Navigating the Mid-Year Changes: A Comprehensive Interim Update of the Financial Services Regulatory Initiatives Grid

Navigating the Mid-Year Changes:

A Comprehensive Interim Update of the Financial Services Regulatory Initiatives

I. Introduction:

Amidst the ever-evolving financial services landscape, it is crucial for industry players to stay informed about the latest regulatory initiatives. This interim update aims to provide a comprehensive overview of significant mid-year changes affecting various sectors within the financial services industry.

Banking Sector:

Basel IV: The Basel Committee on Banking Supervision (BCBS) has finalized the regulatory framework for Basel IV, which introduces new capital and liquidity requirements. The implementation timeline varies by jurisdiction, with some countries planning to comply as early as 2019.

Capital Requirements:

The new framework aims to simplify the calculation of capital requirements, introducing a more risk-sensitive approach for determining Pillar 1 capital.

Liquidity Requirements:

Basel IV also introduces a new Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) to enhance banks’ liquidity management.

I Securities Sector:

Market Abuse Regulation (MAR): The European Union’s MAR, which entered into force in 2016, has undergone significant updates. Changes include clarifications on insider trading and market manipulation practices.

Fintech Sector:

Revised Payment Services Directive (PSD2): PSD2, which took effect in January 2018, requires financial institutions to share customer data with third-party providers upon request. This regulation aims to promote competition and innovation within the sector.

Conclusion:

This interim update offers an overview of the key regulatory changes impacting the financial services industry in the first half of 2019. Staying informed about these developments is essential for maintaining a competitive edge and ensuring ongoing regulatory compliance.

Mid-Year Financial Services Regulatory Initiatives: A Comprehensive Update

I. Introduction

The financial services industry is constantly evolving, with new regulations and initiatives being introduced regularly to ensure transparency, security, and fairness. In the first half of the year, we have seen a number of significant developments in this area that are worth highlighting. This article aims to provide a comprehensive interim update on the most important financial services regulatory initiatives that have taken place or are expected to take place during the mid-year. It is crucial for stakeholders in the industry to stay informed about these changes, as they can impact business operations, compliance requirements, and risk management strategies.

Brief Overview of Financial Services Regulatory Initiatives in the First Half of the Year

Some of the most notable financial services regulatory initiatives during the first half of the year include:

• GDPR: The European Union’s General Data Protection Regulation (GDPR) came into full effect on May 25, 2018. This regulation sets new standards for data privacy and security, and applies to any organization that processes personal data of EU citizens, regardless of where the company is located.
• MiFID II: The Markets in Financial Instruments Directive (MiFID II) went live on January 3, 2018. This regulation aims to improve transparency and reduce market risk in the European Union’s financial markets.
• CCAR: The Comprehensive Capital Analysis and Review (CCAR) stress testing requirements, implemented by the Federal Reserve, have become a critical component of the regulatory landscape for large banks in the United States.

Importance of Staying Informed about These Changes for Stakeholders in the Industry

Keeping up with regulatory changes is essential for financial services organizations, as failure to comply can result in significant fines, reputational damage, and legal consequences. In addition, understanding the implications of these initiatives can help businesses adapt their strategies and processes to remain competitive and efficient. For example, organizations may need to invest in new technology solutions or retrain staff to stay compliant with the latest regulations. By staying informed, companies can anticipate and prepare for these changes, minimizing disruptions and maximizing opportunities.

Regulatory Changes in North America

United States:

1. Securities and Exchange Commission (SEC):
1. New rules on climate disclosures for public companies: The SEC is proposing new rules that would require public companies to disclose information about how climate risks could impact their business operations, financial condition, and prospects.
2. Proposed changes to money market fund reforms: The SEC is considering modifications to regulations governing money market funds, which could result in changes to pricing structures and liquidity requirements.
3. Enhancements to Regulation Best Interest (Reg BI) and Form CRS: The SEC is proposing updates to Regulation Best Interest and Form CRS, which governs broker-dealers’ fiduciary duties and their relationship summary disclosures.

1. Proposed rule on position limits for swap dealers and major swap participants: The CFTC is proposing a rule that would modify existing position limit rules to apply to swaps as well as futures contracts.

Canada:

1. Canadian Securities Administrators (CSA):
1. Amendments to National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations: The CSA is proposing changes to registration requirements, exemptions, and ongoing registrant obligations.
2. Proposed changes to National Instrument 45-106 Prospectus Exemptions: The CSA is consulting on potential modifications to prospectus exemptions for distribution of securities.

1. New guidance on social media use for investment dealers and their registrants: IIROC has issued new guidance on how investment dealers and their registrants should use social media in compliance with regulatory requirements.
2. Proposed changes to continuing education requirements: IIROC is considering modifications to its continuing education program for investment industry professionals.

I Regulatory Changes in Europe

European Union (EU)

Securities and Markets Stability Law (SMSL): The EU has introduced new regulatory measures under the SMSL to enhance financial market stability.

a. New transparency requirements for securitization positions:

The EU’s new transparency requirements aim to improve the understanding of securitization risks. Securitizers will now need to provide more detailed information about their positions, including the underlying assets and risk profiles.

b. Amendments to the Market Abuse Regulation and Markets in Financial Instruments Directive II (MiFID II)

The EU has made significant amendments to MiFID II and the Market Abuse Regulation. These changes include new rules on insider trading, market manipulation, and the disclosure of positions by large investors in public companies.

European Central Bank (ECB)

Proposed changes to the Capital Requirements Regulation and Directive (CRR/CRD V): The ECB is proposing updates to the CRR and CRD, which will impact capital requirements for banks in the EU.

a. Proposed changes to the Capital Requirements Regulation and Directive (CRR/CRD V)

The ECB is proposing new rules on capital requirements for banks, including changes to the calculation of risk-weighted assets and the treatment of certain types of securities.

United Kingdom

Financial Conduct Authority (FCA) updates: The FCA is making several updates to its rules and guidelines.

a. New rules on operational resilience and business continuity planning:

The FCA is implementing new requirements for firms to ensure their operational resilience and have robust business continuity plans in place.

b. Proposed changes to the Senior Managers and Certification Regime:

The FCA is consulting on potential changes to the Senior Managers and Certification Regime, which could include new requirements for firms to report on their senior managers’ performance.

Bank of England updates:

The Bank of England is making several updates to its rules and guidance.

a. New guidance on climate risk disclosures for banks, building societies, and PRA-designated investment firms:

The Bank of England is providing new guidance to help firms understand their climate risks and disclose this information to investors.

Switzerland

Swiss Financial Market Supervisory Authority (FINMA) updates: FINMA is making several updates to its rules and guidance.

a. New guidance on crypto-assets and initial coin offerings (ICOs):

FINMA is providing new guidance on how it will regulate crypto-assets and ICOs, which could impact the way these products are marketed and sold in Switzerland.

b. Proposed changes to the Anti-Money Laundering Ordinance (AMLO):

FINMA is proposing updates to the AMLO, which could include new requirements for firms to conduct enhanced due diligence on their clients and transactions.

Regulatory Changes in Asia-Pacific

China

China Securities Regulatory Commission (CSRC): The Chinese regulatory body has announced several updates that will impact the securities market.

a. New rules on IPO pricing and allocation mechanisms

The CSRC has proposed new rules to improve the IPO pricing mechanism, aiming for more reasonable and transparent pricing. Additionally, changes are underway regarding allocation mechanisms to ensure fairness and reduce market manipulation.

b. Proposed changes to the Measures for the Administration of the Securities Investment Companies

The CSRC has also proposed amendments to the Measures for the Administration of the Securities Investment Companies, which will likely affect the way securities investment companies operate and manage their business.

Japan

Financial Services Agency (FSA): The Japanese regulatory body, FSA, has announced several updates related to cybersecurity and investment trusts.

a. New regulations on cybersecurity for financial institutions

The FSA has introduced new cybersecurity regulations to strengthen the security measures of financial institutions, aiming to protect clients’ information and assets from potential cyber threats.

b. Proposed changes to the Securities and Exchange Law concerning the distribution of investment trusts

The FSA is proposing changes to the Securities and Exchange Law regarding the distribution of investment trusts, which may bring significant shifts in how these financial products are marketed and sold.

Australia

Australian Securities and Investments Commission (ASIC): ASIC, the Australian regulatory body, has announced updates on financial product design and distribution obligations as well as proposed changes to the Corporations Act 2001.

a. New guidelines on financial product design and distribution obligations

ASIC has issued new guidelines on financial product design and distribution obligations to ensure that financial products are designed and distributed in the best interests of consumers.

b. Proposed changes to the Corporations Act 2001 concerning continuous disclosure requirements

ASIC is proposing changes to the Corporations Act 2001 regarding continuous disclosure requirements, which will likely bring significant changes in how companies report their financial information and communicate with investors.

Conclusion

In this article, we have explored significant regulatory changes that are shaping the future of the financial services industry. A key theme has been the increasing focus on data privacy and cybersecurity, with regulations such as GDPR, CCPA, and LGPD setting new standards for protecting consumer data. Another major trend is the push towards greater transparency and ethical business practices, as seen in regulations like MiFID II and MAS Notice 632.

Implications for Financial Services Industry Stakeholders

These regulatory changes have far-reaching implications for financial services industry stakeholders, including institutions and investors. Institutions must ensure that they are in compliance with these regulations to avoid fines and reputational damage. Investors, too, should be aware of how these regulations may impact their portfolios and investments.

Stay Informed and Adapt

To stay informed about ongoing regulatory developments and adapt to the changing landscape, stakeholders should consider the following steps:

• Monitor regulatory news: Stay up-to-date with the latest regulatory developments through industry publications, trade associations, and regulatory agencies.
• Engage with regulators: Build relationships with regulatory bodies to better understand their expectations and priorities.
• Invest in technology: Implement technologies that can help you meet regulatory requirements, such as data analytics tools and cybersecurity solutions.
• Train your team: Ensure that your staff are aware of the latest regulations and their implications for your organization.

Consult Professionals

Finally, we encourage stakeholders to consult legal, regulatory, or compliance professionals for guidance on specific issues and implications for their organizations. The complexities of these regulations can be daunting, and seeking expert advice can help ensure that you are taking the right steps to protect your organization’s reputation and bottom line.