Global Regulator & Central Bank News Roundup

Volume 12/2024 (March 18 – March 24)


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
FSB Updates Guidance on Operational Continuity in Resolution to Address Digital Shared Services
The Financial Stability Board (FSB) has released a revised version of its 2016 Guidance on Arrangements to Support Operational Continuity in Resolution, incorporating a supplementary note that addresses the digitalisation of critical shared services. This guidance, which was initially released in 2016, outlines how supervisory and resolution authorities, along with financial institutions subject to resolution planning requirements, should evaluate and implement appropriate legal, contractual, governance frameworks, resourcing, management information systems, and financial resources to support operational continuity. The addition of the supplementary note highlights the growing reliance of financial institutions on third-party service providers for these critical shared services amidst digitalisation in the financial sector. While acknowledging the benefits such as flexibility, innovation, and improved operational resilience that digitalisation brings to financial institutions, it also cautions against potential disruptions that could jeopardize orderly resolution or even financial stability if not properly managed. The supplementary note clarifies how existing guidance should be interpreted in light of digitalisation without introducing new requirements or guidance but emphasizes considerations specific to digital critical shared services in resolution scenarios.


IMF Blog Analyzes Systemic Implications of Recent Bank Failures and Calls for Enhanced Resolvability Measures
The International Monetary Fund Blog has published a new article taking stock of the key learnings in the aftermath of the significant banking failures in 2023, including Credit Suisse and the U.S. banks Silicon Valley Bank, Signature Bank, and First Republic Bank, which collectively marked a critical test for the global financial system’s ability to manage failures of systemically important banks without jeopardizing financial stability or imposing undue burdens on taxpayers. While the avoidance of broader financial distress and the maintenance of robust financial health indicators across most entities were notable successes, the need for considerable public intervention to mitigate these crises has sparked debates over the potential fiscal risks and the perpetuation of the too-big-to-fail narrative. Specifically, the article emphasizes the necessity for vigilant supervision and preemptive actions to rectify shortcomings in governance and risk management practices. It acknowledges that smaller financial institutions can also trigger systemic threats under specific scenarios, highlighting the overarching requirement for thorough recovery and resolution strategies across the banking sector. Against this backdrop, the article argues for adaptable and flexible resolution strategies to ensure financial stability while safeguarding taxpayer interests and calls for enhanced liquidity support mechanisms during resolution to strengthen confidence in troubled banks as well as improvements in deposit insurance schemes, particularly in light of technological advancements that may quicken deposit withdrawals, is identified as a key area for reform.


Reserve Bank of New Zealand Evaluates Progress on Bank Capital Review Rollout
The Reserve Bank of New Zealand has published a Bulletin article evaluating the initial two years (2021-2023) of implementing the Capital Review. The Capital Review decisions introduced higher capital requirements and buffers, raising requirements to 18% of risk weighted assets (RWAs) for the four largest banks and to 16% for other banks, up from previously 10.5% of RWAs, alongside other changes such as revised definitions for regulatory capital, new processes for recognizing capital instruments, and derecognition of non-compliant instruments. The Bulletin provides a comprehensive analysis of the progress and impacts of the 2019 Capital Review decisions. It notes that all Domestic Systemically Important Banks (DSIBs) have successfully met the mandated increases in their capital buffers in 2022 and 2023 while smaller banks, which so far were not subject to capital increases, are considered well-prepared to meet the forthcoming requirements which are set to begin in July 2024. Findings show that banks have generally used a combination of retained earnings and issuances of new capital instruments to increase their capital. Finally, the early-stage costs of implementation have been in close agreement with the estimates from the 2019 Regulatory Impact Assessment, suggesting only modest increases in interest rates without evidence of financial market disruptions. The full impact of the Capital Review decisions is expected to become fully transparent in 2028 once all adjustments will have been implemented. At that point, another assessment will be carried out.


SEC Ghana Mandates Exclusive Use of “Ghana Card” for Identity Verification in Securities Transactions
The Securities and Exchange Commission (SEC) Ghana has issued a directive mandating the exclusive use of the “Ghana Card” as the sole identity verification tool for all investors engaging in transactions within the securities market. This decision, effective immediately, aims to streamline identity verification processes and enhance compliance with Know Your Customer (KYC) requirements. Investors previously admitted into the market with alternative forms of identification are now required to update their KYC records with their respective market operators using the “Ghana Card.” Accommodations have been made for non-resident Ghanaians and foreign nationals, who may use their passports for transactions until they can obtain a “Ghana Card.” Additionally, members of the Diplomatic Corps are permitted to use their foreign passports as identification. Market operators are tasked with verifying client identities in alignment with Anti-Money Laundering Regulations and must proactively update investor records to comply with this new directive.


UK-OT Illicit Finance Dialogue Marks First-Year Milestones in Combatting Financial Crime
The Ministry of Finance in the British Virgin Islands announced the successful completion of the first year of the UK-OT Illicit Finance Dialogue, co-chaired by the Virgin Islands and the UK. The initiative, established by the Joint Ministerial Council, aims to foster collaboration among Overseas Territories and key UK Government departments such as HM Treasury, the National Crime Agency, and the Foreign, Commonwealth and Development Office to combat illicit finance and enhance measures against financial crime. Throughout its inaugural year, discussions have focused on sanctions, law enforcement collaboration, beneficial ownership, and adherence to international regulations on illicit finance. Significant outcomes include plans to establish sanctions units in various territories including the Virgin Islands, Cayman Islands, and Turks and Caicos. Additionally, there will be training provided by the UK’s National Crime Agency on Cryptocurrencies for law enforcement authorities in Overseas Territories. The dialogue also emphasizes ongoing work by a technical working group on beneficial ownership and efforts to meet global standards set by bodies like FATF satisfactorily. As part of the next phase of the initiative, leadership will transition from the Virgin Islands Government the Cayman Islands Government.


Conduct & consumer protection
FCA Directs Financial Advisory Firms to Reevaluate Retirement Income Advice Procedures
The Financial Conduct Authority (FCA) has issued a communication to the Chief Executives of financial advice firms, urging them to reassess their processes for providing retirement income advice. This action follows a thematic review by the FCA, which evaluated how firms are advising on retirement income. The review highlighted instances of good practice where firms had tailored their advice models to meet customer needs effectively, incorporating detailed processes, specific decumulation training, and tools for simplifying complex information. Despite these positive findings, the FCA also uncovered areas of concern where customer needs were not adequately considered. This included scenarios where the advice given could compromise sustainable retirement income levels or lead to customers losing guarantees or facing unnecessary charges due to unsuitable recommendations. To assist firms in aligning their advice with regulatory standards and ensuring consumer protection, the FCA has introduced a Retirement Income Advice Assessment Tool (RIAAT) along with instructions and published an article on Cash flow modelling. These resources are intended to help firms evaluate if their advice complies with FCA rules and the Consumer Duty.


Fintech & ecosystem innovation
Estonia’s Ministry of Finance Sets New Regulatory Standards for Crypto-Asset Service Providers
The Ministry of Finance in Estonia has approved new regulations governing requirements for cryptocurrency service providers. Under the new regulations, cryptocurrency service providers must obtain an activity license from the Financial Supervision Authority, which will assume the supervision of cryptocurrency service providers, replacing the previous requirement for an operating license from the from the Money Laundering Data Bureau. Service providers with an existing operating license must complete the transition to the new licence until 1 January 2026. Furthermore, the new regulations mandate that crypto-asset services must be provided by entities structured as LLC or AS and be equipped with a management board consisting of at least two members. The regulation aligns with EU Regulation 2023/1114 on markets in crypto-assets (MiCA), establishing uniform rules across the European Union.


U.S. SEC Settles Charges Against Investment Advisors for “AI Washing”
The U.S. Securities and Exchange Commission (SEC) has announced the resolution of charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements regarding their use of artificial intelligence (AI) in their investment strategies.The charges against Delphia included false claims about its AI and machine learning capabilities in SEC filings, press releases, and on its website, specifically overstating its ability to use client data for predictive investments. Similarly, Global Predictions was found to have made misleading statements on its website and social media about being a regulated AI financial advisor and offering expert AI-driven forecasts. Both firms were found in violation of the Marketing Rule among other securities law violations but consented to the SEC’s orders without admitting or denying the findings and a settlement that involved the payment of civil penalties totaling USD 400,000. Additionally, an Investor Alert has been issued by the SEC’s Office of Investor Education and Advocacy concerning AI and investment fraud as part of their ongoing efforts to protect investors from misleading claims related to new technologies.


Payments & money
ECB Expands Digital Euro Rulebook Development with Seven New Workstreams
The European Central Bank (ECB) has announced the establishment of seven new workstreams in furtherance of the development of the digital euro rulebook. The workstreams are designed to cover various aspects of the digital euro’s implementation, including minimum user experience (UX) standards, a certification and approval framework for payment solutions and infrastructure, risk management strategies for digital euro actors, as well as detailed implementation specifications for interactions among business and individual users, intermediaries, payment and acceptance solutions and the Digital Euro Service Platform. For each of the respective workstreams, the ECB is seeking applications from individuals with relevant expertise in area such as payments infrastructure and architecture, technical specifications, scheme management, payments acceptance devices. Each candidate must be nominated by a member of the Rulebook Development Group. The application period is open until 5 April.


Denmark Set to Integrate Krone into Eurosystem’s T2 and TIPS Payment Services by 2025
The European Central Bank (ECB) and Danmarks Nationalbank have formalized an agreement enabling Denmark to integrate into the ECB’s T2 wholesale payment system and the TARGET Instant Payment Settlement (TIPS) service by April 2025. This integration will enable the settlement of high-value payments in both euro and Danish kroner within the T2 system, while also introducing the Danish krone as the third currency available for instant payment settlement in TIPS, following the earlier inclusion of the Swedish krona. Danish financial institutions are currently preparing for this transition by testing both systems. Danmarks Nationalbank, which has been utilizing the T2 system for euro settlements and has engaged with the TARGET2-Securities (T2S) platform for securities settlements since October 2018, will now enable market participants in Denmark to settle all payments and securities in their national currency across all three TARGET services, enhancing liquidity management efficiency. Danmarks Nationalbank Governor Christian Kettel Thomsen expressed enthusiasm about joining T2 and TIPS as a non-euro country, emphasizing strengthened IT security and harmonized infrastructure benefits for Denmark’s financial market.


Riksbank Publishes Final E-Krona Project Report
The Riksbank has published the final report under its e-krona pilot. The report explores the practicalities of a an e-krona if it was to be introduced. Specifically, Phase 4 concentrated on examining three particular areas: (1) the feasibility of developing a balance-oriented offline solution tailored to the e-krona test environment’s parameters, including an assessment of its potential security, (2) the security implications of an offline solution utilizing a specialized e-krona payment card alongside an in-store payment terminal, and (3) the compatibility with the existing EMV standard, which serves as the worldwide norm for debit and credit card transactions. Unlike the token-based offline solution tested in phase 2, which involved transferring copies of e-krona to a payment instrument, phase 4 introduced a technical solution that maintains e-kronas within the online system. This system reserves e-krona for offline use in a “shadow wallet,” with transactions recorded on a payment card that reflects the shadow wallet’s balance. These transactions are only actualized when payment instruments are synchronized with the online system, ensuring that actual e-kronas never leave it. The Riksbank conducted tests involving transfers to and from payment cards, offline payments to merchants, and between end-users, alongside developing and testing a secure synchronization mechanism to accurately record all offline transactions in the online system. The findings from phase 4 highlight that creating a secure and functional offline solution demands significant development in technology, regulations, and processes.


IAIS Seeks Feedback on Revised Climate Risk Guidance for Insurance Core Principles
The International Association of Insurance Supervisors (IAIS) has announced a public consultation on climate risk supervisory guidance, focusing on proposed changes to the Insurance Core Principles (ICPs) guidance and supporting material to better incorporate climate risk into insurance supervision. The consultation seeks input on updates and new material across several areas including corporate governance, risk management, internal controls, valuation of assets and liabilities for solvency purposes, investment activities, and insurers’ enterprise risk management frameworks. Specifically, it introduces proposed additions to ICP 15 (Investments) and ICP 16 (Enterprise Risk Management for Solvency Purposes), alongside updates from the 2021 Application Paper on Supervision of Climate-related Risks in the Insurance Sector and newly developed content. The materials are designed to aid in understanding and applying ICPs by providing recommendations, clarifications, examples but do not introduce new requirements. Feedback to the consultation can be submitted by 19 June. An informational webinar is scheduled for 15 April.


BIS Launches Project Gaia to Advance Climate Risk Analysis with Generative AI
The Bank for International Settlements has released the project report for the first phase under its Project Gaia. Project Gaia, a collaborative effort with the German Bundesbank, seeks to enhance the analysis of corporate climate-related disclosures through the use of large language models. The project’s first phase involved consulting with climate risk experts from central banks and supervisory authorities to design a solution that meets their needs and demonstrating the technical feasibility through a proof of concept (PoC). The project’s proof of concept demonstrated its capability to significantly reduce manual effort in climate assessments by automating the extraction of climate-related data such as total emissions, green bond issuance, and voluntary net-zero commitments from a vast array of reports and enabling detailed analysis of climate-related indicators as well as providing harmonized metrics across various jurisdictions despite differences in naming conventions and disclosure frameworks. By integrating LLMs into an application for data extraction, Project Gaia faced and overcame several technical challenges such as long response times, randomness in responses, and hallucinations through strategic design choices. Project Gaia not only highlights the utility of AI in climate risk analysis but also its broader applicability in financial sector analyses, including its potential to transform unstructured data into actionable insights and contribute to a more resilient financial landscape through rapid identification and addressing of emerging risks.


Japan FSA Publishes 9th Roundtable Meeting Minutes on Climate Change Risk Assessment and Data Integration
The Japan Financial Services Agency has shared the key discussion points from its latest meetings on “Transition Finance Environment Improvement Study Group” and the “Scenario and Data-Related Organizations for Assessing Climate Change Risks and Opportunities”, respectively. The meeting on transition finance examined the issuance of climate transition interest bonds (CTBs), sectoral roadmaps for transition, and the outcomes from COP28. The discussions highlighted the necessity of specifying fund usage before labeling financial instruments as part of transition finance to gain investor trust internationally. Moreover, there was a significant focus on how Japan’s approach to green and transition finance is perceived globally, with particular attention to energy sources like ammonia and renewable energies. The study group also deliberated on aligning Japan’s financial strategies with international standards such as those set by ICMA while considering Japan’s unique energy constraints and goals towards carbon neutrality. The meeting on scenario analysis and data, on the other hand, focused on the integration of climate change data with biodiversity data, the importance of developing scenarios for future forecasting, and the challenges in predicting short-term weather versus long-term climate impacts. Among other things, participants emphasized the need for a collection of case studies on past weather-related disasters to improve business continuity planning as well as reached consensus on the necessity of expert knowledge to effectively utilize both meteorological and biodiversity-related data, with a specific mention of ongoing joint research in Southeast Asia for localizing climate change projection data. The meeting also touched upon the difficulties companies face in aligning their core strategies with external disclosures required by frameworks like TCFD, especially when predicting future decades.


South Korea FSC Outlines Strategy to Strengthen Climate Finance
As part of a recent meeting with officials from government and other industry stakeholders, the South Korea Financial Services Commission’s Chairman Kim Joo-hyun has announced a comprehensive strategy to enhance climate finance. The initiative aims to accelerate the transition to a low carbon economy by significantly increasing green investment. Key measures include the commitment of five major policy financial institutions to boost their annual green funds supply by approximately 67 percent, reaching a total of about KRW420 trillion by 2030. Additionally, the financial industry will establish a future energy fund worth KRW9 trillion, contributed by the banking sector to support renewable energy facility investments estimated at KRW160 trillion. A climate technology fund of KRW3 trillion will also be created to foster promising companies in climate technologies. These efforts are complemented by the Ministry of Environment’s plans to enhance green investment through upgrading Korean Green Taxonomy (K-Taxonomy), laying foundations for green investment promotion, aiming for up to KRW30 trillion in private sector green investment by 2027, and improving the emissions trading scheme.


Other transversal themes
BIS Briefing Examines the Adequacy of Supervisory Resources in Banking Regulation
The Bank for International Settlements published a new brief titled “Under pressure: taking stock of supervisory resources”. Authored by Rodrigo Coelho and Rebecca Guerra, the brief emphasizes the critical role of adequate resources in effective banking supervision. It outlines that, while the presence of relevant powers, operational independence, legal protection, and a proactive stance are essential for supervision, these factors alone are insufficient without the necessary resources. It highlights that the determination of needed supervisory resources varies based on the size of the financial system, banks’ business models, and the specific mandate, perimeter, and approach of the supervisory authority. However, it also notes that actual resource availability is often constrained by budgetary limits and the scarcity of skilled professionals, leading to a frequent mismatch between optimal and available resources. The document further observes that jurisdictions with smaller banking systems or those where supervisory authorities enjoy financial independence tend to be better resourced. In contrast, supervisors in major financial centers face relatively greater resource challenges compared to their peers in other regions.


ECB and EBA Establish Joint Committee to Streamline Bank Data Reporting Standards
The European Central Bank (ECB) and the European Banking Authority (EBA) have announced the establishment of a new Joint Bank Reporting Committee (JBRC) with the objective of enhancing the efficiency of data reporting within the banking industry by harmonizing and integrating the reporting of statistical, supervisory, and resolution data. The new Committee will be tasked with providing non-binding advice provides to “to facilitate the development, implementation and maintenance of an integrated reporting system that aims to reduce the reporting costs and increase efficiencies in the reporting process”. To that end, the JBRC will be responsible to develop common definitions and standards and establish a common data dictionary for bank reporting purposes. The Committee will include members from the EBA, European Central Bank (ECB), European Commission, Single Resolution Board, relevant authorities from European Economic Area Member States with supervisory powers, and banking industry representatives through a consultative body known as the Reporting Contact Group. EBA Chairperson José Manuel Campa highlighted that a harmonized reporting system is a priority for the EBA, aiming for a system that is proportionate and fit-for-purpose. The initiative also aligns with the European Commission’s supervisory data strategy to streamline reporting processes for EU banks. Details of the JBRC have been formalized in a dedicated Memorandum of Understanding between the ECB and the EBA.


TPR Survey Reveals Deficit in Trustee Board Diversity Despite Acknowledgment of Benefits
The Pensions Regulator (TPR) has released findings from its first trustee diversity and inclusion (D&I) survey, revealing a significant lack of diversity among pension trustees compared to the broader UK population. The survey, which is TPR’s largest to date with 2,197 trustees participating, identifies the “typical trustee” as a white, cisgender man over 45 years old without disabilities. Despite this lack of diversity in terms of protected or visible characteristics such as ethnicity and gender—with only 5% from ethnic minorities and 24% women—trustees report high levels of diversity in skills (82%), life experience (74%), professional background (73%), cognitive diversity (73%), and education (61%). The survey underscores the industry’s recognition of the importance of diverse and inclusive boards for effective decision-making, governance, and member outcomes, with substantial majorities acknowledging these benefits. However, less than half of the schemes have taken steps to enhance board inclusivity and diversity. TPR’s Interim Director Louise Davey emphasizes the effectiveness of diverse boards in governance and saver outcomes while encouraging trustees to broaden their understanding of diversity beyond visible characteristics. The survey also highlights that larger pension schemes are more engaged in D&I efforts than micro schemes. TPR has published guidance offering practical ways for improving board D&I and encourages schemes to utilize this resource for enhancing their practices.


Cross-border cooperation
SIPEN and World Bank Forge Technical Cooperation for Dominican Pension System Research
The Superintendence of Pensions (SIPEN) in the Dominican Republic has entered into a technical cooperation agreement with the World Bank with the objective of enhancing research on the Dominican Pension System to foster the development of public policies that could improve and deepen understanding in critical areas such as labor turnover, gender equity, contribution density, and factors influencing contribution decisions. The partnership is expected to enrich local knowledge on social security, contribute significantly to public policy discussions related to social security initiated by the World Bank, and address challenges and outcomes of the Dominican Pension System two decades after its inception.