Global Regulator & Central Bank News Roundup

Volume 20/2024 (May 13 – May 19)

 

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 Updates Basel III Implementation Timeline and Postpones Cryptoasset Standard to 2026
The Bank for International Settlements has released an update on the Basel III implementation and the deferral of the cryptoasset standard. Since their finalization in 2017, significant progress has been made in implementing the Basel III reforms, with about two-thirds of member jurisdictions expected to have implemented all or most standards by this year, and the remainder planning completion by next year. The GHOS members unanimously reaffirmed their commitment to fully, consistently, and promptly implement all aspects of the Basel III framework, emphasizing its importance for financial stability in light of recent market shocks. In response to these shocks, similar to those experienced during the March-May 2023 turmoil which underscored the need for robust regulation and effective supervision, the GHOS has tasked the Committee with ongoing monitoring and assessment of Basel III’s implementation. Additionally, acknowledging developments in cryptoassets and following a consultation on targeted revisions in December 2023, the GHOS has updated the timeline for implementing its prudential standard for banks’ cryptoasset exposures to January 1, 2026. The Committee will consider potential revisions later this year and believes that the revised date will facilitate full, timely, and consistent implementation across member jurisdictions.

 

EIOPA’s Insurance Risk Dashboard Reflects Medium-Level Market Risks Amidst Economic Volatility
The European Insurance and Occupational Pensions Authority (EIOPA) has published its May 2024 Insurance Risk Dashboard, indicating that the EU insurance sector maintains stable risks at medium levels, with specific vulnerabilities due to market uncertainty and potential real estate sector risks. The report highlights that macro risks show signs of positive developments despite low historical GDP growth, while credit risks remain steady with a slight decrease in credit default swap spreads, although insurers’ high exposure to sovereign and corporate bonds warrants close monitoring. Market risks are challenged by volatility and declining commercial real estate prices in early 2023. Liquidity and funding risks are assessed as stable at a medium level; however, increased lapse rates towards the end of the previous year are under scrutiny. Profitability and solvency have also remained stable at medium levels, with improved returns at the end of 2023 compared to 2022 and consistent solvency ratios in Q4-2023. The dashboard further highlights that insurers’ interlinkages with other financial sectors have seen a slight increase in non-banking financial activities exposure. In terms of insurance risks, there has been positive premium growth for life and non-life segments, alongside a minor deterioration in median loss ratios. Finally, ESG-related risks appear stable without significant changes in transition and physical risk indicators while the materiality of digitalization and cyber risks has seen a slight uptick in early 2024 and an increase in negative sentiment indicators related to cyber threats.

 

FINMA Proposes Comprehensive Update to Insurer Liquidity
The Swiss Financial Market Supervisory Authority (FINMA) has issued for consultation a comprehensive revision of its circular on the liquidity of insurers, aligning it with the updated Insurance Supervision Ordinance (ISO) and refining its supervisory approach to liquidity management and risk. This initiative targets insurers who will now be required to report annually to FINMA on their liquidity planning, a mandate that became effective as of January 1, 2024, as stipulated in Art. 98a para. 4 ISO. The revision is motivated by both domestic regulatory changes and increased international focus on liquidity in insurance supervision. The revised circular organizes liquidity oversight into six principle-based subject areas: governance, liquidity management and planning, liquidity reserve, risk management, controlling and monitoring, and an emergency concept for addressing shortfalls. Governance focuses on defining a clear organizational and operational structure with the allocation of tasks, competencies, and personal responsibility. Liquidity management and planning involve forecasting future cash inflows and outflows for different time horizons and managing the associated available cash and cash equivalents. The liquidity reserve area ensures the provision of highly liquid assets to bridge short-term liquidity requirements. Liquidity risk management aims to ensure liquidity even in stress situations and incorporates liquidity risks into the overall risk management of insurers. Liquidity controlling and monitoring introduce effective processes for measuring, monitoring, and managing liquidity, including integrating these processes into the internal control system (ICS). The emergency concept defines processes and measures to address varying severities of liquidity bottlenecks. Feedback to the consultation can be submitted until 12 July.

 


AML & CFT
 
FATF Releases Revised Procedures for Mutual Evaluations, Follow-Up and ICRG
The Financial Action Task Force (FATF) has released updated procedures for its mutual evaluations, follow-up processes, and International Co-operation Review Group (ICRG) activities, which will form the basis for the 5th round of evaluations during 2024. The document details the detailed steps and timelines for the mutual evaluation process, including pre-evaluation engagement, on-site visits, post-evaluation analysis, and follow-up reporting, as well as outlines the oles and responsibilities of the assessed country, assessment team, mutual evaluation reviewers, follow-up experts, and the Secretariat. The procedures were subject to significant revisions following an in-depth assessment of the results of the 4th round of mutual evaluations Under the latest procedures, a country’s assessment sequence will be based on the time since a country’s last evaluation, its level of money laundering and terrorist financing risks, and the size of its economy and financial sector. Following a mutual evaluation, countries have three years to address identified deficiencies, failing which they may face measures including public disclosure of outstanding issues. The follow-up process emphasizes specific actions to combat money laundering, terrorist financing, and the financing of weapons of mass destruction. A detailed summary of the procedures can be accessed here.

 


Fintech & ecosystem innovation
 
Basel Committee Report Explores Digital Finance Impact on Banking Supervision
The Basel Committee has published a report on the implications of the digitalisation of finance for banks and supervision. This report, which builds on the 2018 Sound Practices document, examines recent developments in digital finance, highlighting both the benefits and risks associated with new technologies and the emergence of new technologically enabled suppliers such as big techs, fintechs, and third-party service providers. The report reviews the use of innovative technologies like application programming interfaces, artificial intelligence, machine learning, distributed ledger technology, and cloud computing across the banking value chain and identifies eight key implications for banks and supervisors, covering macro-structural elements, specific digitalisation themes, and the need for capacity building and coordination. It highlights that while digitalisation offers significant advantages, it also introduces new vulnerabilities and amplifies existing risks, including strategic, reputational, and operational risks, as well as potential system-wide risks due to increased interconnections. Banks are adopting various strategies to mitigate these risks, but effective governance and risk management processes are essential. The report underscores the regulatory and supervisory implications, emphasizing the need for monitoring evolving risks, safeguarding data, and securing the necessary resources and capabilities to manage risks from new technologies and business models. A detailed summary of the report can be accessed here.

 

Jordan Securities Commission Announces Inauguration of Central Bank’s Financial Technology Academy
The Jordan Securities Commission has announced the inauguration of the Financial Technology Academy by the Central Bank of Jordan, a strategic initiative aimed at fostering expertise in financial technology and innovation. The Academy, established under the Institute of Banking Studies’ umbrella, is designed to serve as a regional hub for financial innovation, offering specialized education and robust training programs. The programs offered are tailored to equip professionals in the financial and banking sector, future leaders, entrepreneurs, and various other groups—including women and youth—with essential skills to navigate and advance within the rapidly evolving financial landscape. The launch event was attended by government officials, industry leaders from the financial and banking sectors, and international partners. Dr. Adel Al-Sharkas, Governor of the Central Bank, emphasized that this initiative aligns with Jordan’s economic modernization vision for 2023-2033 and underscores the bank’s commitment to technological advancement and innovation in finance.

 

Central Bank of Luxembourg Issues Study Paper on Deep Learning Techniques for Solving DSGE Models
The Central Bank of Luxembourg has published Study Paper n° 184, which explores the application of deep learning (DL) techniques to solve complex economic models frequently utilized by central banks. Specifically, the paper offers a deep dive into the use of DL methods in addressing heterogeneous agent economic models with aggregate risk, life cycle models, and multi-country models. It acknowledges two primary challenges in adopting DL for economic analysis: the often esoteric terminology associated with DL that can deter newcomers and the intricate specification decisions required prior to applying DL methods. To mitigate these issues, the report provides a comprehensive overview of DL techniques and their relevance to economic modeling while offering guidance on methodological choices. A key focus is placed on the stochastic growth model to demonstrate how various user decisions influence the quality of DL solutions and to establish general principles for optimal configuration selection.

 


Payments & money
 
BIS and Central Bank Consortium Launch Project Agorá to Explore Tokenised Deposits for Cross-Border Payments
As part of its Project Agorá, the Bank for International Settlements (BIS), in collaboration with a consortium of leading central banks and the Institute of International Finance (IIF), has launched a call to invite private financial institutions for participation. Project Agorá seeks to explore the potential of tokenised deposits in enhancing cross-border wholesale payments within the two-tiered banking system, focusing on the roles of commercial bank money and central bank money for wholesale transactions. The project is a joint public-private initiative involving BIS, Banque de France, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, the Federal Reserve Bank of New York, and IIF as the private sector convener. Private sector involvement is sought from diverse regulated financial institutions with significant roles in wholesale cross-border payments across seven jurisdictions and currency areas. These institutions are expected to offer technical expertise for platform design and collaborate on use case testing. Eligibility requirements are detailed in the application package available until 31 May 2024, with selected participants anticipated to be announced by early August.

 

IMF Fintech Note Explores Retail CBDCs’ Impact on Cross-Border Payments
The International Monetary Fund has published a new Fintech Note exploring the potential of retail central bank digital currencies (CBDCs) to enhance cross-border payments. The note acknowledges that while the primary objective for issuing retail CBDCs varies across jurisdictions, many central banks are considering their role in improving cross-border payments. It highlights that CBDCs can reduce frictions by providing a safe and liquid asset that minimizes the need for financial intermediaries and settlement risk. The publication points out that although designing CBDC systems for cross-border use does not fundamentally differ from other payment systems, central banks may assume a more significant role due to the nature of CBDC as public money. The note outlines design and policy considerations essential for developing retail CBDC systems compatible with cross-border transactions and draws lessons from current research and experimentation. It emphasizes retail CBDCs—targeting households and non-financial firms—and leaves wholesale CBDC considerations for future discussions, though it notes that many insights apply to both retail and wholesale CBDCs as well as other forms of money. The report underscores that CBDCs can improve cross-border payments by reducing intermediaries, lowering settlement risk, increasing payment diversity, and enabling faster, cheaper transactions. Early design choices are crucial, as factoring in cross-border implications from the outset can prevent future redesign challenges. The note identifies five key elements for cross-border CBDC design: Access, Communication, Currency Conversion, Compliance, and Settlement, and stresses the importance of interoperability with existing financial infrastructures and other CBDCs. Recommendations include carefully evaluating access policies for non-residents and foreign institutions, adopting international standards such as ISO 20022, prioritizing instant settlement and 24/7 availability, leveraging programmability through smart contracts, ensuring compliance with international regulatory frameworks, and adopting flexible technical designs. Additionally, promoting public-private partnerships is encouraged to leverage technological innovations and enhance the efficiency of cross-border payments. The conclusions emphasize that international cooperation, including information sharing, consistent standards, and collaborative infrastructure, are essential for successful cross-border CBDC arrangements. A detailed summary of the Note can be accessed here.

 

HKMA Expands Cross-Boundary e-CNY Pilot with PBoC to Enhance Cross-Border Payments
The Hong Kong Monetary Authority (HKMA) has announced the expansion of the cross-boundary e-CNY pilot in Hong Kong, in collaboration with the People’s Bank of China (PBoC). The initiative is part of the “three connection, three facilitation” measures introduced by the PBoC and aims to enhance cross-border payments between Hong Kong and Mainland China. The expanded pilot allows Hong Kong residents to set up e-CNY wallets using their local mobile phone numbers and top up these wallets through the Faster Payment System (FPS) via 17 participating retail banks, marking the world’s first integration of a faster payment system with a central bank digital currency system. While currently prohibiting person-to-person transfers, e-CNY wallets can be used for merchant payments within both the Guangdong-Hong Kong-Macao Greater Bay Area and other Mainland pilot areas. The HKMA’s Chief Executive, Mr Eddie Yue, expressed enthusiasm about Hong Kong being at the forefront of this innovative venture and outlined future plans to broaden e-CNY applications, improve wallet functionalities, and increase retail merchant acceptance in both regions. The HKMA will also explore corporate use cases to facilitate cross-boundary trade settlement.

 


ESG
 
ISSB Inaugurates Permanent Montreal Office
The International Sustainability Standards Board (ISSB) has confirmed the establishment of its permanent office in Montreal. The ISSB previously set up the interim office in Montreal in June 2022, which since then served as a vehicle to facilitate regional stakeholder engagement and host events such as the 2023 IFRS Sustainability Symposium. Canadian officials have expressed strong support for the ISSB’s presence in Montreal, recognizing its role in advancing environmental objectives and contributing to a more resilient and sustainable economy.

 

NGFS Issues Guidance on Sustainable Investment Practices for Central Banks
The Network for Greening the Financial System (NGFS) has published a cover report and two technical documents on Sustainable and Responsible Investment (SRI) in central banks’ portfolio management, emphasizing the urgency of climate action and the role of central banks in fostering a climate-neutral economy. The cover report provides a comprehensive overview of SRI practices, offering ten non-binding recommendations specifically targeting central bank investment portfolios, excluding those used for monetary policy purposes. These recommendations address governance, measurement, action, and evaluation aspects, urging central banks to integrate sustainability factors into their investment portfolios, set formal SRI policies, establish governance frameworks, enhance sustainability expertise, assess relevant standards and frameworks, and adopt global disclosure practices. The report highlights the dual objectives of SRI: addressing sustainability-related risks to enhance financial performance and generating real-world impact by allocating capital to sustainable investments. It also acknowledges challenges such as data limitations and potential trade-offs between sustainability and financial objectives. The NGFS survey reveals a significant increase in the adoption of SRI practices among central banks, driven by risk management and the goal of setting a good example, with climate-related considerations currently prioritized and a growing focus on net-zero goals. The two technical documents provide detailed strategies for incorporating climate change considerations into non-monetary investments, with one focusing on decarbonization strategies for corporate portfolios and the other on climate-related risks in sovereign investments. A detailed summary of the cover report can be accessed here.

 

ESMA Finalizes Guidelines for ESG and Sustainability Labeling in Fund Names
The European Securities and Markets Authority (ESMA) has published the final report containing Guidelines on funds’ names using ESG or sustainability-related terms. The Guidelines aim to protect investors from misleading claims regarding sustainability in fund names and provide asset managers with criteria for using ESG or sustainability-related terms. Specifically, a minimum of 80% of investments must meet environmental, social characteristics, or sustainable investment objectives to use these terms. Additionally, the Guidelines set out exclusion criteria for terms such as “Environmental,” “Impact,” and “sustainability” in line with Paris-aligned Benchmarks (PAB) rules, and for “Transition,” “Social,” and “Governance” related terms following Climate Transition Benchmarks (CTB) rules. The report also shares responses to ESMA’s consultation paper and explains how comments were addressed. The Guidelines will become effective three months after publication. For existing funds a six-month transitional period will apply while new funds created after the application date must immediately comply with the Guidelines.

 

CVM Initiates Public Consultation on Mandatory Sustainability Disclosure Requirements
The Brazil Securities Commission (CVM) has opened a public consultation for CBPS Technical Pronouncement No. 01 – General Requirements for Disclosure of Financial Information related to Sustainability and the CBPS Technical Pronouncement No. 02 – Climate-Related Disclosures. The pronouncements seek to align with the IFRS S1 and S2 Standards by the International Sustainability Standards Board (ISSB). Publicly held companies are mandated to achieve compliance with the requirements by 1 January 2026 with the option for early adoption of both Pronouncements. Feedback on the draft requirements can be submitted until mid-July.

 


Other transversal themes
 
Bank of England Announces Expansion Plan for Leeds Office with 500 Staff by 2027
The Bank of England has announced plans to expand its presence in Leeds, targeting a headcount of at least 500 staff by 2027, which represents approximately one-tenth of its workforce. This growth will be realized through voluntary relocations and new recruitment within Leeds, while maintaining the Bank’s overall current headcount. The expansion is intended to enhance trust and understanding of the Bank’s work throughout the UK, ensure representation that reflects the populace it serves, access broader talent pools, and retain skilled employees. Governor Andrew Bailey highlighted the opportunity to better represent the public and strengthen local business connections, while Tracy Brabin, Mayor of West Yorkshire, emphasized the move as a significant endorsement for the region’s reputation as a leading banking capital outside London. Currently the Bank operates from 12 agencies across the UK and with a total reported headcount of nearly 5,000 employees as of 2023.

 

NAIC Hosts 2024 International Insurance Forum Highlighting Regulatory Challenges and Strategies in Climate Risk and Technology
The National Association of Insurance Commissioners (NAIC) has convened its 2024 International Insurance Forum in Washington D.C., bringing together state and international insurance supervisors, industry representatives, and other stakeholders to discuss pressing issues in the insurance sector. NAIC President Andrew N. Mais opened the event by emphasizing the need to close protection gaps and highlighting initiatives like the National Climate Resilience Strategy for Insurance and international collaborations. Day One featured panels on technology innovations, climate risk, and the importance of inclusion, with industry leaders discussing the skills gap and championing women leaders. Discussions also covered the impact of diversity, equity, and inclusion policies, property insurance costs, investment strategies amid market fluctuations, public/private partnerships in climate risk management, and the oversight of AI and machine learning. Day Two began with a keynote from Tobias Adrian of the International Monetary Fund on global financial market risks, followed by a panel on the IAIS’ next five-year strategic plan, focusing on global insurance capital standards and collaboration on climate risk, cyber, and fintech. Chuchatr Pramoolpol discussed the insurance landscape in Thailand and efforts to address protection gaps, while the closing panel led by Andrew Mais explored innovation in the insurance industry. The forum underscored the importance of international collaboration, technological innovation, and inclusive policies in addressing current and future challenges.

 


Leadership changes
 
Erik Thedéen To Take Helm as Chair of the Basel Committee on Banking Supervision
The Bank for International Settlements has announced the appointment of Erik Thedéen as the new Chair of the Basel Committee on Banking Supervision, succeeding Pablo Hernández de Cos. Thedéen, currently serving as Governor of the Sveriges Riksbank, will commence his three-year term on June 11, 2024, with the possibility of renewal for a second term. The Basel Committee operates by consensus among its members and reports to the Group of Central Bank Governors and Heads of Supervision (GHOS), chaired by Tiff Macklem. This transition comes at a time when approximately one-third of member jurisdictions have implemented most Basel III standards, with two-thirds expected to do so by end-2024. To that end, a key focus of Thedéen’s leadership will be to drive the full and consistent implementation of Basel III standards by member countries to promote global financial stability.

 

ESMA Confirms Vojtech Belling as Vice Chair for Additional Term
The European Securities and Markets Authority (ESMA) has reappointed Vojtech Belling as its Vice Chair for a second term. Mr. Belling, who currently serves as the Executive Director of the Financial Market Regulation and International Cooperation Department at the Czech National Bank (CNB), will continue in his role at ESMA for an additional two-and-a-half-year term, following his initial appointment in November 2022. His background includes previous positions such as Director of the EU and International Affairs Division at CNB, State Secretary for EU Affairs, and various roles within the Czech Civil Service since 2002. Beyond his responsibilities at ESMA and CNB, Mr. Belling is also a member of the International Relations Committee of the European Central Bank and an alternate member of the Economic and Financial Committee of the EU Council.

 

South African National Credit Regulator Appoints Ms. Lynette De Beer as Acting CEO
The South African National Credit Regulator (NCR) has announced the appointment of Ms. Lynette De Beer as the Acting Chief Executive Officer (CEO), effective from the 1st of May 2024, succeeding Ms. Nomsa Motshegare who retired on the 30th of April 2024 after a decade of service. A Chartered Accountant by profession, Ms. De Beer brings extensive leadership experience from her roles in both private and public sectors to her new position. Prior to this appointment, she served as the NCR’s Chief Financial Officer since October 2021. In this role she was responsible for finance, supply chain management, ICT, and reporting to entities such as the National Treasury and Auditor-General of South Africa.

 


Cross-border cooperation
 
European Parliament and European Stability Mechanism formalize MoU
The European Parliament and the European Stability Mechanism (ESM) have signed a MoU, formalizing a framework for collaboration that has been under discussion for several years. The agreement, resulting from negotiations initiated in 2023, aims to enhance interinstitutional dialogue through regular exchanges of views, annual visits, and written communications, including public and confidential meeting. The agreement will be reviewed every three years and can be amended or terminated by either party.

 

National Banks of Serbia and Hungary Collaborate on Greening Monetary Policy Under Western Balkans Capacity Building Program
The National Bank of Serbia has initiated a collaborative effort with the National Bank of Hungary to exchange expertise on greening monetary policy and the financial system. The partnership is part of the broader “Western Balkans Central Bank Capacity Building Programme,” which aims to integrate Western Balkan central banks into the European System of Central Banks and represents one component of a three-mission framework that also includes participation from the Bank of Italy. The cooperation involves sharing experiences and best practices, particularly in integrating climate goals into central bank mandates, using monetary policy instruments, and managing foreign exchange reserves to support green economic transitions. The first expert mission from Hungary took place at the Serbian central bank on May 16-17, where discussions covered sustainable financing and the role of central banks in this process. The Hungarian experts shared their insights on supporting green initiatives such as educational projects and afforestation financing.