First ACPR climate stress test pilot exercise results
First ACPR climate stress test pilot exercise results
Wed 22 Sep 2021
Climate change introduces considerable economic challenges. On the one hand, financial institutions must contribute to the transition to a low-carbon and balanced economy to effectively combat global warming. On the other hand, the financial sector is exposed to climate-related and environmental risks and therefore needs to implement appropriate risk management practices within a financial stability framework.
In 2022, the European Central Bank will be launching an EU-wide climate stress test in its efforts to examine the resilience of companies and banks to potential disruptions caused by climate change. Taking this into consideration, all European banks should carefully consider the outcomes and conclusions of the first climate stress test pilot exercise by the French Prudential Supervision and Resolution Authority (ACPR).
Conducted in 2020 and based on the recommendations and work of the Network of Central Banks and Supervisors for the Greening of the Financial System (NGFS), the ACPR’s exploratory exercise was designed by the teams of the Bank of France and aimed at assessing the risks associated with climate change.
The pilot exercise took place in France and mainly covered two types of risks: physical risks, initially concerning insurance, and transition risks such as the impact on profitability by increasingly high carbon taxes and consumer displacement of high carbon production.
In this innovative exercise, the ACPR’s multiple objectives achieved at this initial stage include
raising awareness of climate-related and environmental risks among financial institutions;
measuring their vulnerabilities; and
laying the first methodological foundations of a challenging exercise, consisting of modelling events that have never been observed, and whose timeframe is significantly longer than other stress test exercises.
To ensure consistency with the various bodies that have already taken up the subject, the ACPR has capitalised on the NGFS’s work.
NGFS transition scenarios
The NGFS proposes four broad scenarios:
An orderly and predictable transition to a low-carbon economy that achieves predetermined climate goals.
Insufficient and late transition to limit global warming.
Disorderly transition involving disruptive shocks to achieve the predetermined climate goals.
A “hothouse world” scenario with no transition involving the materialisation of severe physical risks.
ACPR transition scenarios
For the pilot exercise, the ACPR selected three transition scenarios. Each of them combined different assumptions related to the implementation of carbon taxes and productivity levels. Two of these ACPR scenarios were calibrated to those outlined by the NGFS:
Reference scenario (orderly transition)
Narrative of the National Low Carbon Strategy.
Significant increase in the price of carbon which limits the rise in temperature to below 2⁰C.
Disordered scenario Variant 1 (late transition)
GHG emission reduction target is not met by 2030.
Very sharp increase in the price of carbon from 2030 ($14 in 2030 to $704 in 2050 per ton), generating a series of heterogeneous shocks on the various economic sectors and thus an increase in real energy prices.
Less favourable evolution of the productivity compared to the reference scenario from 2025 onwards. Less efficient renewable energy technologies than expected, resulting in higher energy prices.
Sharp increase in the price of carbon in 2025 ($14 in 2025 to $704 in 2050 per ton).
Results reveal some interesting insights
A first result identified by the exercise is that, as expected, adverse scenarios yield higher credit risk projections than the baseline scenario.
The effect of the cost of credit risk is presented in the table below:
Evolution in the scenario between 2025 and 2050 in %
Deviation from the reference scenario in 2050 in %
Note: The annual cost of credit risk (in basis points) for each time interval studied is the metric selected by ACPR for assessing the transition impact of credit risk.
Contrary to traditional stress tests, none of the scenarios in this pilot exercise embeds an economic recession by 2050. However, the scenarios do embed a lower growth in activity. As a result, the scenario impacts obtained are lower than those observed in the framework of the biannual stress tests of the European Banking Authority (EBA).
The breakdown of these impacts by portfolio also provides some interesting insights:
Contribution to the increase in the cost of risk between 2025 and 2050 in the reference scenario
The difference in the cost of risk between the accelerated transition scenario and the reference scenario is concentrated in the corporate portfolio. Sensitive sectors represent only 9.7% of the assets but explain one-third of the increase in the cost of risk in the reference scenario.
Due to the small variations in macroeconomic variables between the different scenarios, the accelerated transition scenario has a limited impact (0.5%) on the household portfolio compared to the reference scenario at 2050.
The sovereign portfolio was significantly affected by the scenarios, with a +87.5% difference between the accelerated and the reference scenario.
Beyond these results, the ACPR notes a substantial disparity in the approaches used to dynamically update the balance sheet and deduce the climate risk impacts. As a result, there are inconsistencies in the estimates, particularly affecting the climate-sensitive sectors.
Another interesting point is that the update of the balance sheet structure reveals two impacts. First, a decrease in the cost of risk due to the reduction of exposures in sectors most affected by the scenarios. Second, an increase in the cost of risk linked to the initial higher default probabilities in certain sectors benefiting from the transition.
Conclusion: more emphasis on lessons learnt
Considering the complexity of this modelling exercise, we believe it is important not to focus solely on the numerical results of this exploratory exercise, but on the lessons learnt. Indeed, The points below are essential for the upcoming European Central Bank (ECB) exercise, which will address all Single Supervisory Mechanism (SSM) banks whereby significant institutions in Europe must enhance their systems with climate management metrics, classifications and terminology, and focus on the determination and utilisation of accurate reporting and measuring tools.
Enrichment of the systems and know-how to be able to identify the capacity of borrowers to adapt to the profound transformations of the cost of resources and the fiscal environment linked to climate change;
A first wave of enhancements will consist of enriching the systems with a corporate sector classification, nomenclature adapted to climate issues, particularly concerning transition risk;
A second wave of enhancements will aim to determine the physical location of the entities financed and then identify the upstream (suppliers) and downstream (consumers) links to integrate the physical risks satisfactorily.
Establishing a data repository on lessons learnt will be a key point of success for the financial industry in addressing this complex issue.
Within Mazars, we have built an end-to-end platform to estimate expected credit losses in IFRS and Prudential Stress Tests Frameworks. The interested reader can find a video of the presentation at the below address.
The Covid situation and the need to address new stress test approaches, such as climatic transition, have been motivations to enrich this platform with additional modules that rely on a more granular representation of the risk. These additions include sectorial GDP growth and sensitivities to climatic variables such as the increase of the carbon tax foreseen in the future.
This, in addition to assumption of balance sheet future composition, allowed us to obtain results in line with regulator expectations keeping us and our team members invested in this state-of-the-art project in terms of credit risk assessment in a fast-evolving world.
Future benchmarks and additional studies will help us all ensure the consistency of the risk estimates according to the various frameworks used by the different supervisors.
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NPL secondary market may solve the increase in credit risk
The identification and management of non-performing loans or NPLs as early as possible by banks are among supervisors’ current high-level priorities. Indeed, when prudential, monetary, and fiscal crisis mitigation mechanisms are tapered, the weakening of borrowers’ creditworthiness could materialise, along with increasing credit risks and therefore NPLs. This expected rise of new NPLs in European […]
As the PRA transitions from a “rule-taker” to a “rule-maker”, small and medium-sized banks operating in the UK can expect to benefit from a more “streamlined” regulatory regime that could be easier to interpret, implement and maintain; but at the same time, they can also expect the PRA to be progressively more involved in scrutinising […]
Sustainable finance series: Why does sustainable finance matter?
The momentum towards a low-carbon economic system is only set to grow. Financial services firms are pivotal actors in the transition; consequently, increasing demands are being put on them to demonstrate their sustainable finance activities and credentials. This blog explains what sustainable finance is and why it matters to financial services firms. What is Sustainable […]
A central database to strengthen the anti-money laundering and counter-terrorist financing (AML/CFT) framework was launched by the European Banking Authority (EBA) on 31 January 2022. Called EuReCA, the new database will be essential to coordinate efforts by national competent authorities and the EBA to prevent and fight money laundering and terrorist financing (ML/TF) risks throughout […]
New European authority aims to strengthen framework to fight money laundering
The creation of a new Anti-Money Laundering Authority will transform the supervision of money laundering and financing terrorism (AML/CFT) in the EU. Proposed reforms also extend the AML/CFT rules to all crypto-asset service providers, as well as include specific rules concerning due diligence on customers and beneficial ownership. It is expected that some of these […]
The first supervisory climate risk stress test (2022 CST) conducted by the European Central Bank (ECB) has concluded with official results and findings made public on 8 July 2022. The exercise has complemented the broader ECB’s agenda to assess the readiness of banks in Europe to manage climate-related and environmental risks. The 2022 CST was […]
Sustainability and climate risk: what can banks expect?
The growing importance of sustainability issues and the role of credit institutions in financing transformation places climate and environmental risks at the core of regulatory and supervisory scrutiny today. For some years now, the Network for Greening the Financial System (NGFS), comprising central banks and national supervisory authorities, has been working to enhance sustainability and […]
Quarterly SSM briefing: spotlight on supervisory priorities, banking union and liquidity ratio
Supervisory priorities 2022-2024 In December 2021, the European Central Bank (ECB) and the national supervisory authorities of the Eurozone countries published their supervisory priorities for 2022-2024. The three-year coverage enables the ECB banking supervision to achieve good progress in addressing the identified vulnerabilities while at the same time affording enough flexibility in any corresponding actions […]
Implications of Covid-19 for the LSIs and the supervisory focus: an interview with Patrick Amis, ECB
On 19 January 2022, Mr Patrick Amis, the head of ECB Directorate General Specialised Institutions and Less Significant Institutions (DG/SPL) had a formal meeting with Mazars to discuss the implications of the pandemic for the LSIs and the supervisory focus. The main risks outlined by Mr Amis, were in the areas of NPLs, digitalisation, IRRBB, […]
Positive behavioural and cultural change: the implementation of an accountability framework
As regulated entities execute their post-Brexit strategies and relocate their European Union (EU) operations from the UK to other EU states, a key issue to be addressed for those relocating to Ireland remain to be the impending legislative changes surrounding increased accountability standards for executives and non-executives. Not least, the breaking of the participation link, […]
Quarterly SSM briefing: stable supervisory priorities and the ECB’s green agenda
The last few weeks have been marked by an ongoing review of the supervisory priorities initially listed by the Single Supervisory Mechanism (SSM) for 2022-24, and developments in the climate agenda outlined by the European Central Bank (ECB). ECB’s supervisory priorities for 2022-24 remain stable despite geopolitical instabilities and challenges At the beginning of 2022, […]
Can markets in crypto-assets (MiCA) give banks a regulatory edge?
Crypto-asset markets have been on banks’ radar for some time. While interest and involvement have varied, regulatory developments have been a driving force. In September 2020, the European Union (EU) published a proposal for the regulation of Markets in Crypto-assets (MiCA), offering a uniform legal framework for crypto-assets in the EU. On 14 March 2022, […]
The long road to proportionality in prudential regulation and supervision
The great financial crisis triggered a massive wave of bankruptcies in the worldwide banking sector, affected not only large international banks such as Lehman Brothers but also local ones such as Northern Rock in the UK. Basel prudential standards are designed to cope with financial risks stemming from the global banking system without taking into […]
With the economic repercussions of the Covid-19 crisis yet to be fully assessed, a robust resolution framework is essential to ensure the stability of the banking system. While the banks were given leave to postpone the reporting of some less urgent information in spring 2020, the Single Resolution Board (SRB) has reiterated the importance of […]
The Basel Committee: updated guidance on the external audit of banks
Against the background of a new year still severely affected by the persistence of the pandemic throughout the world and economies facing an unprecedented global macro-economic shock, the Basel Committee has felt it necessary to address the audit of the expected credit loss (ECL) accounting estimate within the overall financial statement audit. With IFRS 9 […]
EBA discussion paper on the management and supervision of ESG risks
European sustainable finance regulations evolved considerably in 2020, and the European Banking Authority (EBA) is continuing this trend into 2021. It recently published a discussion paper assessing the potential inclusion of Environmental, Social and Governance (ESG) risks in the supervisory review and evaluation process (SREP) performed by national competent authorities (NCAs). What firms need to […]
The return of inflation: what consequences for banks?
For several months now, we have been in an economic and financial environment that we have not seen for some years. In May, inflation in the Eurozone reached 8.1%, with six countries exceeding 10%, while the United States recorded an 8.6% year-on-year price increase. The short-term reasons for the return of inflation are well known, […]
Key takeaways & industry challenges following the ECB TRIM project – a focus on credit risk (Part 2)
The Targeted Review of Internal Models (TRIM) was one of the largest projects by the European Central Bank (ECB) aimed at identifying potential sources of unwarranted or non-risk based variability in Significant Institutions (SIs) risk-weighted assets (RWA) from the use of Pillar 1 internal models such as Probability of Default (PD), Loss Given Default (LGD) […]
2021 stress tests planned as banks face worsening crisis
The publication on 29 January of baseline and adverse scenarios, output templates, instructions and market assumptions required to carry out stress tests signals the go-ahead by the European Banking Association (EBA) for the 2021 regulatory exercise. Because of the Covid-19 pandemic, these tests, originally planned for 2020, will take place between now and 31 July […]
EBA: draft technical standards on Pillar 3 disclosures of ESG risks
On 1 March 2021, the European Banking Authority (EBA) launched a public consultation on draft implementing technical standards (ITS) for Pillar 3 disclosures of environmental, social and governance (ESG) risks, under its capital requirements regulation (CRR) mandate. The consultation will end on 1 June 2021. Large banking institutions with securities traded on a regulated market […]
Leveraged transactions: supervisory expectations in the Eurozone
The chair of the European Central Bank’s Supervisory Board, Andrea Enria, has voiced several times in the past months the supervisor’s concern with the increasing growth of the leveraged finance sector, which deals with loans to highly indebted borrowers. By mid-2021, the combination of a strong global loan moratoria policy and the long-standing low interest […]
Brexit, or the UK’s departure from the European Union, became a reality on 1 January 2021. In terms of the regulatory impact for the financial sector, and the banking sector in particular, the UK being a third country, UK banks can no longer benefit from the European passport for their continental activities. Therefore, they can […]
In this edition of our Banking Regulatory Radar, we cover the key regulatory developments in the banking sector for 2020-2025. The latest version of the Mazars’ Regulatory Radar has been updated with all the Level 2 legislation published in 2020, as well as the measures that were taken in the context of the Covid-19 pandemic. […]
The management of regulatory capital following the transition to IFRS 9
On 1 January 2018, banks applying IFRSs move into a new era with the implementation of IFRS 9 on financial instruments, which will supersede the existing IAS 39. Although adopting this new standard will lead to many changes, it was phase 2 of the standard, on provisions, that interested the Basel Committee on 11 October, […]
The digital euro: the future of central banking in Europe?
Central Bank Digital Currencies (CBDCs) continue to receive increasing attention not only from the ECB but all over the world. So far, 10 countries  have already deployed CBDC programmes with another 15 countries  currently conducting pilot programmes. In total, 105 countries are considering using CBDC programmes, representing over 95% of global GDP and […]
Regulatory reform in uncertain times: no rest for the weary
Despite “reform fatigue” and squeezed profit margins, financial services firms are dealing with a continued flood of regulation. Some are turning to new technologies for compliance help. In this article, written by the Economist Intelligence Unit and sponsored by Mazars, we explore regulatory change in the financial services sector and the impact that it has […]
New pilot scheme opens pathway for blockchain technology
A new regulation introducing a pilot scheme based on blockchain technology is set to come into force on 23 March 2023. The new European regulation1 is an experiment to develop secondary markets for financial securities based on distributed ledger technology (DLT). Authorised participants in the scheme will be able to provide trading services and settlement-delivery […]
On Wednesday 23 November, the European Commission presented its long-awaited revision of the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD IV), including the regulatory changes that mark the finalisation of the Basel III agreements. This revision follows five years of consultations conducted by the Basel Committee. It aims to foster financial stability and to enhance […]
Russian sanctions: what implications for financial institutions?
Following Russia’s annexation of Crimea in March 2014, the United States (US) and the European Union (EU), together with other countries, imposed mainly economic sanctions on Russia. Since Russia’s recognition of the self-proclaimed autonomous republics of Donetsk and Lugansk, followed by Russia’s attack on Ukraine on 24 February 2022, these sanctions have taken on new […]
Cyberattacks aren’t just getting more frequent, they are also becoming significantly more vicious and sophisticated. The majority of today’s data breaches result from human error, making cybersecurity a “people problem” as well as a technology issue. The solution to this people problem can’t be solved by purchasing new hardware or software or implementing sophisticated network […]
Arkéa Banking Services began life in 2009 by offering white label banking services on behalf of third parties. CEO, Christophe Bitner tells Mazars why offering support to Fintechs is now an important next step. What’s the driving force behind the evolution of Arkéa Banking Services and what are the levers for growth? Christope Bitner: when the […]
Four routes to better mobilisation of capital in Europe
Efficient supervision of capital markets is a priority of the Capital Markets Union (CMU) given its role in facilitating market integration and European cross-border transactions. But there are currently a number of supervisory barriers halting progress of European mobilisation of capital that now need to be addressed urgently. Following discussions at the CMU’s mid-term conference […]
Consolidated Audit Trail Approved by the U.S. Securities and Exchange Commission
The Securities and Exchange Commission (“SEC”) approved a plan on November 15, 2016, to create the consolidated audit trail (“CAT”), a central data source to collect and accurately identify every order, cancellation, modification and trade execution for all exchange-listed equities and options across all U.S. markets. This plan is pursuant to SEC Rule 613, in […]
Podcast: Implications of Banks Implementing IFRS 9
Greg Simpson, Head of Banking UK and banking experts Paul Hodgett and Pierre Latrobe discuss the implications of IFRS9, more specifically they share some of their experience on helping banks implement IFRS 9. As the standard starts on 1 January 2018, they will also comment on some of the areas that banks need to consider […]
Infrastructure Investments: the Impact on Solvency II Balance Sheets for Insurers
Background and issues The Cambridge dictionary defines ‘infrastructure’ as ‘the basic systems and services that a country or organisation uses to work effectively’. This rather broad definition covers a wide range of assets at the heart of economic activity: they do not just provide a service to an individual or enterprise, but to economic agents […]
The Emergence and Significance of ‘FX GLOBAL CODE-2017’
The FX Global Code (Code) was finally published by the Foreign Exchange Working Group (FXWG) on 25th May 2017, clearly laying down the guidelines for good practices in the FX Wholesale marketplace. With numerous scandals causing turbulence in the FX marketplace in the past, it was deemed necessary for global bodies to roll out a […]
Asset Management sector under scrutiny from UK regulator
The Asset Management industry is positioned to be the main focus of the Financial Conduct Authority (“FCA”). On 28 June 2017, the FCA published the final report of its Asset Management Market Study. This follows on from the interim report published in November 2016. In the publication, the FCA has highlighted a number of pertinent […]
In this podcast Greg Simpson discusses cyber security with our expert Francisco Sanches. They discuss major threats such as emerging risks, FCA guidance on cloud data storage and the cyber security skill gaps to name a few. Podcast player
A closer look at the factors underlying the decision to sell NPLs in Italy
There is a clear pipeline of jumbo disposal Non-Performing Loans (NPLs) in Italy, thanks to the ECB push, however vendors will need to take into careful consideration a few factors in their decision, such as recent regulatory reforms of insolvency and foreclosure and a possible EU bad bank. 1. ECB Push Europe’s NPL assets are […]
Measuring banking risks is a difficult exercise, but striking a balance between simplistic and overly complex measurement techniques is the key to accurate risk measurement. This was the substance of the European Central Bank’s (ECB) Chair of the Supervisory Board, Danièle Nouy, in a speech at the Austrian Chamber of Commerce in Vienna, on 2nd […]
IFRS 9 new provisioning and the phase-in period of regulatory capital: a discretionary approach
In about nine months, IFRS 9 will replace IAS 39 and the new accounting environment won’t be the only element to be impacted. In recent months, the Basel Committee on Banking Supervision (BCBS), the EU Commission and the European Banking Authority (EBA) have also been tackling the impact of the new IFRS 9 provisioning on […]
The Reduction of Regulatory Compliance Examinations for Financial Institutions
Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks Under $1 Billion in Total Assets. The Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board (“FRB”), and the Office of the Comptroller of the Currency (“OCC”) issued joint final rules that increased the number of small banks and […]
Personal data security is increasingly important, but many companies may not be ready to comply with the EU’s tough new data protection laws, which must be implemented by May 2018. All EU businesses that handle data will have to comply with the General Data Protection Regulation (GDPR), which will require investment in systems and training […]
Over a decade ago looking at the state banking webpage for my home state of New Jersey, there were approximately 250 banks doing business in the state then. A similar check today would yield a list of less than 150 or so; a more than 40% decline. With banking regulation at an all-time high, the […]
Michael Lennard, Chief of International Tax Cooperation and Trade in the Financing for Sustainable Development Office (FSDO) of the United Nations, discusses, from a personal perspective, a range of key issues on the UN’s approach to transfer pricing. In 2019 the United Nations Tax Committee issued draft guidance on financial transactions. It was finalized in […]
100 Days Post Brexit Referendum – How much smarter are we?
Saturday 1 October marked the 100th day since the result of the UK referendum to leave the European Union became known. And it seems neither the British nor their European neighbours have fully come to terms with the idea of a European Union without the UK. Yes, all continental Europeans love British eccentricity: driving “on […]
It’s two weeks since the Brexit Referendum and it’s fair to say that its consequences are already being felt. At a broad economic level, sterling has hit a 31 year low and economists have revised down the economic outlook for the UK and the Eurozone. The UK has been downgraded by Standards & Poor to […]
What lessons can be drawn from recent events in the banking sector?
In recent weeks, we have witnessed the successive bankruptcies of three banks in the United States, as well as the hasty takeover of Credit Suisse by UBS. This chain of events inevitably calls into question whether this trajectory echoes the leadup to the financial crisis of 2008. In reality, whilst these crises have stark similarities, […]
The rapid collapse of one of Switzerland’s most emblematic banks, following the demise of tech lenders on America’s west coast, has raised concern over banking stability. What are the consequences for the sector, the economy and for society? Gregory Marchat, Global Head of FS Advisory, and Emmanuel Dooseman, Global Head of Banking and Capital Markets, […]
Risk culture and supervision: beyond the box-ticking exercise, striving for fair balance
Since the 2008 crisis, the financial sector has been under scrutiny. Identified as one of the crisis root causes, the importance of risk management framework and risk culture and its interconnectedness to ensure the long run financial stability of each organisation has been revealed. Accordingly, institutions are expected to develop an effective risk management framework […]
Change in French regulatory landscape for electronic money issuers
The number of electronic money players in the European market has increased in recent years, from 4 in 2010 up to 48 in 2014*. Add to this the fact that numerous players beyond the banking world have also created their own electronic money institutions, including Leetchi, Google and Amazon and the sector is now seen […]
3 Questions to Mister Doe When it comes to the administration of dormant bank accounts and unclaimed life policies, the quality of data, the inflexibility of internal procedures and complex processing is causing banks and insurers big problems. Vladimir Nguekam, CEO of digital analytical firm Mister Doe talks to Mazars about how taking a digital approach […]
The use of Big Data tools to improve the effectiveness for AML/CFT and KYC policy
A series of initiatives designed to help combat terrorism financing have put electronic payment cards in the spotlight due to the fact they guarantee anonymity in the use of small sums. Announced on 23 November 2015, these initiatives supplement the action plan for combatting the financing of the terrorism presented by the Minister on 18 […]
UK Banks are already gearing up for the introduction of the revised Payment Services Directive (PSD2) that comes into force in January 2018. By providing clear guidelines and regulations, the Directive essentially removes the barriers to new players and opens the doors to FinTechs bringing new products and services to the electronic payments market. While […]
New DORA regulation: the challenge for insurers to strengthen their IT and cyber risk management
Since the onset of 2023, regulatory news has been adorned with the latest European legislation, under the acronym DORA, adopted on 10 November 2022 by the European Parliament. Standing for the Digital Operational Resilience Act, it will apply to the members of the European Union from 2025, and concerns companies in the financial sector specifically. […]
New constraints threaten the future of internal model approaches
At the same time as regulators as a whole express their support for the harmonisation, transparency and comparability of banking models at the European level, a new consultative document published by the Basel Committee on 24 March 2016 partly calls into question the use of internal model approaches when evaluating credit risk. The release of […]
Banks prepare for the reinforcement of prudential supervision via the Single Supervisory Mechanism (SSM). After successive waves of new regulatory requirements in recent years, the outlook for the calculation of risks and Pillar 1 capital requirements is becoming clearer. At the same time, whereas the implementation of these new requirements has and continues to mobilise […]
Implementing credible environmental, social and governance (ESG) actions requires successful enablers. So how can firms identify these enablers and, crucially, remove barriers to implementation? If we take our latest C-Suite Sustainability Barometer, we can see that out of the over 1,100 businesses accounted for in the survey, 75% are planning to increase their investment in […]
Harmonisation of internal model approaches, a new era for banks?
Basel 4 and Single Supervisory Mechanism act to reduce the excessive variability in the results of internal model approaches to credit risk. For more than ten years, Basel reform has encouraged the development and use of internal models designed to better place risk management at the heart of banks’ control arrangements. Basel II saw massive banking […]
Compte Nickel is a current account service accessible to all. Operated by the Financial Supervisory Committee of electronic payments (EPF), this new payment account which has been launched recently in France can be opened in 5 minutes at a newsagent/tobacconist by anyone regardless of income requirement. Ryad BOULANOUAR, President of the the French Financial Supervisory […]
Overview of US stress tests and CCAR’s results 2016
The Federal Reserve disclosed the results of its annual supervisory stress tests and CCAR (Comprehensive Capital Analysis and Review) respectively on 23 and 29 June 2016. In a combined exercise which has been running since the financial crisis, 33 US Bank Holding Companies (BHCs) were tested, including US-based banks and the American units of big […]
Data governance : the key to reconciling contradictory requirements
Confronted with legislation that is becoming increasingly constrictive, banks must optimize the management of their data. It’s a challenge that is compounded by the fact that data is often dispersed throughout information systems – a fact that aggregators are capitalising on to offer new multi-bank applications. Banks have a role to play in detecting abnormal […]
Brexit : Insights for the Real Estate Sector in the UK
Following the UK’s landmark referendum decision to leave the European Union, real estate investors have been dealing with the push and pull of post-Brexit market sentiment. Initial panic surrounding the outcome of the vote saw a raft of UK-based fund managers suspend redemptions from property funds worth £18bn as investors looked to exit the asset […]
Bank of Ireland: Placing ethics at the heart of banking
Customers trust their banks with an increasing amount of data that paints a picture not just about their financial situation and preferences, but about their lifestyles. Bank of Ireland’s Garvan Callan, Director, Customer, Digital & Innovation talks to Liam McKenna Partner, Consulting Services – Mazars Ireland, about how ethics and good principles are essential in shaping […]
Climate change valuation adjustment: introducing a climate change scenario extrapolation to long dated CDS curve
The global climate crisis has triggered the financial sphere to address the way in which it conducts business. Climate risk consideration is currently growing in the banking industry but should also be considered by banks in the Credit Valuation Adjustment (CVA) when pricing derivatives. The credit risk for long dated derivatives (beyond 10 years), reflected […]
Permanent tsb: Digitalisation’s role in the ethical banking mix
The arrival of technology has been a game changer for Ireland’s banking industry. Niall O’Grady Commercial Director of permanent tsb (PTSB) talks to Liam McKenna Partner Consulting Services – Mazars Ireland, about how the bank is using digitalisation to create more meaningful relationships with customers. Liam McKenna: Where does technology fit into PTSB’s proposition – as an […]
Brexit: the resilience of the infrastructure sector
In previous weeks, I have commented mostly on early signs and emerging risks in the banking sector, including some early warning shots in the property space in particular. But banks and funds invest in many other types of assets and one sector – infrastructure and energy – may even be feeling some benefits from Brexit. […]
The Fed shares instructions on its first pilot climate scenario analysis exercise
The Federal Reserve Board (Fed) has shared instructions on its pilot climate scenario analysis exercise (CSA). Six of the largest U.S. banks, i.e., Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo are participating in the exercise and are requested to submit their results along with documentation by July 31, 2023. […]
After two years marked by the Covid-19 crisis, the first half of 2022 offered the prospect of a return to a certain economic normality. However, the outbreak of war in Ukraine combined with a deteriorating economic environment have reshuffled the cards and once again brought banks into a zone of turbulence and uncertainty. So how […]
Results of the ECB 2022 thematic review on climate-related and environmental risks
The European Central Bank (ECB) has expressed a significant supervisory concern surrounding more than half of supervised banks in terms of the progress made on fulfilling the expectations specified in the Guide on climate-related and environmental risks. The ECB recently concluded its 2022 thematic review of the banking sector’s alignment with supervisory expectations. This review […]
Over a beer with David Cameron in October last year, Chinese leader Xi Jinping expressed a very clear opinion on which way he wanted Britain’s vote on Brexit. He wanted a “prosperous Europe and a united EU” with the UK firmly in the EU. Britain certainly reached out to China during the last period of […]
FCA data reveals 5,500 UK Companies make use of passporting rules
Brexit continues to be omnipresent. From British Airways’ Business Life (September 2016 p. 11-12, “Post Brexit, Brand Britain must show its mettle… and its sense of humour”) to the Spectator, articles are a mixed cocktail of seeing Britain great again to worries about what’s next. It really depends on the lens through which you are […]
In August 2017, S&P Global Market Intelligence published an analysis of where banks will set up their European hubs. Germany, namely Frankfurt and Berlin, came first with 13 financial institutions. Dublin came a close second attracting 12 banks, insurers or asset managers. Luxembourg, France, the Netherlands and Belgium will also take a share. A bit […]
Brexit : Five Key Insights for the global Real Estate sector
Following the UK’s landmark referendum decision to leave the European Union, real estate investors have been dealing with the push and pull of post-Brexit market sentiment. Initial panic surrounding the outcome of the vote saw a raft of UK-based fund managers suspend redemptions from property funds worth £18bn as investors looked to exit the asset […]
Brexit : Insights for the Real Estate Sector in the USA
In the fourth of our blogs looking at how the UK’s decision to exit the EU is impacting key real estate locations, our experts in the US outline how the current lack of clarity opens the door of opportunity for investors who currently have capital to deploy. Uncertainty also brings opportunity for real estate investors […]
Brexit : Insights for the Real Estate Sector in France
In the third of our blogs looking at how the UK’s decision to exit the EU is impacting key real estate locations, our experts outline some important post-Brexit political and practical considerations for French real estate investors. Need for visibility as political issues take centre stage It’s looking increasingly unlikely that real estate investors will […]
Brexit : Insights for the Real Estate Sector in Germany
In the second of our blogs looking at how the UK’s decision to exit the EU is impacting key real estate locations, our experts shine a light on some of the challenges facing German real estate investors, as well as the potential for greater breadth and depth of real estate opportunities going forward. Berlin: Strong […]
Can BIS develop a cryptoasset regulatory framework without limiting the innovation process?
In summer 2022, the Bank for International Settlements (BIS) published its second consultation paper on the prudential treatment of cryptoasset exposures. The guidelines outlined in the proposed document follow an initial discussion paper released in 2019 and a first consultative document issued in 2021. The complete text is set up as a new standard to […]
While whistleblowing laws and initiatives might differ from country to country, whistleblowers in the financial industry are now well recognized and have gained international attention. Here we analyse the steps taken in the USA to strengthen whistleblowing procedures and practices. Recent allegations of impropriety on several levels have rekindled whistleblowers as a mechanism for identifying […]
On September 27, 2017, the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (the “Banking Agencies”) issued a proposed joint rule to simplify several requirements in the Banking Agencies’ regulatory capital rule for banks. The proposed rule would apply only to banking organizations that are not […]
Local and international trends have transformed the way banks operate, affecting their capital positions and profitability. In particular, ongoing digitalisation programmes and technological innovation continue to add pressure on traditional banking models, including the supply chain. While management’s focus on capital preservation, profitability and growth for shareholders remains, risks from an operational perspective have intensified. […]
Can banks balance the opportunities and challenges of digitalisation?
The Covid-19 pandemic has amplified technology’s impact on the banking sector, helping to prove that technology now stands at the core of business sustainability for banks. In their constant search for convenience, digitally-savvy customers have pushed banks’ focus towards providing global business solutions more than ever. A new normal has emerged: an environment where banks’ […]
Should we be concerned by Facebook’s launch into cryptocurrencies?
Whether the launch of Facebook’s Libra will threaten global monetary and financial stability is a question that has been on all regulators’ and politicians’ minds since Facebook announced its cryptocurrency project on June 18, 2019. Donald Trump himself tweeted that, as a virtual currency, Libra “will have little standing or dependability” and that Facebook should […]
ESMA’s latest Q&A: which key topics are covered and how has it impacted the AFG?
The European Securities and Markets Authority (ESMA) published on 17 November, together with EBA and IOEPA, a Q&A on the RTS of the SFDR Delegated Regulation (Commission Delegated Regulation (EU) 2022/1288), just six weeks before coming into force. The Q&A clarifies a number of points, including those relating to principal adverse impacts (PAIs) and taxonomic […]
On 22 September, the European Commission adopted a review of Solvency II following the consultation launched by EIOPA in 2020, whose final guidance was published in December 2020. As the Commission notes, the 2020 review of the directive met several objectives: • remove the obstacles to long-term financing of the economy and redirect investment by […]
The Financial Stability Oversight Council (FSOC) was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act as a result of the 2007-2008 US financial crisis. A first of its kind, the 15-member council is tasked primarily with identifying growing systemic risks to US financial stability and proposing coordinated regulatory responses to both preempt […]
Persistant negative interest rates, the inherent risk of a trade war between China and the United States, fears of a recession… all worrying signs of an imminent new crisis. However, the real question is not if but when the next crisis will hit. More than ten years after the financial and sovereign debt crisis, it […]
EBA’s Stress Test 2020 Methodology – What’s new for the banks?
The methodology for an exercise to assess the resilience of EU banks to adverse market conditions and test the state of their capital allocations has been released by the European Banking Authority (EBA). The exercise – part of EU-wide stress testing – will apply to broadly 70% of the European banking sector. Some 52 banks […]
How to predict the results of P&L attribution tests in the FRTB framework?
Under the terms of the Fundamental Review of the Trading Book (FRTB), a bank wishing to apply the Internal Modal Approach (IMA) to calculate its capital charge associated with market risk must carry out: backtesting on the Trading Book (TB) and for each trading desk (TD), two profit and loss attribution (PLA) tests for each […]
Banking consolidation in Europe: What can we expect?
The low level of banking consolidation in Europe compared to other countries is raising concerns among the supervisory community in Europe. It is a trend further reinforced after the financial crisis of 2007/2008 that produced a noticeable slowdown in consolidation operations in the EU. So what has been the impact, and what can we expect […]
In recent years, disruption to the banking sector has seen an increasing number of partnerships between banks and FinTechs, as banks look to acquire the digital expertise now required for 21st century banking and FinTechs look to tap into the finance knowledge and consumer reach that traditional banks enjoy. More recently, this quest for technological […]
Study highlights significant variations in HKFRS 9 reporting practices
One year on since the HKFRS 9 standard on financial instruments came into force in Hong Kong and two years since the First Time Application (FTA), trends and insights into impacts of the standard are beginning to evolve. As a reminder, the standard introduced numerous changes with regard to the classification, impairment recognition and the […]
How the new prudential regime will impact EU investment firms notably French
A major step forward has been taken in implementing the European “investment firms” package in France*. The transposition of the package into local legislation, alongside EU Regulation 2019/2033 on prudential requirements for investment firms (IFR), came into full effect on 26 June 2021. In accordance with the proportionality principle, the IFR and investment firms directive […]
Benchmark study of approaches to estimate probability of default in the context of climate risk
Recently, initiatives to tackle climate-related and environmental risks in the financial services industry have begun across the world. These initiatives followed the adoption of the United Nations Paris Agreement on climate change, the 2030 agenda for Sustainable Development and the European Green Deal. Stress testing and scenario analysis are a common framework proposed by different […]
Covid-19: Major risk considerations for the banking sector
As we continue to feel the effects of the global pandemic, the banking sector, like many other sectors, now faces unprecedented uncertainty about the economic outlook ahead. While banks go into this pandemic in a stronger position than the global financial crisis of 2008, the current environment presents particular challenges and disruption to standard accounting […]
The need for a consistent agenda between regulators, supervisors and legislators
With 2019 marking a move for the European Banking Authority (EBA) to Paris in April, regulatory priorities will see the EBA preparing the work of transposing the last Basel III agreements. Following a quantitative and qualitative study, the Commission will be awaiting its opinion in or after June 2019. Further, in the context of EBA mandates […]
Five steps to transforming banking operating models
With the current ultra-low interest rate environment and market volatility having a negative impact on banks’ returns and, ultimately, their capital positions, operating models must quickly adapt and become more cost-efficient to maintain profitability. This drive for cost-efficiency has become more apparent as innovation in technology and ongoing digitalisation have further upended traditional banking systems […]
Covid-19 disruption to the banking sector is widespread, including changes to working patterns, changes in customer behaviour, changes to partner-supplier dynamics and direct impacts on profit and loss accounts. The phase of immediate action to ensure business continuity is now largely complete. As infection curves flatten, restrictions are gradually eased and light starts to emerge […]
Rebuilding Credit Card Profitability post COVID-19
The current pandemic is having far reaching consequences across all aspects of society. Compared to other industries the impact on the credit card industry is relatively mild and from a customer perspective the value of on-demand liquidity is now clearer than ever. However, there will be significant impacts on industry profitability. Reduced international travel will […]
How will COVID-19 affect the financial regulatory response to climate change?
At first glance, regulatory authorities appear to have deprioritised the issue of climate change. However, a closer look would suggest otherwise and climate change in reality remains a key long-term priority of national and European regulators. In some areas, regulatory action on climate change has been delayed Central banks around the world have taken steps […]
HKMA Support Measures and the Impact to the Banking Industry
Pierre Latrobe at Mazars discusses recent HKMA initiatives taken in response to Covid-19 and their implications for Hong Kong banks, highlighting credit risk as a growing threat. The Hong Kong economy has been confronted by several downside factors over the last two years. The first hit was the initiation of the US trade war with […]
The digitalisation of banking processes and the introduction of AI-led technology impact the central and strategic role of information systems within the banking system. The growing use of information and communication technology (ICT) exposes all financial institutions to an increasing level of digital risk that could weaken their operational resilience, in particular, due to more […]
Are banks underestimating the risks of Covid Emergency Loans?
During the last few weeks, the volume of loans issued by banks has snowballed as governments release programmes to bail out businesses affected by Covid-19. As a result of these higher volumes, the exceptional increase in underwriting activity raises several issues for banks. Most notably, banks, like all commercial institutions, are also having to cope […]
Key takeaways & industry challenges following the ECB TRIM project – a focus on CCR (Part 1)
Click here to read ‘Key takeaways & industry challenges following the ECB TRIM project – a focus on credit risk (Part 2)’ As articulated by the ECB in its recent TRIM reporting, the 236 findings cover different key aspects of supervised entities Internal Model Method (IMM) models & frameworks. Remediation actions are underway in all […]
New measures by the European Central Bank aim to improve gender diversity
American entrepreneur, Malcolm Forbes, once described diversity as “the art of thinking independently together”. Today, diversity is beginning to emerge as a quintessential workforce norm and institutions have started to acknowledge the differences in their staff compositions that are deeply ingrained in the fabric of their organisational culture. With many challenges remaining, the independent think […]
Over the past decade, the financial services industry has been disrupted by the arrival of new players whose rise to prominence has pushed traditional banks – previously faced with little competition – to transform themselves. In this context, technology and innovation, particularly 5G, will allow the most skilful and agile banking organisations to take advantage […]
Addressing the challenges of the new sustainable finance regulations
As the world gears up for the transition to net-zero, the European Union is setting ambitious targets with respect to its own environmental footprint. For instance, by 2030 the EU is looking to reduce European greenhouse gas emissions by at least 55% compared to 1990 levels; increase the share of renewables within Europe’s total energy […]
Can Africa’s banking sector maintain its growth momentum?
With more than half of the world’s fastest-growing economies located in Africa1, the continent’s economic outlook is a positive one. Average annual GDP growth since 2000 is over 5%, placing Africa as the second-fastest growing economy behind Latin America. Real GDP growth, estimated at 3.4% for 2019, is projected to accelerate to 4.1% in 2021. […]
Michael Lennard, Chief of International Tax Cooperation and Trade in the Financing for Sustainable Development Office (FfDO) of the United Nations, examines the role of tax toolkits for developing countries from a personal perspective. The Platform for Collaboration on Tax (PCT) involving the UN, OECD, IMF and the World Bank, is certainly a good example […]
The imperative of expanding the traditional MRM function
Financial institutions and non-bank financial technology companies (FinTechs) alike make extensive use of various machine learning models (MLOps) in core and non-core areas of their business. Banks, for example, rely on such models for a range of risk assessments, including predictive underwriting, credit risk management, suspicious and/or fraudulent activity management, fair lending compliance, derivative and […]
Brexit Watch #4 : A snapshot of how the financial services regulators are reacting
Brexit preparation is one of the largest undertakings that regulators and market participants have ever done, considering the uncertainty and the impact it carries. Many financial institutions have stopped waiting for lawmakers to finalise negotiations over the terms of the exit and are already working towards contingency plans. Banks and brokers are setting up new […]
An interview with Ian-Edward Stafrace of Atlas Insurance PCC : Embracing and enabling insurance disruption
As chief risk officer and executive committee member of Atlas Insurance PCC, Ian-Edward Stafrace is passionate about effective enterprise risk management and seeking opportunity from risk. Here Alan Craig and Enrico Federici of Mazars in Malta, talk to him about technological, regulatory and business model changes and how protected cells are enabling innovation. What do […]
SFCR: Review of narrative reports, good practices and EIOPA recommendations
The Solvency II Directive increases the requirements for transparency vis-à-vis both the regulatory authorities and the stakeholders, including policyholders, financial analysts and investors. In this context, insurance undertakings and groups were, for the first time, required to publish a narrative report no later than 19 May 2017, known as the Solvency and Financial Condition Report […]
Could regulation play a role in transforming the FinTech business model?
One of the main differentiators FinTechs have is their current positioning within the financial services value chain ecosystem: they focus on customer experience while their operations execution and control activities are often outsourced to banking institutions. However, is this likely to remain given the increasing interest regulators are paying to these new industry players? While […]
Solvency II Directive measures to aid European economic recovery
While the European Commission’s most recent opinion on the review of the Solvency II Directive is broadly in line with the final European Insurance and Occupational Pensions Authority (EIPOA) opinion issued in December 2020, some measures have now been amended. These amendments are designed to strengthen the capacity of European insurers to contribute to the […]
Embracing a pattern of change: business model innovation across banking, insurance and asset management
In this third article of our thought leadership programme around the transformation of Financial Services, we are focusing on how new business models are emerging. “THIS IS A WORLD OF SIX-MONTH PRODUCT DEVELOPMENT CYCLES AND CONSTANT UPDATES, PRIMARILY OF SOFTWARE, WITH A HUGE PREMIUM ON SIMPLE USER INTERFACES AND TRUSTED SECURITY.” Christine Lagarde, Managing Director […]
The banks’ business model – between function and transformation
The vast array of legal and supervisory requirements for determining a business model draws attention away from the inherent and indispensable need that a successful entrepreneur has for such a model. In the past, was an entrepreneur who had decided to run a bank ever asked about their business model? What is a business model? […]
PSD2 supersedes PSD1 on 13 January 2018: comply with the minimum requirements or embrace the future?
PSD2 will supersede PSD1 on 13 January 2018, retaining key benefits from PSD1 such as increased competition with facilitated market entrance for regulated non-bank players, improved economies of scale, enhanced transparency, but also incorporating technological innovation, enhancements and protection into law. This will ensure that a competitive playing field continues to develop, without exposing individuals, […]
Sustainable finance regulations signal a sea change for insurance sector
The European Green Deal aims to achieve climate neutrality by 2050 and create a modern, competitive and resource-efficient economy. To meet its objectives, the European Commission has begun to restructure the non-financial reporting requirements for companies. Although some of the requirements were partially implemented in 2021, this is only the beginning of a real sea […]
Interview with Nadia Filali, Head of Blockchain Programs at Caisse des Dépôts et Consignations: Is collaboration the key to developing a strong blockchain eco-system?
Nadia Filali is director of blockchain programmes and founder of LaBChain at the French public group Caisse des Dépôts et Consignations. Here Mazars partner Jean Latorzeff and senior managers Emilie Legroux and Christophe Bonnefoy talk to Nadia about the pioneering role Caisse des Dépôts is taking in the development of blockchain technology. Why and how […]
European crisis management framework: ripe for reform?
Since the European crisis management framework was established in 2014, there have not been many failing banks in Europe. However, the recent global health pandemic, combined with the ongoing conflict in Europe between Russia and Ukraine, could easily change this. The EU crisis management framework was established in response to the global financial crisis and […]
Can regulatory systems come to terms with Facebook’s stablecoin?
Facebook’s ambition to create a transferable global digital coin between users on the social media giant’s messaging platforms WhatsApp and Messenger has been controversial from the outset. Perhaps not surprisingly, the backlash from regulators around the world was substantial from day one. The world’s leading economies were less than enthusiastic of the possibility of a […]
New regulatory requirements for insurance companies – focus on Germany
Because of its importance in society, the insurance industry has always faced a considerable amount of regulatory requirements at the national (BaFin) and international (EIOPA) level. Although this is generally something to be welcomed, this also presents a range of different challenges – not least because the regulations have indirect effects and unintended side effects. […]
Tackling the issue of NPLs: a European perspective
Because of the 2008 financial and economic crisis, banks have accumulated billions of non-performing loans (NPLs) on their balance sheets. Even 10 years after this major economic event, the situation is not yet back to normal in some countries. In the European Union, and in the Eurozone particularly, NPLs are a real concern as they […]
Ultimate Forward Rate (UFR): Why we are seeing a change to the rate curve
On 6 February 2018, EIOPA published its latest risk-free interest rate curve to be taken into account for the purposes of Solvency II calculations. Based on calculations for January 2018, the curve is slightly different from previously published curves. This is reflecting significant changes in the long-term expectations of interest rates in recent years which calculates […]
At the end of February 2018, all the major European banks published information on the impact of the implementation of the new standard IFRS 9. IFRS 9 introduces numerous changes (classification, impairment, hedging, etc.). Their impacts at the transition date vary widely from one bank to another. They are negative in most cases, but for […]
Banks need to step up efforts on climate and environmental risk disclosures
In March 2022, the European Central Bank (ECB) published its second snapshot of climate-related and environmental risk disclosure levels among significant institutions under its direct supervision. In line with the results of the first snapshot published in November 2020 – regarded as the baseline measurement – none of the institutions in scope for this second […]
Today’s world is witnessing an explosion of data, including personal data: your civil status, what you do and don’t like, your holidays, your favourite leisure activities. The exploitation of all this data is multiplying through the use of innovative IT tools. [pukka_pullquote width=”300″ txt_color=”#ffffff” bg_color=”#2d2d2d” size=”24″ align=”left”]”A pessimist sees the difficulty in every opportunity; an […]
US Tax Reform: Tax Cuts and Jobs Act Imposes New Limitations on Deductibility of Trade or Business Interest
The Tax Cuts and Jobs Act (the “TCJA”), signed into law in December 2017, and applicable to taxable years beginning after December 31, 2017, contains several provisions that will have a significant impact on specific types of entities and investments. One of the most radical departures from current law involves new limitations on the deductibility […]
The FinTech model is reaching a new level of maturity. The first stage saw them disrupt the traditional banking business models using technology to impact the customer experience and relationship. The second wave offers FinTechs the opportunity to expand their service offering and develop their independence, provided that they understand their relationship with the regulatory […]
Fintech is prominent in today’s business lexicon, having migrated from the back office to a prominent position in both consumer and commercial finance. Its core functionality on mobile devices and wide application in artificial intelligence (AI) spans blockchain, smart contracts, banking, insurance, regulation and cybersecurity. And Amazon Web Services (AWS), a major cloud player, is […]
GDPR has controls over subcontractors in its line of fire
Like all industries, the real estate sector has to implement a range of legal, technical and organisational measures to protect the personal data of its employees, customers, prospects and suppliers. Processing must comply with several regulations related to data protection, including, for example, the General Data Protection Regulation (GDPR), applicable since 25 May 2018. Same […]
Tax legislation generally includes promises to simplify the process of computing taxes. But in the process of transforming legislation into law, those good intentions often are overshadowed by new complexities. The Tax Cuts and Jobs Act of 2017 is no exception, especially for U.S. multinational corporations. Although most corporations herald their much lower 21% tax […]
While 2018 has witnessed some turmoil in the crypto-currency markets, interest in this new asset class – and also in investment funds which allow easy access to crypto-currencies – remains high. On 26 June 2018 CBOE Global Markets filed an application with the US Security and Exchange Commission (SEC) seeking approval for a Bitcoin Exchange […]
Brexit Watch #1 : Impact of No Deal and Other Regulatory Issues
As negotiations on the UK’s exit from Europe continue, albeit slowly, regulatory bodies in the UK and Europe are beginning to issue regulatory changes to cope with all eventualities, including the UK leaving Europe without a deal. As a result, a number of new directives and amendments to regulations have been issued over the summer […]
Cryptoassets: Accounting for an emerging asset class
The sweeping growth and prolific collection of technologies that make up cryptoassets today have made it incredibly challenging for regulators worldwide to standardize and issue authoritative guidance. Professional accounting standard-setting bodies, like the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are certainly no exception. What started out as just bitcoin […]
France’s EU Council Presidency to focus on new growth model
As part of its rotating Presidency of the EU Council for a six-month mandate, France chaired its first EU Council of Finance Ministers (ECOFIN) meeting on 18 January with a view to getting certain current legislative work finalised. The ECOFIN meeting was mainly dedicated to introducing the Presidency’s roadmap for the months to come. Beyond […]
Brexit Watch #2 : Impact of No Deal and Other Regulatory Issues
In the second installation to our Brexit Watch, the delay of the House of Commons vote and subsequent negotiations increases uncertainty, with multiple possible scenarios set to emerge. Brexit preparation has been one of the largest undertakings for regulatory bodies on both sides of the channel. Despite continued unpredictability surrounding outcomes, new directives and amendments […]
Climate change: a threat to the stability of the financial services
With rising global temperatures comes an ever-growing pressure on the financial services sector to respond and prepare for the far-reaching effects of climate change. The impacts upon the sector are already being felt – extreme weather events are creating significant losses for insurers and credit risks for banks, and pressures on businesses to demonstrate sustainable […]
Is there light at the end of the Trading Book’s tunnel?
Seven years after the first Basel Committee on Banking Supervision’s (BCBS) consultative paper on the Fundamental Review of the Trading Book (FRTB) and three years after the publication of the revised Market Risk Framework, is the 14 January 2019 release of the final Minimum Capital Requirements for market risk the end of this particular regulatory […]
Is one single payment standard the way forward for the banking sector?
The financial sector is bursting with disruptive Fintech start-ups at present who are shaking up the banking and insurance sector with innovations varying from online mortgage banks to online payment services. With innovation occurring at such a rapid pace, how are banks responding? To some extent, the arrival of the revised Payment Services Directive (PSD2) […]
Following a majority vote against Theresa May’s Brexit deal on 15 January 2019, and with only 3 weeks until the proposed deadline of 29 March, financial services authorities in the UK and EU have been urgently preparing for an increasingly likely no-deal Brexit, announcing further transitional instruments and offering guidance to firms within the sector. […]
In 2018, the Bank of England (the “BoE”) set up a project called “Future of Finance” aimed at anticipating the upcoming changes in financial services for the next decade, and the impact of these changes for market participants, customers and regulators. This research was led by Huw van Steenis, Senior Adviser to the Governor, and […]