Is one single payment standard the way forward for the banking sector?

Shaping the future of banking with 5G

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 […]

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 […]

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’ […]

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 […]

Sizing Up Amazon Web Services

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 […]

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, […]

Arkéa Banking Services : Innovation in Banking

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 […]

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 [1] have already deployed CBDC programmes with another 15 countries [2] currently conducting pilot programmes. In total, 105 countries are considering using CBDC programmes, representing over 95% of global GDP and […]

Innovation in payments with Compte Nickel

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 […]

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 […]

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 […]

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 […]

Re-engineering the banking sector

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 […]

The Evolution of Banking

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 […]

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 […]

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 […]

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 […]

Whistleblowers: a path to combatting fraud

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 […]

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? […]

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 […]

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 […]

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 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 […]

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

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 […]

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 […]

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 […]

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 […]

The Impact of Robotic Process Automation in Financial Services

Robotic process automation (RPA) is software that sits on a PC or workstation and is programmed to mimic the activities that a member of staff would perform. It will open applications, copy and paste data, and follow predefined rules. A robot will complete activities three to five times faster than a person. Customer satisfaction can […]

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 […]

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 […]

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 […]

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 […]

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 […]

Quantified impacts of IFRS 9 : initial findings

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 […]

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 […]

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 […]

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: Why banks need to address cyber security

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

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? […]

Overview of the US Stress Test Scenarios Vs. the European Scenarios

On February 1, 2018, just one day after the European Banking Authority (EBA) officially kicked off its EU-wide stress test exercise, the Federal Reserve Board (FRB) released the applicable scenarios for its own US stress test. 2018 US Stress Test Scenarios Overview The annual stress test exercise is required by a provision of the Comprehensive […]

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 […]

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 […]

TRIM: Is Winter Coming for Internal Models?

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 […]

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 […]

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 […]

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 […]

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 […]

Mobile money in Africa: promise and perils

As part of the content program on digital finance that Mazars has launched in partnership with the Economist Intelligence Unit, we are exploring in a new article on how mobile money is driving Africa’s cashless future. Over the last few years, Africa has become a global leader in mobile money with the rate of smartphone […]

What next for Africa’s mobile money sector?

Over the last decade, Africa has become a global leader in mobile money. The statistics for the use of smartphones as a payment mechanism are compelling with M-Pesa, in particular, by far the continent’s biggest mobile money triumph. Backed by UK-based Vodafone and launched in 2007 in Kenya by mobile network operator Safaricom, by 2015 […]

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 […]

Digital Finance : Meeting Ethics and Compliance Challenges in Financial Services

We recognise digitisation as an important topic for the financial services industry; for this reason, we have developed a content programme with the Economist Intelligence Unit that focuses on how Financial Services companies are adapting their risk and reporting procedures to the new digital environment. This unique programme of thought leadership examines the new challenges in […]

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 […]

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 […]

Creating a Digital Map for Unclaimed Policies

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 […]

Digital Banking: Lessons from Millennials

By 2025, The Wall Street Journal ([1]) estimated that Generation Y, also known as Millennials, would represent nearly half of the total active population in the world. The challenge for banks is to adapt their strategy to match Generation Y consumer habits and behaviours. Unlike previous generations, Millennials have the increased ability to choose between […]

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 […]

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 […]

How Innovation is revolutionising the payments landscape

Financial Technology (“Fintech”) companies have kick-started a revolution in the payments landscape. Using state-of-the art technology, fintech companies are transforming how payments are transacted and processed. Banks and traditional payment providers are having to entirely rethink their approach to how they interact with innovations in order to stay on top of their game. Technological change […]

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 […]

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 […]

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 […]

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 […]

Empower your people to protect the bank

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 […]

FinTech in Japan: a regulatory framework on the move to support a strong development

The field of money remittance transactions in Japan is expanding and is attracting many overseas companies looking to operate fund transfer and virtual currency exchange businesses. A regulatory framework for FinTech firms in Japan now presents major opportunities and challenges, not just in Japan, but for regulators around the world. To support progress and development […]

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 […]

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 […]

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 […]

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 […]

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 […]

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, […]

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 […]

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 […]

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 – 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 […]

Digital finance: governance & blockchain

“Blockchain is a bit like gluten. Everyone is talking about it, but no one knows what it is,” said Tim Swanson, head of research at R3, the financial technology innovation firm that is leading a consortium partnership working on blockchain to develop industry-wide common practices and standards, architecture models and specific transaction systems for use […]

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! – 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 […]

Climate change: the Bank of England’s commitments

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 […]

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[1]. Some 52 banks […]

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 […]

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 […]

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, […]

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 […]

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 […]

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 […]

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 […]

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. […]

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 […]

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 […]

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 […]

The Single Supervisory Mechanism: Post-pandemic actions and expectations

On 30 July, the European Central Bank unveiled the 2021 supervisory stress test results, which demonstrated that the region’s banking system is resilient in an unfavourable environment. The Common Equity Tier 1 (CET1) ratio has fallen 5.2% to 9.9% under the 3-year adverse scenario, while under the baseline scenario the CET1 ratio will reach 15.8% […]

Deep hedging: application of deep learning to hedge financial derivatives

The recent breakthrough of data science and deep learning make a model independent approach for hedging possible. This hedging approach known as deep hedging is a robust data-driven method able to consider market frictions as well as trading constraints without using model-computed greeks. This article gives the main theoretical tools to understand the methodology and […]

How banks can address supply chain risk

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. […]

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 […]

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 […]

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 […]

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 […]

Achieving digital operational resilience

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 […]

Spotlight on main European banks’ credit risk

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 […]

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, […]

Banking: crisis, what crisis?

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, […]

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 […]

Sustainable finance series: Driving credible ESG actions

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 […]

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 […]

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 […]

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 […]

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 […]

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 […]

The FED announced a pilot climate scenario analysis exercise for early 2023

The Federal Reserve Board (FED) will commence its first bottom-up climate scenario analysis exercise at the beginning of 2023, as announced on 29 September. The exercise will be exploratory in nature and will not result in extra capital requirements. The list of designated participants consists of six of the largest U.S. banks, i.e., Bank of […]

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 […]

Results of the ECB 2022 climate risk stress test

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 […]

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 […]

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 […]

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) […]

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 […]

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 […]

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 […]

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 […]

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 banks can prepare for life after containment

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 […]

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: 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 […]

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 […]

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 […]

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 […]

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, […]

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 […]

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 […]

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 […]

A looming climate crisis?

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 […]

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 […]

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 […]

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, […]

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 […]

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 […]

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 […]

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. […]

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. […]

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 […]

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 […]

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 […]

Bank stress tests – the post Covid agenda

In the early 1990s, stress tests became a popular internal tool for international banks to examine risks and gain a better understanding of threats to the institutions’ balance sheet. From there, the Basel Accord was amended in the mid- ’90s and required banks and investment firms to conduct stress tests. However, these were more internal […]

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, […]

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 […]

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 […]

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 […]