CUBE RegNews: 9th January

A selected summary of key developments for regulated financial institutions

Greg Kilminster

Greg Kilminster

Head of Product - Content

ESMA updates manual on post-trade transparency under MiFID II/ MiFIR   

The European Securities and Markets Authority (ESMA) has updated its manual on post-trade transparency under MiFID II/ MiFIR.  


The manual is also expected to be updated shortly in the context of the MiFID II/ MiFIR review and the subsequent RTS 1 and 2 review.  

Changes are as follows:  

  • Amendment of a response regarding contingent trades executed off-venue, which should be subject to post-trade transparency (Article 13, RTS 1). Therefore, the previous answer in the related table has been updated from “N” to “Y”.  
  • Inclusion of guidance on how to populate the “Inflation index ISIN code / ISIN code of the underlying bond” in Table 2 of Annex IV of RTS 2 (transparency reference data) in the case of bond options whose direct underlying is a bond future. 

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Irish Government issues 2024 climate action plan    

The Irish government has released its 2024 climate action plan, which outlines a series of initiatives aimed at achieving a 50% reduction in the country’s emissions by 2030.  

Regarding financial services, the government acknowledges the benefits of existing EU regulations and is committed to actively participating in upcoming regulations. 

In addition, the plan highlights the government’s dedication to supporting the upskilling of Ireland’s financial services sector through the sustainable finance skillnet. This national network aims to enhance skills and leadership capacity to promote ESG best practices across the financial services sector.  

A public consultation for the plan is scheduled for early 2024. 

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ESAs issue consultation on draft ITS for the European Single Access Point      

The European Supervisory Authorities (EBA, EIOPA and ESMA) have released a consultation paper on the draft implementing technical standards (ITSs) regarding the European Single Access Point (ESAP). 

Background 

Established in November 2023, the ESAP aims to provide a centralised single point of access to public financial and non-financial information about EU companies and investment products, free of charge, in a convenient manner. It does not intend to impose additional information reporting requirements on European companies as the information available on ESAP will already be public and compliant with relevant European directives and regulations. Additionally, sustainability information will also be made available on ESAP. The platform should go live in July 2026, and initial information should be published no later than July 2027. 

Consultation 

The consultation seeks feedback on the responsibilities of collection bodies and the functionalities of the ESAP search system, which should include a user-friendly web portal, an API to enable access to information, a search function in all EU languages, an information viewer, a machine-translation service, a download service, and a notification service. 

These ITSs should enable future users to effectively harness comprehensive financial and sustainability information. 

Next steps 

In addition to the consultation, the ESAs will host a public hearing in the form of a webinar. ESAs will provide more details regarding this on their websites in due course. 

The deadline for feedback is 8 March 2024. 

Click here to read the full RegInsight on CUBE’s RegPlatform

Hong Kong cross-agency steering group announces key sustainable finance initiatives     

The green and sustainable finance cross-agency steering group held their first meeting of the year on 8 January 2024.  

The steering group, co-chaired by the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), was established in May 2020 and aims to manage climate and environmental risks to the financial sector, expedite the growth of green and sustainable finance in Hong Kong, and support the Government’s climate strategies.  

At the meeting, the group updated its work plan for the year with three key initiatives to capture financing and investment opportunities from the Asia-Pacific Region’s low carbon transition.  

  • Prioritising transition finance for 2024 and continuing to integrate transition considerations into policy work  

The Steering Group plans to broaden the development of its local taxonomy to cover transition activities, work with regional and international partners on capacity building, and enhance Hong Kong’s thought leadership in the net-zero transition. 

  • Developing a roadmap to adopt International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards locally as appropriate  

The roadmap will cover sustainability reporting, assurance, data and technology, and capacity building. 

  • Leveraging technology to support sustainability reporting and data analysis.  

In Q1 2024, the Steering group will organise an event to showcase potential green fintech use cases to scale the sustainable finance market. 

The Steering Group will also launch enhancements to its website, including the Climate and Environmental Risk Questionnaire for Non-listed companies (Questionnaire) in digital format and new greenhouse gas emissions calculation and estimation tools. It will also explore new features enabling broader consent-based sharing of the data collected through the Questionnaire. 

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AFCA chief ombudsman expresses concerns about complaints escalation    

The Australian Financial Complaints Authority (AFCA) has announced that it has registered a significant increase in the number of complaints received from consumers and small businesses. Preliminary data shows that AFCA received 102,790 complaints, up 23% from the previous year. 

The number of complaints related to scams has increased by 95% from 4,611 in 2022 to 8,987 in 2023. Financial hardship complaints also increased by 29% to 5,396. 

There were also notable increases in complaints relating to financial products, including personal transaction accounts (64% increase), credit cards (33% increase), unauthorised transactions (48% increase), and denial of claims (50% increase). 

David Locke, chief ombudsman and chief executive officer of AFCA, expressed concerns about the unsustainable rate of complaints escalation. He emphasised the need for financial firms to work better to support their customers and address complaints quickly and efficiently in-house. 

Locke suggested that many financial firms could be doing a better job of handling complaints within their internal processes so that only the most complex cases reach AFCA, which is the role they are meant to play. 

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Michelle Bowman’s regulatory resolutions

In a speech made at the South Carolina Bankers Association 2024 Community Bankers Conference, Federal reserve Governor Michelle Bowman covered various aspects of the US economy, monetary policy, bank regulatory reforms, and developments in the payments system. 

Below are some of the key highlights from her speech. 

Monetary policy and economic overview 

  • Bowman highlighted the Federal Open Market Committee’s (FOMC) decision to maintain the federal funds rate and continue the run-off of the Fed’s securities holdings. 
  • She emphasised the progress in lowering inflation, noting it signals a cautious approach to any further potential changes in the policy rate. 
  • Bowman acknowledged potential upside risks to inflation, including geopolitical influences on food and energy markets. 
  • She mentioned too the risk of easing financial conditions leading to a reacceleration of growth and persistently high core services inflation due to tight labour markets. 

Bank regulatory reforms in 2023 

  • Bowman discussed the busy year for banking regulators, with a focus on Basel III “endgame” capital rules, their scope and calibration, and the failures of Silicon Valley Bank (SVB) and Signature Bank. 
  • She also reviewed the emergency actions taken and subsequent reviews, some of which she felt suffered “serious shortcomings, including compressed timeframes for completion and the significantly limited matters that were within the scope of review.”  
  • She went on to note the “tidal wave” of regulatory initiatives since the banking crisis, adding that many of the subsequent changes had little to do with the issues that arose from the Spring 2023 crisis. 

Community banks’ concerns 

  • Bowman revisited her previously made concernsregarding the Community Reinvestment Act (CRA) regulations and proposed changes to debit interchange fee caps. 
  • She noted concerns around increased cost and burden and potential adverse consequences of the rules, “which include the possibility that these rules will reduce the availability of credit in some underserved markets if banks cut back lending activities due to revisions made to assessment areas defined in the new rules.” 

Supervision and transparency 

  • Bowman discussed new guidance on third-party risk management and climate guidance, emphasising the need for safety and soundness. 
  • She called for increased transparency in supervisory expectations to avoid unwelcome surprises during examinations. 

New Year’s resolutions for regulator 

Bowman then covered three resolutions for banking regulators to consider. 

Safety and soundness 

Bowman proposed that safety and soundness should be prioritised as the ultimate goal of bank supervision to ensure a stable financial system. She was critical of how regulators missed critical risks at SVB due to focusing on less relevant areas, like broader qualitative areas or climate change, instead of fundamental risks like concentration and interest rate risk. 

Renewed commitment to tailoring 

Bowman urged a renewed commitment to tailoring, where requirements align with an institution’s size, complexity, and risk profile. This ensures efficient allocation of supervisory resources, fostering a competitive banking landscape by avoiding “one-size-fits-all” regulations that could unintentionally pressure smaller banks to consolidate. Recent proposals like the Basel capital framework, with its potential “cliff effect” for firms nearing the $100 billion asset threshold, highlight the need to integrate tailoring as a foundational principle in future reforms. By acknowledging fundamental differences between banks, argued Bowman, effective regulations can be achieved that promote both safety and a diverse, competitive financial system. 

Increasing transparency in supervisory expectations 

Bowman argued that regulators should ensure that supervisory expectations and the resulting actions are appropriately calibrated and based on existing conditions, rather than driven by premature judgments and uncertain or unsupported supervisory predictions or assumptions. Transparency allows bankers to understand supervisory expectations in advance and work to meet those expectations. She mentioned too the importance of high regulatory standards while simultaneously emphasising the importance of transparency and communication to minimise disruption and foster a healthy banking environment. 

Bowman concluded her speech with a plea: “My sincere hope for 2024 is that policymakers have the humility to acknowledge the intended and unintended consequences of these and upcoming regulatory reform efforts, and the courage to change course, when necessary, to mitigate and minimise these consequences. The future of the banking system and the ongoing strength of the US economy depend on it.” 

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Consultations – January deadlines

A number of consultations have deadlines in January. Here we summarise a few of them with deadlines. 

  • Australia 

The Reserve Bank of Australia is seeking views from interested parties on a proposal to increase the ‘activity threshold’ under the Financial Stability Standards for SSFs (SSF Standards).   

Deadline 19/1/2024  

Treasury and the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA) are seeking feedback on the proposed features of the Scams Code Framework outlined in the discussion paper, which would introduce obligations for these key sectors to combat scams.  

Deadline 29/1/2024  

This consultation paper seeks feedback and views on proposed reforms that will provide the Tax Practitioner Board with a stronger and more agile sanctions regime.  

Deadline 21/1/2024  

This consultation paper seeks interested parties’ views on proposed changes to the Australian Banking Association’s Banking Code of Practice (Code) in response to an independent review of the Code in 2021.  

Deadline 15/1/2024  

This consultation paper seeks feedback on both the impacts of life insurers utilising genetic test results in underwriting on genetic testing and research, as well as a range of potential policy responses.  

Deadline 31/1/2024  

The Competition Review is seeking public input on a variety of questions and potential changes relating to Australia’s merger rules and processes. The Review is seeking this input to help assess:  

– whether Australia’s current merger rules and processes are effective, enabling beneficial mergers while addressing those that could be anti-competitive.   

– in what ways Australia’s merger rules and processes could be improved.  

Deadline 19/1/2024  

  • United Kingdom 

This consultation paper sets out the Prudential Regulation Authority’s (PRA) proposals to consolidate and formalise existing PRA policy on overseas insurers that write business in the UK through the establishment of a third-country branch, and to offer more clarity on the expectations of these third-country branches.  

Deadline 12/1/2024  

This consultation paper from the PRA sets out proposed clarifications and amendments to the capitalisation of foreign exchange exposures under the market risk capital framework. It also outlines the process for seeking permission to exclude Structural Foreign Exchange (SFX) positions from the capital calculation.  

Deadline 30/1/2024  

In July 2022, the Financial Reporting Council (FRC) published a Position Paper in response to the government’s response in respect of Restoring trust in audit and corporate governance which committed to consulting on the revision of a number of auditing standards in order to enhance the useability and informativeness of the audit. These standards included: ISA (UK) 250 (Revised November 2019) Section A—Consideration of Laws and Regulations in an Audit of Financial Statements and ISA (UK) 250 (Revised November 2019) Section B—The Auditor’s Statutory Right and Duty to Report to Regulators of Public Interest Entities and Regulators of Other Entities in the Financial Sector. The FRC has therefore proposed changes to these standards and is seeking the views of stakeholders in respect of these revisions.  

Deadline 12/1/2024  

The Bank of England must consult on codes of practice (CoPs) that it wishes to publish under the wholesale cash distribution oversight regime. The Bank is now consulting on the detailed CoPs for the market oversight regime and this consultation is relevant to firms with an active role in the wholesale distribution market, including cash centre operators and financial institutions.  

Deadline 31/1/2024  

This discussion paper sets out the PRA’s analysis of those areas of general insurance where the PRA has identified additional Financial Services Compensation Scheme coverage could be warranted to secure an appropriate degree of policyholder protection and possible options to remedy this  

Deadline 24/1/2024  

  • United States 

The Commodity Futures Trading Commission (CFTC) is announcing an opportunity for public comment on the proposed renewal of a collection of certain information by the agency.  

Deadline 16/1/2024  

This proposal would amend the CFTC’s regulations governing the safeguarding and investment by futures commission merchants (FCMs) and derivatives clearing organizations of funds held for the benefit of customers engaging in futures, foreign futures, and cleared swaps transactions. The proposed amendments would specifically revise the list of permitted investments in Regulation 1.25 and introduce certain related changes and specifications.  

Deadline 17/1/2024  

FinCEN is issuing a notice of proposed rulemaking (NPRM), pursuant to section 311 of the USA PATRIOT Act, that proposes requiring domestic financial institutions and domestic financial agencies to implement certain recordkeeping and reporting requirements relating to transactions involving convertible virtual currency (CVC) mixing.  

Deadline 22/1/2024  

US regulators are issuing a proposed rule for comment that would require certain large entities to issue and maintain outstanding a minimum amount of long-term debt. The proposed rule would improve the resolvability of these banking organizations in case of failure, may reduce costs to the Deposit Insurance Fund, and mitigate financial stability and contagion risks by reducing the risk of loss to uninsured depositors.  

Deadline 16/1/2024, extended from 30/11/2023  

  • EU  

This consultation paper from the European Supervisory Authorities discusses the system established by the European Supervisory Authorities for the exchange of information relevant to the assessment of the fitness and propriety of holders of qualifying holdings, directors and key function holders of financial institutions and financial market participants by competent authorities. It contains a draft guideline on the ESAs system for the exchange of information relevant to the assessment of fitness and propriety.  

Deadline 15/1/2024  

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have published a Consultation Paper on two draft Joint Guidelines covering suitability assessment of members of the management body, and suitability of shareholders and members with qualifying holdings of issuers of asset referenced tokens (ARTs) and of crypto-asset service provider (CASPs). The guidance will provide clarity and harmonisation with respect to the criteria to assess the suitability of the management body, the shareholders and members with qualifying holdings, thus reducing the risk of arbitrage in the application of the rules.  

Deadline 22/1/2024 

Click here to read the full RegInsight on CUBE’s RegPlatform