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FS Regulatory Developments - April 2017
FS Regulatory Developments - April 2017
With more surprising political developments this month, most notably the UK’s PM May calling a snap election for 8 June with Brexit at the heart of the debate, and the French two-horse race to the finish with calls for a ‘Frexit’, the rest of Europe and the world looks on with interest. KPMG’s recent attendance at Eurofi saw the debate firmly focussed on the impact and challenges Brexit will have on the EU27, and if others follow, how that will affect the regulatory landscape of the future? We know that changes aren’t imminent, but firms need to be preparing for what risks and opportunities may lie ahead, while balancing the need to manage current developments.
Highlights
Meanwhile, the Financial Stability Board has kicked off the review of post- financial crisis regulation and the Joint Committee of the European Supervisory Authorities (ESAs) have issued a report on risks and vulnerabilities in the EU financial system. It highlights three main risks and suggests policy actions:
- Low profitability of financial institutions in a low yield environment. Forward-looking supervisory approaches and proactive reduction of banks’ non-performing loans are needed.
- Increasing interconnectedness of bank and non-bank entities. The ESAs call for enhanced supervisory monitoring of concentration risks, cross border exposures and regulatory arbitrage.
- Potential contagion from China and other emerging markets. This risk should be included in stress tests and optimistic assumptions of firms should be scrutinised.
Key developments this month include the impact EIOPA’s new methodology to derive the Ultimate Forward Rate (UFR) from January 2018 will have on insurance firms. In Investment Management, we link to our monthly thematic newsletter ‘IM Regulatory Insights’ where we ask firms to think about what they want by way of a truly pan-EU funds market. Cross sector, we summarise the FSB consultation on the framework for post-implementation evaluation of the effects of the G20 financial regulatory reforms.
In Banking, we comment on the Basel Committee’s consultation on the regulatory treatment of accounting provisions, and how ‘step-in risks’ could be highly burdensome for some banks to deal with. We also examine the results of their latest assessment of G-SIB compliance with the Principles for effective risk data aggregation and risk reporting.
The European Banking Authority (EBA) has outlined plans to update the common European framework for the supervisory review and evaluation process (SREP), and jumping from a Pillar 2 update to Pillar 3, the Basel Committee has now completed the second stage of its revised disclosure requirements.
While we don’t tend to focus on individual countries, the new UK annual stress test’s exploratory scenario - which will focus on how banks could both meet regulatory requirements and build sustainable business models in a continually challenging economic environment - may be of interest to colleagues across EMA.
April 2017 edition
- The FSB initiates a review of post-financial crisis regulation
- Increase to insurance liabilities – EIOPA publishes revised UFR methodology
- Regulatory treatment of accounting provisions
- Step-in risk
- A sorry tale and two long tails: BCBS 239 (non-)compliance
- European Banking Authority Pillar 2 update
- Pillar 3 disclosures: completion of stage 2
- More stress tests for UK banks
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