Greg Kilminster
Head of Product - Content
US-UK financial regulatory working group update
The US-UK Financial Regulatory Working Group met in London in January for their ninth official meeting.
The meeting brought together officials and senior staff from prominent regulatory bodies, including the Bank of England, HM Treasury (HMT), the Financial Conduct Authority, Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Securities and Exchange Commission.
Key themes addressed during the meeting included:
- Economic and financial stability outlook: The group commenced with a comprehensive assessment of the economic and financial stability outlook, considering current trends, market conditions, and global factors shaping the landscape.
- Banking issues: Discussions centred on developments within domestic banking systems, including regulatory updates, proposed revisions to capital requirements, and enhancements to the UK’s resolution regimes. The importance of international dialogue to ensure effective implementation of regulatory initiatives and reforms was noted.
- Non-bank financial intermediation (NBFI): The group underscored the importance of fostering resilience in the NBFI sector, exchanging insights on domestic reform agendas and engaging at global forums to address vulnerabilities and enhance market preparedness.
- Climate-related financial risks and sustainable finance: The group shared recent developments including the International Sustainability Standards Board’s (ISSB) final disclosure standards, noting the vision of promoting interoperability. The UK team noted the launch of the Transition Plan Taskforce Disclosure framework and the industry code of conduct for environmental, social, and governance (ESG) ratings and data providers and the Transition Finance Market review.
- Digital finance: Discussions covered updates on crypto-asset markets, regulation, and oversight, as well as developments in Central Bank Digital Currency (CBDC) and artificial intelligence (AI) within the financial services sector.
- Cross-border regimes and operational resilience: The group acknowledged the importance of international cooperation in areas such as cross-border regimes, particularly the CFTC and HMT ongoing work on central counterparties/derivatives clearing organisations.
The meeting concluded with a commitment to reconvene in September 2024.
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First National Bank to pay $13.5 million settlement for lending discrimination in North Carolina
The Justice Department and the State of North Carolina have announced that First National Bank of Pennsylvania (FNB) will pay $13.5 million to settle allegations that it engaged in a pattern of lending discrimination by redlining predominantly Black and Hispanic neighbourhoods in Charlotte and Winston-Salem, North Carolina.
According to the complaint, from 2017 to 2021, FNB failed to provide mortgage lending services to predominantly Black and Hispanic neighbourhoods in Charlotte and Winston-Salem. Furthermore, the bank discouraged people seeking credit in those communities from obtaining home loans. FNB’s branches in both cities were predominantly in white neighbourhoods, with the bank closing its only branch in a predominantly Black and Hispanic neighbourhood in Winston-Salem in 2021.
The complaint also alleges that FNB relied on mortgage loan officers working out of predominantly white areas to generate loan applications. The bank did not track how its mortgage loan officers developed loan referrals or distributed the bank’s mortgage marketing materials.
The Justice Department and the State of North Carolina have proposed consent orders that require FNB to invest $13.5 million to increase credit opportunities for communities of colour in Charlotte and Winston-Salem. Specifically, FNB will:
- Invest at least $11.75 million in a loan subsidy fund to increase access to home mortgage, home improvement, and home refinance loans for residents of majority-Black and Hispanic neighbourhoods in FNB’s Charlotte and Winston-Salem service areas.
- Spend $1 million on community partnerships to provide services related to credit, consumer financial education, homeownership and foreclosure prevention for residents of predominantly Black and Hispanic neighbourhoods in those service areas.
- Allocate $750,000 for advertising, outreach, consumer financial education, and credit counselling focused on predominantly Black and Hispanic neighbourhoods in those service areas.
- Open three new branches in predominantly Black and Hispanic neighbourhoods in Charlotte and Winston-Salem (two in Charlotte and one in Winston-Salem), with at least one mortgage banker assigned to each branch.
- Hire a director of community lending who will oversee the continued development of lending in communities of colour.
FNB has also agreed to retain independent consultants to enhance its fair lending program and better meet the communities’ needs for mortgage credit. The bank will conduct a community credit needs assessment, evaluate its fair lending compliance management systems, and conduct staff trainings. The proposed consent orders are subject to court approval.
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ASIC grants no-action position to institutional investors under UCT regime
The Australian Securities and Investments Commission (ASIC) has recently granted a limited class no-action position for institutional markets under the Unfair Contract Terms (UCT) regime.
The UCT regime outlines the criteria for a term in a standard form contract to be considered unfair and was amended in November 2023. The amendments make UCTs illegal, impose substantial penalties for each unfair term, and expand the class of small businesses relying on UCT protections.
In September 2023, the Australian Financial Markets Association (AFMA) raised concerns regarding the applicability of the amended UCT regime to certain sophisticated participants and requested a class no-action letter in respect of any potential non-compliance. After consulting with Treasury, AFMA, and industry participants, ASIC has granted a limited class no-action position.
Under this position, ASIC will not take any action for a contravention where each counterparty to a standard form contract is an institutional investor or where each counterparty to an industry standard form contract is a wholesale client, and the contract is used for dealing in, or related to a dealing in, financial markets. Additionally, ASIC will not take action where an Australian financial services licensee benefits from the no-action position and does not report such contravention as required under section 912DAA of the Corporations Act.
This no-action position will remain valid until the end of 9 November 2027 or the end of the day on which any amendments to the ASIC Act commence, whichever is earlier.
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Hong Kong DPS protection limit increased to HK$800,000
The Hong Kong Deposit Protection Board (Board) has released the results of the public consultation on the Deposit Protection Scheme (DPS) enhancements, which ran from July to October 2023.
In response to the feedback received, the Board has decided to increase the protection limit of the DPS by 60% to HK$800,000, with the new limit expected to be in effect in the fourth quarter of 2024 once the necessary legislative amendments are prepared.
In addition, other enhancements will be implemented in phases by early 2025. These include refining the levy system to account for the higher protection limit, improving deposit protection arrangements in the event of a bank merger, expanding the display of the DPS membership sign to digital channels, and simplifying negative disclosure requirements for private banking customers.
The Board plans to review the limit in three years, with conclusions published the following year.
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Consultations: February deadlines
United Kingdom
DP23/4: Regulating cryptoassets Phase 1: Stablecoins: Deadline 6 February 2024
PS23/13 Introducing a gateway for firms who approve financial promotions: Deadline 7 February 2024
CP24/23 – Funded reinsurance: Deadline 16 February 2024
CP25/23 – Supervisory statement – Prudential assessment of acquisitions and increases in control: Deadline 23 February 2024
CP23/26: Implementing the Overseas Funds: Deadline 12 February 2024
CP23/27: Reforming the commodity derivatives regulatory framework Regime: Deadline 16 February 2024
CP23/29 Access to Cash: Deadline 8 February 2024
Cycle 2 APP fraud data reporting guidance for PSPs: Deadline 16 February 2024
CP23/33 Consultation on payments to data providers and DRSP forms including Policy Statement for the framework for UK consolidated tape: Deadline 9 February 2024
United States
Protection of Clearing Member Funds Held by Derivatives Clearing Organizations: Deadline 16 February 2024
Real-Time Public Reporting Requirements and Swap Data Recordkeeping and Reporting Requirements: Deadline 26 February 2024
Final Rule Regarding Access to Beneficial Ownership Information: Deadline 20 February 2024
Capital and Financial Reporting Requirements for Swap Dealers and Major Swap Participants: Deadline 13 February 2024
SR-FINRA-2024-003: Proposed Rule Change to Adopt FINRA Rule 6897(b) (CAT Cost Recovery Fees): Deadline 11 February 2024
SR-FINRA-2024-004: Proposed Rule Change to Amend FINRA Rule 6730 (Transaction Reporting): Deadline 09 February 2024
FINRA has proposed a rule change to Amend FINRA Rule 6730 (Transaction Reporting) to Reduce the 15-Minute TRACE Reporting Timeframe to One Minute with exceptions for member firms with de minimis reporting activity and for manual trades.
SR-FINRA-2024-001: Proposed Rule Change to Amend FINRA Rule 3240 (Borrowing From or Lending to Customers): Deadline 12 February 2024
SR-FINRA-2024-002: Notice of Filing of a Proposed Rule Change to Adopt FINRA Rule 6897(a) and Supplementary Material: Deadline 11 February 2024
Guidelines Establishing Standards for Corporate Governance and Risk Management for Covered Institutions With Total Consolidated Assets of $10 Billion or More: Deadline 09 February, extended from 11 December 2023
Europe
Draft Guidelines on complaints-handling of credit servicers under Directive (EU) 2021/2167: Deadline 9 February 2024
Guidelines on preventing the abuse of funds and certain crypto-assets transfers for money laundering and terrorist financing purposes under Regulation (EU) 2023/1113 (‘The Travel Rule Guidelines’): Deadline 26 February 2024
Consultation on draft RTS on the materiality of extensions and changes to the use of FRTB IMA and changes to the subset of MRF (EBA/CP/2023/36): Deadline 29 February 2024
Draft Regulatory Technical Standards on the conditions for assessing the materiality of extensions and changes to the use of alternative internal models and changes to the subset of the modellable risk factors referred to in Article 325bc under Article 325az(8)(a) of the CRR: Deadline 29 February 2024
Consultation on Technical Advice on CSDR Penalty Mechanism: Deadline 29 February 2024
Public consultation on draft recast Regulation on investment fund statistics: Deadline 12 February
Other jurisdictions
Financial market infrastructure regulatory reforms: Deadline 9 February 2024
The draft legislation aims to strengthen and streamline the Australian Securities and Investments Commission and the Reserve Bank of Australia’s licensing, supervisory and enforcement powers over FMIs and reallocates powers between the minister and regulators to better accord with their respective mandates. It also enhances regulator powers over foreign entities operating FMIs with a significant Australian nexus to ensure they are subject to appropriate oversight.
Climate-related financial disclosure: exposure draft legislation: Deadline 9 February 2024
Consultation paper on superannuation prudential framework amendments: Deadline 28 February 2024
Financial advisers – amendments to certain legislative instruments: Deadline 27 February 2024
In addition to the above deadlines applying to Australia, the Australian Securities and Investments Commission has numerous proposals to remake class orders as follows. Each has a consultation deadline of 16 February.
- ASIC Class Order [CO 13/1200] Periodic statements relief for AQUA quoted and listed managed investment scheme manager.
- ASIC Class Order [CO 13/1406] Land holding for primary production schemes.
- ASIC Class Order [CO 13/1409] Holding assets: Standards for responsible entities.
- ASIC Class Order [CO 13/1410] Holding assets: Standards for providers of custodial and depository services.
- ASIC Class Order [CO 13/1621] Exemption and declaration for the operation of mFund.
Consultation paper on Proposed Enhancements to the Policy Owners’ Protection Scheme in Singapore: Deadline 16 February 2024
Joint consultation paper to gather views on proposal to regulate issuers of stablecoin: Deadline 27 February 2024
- introducing a new piece of legislation to implement a licensing regime requiring all FRS issuers that meet certain conditions (Note 2) to be licensed by the Monetary Authority (MA);
- requiring that FRS can only be offered by specified licensed entities (Note 3), and only FRS licensed by the MA can be offered to retail investors;
- prohibiting the advertising of:FRS issuance by unlicensed entities; or non-specified licensed entities’ offering of FRS;
- providing the necessary powers for the authorities to adjust the parameters of in-scope stablecoins and activities having regard to the rapid VA market development; and
- providing a transitional arrangement to facilitate the implementation of the regulatory regime.
Consultation Paper on Draft Insurance (Exemption to Appointment of Actuary) Rules, Draft Insurance (Maintenance of Assets in Hong Kong) Rules, Draft Insurance (Marine Insurers and Captive Insurers) Rules and Draft Insurance (Lloyd’s) Rules: Deadline 9 February 2024
Disclosure of climate-related financial risks: Deadline 29 February 2024
Digital fraud and banking: supervisory and financial stability implications: Deadline 16 February 2024
Click here to read the full RegInsight on CUBE’s RegPlatform