How the new prudential regime will impact EU investment firms notably French

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 […]

Asset managers and ESG implementation: turning regulatory and operational compliance into commercial opportunities

ESG-related regulatory requirements, and scrutiny, show no signs of abating. Asset managers have a pivotal role in financing the transition towards low-carbon economic systems. Hence, governments have introduced several ESG-related regulatory requirements that apply to asset managers. Some examples of these are the Sustainable Finance Disclosure Regulation (SFDR) in the EU and the mandatory disclosures […]

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 […]

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 Six Key Themes of Internal Governance Harmonisation

As recent as 26 September 2017, the European Banking Authority (EBA) under the Directive 2013/36/EU published its revised guidelines on harmonising the internal governance arrangements of banks across the European Union. The EBA Guidelines will apply as of 30 June 2018 to competent authorities across the EU, as well as to institutions on an individual […]

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 […]

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 […]

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. […]

The Basel Committee finalises the Basel III agreements

On 7 December, after several years of negotiations (starting in 2012 with the market risk review), Mario Draghi, chair of the Basel Committee’s Group of Governors and Head of Supervision (G-HOS), announced the finalisation of the Basel III agreements. These represent the final stage in the post-financial crisis reforms to the prudential regulations. For the […]

Introduction of prudential backstops for non-performing loans

Non-performing loans (NPLs) remain at the forefront of the European regulatory agenda, with two major consultations run by the European Central Bank (ECB) and the European Commission (EC) over the recent weeks, both in relation to the introduction of minimum prudential backstops. NPLs, a longstanding hot topic in Europe In the aftermath of the great […]

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, […]

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 […]

EU regulatory framework on the establishment of the digital euro: from investigation to realisation

With the approaching end of the investigation phase of the ECB’s digital euro project in October 2023, and the expectance of a decision on starting a realisation phase by the end of this year, the pros and cons of a potential digital euro have been widely discussed in the past months. The topic became even […]

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 […]

FRTB: has the journey finally begun or has it just ended?

It is truly amazing the turmoil 88 pages can produce. Yet while the whole Banking Industry is strongly opposed to some of the new Fundamental Review of the Trading Book (FRTB) requirements, such as the Profit & Loss Attribution (PLA) test, could the EU Council now be considering to only include reporting requirements in CRR2? […]

Rethinking Compliance for the Protection of Personal Data

A holiday photo on Instagram, a “like” on Facebook, a PayPal transfer to pay for your Airbnb, or just a bank card payment or an ATM withdrawal: every day, we feed data into greedy and enthusiastic algorithms that are gathering our personal information. A new European regulation adopted in response to this irrational frenzy, the […]

Let’s make the regulatory capital rule simple

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 […]

The clock is ticking

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 […]

Action Plan for Banks in the West African Monetary Union

A new prudential framework applicable to banks and credit institutions in the West African Economic and Monetary Union (WAEMU) is set to come into force on 1 January 2018. However, a significant delay has been observed in implanting reforms in the majority of banks, where the scale and implications of the necessary work are widely […]

Implications of the Revised Banking Chart of Accounts for the West African Financial System

Reforms to an accounting system that has been in force for nearly 20 years will help to increase the security and robustness of the West African financial system, while improving the quality of financial reporting. The Revised Banking Chart of Accounts has been adopted by the monetary authorities in the course of convergence towards Basel […]

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 […]

Are ICOs the New Future of Start-ups?

The term “ICO” is a common buzzword in investment circles these days. While these “Initial Coin Offerings” are distant cousins of IPOs (in the sense that both share the objective of helping firms raise capital from various sources), their likely timing and means of achieving funds are quite different. An ICO is a form of […]

The Emergence and Significance of ‘FX GLOBAL CODE-2017’

The FX Global Code (Code) was finally published by the Foreign Exchange Working Group (FXWG)[1] 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 […]

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 […]

GDPR and PSD2: what are the issues for FinTechs?

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 […]

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 […]

A decade on from Lehman Brothers

Which is the more significant – the tenth anniversary of the collapse of Lehman Brothers, or the tenth anniversary of the opening of the App Store? For the global financial community world, 15 September 2008 is a key date, weighted with as much symbolism as the great stock market crash of 24 October 1929 had […]

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 […]

Implementation of post-crisis reforms and remaining challenges in 2019

At the last G20 summit in Buenos Aires, leaders called for the full implementation of all major international financial reforms intended to improve the financial system, in particular, those drawn up by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS), the last being the review of market risk framework published […]

Brexit, Volcker 2.0 and the Bipartisan Banking Bill lead topics of 2019 Institute of International Bankers conference

On March 11 and 12, 2019, Mazars attended the 30th annual conference organized by the Institute of International Bankers (IIB). Agencies and regulators serving as speakers and panelists this year, included: •The Federal Reserve Board (FRB) •The Department of the Treasury •The Commodity Futures Trading Commission (CFTC) •The Securities and Exchanges Commission (SEC) •The Office […]

Data Protection: constraint or opportunity?

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 […]

Brexit Watch #3: countdown is on

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. […]

LIBOR reform: Setting the cat among the pigeons

Could the transition period towards the new alternative Risk-Free Rates (RFRs) be more complex than initially envisaged? The speech given by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the Financial Conduct Authority (FCA), on the 28 January 2019, suggests this might be the case. While Mr Latter re-affirmed that the key focus […]

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 […]

Climate change: a threat to the stability of the financial services

With rising global temperatures[1] 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 […]

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 […]

Chinese Investment In NYC Hotels Remains Strong, But Shows Signs Of Slowing

By Bisnow, sponsored by Mazars New York City was both the most liquid hospitality market in the country[i], and global hotel investors’ destination of choice in 2015, according to JLL. That year, its transaction volume exceeded $6.6B, outpacing London by 40% and eclipsing its own 2011 record of $3.1B. Although total hotel deal volume decreased […]

European banks are better armed against macro-economic shocks

On Friday 2 November, as expected, the European Banking Authority (EBA) published the results of the 2018 EU wide stress tests on European banks’ solvency in the event of macro-economic shocks. This was the fourth exercise of the now-biannual testing which has been carried out on European Union banks. Despite more severe tests than in […]

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 […]

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 […]

Crypto-Funds: Regulation? Yes please!

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 […]

BEAT Could Eat Into Income Tax Savings

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 […]

An IBOR revolution is on its way

The whole financial system relies on reference interest rates, more precisely on InterBank Offered Rates (IBORs) whose integrity and reliability have raised some concerns since the 2008 financial crisis and the LIBOR manipulation scandal. These IBORs are used to determine the unsecured short-term funding cost in the interbank market for a combination of currencies, tenors […]

President Trump Signs the Senate’s Banking Regulatory Reform Bill (S.2155)

S.1255 the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Senate Banking Bill”) was passed on March 14, 2018 after a strongly bipartisan 67-31 vote. On May 22, 2018, the House passed the Senate Banking Bill with 258 yeas (225 Republicans and 33 Democrats) and 159 nays (1 Republican and 158 Democrats). The bill […]

Podcast: Basel III Implementation – May 2018

In this podcast, Greg Simpson discusses the Prudential Regulatory changes proposed by Basel 3. Together with Phuong Gomard and Bowen Lu, regulatory specialists in Mazars’ Banking Consulting practice, they highlight the impact on the standardised approach to credit risk and operational risk. Whilst relevant to all UK banks, it is particularly relevant to smaller challengers and […]

Podcast: Banking Regulatory Outlook

Along with Mazars banking regulatory advisory specialists Pauline Pelissier and Audrey Cauchet, Greg Simpson provides an overview of the banking regulatory outlook in the UK and Europe over the next 12 to 18 months. They also discuss IFRS9 in the context of regulatory treatments, credit risk management, non-performing loans, CRD5 and CRR2. Podcast player

Unilateral deregulation by the USA would lead banks to seek new trade-offs

Solvency, liquidity, transparency and oversight requirements: as the Basel Committee meeting in Santiago, Chile in November 2016 demonstrated, there is still much to be discussed on the finalisation of the Basel III agreements. However, the inauguration of the new President of the USA could change the condition of the international dialog. Some might decide to […]

Data privacy – too strategic for boards to ignore

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 […]

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 […]

BREXIT! – Not GREXIT?

Greece’s financial systems have been tightly monitored by the institutions – once called the Troika – of ECB, IMF and EU Commission in recent years. The systemically relevant Greek banks are under close control of the Joint Supervisory Team (JST), consisting of staff from the European Central Bank and members of the Bank of Greece, […]

Are you prepared? New York State issues new BSA/AML/OFAC transaction monitoring and filtering program regulation

Recently released guidelines require institutions to adopt risk-based programs to monitor and filter transactions for potentially suspicious activity. Beginning January 1, 2017, financial institutions registered under the New York banking law are responsible for complying with anti-terrorism transaction monitoring and filtering program regulations, established by the New York Department of Financial Services (NYDFS). Last month, […]

Brexit: opportunities for smaller overseas banks

The impact of Brexit on foreign banks, and especially the larger ones, has already been the subject of extensive media coverage and speculation. Discussions on the advantages and disadvantages of Brexit for larger overseas banks have been wide-ranging. Will the uncertainty over business models be solved in the short or mid-term? Would relocation bring cost […]

Ifs and Buts

The Brexit debate last week was overshadowed by Theresa May becoming the UK’s new Prime Minister and some of her more radical appointments to her Cabinet. On top came the horrific terror attack in Nice and the failed coup d’état in Turkey. Understandably, the core Brexit debate did not take centre stage but instead provided […]

Italian banking – a Brexit-fueled calamity

Brexit continues to dominate the political and financial world across Europe and beyond as people wrestle with its impact. But there’s another massive storm on the horizon for the EU that has been brewing for some time and Brexit may well have brought forward its impact: The Italian Banking Crisis. As reported in the Wall […]

BCBS’ amendments on Simple, Transparent and Comparable (STC) securitisations

As implied in the BCBS consultative document on November 2015, the BCBS published new standards on 11 July 2016 to include amendments on STC securitisations and thus make its final decision for their calibration. The securitisation framework was highlighted in the 2008 financial crisis because of the major role of subprimes in the collapse of […]

Feeling the effects of Brexit

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 […]

Capital Markets Union: The Impact on Banks

Business funding diversification, helping to increase options for savers and making the economy more resilient are some of the main objectives set out in the European Commission’s Action Plan on Building a Capital Markets Union (CMU) published on 30 September 2015. While a better spread of financing sources over the capital markets, insurers, households and […]

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 […]

Latest consultation puts systemically important banks (G-SIBs) under the microscope

On 6 April 2016, the Basel Committee published a new consultative document outlining revision plans for the calculation of the leverage ratio and submit proposals for additional requirements applicable to systemically important banks (G-SIBs). This new consultation comes as no surprise. Since 2014 the leverage ratio, calculated by dividing Tier 1 capital by the bank’s […]

ICAAP / ILAAP: what will change in 2016?

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 […]

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: Five Tactics to Survive Fintech Disruption

The revised Payment Services Directive (PSD2) that comes into force in January 2018 will essentially remove many of the barriers to new players looking to enter the payments market by providing access to customer data and accounts through an EEA wide common legislative platform. Already under pressure from regulatory change and increased competition PSD2 is […]

PSD2, FinTechs and Brexit: The Wider Implications

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 […]

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 […]

Simplicity is a complex issue

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A good bank requires good supervision

To be a ‘good bank’, a bank must be efficient, innovative and trustworthy. Given its central role at the heart of the economy and financial system and the risks associated with fulfilling its role, banks have to operate within an environment subject to laws, regulations and directives. Outcomes can often be subject to the constraints […]

Brexit and China: a mountain to climb?

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 […]

Sustainable banks must manage their risks

At a time when the European Banking Authority’s stress tests have provided valuable insights into the solvency levels of European banks, these banks are continuing their efforts to formalise the conceptual and operational framework of risk management. While changes in capital requirements (the Basel Pillar 1 quantitative requirements) still command the attention of bankers and […]

Brexit Watch #5: Brexit Extension – How are the Regulators Reacting?

During a meeting of the Special European Council on the 10 April 2019, EU leaders agreed to a flexible Brexit extension until 31 October 2019, to allow for the ratification of a withdrawal agreement. Despite this extension, there is still great pressure on Theresa May to secure a deal before the EU Parliament elections are […]

Impact of the New Revenue Recognition Standard on the Asset Management Industry

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. Topic 606, Revenue from Contracts with Customers, presents the new revenue recognition guidance. FASB also issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, in August 2015. As a […]

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 […]

EBA opinion on IFRS 9 and the impact on regulatory capital

After the Basel Committee consultation in October and then the European Commission’s legislative proposal of the package CRR II / CRD V in November 2016, the EBA has now given its opinion on the management impact of IFRS 9 on regulatory capital, notwithstanding a second impact study has just been completed. This opinion, primarily addressed […]

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 […]

Do Androids Dream of Stock Prices?

We look at the rise of ‘robostocks’ and algorithmic trading, and consider the repercussions on financial markets. An old investment adage mockingly states that “a failed trade becomes a long term investment”. The idea behind it is that if a security is bought and underperforms, investors tend to keep it until it eventually becomes profitable, […]

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 […]

Germany reforms taxation of investment funds

The principle of tax transparency for investment funds will soon be replaced by taxation at fund level with partial exemption for investors. This will also apply to foreign funds with German income. The new rules have been integrated in the completely revised German Investment Tax Act (Investmentsteuergesetz). This will lead to a complete change in […]

Creating a compliance pathway for dealing with NPLs

Non-Performing Loans (NPLs) are a key issue and will continue to be on the European agenda as a top priority for a long time. On the one hand, the ECB guidelines are already applicable, as they represent a best practice reference for the day-by-day work of the Joint Supervisory Teams. On the other hand, the […]

Revision of the CRR / CRD IV package

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 […]

What’s at stake with the ECB draft guidance to banks on non-performing loans?

The European Central Bank (“ECB”) recently launched public consultation on guidance to banks on non-performing loans (“NPL”). Consultation periods runs until 15 of November 2016. As NPL harms the profitability, funding and capital of banks and more globally the real economy, the ECB issued this guidance, aiming to achieve common practices for how to handle […]

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[1] as investors looked to exit the asset […]

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, […]

Brexit – playing for a draw?

On 20th October, I was delighted to chair an event in collaboration with OMFIF on the implications of Brexit for the financial services industry. We had an excellent panel of experts representing banks and asset managers as well as the City of London in general. The event was badged as a 100 days post referendum […]

SEC Adopts Amendments to Investment Adviser Act Rules

On August 25, 2016, the Securities and Exchange Commission (the “SEC” or the “Commission”) adopted amendments to various rules under the Investment Advisers Act of 1940 (the “Act”). The amendments will be effective 60 days after the date of publication in the Federal Register, but investment advisers are expected to comply with the amendments after […]

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 […]

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[1] as investors looked to exit the asset […]

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 […]

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 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 […]

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 […]

European CIB firms penalised by their regulatory environment

September 2018 saw the tenth anniversary of the collapse of Lehman Brothers, the US corporate and investment bank that was symbolic of Wall Street. Its failure is still fresh in the mind, and marked a turning point for banking and financial regulation. The disappearance of Lehman launched a cycle of “re-regulation” intended to increase the […]

IBOR reform moves forward, but challenges remain

A raft of recent consultations on Ibor reform indicates that we may finally be making some progress. We have seen the International Swaps and Derivatives Association (ISDA) issue another round of consultations for Inter-Bank Offered Rates (IBORs) trying to solve the issue of the spread and term adjustments in fall-back for derivatives referencing IBORs 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 […]

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, […]

Prudential risks for banks with a Russian presence

The invasion of Ukraine by Russia on 24 February 2022 is considered the most significant geopolitical event since the Second World War. While there is no question of military intervention by the European Union (EU) at the moment, the EU has nevertheless decided on a major package of sanctions that will have a heavy impact […]

EBA launches a central database for AML/CFT

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 […]

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 […]

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 […]

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, […]

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 […]

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, […]

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 […]

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 […]

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 […]

European Commission adopts review of Solvency II

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 FSOC weighs in on climate risk

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 […]

Regulated firms: A matter of life and death

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 […]

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 […]

The road to implementing the final Basel agreements

The unveiling of the new banking package “CRR3 – CRD6” on 27 October 2021 presents a further landmark on the road to implementing the final Basel III agreements. The regulatory scheme will also focus on the revision of the market risk framework from January 2019, as well as the latest developments in pillar 3 requirements. […]

First ACPR climate stress test pilot exercise results

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 […]

ESG investing: Three risks to consider

The continued popularity of funds with an environmental, social and governance (ESG) focus has put global ESG assets on track to exceed $53tn by 2025, up from nearly $38tn at the end of 20201. As growth continues, expectations for effective compliance policies and controls in place are expected to become more rigorous as political and […]

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 […]

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 […]

2021: The year of Brexit for banks

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 […]

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. […]

The European Parliament devises a new agreement to restrict access and abuse of financial services information

New measures to combat money laundering and terrorist financing The European Parliament has adopted a set of stringent measures to strengthen the fight against money laundering and terror financing, alongside circumventing sanctions within EU. These regulations are presented by EU in the form of a “legislative package” comprising three key measures which provide various practical […]

European Commission to strengthen regulatory framework for bank crisis management

The European Commission published on 18 April 2023 a new legislative package aiming to adapt and strengthen the framework for crisis management and deposit insurance (CMDI), with an acute focus on small and medium-sized banks. This proposal, which follows the announcement of the Eurogroup finance ministers inviting the Commission and the European co-legislators to review […]

Greater insight into the AMF certification exam, the AMF-ACPR report and ROSA

On 16 December 2022, the AMF published additional information[1] on its website about the AMF exam, more commonly known as the “AMF certification” exam, since it certifies only the entities that organise the exam, rather than the people who pass it. The AMF lists the various functions within ISPs and FIAs that are covered by […]

How does the 2023 Finance Act provide clarification on tax-favoured schemes and extend their validity?

The tax system applicable in the overseas public authorities includes a set of investment incentive schemes designed to promote their economic and social development. One factor to their successful implementation in practice is to provide as much visibility and sustainability for an investor as possible over time. Another key is to have a broad scope […]

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. […]

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 […]

Governance, operational resilience, and business models remain crucial for banks in an environment of rising rates and digital banking

In an interview, Korbinian Ibel, Director General at the European Central Bank (ECB), shares insight on how bank-specific direct supervision works, what the current risks and challenges are, and priorities to look out for in the coming years. What does the Banking Supervision arm of the European Central Bank do? Find out about its policies, […]

The digital euro as we know it today

“I see digital as the future of finance”. These are the words of the Executive Vice President of the European Commission (EC), Valdis Dombrovskis, voiced in the summer of 2020. He has undoubtedly been proven right as governments and central banks around the world have heightened their efforts to keep oversight of the digital transition […]

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 […]

Impacts and consequences of the war in Ukraine for banks and insurance companies

The war in Ukraine, as well as the unprecedented sanctions imposed by the European Union, the United States and their partners against Russia have had major consequences for financial services institutions. For foreign companies operating in Russia or Ukraine, the first concern was the safety of their staff. They had to make difficult choices to […]

EBA considers bottom-up stress testing with top-down elements

The European Banking Authority (EBA) is tasked, in cooperation with the European Systematic Risk Board (ESRB), to initiate and coordinate biennial EU-wide stress testing exercises to assess the resilience of institutions to adverse market developments. The objective is to provide supervisors, banks, and other market participants with a common analytical framework to consistently compare and […]

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 […]

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 […]

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 […]

How to address climate risk in the banking prudential framework

Climate change is now firmly in the focus of prudential regulators and supervisors across the globe. Against this background, the European Banking Authority (EBA) is mandated to assess whether a dedicated prudential treatment of exposures related to assets or activities associated substantially with environmental and social objectives would be justified. Based on its findings, the […]

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, […]

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, […]

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 […]

ESG investing: From buzzword to mainstream

A growing interest in environmental, social and governance (ESG) issues is driving record inflows into the ESG-led investment sector. During 2020, sustainable funds available to European investors attracted net inflows of €233bn1, which saw assets under management hit the $1.1tn milestone, accounting for almost 10% of total European fund assets. A similar growth story in […]

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 […]

The EBA publishes new report and guidelines in response to risk within the financial services sector

New report on AML/CFT risks in payment institutions In accordance with the European Union regulations, the European Banking Authority (EBA) has been mandated to assess the management of the most significant risks in the fight against money laundering and terrorist financing (ML/FT). The entity’s analysis is centred around the identification and management of ML-FT risks […]

Do Asian market Libor preparations pose systemic risk to world markets?

Since Libor was first used in financial markets in 1986, it has become the foundation of the global interbank funding market. However, regulators ruled that Libor’s volatility during the last global financial crisis (GFC) and a rate-rigging crisis in 20121 involving the world’s largest banks exposed a fundamental weakness with the rate’s publication methodology. Yet, […]

Are more stringent gender diversity measures required?

Gender equality, while not systematically embedded in national laws, is clearly set in European law. The Capital Requirements Regulation (CRR) requires financial institutions to adopt a policy promoting diversity within their management bodies and, for the most significant ones, to set targets to reach gender-balanced boards. Despite these regulatory requirements, the conclusions of the European […]

Progress on transitioning to SONIA

The Risk-Free Rates Working Group (RFRWG) published an update on the impact of COVID-19 on the timeline for firm’s plans to transition away from GBP LIBOR on the 29th April. While the central assumption of LIBOR’s publication being ceased after the end of 2021 remains intact, the Working Group has amended the timeline for the […]

ARRC acts for a smooth IBOR transition

The Alternative Reference Rates Committee (ARRC) continues to support market participants in their efforts to transition from USD London Interbank Offered Rate (LIBOR) towards the Securities Overnight Reference Rate (SOFR). Following the Financial Conduct Authority’s (FCA) March 2020 statement that the expected LIBOR cessation deadline remains unaltered – i.e. end of 2021 – ARRC published […]

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 […]

Regulatory flexibility gives banks the tools to support the economy during the Covid-19 pandemic

With banks no longer the weak link in the financial system, they now have a key role to play in supporting the real economy to survive the crisis caused by the Covid-19 pandemic. The significant strengthening of prudential regulation over the past decade since the 2008 financial crisis has enabled banking institutions to post solid levels […]

COVID-19: Phase 1 of SFTR delayed

The European Securities and Markets Authority (ESMA) has issued a public statement to announce the delay of the industry’s compliance with phase one of the Securities Financing Transactions Regulation (SFTR). This is in response to ESMA’s awareness of the financial industry’s struggle to devote resources to comply with the new reporting obligation, as firms face […]

COVID-19, banks and regulation: the road ahead in the UK and Europe

The Covid-19 outbreak and the unprecedented emergency it presents has created a unique threat to the world’s economy. Like all sectors, banking has been impacted, and its stakeholders have felt excessive pressure over the last few weeks to get things right. Regulators in financial markets around the globe have all announced Covid-19 action plans, which […]

IBOR transition: Fallback language developments

The expected 2021 disappearance of LIBOR requires robust fallback language for cash products and derivatives alike. Industry associations have taken initiatives to reform the historic fallback language of securities, with ISDA proactively leading the way on derivatives and national working groups proposing enhancements for cash products. While the derivatives market is expected to be harmonized […]

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 […]

Is SOFR a strong enough USD LIBOR alternative?

With COVID-19, being declared a pandemic on March 11, 2020, financial institutions have had to shift most of their resources to mitigate the risks that have arisen. This has adversely affected important activities, one of which is market participants’ efforts to detach from LIBOR before its cessation at the end of 2021. As a result, […]

New prudential regulation for investment firms in Europe

At the end of nearly two years of legislative work, the reform of the prudential regulation of investment firms completed its final phase with the publication in the Official Journal of the European Union of two new regulatory texts: Regulation 2019/2033 on the prudential requirements of investment firms (IFR), and Directive 2019/2034 on the prudential […]

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 […]

Is Asia on its way to IBOR transition?

With Libor’s cessation date at the end of 2021 looming, global regulators are hastening their IBOR fallback strategies. Yet while market momentum has increased for multiple published RFR indices, among them the GBP SONIA, the EUR €STR, and the USD SOFR, Asian economies, some of which rank among the world’s largest, continue to lag. While […]

Is SOFR the ultimate replacement for USD LIBOR?

Financial market participants – at least the largest ones – are actively preparing for the expected discontinuation of the London Inter-Bank Offered Rate (LIBOR) after 2021. Transitioning towards a LIBOR-free world is a challenge that requires the involvement and coordination of the whole industry in order to find appropriate solutions to replace the 35 different […]

Conduct Risk should not be underestimated during IBOR Transition

With little more than two years to go, Libor’s cessation date continues to near. The voluntary agreement of panel banks submitting to Libor will conclude at the end of 2021, from which risk-free rates (RFR) are expected to replace Libor and similar indices. Are corporates paying enough attention to Libor updates? Libor’s cessation should be […]

The Supervisory Answer to Hong Kong’s Worsening Economic Performance

Pierre Latrobe at Mazars discusses the measures the HKMA has taken so far to strengthen its macroprudential supervisory toolkit and address potential risks to the wider financial system. The Hong Kong economy is suffering from several lingering negative factors, the US-China trade war, the global economic slowdown and the ongoing protests, to name but a […]

IBOR Reform – key takeaways

With significant IBOR reform on the horizon, Mazars brought together industry experts, practitioners and regulators to discuss the challenges and opportunities they face. Speakers included the Bank of England Market Division’s Alastair Hughes, EFRAG’s Didier Andries and Mazars’ IBOR lead, Pauline Pelissier. From a comprehensive and illuminating session, Pauline sums up the key takeaways: “What […]

Brexit Watch #6: Seeing past the fog of uncertainty – How are the regulators responding?

The British political landscape has been unsettled and uncertain. Boris Johnson defeated Theresa May in July 2019 to become Prime Minister with his “do or die” conviction for the UK’s exit from the EU, with or without a deal. While the Government has been successful in achieving Parliament’s support for a renegotiated withdrawal deal, MPs […]

Covid-19 US policy changes: what banks need to know

Impacts from the COVID-19 pandemic have reverberated across every part of the global economy. Small businesses are struggling to pay their employees, banks are grappling with collapsing local economies, and many borrowers across the nation cannot meet their monthly mortgage payments. Banks will play a critical role in supporting their communities through this crisis, and […]

Federal reserve board publishes 2020 stress testing results and additional sensitivity analysis

The Federal Reserve Board released stress test results for DFAST 2020 including additional sensitivity analysis, considering the COVID19 outbreak, to assess the resiliency of large banks under three hypothetical recessions, or downside scenarios, that could result from the coronavirus event. Furthermore, the Board provides guidance for large banks to maintain resiliency during economic uncertainties from […]

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) […]

Mazars’ banking regulatory radar: 2020-2025

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. […]

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 […]

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 […]

Managing an increase in bank credit risk

While 2020 went relatively smoothly for the banking sector, uncertainties remain on the potential effects of Covid-19 on the real economy. Any negative impact could lead to heavy losses for the sector, especially when support measures are gradually phased out. These measures have not only contained the anticipated increase in credit risks, but have also […]

The impact of credit risk on 2021 stress tests

On 13 November 2020, the EBA published the final methodological note for the 2021 EU-wide stress-testing exercise. The aim of the stress tests is to assess the resilience of financial institutions to adverse economic and financial developments, in particular in the event of an increase in credit risk due to the default of the borrower. […]

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 […]

Resolvability is now the SRB’s key focus

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 […]

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)[1]. What firms need to […]

Injecting noise into the discussion

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 […]

Building a more inclusive tax model

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 […]

Acceleration in changing the prudential treatment for Software Assets: Covid-19 impact

Over recent years, technology and software have become strategic assets for competitiveness and resilience in the banking sector. Institutions have no choice but to invest to develop and deliver innovative services whilst managing ever greater IT and cybersecurity risks. The pandemic and announcement of lockdown measures posed a significant challenge for banks’ technology teams as […]

2021 Stress testing the UK banking system: the Bank of England’s approach

March 2020 marked the first time – since its inception in 2014 – that the Bank of England (BoE) cancelled its annual stress tests for the UK’s biggest lenders. Instead, they undertook a desktop analysis of the UK banking sector resilience. In late 2020, the Financial Policy Committee (FPC) judged that most banks have capital […]

UK supervision of international banks post Brexit

Around one-fifth of global banking activity is undertaken in the UK. Almost half of the UK’s banking assets are held by international banks. The PRA currently supervises approximately 250 international banks, both branches and subsidiaries, which are part of around 180 international groups. Background On 11 January 2021, the PRA shared in a Consultation Paper […]

IBOR Transition: Modelling RFR term rates to price IR derivatives

One of the anticipated challenges in the transition from IBOR rates to risk-free rates (RFRs) is the management of its impact on quantitative models. The ones currently used for pricing IBOR-linked financial instruments account for term rates which are “forward-looking”. The RFRs replacing the IBORs are all overnight rates. This means that a term rate […]

Reducing reporting burden for European banks while increasing data quality: a challenge for the EBA

Under article 430c of the updated Capital Requirements Regulation (CRR 2), the European Parliament and the Council of the European Union mandate that the European Banking Authority (EBA) perform a feasibility study on reducing the reporting burden for the European banking sector while ensuring data collection for monetary policy, resolution and supervisory purposes and take […]

IBOR transition: impacts of the SOFR discounting switch

An important milestone in the IBOR transition is the change in rates used by LCH and CME for discounting and Price Alignment Interest (PAI) calculations for USD OTC cleared swaps. Indeed, on October 16, 2020, they moved from using the daily Effective Federal Funds Rate (Fed Funds) to the Secured Overnight Funding Rate (SOFR) for […]

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 […]

IBOR transition and FRTB cross dependencies highlighted

The revised market risk framework – also known as the Fundamental Review of the Trading Book (‘FRTB’) – not only impacts an institution’s regulatory capital charge calculation for market risk, but also affects operational, governance and business strategies. FRTB brings significant change. With the aim of harmonising capital standards for market risks across jurisdictions and […]

IBOR Transition: modelling of SOFR risk factors

One of the major challenges of IBOR transition is the availability of historical data on alternative risk-free rates (RFRs) required to implement interest rate model changes or re-calibration. With the Secured Overnight Financing Rate (SOFR) only published since April 2018, the available time series do not provide enough observations for risk modelling. Adding to that, […]

Looking ahead – ECB and NCA focus 2016, and what does it mean for the market participants?

The last five years have been a time of much challenge and change for the Central Banking Fraternity in Europe. Crisis, both economic and political, has been followed by much adjustment and change, including both practical economic and policy interventions, structural change in the form of Banking Union, much new regulation and most recently the […]