Global Regulator & Central Bank News Roundup

Volume 10/2024 (March 4 – March 10)

 

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 Proposes Revisions to Thwart G-SIB Window-Dressing Tactics
The Basel Committee on Banking Supervision (BCBS) has initiated a consultation on measures to curb window-dressing practices among global systemically important banks (G-SIBs). The proposed measures aim to target the manipulation of banks’ systemic importance indicators around the key reference dates for reporting and public disclosure of G-SIB scores. This behavior, which is characterized by banks contracting their market activity and footprint during the reference periods for G-SIB score reporting and disclosure, can have implications for micro- and macro-prudential policy and financial stability as well as undermine critical policy objectives. The proposed revisions would mandate that banks report and disclose G-SIB indicators based on average values throughout the reporting year, as opposed to only year-end figures, thereby limiting the potential for regulatory arbitrage. Alongside the consultation, the Committee has published a working paper that provides supporting evidence for the observed behavior. Feedback on the consultation can be provided until 7 June.

 


AML & CFT
 
Wolfsberg Group Releases Revised Country Risk FAQs
The Wolfsberg Group has released an updated version of its Country Risk Frequently Asked Questions (FAQs), aimed at providing a deeper understanding of how country risk factors into anti-money laundering (AML) and counter-terrorism financing (CTF) efforts, including customer due diligence (CDD) processes. The revision is intended to offer a clearer definition of country risk within the broader scope of CDD and enhanced due diligence (EDD) and the approaches for determining country risk. Among other things, they detail the criminal, political, and regulatory considerations that financial institutions should account for when evaluating country risk, including the types of data sources and the frequency of their update. Besides that the FAQ address a range of other critical points including inter alia the implications of sactions in the context of AML/CFT country risk The FAQ also address the implications of sanctions in the context of AML/CTF country risk, approaches for assessing the effectiveness of country risk approaches and how country risk ratings should drive CDD and EDD considerations.

 


Cyber & operational resilience
 
Reserve Bank of New Zealand Mandates Formal Cyber Resilience Reporting for Financial Entities
Following consultation, the Reserve Bank of New Zealand has announced the implementation of formal cyber resilience reporting requirements for entities under its purview. The new reporting requirements, developed in collaboration with the Financial Markets Authority (FMA) to ensure a streamlined process for entities regulated by both bodies, require immediate reporting of material cyber incidents within 72 hours, periodic reporting of all cyber incidents as well as reporting by entities to the RBNZ on their self-assessment against the RBNZ’s Guidance on Cyber Resilience. The frequency with which these measures apply is proproportionate to the size of the entities, with large entities obligated to submit all cyber incidents every six months and complete the self-assessment in a two-year interval. The new measures are set to be phased in throughout 2024.

 

EU Council and Parliament Reach Provisional Accord on Enhanced Cybersecurity Framework and Emergency Response Mechanisms
The European Council has announced a provisional agreement between the Council presidency and European Parliament negotiators on the so-called ‘Cyber Solidarity Act’ along with a targeted amendment to the Cybersecurity Act (CSA) in an effort to strengthen the EU’s cybersecurity framework. Specifcally, the agreement seeks to enhance the EU and its member states’ capabilities in detecting, preparing for, responding to, and recovering from large-scale cyber threats or incidents. To that end, it introduces a new regulation for establishing a cyber security alert system across the EU, comprising national and cross-border cyber hubs for effective threat detection and response. Additionally, it outlines the creation of a cybersecurity emergency mechanism to improve preparedness and response capabilities, including a new EU cybersecurity reserve of private sector incident response services. The agreement also includes financial mutual assistance and an evaluation mechanism to assess the effectiveness of these initiatives. The amendment to the CSA focuses on enabling European certification schemes for managed security services to ensure high-quality cybersecurity services across member states. This includes clarifying managed security services’ definition, aligning certification schemes’ security objectives with those under CSA, and specifying the role of the EU Agency for cybersecurity role in consulting relevant actors.

 

Federal Reserve Board Finalizes Enhanced Operational Risk Management Standards for Key Financial Market Utilities
The Federal Reserve Board has announced the finalization of its rule revising risk management requirements for systemically important financial market utilities (FMUs) under its supervision. The final rule, which is largely consistent with the original proposal, introduces more detailed and clear requirements in four critical areas of operational risk management: (1) incident management and notification, (2) business continuity management and planning, (3) third-party risk management, and (4) the review and testing of operational risk management measures. This also includes the requirement to establish an incident management framework and to advance cyber resilience capabilities among FMUs.

 


Conduct & consumer protection
 
APRA and ASIC Finalize Rules and Guidance for New Financial Accountability Regime
Following earlier consultation, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have released the final rules and additional guidance to facilitate the financial services industry’s compliance with the new Financial Accountability Regime (FAR), which introduces a more stringent framework for responsibility and accountability among directors and senior executives of APRA-regulated entities and which supersedes the Banking Executive Accountability Regime (BEAR). The newly released materials encompass rules detailing the information required for the FAR register of accountable persons, transitional rules for authorised deposit-taking institutions (ADIs) regarding their accountable persons under BEAR at the transition to FAR, descriptions of ADI key functions to aid in allocating key functions within banking entities, and reporting form instructions for banking entities to submit necessary information to APRA and ASIC.The final rules and guidance are part of a comprehensive FAR information package previously released on 3 October 2023. The FAR is set to be implemented in the banking industry on 15 March 2024, with its application in the superannuation and insurance sectors beginning on 15 March 2025. Future consultations will focus on proposed key functions for insurance and superannuation entities.

 

UAE Central Bank Inaugurates New Independent Ombudsman Unit Sanadak
The Central Bank of the UAE has announced the launch of operations of Sanadak, the UAE’s first financial and insurance ombudsman. Sanadak, an independent Ombudsman Unit. Sanadak has been established to protect consumer rights and resolve complaints against financial institutions and licensed insurance companies and takes over the consumer complaint-handling responsibilities from the Central Bank of the UAE’s Consumer Protection Department and Insurance Dispute Resolution Committee. The shift in responsibilities is expected to streamline the complaint resolution process, making it more efficient and effective by offering a transparent and impartial mechanism. Sanadak offers multiple channels for complaint submission, including a website, mobile application, a contact center, as well as in-person submissions at its Abu Dhabi office, with special provisions for People of Determination and the elderly.

 

CFPB Finalizes Rule to Cap Credit Card Late Fees at USD 8
The Consumer Financial Protection Bureau (CFPB) has finalized its rule to limit excessive credit card late fees. Under the new rule, the typical credit card late fee is lowered from USD 32 to USD 8 for issuers with 1+ million open accounts. Additionally, the rule halts the automatic annual inflation adjustment for late fees and mandates that larger issuers must justify any higher charges by demonstrating they are necessary to cover actual collection costs. The rule addresses the exploitation of a loophole by credit card giants since 2010, which allowed them to inflate fees under the guise of covering collection costs while significantly increasing their profits through these fee income, and forms part of the CFPB’s broader efforts to foster competition and address issues within credit card markets. It is estimated that the reduction in fees will translate into average saving of USD 220 for the more than 45 million individual consumers affected by these charges. Ranking Member Tim Scott from the U.S. Senate Committee on Banking, Housing, and Urban Affairs in a statement expressed his opposition to the new rule, arguing that reducing late penalty caps could negatively impact credit availability for those in need, increase rates for borrowers who pay on time but maintain a balance, and elevate the likelihood of late payments. Likewise, the Chairman of the House Financial Services Committee, Patrick McHenry, publicly criticized the rule, stating that it will increase borrowing costs for consumers.

 

CONDUSEF Expands Project Minerva to Further Strengthen Women’s Financial Skills
Mexico’s National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF) has announced the introduction of two new educational modules to is Project Minerva, which is aimed at enhancing women’s financial skills. The new modules, focusing on entrepreneurship and financial fraud prevention, are part of a broader initiative to provide women with the necessary tools and knowledge to navigate financial products and services effectively. Since its inception in 2020, the Project Minerva has offered a gender-focused financial education platform, featuring a variety of online modules that cover topics such as budgeting, savings, credit, insurance, and women’s economic participation. The latest additions aim to equip women with the skills to identify business opportunities and protect themselves against financial fraud. The initiative targets women aged 15 and above, including those in vulnerable situations or participating in social programs, emphasizing the role of financial knowledge in breaking cycles of economic dependency and violence.

 


Fintech & ecosystem innovation
 
HKMA Launches Project Ensemble to Foster Hong Kong’s Tokenisation Ecosystem
The Hong Kong Monetary Authority (HKMA) has launched Project Ensemble, a strategic initiative aimed at strengthening the development of the tokenisation market in Hong Kong through the introduction of a new wholesale central bank digital currency (wCBDC) project. The project is designed to investigate and implement innovative financial market infrastructure (FMI) that enables efficient interbank settlement of tokenised money via wCBDC, with an initial focus on tokenised deposits. A core component of Project Ensemble is the establishment of a wCBDC Sandbox, which is set to be launched within the year and which will serve as a platform for researching and testing various use cases for tokenisation including the settlement of real-world assets like green bonds and carbon credits. Additionally, the HKMA plans to create a wCBDC Architecture Community comprising local and multinational banks, digital asset industry leaders, technology firms, and the CBDC Expert Group to help define industry standards and set out a future-oriented strategy. Project Ensemble builds upon previous experiments conducted with major financial institutions including HSBC, Hang Seng Bank, and Ant Group in 2023 as well as is closely linked to other initiatives such as the e-HKD and projects in collaboration with the Bank for International Settlements Innovation Hub.

 

EBA Launches Consultation on Guidelines for Redemption Plans under MiCAR
The European Banking Authority (EBA) has initiated a consultation on the development of Guidelines for the orderly redemption of asset-referenced tokens (ART) and e-money tokens (EMT) in scenarios where issuers fail to meet their obligations under the Markets in Crypto-Assets Regulation (MiCAR). Specifically, the proposed Guidelines set out the main principles governing the redemption plan, including the equitable treatment of token holders, outline the key steps for the orderly and timely implementation of the plan’s components along with the triggers for its implementation, as well as specify the content of the redemption claims and the distribution plan. Feedback to the proposed Guidelines can be provided until 10 June. A virtual public hearing has been scheduled for 22 May.

 


ESG
 
SEC Finalizes Rules for Enhanced Climate Risk Disclosure Requirements in Public Company Filings
The Securities and Exchange Commission (SEC) has adopted the final new rules on climate-related disclosures by public companies and in public offerings. Initially proposed on March 2022, the rules mandate registrants to disclosure an extensive set of information. These include inter alia (1) the material climate-related risks and their impact on business strategy, results of operations, or financial condition, (2) activities undertaken to assess, mitigate or adapt to such risks and the integration of these activities within broader risk management efforts, (3) the role of the board of directors in their oversight capacity as well as management’s role in assessing and managing risks, as well as (4) any climate-related targets or goals that could materially affect the registrant. Additionally, for certain filers, there will be requirements to disclose material Scope 1 and Scope 2 emissions along with an assurance report at specified levels of assurance. Finally, the rules also cover disclosures related to severe weather events, carbon offsets, renewable energy credits, and how these factors impact financial estimates and assumptions. The rules will be phased in starting in 2025 up until 2033 with varying compliance dates by registrant and disclosure type.

 

CSA Updated ESG Disclosure Guidance for Investment Funds in Canada
The Canadian Securities Administrators (CSA) has updated its guidance for investment funds on ESG (Environmental, Social, and Governance)-related disclosure practices. The guidance, initially published in January 2022, covers various areas of ESG-related disclosures including in relation to investment funds’ investment objectives, fund names, investment strategies, risk disclosure, continuous disclosures and sales communications as well as delineates the types of investment funds that can market themselves as ESG-focused or as incorporating ESG factors into their investment strategies. Updates since the initial release encompass areas previously not covered. Most notably, the update clarifies disclosure expectations for funds that may not explicitly reference ESG factors in their investment objectives but employ ESG strategies in their investment processes.

 


Other transversal themes
 
UK House of Commons Treasury Committee Releases Raises Concerns Over Lack of Progress in Creating Supporting Conditions for Women in Financial Services
The UK House of Commons Committee has released its sixth progress report discussing progress on conditions for women within the UK financial services sector. Overall, the report stressed that despite some improvements in women’s representation in senior roles since the initial 2018 inquiry, there remains significant lack of progress in combating sexual harassment, bullying, and creating an inclusive culture. While recognizing the positive impact of several initiatives, the Committee expressed concern over their limitations and potential unintended consequences. In particular, it questioned the regulatory proposals by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) for extensive data reporting and target setting on diversity, fearing they might not effectively address cultural issues or impact smaller firms with worse cultures. The FCA agreed with the observations and noted its intention to expand the focus on proposals that address misconduct, including bullying and sexual harassment more specifically as well as to explore recommendations made by the Committee on improved whistleblower protections in the face of sexual harassment and legislative actions against misuse of non-disclosure agreements (NDAs) in harassment cases.

 

SEC Adopts Enhanced Disclosure Rules for Broker-Dealer Order Execution Quality
The U.S. Securities & Exchange Commission (SEC) has announced the adoption of final rules aimed at enhancing the disclosure requirements for order execution quality. The rules extend the disclosure requirements to large broker-dealers, defined as those with over 100,000 customers, which represent a significant portion of customer accounts and order volumes in the market, marking a significant expansion from the previous Rule 605, which only mandated such disclosures from market centers. The updated rules also introduce a requirement for more detailed types of data in execution quality reports, including percentage-based metrics like the effective over quoted (E/Q) spread, and apply to a broader range of order sizes and types. Additionally, market centers and broker-dealers are now required to produce summary reports on execution quality that are accessible and understandable to everyday investors, moving away from the complex presentations that have been likened to “The Matrix” movie’s opening credits. The changes are intended to improve transparency for investors by enabling them to better assess and compare the execution quality of brokers, thereby fostering competition in the market

 

NAIC Launches Multi-State Property & Casualty Market Data Collection Initiative Targeting Over 80% of U.S. Market Share
The National Association of Insurance Commissioners (NAIC) has announced the initiation of a comprehensive, multi-state Property & Casualty Market Intelligence Data Call (PCMI) aimed at collecting and analyzing data from over 400 property insurers, representative of more than 80% of the U.S. property insurance market by premium volume. The initiative, coordinated by the NAIC’s Property and Casualty Insurance (C) Committee, seeks to provide state insurance regulators with a detailed understanding of market dynamics, insurance costs, coverage options, and the identification of potential coverage gaps and affordability issues and comes in response to the rising costs of property insurance and the challenges in coverage that have been exacerbated by natural disasters, reinsurance costs, and inflationary pressures. The data call involves the collection of over 70 data points at ZIP-code-level granularity on various aspects such as premiums, policies, claims, losses, and deductibles. Insurers have a 90-day window to submit their data.

 


Leadership changes & appointments
 
IFRS Foundation Confirms Erkki Liikanen as Chair Until 2027 to Advance Sustainability and Accounting Standards
The International Financial Reporting Standards (IFRS) Foundation has announced the reappointment of Erkki Liikanen as Chair of the IFRS Foundation Trustees for a third term until September 2027. Liikanen, who has been at the helm since October 2018 and brings significant expertise and experience through roles as Governor of the Finnish Central Bank and European Commissioner, has been a critical driver in broadening the Foundation’s scope to include sustainability disclosures and improving its governance framework. His re-appointment seeks to contribute to leadership continuity as the Foundation focuses on institutionalizing the work of the International Sustainability Standards Board (ISSB) and enhancing the International Accounting Standards Board’s (IASB) IFRS Accounting Standards.

 

Hong Kong SFC Chief Executive to Chair IOSCO’s Asia-Pacific Regional Committee Starting May 2024
The Hong Kong Securities and Futures Commission (SFC) has announced the appointment of its Chief Executive Officer, Ms. Julia Leung, as the Chair of the Asia-Pacific Regional Committee (APRC) of the International Organization of Securities Commissions (IOSCO). Ms. Leung’s term as Chair will commence following the IOSCO Annual Meeting in May 2024 and will last for two years. The APRC, as one of IOSCO’s four regional committees, focuses on regional securities regulation issues and includes 21 jurisdictions in Asia-Pacific, along with nine non-voting members. In her statement, Ms. Leung emphasized the APRC’s critical role in fostering strong working relationships and enhancing collaboration among securities regulators within the Asia-Pacific region. She also highlighted the importance of ensuring that the region’s perspectives are globally recognized.

 

Central Bank of Seychelles Confirms Caroline Abel for Third Term as Governor
The Central Bank of Seychelles (CBS) has announced the reappointment of Ms. Caroline Abel as Governor, marking her third term in this position. Abel has spent a 30-year career with the CBS including 12 years as Governor. Her reappointment is part of a broader strategy by CBS to ensure business continuity through a staggered approach in senior management appointments.

 


Cross-border cooperation
 
RBI and BI Sign MoU to Enhance INR-IDR Transactions for Bilateral Trade
The Reserve Bank of India (RBI) and Bank Indonesia (BI) have entered into a MoU to establish a framework aimed at promoting the use of their respective local currencies for cross-border transactions. Signed in Mumbai by both central bank Governors, the MoU encompasses all current account transactions, permissible capital account transactions and any other economic and financial transactions, in addition to other mutually agreed upon economic and financial transactions and is designed to facilitate exporters and importers in both countries to invoice and settle payments in their domestic currencies, thereby fostering the development of an INR-IDR foreign exchange market and optimizing transaction costs and settlement times.