Global Regulator & Central Bank News Roundup

Volume 15/2024 (April 8 – April 14)

 

Your weekly summary of key regulatory updates in an objective bite-size format, drawing on official news and press releases from 700+ financial services regulators, central banks as well as global and regional standard setters. For more current updates, visit Regxplora, Regxelerator’s end-to-end automated and generative AI-powered financial regulatory intelligence platform. Sign up here to receive the roundup via email.
 


Themes covered in this edition
 

 


Prudential & financial stability
 
ECB Issues Q4 2023 Supervisory Banking Statistics for Significant Institutions
The European Central Bank has released supervisory banking statistics for significant institutions for the fourth quarter of 2023. The latest statistics continue to show stable capital positions with a slight increase in the Aggregate Common Equity Tier 1 (CET1) ratio to 15.73% and the aggregate Tier 1 rate at 17.10% and aggregate total capital ratio at 19.71%. Furthermore, non-performing loans (NPL) ratio remained stable at 2.30% while the share of stage 2 loans was subject to a slight increase from 9.29% to 9.74% up from 7.68% in the fourth quarter of 2022, driven largely by substantial increases in operating income and net interest income, and a further increase by 0.24% to 1.60% over the same period.

 

Swiss Federal Council Proposes Substantial Enhancements to Too-Big-To-Fail Regime
The Swiss Federal Department of Finance (FDF) has announced that the Federal Council has at its meeting on April 10 adopted the comprehensive report on banking stability, which evaluated the existing too-big-to-fail regime against the backdrop of the Credit Suisse crisis. On the basis of various identified gaps in the current regime, the Council has put forward a package of 22 measures intended for direct implementation. The measures focus on (1) strengthening prevention by equipping FINMA with strengthened powers for intervention, expanding its toolkit in the areas of corporate governance and risk management among systemically important banks, such as through the introduction of a dedicated senior managers regime and new rules on bonuses, and more stringent quantitative and qualitative capital requirements for systemically important banks; (2) strengthening liquidity through further expanding liquidity provision by the Swiss National Bank (SNB) and the formal embedding of the possibility of a public liquidity backstop in law; and (3) expanding the crisis toolkit, among other things through enhanced resolution planning and improved crisis organization and coordination among FINMA, the SNB and FDF. The next steps involve amendments to ordinances followed by legislative changes to be submitted to Parliament, taking into account insights from the Parliamentary Investigation Committee (PInC).

 

FDIC Outlines Steps for Orderly Resolution of Global Systemically Important Banks
The U.S. Federal Deposit Insurance Corporation (FDIC) has published a comprehensive report detailing its strategy for the orderly resolution of Global Systemically Important Banks (GSIBs) under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The report details the FDIC’s preparedness to implement its Title II resolution authority for U.S.-headquartered GSIBs under a single point of entry resolution strategy. Specifically, the report provides an in-depth overview of the resolution-related authorities granted by the Dodd-Frank Act, key preparatory and implementation measures for utilizing Title II authority, and insights into strategic decision-making processes for its application. The operational steps detail inter alia the process for (1) launching a resolution including the formation of the bridge financial company and the establishment of its oversight, (2) the stabilization of operations through funding and capitalization of the bridge financial company and measures to ensure operational continuity, as well as (3) the process for existing from the resolution including orderly wind-down and termination of the bridge financial company.

 


AML & CFT
 
Bank of Mauritius and Bank Al-Maghrib Issue Joint AML/CFT Report for GSBF Jurisdictions
The Bank of Mauritius, in collaboration with Bank Al-Maghrib, have announced the release of a joint report titled “Anti-Money Laundering and Countering the Financing of Terrorism in GSBF Jurisdictions” during the Plenary Meeting of the Group of Francophone Banking Supervisors (GSBF). This inaugural report under the GSBF’s auspices shares insights from Mauritius and Morocco’s experiences following their removal from the Financial Action Task Force (FATF) grey list. It is intended as a practical tool that provides other GSBF members with foundational principles, best practices, and lessons learned to enhance their legal and regulatory frameworks as well as improve their anti-money laundering and counter-terrorism financing (AML/CFT) supervision and control systems with a view to facilitating compliance with FATF standards.

 


Cyber & operational resilience
 
MAS Partners with Mastercard on Cybersecurity Initiatives to Strengthen Financial Sector Resiliency
The Monetary Authority of Singapore (MAS) and Mastercard have entered into a Memorandum of Understanding (MoU) aimed at strengthening cybersecurity within Singapore’s financial services sector. This strategic partnership focuses on enhancing cyber resilience through several key initiatives, including the bilateral sharing of cyber threat intelligence to improve situational awareness, conducting joint analyses of emerging cyber threats to generate actionable insights and recommendations for countermeasures, and engaging in competency-building activities such as joint cybersecurity exercises, staff training, and study visits. Both parties have expressed their commitment to this collaboration as a means to secure the financial ecosystem more effectively against the backdrop of an increasingly complex cyber threat landscape and the rapid digitalization of financial services globally. Vincent Loy from MAS highlighted the importance of public-private partnerships in building a resilient financial ecosystem.

 

European Supervisory Authorities Launch Voluntary DORA Reporting Preparedness Exercise
The European Supervisory Authorities have jointly announced the initiation of a voluntary dry run exercise aimed at preparing financial entities for the forthcoming implementation stage of the Digital Operation Resiliance Act (DORA), which mandates financial entities to maintain registers of information on their use of ICT third-party service providers starting from 2025. The preparatory exercise, set to launch in May, involves the collection of registers of information from financial entities via competent authorities and is designed to assist the entities in establishing and reporting their registers in alignment with the ESAs’ final draft Implementing Standards. Participants will benefit from support in building their register to mirror the expected steady-state reporting format from 2025, testing the reporting process, addressing data quality issues, and enhancing internal processes related to their information registers. Additionally, participating financial entities will receive feedback on data quality, cleaned files of their registers, and have access to workshops and responses to frequently asked questions.

 

U.S. Financial Services Committee Announces Reintroduction of Bipartisan Ransomware and Financial Stability Act
The U.S. Financial Services Committee has announced the reintroduction of the bipartisan Ransomware and Financial Stability Act by Chairman Patrick McHenry and U.S. Representative Brittany Pettersen. The legislation seeks to provide a structured response framework for financial institutions in the face of ransomware attacks. The bill specifically targets Financial Market Utilities, large securities exchanges, and key technology service providers that support core banking services. It mandates that covered entities notify the Treasury Department prior to making any ransomware payment and restricts large payments over $100,000 unless authorized by law enforcement or deemed necessary under a presidential waiver for national interest. Additionally, the act seeks to protect the confidentiality of reports made to authorities regarding ransomware attacks and offers legal protection for institutions assessing cybersecurity threats or complying with authorized ransom payments.

 


Conduct & consumer protection
 
Hong Kong Authorities Introduce Enhanced Anti-Scam Consumer Protection Charter 2.0 with Multi-Sectoral Support
Hong Kong financial regulators, including the Hong Kong Monetary Authority, Securities and Futures Commission, Insurance Authority and Mandatory Provident Fund Schemes Authority, in collaboration with the Hong Kong Association of Banks have announced the launch of the Anti-Scam Consumer Protection Charter 2.0. The revised charter seeks to improve the protection from credit card scams and other digital frauds by encouraging financial institutions to adopt specific preventive measures, which are grouped under four principles. These include refraining from sending instant electronic messages with embedded hyperlinks for acquiring personal information, incorporating anti-scam messages in communications with customers and the public, providing appropriate inquiry channels for customers, and improving training for frontline staff. The initiative has garnered the formal support from over than 230 financial institutions and merchants alongside other regulatory bodies such as the Airport Authority, the Consumer Council, the Hong Kong Police Force, and the Travel Industry Authority.

 


Payments & money
 
BIS FSI Insights Paper Explores Regulatory Approaches to Stablecoins
The Financial Stability Institute of the Bank for International Settlements has published a new FSI Insights paper titled “Stablecoins: regulatory responses to their promise of stability”. The paper reviews the increasing integration of stablecoins within the mainstream financial sector, highlighting both the potential benefits and challenges they present, particularly in achieving consistent value parity with fiat currencies. It provides an in-depth analysis of how national and international regulatory bodies are adapting to the evolving stablecoin market by implementing a broad range of measures aimed at addressing risks related to stablecoin issuance, including in relation to licensing requirements, management of reserve assets, redemption rights, capital adequacy standards, consumer protection protocols, governance and risk management practices, cybersecurity measures, and compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations. Furthermore, the paper conducts a comparative analysis of regulatory frameworks from 11 authorities across seven jurisdictions concerning issuers of single fiat-pegged stablecoins to identify trends and commonalities in their approaches, which offers insights into how different jurisdictions are navigating the challenges posed by stablecoins and crafting regulations to ensure their safe integration into the financial system.

 

Central Bank of the Solomon Islands Introduces SOLATS Digital Payment System
The Central Bank of Solomon Islands (CBSI) has launched a new digital payment platform, the Solomons Automated Transfer System (SOLATS). SOLATS, a real-time gross settlement (RTGS) system, is expected to replace outdated manual transfer methods that relied on cheques and often resulted in delays in fund clearing. This initiative is part of a broader effort to digitalize the Solomon Islands’ economy and enhance the efficiency and security of financial transactions, thereby supporting the integration of more individuals into the formal financial system and addressing the issue that over 30% of adult Solomon Islanders lack access to banking services as identified in a 2015 survey. The development of SOLATS received technical support from IFC, with funding from the Australian and New Zealand governments alongside assistance from the World Bank. This support reflects similar efforts undertaken in other Pacific nations like Papua New Guinea, Fiji, Samoa, and Vanuatu aimed at fostering responsible and inclusive digital financial services. Additionally, CBSI plans to launch a Central Securities Depository for holding government and central bank securities electronically, which will be linked to SOLATS for real-time processing.

 

Bank of England’s CBDC Academic Advisory Group Convenes First Meeting
The Bank of England has shared the key points from its inaugural meeting of the CBDC Academic Advisory Group, co-chaired by Neeraj Patel from HM Treasury. Key agenda items included presentations on (1) the future of money and payments with focus on the central bank’s role in financial stability and governance issues related to CBDCs and the role of payment interface providers within a digital pound ecosystem, (2) behavioral drivers influencing cash usage and its implications for a digital pound, and (3) technological risks and opportunities associated with CBDCs, including AI, quantum computing, cybersecurity, and programmable payments. The group further engaged in a roundtable discussion about future payment landscapes, considering tokenization’s impact on financial stability, cybersecurity concerns for SMEs and larger corporations, public understanding of various forms of money, engagement strategies for technology projects including pilot testing for a digital pound, and current trends in payment technology that could inform future adoption strategies. The importance of maintaining a mixed payment system to support financial inclusion was highlighted alongside considerations about incumbent actors’ roles in facilitating or hindering the transition towards a digital pound.

 


ESG
 
UK Pension Regulator Evaluates Pension Trustees’ Climate Risk Management and Reporting Practices
The Pensions Regulator (TPR) has published a review analyzing climate-related disclosures by pension trustees, focusing on how they are managing climate risks and opportunities. The review, which covers reports from schemes with assets over £1 billion and authorized schemes, highlights a range of strategic decisions and practices with a view to showcasing what constitutes ‘good’ climate reporting. Insights from the review indicate that over 60% of the sampled reports have set net zero goals with target dates of 2050 or earlier. The findings emphasize good practices in strategic decision-making, including updating investment strategies to incorporate sustainable funds and increasing allocations to low carbon tracker funds. Trustees are also exploring investments in green bonds and private market renewables while encouraging fund managers to engage with major carbon emitters. The review provides detailed feedback for trustees on improving their reports by considering context, materiality, avoiding generic wording, updating developments between reports without excessive length, and including member summaries in plain English. Additionally, TPR observed some effective scenario analyses but noted areas for improvement such as enhancing qualitative analysis and addressing challenges in scenario analysis more thoroughly in future reports.

 

AMF and OSFI Launch Consultation for Standardized Climate Scenario Exercise in Québec Financial Sector
The Autorité des marchés financiers (AMF) has initiated a consultation with selected financial institutions in Québec for a Standardized Climate Scenario Exercise (SCSE), in collaboration with the Office of the Superintendent of Financial Institutions (OSFI). The SCSE aims to enhance the understanding and management of climate-related risks by financial institutions, focusing on increasing their capacity for climate scenario analysis and measuring potential financial exposures. The exercise involves a draft methodology and workbook, refined from prior feedback collected during an initial consultation phase in fall 2023. The SCSE will be carried out under a hybrid approach, whereby the AMF jointly with the OSFI will set the methodology while financial institutions will be responsible to identify exposures, classify them into relevant sectoral and geographical segments, and perform the relevant calculations, and will comprise four modules that involve assessments of climate transition on credit and market risk for commercial exposures and with respect to real estate exposure as well as a physical risk exposure assessment. Participating institutions, chosen based on their size and level of exposure to climate risks, are expected to submit their comments by 7 June.

 


Other transversal themes
 
IOSCO Releases Updated 2024 Workplan
The International Organization of Securities Commissions (IOSCO) has announced an update to its 2024 Workplan, which aligns with its broader two-year Work Program for 2023/24. Under the revised plan, IOSCO will continue to pursue priorities under five core themes, notably: (1) Protecting investors, (2) Addressing new risks in sustainability and fintech, (3) strengthening financial resilience, (4) supporting market effectiveness, and (5) Promoting regulatory cooperation and effectiveness. Under this umbrella, several new workstreams are introduced to address the evolving landscape of financial markets, including the increased focus on Artificial Intelligence (AI), Financial Asset Tokenization, credit default swaps, green finance, and transition plans by issuers of securities and asset managers. Among other things this includes a dedicated 2-year workstream focused on AI to investigate the issues, risks and challenges presented by emerging AI technology with respect to market integrity, financial stability and investor protection and evaluate possible policy responses. IOSCO will also introduce a new workstream on green finance identify trends and potential emerging risks from new green products while continuing engagement with the International Sustainability Standards Board (ISSB). As part of the new priorities IOSCO will furthermore enhance its Capacity Building Program to support regulatory effectiveness in areas such as sustainable finance and fintech.

 

ESMA Publishes Fourth Edition of Report on EU Regulatory Data Quality and Utilization
The European Securities and Markets Authority (ESMA) has released the fourth edition of its Report on the Quality and Use of Data, which provides an overview of how data collected under various EU regulations is systematically utilized by authorities such as National Competent Authorities (NCAs), the European Central Bank (ECB), the European Systemic Risk Board (ESRB), and ESMA itself. This edition integrates new developments that align with ESMA’s overall Data Strategy and technological advancements, enhancing dataset coverage and offering insights into data quality indicators. The report details the application of data in daily operations across multiple legislative frameworks, including EMIR, SFTR, MIFIR, Securitisation Regulation, AIFMD, and MMFR. It also discusses the feedback from NCAs, ECB, and ESRB on their data usage for purposes ranging from market monitoring to supervision and policy-making. Additionally, it outlines the actions taken in 2023 to improve data quality across various datasets and introduces a new annex that describes methodologies for calculating data quality indicators for four datasets along with a code for web-scraping transparency data from APAs’ websites. A webinar has been scheduled for 26 April to further discuss insights from the report.