Global Regulator & Central Bank News Roundup

Volume 16/2024 (April 15 – April 21)

 

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 Consults on Strengthening Liquidity Risk Management for Non-Bank Entities Under Market Stresses
The Financial Stability Board (FSB) has published a consultation report proposing measures to improve liquidity preparedness among non-bank market participants for margin and collateral calls during market-wide stress. The report identifies risk management and governance weaknesses as primary causes of inadequate liquidity preparedness, as observed in recent liquidity stress events, such as the March 2020 turmoil, the Archegos failure, and commodity market issues in 2022. To address these weaknesses and reduce excessive procyclical behavior during times of market-wide stress, the FSB proposes eight cross-sectoral policy recommendations aimed at improving non-bank institutions’ liquidity risk management practices, governance practices, stress testing procedures, scenario design for margin and collateral calls under both normal and stressed conditions, and collateral management. The initiative forms part of the FSB’s broader work program on enhancing resilience of non-bank financial institutions. Feedback to the consultation can be submitted until 18 June.

 


AML & CFT
 
FATF Ministers Re-Declare Commitment to Combat Money Laundering and Terrorist Financing
The Financial Action Task Force (FATF) Ministers, during their biennial meeting in Washington D.C., reaffirmed their commitment to combating financial crime, including money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction (AML/CFT/CPF) through a dedicated ministerial declaration. As part of the declaration, the Ministers acknowledged the achievements under the Singapore Presidency, notably in enhancing FATF Standards on asset recovery and reinforcing the framework for beneficial ownership transparency and recognized FATF’s leadership in regulating virtual assets and service providers for AML/CFT/CPF purposes. Despite progress, they noted ongoing gaps in effective implementation of FATF Standards and pledged to continue to improve outcomes. Specifically, the declaration emphasized the need for further efforts on supervision, preventive measures, beneficial ownership transparency, investigating and prosecuting money laundering, and confiscating crime proceeds. Other critical areas addressed in the declaration include inter alia a commitment towards further enhancing the effectiveness of FATF assessments, including through a higher frequency of evaluations and elevated focus on the effectiveness of outcomes, further strengthening the global network including the role of the FATF Regional-Style bodies and the cooperation with the IMF, the World Bank, and the United Nations as well as maintaining a close relationship with relevant public and private sector stakeholders to ensure responsible innovation within the financial sector under consideration of AML/CFT/CPF objectives.

 

ESAAMLG Convenes 47th Task Force Meeting to Advance AML/CFT Initiatives in Eastern and Southern Africa
The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) held its 47th Task Force of Senior Officials Meetings in Lubango, Angola, with over 400 delegates from 21 member countries and representatives from supporting nations and organizations. Discussions included the 2nd Round Mutual Evaluation Report (MER) of Rwanda, Follow up Reports (FURs) with rerating requests for Kenya, Madagascar, Malawi, Namibia, Seychelles, and Zimbabwe as well as FURs without re-ratings for ten other member countries. Additionally, plenary sessions involved the discussion of several reports such as on risk trends and technical assistance coordination as well as the adoption of various documentation including a manual for FIUs on producing quality financial intelligence, a report on best practices to exit the FATF’s International Cooperation Review Group process effectively, and a survey on fintech challenges related to virtual assets. New projects discussed during the meeting focused on enhancing AML/CFT efforts include a review of FATF Recommendation 8 implementation in the region, a typologies study on illicit cross-border cash movements, and an analysis project on front companies used for money laundering. Finally, against the backdrop of the meeting,ESAAMLG members also signed the “Statement of Principles for a Multilateral Approach to Combating Illegal Wildlife Trade”. The statement outlines strategic measures for using financial intelligence and investigations to disrupt illegal wildlife trade, enhance enforcement, strengthen legal frameworks, and increase awareness. Heads of 21 Financial Intelligence Units (FIUs) formally endorsed the commitment, representing a significant step in regional cooperation aimed at protecting biodiversity and promoting sustainable development by targeting the financial aspects of wildlife trafficking.

 


Cyber & operational resilience
 
ESAs Launch Public Consultation on Draft RTS for Joint Examination Teams Operations under DORA
The European Supervisory Authorities have initiated a public consultation on the draft Regulatory Technical Standards (RTS) concerning oversight activities under the Digital Operational Resiliency Act (DORA). The draft RTS outlines criteria for forming joint examination teams, including their composition, member designation, tasks, and working procedures. The standards are designed to optimize the efficiency and effectiveness of these teams in their critical role overseeing ICT third-party service providers (CTPPs), acknowledging both the technical complexity of oversight activities and the limited availability of necessary expertise. Under DORA, CTPPS will be overseen by joint examination teams headed by a Lead Overseer. Among other things the RTS set out that the number and composition of the examination team must take into account aspects such as the number of CTPPS to be overseen, the individual oversight needs for specific CTPPs and the associated skill and expertise requirements, and the Member States in which the CTTP provides ICT services that support critical or important functions of the financial entities along with the competent authorities responsible for oversight of the financial entities dependent on the CTTP. An examination team is established at a point when a CTTP is designated. Its members may be assigned on a full or part-time basis. Feedback to the consultation can be submitted until 18 May.

 


Fintech & ecosystem innovation
 
BIS Working Paper Explores AI’s Macroeconomic Effects on Output and Inflation Dynamics
The Bank for International Settlements has released a new working paper, which examines the economic impact of artificial intelligence (AI) on employment, output, and inflation across various industries and the broader economy. The paper utilizes a macroeconomic multi-sector model calibrated to an index of industry exposure to AI to explore how AI’s influence on an industry’s employment and output is related to that industry’s direct exposure to AI, as well as the effects of AI adoption on output and inflation in both the short and long term. The findings suggest that AI significantly boosts productivity growth leading to increased aggregate output, consumption, and investment in both timeframes. Specifically, the study finds that an industry’s direct exposure to AI has minimal impact on its long-term outcomes; instead, total demand changes along with relative prices and input costs play a more significant role than the initial productivity gains from adopting AI. Additionally, it highlights that while higher productivity through AI is disinflationary by boosting supply, substantial investments required for leveraging AI could increase demand and raise inflation. The net effect on inflation however is uncertain as it depends on how households and firms anticipate the transformative potential of AI. Against the backdrop of these findings, the paper lays out policy implications for central banks for fostering AI adoption.

 

UK Joint Regulatory Oversight Committee Seeks Input on Proposed Open Banking Future Entity
The UK Joint Regulatory Oversight Committee (JROC) has released proposals for the establishment of the future open banking entity, which will act as the permanent central coordinating and standard setting body for open banking in the UK and replace the currently established Open Banking Limited. The proposed Future Entity will focus on enhancing and standardizing the open banking experience, ensuring consistent user experiences, and fostering interoperability across the ecosystem. As part of the newly released consultation paper, the JROC is seeking feedback from firms on various aspects of the Future Entity, including its structure, governance, and both interim and long-term funding models. Among other things, the Future Entity is proposed to be set up as a company limited by guarantee in line with its core function as a non-profit, which will be overseen by an independent Board of Directors composed of representatives from various stakeholders groups such as end users, third party providers, and account servicing payment service providers. The establishment of the Future Entity will be preceded by an Interim Entity that will operate during the transitional phase before the full establishment of the Future Entity and handle the progression certain JROC workstreams as well as lay the groundwork for the regulatory framework development.

 


Payments & money
 
Reserve Bank of New Zealand Initiates Consultation on Proposed CBDC
The Reserve Bank of New Zealand has announced its exploration into a possible CBDC, termed “digital cash”. The initial consultation, which forms part of a multi-stage exploration until 2030, outlines the overall considerations and high-level design options for the introduction of a CBDC. Under the proposal, digital cash would be issued by the Reserve Bank, denominated in NZD and exchangeable against other forms of NZD 1:1 and distributed under a two-tier model via private sector companies including banks, payments companies and certain other new providers. The CBDC would facilitate payments for individuals and businesses both online and offline, including instant digital payments across different banks which are not currently possible unless customers share the same banking institution. Additionally, it could operate via Bluetooth to allow transactions during emergencies or power outages without internet connectivity. The consultation paper sets out several key strategic design choices and principles regarding the CBDC. Key principles include uniformity, ensuring digital cash holds the same value as physical cash; universality, making digital cash accessible and usable by everyone; privacy, with robust data governance ensuring transactional anonymity; innovation, allowing for the development of new financial services; reliability, ensuring digital cash remains operational even in adverse conditions; and orderliness, managing the issuance process to prevent disruption to financial stability. Feedback to the consultation can be provided until end of July.

 

Deutsche Bundesbank Partners with MIT for CBDC Technology Exploration
The Deutsche Bundesbank has announced a collaboration with the Massachusetts Institute of Technology (MIT) to explore central bank digital currency (CBDC) through a joint research project. The partnership will leverage the expertise of the MIT Media Lab’s Digital Currency Initiative (DCI) to examine new technologies that could be employed in CBDC design, focusing among other things on security and privacy. The outcomes of the research are expected to enhance understanding of CBDC applications both in Europe and globally, with plans to publish the findings for broader knowledge dissemination.

 

BCRP Issues Circular Governing CBDC Pilot Programs
The Central Reserve Bank of Peru (BCRP) has introduced Circular No. 0011-2024-BCRP, titled “Regulation of Digital Money Innovation Pilots,” aimed at increasing digital payment services access for the unbanked population. Recognizing the growth in digital payments primarily among those already banked, the BCRP is exploring central bank digital money (CBDC) as a potential tool to engage the cash-only segment without internet access. The circular outlines plans to conduct controlled pilot experiences with CBDCs, involving private sector collaboration to distribute digital money and gather insights on secure and efficient access methods for the unbanked. The pilots, which are set to be carried out over the course of one year, will have specific objectives and assess various aspects including inter alia innovative models for digital payment access by the unbanked population, non-internet-based solutions for operating digital wallets, and the substitution effect between cash and digital money.

 


ESG
 
BCBS Launches Consultation on the Role of of Climate Scenario Analysis for Enhancing Climate-Related Financial Risk Management
The Basel Committee on Banking Supervision has released a discussion paper exploring the use of climate scenario analysis (CSA) in enhancing the management and supervision of climate-related financial risks. Building on the 2022 Principles that encouraged banks to employ CSA to evaluate their business models’ resilience against various climate-related scenarios and assess their impact on risk profiles, the paper examines the objectives and essential features for the design, implementation and use of CSA exercises to support a more focused dialogue. Current differences in CSA exercises’ scope, features, and approaches across jurisdictions and banks pose challenges to harmonizing supervisory expectations and comparing results. To that end the paper identified seven features relevant to banks and supervisors in conducting CSAs: motivation, comprehensiveness, plausibility, coherence, transparency, tractability and proportionality. These are complemented by usage-case specific considerations, which are expected to vary depending on the objective of a given CSA exercise and address aspects such as the degree of standardisation, time horizons, severity of scenarios, baseline selection, granularity, balance sheet assumptions, and analytical frameworks. Feedback on the scope and appropriateness of the outlines features and considerations can be provided until 15 July.

 

NGFS Issues Trio of Reports With Focus on Transition Plans
The Network for Greening the Financial System (NGFS) has released three new reports focused on transition planning. Building on its foundational work on transition plans and prepared in collaboration with the Institute of International Finance (IIF), the three reports – titled “Tailoring Transition Plans: Considerations for EMDEs,” “Connecting Transition Plans: Financial and non-financial firms,” and “Credible Transition Plans: The microprudential perspective” – address the specific needs of emerging market and developing economies, the interconnections between real economy firms and financial institutions’ transition plans, and the credibility of these plans from a micro-prudential standpoint. The reports call for concerted global efforts to enhance the adoption of transition plans, stressing the development of integrated international guidance and frameworks for the disclosure of such plans as well as advocate for the formulation of holistic transition plans that account for both transition and physical risks while acknowledging biodiversity loss, and while acknowledging biodiversity loss.

 

MAS Allocates S$35 Million for Workforce Development in ASEAN Sustainable Finance Sector
The Monetary Authority of Singapore (MAS), in collaboration with the Institute of Banking and Finance (IBF) and supported by Workforce Singapore (WSG), has launched the Sustainable Finance Jobs Transformation Map (JTM), which outlines the impact of sustainability trends on jobs within Singapore’s financial services sector and identifies the skills needed to meet sustainable financing demands. The JTM study forecasts that the ASEAN sustainable finance market could reach SGD 4-5 trillion over the next decade, requiring 50,000+ professionals to incorporate new sustainable finance-related tasks into their roles in existing areas such as risk, compliance and legal, product solutioning and management as well as sales and relationship management in addition to the emergence of new job roles with focus on sustainability risk and strategy. Against this backdrop, the JTM is intended as a resource for financial institutions and individuals to identify necessary skillsets for resilience and future readiness. To support the efforts towards upskilling the workforce in sustainable finance, the MAS has allocated SGD 35 million from the Financial Sector Development Fund for initiatives over a period of three years. Initiatives include among other things expanding sustainable finance courses for individuals with two undergraduate programs at local universities and several new executive programs as well as the implementation of an IBF Skills Badge to recognize professionals’ acquisition of sustainable finance skills.

 


Other transversal themes
 
Saudi Finance Minister and IMFC Chair Summarizes Key Takeaways from IMFC Meetings
As part of a joint press conference, Mr. Mohammed Aljadaan, the new Chair of the International Monetary and Financial Committee (IMFC) and Saudi Minister of Finance, along with IMF Managing Director Ms. Kristalina Georgieva, highlighted the key outcomes of the latest IMFC meetings held in Washington, D.C. Aljadaan acknowledged the significant contributions of his predecessor, Ms. Nadia Calviño, and emphasized the critical need for enhanced multilateral cooperation to strengthen global economic resilience and the robustness of the international monetary system. To that end, the IMFC articulated a range of policy priorities in response to current global economic challenges, emphasizing the necessity of achieving price stability, enhancing fiscal sustainability, and ensuring financial stability to foster inclusive and sustainable growth. Among other things, the committee stressed the importance of rebuilding fiscal buffers, customizing responses to country-specific circumstances, and protecting vulnerable groups and critical investments. Central banks also reaffirmed their commitment to price stability, tailoring policies in a data-dependent manner, and working closely with regulatory authorities to monitor and address risks, including those in property markets. Structural reforms aimed at enhancing supply, boosting productivity, and supporting the green and digital transitions were highlighted as critical to improving economic resilience to transformative global trends. The discussions also addressed the global economic impacts of ongoing conflicts, including the war in Ukraine and the crisis in Gaza, underscoring the interconnected nature of geopolitical stability and economic health, despite these issues being outside the IMFC’s direct mandate.

 

ISDA Expands Digital Regulatory Reporting Initiative to Three Additional Jurisdictions
The International Swaps and Derivatives Association (ISDA) has expanded its Digital Regulatory Reporting (DRR) initiative to include additional jurisdictions with a view to further facilitating cost-effective and accurate implementation of changes to regulatory reporting requirements. Following the expandion, the DRR now encompasses rule amendments under the UK European Market Infrastructure Regulation, as well as those by the Australian Securities and Investments Commission and the Monetary Authority of Singapore, with deadlines for implementation set for September 30, 2024 in the UK, and October 21, 2024 in Australia and Singapore. The DRR code for these rules is available for market participants to review and test. ISDA’s DRR provides a “golden-source” interpretation of each rule set through an industry committee’s review and agreement, which is then translated into free machine-readable code using the Common Domain Model. This allows firms to use ISDA’s DRR as an implementation basis or validation tool against their interpretations. Since its initial launch in November 2022 with CFTC rule changes, the DRR has been extended to cover amendments in Japan and the EU; further extensions will include Canada and Hong Kong in 2025 with codes available prior to their respective deadlines.

 

ESAs Establish Joint Framework for DPM 2.0 Standard Governance
The European Insurance and Occupational Pensions Authority (EIOPA), the European Banking Authority (EBA), and the European Central Bank (ECB) have established an alliance to enhance governance and collaboration in the development and maintenance of Data Point Model (DPM) Standards. Through the alliance, which follows the joint publication of DPM standard 2.0 by EIOPA and EBA in June 2023, the authorities aim to harmonize their methodologies for modeling reporting requirements, the metamodel for populating these requirements, and the supporting documentation. More broadly, the alliance seeks to streamline regulatory data definition and exchange within the financial sector, improve efficiencies by reducing duplicated efforts, and support more effective processes for defining reporting requirements as well as collecting and exchanging data and metadata among reporting entities, national authorities, and European authorities.

 

Authorities from Austria, France, Italy and Spain Set Out Macro-Prudential Framework Priorities for Asset Management Sector
The French Autorité des marchés financiers (AMF), the Austrian Financial Market Authority (FMA), the Italian Securities Commission (CONSOB), and the Spanish Securities Commission in a joint release have outlined their priorities for enhancing the macro-prudential approach to asset management in anticipation of the European Commission’s consultation on the subject. Recognizing the growing risks associated with non-bank financial intermediation (NBFI) and its potential impact on the real economy, the four authorities emphasize that asset management possesses distinct characteristics from banking, necessitating precise risk identification and tailored regulatory measures. To that end, they advocate for regulatory measures that address excessive price volatility and liquidity stress rather than capital requirements or liquidity buffers. The specific five priorities set out include: (1) promoting widespread adoption of Liquidity Management Tools (LMTs) in Open-Ended Funds (OEFs), particularly following revisions to the Alternative Investment Fund Manager Directive; (2) banning amortized cost accounting in money market funds due to its negative implications for financial stability; (3) implementing systematic stress tests to assess vulnerabilities within asset management groups; (4) establishing a consolidated supervisory framework for large cross-border asset management groups through supervisory colleges; and (5) creating an integrated data hub for use by market supervisors and central banks for both supervision and stress-testing purposes.

 

CFTC Unrolls Inaugural DEIA Strategic Plan to Enhance Organizational Diversity and Market Responsiveness
The Commodity Futures Trading Commission (CFTC) has published its inaugural Strategic Plan to Advance Diversity, Equity, Inclusion, and Accessibility (DEIA Plan). Designed as a two-year initiative, the plan complements the CFTC’s 2022-2026 Strategic Plan and sets out the agency’s vision for fostering DEIA within its workforce alongside a comprehensive set of initiatives. Specifically, the plan outlines six key goals: (1) creating inclusive workplaces through improved policies and training; (2) enhancing partnerships and recruitment to attract diverse talent; (3) expanding paid internships to develop a diverse talent pipeline; (4) advancing professional development and career progression opportunities for all employees; (5) employing a data-driven approach to inform DEIA decision-making; and (6) ensuring equity in procurement and customer outreach. The plan’s implementation will be overseen by an internal DEIA Executive Council.

 


Leadership changes & appointments
 
Eurosif Elects Nathalie Dogniez as New Chair
Eurosif has announced the appointment of Nathalie Dogniez as its new Chair, succeeding Will Oulton who stepped down after over eight years of service. Dogniez, who joined Eurosif’s Board as an Independent Director earlier in the year, was elected to the Chair position by the organization’s membership during Eurosif’s General Assembly on April 11 and subsequently confirmed by the Board. Her term as Chair is set for three years.

 

Jersey FSC Confirms Changes to Board
The Jersey Financial Services Commission (JFSC) has announced the appointment of Jane Platt CBE as its new Chair and Helene Narcy as a new Commissioner, respectively. Jane Platt joins with significant experience in various leadership positions in the industry as well as her role on the Board of the UK Financial Conduct Authority while Helene Narcy is recognized for her expertise as a Chief Finance Officer with a strong background in regulated industries. Platt succeeds the former Chair Mark Hoban and Interim Chair Monique O’Keefe.

 


Cross-border cooperation
 
Central Bank of Türkiye Signs MoUs with Central Bank of Brazil and National Bank of Kazakhstan
Against the backdrop of the IMF Meetings in Washington, D.C., the Central Bank of the Republic of Türkiye has entered into MoUs with both the Central Bank of Brazil and the National Bank of the Republic of Kazakhstan. Signed by by Governor Fatih Karahan and his counterparts Governor Roberto Campos Neto from Brazil and Timur Suleimenov from Kazahkstan, the agreements are intendd to strengthen and formalize the cooperation and corporate technical activities between the respective institutions, including through joint initiatives and projects.

 

Bank of Italy and Banque de France Formalize Cooperation Agreement with Focus on IT Infrastructure
The Bank of Italy has announced the signing of a collaboration agreement with Banque de France focused on the IT infrastructures sector. The agreement, signed by Luigi Federico Signorini, Senior Deputy Governor of Banca d’Italia, and Denis Beau, First Deputy Governor of Banque de France, is aimed at enhancing the resilience and operational efficiency of both central banks’ IT systems. Through the partnership, the two institutions are committing to work together to improve their technological frameworks which underpin their respective banking operations.