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Be ing be tte r inform e dFS regulatory, accounting and audit bulletin

PwC FS RegulatoryCentre of Excellence

April 2014

In this month’s edition:

EP approve Omnibus II

EC look at crowdfunding

FCA publish Risk Outlookand Business Plan

UK Insurance sectorrocked

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Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 2

Welcome to this edition of “Being better informed”, ourmonthly FS regulatory, accounting and audit bulletin,which aims to keep you up to speed with significantdevelopments and their implications across all thefinancial services sectors.

Laura CoxLead PartnerFS Regulatory Centre of Excellence

The UK life insurance industry was shaken by a trio ofregulatory announcements in March that temporarilyknocked billions off the market value of insurers.These developments may have long-termconsequences for the industry, raising doubts over theviability of certain business lines.

First, UK Government announced in the Budget thatbuying an annuity will no longer be compulsory andinstead savers will be able to take the cash and investor spend as they see fit. This change represents one ofthe biggest adjustments to the UK pension regime foralmost a century and will pose a significant challengeto firms that are heavily reliant on annuity business.But it also creates opportunities for firms to developinnovative new products and services for customerswho want to continue investing their assets duringretirement.

Second, the UK Government announced a cap on thecharges that companies can impose on workplacepensions (auto enrolment). The cap is lower thanwhat many companies currently charge, and somemay struggle to make profits at this level. This changeis likely to drive consolidation in this product space,as companies seek larger rewards for economies ofscale and focus more on efficiency savings.

Third, the press reporting of an FCA review intolegacy products caused panic in markets, especiallyfor the closed book consolidators. The FCAsubsequently clarified that the review was much lessintrusive than had been reported, and the marketsrecovered. The review’s focus is around the fairness oflegacy products, which often have much highercharges than equivalent products sold today andwhether or not insurers "target" the inertia ofcustomers for their own benefit.

The idea of treating customers fairly is a centralthread to the FCA’s philosophy which pervades itssupervisory approach to all financial firms. The FCAreiterated its commitment to this principle in theannual Risk Outlook and Business Plan which waspublished on 31 March 2014. While headlines focusedon the FCA’s review of legacy business it representsonly a small part of the FCA’s agenda for the yearahead.

IT resilience will be another key focus area for theFCA. Keeping abreast with the pace of technologychange remains an ongoing challenge for firms andconsumers – from the role and distributionimplications of price comparison websites, to newpayment methods and mobile banking. So the FCA isputting much more emphasis on the resilience of

existing IT infrastructure in firms. The FCA has alsoidentified other new risks such as the fallout from apotential real estate bubble in some regions of the UKand a possible rise in interest rates –which are athistorically low rates.

The FCA approach doesn’t feel very different from thecourse it set in its inaugural business plan last year.Some specific sectors, such as retirement incomeproducts and consumer credit, will see increasedregulatory scrutiny. Mere box-ticking won’tdemonstrate compliance with regulatoryrequirements - firms need to demonstrate tosupervisors how they act to put the client first.

Crowdfunding became the latest financial activity tocome under regulatory scrutiny when the FCAfinalised its rules in March. The crowdfunding rulesapply to both loan-based and investment-basedcrowdfunding activities. Some firms will be subject toFCA regulation for the first time, when the OFTtransfers consumer credit regulation to the FCA.

The EC also wants to unlock the potential fromcrowdfunding and see it flourish in the coming years.It intends to establish an expert group oncrowdfunding to provide advice, particularly onexploring the potential of establishing a “quality label”to build trust with users and provide expertise inpromoting transparency, best practices andcertification.

Our feature article this month reviews the Europeanlegislative agenda as we gear-up for the EuropeanParliamentary elections in May. We expect a numberof big ticket reforms such as MiFID II, UCITS V, andBasic Bank Account Regulation to all clear EP at firstreading before the elections, leaving the way clear for

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them to be adopted by mid-summer. Some other textslike IMD2 and the revised Payment Services Directivewill be adopted in first reading but the triloguenegotiations on these measures will be postponeduntil the autumn when the new European Parliamentis in place.

The UK consumer credit industry changed forever on1 April 2104, when the FCA took over regulating50,000 firms previously regulated by the OFT. Thesefirms will have to prepare themselves for a new styleof regulation – a big sea change for many of them.This month we cover a few final measures that havecome through from FCA in March, and we’ll cover thenew consumer credit regime in more detail in ourApril edition.

We hope you will find much to stimulate and interestyou on these topics and the many other developmentsthat we cover this month. March has proved anotherbumper month for regulatory change.

Laura CoxFS Regulatory Centre of Excellence020 7212 1579laura.cox@uk.pwc.com@LauraCoxPwC

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How to read this bulletin?

Review the Table of Contents the relevantSector sections to identify the news ofinterest. We recommend you go directly tothe topic/article of interest by clicking in theactive links within the table of contents.

Conte nts

Exe cutive sum m ary 2

EU Parliam e ntary ele ctions 5

Cross se ctor announce m e nts 7

Bank ing and capitalm ark e ts 12

Asse tm anage m e nt 16

Insurance 19

M onth ly calendar 23

Glossary 30

Contacts 35

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As the current European Parliament (EP) draws to aclose and we look back on the past year, we see EUlegislators have made much progress in addressingthe shortcomings identified after the financial crisis,but much more remains to be done. We’ll experience abrief summer hiatus in this transitional year for theEU. A new EU Parliament will be elected in May, we’llhave a new European Commission (EC) in place fromNovember, and a new President of the EuropeanCouncil (Council) will take office in December.

So what is likely to happen to the many outstandingEU legislative proposals as the EP winds down? Wecan sort them into three categories. For some, thelegislative process will continue to completion. Onothers, sufficient work has already been undertaken toprovide the new EP some orientation for progressnext autumn. And finally, the rump – wherenegotiations have stalled or not progressed at all –will be left for the new EP take forward as it will.

M oving to com pletionA number of outstanding legislative texts have passedthe key milestone of political agreement in trilogue(i.e. agreement between the EP, Council and EC).These texts will be adopted by the EP during the lastplenary session before the May elections, and thenwill continue to progress through to publication in theOfficial Journal of the European Union (OfficialJournal) after the current EP dissolves. The texts that

are now on this ‘safe path’, with plenary votesscheduled in April, are:

all remaining ‘Banking Union’ texts, including theBank Recovery and Resolution Directive, theDeposit Guarantee Schemes Directive, and theRegulation on the Single Resolution Mechanism

MiFID II and MiFIR

the Central Securities Depositories Regulation

UCITS V

The Payment Accounts Directive

PRIPs.

Following the plenary vote in the EP, any outstandinglegal and linguistic review work will be completedbefore the ECOFIN Council formally adopts the textand the EC submits it to the Official Journal forpublication. Each text becomes EU law after thenumber of days prescribed in it (usually 20 days). Weexpect to see publication of all these texts in theOfficial Journal over the summer.

W ork s in progre ssThe Economic and Monetary Affairs Committee(ECON) of the EP has also made considerableprogress on a number of other dossiers. Thesemeasures should be adopted at first reading in thecurrent EP. The incoming EP will not be obliged toresume work on any of these dossiers but traditionallynew EPs have continued to progress dossiers thatwere active at the end of the preceding EP. We expectthat the following dossiers will move forward nextautumn:

AML4 package: The EP voted in plenary on itsfirst reading position on 11 March 2014. The GreekPresidency hopes to agree on the Council’s GeneralApproach on this package before the end of itsterm. To date, three compromise positions havebeen published on the AML4 text itself, and onecompromise position, dated 25 March, on theaccompanying regulation on informationaccompanying fund transfers. But if the GreekPresidency does not meet its objective on thisdossier, the next Presidency under Italy will havesome time as trilogue negotiations cannotcommence until the autumn.

We expect the revision of the Payment ServicesDirective (PSD2) and the accompanying regulationon interchange fees to be adopted at first readingin the EP plenary on 3 April. To date, the Councilhas not published any compromise texts on theEC’s July 2013 proposal, so the work on this filewill pass to the Italian Presidency.

The EP held its first reading vote on the recastInsurance Mediation Directive (IMD2) on 26February 2014. Although tabled in July 2012, verylittle work has been done on this dossier in Councilto date given other priorities, but this should bepicked up by the Italian Presidency.

The EP position the European Long TermInvestment Funds (ELTIFs) is currently scheduledto be debated, but not voted on, during the 14-17April plenary session. So this dossier may not beadopted at first reading during this Parliamentarysession. There has been limited work done on it in

EU Parliam e ntary elections: ch anging ofth e guard

W endy R e e dDirector+32 2710 7245

wendy.reed@be.pwc.com

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Cross sectorannouncements

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the Council to date, so measure will also be pickedup by the Italian Presidency.

Th e tailendSome significant proposals have not advanced duringthe current Parliamentary session, for example, thoseon money market funds (MMF), financialbenchmarks, bank structure and securities financialtransactions. Although initial discussions have beenheld on the MMF proposal and financial benchmarks,the ECON Committee wasn’t able to agree oncompromise positions. The ECON Chair, SharonBowles, recently confirmed that further work will beleft to the new Parliament. ECON made it clear fromthe start that the proposals on bank structure andsecurities financing transactions, published on 29January 2014, were issued too late for this Parliamentto progress.

W h at’s ne xt?Under Sharon Bowles’ very able leadership the ECONCommittee completed an enormous amount of workduring the 2009-2014 legislature. She noted recentlythat, during this session, ECON has adopted 63 piecesof legislation and produced 192 other reports,opinions and resolutions, the majority of which relatedirectly to financial services legislation or specificmeasures dealing with the financial crisis. When shesteps down at the end of the current EP, she will besadly missed.

The next ECON Committee will continue with all theoutstanding proposals, and a few new ones, includingrevising the Institutions of Occupational RetirementProvisions (IORP) Directive published on the 27March 2014, and advancing a proposal for therecovery and resolution of non-bank financialinstitutions which is expected later in year.

But, from this summer, the EU regulatory agenda willfocus much more on the development of detailedLevel 2 measures to support the recently agreeddirectives and regulations. Initially, the EuropeanSupervisory Authorities will be in the spotlight,developing technical advice and drafting regulatorytechnical standards, for adoption or endorsement bythe EC and then scrutiny by the Council and the EP.Intensive consultation work awaits us during theremainder of 2014, not just on the texts mentionedabove, but also on a number of others adoptedrecently which haven’t yet appeared in the OfficialJournal, such as MAD II/MAR, Omnibus II (SolvencyII) and residential mortgages.

With a new EP, EC and EU President comes thepotential for the legislative agenda to take a verydifferent direction. It is too early to predict theelection results, but we’ll be watching the outcomewith great interest. The public’s memory of thefinancial crisis is still fresh, and public support forfurther reforms has been spurred on by recent mis-selling problems and ongoing regulatoryinvestigations into market practices. Whatever theelection result, we expect that regulation will continueto be high on the agenda.

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Cross sectorannouncements

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In this section:

Regulation 8

Alternative investment 8

Unlocking long-term financing 8

Banking union 8

Landmark agreement on Eurozone bank resolution 8

Catching up on SSM 8

Capital, Liquidity & Funding 8

ESRB describes macroprudential arsenal 8

Two prudent valuation methods allowed 9

Treating multi dividend instruments 9

Calculating additional collateral outflows 9

Discounting variable pay 9

Consumer credit Error! Bookmark not defined.

Consumer credit thematic reviewError! Bookmark not defined.

Applying for consumer credit authorisationError! Bookmark not defined.

Competition Error! Bookmark not defined.

Competition Network launchedError! Bookmark not defined.

CMA takes over business bankingError! Bookmark not defined.

Consumer protection Error! Bookmark not defined.

UK opposes harmonising pension rulesError! Bookmark not defined.

Crowdfunding regulation landsError! Bookmark not defined.

Corporate Governance 9

EC publishes prospectus supplements 9

FCA: a year in preview Error! Bookmark not defined.

Market Infrastructure Error! Bookmark not defined.

Payments Systems regulator developsError! Bookmark not defined.

BoE announces new mission statementError! Bookmark not defined.

Mortgages Error! Bookmark not defined.

Preparing for new mortgage reportingError! Bookmark not defined.

Other regulatory 9

Talking to ESMA 9

FCA consults on Handbook changesError! Bookmark not defined.

Cooperating with Seoul Error! Bookmark not defined.

FCA finalises Handbook changesError! Bookmark not defined.

FCA’s fee hike Error! Bookmark not defined.

GABRIEL ready for COREP and FINREPError! Bookmark not defined.

PRA consults on minor rule changesError! Bookmark not defined.

Speeding up cheques Error! Bookmark not defined.

FSCS levy approved Error! Bookmark not defined.

RDR Error! Bookmark not defined.

Refining reporting requirementsError! Bookmark not defined.

Independence is right! Error! Bookmark not defined.

Regulatory reform Error! Bookmark not defined.

PRA accounts for secondary objectiveError! Bookmark not defined.

Securities & derivatives 9

ESMA discusses CSD specifics 9

ESMA’s good practice for structured products 10

Supervision 10

JCESA guides conglomerate supervisors 10

Transparency 10

Reviewing major shareholding exemptions 10

Accounting 10

Audit 10

Enhancing bank audits 10

Cross se ctor announcem e nts

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Regulation

Alte rnative inve stm e ntUnlocking long-term financing

The EC adopted a package of measuresto stimulate long-term financing andinvestment across the EU on 27 March2014. The package includes acommunication which details the EC’swork, including mobilising of savings,developing capital markets andattracting more private finance toinfrastructure. The EC has proposedrevisions to the Occupational PensionFund (IORP) Directive to promotecross-border activity and furtherdevelop IORPs as key long-terminvestments. The changes are designedto protect pension scheme membersagainst risks and enable them to reapthe benefits of a single market forIORPs.

The EC plans to establish an expertgroup on crowdfunding aiming tounleash the potential of crowdfundingin the European Union. The expertgroup will explore the potential ofestablishing a “quality label” to buildtrust with users and provide expertisein promoting transparency, bestpractices and certification. It aims toraise the sector’s profile by promotinginformation and training as well asraising standards. The EC intends tomap national regulatory developments

and hold regulatory workshops toassess if regulatory intervention isnecessary at EU level.

Bank ing unionLandmark agreement on Eurozonebank resolution

Eurozone politicians agreed the finalpiece of the banking union puzzle in theearly hours of 20 March 2014. The EPsecured a number of concessions fromthe Council which may improve themechanism’s operation. Specifically theEP clarified that the:

ECB is the triggering authority for abank resolution process, althoughthe new Resolution Board may alsoplay a role if the ECB is reluctant orhesitates to act

the decision-making processes ofthe Resolution Board have beenstreamlined to facilitate efficientand prompt bank resolutions whenrequired

the single resolution fund (SRF),intended to provide the backstop forbank rescues after bail-in, will beallowed to borrow in the markets ‘toincrease its firepower’

mutualisation of the SRF across theEurozone countries will happenfaster, with 40% to be mutualised infirst year, 20% in second year, andthe remaining 40% in equalproportions over a further 6 years.

The target size of the fund remainsunchanged at approximately €55billion.

The EP is expected to vote on the texton 15 April and the Council soonthereafter. It is likely to be published inthe Official Journal in June this year.Most of its provisions will come intoeffect from 1 January 2015, alongsideand supported by the Bank Recoveryand Resolution Directive.

Catching up on SSM

Danièle Nouy, chair of the SSMSupervisory Board, attended her firstECON hearing on 18 March 2014. Nouyindicated that the SSM preparations are“well on track”. Operationally, mostsenior managers are in place and theyare recruiting for the remaining 800positions. Importantly, the JointSupervisory Teams (JSTs), responsiblefor the operational supervision ofsignificant banks, are taking shape. Inparallel, the ECB is designinginformation management solutions tosupport the supervisory processes, inparticular the work of the JSTs.

The ECB is close to finalising its newsupervisory model. It has prepared amanual which covers the generalprinciples, processes and procedures,and the methodology for supervisingsignificant and less significantinstitutions. It’s currently an internal

document but a public version will soonbe available.

Novy made clear that the AQR will be“rigorous”, in response to concerns insome quarters about its robustness. Theselection of all the portfolios to bereviewed for the AQR is complete andthe review is underway.

Capital, Liquidity &FundingESRB describes macroprudentialarsenal

The ESRB published its Handbook onOperationalising Macro-prudentialPolicy in the Banking Sector on 3March 2014. It describes the prudentialpolicy tools which European regulatorsand central banks can deploy toinfluence macroeconomic activity andpreserve financial stability, including:

the countercyclical capital buffer

systemic risk buffers

the leverage ratio

sectoral capital requirements

liquidity requirements.

The ESRB produced the Handbookwith input from regulators and centralbanks across Europe. Its analysis is notbinding but is likely to inform decisionson the use of macroprudential tools.

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Two prudent valuation methodsallowed

The EBA published Final draft RTS onprudent valuation under the CRR on 31March 2014. It outlined two methods ofcalculation for the additional valuationadjustments for determining theprudent value of fair valued positions inthe trading book:

core approach – the method usedalready by most banks

simplified approach – a less onerousmethod which may be used by abank if the sum of all its assets andliabilities is less than £15 billion.

The EBA has sent the RTSs to the ECfor endorsement, and they will enterinto force after being published in theOfficial Journal.

Treating multi dividend instruments

The EBA published Final draft RTS onown funds – multiple dividends anddifferentiated distributions on 27March 2014. The EBA has harmonisedcriteria for instruments with multipledistributions that would create adisproportionate drag on capital, aswell as clarifying the meaning ofpreferential distributions. The RTSdeals with the consequences of notmeeting the criteria provided for interms of (dis)qualification ofinstruments as CET1 capital.

The EBA has submitted the draft RTSto the EC for their adoption as EURegulations.

Calculating additional collateraloutflows

The EBA published Final draft RTS onadditional liquidity outflows fromcollateral needs on 28 March 2014. TheEBA aims to strengthen the EUfinancial system’s resilience againstliquidity risk and offers two methodsfor determining the additionalcollateral outflows:

an internal model-based approachcalled the "advanced method foradditional outflows" (AMAO) –designed for institutions with largederivative portfolios

the historical look-back approach –this serves as an obligatory floor tocapture minimum additionalcollateral outflows and mustimplemented by all banks regardlessof whether they adopt the AMAO ornot.

The EBA has submitted the final draftRTS to the EC for their adoption as anEU regulation.

Discounting variable pay

The EBA published its Final Guidelineson the applicable notional discountrate for variable remuneration on 27March 2014, following a three-monthconsultation starting in October 2013.

Under the CRR, national supervisorscan allow firms to discount variableremuneration to the maximum of 25%provided it is paid in instruments thatare deferred for at least five years. TheEBA has combined four factors tocalculate the discount rate:

the national annual inflation rate

the average interest rate of EUgovernment bonds to take accountof opportunity costs and inflationrisk

a nominal factor to provide forincentives for paying variableremuneration in instruments thatare deferred for at least five years

a nominal factor to provide forincentives to apply additionalretention periods.

The notional discount rate can beapplied to the variable remunerationfor the performance year 2014 andonwards. Firms will be able to use thesame discount rate in all relevantsubsidiaries and branches at grouplevel.

Corporate Gove rnanceEC publishes prospectus supplements

The EC published a Draft RTS forpublication of supplements to theprospectus on 7 March 2014. It isbroadly similar to the draft instrument

that ESMA published in December2013.

The Prospectus Directive envisages thata prospectus supplement will berequired where new information affectsa security’s assessment. The EC hasagreed with ESMA that prospectussupplements should be required wherethe new information is significant ormaterial, regardless of whether theinformation results in a positive ornegative change in circumstances.

The EP and Council will now considerthe draft. If no objections are received,the legislation will be published in theOfficial Journal and come into forcetwenty days later.

Oth e r re gulatoryTalking to ESMA

ESMA published guidelines oncooperation arrangements andinformation exchange between it andcompetent authorities on 27 March2013. The guidelines require competentauthorities to enter into, and complywith the provisions of, a multilateralmemorandum of understanding, whichenters into force 27 May 2013.

Securitie s & de rivative sESMA discusses CSD specifics

ESMA outlined its initial views on theCSD Regulation in its Draft TechnicalStandards on Securities Settlement inthe EU and CSD Discussion Paper

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published 20 March 2014. ESMA isrequired to develop a number oftechnical standards for the CSDRegulation, including settlementdiscipline, CSD registration andauthorisation requirements,confirmation rules, acceptance orrejection of terms, and CSDaccessibility.

The CSD Regulation will harmonisesettlement periods and settlementdiscipline across the EU. Its reliance onbook entry will also modernise theindustry in the EU over time.

ESMA is aiming to obtain preliminarystakeholder feedback on itsinterpretation of key concepts and rulesby issuing this discussion paper eventhough the Level 1 text hasn’t yet beenfinalised. ESMA expects to follow upwith a consultation paper later this yearor early next year.

The discussion paper closes forcomments 22 May 2014.

ESMA’s good practice for structuredproducts

ESMA published an opinion on goodpractices for product governance ofstructured retail products (SRPs) on 27March 2014. It expects firmsmanufacturing or distributing SRPs toadopt sound formal productgovernance arrangements, coveringproduct design, product testing, targetmarket and distribution strategies.

ESMA says arrangements should betargeted at addressing potential sourcesof investor detriment and make surethat investors’ interests are consideredduring the life of an SRP.

ESMA’s opinion follows its July 2013report ‘Retailisation in the EU’, inwhich it argued that retail investorsmay have difficulty understanding thedrivers of risks and returns ofstructured products.

Supe rvisionJCESA guides conglomeratesupervisors

The JCESA consulted on enhancingcooperation between nationalregulators when supervising financialconglomerates in Guidelines on theconvergence of supervisory practicesrelating to financial conglomerates on12 March 2014. The guidelines coveractivities where close cooperationbetween supervisors is needed,specifically:

mapping of conglomerate structuresand written agreements

coordinating information exchangein both benign and emergencysituations

assessing financial conglomerates

planning and coordinatingsupervisory activities in benign andemergency situations

other decision-making processesamong the competent authorities.

The JCESA also provided practicalguidance for the coordinator and thecompetent authorities about how toshare information. The consultationcloses on 12 June 2014.

Transpare ncyReviewing major shareholdingexemptions

ESMA published a Draft RTS on majorshareholdings and indicative list offinancial instruments subject tonotification requirements under therevised Transparency Directive on 21March 2014. The draft RTS define whenclient trading, hedging and riskmanagement transactions are exemptfrom parts of the revised TransparencyDirective. ESMA provides a non-exhaustive list of the financialinstruments that are subject to newnotification requirements.

ESMA also defines the method for:

calculating the 5% threshold for themarket marker and trading bookexemption

calculating voting rights forfinancial instruments of “similareconomic effect” to holding sharesand entitlements to acquire shares

determining “delta” for the purposesof calculating voting rights related to

financial instruments that provideexclusively for cash settlement.

ESMA is required to submit these RTSto the EC by 27 November 2014 – oneyear after the revised TransparencyDirective entered into force.

The consultation closes on 30 May2014.

Accounting

AuditEnhancing bank audits

The BCBS provided guidelines on bankaudit responsibilities in ExternalAudits of Banks on 31 March 2014. Itoffers guidance on the responsibilitiesof an audit committee, overseeing theexternal audit function and theprudential supervisor's engagementwith the external auditors of banks. TheBCBS outlines its expectations of, andrecommendations for, bank auditors,which it believes will enhance thequality of audits.

The BCBS reinforces the key role playedby a bank's audit committee inpromoting quality audits througheffective communication with theexternal auditor and robust oversight ofthe external audit process. It alsohighlights areas of common interestbetween the external auditor andbanking supervisors, and how they caneffectively interact in two-way dialogue

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to contribute to both audit quality andfinancial stability.

The document enhances andsupersedes the BCBS’ previousguidance in 2002 on The relationshipbetween banking supervisors andbanks' external auditors and in 2008on External audit quality and bankingsupervision. The previous documentsprovided guidance on how therelationship between bank auditors andsupervisors could be strengthened tomutual advantage. The new guidancefocuses primarily on factors thatcontribute to enhancing audit quality atbanks.

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In this section:

Regulation 13

Capital and liquidity 13

EBA recommends Basel leverage ratio 13

Tying up liquidity loose ends 13

EU banks pass LCR requirements 13

FPC to review leverage ratio Error! Bookmark not defined.

CRDIV 13

Counterparty credit risk measure enhanced 13

EC adopts CRR technical standards 13

EBA consults on new XBRL 13

Incentives and rewards Error! Bookmark not defined.

PRA claws back more remunerationError! Bookmark not defined.

Other regulatory Error! Bookmark not defined.

Raising the bank levy Error! Bookmark not defined.

Securities and derivatives 14

IOSCO struggles with securities 14

ESMA previews clearing exemption condition 14

Central clearing steps closer 14

Resolving OTC cross-border conflicts 14

FX forwards caught by EMIR 15

EMIR third country rules finalised 15

Bank ing & CapitalM ark e ts

Mark James

+44 (0) 1534 838304mark.james@je.pwc.com

Nick Vermeulen

+44 (0) 1481 752089nick.vermeulen@gg.pwc.com

James de Veulle

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Bank ing and capitalm ark e ts

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Regulation

Capitaland liquidityEBA recommends Basel leverage ratio

The EBA analysed different leverageratio definitions in its Report on impactof differences in leverage ratiodefinitions published 4 March 2014. Itcompared the CRR leverage ratio to therevised standard published by BCBS inJanuary 2014.

The EBA concluded that the BCBSdefinition creates leverage ratios thatare broadly in line with, or possiblyslightly higher than, leverage ratioscalculated under CRR. The EBArecommended aligning the CRRdefinition of the leverage ratio'sexposure measure to the BCBSframework to ensure consistency. Italso recommended bringing SFTs inline with the BCBS treatment.

Tying up liquidity loose ends

The EBA published Final draft ITS andRTS on liquidity requirements on 28March 2014. It identified:

a list of currencies for which liquidasset demand exceeds availability(namely the Norwegian and Danishkrone) - this may be revised once afinal EU definition of ‘liquid assets’is available

the derogations that could beapplied to currencies facingconstraints on the availability ofliquid assets

a list of currencies with an extremelynarrow definition of central bankeligibility (only the Bulgarian lev).

The EC will now consider adoptingthese final standards, after which theyas regulations will be directly applicablethroughout the EU.

EU banks pass LCR requirements

The EBA published its fifth Basel IIImonitoring exercise on the EU bankingsystem on 6 March 2014. The exercisewas performed using June 2013 dataand showed that the aggregate CET1capital ratio of the largest EU banks(Group 1 banks) was 9.1%. A fifth of theGroup 1 banks faced a CET1 capitalshortfall of €36.3bn from the target 7%ratio required of G-SIBs.

Although the LCR is not yet arequirement, if applied as drafted theaverage LCR of Group 1 banks wouldhave been 104%. This outcome is aconsequence of two-thirds of the banksalready meeting the final 100%requirement to be reached by 2019.

CRDIVCounterparty credit risk measureenhanced

The BCBS replaced the standardisedmethod for calculating counterparty

credit risk (CCR) in The standardisedapproach for measuring counterpartycredit risk exposures on 31 March2014. The new Standardised Approach(SA-CCR) calculation introducessignificant changes to the methodologyfrom the current non-internal modelmethod approaches. From 1 January2017, the SA-CCR will be used tocalculate the CCR exposure associatedwith OTC derivatives, exchange tradedderivatives and long settlementtransactions, replacing theStandardised Method, CurrentExposure Method, or Internal ModelMethod (IMM) shortcut. Firms that usethe IMM to calculate their CCR will notbe affected.

The BCBS recognises that currentstandardised methods of calculatingCCR exposure do not differentiatebetween transactions with and withoutmargin capital, accurately reflect thevolatility observed in recent stressedperiods or accurately recognise nettingbenefits. The new SA-CCR is more risksensitive, limits the need for discretionby national authorities, minimises theuse of banks' internal estimates, andavoids undue complexity. It has beencalibrated to reflect the level ofvolatility observed in the recent stressperiod and to encourage centralisedclearing of derivative transactions.

The SA-CCR contains two keyregulatory components (replacement

cost and potential future exposure)which are aggregated and thenmultiplied by the BCBS set multiplier(currently 1.4) as used by IMM firms.The potential future exposure elementalso includes a multiplier that allowsfor the partial recognition of excesscollateral and an aggregate add-on. TheBCBS provide methodologies forcalculating the add-ons.

EC adopts CRR technical standards

The EC endorsed nine sets of technicalstandards on prudential regulation on13 March 2014, covering:

credit, market and operational riskmodels

standardised market risk

the risk-retention rule forsecuritisation originators andsponsors

long-term-incentive remuneration

information sharing by regulators.

The technical standards are nowsubject to scrutiny by the EP andCouncil. Assuming no objections, theyshould be published in the OfficialJournal in late April 2014.

EBA consults on new XBRL

The EBA launched a consultation on arevised version of XBRL taxonomy forsupervisory reporting on 21 March2014. The revised XBRL taxonomy now

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covers asset encumbrance, non-performing exposures and forbearance.The EBA had to wait for relatedtechnical standards to be finalisedbefore it could issue its XBRLtaxonomy.

XBRL was originally designed to allowregulators to share information withthe EBA. Now, many regulatorsincluding the FCA and PRA will requirefirms to report their COREP forms inthis format. The consultation closes 21April 2014.

Securitie s and de rivative sIOSCO struggles with securities

IOSCO analysed the differences ininternational prudential frameworksapplied to securities firms in its reportA Comparison and Analysis ofPrudential Standards in the SecuritiesSector on 10 March 2014. IOSCO alsoidentified the key challenges to solvingthese differences, using this exercise asa precursor to updating its 1989 reporton Capital Adequacy Standards forSecurities Firms in light of theidentified issues.

IOSCO found that differences inregulatory scope across jurisdictionsobstruct international consistency.Regulatory arbitrage opportunities existwhere securities activities deemed inscope in one jurisdiction are out ofscope in another. IOSCO highlightedthe challenge of numerical comparison

of the overall prudential requirementsin multiple jurisdictions. Differentapproaches to setting prudentialstandards and individual supervisorydiscretion add to the difficulty ofassessing whether one jurisdiction ismore onerous than another.

IOSCO identified firms’ use of internalrisk models as another variable thatlimits the comparison of prudentialregimes. IOSCO needed to make severalmodel assumptions in order to calibrateprudential requirements from internalmodels. The organisation was forced tomake assumptions on model choice,data inputs and accounting andhedging techniques. Layering theseassumptions, and their interactionswith one another, made it extremelychallenging to compare the capitalstandards of firms with risk modelpermissions.

IOSCO is asking for feedback on tworegulatory and supervisory areas thatmight be considered in an update of its1989 report: identifying regulatoryarbitrage opportunities created bydifferences across jurisdictions andaccounting for the use of internal riskmodels that may leave the systemundercapitalised. The consultationcloses 10 June 2014.

ESMA previews clearing exemptioncondition

ESMA updated its EMIR Q&A on 20thMarch 2014, setting out high levelrequirements for firms that rely on theEMIR intra-group clearing exemption.The exemption requires companies tocomply with centralised riskmanagement. ESMA outlines five non-exhaustive sets of governance andcontrols processes to demonstratecentralised risk management.Counterparties should apply for theexemption after the first clearing RTScomes into force.

ESMA provides guidance on the rightsof CCPs to transfer assets of defaultingmember firms. It also details guidanceon implementing specific transactionreporting data fields for underlyingassets, purpose of the trades, tradingplatform codes and exchange rates.

Central clearing steps closer

NASDAQ OMX Clearing announcedthat it received the first EMIR CCPauthorisation on 18 March 2014. Thisannouncement initiates several criticalevents for derivative counterparties.NASDAQ OMX Clearing and itsclearing members are now required tooffer EMIR compliant segregatedaccounts.

ESMA published the list of contractscleared by NASDAQ on the PublicRegister for Clearing Obligation under

EMIR on 20 March 2014. ESMA willnow assess these contracts to determineif they are suitable for mandatorycentral clearing. Derivativecounterparties should carefully monitorderivative contracts listed in the PublicRegister and the development ofregulatory technical standards toidentify which contracts will be subjectto mandatory clearing.

More EU CCPs are expected to obtainEMIR authorisation during the spring.CCPs in third countries that haveapplied for EMIR authorisation are notexpected to receive recognition untillater in 2014 or early 2015.

Resolving OTC cross-border conflicts

The OTC Derivatives Regulators Group(ODRG) published a Report on Cross-Border Implementation Issues on 31March 2014, highlighting modestprogress made last year. The US andEU recognised foreign OTC derivativerules in 2013, a small step in mutualrecognition through equivalence andsubstituted compliance.

IOSCO established a centralinformation repository for nationalclearing requirements in 2014,progressing harmonisation of clearingdeterminations. The BCBS and IOSCOplan to establish a group in 2014 tomonitor implementation of marginrequirements for non-centrally clearedderivatives which should enhance the

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consistency of non-centrally clearedmargin obligations.

The ODRG plan to update the G20Leaders on new work streams inNovember 2014.

FX forwards caught by EMIR

The EC publically responded on 20March 2014 to ESMA’s request forclarification on the regulatory status ofFX forwards. The EC believes FXforwards are financial instrumentsunder the MiFID definition. Therefore,they are caught by the EMIR reportingobligation which came into effect on 12February 2014.

Some Member States, including theUK, have historically viewed some FXforwards as outside the scope of MiFIDand EMIR. The FCA interpretation ofMiFID excludes FX forwards enteredinto for commercial purposes,exempting the treasury financingactivity of companies hedging FX risk.The EC believes that the commercialpurpose exemption should only applyto commodity derivatives and not FX.

The EC has requested furtherinformation from ESMA beforereaching its final conclusion. If thecurrent interpretation prevails the EC islikely to introduce new delegated actsto clarify the scope of MiFID and obligeMember States to amend their nationallegislation accordingly. In practice,these changes are likely to arrive as part

of the update to MiFID II so unlikely totake effect before early 2017.

Firms that trade FX forwards forcommercial purposes and do notcurrently report those trades underEMIR should prepare for a change inthe reporting requirements andmonitor further developments.

EMIR third country rules finalised

The EC completed RTS on the direct,substantial and foreseeable effect ofcontracts within the EU and to preventthe evasion of rules and obligations on21 March 2014. The Commissiondefines the conditions under whichentities established outside the EU(Third Country Entities (TCEs)) will besubject to EMIR clearing and non-centrally cleared derivative transactionrequirements.

The EU standards define contractswhich have a ‘direct, substantial andforeseeable effect in the EU’ as thosetransacted between TCEs when tradingis conducted:

Outside the EU between TCEs:transactions in which at least oneTCE benefits from a guaranteeprovided by an EU financial entityare in scope. The guarantee must befor an aggregated notional amountof OTC derivative exposure of atleast €8 billion. The guaranteedliability must also be equal to orgreater than 5% of the EU

guarantor’s OTC derivative currentexposure.

In the EU between TCEs:transactions conducted between theEU branch offices of TCEs thatwould qualify as EMIR financialcounterparties (if established in theEU) are also in scope.

TCEs are exempt from EMIR rules ifthey are subject to an equivalent regimein the TCE’s home country.

The EC extend EMIR rules to tradingconducted between TCEs if the trade’sprimary purpose is EMIR avoidance.Any arrangement that intrinsicallylacks business rationale, commercialsubstance or relevant economicjustification shall be considered anartificial arrangement.

The rules extending EMIR totransactions with direct, substantialand foreseeable effect in the EU comeinto force on 10 October 2014. The anti-avoidance provisions came into forceon 10 April 2014.

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In this section:

Regulation 17

AIFMD 17

Updated AIFMD Q&A 17

New Q&A for alternative funds 17

Sharing AIFMD information 17

Retail products 18

Finalising collateral guidance 18

Asse tM anagem e nt

John Luff

+44 (0) 1481 752121john.luff@gg.pwc.com

Chris Stuart

+44 (0) 1534 838232chris.stuart@je.pwc.com

Mary Bruen

+44 (0) 1534 838251mary.bruen@je.pwc.com

Asse tm anagem e nt

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Regulation

AIFM DUpdated AIFMD Q&A

ESMA published Questions andAnswers: application of the AIFMD on25 March 2014, updating the February2014 version. ESMA has added newinformation on regulatory reportingunder AIFMD, in particular that:

an AIF’s repurchase transactionsshould be considered as financingoperations

AIFMs should use an instrument’sresidual maturity date

AIFMs should calculategeographical exposure in relation tothe NAV of the AIF

AIFMs should submit an AIF’s finalreport no later than one month afterthe end of the quarter in which anAIF is liquidated or put intoliquidation

AIFMs should take the mostconservative approach todetermining an AIF’s liquidityportfolio

an AIF’s inception date is when itwas authorised, registered or

launched, whichever is applicable tothat AIF

any cash received throughrepurchase agreements should beincluded in an AIF’s cash and nearcash holdings

XML codes in the template shouldnot be changed into any nationallanguage

ESMA suggests AIFMs shouldreport in English, except wherenational regulators require adifferent approach.

The Q&A provides guidance to EUregulators and market participants onthe practical application of the AIFMDrequirements.

New Q&A for alternative funds

ESMA published Questions andAnswers: application of the EuSEF andEuVECA Regulations on 26 March2014. European SocialEntrepreneurship Funds (EuSEFs) andEuropean Venture Capital Funds(EuVECAs) are new funds for socialentrepreneurship and venture capitalthat can be marketed across the EUunder a passport even if the fund’smanager falls outside the full scope ofAIFMD due to its size.

The Q&A provides guidance that EuSEFand EuVECA managers:

can launch new funds in this marketeven if the manager is above theAIFMD size threshold andauthorised as an AIFM by their localregulator

will have to register (if outsideAIFMD size thresholds) twice – asan AIFM and as a EuVECA/EuSEFmanager - ESMA urges regulators tosimplify this process to ease themanager’s regulatory burden wherepossible

can manage and market AIFs - butcannot use the AIFMD marketingpassport for AIFs unless themanager is an authorised AIFM.

The Q&A provides guidance to EUregulators and market participants onthe practical application of parts of thenew EuSEF and EuVECA Regulations.

Sharing AIFMD information

On 26 March 2014, ESMA publishedtechnical advice to the EC on theAIFMD information to be provided bycompetent authorities. The EC mustadopt a delegated act setting out theinformation that regulators have toshare on AIFs marketing in theircountry, either through the AIFMD

marketing passport or their nationalprivate placement regime.

ESMA has not consulted on the advice,to avoid burdening regulators. Itsuggested that each regulator shouldinclude information on:

the number of authorised AIFMs inits Member State

the number of its AIFMs and AIFsusing the AIFMD passport in otherMember States

any instances where AIFMs haverefused to provide it withinformation

requests for assistance fromregulators it has sent and received

the number of times it has receivedinformation from another regulatorto enable ESMA to monitor systemicrisk

the number of AIFMs (both EU andnon-EU) that market non-EU AIFsin its home country

any requests for information from anon-EU regulator in line with theAIFMD MoU

the types of responses it receivedfrom those non-EU regulators

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the number of on-site visits itperformed on non-EU regulatorsand AIFMs.

In total, ESMA outlines 46 differentpieces of information that nationalregulators should provide. Regulatorswill have a month following the end of aquarter to provide the specifiedinformation.

RetailproductsFinalising collateral guidance

ESMA published the Final report:revision of the provisions ondiversification of collateral in ESMA’sguidelines on ETFs and other UCITSissues on 24 March 2014.

ESMA originally published theseguidelines in December 2012, whichtook effect in February 2013. Theindustry wanted EMSA to review theguidelines on collateral diversification,because they had a significant impacton MMF’s collateral managementpolicies. ESMA re-consulted on thecollateral requirements in December2013, and has now issued this finalreport amending the guidelines.

The revised collateral diversificationlimits apply to all UCITS, not justMMFs. UCITS can now hold moreconcentrated collateral in government

and public securities (up to 100%),provided the UCITS holds securitiesfrom at least six different issues andany single issue accounts for no morethan 30% of net asset value.

Member States will have two months tocomply after the changes to theguidelines are published in the EU’sOfficial Journal.

ESMA also published an updated Q&Aon 24 March 2014, to clarify the howthe UCITS guidelines apply,particularly to financial indices.Amongst other issues, ESMA confirmedthat the guidelines do not apply toUCITS that only use an index as aperformance benchmark.

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In this section:

Regulation 20

COB Error! Bookmark not defined.

FCA clarifies zombie fund approachError! Bookmark not defined.

A way forward for with-profits mutualsError! Bookmark not defined.

General insurance add-ons uncompetitiveError! Bookmark not defined.

Updated guide for unit-linked fundsError! Bookmark not defined.

Other 20

Global insurance capital standards progress 20

Complaints-Handling for Insurance Intermediaries 20

Business model analysis in supervisionError! Bookmark not defined.

Annuity reform brings challenges and opportunitiesError! Bookmark not defined.

0.75% pension charge cap confirmedError! Bookmark not defined.

Solvency II 20

Omnibus II approved 20

Common application of internal models 20

PRA publishes general insurance provisions and modelsError! Bookmark not defined.

Capital instruments prior to SIIError! Bookmark not defined.

Insurance Europe issues SII warningError! Bookmark not defined.

Pillar 3 reporting PwC readiness survey 20

Accounting 21

New UK GAAP Error! Bookmark not defined.

New accounting for insurance contractsError! Bookmark not defined.

PwC publications 21

IFRS News 21

Year-end accounting reminders 21

FRC comments on non-financial reporting 21

World Watch - How standardised is IFRS? 21

IASB progress on insurance contracts 21

New IFRSs for 2014 21

Amendments to financial statements presentation 22

Insurance

Evelyn Brady

+44 (0) 1481 752013evelyn.brady@gg.pwc.com

Adrian Peacegood

+44 (0) 1481 752084Adrian.peacegood@gg.pwc.com

Insurance

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Regulation

Oth e rGlobal insurance capital standardsprogress

The IAIS published the March issue ofthe IAIS Newsletter on 17 March 2014,offering insight into progress on itsprojects.

Field testing of ComFrame, the IAIS’Common Framework for theSupervision of Internationally ActiveInsurance Groups (IAIGs) waslaunched on 21 March 2014. The resultsof this work will inform thedevelopment of a Basic CapitalRequirement (BCR) for G-SIIs.Insurers participating in the G-SII datacall have been asked to submit data totheir group-wide supervisors by the endof May.

The IASB and FASB are no longerexpected to develop a joint approach forvaluing insurance contracts liabilitiesfor accounting purposes so the IAIS isproposing using the “best estimate” or“current estimate” method for thepurposes of global capital standards,including the BCR. The currentestimate method reflects the expectedpresent value of all relevant future cashflows that arise in fulfilling insurance

obligations, using unbiased, currentassumptions. Margins currentlyincluded in liability valuations will bereallocated to capital resources for BCRassessment purposes.

Deputy Head of the PRA Julian Adamsspoke on G-SIIs: issues, policies andchallenges after designation on 24March 2014. Adams felt that the use ofa “best” or “current estimate” by allfirms is essential in the development ofa globally consistent capital measure.Stakeholders will have the opportunityto comment on this approach duringthe field testing, which requires aninsurer’s best estimate of liabilities onfour different bases to test the impact ofvarious valuation approaches.

IAIS plans to consult on the BCR againin mid-2014, and to implementComFrame at the end of 2018.

Complaints-Handling for InsuranceIntermediaries

EIOPA published a One Minute Guideon Guidelines on Complaints-Handlingby Insurance Intermediaries on 27March 2014. This Guide provides asummary for NCAs of what the EIOPAGuidelines on Complaints-Handling byInsurance Intermediaries mean for allinsurance intermediaries. It has aparticular focus on ensuring a

proportionate approach towards smallinsurance intermediaries, especiallysole traders.

Solvency IIOmnibus II approved

The EP approved the Omnibus IIDirective on 11 March 2014, followingthe long-awaited plenary vote. Thisapproval completes SII’s Level 1 text.The Council will formally adopt theDirective before it is published in theOfficial Journal, which will come intoforce the day after publication. SIIremains on course to be transposed intonational law in all EU Member Statesby 31 March 2015. It will enter intoforce 1 January 2016. The EC is nowpreparing to adopt a Delegated Actcontaining a large number of detailedimplementing rules, planned forsummer 2014. EIOPA is working on apackage of ITS and guidelines to ensurethat everything will be ready for theapplication of SII on 1 January 2016.

Common application of internalmodels

EIOPA published its opinion on the useof a common application package forinternal models on 31 March 2014.EIOPA issued this opinion in responseto concerns from EU insurance groupsabout the diversity of information

required for approval to use an internalmodel to calculate SCR under the SIIframework.

EIOPA has developed a commonapplication package for insurersapplying to use internal models, toavoid differing national solutions andpromote consistent supervisorypractices. The package aims to helpinsurers understand what is required inthe application and allow competentauthorities to carry out the requiredcompleteness check once an applicationis received. EIOPA is sending thepackage to competent authorities toconsult their respective insurancegroups. EIOPA plans to make theirfeedback publicly available. Whenpublished, EIOPA expects nationalregulators to recommend insurers usethe package when demonstratingcompliance.

Pillar 3 reporting PwC readinesssurvey

We published the results of a SII Pillar3 reporting poll on 27 March 2013. Ourpoll of insurance industry leaders andexperts highlighted that 68% ofinsurers are still less than half waythrough their Pillar 3 preparations.Nearly 75% are at the 'assess' stage oftheir preparations, where they feel they

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have understood the reportingrequirements and are aware of theirsystems deficiencies and gaps. Only 2%of respondents have dry-run their SIIreporting and are ready to embed intotheir business as usual reportingprocesses.

The poll also reveals that the top threechallenges for insurers are:

technology, including changes tocurrent systems architecture such asdata storage and retrieval, and end-user computing

data sources, i.e. obtaining qualitydata that is internally consistent andreconcilable to other systems andfinancial reports

reporting time frames - managingsolo and group annual and quarterlyreporting within the requiredtimeframes.

Over 39% of respondents think that theresults of Pillar 3 reporting will affectshare price, indicating the impact thatputting Pillar 3 information into thepublic domain could have.

W h e re to go for m oreinform ation

Read more about Solvency II UK on ourwebpages atwww.pwc.co.uk/solvencyII.

Accounting

Pw CpublicationsIFRS News

The March edition of IFRS news coversthe following:

Financial performance: Change onthe horizon

IFRS 3 – relevance versuscomplexity: Olivier Schérer looks atthe post implementation review

Non-viability instruments: Debtversus equity

Insurance project: Convergence outof sight

Cannon Street Press:

IFRS 9 effective date

New revenue standard delayed

IFRS Work plan

IC stops debate on ‘higher of’plans

Questions and answers: ‘N’ is forNon-controlling interests.

Year-end accounting reminders

Our publication Year-end accountingreminders – IFRS and UK GAAP –March 2014 looks at topical accountingissues and reporting requirements as at31 March 2014, including newstandards, interpretations and otherguidance that apply at this date andnew IFRS standards that are publishedbut effective at later dates, and hencehave to be disclosed by IFRS reporters.

FRC comments on non-financialreporting

EU Member States agreed to amendcurrent EU accounting legislation tointroduce new non-financial reportingrequirements for EU companies. TheFRC welcomes these changes, whichwill give investors greater transparencyon environmental, social, employee,human rights, anti-corruption, briberyand diversity matters. The FRC recentlyissued draft guidance on the strategicreport which encourages companies tofacilitate communication andengagement with investors bypublishing more relevant narrativereports. The new non-financialreporting proposals bring into EUlegislation much of the recognised UK

framework reinforced by the strategicreport regulations. For further detailssee the FRC press release.

World Watch - How standardised isIFRS?

How consistent has the world been inits interpretation of the IFRS standardssince they became mandatory in the EUand Australia nearly 10 years ago?Christopher Nobes, Professor ofAccounting at the Universities ofLondon and Sydney, takes a look inWorld Watch.

IASB progress on insurance contracts

Our Insurance Alert – IASB educationsession and meeting, 13 and18 March2014 summarises the discussions at theMarch 2014 IASB meetings. The IASBdiscussed two of the areas for re-exposure, the unlocking of thecontractual service margin and therecognition of changes in discount ratesin other comprehensive income.

New IFRSs for 2014

Our practical guide to new IFRSs for2014 outlines the new IFRS standardsand interpretations for 2014 year ends.Four amended standards and one newinterpretation are mandatory forentities outside the EU for 2014 yearends. In the EU, IFRSs 10, 11 and 12and related amendments also become

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mandatory for 2014 year ends. Otherrevisions including the annualimprovements for 2012 and 2013 areeffective from 1 July 2014, but can beadopted early.

Amendments to financial statementspresentation

The IASB published Proposedamendments to IAS 1 'Presentation offinancial statements' on 25 March2014. The IASB addresses areas of IAS1 that are currently misunderstood bysome practitioners. The proposalsaffect every entity, but will beparticularly relevant to entities thatpresent additional subtotals in thestatement of financial position or thestatement of profit or loss and othercomprehensive income.

The proposed amendments:

clarify the materiality requirementsin IAS 1, including an emphasis onthe potentially detrimental effect ofoverwhelming useful informationwith immaterial information

clarify that specific line items in thestatement(s) of profit or loss andother comprehensive income andthe statement of financial positioncan be disaggregated

add requirements for how an entityshould present subtotals in thestatement(s) of profit or loss andother comprehensive income andthe statement of financial position

clarify that entities have flexibilityon the order in which they presentthe notes, but also emphasise thatunderstand ability andcomparability should be consideredby an entity when deciding thatorder

remove potentially unhelpfulguidance in IAS 1 for identifying asignificant accounting policy.

The comment period ends 23 July2014. For further details see ourStraight away publication.

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Open consultations

Closing datefor responses

Paper Institution

01/04/14 A consultation on a change in regulation and Charity Commission policy: the regulation of common deposit funds CharitiesCommission

04/04/14 CP14/4 – Quarterly Consultation Paper No. 4., chapter 5 FCA

07/04/14 Speeding up cheque payments: legislating for cheque imaging. HMT

07/04/14 Consultative document: assessment methodologies for identifying non-bank non-insurer global systemically important financialinstitutions

FSB/IOSCO

07/04/14 CP14/5: Changes to regulatory reporting: Adviser and consultancy charging, Authorised Professional Firms (APFs) and ProductSales Data (PSD), Questions 6, 7, 8, 11, and 12

FCA

08/04/14 MS14/1: General insurance add-on products FCA

11/04/14 Consultative document: Basel III – net stable funding ratio BaselCommittee

14/04/14 Solvency II: calculation of technical provisions and the use of internal models for general insurers – CP7/14 PRA

15/04/14 Payment Systems Regulation: Call for Inputs FCA

15/04/14 PRA Administration Instruments PRA

M onth ly calendar

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Closing datefor responses

Paper Institution

15/04/14 CP5/14: Occasional Consultation Paper PRA

18/04/14 Consultative document: revised good practice principles for supervisory colleges BaselCommittee

25/04/14 HM Treasury National Risk Assessment of money laundering and terrorist financing HMT

30/04/14 CP14/2: proposed amendments to the Listing Rules in relation to sponsor competence and other amendments to the Listing Rulesand Prospectus Rules

FCA

05/05/14 Consultation paper: draft ITS on the mapping of ECAIs’ credit assessment under Article 136(1) and (3) of the CRR JointCommittee ofthe ESAs

06/05/14 CP14/4 – Quarterly Consultation Paper No. 4., All remaining chapters FCA

07/05/14 Bail-in powers implementation HMT

08/05/14 A bank levy banding approach: consultation HMT

09/05/14 Consultation paper on draft regulatory technical standards on the margin periods for risk used for the treatment of clearingmembers' exposures to clients under Article 304(5) of Regulation (EU) No 575/2013.

EBA

13/05/14 CP6/14 Clawback PRA

30/05/14 ESMA consults on major shareholders disclosures ESMA

30/05/14 FCA regulated fees and levies: rates proposals 2014/15 FCA

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Closing datefor responses

Paper Institution

30/05/14 PRA - Regulated fees and levies: rates proposals 2014/15 - CP8/14 PRA

06/06/14 CP14/5: Changes to regulatory reporting: Adviser and consultancy charging, Authorised Professional Firms (APFs) and ProductSales Data (PSD), All remaining questions

FCA

07/06/14 Consultation on draft technical standards on data waiver EBA

10/06/14 IOSCO Report compares, analyses prudential standards in the securities sector IOSCO

12/06/14 EBA, ESMA and EIOPA consult on supervisory practices for financial conglomerates JointCommittee ofthe ESAs

30/06/14 EIOPA consults on Set 1 of its Implementing Technical Standards for Solvency II EIOPA

30/06/14 EIOPA consults on operational functioning of colleges of supervisors EIOPA

Forthcoming publications in 2014

Date Topic Type Institution

Capitaland Liquidity

TBD 2014 A new capital regime for self-invested personal pension (SIPP)operators

Policy statement FCA

Clie ntM one y

Q2 2014 Review of the client assets regime Policy statement FCA

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Date Topic Type Institution

Q2 2014 Client assets review including consultation on EMIR indirectclient clearing

Policy statement FCA

TBD Review of the client money rules for insurance intermediaries Policy statement FCA

TBD Regulated client money regime for consumer credit companies Consultation paper FCA

Consum e r prote ction

Q2 2014 An EU framework for collective redress Legislative proposals EC

Q2 2014 Investor Guarantee schemes – revision Legislative proposals EC

Q2 2014 Mortgage Credit Directive and transfer of second chargemortgages

Consultation paper FCA

TBD National Depositor Preference and UK depositors Policy statement PRA

TBD Mortgage Market Review: Arrears and Approved Persons – finalrules

Policy statement FCA

Financialcrim e , se curity and m ark e tabuse

Q4 2014 Market Abuse Review Technical advice ESMA

Insurance

Q2 2014 Technical standards for Omnibus II Technical standards ESMA

TBD 2014 Institutions for Occupational Retirement Provision Legislative proposals EC

TBD 2014 Advice or technical standards for IMD2 Technical advice or technical standards EIOPA

Securitie s and m ark e ts

Q2 2014 OTC Derivatives, CCP Requirements, Trade Repositories andCCP Interoperability (EMIR)

Guidelines ESMA

Q2 2014 Guidelines on the enforcement of EMIR provisions on OTC Guidelines ESMA

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Date Topic Type Institution

derivatives

Q2 2014 Joint technical standards on Article 11 of EMIR (exchange ofcollateral)

Technical standards ESAs

Q2 2014 Central counterparties loss allocation rules Consultation paper FCA

Q2 2014 Bilateral margins Technical standards ESMA

Q2 2014 Enhancing the effectiveness of the listing regime: feedback toCP12/25 and further consultation on related issues

Policy statement FCA

Q4 2014 Harmonised transaction reporting Guidelines ESMA

Q4 2014 Exchange-traded derivatives reporting Guidelines ESMA

Q4 2014 Technical standards following the revision of MiFID (MiFID IIand MiFIR)

Technical standards ESMA

Q4 2014 Transparency Directive and Prospectus regime Technical standards ESMA

Q4 2014 Credit Rating Agencies Regulation Guidelines ESMA

TBD 2014 Securities Law Directive Legislative proposals EC

TBD 2014 Revision of the Transparency Directive Discussion papers ESMA

TBD 2014 Close-out netting Legislative proposals EC

Products and inve stm e nts

Q2 2014 Personal pensions – disclosures by SIPP operators andconsultation on inflation-adjusted illustrations (disclosures only)

Policy statement FCA

Q2 2014 Personal pensions – disclosures by SIPP operators andconsultation on inflation-adjusted illustrations(inflation-adjusted illustrations only)

Policy statement FCA

Q2 2014 Use of dealing commissions Policy statement FCA

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 28

Date Topic Type Institution

Q4 2014 European Social Entrepreneurship Funds Technical advice ESMA

Q4 2014 European Venture Capital Funds Technical advice ESMA

Q4 2014 Packaged Retail Investment Products Technical standards ESMA/EIOPA

Q4 2014 Undertakings For The Collective Investment of TransferableSecurities V

Technical advice ESMA

Q4 2014 Money market funds Technical standards ESMA

TBD 2014 Development of high level principles for the product approvalprocess

Principles ESAs

TBD 2014 A framework for the activities and supervision of personalpension schemes

Advice EIOPA

Re cove ry and re solution

Q2 2014 Rescue and restructuring of financial institutions in Europe Guidelines EC

Q2 2014 Recovery and resolution plans Policy statement PRA

TBD 2014 EU framework for recovery and resolution plans Technical advice EBA

Solvency II

TBD 2014 Solvency II – draft Level 2 delegated acts Level 2 text EC

TBD 2014 Solvency II Level 3 measures Level 3 text EIOPA

Supe rvision, gove rnance and re porting

Q2 2014 Corporate reporting Guidelines/recommendations ESMA

Q2 2014 EU corporate governance and company law Action plan EC

Q2 2014 The equivalence of CRA rules in a number of third countries Technical advice ESMA

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 29

Date Topic Type Institution

Q2 2014 Framework on the establishment of the common supervisoryculture on financial information

Guidelines ESMA

Q4 2014 Alternative performance measures Guidelines ESMA

Q4 2014 Electronic reporting format and access to regulated information Regulatory technical standards ESMA

Main sources: ESMA 2014 work programme; EIOPA 2014 work programme; EBA 2014 work programme; EC 2014 work programme; FCA policy development updates

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 30

2EMD The Second E-money Directive 2009/110/EC

ABC Anti-Bribery and Corruption

ABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AIMA Alternative Investment Management Association

AML Anti-Money Laundering

AML3 3rd Anti-Money Laundering Directive 2005/60/EC

AQR Asset Quality Review

ASB UK Accounting Standards Board

BaselCommittee

Basel Committee of Banking Supervision (of the BIS)

Basel II Basel II: International Convergence of Capital Measurementand Capital Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

BBA British Bankers’ Association

BIBA British Insurance Brokers Association

BIS Bank for International Settlements

BoE Bank of England

BRRD Bank Recovery and Resolution Directive

CASS Client Assets sourcebook

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CEBS Committee of European Banking Supervisors (predecessor ofEBA)

CEIOPS Committee of European Insurance and OccupationalPensions Supervisors (predecessor of EIOPA)

CET1 Core Equity Tier 1

CESR Committee of European Securities Regulators (predecessor ofESMA)

Co-legislators Ordinary procedure for adopting EU law requires agreementbetween the Council and the European Parliament (who arethe ‘co-legislators’)

CFT Counter Financing of Terrorism

CFTC Commodities Futures Trading Commission (US)

Glossary

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 31

CGFS Committee on the Global Financial System (of the BIS)

CIS Collective Investment Schemes

CMA Competition and Markets Authority

Council Generic term representing all ten configurations of theCouncil of the European Union

CRAs Credit Rating Agencies

CRD ‘Capital Requirements Directive’: collectively refers toDirective 2006/48/EC and Directive 2006/49/EC

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

CRD IV Capital Requirements Directive 2013/36/EU

CRR Regulation (EU) No 575/2013 on prudential requirements forcredit institutions and investment firms

CTF Counter Terrorist Financing

DFBIS Department for Business, Innovation and Skills

DG MARKT Internal Market and Services Directorate General of theEuropean Commission

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer ProtectionAct (US)

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECOFIN Economic and Financial Affairs Council (configuration of theCouncil of the European Union dealing with financial andfiscal and competition issues)

ECON Economic and Monetary Affairs Committee of the EuropeanParliament

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

EMIR Regulation on OTC Derivatives, Central Counterparties andTrade Repositories (EC) No 648/2012

EP European Parliament

ESA European Supervisory Authority (i.e. generic term for EBA,EIOPA and ESMA)

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

EU European Union

EURIBOR Euro Interbank Offered Rate

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 32

Eurosystem System of central banks in the euro area, including the ECB

FASB Financial Accounting Standards Board (US)

FATCA Foreign Account Tax Compliance Act (US)

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

FDIC Federal Deposit Insurance Corporation (US)

FiCOD Financial Conglomerates Directive 2002/87/EC

FiCOD1 Amending Directive 2011/89/EU of 16 November 2011

FiCOD2 Proposal to overhaul the financial conglomerates regime(expected 2013)

FMI Financial Market Infrastructure

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FSA Financial Services Authority

FSB Financial Stability Board

FS Act 2012 Financial Services Act 2012

FS Reform Bill2012

Financial Services (Bank Reform) Bill 2012

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FSOC Financial Stability Oversight Council

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

G-SIIs Global Systemically Important Insurers

HMRC Her Majesty’s Revenue & Customs

HMT Her Majesty’s Treasury

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICAAP Internal Capital Adequacy Assessment Process

ICAS Individual Capital Adequacy Standards

ICB Independent Commission on Banking

ICOBS Insurance: Conduct of Business Sourcebook

IFRS International Financial Reporting Standards

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 33

IMA Investment Management Association

IMAP Internal Model Approval Process

IMD Insurance Mediation Directive 2002/92/EC

IMD2 Proposal for a Directive on insurance mediation (recast)COM(2012) 360/2

IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision Directive2003/43/EC

IOSCO International Organisations of Securities Commissions

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

JURI Legal Affairs Committee of the European Parliament

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

LTGA Long-Term Guarantee Assessment

MAD Market Abuse Directive 2003/6/EC

MAD II Proposed Directive on Criminal Sanctions for Insider Dealingand Market Manipulation (COM(2011)654 final)

MAR Proposed Regulation on Market Abuse (EC) (recast)(COM(2011) 651 final)

Member States countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

MiFID II Proposed Markets in Financial Instruments Directive (recast)(COM(2011) 656 final)

MiFIR Proposed Markets in Financial Instruments Regulation (EC)(COM(2011) 652 final)

MMF Money Market Fund

MMR Mortgage Market Review

MTF Multilateral Trading Facility

MoJ Ministry of Justice

NAV Net Asset Value

NBNI G-SIFI Non-bank non-insurer global systemically important financialinstitution

NFC Non-financial counterparty under EMIR

NFC+ Non-financial counterparty over the EMIR clearing threshold

NFC- Non-financial counterparty below the EMIR clearingthreshold

NSFR Net stable funding ratio

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2014 PwC 34

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union

OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflectLisbon Treaty and new supervisory infrastructure(COM(2011) 0008 final) – amends the Prospectus Directive(Directive 2003/71/EC) and Solvency II (Directive2009/138/EC)

ORSA Own Risk Solvency Assessment

OTC Over-The-Counter

PCBS Parliamentary Commission on Banking Standards

PRA Prudential Regulation Authority

PPI Payment Protection Insurance

Presidency Member State which takes the leadership for negotiations inthe Council: rotates on 6 monthly basis

PRIPsRegulation

Proposal for a Regulation on key information documents forinvestment products COM(2012) 352/3

RAO Financial Services and Markets Act 2000 (RegulatedActivities Order) 2001

RDR Retail Distribution Review

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SCR Solvency Capital Requirement (under Solvency II)

SEC Securities and Exchange Commission (US)

SFT Securities financing transactions

SFD Settlement Finality Directive 98/26/EC

SFO Serious Fraud Office

SII Solvency II Directive 2009/138/EC

SIPP Self-invested personal pension scheme

SOCA Serious Organised Crime Agency

SREP Supervisory Review and Evaluation Process

SSM Single Supervisory Mechanism

SSR Short Selling Regulation EU 236/2012

T2S TARGET2-Securities

TR Trade Repository

TSC Treasury Select Committee

UCITS Undertakings for Collective Investments in TransferableSecurities

XBRL eXtensible Business Reporting Language

Executive summary EU Parliamentaryelections: changingof the guard

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

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