Being better informedFS regulatory, accounting and audit bulletin
PwC FS Risk and Regulation Centre of Excellence
February 2015
In this month’s edition:
ECB supervision reviewing bank dividend payments
and variable remuneration
Number of important CMU developments
HMT explores open data for banking
FCA sets out final recovery and resolution rules for
investment firms
Analysis of the new TLAC and MREL requirements
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 1
Welcome to this edition of “Beingbetter informed”, our monthly FSregulatory, accounting and auditbulletin, which aims to keep you up tospeed with significant developmentsand their implications across all thefinancial services sectors.
Our annual survey of business leadersfrom around the world was launched atDavos in January. The overwhelmingmajority of CEOs surveyed believe thatregulation is still the biggest threat togrowth prospects in 2015. CEOs seeregulation as creating upheaval andmore costs on the one hand, whilediverting attention from other strategicchallenges on the other. Inconversations our financial serviceclients tell us they have three majorpriorities – finding growth in a
challenging environment, drivingproductivity, and getting ahead of riskand regulatory management.
Fewer CEOs than last year think globaleconomic growth will improve over thenext 12 months, but confidence in theirability to achieve revenue growth intheir own companies remains stable.The situation in Europe is particularlyconcerning. The austerity/stimulatedebate kicked-off again in Januaryfollowing Syriza’s election victory inGreece. But while debate continuesabout the optimal fiscal path torecovery, the necessity of having a well-functioning financial system remainssacrosanct.
In the EU, policy makers’ focus thisyear will be unlocking additionalinvestment from the financial systemsto help increase growth and jobs. On 28January 2015, the EC kicked-off itsCMU following a “positive” orientationdebate of its college of commissioners.It expects to launch a Green Paper onCMU in February 2015, and a fullaction plan by the third quarter of thisyear. Elsewhere, EIOPA recentlyannounced plans to start a new workstream on insurers’ infrastructureinvestments while the EBA, BoE andFederal Reserve are continuing toinvestigate ways to stimulate “prudent”securitisation.
On 27 January 2015, ECON finalised itsview of the new MIF Regulation: a largemajority of members voted in favour.The EP will now vote on the Regulationat an April plenary, after which it needsto be endorsed by the Council.
Elsewhere in the EU, the ECB sent aletter to big Eurozone banks ondividend distribution policies on 29January 2015. The letter calls on banksto adopt a conservative policy whendistributing dividends, taking intoaccount the challenging economic andfinancial conditions. Banks which failedthe comprehensive assessment havebeen told not to distribute dividendsand instead focus on replenishing theirbalance sheets. The ECB also notifiedall Eurozone banks that variableremuneration will be “thoroughlyreviewed” in the coming months.
In the derivatives space, the EC’sOlivier Guersent briefed the ECONCommittee on a recent EU/USFinancial Services Dialogue meeting on27 January 2015. Progress has nowbeen made on the derivatives dilemma.Although EU firms will still need to beregistered in the US, substitutedcompliance will be applied to a numberof the requirements.
At home, the FCA published its much-anticipated finalised guidance on theboundary around regulated advice in
January. This topic is hot right now,with a large number of firms looking tofind ways to offer customers simpler,lower cost ways to access investmentsand pensions compared with traditionalfull financial advice services. See ourblog for Lee Clarke’s thoughts on thekey points.
In the month ahead we’ll be keeping aneye on the evolving situation in Greece,and the risks that may pose for firms.We’re eagerly awaiting the CMUroadmap to see what that holds for theEU and London as a financial centre.And as the UK elections approach, we’llbe looking to learn more about theparties’ respective platforms and howvarious coalition combinations mayimpact businesses and consumers,including the key issue of whether theUK should stay in the EU.
Laura Cox
FS Risk and Regulation Centre of Excellence
020 7212 1579
@LauraCoxPwC
Executive summary
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 2
How to read this bulletin?
Review the Table of Contents therelevant Sector sections to identify thenews of interest. We recommend yougo directly to the topic/article ofinterest by clicking in the active links
within the table of contents.
ContentsExecutive summary 1
Saving the taxpayer – ending ‘too big to fail’ 3
Cross sector announcements 6
Banking and capital markets 15
Asset management 18
Insurance 19
Monthly calendar 21
Glossary 27
Contacts 32
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 3
Preventing another taxpayer funded bailoutof financial firms is one of the most vitaltasks facing policymakers today. Votersacross the world remain incensed that it fellto the taxpayer to shoulder the burden of aneconomic downturn that they attribute to‘greedy bankers.’ The financial communityis also keen to draw a line under the crisis.Doing so requires a credible solution to the‘too-big-to fail’ (TBTF) problem. Withpressure for a solution emanating from allsides, the FSB has developed a proposalwhich Mark Carney described as a‘‘watershed’’ in ending the problem,ensuring shareholders and creditors are notlet off the hook. The FSB has labelled this‘TLAC’. G-SIBs are now starting to digestwhat TLAC means in practice for them.
Meanwhile, in the EU the BRRD introducesthe concept of MREL, to be applied morewidely to credit institutions and 730kinvestment firms as defined under the CRR.MREL is part of a broader range ofmeasures outlined in the BRRD whichshould ease the path to orderly resolutionand ensure shareholders and creditors meet
the cost of recapitalisation rather thantaxpayers.
Both initiatives aim at ensuring firms havesufficient capacity to absorb losses in case offailure but they vary in their approach.
What is TLAC?
TLAC is a global standard for minimum
amounts of Total Loss Absorbing
Capacity (TLAC) to be held by G-SIBs. It
was proposed by the FSB in November
2014.
TLAC will apply to 27 of the 30 firmsidentified by the FSB in November 2014 asG-SIBs. The Chinese G-SIBs are exemptedunder an ‘Emerging Markets’ provision.Banks can meet the TLAC requirement withboth equity and debt. It comprises twoelements, a minimum Pillar 1 standard forall G-SIB’s and a Pillar 2 firm-specificrequirement.
The Pillar 1 requirement is calculated at16%-20% of RWAs, with the precisepercentage to be determined following aQuantitative Impact Study (QIS). Theminimum Pillar 1 requirement is at leasttwice the Basel III Tier 1 Leverage Ratio,which translates into 6% of total assets. Thiscalculation sets a floor for the requirementthat aims to adjust for any inconsistenciesin the G-SIBs’ reported RWAs. Bankregulators will determine the Pillar 2requirement based on each firm’s recoveryand resolution plan, its risk profile andsystemic footprint.
Regulatory capital will count toward TLACbut capital buffers will not. Non-regulatorycapital and Tier 1 and Tier 2 instruments inthe form of debt will need to constitute atleast 33% of TLAC, limiting the amount thatcan be met by regulatory capital. To counttowards TLAC, liabilities need to beunsecured, subordinated to non-TLACeligible liabilities, not subject to nettingrights and have a remaining maturity of atleast one year. Structured notes are noteligible for TLAC in the current proposals,something the industry flagged as a majorconcern in the consultation process.
The proposal envisages that external TLACis held at the level of the top company ineach consolidated resolution group. Ideally,a consolidated group will consist of a singleconsolidated resolution group (known as a‘Single Point of Entry’ resolution strategy)under a resolution entity. More complexfirms may instead comprise multipleresolution groups (Multiple Points of Entry)with a separate operating or holdingcompany acting as the resolution entity foreach resolution group. The resolution entitywill then issue capital internally to thematerial subsidiaries of the resolutiongroup. This process is referred to as ‘pre-positioning.’ The capital required for pre-positioning will likely be in the range of 75-90% of the Pillar 1 Minimum TLACrequirement, but this is not final. This intra-group debt from the parent resolution entitywould be forgiven in the event of a materialsubsidiary entering resolution.
G-SIBs must deduct exposure to eligibleTLAC liabilities issued by other G-SIBs fromtheir own TLAC, which is in line with Basel
provisions on the management of LargeExposures. This deduction is designed tolimit inter-connectedness and enhancesystemic resilience.
While this is still at proposal stage, weexpect the FSB to phase in TLAC fromJanuary 2016 with full implementation byJanuary 2019.
And MREL?
MREL is an EU wide minimum
requirement for own funds and eligible
liabilities (MREL) which applies to
credit institutions and investment firms
in the scope of BRRD. The EBA issued a
consultation on the criteria for setting
MREL on 28 November 2014.
In Europe each firm’s resolution authoritywill set MREL on a case by case basis afterconsulting the regulator. There are sixconsiderations for determining a firm’sMREL:
the institution can be resolved with theapplication of the resolution tools
the Common Equity Tier 1 ratio can berestored to the level necessary to meetthe conditions for authorisation andrestore market confidence in the firm
eligible liabilities are sufficient to coverexcluded liabilities
the size, business model, funding modeland risk profile of the firm
Saving the taxpayer – ending ‘too big to fail’
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 4
the extent to which the DepositGuarantee Scheme (DGS) couldcontribute to the financing of resolution
the systemic risk posed by the firm.
Unlike TLAC, capital instruments cansimultaneously meet MREL and capitalbuffer requirements. Eligible liabilities mustbe unsecured, issued and fully paid up, easyto value in resolution and have a remainingmaturity of at least one year. The BRRD alsosets an MREL floor equal to 8% ofliabilities. The Directive stipulates thatfirms must bail in these liabilities before anyother arrangement is made, such as use ofthe resolution fund which can only be donein exceptional circumstances.
Under the BRRD, the bail-in requirementcomes into force in January 2016. But giventhe significant impact on firms’ fundingstructures and costs, the EBA RTS proposesa period of 4 years (i.e. up until 2020) forfirms to comply.
A global level playing field?The new TLAC requirement is a minimumstandard. Regulators across the world havethe option to gold plate the rules, whichcould create an unlevel playing field for G-SIBs. The US has already indicated it willimpose more stringent requirements thanthe proposal suggests. One likely deviationis the stipulation that eligible debt mustcomprise 50% of RWAs rather than the 33%set out in the proposal. This change reflectsthe US view that resolution will wipe outmost equity. Similarly, the PRA and FCAcould decide to gold plate the requirementsby using the UK minimum Leverage Ratiostandard to calculate TLAC.
At the opposite end of the spectrum,Chinese G-SIBs are currently exempt from
the TLAC requirements. China now has theworld’s second biggest economy and housesthree of the world’s largest banks. Theirfailure would almost certainly have a globalimpact even if those banks are largelydomestically focused. This situation raisesthe question of how much longer it will beappropriate for China to rely on theEmerging Markets exemption. Oureconomists project that it will become theleading global economy before 2030.
The pre-positioning provision may alsothreaten the long-term sustainability of the‘global banking’ business model. Itconforms to the emerging trend of‘balkanisation’ with more capital heldlocally, the establishment of intermediaryholding companies in the US, and theincreasing push for subsidiarisation ofbranches in the EU. This fragmentationcould impede global trade flows, which inturn decreases the scope for economies ofscale for banks and may potentially lead toincreased costs for customers.
Unintended consequences?TLAC requirements will have an impact onG-SIBs’ structures and funding models.Some firms have expressed the view thatTLAC requirements are easier to implementfor G-SIBs structured with a holdingcompany as preferred in Anglo-Saxoncountries, rather than as a group ofoperating companies. The requirement tohold 33% of TLAC as non-regulatory capitalhas also attracted criticism because iteffectively penalises those G-SIBs which aremostly deposit funded and do nottraditionally raise wholesale funding in themarket. This is especially the case for EUbanks.
The additional cost of funding involved inraising fresh debt and equity poses achallenge to all firms - it will reduceprofitability and put further pressure onReturn on Equity (RoE). Meeting TLACrequirements may translate into lessfinancing available for the real economy,while at the same time investors may pushfirms to engage in riskier activities torestore margin.
Pre-positioning TLAC so that materialsubsidiaries can substantially meet theirrequirements on a stand-alone basis maycreate an incentive for local regulators tobail-in earlier than they would have doneotherwise. It could even prove a barrier toswift recapitalisation if losses occur wherethey are not expected. Co-operation throughdetailed agreements between home andhost regulators will be crucial to preventthis. These issues illustrate the challenge forfirms in adequately preparing for financialdifficulty without significantlycompromising their ability to react tounexpected circumstances or significantlyharm their business model, which couldresult in increased costs for end users offinancial products and services. It is tooearly to tell which side the current proposalsbest accommodate.
Will there be enoughdemand?One big uncertainty surrounding theproposals concerns the buyers of the debtand capital instruments which firms willneed to issue to satisfy these regulatoryrequirements. The volume of TLAC neededis estimated to be between €300 -500billion, at a time of considerable uncertaintyfor banks and for the global economy. Theprovisions restricting the TLAC exposure of
one G-SIB to another also reduces the poolof potential investors. Recent issuances ofconvertible debt have revealed tight spreadsbut this situation could reflect the currentlow interest environment which analysts donot expect to continue indefinitely.
Even if G-SIBs attain the requisite level offunding, it is not clear that sufficientinvestor demand exists for mid-sized EUbanks and investment firms subject toMREL requirements. The FCA sent a strongsignal to the investor community in late2014 when it banned the sale of CoCos toretail investors. Even if sufficient demandexists among institutional investors, aquestion remains over pension funds andinsurers becoming too concentrated inTLAC/MREL eligible instruments andabsorbing losses in the event of a firm’sfailure. This suggests that financial sectorlosses will still pass to the real economy andthe general public, albeit through a differentavenue.
Operational impactsAffected firms will need a much more robustinternal capital adequacy process to ensurethey are not triggering recovery indicatorsand biting into capital as this mayeventually push them into a state wherethey are likely to fail and the supervisor canintervene. They will need to monitor theeligibility of liabilities and the sufficiency ofthese in meeting the new requirements, asliabilities become ineligible when theirmaturity shortens to less than one year. Anyshortfall will need to be met with a newissuance of eligible debt/equity.Accordingly, firms must improve theirsystems/processes and developcomprehensive management informationfor asset-liability management.
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 5
Better links between Risk, Finance andTreasury will be necessary to connectnormal business activity to the recoverystage and remediation, whilst managingcommunications with the regulators andexternally with investors.
Smaller firms may find themselves morechallenged by these changes than largerfirms which already have moresophisticated systems and scale in theirprocesses.
Looking aheadTLAC and MREL are only a part of the newcapital framework facing financialinstitutions. Firms will need to form astrategic view of their business andorganisational structure in light of all thenew capital regulations. The ongoingregulatory push for more capital and theresulting pressure on funding costs calls fora more rigorous review of revenuegeneration, profitability and the cost ofcapital required to do business. Firms mustconsider these costs at a granular level.
As acknowledged at the G20 Brisbanemeeting, policy makers and the industryalike have made good progress on endingTBTF but uncertainties remain, includinghow to ensure co-operation betweensupervisory colleges and harmonise thehome-host approach to resolution forglobally active firms and to build the trustneeded to underpin a credible resolutionregime. Only the next financial crisis willreveal whether the measures envisagedadequately address these issues andproduce a safer, self-sustaining financialsystem.
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 6
In this section:
Regulation 6
AML 6
Capital and liquidity 6
Competition 7
CMU 7
Data 8
Financial crime 8
Other regulatory 8
Pensions 9
Recovery and resolution 10
Retail advice 11
Securities and derivatives 11
Accounting 12
Audit 12
Corporate governance 13
Financial accounting 13
PwC publications 14
Regulation
AMLECOFIN reaches agreement onAMLD4
ECOFIN endorsed the agreement reached
with the EP on the AMLD4 on 27 January
2015. The Council and the EC have also
agreed on the need to take decisive actions
against terrorist financing. ECOFIN calls for
further efforts to strengthen co-operation
on terrorist financing between Member
States' financial intelligence units.
ECOFIN added an anti-abuse clause to the
parent-subsidiary directive to prevent tax
avoidance and aggressive tax planning by
corporate groups. This amendment was
published in the Official Journal on 28
January 2015.
Capital and liquidityBasel Committee revising Pillar 3
The Basel Committee published Revised
Pillar 3 disclosure requirements on 28
January 2015. The most significant changes
relate to the use of templates for
quantitative disclosure. The Basel
Committee wants to enhance comparability
of bank’s disclosures, both between banks
and over time for an individual bank. It also
focuses on improving the transparency of
internal model based approaches that banks
use to calculate minimum regulatory capital
requirements.
Firms will have to disclosure and attest that
disclosures have been prepared in
accordance with board-agreed internal
control processes. The revised requirements
take effect from end-2016.
Tweaking supervisory reporting
The EC adopted two Implementing
Regulations amending Commission
Implementing Regulation 680/2014 on
supervisory reporting under CRD IV on 12
January 2015.
The EC makes minor changes to reporting
templates and provides instructions to
correct errors and reflect the revised data
point entry and taxonomy for Asset
encumbrance, single data point model and
validation rules and Forbearance and non-
performing exposures and certain minor
amendments.
Both Implementing Regulations will enter
into force after they are published in the
Official Journal.
Finalising CRD IV’s technicalprovisions
The Implementing Regulation laying down
ITS with regard to supervisory reporting of
institutions according to the CRR as
regards asset encumbrance, single data
point model and validation rules was
published in the Official Journal on 21
January 2015. The Implementing
Regulation relates to Articles 99(5) and 100
of the CRR.
The Implementing Regulation entered into
force on 10 February 2015.
Banking on capital markets
The BoE released Trends in Lending:
January 2015 on 21 January 2015.
Businesses are increasingly turning to
capital markets to fund investment, as
concerns about the ability of banks to keep
pace with demand continues. While average
monthly net lending flow to UK businesses
was negative in the three months to
November, net capital market issuance was
the highest in five years.
Mortgage approvals for UK house purchases
have fallen in recent months and were lower
than at the start of the year. The consumer
credit annual growth rate increased to 6.9%
in November. Pricing on lending to small
and medium-sized enterprises was broadly
unchanged in the three months to
November.
Respondents to the BoE’s 2014 Q4 Credit
Conditions Survey reported that spreads on
new lending to large businesses fell
significantly. The quoted interest rates on
some two-year fixed-rate mortgages, such as
those at 75% and 90% loan to value ratios,
fell in 2014 Q4.
Cross sector announcements
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 7
HMT adopts CRD IV buffers
HMT published draft capital buffers
legislation on 12 January 2015. Regulators
can apply additional capital requirements to
banks and investment firms if they believe
these firms to be so large that they pose a
risk to the financial system. The draft
statutory instrument transposes the
systemic risk buffer (SRB) provisions into
UK law and comes into force on 31 May
2016 and 1 January 2019.
The FPC will be responsible for defining a
framework to assess whether a bank poses a
systemic risk. The PRA will then assess
individual banks against that framework in
order to determine if the SRB should apply.
PRA overhauling Pillar 2
The PRA published CP1/15 – assessing
capital adequacy under Pillar 2 on 19
January 2015. The PRA proposes that at
least 56% of Pillar 2 capital requirements
(sometimes called the individual capital
guidance (ICG)) must be met using CET1
capital. Tier 2 capital cannot be used for
more than 25% of the ICG requirement.
This ensures consistency with the quality of
capital used to cover Pillar 1 capital
requirements.
The PRA confirmed that the PRA Buffer will
replace the Capital Planning Buffer from
January 2016. The PRA Buffer will be an
additional requirement, separate to the ICG.
Firms that are judged to have poor risk
management and governance arrangements
will also be subject to a special PRA Buffer
‘add-on’. The PRA Buffer will apply
concurrently with the systemic risk buffers
and the capital conservation buffer, so will
not give rise to any additional capital
requirement if it less than the CRD IV
buffers.
Firms will be able to disclose their ICG. The
PRA expects that the markets will be
increasingly interested in banks’ individual
ICG requirements over other capital
measures.
The consultation closes on 17 April 2015.
New third country equivalence rules
The PRA repealed its guidance on
equivalence of third country regulatory
regimes for credit risk purposes on 23
January 2015, which had been in force
during 2014. Banks with exposures to non-
EU entities could treat them as exposures to
EU entities for credit risk purposes if certain
conditions were met.
The PRA’s guidance has been superseded by
the EC’s December 2014 Implementing
Decision on equivalent regulatory regimes.
The EC lists countries that have regulatory
regimes at least equivalent to the EU. The
Decision replaces all national regulators’
guidance on equivalence. It took effect
throughout the EU from 1 January 2015.
CompetitionCompetitive interventions
On 15 January 2015 the FCA published
CP15/1 – competition concurrency
guidance and Handbook amendments,
setting out how it will use the new
competition powers from 1 April 2015.
The FCA sets out the new legal framework
and the relationship between its concurrent
competition powers under the Competition
Act 1998, its forthcoming powers under the
Enterprise Act 2002 (EA02) and its existing
competition powers under FSMA. It also
explains its proposed approach to selecting,
conducting and concluding investigations.
The FCA will use market studies to inform
its views on competition in a particular
market and can carry out market studies
under FSMA or the EA02. Both studies use
the same six stages of launch, research,
analysis and interim report, final report and
remedies. The FCA expects both types of
study to take 6 – 12 months to complete but
is under a statutory deadline to finish
studies under the EA02 within 12 months.
The FCA has stronger information gathering
powers under the EA02 than under FSMA.
Under the EA02, the FCA can request
information from any person - whether or
not they carry out regulated activities.
Where it considers that a person hasn’t
complied with its requirement it has the
power to impose a penalty.
Both FSMA and the EA02 give the FCA a
number of remedies that it can use to fix
competition in a market, ranging from
making policy or regulatory changes, using
enforcement or, as an extreme measure,
forcing a firm to divest some assets or part
of its business to increase competition. The
FCA is also bound to consider competition
issues before taking other action, such as
varying a firm’s permission. It is also able to
pursue individual enforcement action in
addition to market or sector-wide
competition remedies, utilising information
captured during a competition
investigation.
The consultation closes on 13 March 2015.
CMUJuncker fund moves closer
The EC published its proposed Regulation
on the European Fund for Strategic
Investments (EFSI) on 13 January 2015.
The EFSI aims to raise €315 billion public
and private investment to invest in small
and medium companies (fewer than 3000
employees) and infrastructure investments.
It is part of EC President Juncker’s plan to
boost growth and increase provision of
alternative investment financing.
The EFSI will be governed by a Steering
Board, made up initially of members of the
EC and the European Investment Bank
(EIB). Member States contributing to the
EFSI will get a proportionate representation
on the Steering Board, giving greater
opportunity to promote local projects for
investment. The EIB will separately
establish a European Investment Advisory
Hub (EIAH), which will be tasked with
identifying suitable investment
opportunities for the EFSI. The EIAH will
be expected to develop more detailed
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 8
criteria setting out how suitable projects will
be identified.
The EFSI should be launch by mid-2015.
Up-Hill challenge
The EC commenced its work on CMU on 28
January 2015 by holding an orientation
debate at the college of Commissioners.
CMU is one of the flagship projects of the
new EC and aims to meet the EC’s primary
objective, to boost jobs and growth in the
EU.
The orientation debate focused on the key
challenges and priorities for the integration
of capital markets. The EC expects to launch
a Green Paper on CMU on 18 February
2015, with a full action plan by Q3 2015.
The challenge the EC faces is to open
additional refinancing channels without
creating possibilities to arbitrage financial
sector stabilisation.
DataOpening up banking data
HMT called for evidence on data sharing
and open data in banking on 28 January
2015. Following its December 2014 report
which explored how fintech firms can use
application programming interfaces (APIs)
and open data to make better use of bank
data on behalf of customers, HMT is now
seeking views from interested parties on
how the recommendations set out in the
report should be developed.
Many organisations currently access data
through manual downloads, screen scraping
and manual entry which are hard to use,
expensive, and have limited capabilities.
HMT believes that APIs, a set of
instructions allowing software systems to
connect with one another, and open data
which anyone is free to use will improve
competition and innovation in UK banking
and create a richer banking experience for
customers. HMT also believes that
introducing APIs and open data should
increase competition between banks.
HMT estimates costs of around £1 million
per bank to develop an open API standard,
with work complete within a year. Firms
believe it will take considerable effort and
coordination to achieve this.
The consultation closes on 25 February
2015.
Financial crimeProtecting your information
The EU Agency for Network and
Information Security (ENISA) published its
latest research on network and information
security (NIS) for the EU’s Finance Sector
on 20 January 2015. It evaluated the scope
of NIS obligations in the regulatory
landscape (both at EU and Member State
level), and compared it with the industry’s
prospects.
ENISA found that large international
banking groups demonstrated a good
understanding of the risk landscape and
available security schemes. But medium
sized stakeholders demonstrated limited
senior management involvement or capacity
to be certified against current international
standards, and the de-prioritisation of
security investments.
Keeping hackers at bay
As part of “Keeping the UK safe in cyber
space” GCHQ, the Centre for the Protection
of National Infrastructure, DfBIS and the
Cabinet Office reissued cyber security
guidance for businesses on 16 January 2015.
DfBIS found that 81% of large organisations
had experienced a security breach in 2014
costing organisations, on average, between
£600,000 and £1.5 million. The bodies have
provided practical steps to help businesses
improve their network security.
The guidance has been updated to ensure it
continues to be relevant with the growing
cyber threat and operates alongside existing
schemes such as Cyber Essentials and the
Cyber Incident Response schemes, launched
as part of the National Cyber Security
Programme.
Other regulatoryTentative recovery remains on-track
The ESRB published its Risk Dashboard:
Issue 10 on 5 January 2015. The ESRB
found that the perception of systemic risk
remains in line with pre-crisis levels,
despite some renewed bouts of volatility in
July and August. Financing conditions for
new private sector loans improved in the
third quarter of 2014, although some
countries had tightened credit standards
(e.g. mortgage credit in the UK).
Financial market conditions overall remain
buoyant. Money market spreads and
financial market liquidity indicators have
been stable at low levels throughout 2014.
But volatility has increased significantly in
some market segments. Uncertainty
regarding Eurozone interest rates has
recently increased again without any sign of
reversal.
Despite continued low levels of profitability,
banks were able to improve their solvency.
In the second quarter of 2014, large EU
banking groups were able to increase Tier 1
capital to total assets, benefitting from
favourable equity market conditions.
CMU tops Latvia’s wish list
The Latvian Presidency of the EU Council
published its Work Programme: 1 January
to 30 June 2015 on 6 January 2015.
The Presidency will “ensure a broad
exchange of views” on the CMU ahead of
Commissioner Hill’s proposals, expected in
February. Banking Union is also a high
priority, with the Presidency committing to
ensuring timely implementation and
smooth functioning of banking union. It will
also attempt to push forward negotiations
on a number of tabled proposals, including
bank structural reform, the SFT Regulation,
PSD2, the Benchmark Regulation, IMD2
and AML4.
The Presidency will also prioritise reaching
agreement on wider issues of relevance to
the financial services industry, including the
General Data Protection Regulation and
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 9
Directive and finalising negotiations on the
proposed Cyber-Security Directive.
FSCS annual funding consultation
The FCA and PRA jointly published CP15/2
(FCA)/CP2/15 (PRA): FSCS – Management
Expenses Levy Limit (MELL) 2015/16 on 19
January 2015. The FSCS budget is set
annually, with the MELL meeting non-
compensation expenses such as staff and IT
costs. For 2015/16 the regulators are
proposing a £74.4m levy. The consultation
closes on 16 February 2015.
FOS 2015 plans
The FOS consulted on its plans and budget
for 2015/16 on 6 January 2015. It foresees a
challenging year, with PPI complaints
continuing to dominate its workload and
rises expected in banking and consumer
credit complaints. The FOS plans to meet
these challenges by:
modernising its IT and case-handling
infrastructure to increase efficiency
developing new ways of working that
meet the needs of its customers
improving information flow between its
own operation and firms to increase the
speed with which it resolves complaints
improving data sharing to prevent
similar complaints in the future.
The FOS expects to operate on a reduced
budget and will collect 13% less in fees from
financial businesses. It has also frozen case
fees and levies for another year.
Firms can comment on the plan and budget
until 16 February 2015.
FCA publishes bulletin
On 29 January 2015 the FCA published its
Data Bulletin January 2015. The Bulletin
reports that:
authorisation timelines are increasing
for retail firms but reducing for
wholesale firms
the FCA has received 83 requests
through Project Innovate
82% of approved persons are men
FCA reviewed over 3,000 financial
promotions in the second half of 2014,
leading to action against 181
advertisements.
Promoting regulatory co-operation
The FCA published three separate MoUs
with the Information Commissioners
Office, Advertising Standards Authority
and Cifas (on Immigration Act
responsibilities) on 28 January 2015.
Each MoU establishes a framework for co-
operation between each authority and the
FCA on:
roles and responsibilities
policy and rule-making powers
information exchange mechanisms
investigation and enforcement.
Each MoU is subject to annual review by the
FCA and the relevant authority.
PensionsEU pensions’ data published
EIOPA published a statistical database for
pensions on 30 January 2015. The database
includes pensions’ statistics from 21 EEA
jurisdictions for the period 2004 to 2013. It
covers mainly IORPs and some ‘1st Pillar
bis’ (mandatory statutory) occupational
funds. EIOPA plans to complete and update
the database on a yearly basis. EIOPA has
collected this data to help it monitor
developments in the market and identify
trends, potential risks and vulnerabilities.
Investment options for DC pensioners
EIOPA published a Report on investment
options for occupational defined
contribution (DC) scheme members on 29
January 2015. This report considers the
choices available to members of
occupational DC pension schemes. EIOPA
found that in most EU states, occupational
DC pension scheme members have no or
limited ability to make investment choices.
In states where schemes made available
investment choices, members generally had
a default investment option as well.
EIOPA found that the IORP was important
in developing the investment strategy for
schemes but, in most cases the employer
was involved in setting the default
investment option. It identified the
following areas for possible further
attention:
methods of improving suitability of
investment options compared to target
members’ risk and return characteristics
methods of supporting third parties (e.g.
employers) who make or frame
investment decisions on behalf of
members
mechanisms for providing relevant
standardised and comparable
information to help members making
better investment decisions, in case they
have to make such decisions.
Transfers of supplementaryoccupational pension rights
The EP and Council adopted a ‘Directive on
minimum requirements for enhancing
worker mobility by improving the
acquisition and preservation of
supplementary pension rights’ on 16 April
2014. This directive encourages Member
States to improve the transferability of
vested pension rights. Subsequently, EIOPA
published Consultation paper on a report
on good practices on individual transfers of
supplementary occupational pension rights
on 29 January 2015 in response to the EC’s
call for advice to EIOPA regarding
transferability of supplementary pension
rights.
In the draft report, EIOPA identifies the
main impediments to transfers of
supplementary pension rights and good
practices to overcome them, including
establishing voluntary agreements covering
as many providers as possible, layering
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 10
information and using appropriate tools to
provide relevant information. EIOPA also
considers it good practice to aid scheme
member's access to advice. EIOPA believes
transferability could also be improved when
schemes communicate directly, without
involving the scheme members, on the
practicalities of the transfer execution and
maintain reasonable time limits for the
execution of transfers.
EIOPA expects Member States to refer to
this report when transposing the Directive.
The consultation closes on 10 April 2015.
Recovery and resolutionTemplates for resolution planning
The EBA published Consultation paper -
draft ITS on procedures, forms and
templates for the provision of information
for resolution plans under the BRRD on 14
January 2015. Resolution authorities will
initially seek information on a firm’s
resolution plan from the firm’s regulator,
but will directly seek information from the
firm if this is not forthcoming. Firms should
complete the EBA’s templates when asked
for more information on:
organisational structure
governance and management
critical functions and core business lines
critical counterparties
structure of liabilities
funding sources
off balance sheet
payment systems
information systems
interconnectedness
authorities and legal framework.
The consultation closes on 27 February
2015.
Pre-funding resolution costs
On 17 January 2015 the Commission
Delegated Regulation supplementing RRD
with regard to ex ante contributions to
resolution financing arrangements was
published in the Official Journal. The
Regulation sets out the methodology for
calculating firms’ contributions to
resolution financing arrangements and the
adjustment to the risk profile of institutions.
The contribution is calculated as a fixed
amount according to a firm’s liabilities to
reflect the fact that larger firms are
considered more risky. The contribution is
adjusted through the use of risk pillars and
risk indicators which are assigned relative
weights. In the case of groups the
contribution should take into account the
interconnectedness of the group to avoid
double counting of intragroup exposures.
The Regulation applied from 1 January 2015
and the Commission will review the risk
adjustment before 1 June 2016.
Recovery and resolution forinvestment firms
The FCA published PS15/2 - Recovery and
Resolution Directive: Feedback on CP14/15
and final rules on 16 January 2015,
implementing BRRD for investment firms.
The new rules will apply to investment firms
that have the FCA as their sole regulator
and that are IFPRU 730k firms, as well as to
entities in a group that contains an IFPRU
730k firm or a credit institution.
The finalised rules:
remove the communication and
disclosure element from the recovery
planning requirements for firms subject
to the simplified obligations
retract any application to unregulated
entities
remove any duplication of the rules
where they overlap with the PRA’s rules
amend the transitional provisions with
regard to EU and EEA application.
The FCA has not made any significant policy
changes to previous proposals. It has
included some guidance on intra-group
financial support agreements and agreed to
discuss with the BoE concerns that firms
reporting under US GAAP (rather than UK
GAAP or IFRS) enjoy an advantage when
calculating MREL due to the laxer netting
requirements.
The finalised rules entered into force on 19
January 2015, except for the rules on the
contractual recognition of bail-in which will
come into force on 1 January 2016.
Updated RRP guidance
The PRA updated its December 2013
supervisory statements: SS18/13 –
Recovery planning and SS19/13 Resolution
Planning on 16 January 2015. The PRA set
out its expectations on the content of
recovery plans and group recovery plans, to
complement existing RTS, rules and
guidance. Firms which are members of an
international group headquartered in third
countries should assess and demonstrate
how the UK plan submitted to the PRA fits
with the group recovery plan in addressing
UK operations.
The PRA also outlined the two stages of
resolution planning. Phase 1 will see the
PRA request baseline information to
establish a resolution strategy. All firms are
required to submit Phase 1 information by
April 2016 and every two years thereafter
unless they experience a material change to
their structure or business activities. Phase
2 contains the detailed information needed
to support the preferred resolution strategy,
chosen by the PRA in conjunction with the
BoE, while ensuring that critical functions
are maintained. Firms may be required to
submit information relating to more than
one resolution strategy to assess the
feasibility of different options.
The final PRA rules came into force on 19
January 2015, except for contractual
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 11
recognition of MREL which comes into
force on 19 February 2015.
Tweaking BRRD implementation
The PRA published PS1/15: Implementing
the BRRD - response to CP13/14 on 16
January 2015. The PRA now proposes that:
the recovery plan rules are extended to
capture holding companies
firms undertake scenario testing
intragroup financial support is captured
by a new framework
BRRD firms must notify the PRA if they
consider they meet the conditions for
failing or likely to fail
BRRD firms include a term in
contractual provisions governing eligible
liabilities governed by the law of a third
country which states the liability is
subject to UK bail in powers.
The final PRA rules came into force on 19
January 2015 except for contractual
recognition of MREL which comes into
force on 19 February 2015.
Retail adviceAdvising on pension transfers
UK Parliament published The FSMA 2000
(Regulated Activities) (Amendment) (No. 2)
Order 2015 on 29 January 2015.
The Order makes providing advice on the
conversion or transfer of a class of pension
benefits known as “safeguarded benefits” a
regulated activity. This follows the Budget
2014 pension freedoms, which allows those
with defined contribution pensions more
flexibility in accessing their pension pot.
The explanatory memorandum states that
the Order mirrors, or copies out, four
definitions set out in the Pensions Bill 2014-
15 (around flexible benefits, safeguarded
benefits, subsisting rights and survivors).
The UK government expects the Pensions
Bill 2014-15 to receive Royal Assent in
February or March 2015, and take effect on
6 April 2015.
Clarifying advice boundaries
The FCA published feedback and FG15/1 –
Retail investment advice: clarifying the
boundaries and exploring the barriers to
market development on 22 January 2015.
FCA responded to a perceived regulatory
expectation gap by clarifying where the
boundaries lie between:
offering personal recommendations
(advice caught under MiFID suitability
requirements)
providing regulated advice under the
RAO
providing information that is not
regulated advice.
The FCA also clarified the application of
suitability requirements when firms provide
focused advice, including how much
indirectly relevant client information
advisers need
But firms might find that the guidance does
not answer all their questions. Advisers still
need to identify their own risk appetite
when carrying out suitability checks on a
client and decide how much additional
information they need to provide. Firms
looking to provide automated or simplified
models will welcome the advice on filtering
and risk profiles within systems, but might
still have outstanding questions. See our
blog for more details on the main issues we
have identified from the guidance.
Securities and derivativesIOSCO promotes derivative certainty
IOSCO outlined nine standards to reduce
uncertainties in derivatives markets in its
final report on Risk Mitigation Standards
for Non-centrally Cleared OTC Derivatives
on 28 January 2015. It published these to
support the capital requirements for non-
centrally cleared OTC derivatives
published jointly with the Basel Committee
in 2013.
IOSCO’s recommendations cover all major
players in the non-centrally cleared OTC
derivatives market. Financial entities and
systemically important non-financial
entities that use non-centrally cleared OTC
derivatives should employ the risk
mitigation techniques IOSCO recommends.
It proposes these firms establish policies
and procedures to:
document the trading relationship with
their counterparties before executing a
non-centrally cleared OTC derivatives
transaction, including all material terms
governing the relationship
ensure the material terms of all non-
centrally cleared OTC derivatives
transactions are confirmed as soon as
practical
reconcile with counterparties the
material terms and valuations of all
transactions in a non-centrally cleared
OTC derivatives portfolio
regularly assess and engage in portfolio
compression.
Firms must agree and document the process
for determining the value of each
transaction at any time, and the process for
determining when discrepancies in material
terms or valuations should be considered
disputes. IOSCO wants regulatory
authorities to collaborate to minimise
inconsistencies in risk mitigation
requirements across jurisdictions, and to
implement the standards as soon as
possible.
LEI goes online
On 26 January 2015 the Global Legal Entity
Identifier Foundation (GLEIF) launched its
new website in a further step to make LEI
information available. The GLEIF,
established by the FSB in 2014, manages the
worldwide development of LEIs.
The site enables communication with the
GLEIF and sets out instructions for
obtaining an LEI from local operating units.
In late 2015 the GLEIF expects the website
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 12
functionality will allow LEI participants to
access to the database of all LEIs issued
globally and their associated reference data.
Clearing regime for IRS
ESMA published Opinion on Draft RTS on
the Clearing Obligation on Interest Rate
Swaps (IRS) on 29 January 2015. ESMA
must specify the class of OTC derivatives
that should be subject to the clearing
obligation under EMIR, and submitted a
draft RTS on the clearing obligation on
interest rate swaps on 1 October 2014.
The EC signalled its intent to endorse the
draft RTS with some amendments on 18
December 2014. The EC modified the RTS,
amending the start date of the frontloading
obligation and adding a new provision on
the treatment of non-EU intragroup
transactions.
ESMA agreed with the ultimate objectives of
the EC’s modifications but believes that the
change relating to non-EU intragroup
transactions is not appropriate from a legal
perspective. ESMA indicated a desire to
work with the EC to explore an alternative
to that provision.
Matching transparency to markets
In Occasional Paper 6: Transparency in
the UK Bond Markets: An Overview,
published on 16 January, 2105, the FCA
discusses key features of the UK bond
market and how proposed MiFIR
transparency requirements may impact
these segments. It proposes that the EU
should not follow a “one size will fit all”
approach in applying MiFIR transparency
requirements to diverse fixed-income
(bond) markets.
BIS statistics reveal that the global bond
market is twice the size of the global equity
market, and that the UK is home to 70% of
all secondary trading. As a key stakeholder
in MiFIR rule developments, the FCA
reviewed UK listed bond transaction reports
submitted from 2008 to 2011 to analyse the
market. The FCA found significant diversity
in the UK bond markets. Unlike equities,
bonds are traded sporadically, with only 35
bonds representing 50% of secondary
trading activity. Only a small sub-set of
bonds are liquid and frequently traded at
established trading venues.
The survey also revealed that:
bonds’ liquidity profiles vary widely
during their lifetime
transactions in UK-listed bonds are
largely executed off-exchange
liquidity is provided by a small number
of broker and market maker services
trading costs vary by transaction size,
credit risk and maturity.
The FCA recommends that EU law makers
calibrate MiFIR pre- and post-trade
transparency requirements by segment.
This will ensure that the rules achieve the
aim of increased competition but do not
impair liquidity in certain segments. ESMA
launched a consultation on its MiFIR pre-
and post-trade transparency requirements
proposals on 19 December 2014: responses
are due by 2 March 2015.
Fair and effective market supportgrows
Jerome H. Powell, Member of the Board of
Governors of the Federal Reserve System
expressed his support for the UK’s Fair and
Effective Markets Review in a speech
delivered on 20 January 2015. Powell
highlighted specific US measures aimed at
making markets fairer and more effective.
Powell said that the importance of FICC
markets extends far beyond their
participants and that proper market
functioning is actually a public good that
relies on confidence and trust among
market participants and the public. He
argued that bad conduct, weak internal firm
governance, misaligned incentives and
flawed market structure can all place this
trust at risk.
A number of US firms have already
reformed compensation packages to better
align incentives. US financial regulators are
preparing a new rule on incentive
compensation that will codify and
strengthen these initiatives.
On benchmarks, Powell explained that the
Federal Reserve has asked a group of the
largest global dealers to form the
Alternative Reference Rates Committee. The
Committee will work with the Federal
Reserve to promote alternatives to US dollar
LIBOR that better reflect the current
structure of funding markets.
Sponsors face toughened rules
The FCA published its tenth Primary
Market Bulletin on 30 January 2015. Two
new technical notes have been added to the
UKLA Knowledge Base and set out the
FCA's approach to sponsor competence:
UKLA Technical 714.1 delineates the
types of skills, knowledge and expertise
that the FCA expects a sponsor to
consider when assessing its ability as a
firm to show an understanding of each
competency set.
UKLA Technical 715.1 sets out questions
and answers to assist sponsors or
applicants in considering whether the
firm meets, or continues to meet, the
rules requiring sponsors to be
competent to provide sponsor services at
all times.
Sponsors must effectively monitor and
mitigate against conflicts of interest that
arise from their roles. The two new
technical notes applied from 1 February
2015.
Accounting
AuditPresenting negative interest rates
On 7 January 2015 the EBA requested that
the IFRS Interpretations Committee
reconsider how financial instruments with a
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 13
negative yield should be presented in
financial statements. The IFRS had
previously agreed to refrain from finalising
its decision on this issue until the
completion of the IFRS 9 redeliberations
(which happened in July 2014).
As the ECB has applied negative interest on
the amount of deposits which are above a
certain limit, and given poor growth
prospects in the Eurozone, clarity on the
presentation of negative interest in IFRS in
important. The EBA is concerned that
divergence of accounting practices on this
matter could emerge.
Corporate governanceFRC governance update
Our in brief publication looks at the FRC’s
priorities for corporate governance and
reporting coming from its recent
publications ‘Developments in Corporate
Governance and Stewardship 2014’ , ’Draft
Plan & Budget and Proposed Levies
2015/16’ and ‘Year-end advice to
preparers’.
Levels of compliance with the UK Corporate
Governance Code have continued to
increase. Reporting has become more
transparent and informative, with audit
committee reports and diversity reporting
particularly improved. The FRC's annual
review of developments in Corporate
Governance and Stewardship for 2014 has
seen an increase in signatories to the
Stewardship Code with signs of better
engagement with large companies by
investment managers. But the FRC believes
that more needs to be done to ensure asset
owners and managers follow-through on
their commitments to the principles set out
in the Code.
Financial accountingConsolidated financial statementsQ&As
IFRS 10 ‘Consolidated financial statements’
and IFRS 12 ‘Disclosure of interests in other
entities’ were issued in May 2011. IFRS 10
retains the key principle of IAS 27 and SIC
12: all entities that are controlled by a
parent are consolidated. But some of the
detailed guidance is new and may result in
changes in the scope of consolidation for
some parent companies. Experience
suggests that the new requirements will
have the greatest impact on consolidation
decisions for structured entities (i.e. SPVs)
and for pooled funds managed by a third
party.
Our In depth publication IFRS 10 and 12 -
Questions and answers sets out our views
on some of the most common issues that
arise during the implementation of the new
standards. For further guidance on IFRS 10,
see our ‘Practical guide to IFRS:
Consolidated financial statements –
redefining control’ and the supplement for
the asset management industry.
Hedging in practice
Many companies are now considering IFRS
9, the new accounting standard on financial
instruments. IFRS 9 addresses all the
relevant aspects on the accounting for
financial instruments, including
classification and measurement,
impairment of financial assets and general
hedge accounting.
Our publication ‘IFRS 9 Hedging in
Practice - Frequently asked questions’
presents a number of frequently asked
questions and focuses on just one topic in
IFRS 9: general hedge accounting.
IASB Investor Update - January 2015
IASB Investor Update - Our newsletter for
the investment community - January 2015
includes discussion of judgements and
estimates in revenue recognition.
IFRS for SMEs - January 2015
Our January update on IFRS for SMEs
includes the following discussions:
IASB meetings on the comprehensive
review of the IFRS for SMEs
adopting the IFRS for SMEs in Uruguay
upcoming ‘train the trainers’ workshops
IFRS for SMEs translations: status
report
where to obtain IFRS for SMEs
materials.
EU endorses IAS 19 amendments
The EU has endorsed the amendments to
IAS 19 'Employee benefits', on defined
benefit plans, issued in November 2013.
These narrow scope amendments apply to
contributions from employees or third
parties to defined benefit plans. The
objective of the amendments is to simplify
the accounting for contributions that are
independent of the number of years of
employee service, for example, employee
contributions that are calculated according
to a fixed percentage of salary.
The IASB effective date is 1 July 2014, but
the EU has endorsed the amendments for
annual periods starting on or after 1
February 2015. For further details of the
amendment see our Straight away guide -
IASB issues amendment to IAS 19R.
EU endorses annual improvements
The EU has endorsed the annual
improvements 2010-2012 cycle issued in
December 2013. These amendments affect
seven standards:
IFRS 2 ‘Share-based payment’
IFRS 3 ‘Business combinations’
IFRS 8 ‘Operating segments’
IFRS 13 ‘Fair value measurement’
IAS 16 ‘Property, plant and equipment’
IAS 38 ‘Intangible assets’
IAS 24 ‘Related party disclosures’.
Consequential amendments are also made
to IFRS 9 'Financial instruments', IAS 37
'Provisions, contingent liabilities and
contingent assets', and IAS 39 'Financial
instruments - Recognition and
measurement'. The IASB effective date is 1
July 2014, but the EU has endorsed the
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 14
amendments for annual periods starting on
or after 1 February 2015. For further details
of the amendments see our Straight away
guide - IASB publishes final standard on
Annual Improvements 2010-12 cycle.
PwC publicationsImpairment review considerations
Many companies consider impairment tests
at the year end, either on a one-off basis due
to a triggering event, or as part of an annual
impairment test for indefinite lived
intangibles and goodwill. Bond yields in
many major currencies (e.g. Sterling, US
Dollar, Euro) are lower at 31 December
2014 than they were at 31 December 2013.
This situation might lead you to believe that
discount rates have fallen and therefore that
the risk of impairment has reduced. Please
be aware that this is not the case. For
further details see our In brief publication
‘Discount rates and cash flows for
impairment reviews’.
Impairment reviews of non-financialassets
Recent months have been marked by
increased volatility in global markets. This
environment could lead to revised budgets
and forecasts with an expectation of lower
cash-flows from existing non-financial
assets. Our In brief publication ‘Top 5 tips
for impairment reviews of non-financial
assets’ highlights the top 5 tips to focus on
when completing impairment review for
non-financial assets.
Implications of movements in theSwiss Franc rate
On 15 January 2015, the Swiss National
Bank (SNB) stopped trying to peg the Swiss
Franc to the Euro. As a result, the Swiss
Franc appreciated 15% against the Euro and
then stabilised close to parity (SFr1:€1) as at
29 January 2015. The immediate
consequences were significant for some
entities - in the UK some currency brokers
were forced into administration.
For the December 2014 year end, the
foreign currency movements triggered by
the SNB's decision are events after the
balance sheet date whose nature and
estimated financial effect will have to be
disclosed if significant. This could be an
impairment indicator in 2015 accounts for
entities with exposure to Swiss activities. In
some cases, the going concern basis may no
longer be appropriate. Our In brief guide
‘Swiss National Bank's decision on the
CHF/EUR rate’ includes an overview of the
potential issues and the relevant guidance
under IFRS.
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 15
In this section:
Regulation 15
Capital and liquidity 15
Conduct 16
Consumer credit 17
Accounting 17
Regulation
Capital and liquidityRestoring confidence in capital
The Basel Committee published its Work
Programme for 2015 and 2016 on 21
January 2015. Much of its work will be
geared towards reviewing existing methods
of measuring risk-weighted assets. It will
consider the use of simple, transparent and
comparable criteria for securitisations, the
fundamental review of the trading book and
interest rate, credit and operational risk in
the banking book.
The Basel Committee also plans new
initiatives to:
review the regulatory treatment of
sovereign risk
assess the interaction, coherence and
overall calibration of the reform policies
assess the role of stress testing in the
regulatory framework in light of national
developments.
The Basel Committee will continue to
monitor its members’ implementation of the
Basel framework via the Regulatory
Consistency Assessment Programme
(RCAP). This year the RCAP will be
expanded to also cover liquidity standards
and the frameworks for G-SIBs and D-SIBs.
Banks struggle with risk managementprinciples
The Basel Committee published its second
report on Progress in adopting the
principles for effective risk data
aggregation and risk reporting
(“Principles”) on 23 January 2015. The 2013
Principles strengthen risk data aggregation
and risk reporting at banks to improve risk
management practices and decision-making
processes. Firms designated as G-SIB are
required to implement the Principles in full
by 2016.
The Basel Committee outlines the measures
G-SIBs took to improve their overall
preparedness for compliance with the
Principles during 2014. While G-SIBs are
increasingly aware of the importance of
implementing the Principles, 14 of the 31
participating banks reported that they will
be unable to fully comply by the 2016
deadline, compared with 10 G-SIBs in 2013.
Activating emergency prudentialpowers
The ESRB Chairman, Mario Draghi, sent a
letter on 7 January 2015 to the EC on the
systemic risk conditions in the EU. The EC
requested input from the ESRB in its annual
review of its CRR powers. Under CRR, the
EC can adopt delegated acts imposing
stricter prudential requirements on banks
where CRD IV powers are insufficient to
address the prudential risks.
Banking and capital markets
Mark JamesPartner, Jersey office+44 (0) 1534 [email protected]
James de VeulleDirector, Jersey office+44 (0) 1534 [email protected]
Nick VermeulenPartner, Guernsey office+44 (0) 14 81 [email protected]
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 16
The ESRB found no need for the EC to use
these powers based on current conditions.
But it suggests that there are two instances
where, in theory, these powers might help to
address specific systemic threats:
systemic fragilities in financial markets
that might call for comprehensive,
uniform and swift policy responses
indirect contagion that might easily
spread to other states, necessitating
broad preventative measures across the
EU.
The ESRB believes that the EC could
enhance systemic stability by requiring
firms to improve public disclosures on
exposures, indicators or practices of
systemic relevance.
Calculating DGS needs
On 12 January 2015, the EBA published
slides from its public hearing on methods
for calculating contributions to the deposit
guarantee scheme (DGS), held on 8
January 2015. EU banks must contribute
annually to the new DGS. The contribution
will be dependent on the institution’s
covered deposits, aggregate risk weight and
contribution rate. The EBA will also add an
adjustment coefficient to ensure the DGS
reaches annual target levels.
At the public hearing the EBA described:
the calculation formula
specific indicators
risk classes for members
thresholds for risk weights assigned to
specific risk classes
other necessary elements to pre-fund
the DGS.
A bank’s contribution will mostly be
determined by its risk class so the EBA
provided a list of core risk indicators that it
will assess, with most heavy weight placed
on its non-performing loan ratio and
covered deposits.
The DGS consultation closed on 11 February
2015. Banks will contribute from 3 July
2015.
Relaxing the volatility test
The EBA revised its Final draft RTS on
prudent valuation the CRR on 23 January
2015. The EBA has replaced references to
“volatility” in Articles 9 and 10 of the initial
final draft RTS with “variance” for the
purposes of computing market price
uncertainty and close-out costs additional
valuation adjustments.
The change will only affect institutions
using the “core approach”. It will result in a
slight relaxation of the calibration of the
volatility test performed under the two
articles, and is intended to avoid unwanted
side-effects during the first year
implementation of the core approach.
The RTS is now with the EC to be finalised
and published in the Official Journal.
Limiting dividend payments
ECB Banking Supervision wrote to
significant Eurozone banks on dividend
distribution policies on 29 January 2015.
Banks should adopt a conservative policy
when distributing dividends, taking into
account the current challenging economic
and financial conditions. Banks with a
residual capital shortfall following the
comprehensive assessment in 2014 should
not distribute dividends at all. Moreover,
work on building banks’ capital base needs
to continue in line with CRD IV
requirements.
The ECB also notified banks that variable
remuneration will be thoroughly reviewed
in the coming months.
PRA transition to new DGS
The PRA published CP4/15: Depositor,
dormant account and policyholder
protection policies - amendments on 27
January 2015. The PRA proposes
transitional provisions, new rules and
amendments to the PRA Handbook
following feedback to the Depositor
Protection and Policyholder Protection
consultations published in October 2014.
The PRA proposes transitional rules for
depositor protection, including expectations
for the single customer view, account
marking and information requirements. To
protect dormant accounts, the PRA wants to
change compensation arrangements,
outlining how it expects the FSCS to operate
the Dormant Account Scheme and interact
with a dormant account fund operator. It
also proposes new transitional rules to
clarify what circumstances and measures
will continue to fall under the current
compensation and fees rules, or under the
new rules from 3 July 2015.
The consultation closes on 27 February
2015. The PRA plans to publish policy
statements alongside final rules and
supervisory statements in the first half of
2015 with the new rules planned to take
effect from July.
ConductTeaser rates to continue
The FCA published its findings and
recommended remedies from MS14/2.3 –
cash savings market study report on 20
January 2015. FCA focused on interest-
bearing cash savings accounts and analysed
seven main types of savings accounts,
including easy access accounts, fixed term
bonds and cash ISAs. It concluded that the
cash savings market is not working well for
many consumers. In particular:
significant numbers of accounts opened
more than five years ago paying lower
interest rates than those opened more
recently
consumers receiving little information
about alternative products
consumers are put off switching by the
expected hassle and perceived low gains
from opening another account
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 17
large personal current account providers
have considerable advantages because
they can attract most easy access
balances despite offering lower interest
rates.
The FCA is not proposing to ban
introductory teaser rates or require
providers to offer all customers the same
interest rate. But it does want providers to
improve communications on interest rate
changes and bonus rate expiry. Under the
proposals, firms are required to warn
customers of accounts with low interest
rates, emphasise the interest rate on
statements, explain how to switch and the
potential benefits of switching and remind
consumers of interest rate changes,
including bonus rate expiry.
The FCA welcomes comments by 18
February 2015 and will then consult if
rule changes are required.
Time-barred PPI complaints?
On 30 January 2015 the FCA announced its
intention to gather evidence on current
trends in PPI complaints to decide if further
intervention is required. This could include:
a consumer communication campaign
possible time limit on complaints
other rule changes or guidance.
The FCA also believes that a continuation of
the current process may be the preferred
outcome. It expects to commence the
evidence gathering shortly and give its view
on the evidence collected in the summer.
Consumer creditReporting requirements
On 21 January 2015, the FCA published a
reporting framework for firms to report
consumer credit financial data. It plans to
use this data to:
build an overall picture of the size of the
consumer credit market and how
revenue is generated
analyse the on-going viability of a firm
verify that debt management firms are
complying with their prudential
requirements
understand the size of the debt
collection market and identify where
there is a risk of consumer detriment.
The information provides a basis for the
FCA’s supervisory activities. All fully
authorised firms, except those that only
provide credit references, must report.
Firms with limited permissions that provide
credit not as their main business are subject
to reduced reporting requirements.
FCA concerned with payday lenders
On 21 January 2015 the FCA published a
“Dear CEO” letter to high cost short term
credit providers (HCSTC) holding an
interim permission. FCA sets out concerns
including:
poor practice in the credit broking
market in relation to transparency of
fees and customer outcomes
inadequacy of affordability checks
the fair treatment of customers in
financial difficulties
governance and controls which should
ensure organisational changes are
effectively embedded.
FCA also highlights the consequences of
firms failing to submit an application for
authorisation before their authorisation slot
deadline. These firms will be acting illegally
and will be unable to grant further loans or
accept or recover payments from existing
loans.
Accounting
Expected credit loss disclosures
IFRS 9 introduces significant additional
disclosure requirements relating to credit
risk and expected credit loss allowances.
Understanding the data and systems needed
to meet these new requirements will be
critical to ensuring the completeness of
IFRS 9 project scopes, thereby avoiding
revisions later in the project that could be
costly and jeopardise project timings.
Simply replicating the illustrative
disclosures included in IFRS 9 risks missing
key information requirements.
Considering these disclosure requirements
as part of the broader consideration of
internal management reporting and
investor communications will also likely
deliver significant benefits. Our In depth
publication ‘IFRS 9: Expected credit loss
disclosures for banking’ sets out key
considerations and what they will mean in
practice.
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 18
In this section:
Regulation 18
AIFMD 18
Retail products 18
Regulation
AIFMDUpdated AIFMD Q&A
ESMA updated its Q&A – application of theAIFMD on 9 January 2015. It added moreinformation about the AIFMD reportingtemplates:
AIFMs should report the value, notnumber, of subscriptions andredemptions in a reporting period
the fund NAV should be calculated aftersubscriptions, redemptions andinvestment performance are taken intoaccount over a month
AIFMs with fund-of-funds as well asother funds should report twice – amonth after the end of the reportingperiod for the funds and 45 days afterthe end of the period for the fund-of-funds.
FCA clarifies reporting expectations
The FCA published a Q&A for AIFMsreporting on the FCA’s GABRIEL system on20 January 2015 and a further update forfirms on 29 January 2015. Most AIFMswere authorised by the FCA on or around 21July 2014, so must have reported underAIFMD for the first time at the end ofJanuary 2015.
The FCA cannot offer guidance on AIFMDreporting, as this is defined in a DelegatedRegulation. Instead the FCA offers guidanceon how to use the FCA’s reporting system(GABRIEL), the specific AIFM forms thatfirms need to submit and details on how toensure information is validated correctly.The update confirmed that AIFMs unable toreport on GABRIEL due to technical issuesor those who do not yet have a PRN will notface enforcement action as long as theyreport as soon as possible.
Firms authorised after July 2014 with laterreporting deadlines should note the FCA’sguidance.
Retail productsUpdated UCITS Q&A
ESMA updated the Q&A – ESMA’sguidelines on ETFs and other UCITS issueson 9 January 2015, focusing on collateralmanagement. ESMA confirms that:
in some circumstances derivativescounterparties can implement rules setout by the UCITS management companywithout being seen to have discretionover the investment portfolio
any short-term MMFs that fundsinvested into for collateral purposesshould meet the UCITS definition of ashort-term MMF.
Asset management
John LuffPartner, Guernsey office+44 (0) 1481 [email protected]
Mike ByrnePartner, Jersey office+44 (0) 1534 [email protected]
Adam GulleySenior Manager, Jersey+44 (0) 1534 [email protected]
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 19
In this section:
Regulation 19
Solvency II 19
UK Updates 20
Regulation
Solvency IINew Solvency II fact sheet
The EC published Solvency II Overview –
Frequently asked questions on 12 January
2015. This publication looks at the
development of Solvency II and its key
requirements and is a useful learning guide.
Implementing rules come into force
The Delegated Regulation on the taking-up
and pursuit of the business of insurance
and reinsurance (Solvency II) was
published in the Official Journal and
entered into force on 18 January 2015. The
Delegated Regulation sets out more detailed
requirements for individual insurance
undertakings as well as for groups. They will
make up the core of the single prudential
rulebook for insurance and reinsurance
undertakings in the EU, and are based on 76
empowerments in the Solvency II Directive.
The Delegated Regulation considers:
rules for market-consistent valuation of
assets and liabilities, including technical
provisions and details of the long-term
guarantee measures
rules for the eligibility of insurers' own
fund items
methodology and calibration of the
minimum capital requirement and of the
standard formula for the SCR
calculation
standards that undertakings applying to
use an internal model to calculate their
SCR must meet as a condition for
authorisation
criteria for supervisory approval of the
scope of the authorisation of SPVs
taking on reinsurance risk, and
requirements related to their operation
rules related to insurance groups, such
as the methods for calculating the group
solvency capital requirement, the
operation of branches, coordination
within supervisory colleges
criteria to assess whether or not a
solvency regime in a third country is
equivalent.
In addition, the EP published a letter from
Roberto Gualtieri (ECON), to Jonathan Hill
(European Commissioner for Financial
Stability, Financial Services and Capital
Markets Union) on the proposed Delegated
Regulation supplementing the Solvency II
Insurance
Evelyn BradyPartner, Guernsey office+44 (0) 1481 [email protected]
Adrian PeacegoodDirector, Guernsey office+44 (0) 1481 [email protected]
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 20
Directive (2009/138/EC) on 9 January
2015 and Jonathan Hill’s response to this
letter on 29 January 2015. These letters
address a number of corrections to the text,
additional empowerments and further work
required.
Additional transitional measurespublished
The PRA published CP3/15 Solvency II:
transitional measures and the treatment of
participations on 23 January 2015. This
document proposes draft rules to
implement Solvency II’s transitional
measures for risk-free rates and technical
provisions in the UK.
Firms can apply to the PRA for approval to
use these transitional measures to:
Move from their current discount rate
requirements to the corresponding
Solvency II requirements. The
transitional measure applies for 16 years
and is an adjustment to the relevant
risk-free interest rate term structure
used to discount admissible insurance
obligations (i.e. those existing at the
Solvency II transition date).
Move from current requirements for
technical provisions to the Solvency II
requirements. The transitional measure
also applies for 16 years, and is a
deduction from the amount of Solvency
II technical provisions. The deduction is
initially calculated as the difference
between current technical provisions
and Solvency II technical provisions at
the Solvency II transition date, and
decreases linearly during the 16-year
transitional period.
The PRA sets out its expectations on the
application process and calculations for
these transitional measures in a draft
supervisory statement. Firms wishing to use
these transitional measures should notify
their supervisor as soon as possible and
submit an application to the PRA
electronically from 1 April 2015. When
applying, firms should inform the PRA of
any other approvals that they have applied
for or plan to apply for during the next
twelve months. The PRA may ask firms to
obtain an external validation of their
calculations. In such cases, it will agree the
scope and timescales for the validation with
firms on a case-by-case basis.
The consultation also includes a draft
supervisory statement on the internal model
treatment of participations in (re)insurance
firms and how they are reflected in the SCR
at the solo level.
The PRA is required to transpose Solvency
II into its rules by 31 March 2015, and it will
apply to firms from 1 January 2016. The
consultation closes on 20 February 2015.
Submitting information to NCAs
EIOPA updated its Answers to questions on
Submission of Information to National
Competent Authorities (NCAs) on 28
January 2015, providing answers to a range
of technical questions on completing the
reporting templates for supervisors.
Where to go for moreinformation
Read more about Solvency II UK on our
webpages at www.pwc.co.uk/solvencyII
UK UpdatesRegulating the insurance industry
On 22 January 2015, the PRA published
‘Regulation and the future of the insurance
industry’ a speech given by Paul Fisher,
Deputy Head of the PRA and Executive
Director, Insurance Supervision.
As well as the new Solvency II regime,
Fisher looked at the role insurance plays in
the wider economy and the broader
challenges facing the insurance industry. He
considered the impact of the prevailing low
interest rate environment and consequent
influx of alternative capital, especially into
reinsurance markets, the transformation to
the ‘at retirement’ taxation system in the UK
and competition in general insurance from
overseas locations, possibly linked to
regulatory arbitrage.
Transferring insurance business
The PRA published letter on transfers of
insurance business under FSMA on 21
January 2015. The PRA is aware that a
significant number of firms are seeking to
complete transfers of insurance business
before Solvency II is implemented on 1
January 2016, which poses a resource
challenge for the PRA.
The letter explains what firms need to do,
and the timescales, to ensure that the PRA
accepts their application. The PRA intends
to continue to progress those insurance
transfers where:
the fee has been paid (or where a special
project fee has been agreed)
the firm has indicated its intention to
complete the transfer in 2015
the firm is on track to complete the
transfer.
All other cases will be considered on a case
by case basis.
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 21
Open consultations
Closing datefor responses
Paper Institution
16/02/15 CP15/2 and CP2/15: FSCS – management expenses levy limit PRA and FCA
16/02/15 Consultation paper – plans and budget for 2015/16 FOS
17/02/15 Discussion paper: key information documents for PRIIPs ESAs
18/02/15 MS14/2.3 – cash savings market study report: final findings and proposed remedies FCA
19/02/15 Consultation paper on Guidelines on Access to a CCP or a Trading Venue by a CSD ESMA
19/02/15 Consultation paper on Technical Advice under the CSD Regulation ESMA
19/02/15 Consultation paper on Technical Standards under the CSD Regulation ESMA
20/02/15 FSCS plan and budget 2015/16 FSCS
20/02/15 CP3/15 – Solvency II: transitional measures and the treatment of participations PRA
20/02/15 Fundamental review of the trading book: outstanding issues BCBS
25/02/15 Call for evidence on data sharing and open data in banking HMT
27/02/15 Strengthening accountability in banking: forms, consequential and transitional aspects PRA/FCA
Monthly calendar
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 22
Closing datefor responses
Paper Institution
27/02/15 CP4/15: depositor, dormant account and policyholder protection - amendments PRA
27/02/15 Discussion Paper The Use of Credit Ratings by Financial Intermediaries Article 5(a) of the CRA Regulation JCESA
27/02/15 Consultation paper: draft RTS on criteria for determining the minimum requirement for own funds and eligible liabilities underthe BRRD
EBA
27/02/15 CP27/14 – CRD IV: liquidity PRA
02/03/15 Public consultation on the Solvency II standards and guidelines EIOPA
02/03/15 Consultation Paper: MiFID II/MiFIR ESMA
02/03/15 Consultation Paper on the proposal for draft ITS on the equity index for the symmetric adjustment of the equity capital charge EIOPA
06/03/15 Consultative Document: Net Stable Funding Ratio disclosure standards BaselCommittee
09/03/15 Lending Code review LSB
12/03/15 Consultation paper: draft RTS on the specification of the assessment methodology for competent authorities regarding complianceof an institution with the requirements to use the IRB approach under the CRR
EBA
12/03/15 Draft requirements on passport notifications for credit intermediaries under the Mortgage Credit Directive EBA
13/03/15 Improving complaints handling FCA
13/03/15 Guaranteed Asset Protection insurance: a competition remedy FCA
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 23
Closing datefor responses
Paper Institution
13/03/15 CP15/1: FCA competition concurrency guidance and Handbook amendments FCA
20/03/15 Auditing and ethical standards Implementation of the EU Audit Directive and Audit Regulation FRC
22/03/15 Joint Committee Consultation Paper on guidelines for cross-selling practices JCESA
27/03/15 Revisions to the Standardised Approach for credit risk BaselCommittee
27/03/15 Capital floors: the design of a framework based on standardised approaches BaselCommittee
27/03/15 Discussion Paper Share classes of UCITS ESMA
31/03/15 Call for evidence – competition, choice and conflicts of interests in the CRA industry ESMA
10/04/15 Consultation paper – rethinking the UK financial services trade association landscape FS tradeassociations
10/04/15 Consultation paper on a report on good practices on individual transfers of supplementary occupational pension rights EIOPA
14/04/15 Consultation paper: draft ITS on procedures, forms and templates for the provision of information for resolution plans under theBRRD
EBA
17/04/15 CP1/15: assessing capital adequacy under Pillar 2 PRA
30/04/15 Consultative document – guidance on accounting for expected credit losses BaselCommittee
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 24
Forthcoming publications in 2015
Date Topic Type Institution
Client Money
Q1 2015 Review of the client money rules for insurance intermediaries Policy statement FCA
Consumer protection
Q1 2015 National Depositor Preference and UK depositors Policy statement PRA
Q3 2015 Calculation of contributions to DGSs Guidelines EBA
Financial crime, security and market abuse
Q2 2015 Draft MAR technical standards Technical standards ESMA
TBD 2015 Advice to Commission on Benchmark legislation Advice ESMA
Prudential
Q1 2015 Update on ITS on reporting of the leverage ratio Technical standards EBA
Q2 2015 LGD floors for mortgage lending Consultation EBA
Q2 2015 RTS on PD estimation Technical standards EBA
Q4 2015 Report on NSFR methodologies Report EBA
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 25
Date Topic Type Institution
Securities and markets
Q1 2015 Implementing acts on third country equivalence decisions on exposuresto third country investment firms, clearing houses and exchanges treatedas exposures to an institution
Advice EBA
Q2 2015 Consultation Paper on MAR guidelines Consultation paper ESMA
Q2 2015 Feedback and Policy Statement on CP14/02, consultation on jointsponsors and call for views on sponsor conflicts – PS to CP14/21
Policy statement FCA
Q2 2015 Technical advice to the Commission on the review of EMIR Technical advice ESMA
Q2 2015 MiFID/MiFIR Draft Regulatory Technical Standards Technical standards ESMA
Q2 2015 Draft technical standards on CSDR Technical standards ESMA
Q4 2015 MiFID/MiFIR Draft Implementing Technical Standards Technical standards ESMA
Q4 2015 Securities Financing Transactions Regulation Discussion or ConsultationPaper on technical standards
Consultation or technical standards ESMA
Products and investments
Q2 2015 Restrictions on the retail distribution of regulatory capital instruments –PS to CP14/23
Policy statement FCA
Q3 2015 Advice on the application of the passport to third-country AIFMs andAIFs
Advice ESMA
TBD 2015 Undertakings For The Collective Investment of Transferable Securities V Technical advice ESMA
TBD 2015 RTS on format and content of disclosures in KID for PRIPs Technical standards ESMA
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 26
Date Topic Type Institution
Recovery and resolution
Q2 2015 Advice on the criteria for determining the number of years by which theinitial period for the build up of the SRF may be extended
Advice EBA
Q2 2015 Partial transfer safeguards Advice EBA
Q3 2015 Notification requirements Technical standards EBA
Q3 2015 RTS on Contractual Bail in Technical standards EBA
TBD 2015 Recovery and Resolution Directive – PS to CP14/15 Policy statement FCA
TBD 2015 Strengthening the Alignment of Risk and Reward: New RemunerationRules – PS to CP14/14
Policy statement FCA
TBD 2015 Strengthening accountability in banking: a new regulatory frameworkfor individuals – PS to CP14/13
Policy statement FCA
Solvency II
Q1 2015 Solvency II
changes – PSPolicy statement FCA
TBD 2015 Solvency II Level 3 measures Level 3 text EIOPA
Supervision, governance and reporting
Q4 2015 Assessment of national SREP approaches Report EBA
Main sources: ESMA 2015 work programme; EIOPA 2015 work programme; EBA 2015 work programme; EC 2015 work programme; FCA policy development updates
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 27
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
Banking ReformAct (2013)
Financial Services (Banking Reform) Act 2013
Basel Committee Basel Committee of Banking Supervision (of the BIS)
Basel II Basel II: International Convergence of Capital Measurement andCapital Standards: a Revised Framework
Basel III Basel III: International Regulatory Framework for Banks
BBA British Bankers’ Association
BCR Basic capital requirement (for insurers)
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 of EBA)
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 are the ‘co-legislators’)
CFT Counter Financing of Terrorism
CFTC Commodities Futures Trading Commission (US)
CGFS Committee on the Global Financial System (of the BIS)
CIS Collective Investment Schemes
Glossary
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 28
CMA Competition and Markets Authority
CMU Capital markets union
CoCos Contingent convertible securities
Council Generic term representing all ten configurations of the Council of theEuropean Union
CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009
CRA2 Regulation amending the Credit Rating Agencies Regulation (EU)No 513/2011
CRA3 proposal to amend the Credit Rating Agencies Regulation anddirectives related to credit rating agencies COM(2011) 746 final
CRAs Credit Rating Agencies
CRD ‘Capital Requirements Directive’: collectively refers to Directive2006/48/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 for creditinstitutions and investment firms
CTF Counter Terrorist Financing
DFBIS Department for Business, Innovation and Skills
DG MARKT Internal Market and Services Directorate General of the EuropeanCommission
Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act (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 and fiscal andcompetition 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 and TradeRepositories (EC) No 648/2012
EP European Parliament
ESA European Supervisory Authority (i.e. generic term for EBA, EIOPAand ESMA)
ESCB European System of Central Banks
ESMA European Securities and Markets Authority
ESRB European Systemic Risk Board
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 29
EU European Union
EURIBOR Euro Interbank Offered Rate
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 (expected2013)
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
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 Institutions
HMRC Her Majesty’s Revenue & Customs
HMT Her Majesty’s Treasury
IAIS International Association of Insurance Supervisors
IASB International Accounting Standards Board
ICAS Individual Capital Adequacy Standards
ICB Independent Commission on Banking
ICOBS Insurance: Conduct of Business Sourcebook
IFRS International Financial Reporting Standards
IMA Investment Management Association
IMAP Internal Model Approval Process
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 30
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
MA Matching Adjustment
MAD Market Abuse Directive 2003/6/EC
MAD II Proposed Directive on Criminal Sanctions for Insider Dealing andMarket Manipulation (COM(2011)654 final)
MAR Proposed Regulation on Market Abuse (EC) (recast) (COM(2011) 651final)
MCD Mortgage Credit Directive
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
MREL Minimum requirements for own funds and eligible liabilities
MTF Multilateral Trading Facility
MoJ Ministry of Justice
MoU Memorandum of Understanding
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 clearing threshold
NSFR Net stable funding ratio
OECD Organisation for Economic Cooperation and Development
Official Journal Official Journal of the European Union
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
FS regulatory, accounting and audit bulletin – February 2015 PwC 31
OFT Office of Fair Trading
Omnibus II Second Directive amending existing legislation to reflect LisbonTreaty and new supervisory infrastructure (COM(2011) 0008 final)– amends the Prospectus Directive (Directive 2003/71/EC) andSolvency II (Directive 2009/138/EC)
ORSA Own Risk Solvency Assessment
OTC Over-The-Counter
p2p Peer to Peer
PERG Perimeter Guidance Manual
PRA Prudential Regulation Authority
Presidency Member State which takes the leadership for negotiations in theCouncil: rotates on 6 monthly basis
PRIIPsRegulation
Proposal for a Regulation on key information documents forinvestment and insurance-based products COM(2012) 352/3
PSR Payment Systems Regulator
QIS Quantitative Impact Study
RDR Retail Distribution Review
RFB Ring Fenced Bank
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
SIPP Self-invested personal pension scheme
SOCA Serious Organised Crime Agency
Solvency II Directive 2009/138/EC
SSM Single Supervisory Mechanism
SSR Short Selling Regulation EU 236/2012
T2S TARGET2-Securities
TLAC Total Loss Absorbing Capacity
TR Trade Repository
TSC Treasury Select Committee
UCITS Undertakings for Collective Investments in Transferable Securities
XBRL eXtensible Business Reporting Language
Executive summary Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management Insurance Monthly calendar Glossary
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives andpractical advice. See www.pwc.com for more information.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation orwarranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
150203-100224-JN-OS
Laura Cox020 7212 [email protected]@LauraCoxPwC
Asset Management Banking & Capital Markets Insurance Local regulations & AML
John Luff
+44 (0) 1481 752121
Mark James
+44 (0) 1534 838304
Evelyn Brady
+44 (0) 1481 752013
Nick Vermeulen
+44 (0) 1481 752089
Mike Byrne
+44 (0) 1534 838278
Nick Vermeulen
+44 (0) 1481 752089
Adrian Peacegood
+44 (0) 1481 752084
Neil Howlett
+44 (0) 1534 838349
Adam Gulley
+44 (0) 1534 838390
James de Veulle
+44 (0) 1534 838375
Chris van den Berg
+44 (0) 1534 838308
Contacts