Global Regulator & Central Bank News Roundup

Volume 17/2024 (April 22 – April 28)

 

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
 
BIS Holds 23rd International Conference of Banking Supervisors, Endorses Revised Core Principles for Effective Banking Supervision
The Bank for International Settlements has hosted its 23rd International Conference of Banking Supervisors (ICBS), gathering over 220 central bankers and banking supervisors from more than 90 jurisdictions in Basel across two days to celebate the 50th anniversary of the Basel Committee on Banking Supervision and reflect on key achievements as well as to discuss critical developments and the outlook on banking supervision. A critical outcome of the conference was the endorsement of the revised Core Principles for Effective Banking Supervision, which have been updated to incorporate lessons learned and more specifically address the macroprudential supervision aspect since their last revision in 2012, reinforce corporate governance, risk management and operational resilience practices, as well as address new challenges such as digital finance and climate-related financial risks. Specific changes include inter alia adjustments regarding the scope of supervisory powers and responsibilities in relation to macroprudential supervision, amendments to corporate governance and risk management principles to harmonize them with the 2015 Corporate Governance guidelines, the introduction of a definition of climate-related financial risks and modifications to the requirements for scenario analysis and stress testing to support a
more flexible and proportionate application and certain amendments to the principles pertaining to service providers and operational resilience for improved alignment with the Basel Committee’s latest principles on operational resilience and the sound management of operational risk. Additionally, the Basel Committee agreed to release a consultation paper on guidelines for strengthening banks’ counterparty credit risk management and an analytical report on the digitalization of finance, both reflecting recent industry developments and regulatory responses. Beyond this, the conference underscored ongoing commitments to cross-border cooperation in supervision, effective implementation of Basel III standards, and reinforced risk management practices among banks globally.

 

FSB Sets Forth Global Standard for Orderly Resolution of Systemically Important CCPs
The Financial Stability Board (FSB) has introduced a new global standard designed to enhance the orderly resolution of systemically important central counterparties (CCPs). The new standard is anchored in a toolbox approach which encompasses seven types of resources and tools that resolution authorities can flexibly draw on to support CCP resolution, notably: (1) Bail-in bonds, (2) Resolution funds (regional/national/supranational), (3) Resolution-specific insurance, (4) Resolution-specific third-party contractual support, (5) Resolution cash calls, (6) Statutory or contractual VMGH for resolution, and (7) Equity in a first-loss position in resolution. Jurisdictions are expected to make their methods for calibrating these tools transparent. To ensure effective implementation, the FSB will monitor CCPs that are systemically important in more than one jurisdiction and will publish its findings in its annual Resolution Report. Alongside the introduction of the new standard, the FSB has updated adjacent documentation including its guidance on financial resources to support the resolution of systemically important central counterparties (CCPs) and on the treatment of CCP equity in resolution, published initially in November 2020, as well as its Key Attributes of Effective Resolution Regimes for Financial Institutions, which outlines twelve essential features for jurisdictions to incorporate into their resolution regimes to enable orderly resolution of financial institutions.

 

SARB Inaugurates South Africa’s New Corporation for Deposit Insurance
The South African Reserve Bank (SARB) has announced the launch of the Corporation for Deposit Insurance (CODI) in Johannesburg, which became operational at the turn of the month. CODI is set up as a subsidiary of the SARB, operating as a separate legal entity with its own Chief Executive Officer and Board of Directors and complementing the SARB’s role as Resolution Authority and lender of last resort under the country’s Twin Peaks model. It is also a member of the International Association of Deposit Insurers (IADI). The scheme covers individuals and non-financial corporate depositors up to R100 000 per account in qualifying products and aims to provide access to funds within 20 days initially, with plans to reduce this timeframe further. Funded by monthly premiums and loan contributions from member banks based on their total covered deposits, CODI operates under a ‘paybox plus’ mandate that allows it to support various resolution strategies. A public awareness campaign has been launched in partnership with member banks to inform about depositor protection limits. Lesetja Kganyago, Governor of the South African Reserve Bank, in a speech addressing the launch highlighted that while South Africa’s financial system has been relatively safe for depositors, formalizing a system of deposit insurance is considered global best practice. She also emphasized that CODI is intended to further improve competition among banks for deposits by ensuring that deposits up to R100,000 are equally safe across all member banks, potentially narrowing the gap between interest rates on checking accounts and policy rates set by SARB.

 


AML & CFT
 
GAFILAT Hosts Workshop in Panama on Leveraging New Technologies for ML/TF Detection and Prevention
The Financial Action Task Force of Latin America (GAFILAT) held a workshop in Panama City, Panama, focusing on the application of new technologies in the detection and combating of money laundering and terrorist financing (ML/TF). The workshop aimed to facilitate the exchange of good practices and successful experiences among national representatives from Financial Intelligence Units (FIUs) and Anti-Money Laundering Prosecutors’ Offices. Discussions centered on the impact of digital transformation on AML/CFT efforts, the use of artificial intelligence to enhance FIU processes, and investigative techniques for handling virtual assets. Additionally, there was a focus on how new technologies can assist the private sector in meeting customer due diligence obligations. The event saw participation from representatives across GAFILAT’s 18 member countries and featured experts from various international organizations including the Global Facility, Italy’s Guardia di Finanza, Spain’s Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences (SEPBLAC), and Argentina’s Specialized Prosecutor’s Office for Cybercrime Investigation.

 


Cyber & operational resilience
 
G7 Financial Authorities Complete Cybersecurity Coordination Drill to Strengthen Cross-Border Cyber Incident Response
The G7 Cyber Expert Group has announced the successful completion of a two-day cross-border coordination exercise aimed at enhancing the crisis management capabilities of G7 financial authorities in the event of a large-scale cyber incident. The exercise, which involved 23 competent authorities, ministries of finance, central banks, and market authorities as well as private industry participants from across all G7 countries, simulated a large-scale cyber attack on financial market infrastructures and entities. These exercises are routinely conducted to improve the resilience of the financial sector and minimize disruptions within G7 countries by integrating various lines of effort for effective incident response. In the joint statement, Expert Group emphasized the importance of cross-border coordination, preparedness for incident response, and information sharing as key priorities in an interconnected world.

 

Bank of France Outlines Cyber Resiliency Enhancement Strategies in New ESRB Report
In a separate release, the Bank of France has shared a new report discussing strategies to mitigate risks from systemic cyber incidents. The report, which builds on the European Systemic Risk Board’s (ESRB) previous work, suggests three main avenues for both private and public institutions to enhance cyber resilience: improving information management and sharing, aligning crisis management and coordination practices, and evaluating system-wide contingency options and backup arrangements. It elaborates on the ESRB’s foundational work by detailing the systemic impact tolerance objective (SITO) approach, which sets thresholds for macroprudential policy responses to prevent severe damage to the financial sector. Additionally, the it examines potential preventative and remedial measures that authorities can employ, such as capital buffers and cyber resilience scenario testing (CyRST).

 


Conduct & consumer protection
 
New Zealand Government Unfolds Two-Stage Financial Services Reform Plan Focusing on Regulatory Clarity and Consumer Protection
The New Zealand Government is advancing a two-phased reform package with a view to reducing compliance costs and improving financial consumers’ accessibility to home loans and other lending. Focus of Phase 1 of the reforms will be the revocation of prescriptive affordability assessment requirements under the Credit Contracts and Consumer Finance Act (CCCFA) as well as certain legacy COVID-19 regulations. It also includes the introduction of certain exemptions, such as the exemption of voluntary targeted rates schemes provided by local authorities from the CCCFA to enable them to offer low-risk financial products to help households, including loans to install insulation or heat pumps. Phase 2 will subsequently involve a more substantive review of financial services legislation including transferring regulatory responsibility for the CCCFA from the Commerce Commission to the Financial Markets Authority (FMA), reassessing high-cost credit provisions of the CCCFA, and improving the financial dispute resolution system’s accessibility and effectiveness.

 

CSA Reports Indicate CRM2 Amendments Influence on Investment Fund Industry and Investor Behavior
The Canadian Securities Administrators (CSA) has published two research reports analyzing the effects of the Client Relationship Model Phase 2 (CRM2) Amendments on the investment fund industry and investor behavior. The CRM2 Amendments, which came into effect in 2016, aimed to enhance financial disclosure to investors by mandating increased transparency regarding the costs and performance of client accounts. The research indicates a shift in industry behavior towards trends that align with the hypothesized impacts of these regulations, such as a decline in average fees and an improvement in investment performance. Specifically, management expense ratios (MERs) and management fees for mutual funds and exchange-traded funds (ETFs) have decreased, with assets moving towards funds with lower fees. Additionally, fund managers have reduced fees charged to investors. The study also noted better risk-adjusted gross investment performance against model benchmarks during the 2013-2020 period. However, it is acknowledged that these changes cannot be solely attributed to CRM2 due to other potential contributing factors not accounted for in the analysis. The CSA emphasizes that while there is no evidence of a shift towards products outside CRM2’s scope, other market or regulatory developments could also influence these outcomes.

 


Fintech & ecosystem innovation
 
HKMA Kicks Off FiNETech Series to Foster Collaboration between Financial Institutions and Technology Providers
The Hong Kong Monetary Authority (HKMA) has announced the launch of its new FiNETech series. Backed by multiple stakeholder groups from across the public and private sector such as all key local financial regulators including the Securities and Futures Commission, the Insurance Authority, the Mandatory Provident Fund Schemes Authority and major industry associations, the FiNETech series seeks to offer a one-stop platform for financial institutions to access information on technology sourcing options in the areas of Wealthtech, Insurtech, Greentech, Artificial Intelligence (AI), and Distributed Ledger Technology (DLT) and serve as a collaboration platform with a view to fostering new partnerships between financial institutions and technology providers and the development of novel financial solutions. Once a partnership has formed, financial institutions and technology partners also have the option to jointly approach the HKMA’s Fintech Supervisory Chatroom to present and discuss innovative proposals as well as leverage the Fintech Supervisory Sandbox 2.0 for testing and receiving early supervisory feedback on their solutions. Forthcoming FiNETech sessions the initiative will place particular focus on the opportunities associated with AI including generative AI alongside Greentech and DLT.

 

CBUAE Subsidiary AEP Partners with Core42 to Initiate Open Finance Framework in UAE
Al Etihad Payments (AEP), a subsidiary of the Central Bank of the UAE (CBUAE), has announced its partnership with Core42 and select other technology providers initiate the implementation of open finance in the UAE. The collaboration seeks to establish global standards for open finance and introduce a consolidated trust-framework and centralized API hub, allowing secure access to banking and insurance markets with customer consent. The open finance initiative will initally begin with open banking and subsequently be expanded to open insurance in phases throughout 2024. All participating entities will be licensed by the CBUAE. The CBUAE will license and supervise all participating entities. The initiative forms part of the CBUAE’s broader financial infrastructure transformation programme and is among other things intended to enhance digital financial inclusion.

 


Payments & money
 
SARB Release Digital Payments Roadmap
The South African Reserve Bank (SARB) has released its Digital Payments Roadmap, which outlines strategic initiatives aimed at enhancing the digital payments system in line with the National Payment System Framework and Strategy: Vision 2025. The Roadmap emphasizes promoting competition, innovation, cost-effectiveness, interoperability, and financial inclusion within South Africa’s advanced banking and financial services sector. The release comes on the heels of recent key advancements such as the discontinuation of cheques, the introduction of PayShap—a new faster payments system launched in March 2023—and the adoption of contactless payments and QR codes. Despite these developments, challenges persist in fully adopting digital payment methods due to factors including inter alia high reliance on cash, high operational costs for consumers and SMEs, fragmented and outdated legacy systems, as well as limited infrastructure access including internet connectivity issues, and general distrust in digital payment solutions. The new Roadmap proposes solutions to overcome these barriers to increase accessibility and usability of digital payments which will support economic growth and improve socioeconomic conditions for South Africans. Implementation roles are designated to various stakeholders including SARB itself, National Treasury, other regulatory bodies, government departments and agencies at multiple levels (including municipalities), as well as entities within the payment industry like fintechs and mobile money operators.

 


ESG
 
Sustainable Banking and Finance Network Releases Key Progress Report and New Data Portal
The Sustainable Banking and Finance Network (SBNF) has released its 2024 Global Progress Brief, which highlights key progress made of its member countries in the areas of ESG integration, climate and nature-related risk management and financing sustainability. Notably, 59% of the SBFN countries have launched ESG integration frameworks, with over half developing technical guidance for implementation. In addition, 53% of countries have adopted frameworks for climate risk management, reflecting a significant increase compared to the previous report. Furthermore, 42% of SBFN countries have published or are developing taxonomies to guide sustainable finance activities, contributing to a total of $759 billion in thematic bonds issued. Alongside the publication of the brief, the Network has also launched a new Data Portal, which offers insights into sustainable finance progress across 70 emerging markets and developing economies, including perspectives on global trends and information on country-specific developments, actions and initiatives. It is anchored in the SBNF’s measurement framework and methodology, which was introduced in 2023 as a systematic approach to assessing and benchmarking country progress in developing national sustainable finance frameworks.

 

FINMA Initiates Evaluation of Effectiveness of Climate-Related Disclosure Mandates for Major Banks and Insurers
The Swiss Financial Market Supervisory Authority (FINMA) is undertaking an ex-post evaluation of the climate-related disclosure requirements that were implemented in 2021 for banks and insurers in supervisory categories 1 and 2. Following the completion of three disclosure cycles, FINMA aims to review the effectiveness of these requirements. As part of this process, FINMA has released a questionnaire with two sets of questions. The first set is directed at institutions and focuses on assessing the impact and effectiveness of the new regulations in specific areas such as risk identification, methods and metrics for risk assessment, internal governance, and information disclosure structuring. They also explore the additional workload and costs incurred by institutions and seek to understand how these requirements have influenced legal and planning certainty concerning climate risk disclosure. The second set seeks to gather views from a broader range of stakeholders including users of climate-related information on the quality and ease of access of climate-related information published by financial entities as well as their usefulness in helping improve the understanding of climate-related risks.

 


Other transversal themes
 

CBUAE Announces Two-Year SupTech and EDM Initiatives
The Central Bank of the UAE (CBUAE) has announced plans and next steps to advance its digital transformation agenda through comprehensive SupTech and Enterprise Data Management (EDM) initiatives. The SupTech initiative will leverage technology to advance the digitalization and improve effectiveness across licensing, supervision and enforcement processes while the EDM programme will focus on data integrity, analytics, automation, AI-driven decision-making through a unified supervision portal. Both initiatives will span a timeframe of two years. As part of the work, the CBUAE has also announced partnerships with a consortium of technology solution providers.

 


Cross-border cooperation
 
Sustainable Banking and Finance Network Welcomes Bank of Papua New Guinea As New Member
The Sustainable Banking and Finance Network (SBFN) has expanded its global network by welcoming the Bank of Papua New Guinea (BPNG) as its latest member. The BPNG has been proactive in promoting environmental, social, and governance (ESG) standards within its local banking sector including through the launch of the Inclusive Green Finance Policy (IGFP) project in 2021 to enhance climate resilience and inclusive green growth in Papua New Guinea, which among other things involved the creation of a Green Finance Center tasked with leading IGFP implementation and advancing green finance initiatives. Furthermore, BPNG is set to trial an Inclusive and Green Taxonomy with select financial institutions in 2024 and will introduce a Green Refinance Facility aimed at increasing green loans availability. The addition of BPNG brings SBFN’s membership to 90 across 69 countries.

 

CMA Kuwait and India’s IFSCA Enter into MoU
The Capital Markets Authority (CMA) of Kuwait has entered into a MoU with the International Financial Services Centers Authority of the Republic of India to foster joint cooperation in the development and regulation of financial products, services, and institutions. Key areas covered by the MoU include promoting development within their respective competencies, exchanging historical data along with recent trends and events, sharing best practices in regulatory frameworks, governance controls in IT and FinTech innovations within capital markets, as well as organizing seminars and conferences to further develop their jurisdictions. The MoU also outlines assistance provisions for delegations from both bodies regarding compliance with relevant laws including disclosure obligations for entities already listed or those seeking listing on securities markets regulated by either authority.