arising from Russia’s ongoing war against Ukraine, while also focusing on facilitating structural transformations for green and digital transitions.


Clare Lombardelli Appointed as Bank of England’s New Deputy Governor for Monetary Policy
The Bank of England has announced the appointment of Clare Lombardelli as the next Deputy Governor for Monetary Policy, effective from 1 July 2024, for a term of five years, following approval by His Majesty The King. Lombardelli, who will be succeeding Ben Broadbent, is tasked with overseeing the UK’s monetary policy formulation and implementation. Her responsibilities will include leading the Bank’s research, data and analytics efforts, and she will be a key member of several committees including the Monetary Policy Committee, the Financial Policy Committee, and the Court of the Bank of England. Additionally, Lombardelli will lead initiatives in response to Ben Bernanke’s review of the Bank’s forecasting process and drive forward a new data and analytics strategy in collaboration with the Bank’s Chief Operating Officer. Furthermore, she will lead the Centre for Central Banking Studies and represent the Bank on various national and international bodies.


Bahamas Securities Commission Executive Director Re-elected for Third Term as IOSCO IARC Vice Chair
Executive Director of the Securities Commission of The Bahamas, Christina Rolle, has been re-elected as Vice Chair of the Inter-American Regional Committee (IARC) of the International Organization of Securities Commissions (IOSCO) for the term 2024-2026. The re-election marks Rolle’s third term in the role. The IARC, one of IOSCO’s four regional committees, focuses on securities regulation issues within the Inter-American region, providing a platform for members to discuss IOSCO policy initiatives, regulatory challenges, and share regulatory experiences, with membership of securities regulators from across North, Central and South America, and the Caribbean.