Greg Kilminster
Head of Product - Content
ESMA releases updated Q&As covering CRA, EMIR, MiFIR and MiCA
The European Securities and Markets Authority (ESMA) has published an updated set of Questions and Answers (Q&As) covering a wide range of topics, including regulations related to Credit Rating Agencies (CRA), European Market Infrastructure Regulation (EMIR), and Markets in Financial Instruments Regulation (MiFIR). The update also includes the first set of Q&As related to Markets in Crypto-Assets Regulation (MiCA), ahead of its implementation in December 2024 and the June 2024 deadline to opt out of grandfathering or reduce duration.
These Q&As cover various aspects, such as:
- New CASPs established before (and after) 30 December 2024
- Passporting rights for entities benefiting from grandfathering
- Prohibition of monetary and non-monetary benefits
- Provision of crypto-asset services by credit institutions
- Notifications under Article 60 MiCA
It’s worth noting that from 1 January 2024 onwards, Q&As are not included in individual documents but are accessed through a new tool.
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HKMA publishes latest Complaints Watch
The Hong Kong Monetary Authority (HKMA) has released its half-yearly Complaints Watch report, which highlights the recent complaint trends, emerging topical issues, and areas that Authorised Institutions (AIs) and members of the public should be aware of. The report covers the period from July to December 2023, during which HKMA received 1550 complaints. Of these, 149 were related to conduct issues, and 1,401 were regarding general banking services. Notably, HKMA received 1,201 fraud-related banking complaints in 2023, more than twice the number of cases received in 2022.
Key takeaways:
Customers struggle to differentiate between important and routine email notifications
One of the key issues highlighted in the report is the difficulty customers face in distinguishing between important and routine notifications. Customers have complained about receiving identical and generic subject headings for notification messages, which makes it challenging to identify monthly account statements, transaction records, and corporate action notices that require immediate attention. To address this issue, AIs are advised to review their notification arrangements and adopt good industry practices such as providing distinct email subject headings, sending reminders on important messages, and using secure channels to deliver vital notifications.
Banks should report material incidents promptly
Another important reminder given in the report is for banks to report material incidents to regulatory authorities promptly. The HKMA emphasises that banks must report any incidents that may significantly impact their business, customers, or reputation, such as illegal activities or staff misconduct. Banks should also ensure their responsible teams understand the applicable reporting thresholds and follow the guidance of relevant regulatory authorities.
The HKMA plans to engage with relevant authorities and develop joint public-private initiatives to promote integrity in the banking sector and protect banks and their customers from financial crime, corruption, or compromise of personal data. It will announce further details in due course.
AIs should embrace innovation
Finally, the HKMA, drawing on the enforcement division experience, encourages AIs to adopt innovative technology to enhance the efficiency and effectiveness of customer complaints handling.
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APRA updates FAQs on SDT project and outcomes assessment
The Australian Prudential Regulation Authority (APRA) has recently made updates to its Frequently Asked Questions (FAQ) section on the Superannuation Data Transformation (SDT) project and the outcomes assessment under s. 52(9) of the Superannuation Industry (Supervision) Act 1993.
The updates include four newly added FAQs and two updated worked examples that offer reporting-related guidance on the SDT project. Additionally, six FAQs have been updated to help RSE licensees carry out the outcomes assessment effectively.
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ASIC and APRA postpone Financial Accountability Regime implementation
The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) have jointly issued a letter to all Authorised Deposit-taking Institutions (ADIs) and their Authorised Non-operating Holding Companies (NOHCs) regarding the Financial Accountability Regime (FAR).
The regime, which introduces a more robust accountability and responsibility framework for entities, their directors and senior executives, was set to come into effect on 15 March 2024. However, since ministerial rules attached to the legislation have yet to be finalised, the regulators have postponed the submission of applications for registration of new accountable persons and the core or enhanced notification obligations to 30 June 2024.
Once the Minister Rules are released, ASIC and APRA will issue the Regulator Rules, Transitional Rules and reporting form instructions and provide further details about APRA Connect FAR form availability and FAR entity profile submissions.
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Michelle Bowman discusses the future of banking
In a speech at the 157th Assembly for Bank Directors at the Southwestern Graduate School of Banking in Maui, Hawaii Michelle Bowman, governor at the Federal Reserve, addressed the current economic landscape, monetary policy decisions, and the future of the banking industry.
In the section on the future of banking, Bowman expressed the view that the sector was at an “interesting juncture” noting that traditional risks like interest rate and liquidity risk are the priority but exist alongside emerging risks like cybersecurity and fraud. Bowman also emphasised the crucial role of banks in supporting their communities and adapting to deliver innovative financial products.
Bowman went on to note how prolonged periods of calm, such as the aftermath of the 2008 financial crisis, can lead to false assumptions and complacency among bankers and regulators. The consequences of such complacency can be periods of stress, such as the 2023 crisis. Bowman asked: “how do we protect the banking system against the risks that come from complacency?” answering that a constant focus on risk – traditional and emerging – is the way to deal with this question and that: “we should consider the dynamic nature of the banking system and know that we must be assertive in identifying known and emerging risks, and [be] nimble in responding to them.”
Continuing the theme of evolving risk, Bowman mentioned several areas where risk is still prevalent or increasing:
- the use of paper cheques;
- ATM and electronic banking services; and
- third-party service providers
Bowman pointed out the challenges of merging an innovation mindset with the necessity for prudent banking practices. She noted the importance of responsible innovation and urged banks to ensure that new technologies are well-understood, well-managed, and used appropriately.
Stressing the key role of regulators in making sure the banking system is safe and sound in light of evolving risks Bowman outlined three resolutions guiding the regulatory approach:
- prioritising safety and soundness;
- renewing commitment to tailoring; and
- increasing transparency
Reiterating a familiar theme in recent speeches by Governor Bowman, she emphasised the need to consider the unintended consequences of regulatory changes and called for a consistent framework to avoid regulatory whiplash. She raised pertinent questions about the definitions of a “community banks”, the potential impact of regulatory proposals, and the potential loss of smaller institutions and the impact of that on communities.
Finally, Bowman talked about the “regulatory perimeter” that delineates institutions subject to direct oversight from those that are not. She expressed concerns about the migration of risks across the regulatory boundary and its implications for the stability of the financial system, and particularly a specific concern about intentional regulatory actions pushing activities into the nonbank financial system.
Noting that regulators often focus on banks directly, she suggested using oversight of third-party service providers under the Bank Service Company Act as an underused tool to address risks on the borders of the regulatory perimeter.
In closing, Bowman said: “the factors I have highlighted do not – and could not possibly – provide a roadmap to the future, they do provide a different way of thinking about the long-term challenges and opportunities in the banking industry, a perspective that may be helpful for bank directors, bankers—and even for regulators.”
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