Global Regulator & Central Bank News Roundup

Volume 11/2024 (March 11 – March 17)

 

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
 
Reserve Bank of New Zealand Advances Policy Proposals for Depositor Compensation Scheme Rollout
Following a 9-month consultation and engagement process, the Reserve Bank of New Zealand has announced the next phase of policy proposals for the Depositor Compensation Scheme (DCS) under the Deposit Takers Act (DTA). The DTA is set to enhance the Reserve Bank’s supervisory powers over banks, credit unions, building societies, and finance companies. The establishment of the DCS, under which deposits are protected up to NZD 100,000 per customer per deposit taker, forms a core pillar of the Act. It covers current accounts, saving accounts and term deposits held with banks, building societies, credit unions and finance companies registered or licensed in New Zealand and will be funded by deposit takers. The latest proposals detail key operational components of the DCS, including levy calculation methods, eligible products, and coverage scope and are open for public comment until 10 May. Under current planning, the new DCS is expected to be operational by mid-2025.

 


AML & CFT
 
FATF Issues Updated Guidance on Transparency and Beneficial Ownership of Legal Entities
The Financial Action Task Force (FATF) has released updated risk-based guidance for Recommendation 25 on beneficial ownership and transparency of legal arrangements, following its revisions in February 2023. This guidance is intended to support the implementation of transparency requirements for legal arrangements such as trusts, by both countries and the private sector by providing practical advice on assessing money laundering and terrorist financing risks associated with these entities, outlining the FATF’s expectations for obtaining and verifying adequate, accurate, and up-to-date beneficial ownership information including the mechanisms and sources for obtaining them, as well as outlining sanctions considerations. Emphasizing the necessity of international cooperation to combat cross-border financial crimes, the guidance also reflects contributions from public consultations and extensive engagement with stakeholders.

 

MFSA Issues Guidance on Money Laundering Reporting Officers
The Malta Financial Services Authority (MFSA) has published a new guidance document with focus on Money Laundering Reporting Officers (MLROs). Drawing on over 170 interviews with MLRO applications and 100+ supervisory inspections across authorized entities, the guidance addresses common issues identified during the scrutiny of MLRO candidates and ongoing supervision, focusing on independence, conflicts of interest, knowledge and expertise, dedication to role responsibilities, and training. It also includes self-assessment questions to aid regulated firms in evaluating their AML/CFT approaches alongside examples of good and bad practices.

 


Cyber & operational resilience
 
European Commission Adopts Three Regulatory Technical Standards Under DORA
Following the adoption of the Delegated Acts under the Digital Operational Resiliency Act (DORA) in late February, the European Commission has announced the further adoption of three regulatory technical standards. These include the specific rules for classifying cyber incidents, standardizing information and communication technology (ICT) risk management tools, methods, processes, and security policies for financial entities, as well as the specific rules that outline the risk elements that financial entities are expected to consider when devising their own internal policies on the use of ICT services provided by third-party service providers that support critical or important functions. As a next step in the process, the technical standards are subject to review by the European Parliament and the Council.

 


Conduct & consumer protection
 
Australian Treasury Opens Public Consultation on BNPL Regulatory Framework Amendments
The Department of Treasury (Australia) has announced a public consultation period for its exposure draft legislative package aimed at regulating Buy Now, Pay Later (BNPL) arrangements within the existing regulatory framework. This initiative follows previous consultations on BNPL regulation and comprises an exposure draft bill and exposure draft regulations. The proposed amendments target the National Consumer Credit Protection Act 2009 and the National Consumer Credit Protection Regulations 2010, aiming to integrate BNPL arrangements in a manner that is flexible, adaptable, and proportionate to the potential risk of consumer harm. Specifically, the proposed Bill defines a BNPL contract as a type of Low Cost Credit Contracts (LCCC) and subjects LCCC providers to licensing requirements under the Credit Act. Furthermore, it establishes anti-avoidance measures to prevent circumvention of regulatory oversight and introduces a requirement for providers to develop policies on assessing consumer suitability for these products. The consultation is open for feedback until 9 April.

 

OJK Launches National Sharia Finance Campaign During Month of Ramadan to Strengthen Financial Literacy and Inclusion
The Financial Services Authority (OJK) of Indonesia has launched the 2024 Islamic Financial Ramadan Gebyar (GERAK Syariah) program, a national campaign aimed at enhancing sharia financial literacy and inclusion during the month of Ramadan in 2024. The launch comes amid a currently low Sharia financial literacy and inclusion indices in Indonesia at 9.14 percent and 12.12 percent respectively, compared to higher national financial literacy and inclusion indices. The program seeks to enhance the literacy and inclusion figures through various activities and innovative engagement methods, ranging from educational webinars, Islamic talk shows and social activities, and a dedicated Sharia finance competition with the goal of reaching up to two million people. The activities will be carried out across 35 OJK regional offices with the support of stakeholders including the Regional Committees for Sharia Economy and Finance.

 


Fintech & ecosystem innovation
 
BIS Working Paper Explores Leverage Dynamics in Decentralized Finance Lending Platforms
The Bank for International Settlements has published a new working paper with focus on the dynamics of leverage within the decentralized finance (DeFi) ecosystem, notably DeFi lending platforms. The paper provides an in-depth analysis of DeFi borrowers’ leverage, measured as the asset-to-equity ratio at the wallet level, using detailed trade-by-trade data from major DeFi lending platforms on the Ethereum blockchain. It highlights that overall wallet leverage typically ranges between 1.4 to 1.9, with more active and larger borrowers showing higher levels of leverage. The study identifies factors influencing wallet leverage, including loan-to-value (LTV) ratios, borrowing costs, and market sentiment. It finds that despite the potential for higher leverage as allowed by LTV ratios, borrowers tend to maintain lower actual leverage to avoid automatic liquidation risks—especially in rising crypto markets where users deposit more assets without increasing debt. Furthermore, the paper notes that while higher wallet leverage correlates with a greater proportion of loans nearing liquidation, it does not significantly affect actual liquidation incidents due to their associated costs and specific triggering events. The paper also observes that most borrowers nearing liquidation do not opt for more volatile collateral; however, those who do are likely to adjust their collateral portfolios more aggressively if they have higher wallet leverage.

 

HKMA Initiates Stablecoin Issuer Sandbox to Inform Regulatory Framework Development
The Hong Kong Monetary Authority (HKMA) has introduced a dedicated stablecoin issuer sandbox arrangement. Aimed at guiding and gathering feedback from entities interested in launching fiat-referenced stablecoins within Hong Kong as well as serving as a vehicle to communicate supervisory expectations towards participants, the initiative aligns with ongoing consultations regarding legislative proposals to establish a regulatory framework for stablecoin issuers and will help inform the continued refinement of regulatory requirements. The sandbox seeks to attract applicants with a serious intent and a viable business plan for stablecoin issuance.

 

EBA Releases Final Draft Standards on Complaints Handling for Issuers of Asset Referenced Tokens
Following public consultation in 2023, the European Banking Authority (EBA) has released the final draft Regulatory Technical Standards (RTS) detailing the requirements, templates, and procedures for managing complaints from issuers of asset referenced tokens (ARTs), as mandated under the Markets in Crypto-Assets Regulation (MiCAR). Developed in collaboration with the European Securities and Markets Authority (ESMA), these standards encompass a comprehensive framework for complaints handling, including policies and functions for complaints management, information provision to ART holders and other stakeholders, use of templates and recordings, language considerations, investigation processes, communication of outcomes to complainants, and handling complaints involving third parties. BAsed on the consultation feedback, the EBA has implemented targeted adjustments, aimed to enhance clarity and achieve closer alignment with ESMA’s standards concerning language requirements, data protection, and electronic complaint submission procedures.

 


Payments & money
 
HKMA Initiates Phase 2 of e-HKD Pilot Programme
The Hong Kong Monetary Authority (HKMA) has initiated Phase 2 of its e-HKD Pilot Programme with a view to further investigating the potential applications of an electronic Hong Kong Dollar (e-HKD) in innovative financial transactions. Following the completion of Phase 1 in October 2023, which focused on domestic retail use cases including programmable payments, settlement of tokenized assets, and offline payments, Phase 2 will concentrate on expanding selected pilots that demonstrated unique value through programmability, tokenization, and atomic settlement as well as explore new use cases not previously covered. An enhanced e-HKD sandbox will be utilized to facilitate the rapid prototyping, development, and testing of these use cases by pilot participants. The sandbox will be built upon the infrastructure developed under the newly launched Project Ensemble for a wholesale central bank digital currency (wCBDC), which seeks to study interoperability and interbank settlements between e-HKD and other forms of tokenized money. Insights from both phases of the e-HKD Pilot Programme and associated research efforts will further guide considerations for implementing an e-HKD.

 

Bank of Israel Explores Two-Tiered CBDC System in New Digital Shekel Architecture Paper
The Bank of Israel has released a paper exploring architecture alternatives for the implementation of a two-tiered central bank digital currency (CBDC) system. The paper forms part of the broader design process for a potential digital shekel and aligns with global central bank efforts to examine CBDC issuance through a model where end users access the currency via private-sector intermediaries. Drawing on insights from international collaborations, such as “Project Sela” with the BIS Innovation Hub and the Hong Kong Monetary Authority, which tested a two-tier model architecture, the paper explores various architectural considerations including identifying potential system participants beyond payment service providers, outlining an indirect distribution model where digital shekels are distributed to institutions managing end user accounts for further distribution to end users, and establishing principles for managing the back-end settlement engine with clear separations in functionality. The analysis adopts a technology-agnostic perspective, focusing on logical architecture without committing to specific technological solutions such as distributed ledger technology or traditional databases.

 


ESG
 
NZBA Members Approves Enhanced Climate Target Setting Guidelines Including Capital Market Emissions
The United Nations Environment Programme Finance Initiative announced that members of the Net-Zero Banking Alliance (NZBA) have agreed to adopt an updated version of the Guidelines for Climate Target Setting for Banks, marking a significant enhancement in their climate commitments. The revision introduces, for the first time, the inclusion of emissions attributable to banks’ capital markets activities, acknowledging that for some institutions, these services represent their largest source of greenhouse gas emissions. The updated guidelines also refine technical language to better reflect recent advancements in practices, methodologies, and data availability concerning policy engagement and transition planning. The core ambition and principles from the original guidelines remain intact, with banks committing to achieve net zero by 2050 or sooner and setting intermediate sectoral targets for 2030 aligned with 1.5°C scenarios across nine carbon-intensive sectors. The revision process involved extensive consultation among member banks drawing on their experiences with implementing climate targets and financing transitions across different sectors.

 

Japan FSA Launches Asian GX Consortium to Forge Path in Transition Finance
The Japan Financial Services Agency announced the launch of the Asian GX Consortium against the backdrop of the Consortium’s inaugural meeting. The Consortium was formed as a new collaborative effort for exploring and defining the future of transition finance in Asia, bringing together both private financial institutions and public entities to develop specific methodologies and projects tailored to the region’s unique needs. The consortium’s kick-off meeting saw participation from a diverse group of stakeholders, including representatives from Japanese financial institutions, the Asian Development Bank (ADB), the Glasgow Financial Union (GFANZ), and the Association of Southeast Asian Nations (ASEAN) Secretariat. Details from the discussion are planned to be shared with the broader public later in the year.

 

Canadian Sustainability Standards Board Launches Inaugural Canadian Sustainability Disclosure Standards Consultation
The Canadian Sustainability Standards Board (CSSB) has introduced its inaugural Canadian Sustainability Disclosure Standards (CSDS) for public consultation. The proposed CSDS 1 and CSDS 2 are designed in alignment with the International Sustainability Standards Board’s (ISSB) first standards – IFRS S1 and IFRS S2, which were issued in June 2023, focusing on general requirements for disclosing sustainability-related financial information and climate-related disclosures respectively. The CSSB’s versions include proposed modifications specific to Canada such as different effective dates and transition relief proposals to facilitate implementation. Additionally, a discussion paper is available for public comment on potential adjustments required to adapt IFRS Sustainability Disclosure Standards for use in Canada, reflecting the CSSB’s commitment to aligning with global standards while considering local nuances.

 


Other transversal themes
 
IAIS Seeks Stakeholder Feedback on Application Paper for DEI Supervision in Insurance Sector
The International Association of Insurance Supervisors (IAIS) has initiated a public consultation on its Application Paper concerning the supervision of diversity, equity, and inclusion (DEI) from the perspectives of governance, risk management, and corporate culture.The paper reiterates the importance of DEI in enhancing prudential and consumer outcomes within insurance organizations and is designed to provide supervisors with guidance on assessing insurers’ DEI strategies, identifying potential deficiencies, as well as outlines possible supervisory actions that can be taken to address identified issues, ranging from softer approaches to more formal interventions. Complementary to this Application Paper, efforts are underway for the development of a second Application Paper with focus on DEI in relation to conduct of business to ensure fair treatment for all consumers, with consultation expected in Q3 2024. Comments on the current paper can be submitted until mid-June. A webinar has been scheduled for 3 April 2024 to discuss the paper and field questions from stakeholders.

 

ECB Banking Supervision To Relocate to Gallileo Building in Frankfurt Center
The European Central Bank (ECB) has announced its decision to consolidate its banking supervision staff by signing a lease on the Gallileo building in Frankfurt, aiming for a relocation from the Eurotower and Japan Center by the end of 2025. The move is part of an effort to centralize operations within Frankfurt, specifically between the main building in the Ostend district and the newly leased Gallileo building located in the city center. The consolidation is expected to significantly reduce the ECB’s physical and environmental footprint by decreasing total energy consumption and aligning with its energy efficiency goals, while also introducing a more flexible cost structure.

 


Leadership changes & appointments
 
Alexandre Kech Appointed as CEO of Global Legal Entity Identifier Foundation to Lead Next Phase of LEI Adoption
The Global Legal Entity Identifier Foundation (GLEIF) has announced the appointment of Alexandre Kech as its new Chief Executive Officer (CEO), effective end of June. Kech, who will assume the role of CEO-elect starting May 1, 2024, is set to succeed Stephan Wolf, who has been leading the organization since its inception in 2014. Kech is recognized for his extensive experience spanning 25 years across finance, infrastructure, blockchain, and standardization sectors. His leadership is expected to be key in advancing the adoption of the Legal Entity Identifier (LEI) and its digital counterpart, the verifiable LEI (vLEI), both aimed at the universal standardization in legal entity identification

 

Dessislava Guetcheva-Cheytanova Appointed as New BIS General Counsel
The Bank for International Settlements (BIS) has announced the appointment of Dessislava Guetcheva-Cheytanova as its new General Counsel and member of the Executive Committee, effective from 1 September 2024, for a five-year term. She will be succeeding Diego Devos, who is retiring after serving as General Counsel since 2009. Guetcheva-Cheytanova, who currently holds the position of Deputy General Counsel at the BIS since March 2020, brings over two decades of legal advisory and leadership experience within international organizations to her new role. Her previous positions include Director, Chief Counsel Corporate at the European Bank for Reconstruction and Development and roles at the Organisation for Security and Cooperation in Europe.

 

Jean-Paul Servais Secures Second Term as Chair of IOSCO’s European Regional Committee
Jean-Paul Servais, the Chairman of the Belgian Financial Services and Markets Authority (FSMA) and current Chair of the International Organization of Securities Commissions (IOSCO) Board, has been re-elected as chair of IOSCO’s European Regional Committee (ERC) for a two-year term. The ERC, which comprises 52 members from across Europe, is one of four regional committees within IOSCO that focuses on initiatives relevant to Europe’s financial markets while contributing to strengthening global standards.It serves as a key platform for information sharing and cooperation among European securities regulators and fora for the discussion of key policy matters.

 


Cross-border cooperation
 
South Korea’s FSC and FSS Expand Supervisory Cooperation via APRC Capital Markets MMoU
The South Korea Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have become signatories to the multilateral memorandum of understanding (MMoU) of the International Organization of Securities Commission’s (IOSCO) Asia Pacific Regional Committee (APRC). The APRC comprises capital market supervisors and regulators from 22 countries, with South Korea joining an existing group of 10 member countries that had previously signed up for this supervisory cooperation MMoU, including Hong Kong, Japan, Australia, Singapore, among others. The FSC and FSS’s participation in this MMoU builds on their previous commitments to international regulatory cooperation under IOSCO’s MMoU and Enhanced MMoU frameworks since 2010 and 2019 respectively.

 

ADGM and KIFC Sign MoU to Collaborate on Financial Hub Development and Sustainable Finance Initiatives
The Abu Dhabi Global Market (ADGM) and the Kigali International Financial Centre (KIFC) have entered into a MoU to formalize a new strategic partnership. Objective of the partnership is to transform Rwanda into a premier financial hub for investors interested in African opportunities while supporting ADGM’s mission to foster economic diversification in line with Abu Dhabi’s vision. It focuses on several key areas including promotion, international development, mutual recognition of regulated entities, capacity building, skills development, Islamic finance, as well as sustainable finance.

 

BMA and Lloyd’s Partner to Advance Global (Re)Insurance Innovation and Education
The Bermuda Monetary Authority (BMA) has announced a collaboration with Lloyd’s to enhance innovation and education within the global (re)insurance sector. The partnership aims to leverage the strengths of both the Bermuda and Lloyd’s markets by focusing on improving access to educational academies, fostering innovation through initiatives such as the Lloyd’s Lab and the Bermuda Insurance Sandbox, and supporting risk expertise sharing. A significant aspect of this collaboration is the launch of a Lloyd’s Lab reinsurance cohort in H1 2025, designed to utilize Bermuda’s market expertise. Additionally, this partnership will focus on training future industry professionals by improving access to resources from BMA, Lloyd’s, and members of the Association of Bermuda Insurers and Reinsurers (ABIR).