CUBE RegNews: 9th October

Greg Kilminster

Greg Kilminster

Head of Product - Content

EIOPA publishes 2024 work programme 

Following last week’s work programme announcements from the European Securities and Markets Authority and the European Banking Authority, the European Insurance and Occupational Pensions Authority (EIOPA) has outlined its own strategic priorities for the period 2024 – 2026. 

EIOPA is focusing on six areas, summarised as follows: 

  • Sustainable finance: Integrate ESG risks into prudential frameworks and address protection gaps. 
  • Digital transformation: Support consumers, the market, and the supervisory community through digital transformation. 
  • Supervision: Enhance the quality and effectiveness of supervision, particularly in view of increased cross-border business. 
  • Policy: Ensure technically sound prudential and conduct of business policy. 
  • Financial stability: Identify, assess, monitor, and report on risks to financial stability and conduct of business. 
  • Human capital: Provide effective recruitment, management, and development of EIOPA’s human capital. 

The Single Planning Programme document which discusses the priorities in detail notes that “Delivering on all tasks within our mandate is what we continue to aim for, as times of transformation also give rise to opportunity. Looking ahead, our goal is to continue to remain alert to changes and to build on our strong foundation as the European Insurance and Pensions authority. We will continue to deliver effective supervision, so that the insurance and pensions sectors can continue to deliver value to policyholders and beneficiaries, to business and the EU economy.”

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Michelle W Bowman discusses regulatory reform    

Speaking at the CEO/Executive Management Conference in Banff, Canada, Federal reserve G Governor Michelle W. Bowman discussed three aspects of banking regulatory framework: 

  • how efficiency should be a key factor in policy discussions, 
  • how to think about limits on the Board of Governors of the Federal Reserve’s tools to implement policy decisions, and 
  • the importance of due process and public engagement in rulemaking. 

Bowman expanded on each: efficiency should guide policies, aiming for targeted approaches that minimise costs and administrative burdens on financial institutions. An example she gave is the recent third-party risk management guidance issued in conjunction with the FDIC and OCC. While it had a valuable goal, Bowman argued, its implementation could have been more efficient, especially for community banks. Guidance must be clear and supportive for the smallest banks she stressed. 

Bowman then discussed the limits of regulatory tools for climate-related financial risk. She argued that the Board should carefully consider its legal authority before using any regulatory or supervisory tool and that it should only mandate guidance on a narrow area like climate-related financial risk if there is evidence of unique climate financial risks and an identified need for more guidance. 

Conditions in applications are essential but cannot replace rulemaking. Bowman noted that the Board should evaluate the appropriateness of the tools used and prioritise rules and regulations in addressing supervisory and financial stability concerns. 

Bowman then discussed the importance of due process and public engagement in the rulemaking process. She noted that these elements are essential for policymakers to understand the impact of proposed rules and to make sound decisions. 

She cited the example of the Board’s recent amendments to Regulation II, which implement new rules pertaining to debit card routing on different networks. Community banks raised substantial concerns with the proposal, specifically around the uncertainty of the rule revisions on fraud and the cost of compliance. Bowman herself did not support the Board’s final action, in part because she believed that significant questions remained about the effect of the rule. 

In conclusion, the speech noted the importance of full and active consultation noting: “[Forthcoming] reforms will be extensive and could reshape the contours of the bank regulatory framework, including for community banks, and could restrict the ability of consumers and businesses to access credit and other financial services from chartered financial institutions. It is critical that stakeholders engage in the comment process and communicate with policymakers to share their views on the rulemaking agenda, including the specific impacts—intended and unintended—of any changes.” 

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Australian stock exchange confirms Implementation of all central bank recommendations 

The Australian Stock Exchange (ASX) has confirmed it will implement all the recommendations outlined in the Reserve Bank of Australia (RBA) annual Financial Stability Standards (FSS) assessment of ASX’s clearing and settlement (CS) facilities. 

The assessment requires ASX to place high priority on recommendations related to board process, internal audit, stakeholder management and the management of aging technology assets. The recommendations are as follows: 

  • Board process. Redouble efforts to ensure key issues are appropriately raised with the ASX boards. 
  • Internal Audit. Assess and implement cultural changes to remediate the relationship between Internal Audit and the executive, while ensuring Internal Audit remains an independent source of challenge. 
  • Technology renewal. Prioritise remediation of ageing assets to ensure ASX manages risks associated with legacy systems. 
  • Stakeholder engagement Facilitate effective stakeholder engagement. 

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