Podcast: Why banks need to address cyber security
Perspectives
Podcast: Why banks need to address cyber security
Wed 21 Jun 2017
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.
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Simplicity is a complex issue
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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 […]
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 […]
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
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 […]
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 […]
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 […]
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 […]
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 […]
Evolving role of AI with cyber risk
Cyber as an organsational risk In 93% of data breaches, the targeted systems were compromised within minutes. 83% of the time, those breaches were not discovered for weeks, leaving the attackers with plenty of time to do their damage and exfiltrate data[1]. The average consolidated total cost of a U.S. data breach in 2016 was […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
New-style cyber insurance policy models on the rise
Regardless of geography or business sector, many groups and companies have taken out cybersecurity insurance policies in recent years. These policies cover companies against new threats to information systems, including ransomware and data theft incidents that have been making the headlines. For a long time, the risks identified in these policies were on the borderline […]
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 […]
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, […]
Eurofi financial summit addresses EU’s ecological and digital transition
As a setting for exchange between European Union (EU) economic and financial regulators and senior financial sector executives from the industry, one of the world’s largest financial services conferences, Eurofi, took place in Paris in February. Established in 2000, the Eurofi meetings occur bi-annually* alongside the Economic and Financial Affairs Council configuration (ECOFIN) meetings. The […]
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 […]
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 […]
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, […]
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, […]
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 […]
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 […]
SSM supervisory priorities for 2024-2026: addressing identified vulnerabilities in banks
On 19 December 2023, the European Central Bank (ECB) published its updated Single Supervisory Mechanism (SSM) strategic supervisory priorities for the period 2024 to 2026. The priorities indicate what banks should expect in terms of supervisory activities in 2024. For 2024-2026, the ECB supervisory priorities are built upon three main pillars: These priorities were informed […]
Unlocking the potential of ecosystems: a deep dive into open insurance and APIs
In the contemporary landscape of insurance, the business model of open insurance, characterised by the strategic opening of insurers’ resources to external collaborators, has been a focal point of discussion. Unlike the banking sector, where regulatory mandates such as the Payment Services Directive (PSD2) of 2018 have compelled the development of open banking practices, insurers […]
Unveiling the European Central Bank’s strategy: data, scenarios and models
In January 2024, the European Central Bank (ECB) published its Climate and Nature Plan for 2024-2025. This plan aims to: This plan underscores those financial risks stemming from climate change remain a key area of attention for the ECB. The ECB will continue working on several topics including stress testing, scenarios and climate-related data, and […]
How banks and insurers have progressed in embedding sustainability into their businesses
In late 2023, and to coincide with COP 28, Mazars published its latest Sustainability practices survey on the progress banks and insurers have made in embedding sustainability into their businesses, our most comprehensive and information-rich report to date covering 404 executives in banks and insurance companies in 16 countries Despite sustainability being in the limelight […]
Assessing materiality and verification of sustainability disclosures
In environmental, social and governance (ESG) reporting, materiality is crucial for enhancing transparency and accountability in sustainability and climate-related disclosures. Importantly, it helps identify and report on matters that are deemed significant, emphasizing their relevance to stakeholders. Materiality comes in various forms. Financial materiality focuses on sustainability issues impacting financial performance, aligning with annual financial […]
What’s driving financial firms’ sustainability strategies?
To adapt to the swiftly evolving regulatory landscape and meet stakeholders’ expectations, financial firms are increasingly formulating sustainability strategies to address environmental, social and governance (ESG) factors. Notably, emissions reduction and the pursuit of net-zero targets have become central elements of ESG strategies for many financial firms, according to the latest Mazars’ survey Sustainability practices stocktake: […]
Mitigating the financial impacts of climate-related risks
The integration of environmental, social and governance (ESG) considerations into strategic planning is increasingly becoming a common practice among financial services firms. However, climate-related risks can also serve as drivers of financial risk for institutions. These risks can manifest through various transmission channels, translating climate and environmental (C&E) risks into more conventional categories such as […]
How are financial institutions reflecting C&E considerations in risk appetite statements?
There is growing pressure for banks and insurers to incorporate C&E factors in their risk management frameworks (RMF). As a practice, it gives the ability to set clear thresholds for the climate impacts banks and insurers are willing and able to absorb. By establishing these thresholds, firms can effectively monitor their exposure to C&E risks, […]
Adapting governance to spearhead sustainability more effectively
There are increasing regulatory expectations globally for financial institutions to disclose and demonstrate how sustainability-related responsibilities are allocated within the organisation. In this respect, the increasing global trend towards mandatory sustainability disclosure frameworks continues to underscore the significant role that the finance function is anticipated to assume in sustainability. It’s a trend reflected in Mazars’ […]
The insurance industry in flux: what changes are currently unfolding?
The regulatory requirements for insurance companies are becoming increasingly complex. In this interview, Marc Böhlhoff and Thomas Volkmer, Partners at Mazars in Germany, discuss the impact of this change on the industry and delve into what it means for the operations of auditing and consulting firms. Mr. Volkmer, the insurance industry is undergoing rapid change. What […]
Managing tomorrow’s banking risks
While the banking sector has shown resilience over recent years, the economic environment and geopolitical situation remain tense. So, what does this mean for risks to the banking sector? More specifically, what is the impact on capital requirements for banks with the implementation of the Capital Requirements Regulation (CRR3) and the Capital Requirements Directive (CRD6), […]
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. […]
Lessons from the spring 2023 banking turmoil: five areas for banks to focus their attention
The Basel Committee on Banking Supervision (BCBS) and Financial Stability Board (FSB) published reports in October 2023 on the causes and lessons learnt from the Spring 2023 banking turmoil. The BCBS report provides an assessment of the causes of the banking turmoil, the regulatory and supervisory responses, and the initial lessons learnt. The FSB report […]
European green taxonomy eligibility ratios in the banking sector
The implementation of the European Union’s ‘Taxonomy’ regulation, which integrates two climate objectives, was carried out on 1 January 2022 through the ‘Climate’ Delegated Act released in April 2021. In line with this, the banking sector has been provided with corresponding regulations, allowing banks to measure the portion of their financing dedicated to sustainable economic […]
DORA: how to move from operational risk management to operational resilience?
DORA (the Digital Operational Resilience Act) is the key regulatory outlook for IT and Cyber risk between now and 2025. The European Supervisory Agencies have sought to strengthen the resilience of institutions by emphasising the need to evolve the approach to operational risk management, of which information and communication technology risks are a part. DORA […]
Diversity in forward-looking macroeconomic scenarios
Under IFRS 9, forward-looking information is a key component of Expected Credit Loss (ECL) calculations. However, forward-looking information requires a significant level of judgement, making comparisons difficult to navigate. Indeed, similar to the use of post-model adjustments, forward-looking scenarios have also been reported by stakeholders in the context of the IFRS 9 impairment post-implementation review […]
Bank credit risk trends show a relative decrease in high risk exposures
Despite banks emerging from the Covid-19 crisis in reasonably good health, the war in Ukraine combined with a global energy crisis and an uncertain economic landscape have once again put the spotlight on credit risk exposures. To better understand credit risk trends, Mazars conducted an analysis of 26 banks in 11 European countries in May […]
The use of post-model adjustments to capture emerging risks
Since the Covid-19 pandemic, post-model adjustments1, or management overlays, have become an increasingly common and accepted mechanism used by banks to manage expected credit losses (ECLs). The number of post-Covid unprecedented events related to the war in Ukraine, energy crisis and global economic uncertainty has raised a number of questions relating to the consistency and […]
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 […]
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, […]
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 […]
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 […]
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 […]
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 […]
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 […]
How the insurance industry can emerge stronger
There is little doubt that Covid-19 has had a significant impact on insurers, but there were already factors in play that were adding pressure on the insurance industry. What covid-19 has done is to create new challenges, as well as bringing existing challenges to the foreground. Looking ahead, the actions insurers take now to deal […]
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 […]
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 […]
A Tax Playbook for the Digitalised Economy (Part 1)
In a series of articles aimed at promoting debate on the evolution of international tax regimes, Michael Lennard, Chief of International Tax Cooperation and Trade in the Financing for Development Office (FfDO) of the United Nations, discusses the tax-related challenges governments, professionals and practitioners face. In the first of this two-part article, Mr Lennard expresses […]
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, […]
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 […]
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 […]
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 […]
Rebuilding Credit Card Profitability post COVID-19
The current pandemic is having far reaching consequences across all aspects of society. Compared to other industries the impact on the credit card industry is relatively mild and from a customer perspective the value of on-demand liquidity is now clearer than ever. However, there will be significant impacts on industry profitability. Reduced international travel will […]
How 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 […]
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 […]
A Tax Playbook for the Digitalised Economy (Part 2)
In a series of articles aimed at promoting debate on the evolution of international tax regimes, Michael Lennard, Chief of International Tax Cooperation and Trade in the Financing for Sustainable Development Office (FSDO) of the United Nations, discusses the tax-related challenges governments, professionals and practitioners face. Following on from the first article on this topic, […]
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 […]
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 […]
Remote working: A growing target for hackers
The widespread use of working from home (WFH) during the pandemic, regardless of sector or geographical location has required organisations and their information systems (IS) management to be very agile in deploying or increasing their capacity for remote collaboration. Some institutions were already prepared – for example, following the wave of strikes at the end […]
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. […]
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% […]
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 […]
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 […]
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 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 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 […]
Digitalising the real estate industry
While digital transformation has been disrupting all business sectors for many years, 2020 will be remembered for its particular impact on real estate administrators. A third of French respondents believe that artificial intelligence can be more efficient than a real estate agent. Moreover, 40% of those under 50 years old are convinced that the property […]
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. […]
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 […]