PwC June 2019 Regulatory Update · 2019. 6. 20. · The levies are aimed at covering higher regulatory costs for the banking regulator APRA flowing from the Financial Services Royal

PwC Regulatory Update

June 2019

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Contents

PwC Regulatory Update

3Legislative/Government

developments

5What have

the regulators been up to?

10Industry bodies

13Overseas

developments

19PwC publications

21Contacts

Legislative/Government developments

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1. Legislative/Government developments

PwC Regulatory Update

Government consults on superannuation binding death benefit nominations and kinship structures

In response to recommendations within Commissioner Hayne’s final report, the Government has released a discussion paper, Superannuation binding death nomination and kinship structures. The Government will leverage the feedback provided through submissions to determine whether any changes to the law are required to address how Aboriginal and Torres Strait Islander kinship structures are treated by laws applying to superannuation death benefits.

Source: Treasury

Government consults on proposed financial industry supervisory levies

The Government has released a discussion paper, Proposed Financial Institutions Supervisory Levies for 2019-20, in conjunction with APRA. The paper sought the views of interested stakeholders on the proposed levies.

Source: Treasury

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

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What have the regulators been up to?

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2. What have the regulators been up to?

PwC Regulatory Update

APRA releases report on industry self-assessmentsAPRA has released a report examining the self-assessments into governance, culture and accountability conducted by 36 of Australia’s largest financial institutions. A number of consistent findings were noted in the report, including:

• Non-financial risk management requires enhancement;

• Accountabilities are sometimes unclear and not adequately enforced;

• Weaknesses are well-established and widely known;

• Risk culture is not well understood and may therefore be preventing desired behaviours.

Source: APRA

APRA consults on proposed changes to mortgage lending guidanceIn a letter to all authorised deposit taking institutions (ADIs), APRA has proposed the following changes to its guidance on mortgage lending:• Removing the quantitative guidance on the serviceability floor rate to allow

an ADI to determine an appropriate level based on their own risk appetite, portfolio mix and other circumstances;

• Increasing the serviceability floor rate buffer to 2.5 per cent;

• Removing the requirement to use a serviceability floor rate buffer above the proposed 2.5 per cent for prudent ADI.

Source: APRA

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

bodies

ASICAustralian Securities and Investments Commission

RBAReserve Bank of Australia

APRAAustralian Prudential Regulation Authority

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2. What have the regulators been up to?

PwC Regulatory Update

Australian Securities and Investments Commission (ASIC) consults on proposed new standards to improve the transparency of complaints handlingASIC is seeking feedback on proposed new standards about how financial firms deal with consumer and small business complaints through their Internal Dispute Resolution (IDR) arrangements.

Submissions are due by 9 August 2019 and new IDR standards will be released by the end of 2019.

Source: ASIC

ASIC urges financial institutions to prepare for transition from London Interbank Offered Rate (LIBOR)ASIC has written to the CEOs of a number of major Australian financial institutions in relation to the preparations for the end of LIBOR. APRA and the Reserve Bank of Australia (RBA) have voiced their support of the initiative. Together the regulators are seeking assurance that these financial institutions fully understand the risks and impact of this transition and are taking suitable actions to manage these risks.

Source: ASIC

ASICAustralian Securities and Investments Commission

APRAAustralian Prudential Regulation Authority

RBAReserve Bank of Australia

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

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2. What have the regulators been up to?

PwC Regulatory Update

ASIC launches events to promote regulatory technology (regtech) adoption

ASIC has launched three events to promote regtech solutions in the financial services industry. The events give regtech stakeholders the opportunity to demonstrate how their regtech solutions provide better outcomes for consumers and promote regtech adoption across Australian financial institutions.

Source: ASIC

ASIC releases new information on initial coin offerings (ICOs) and crypto-assets for businessesASIC has updated Information Sheet 225, Initial coin offerings and crypto-assets, to help businesses involved with ICOs and crypto to fulfil their obligations under the Corporations Act.

Source: ASIC

ASICAustralian Securities and Investments Commission

APRAAustralian Prudential Regulation Authority

RBAReserve Bank of Australia

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

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2. What have the regulators been up to?

PwC Regulatory Update

RBA decides to implement variations in the Interchange Standards operationThe RBA has decided to implement proposals to vary the operation of the Interchange Standards which has been approved by the Payments System Board and takes effect from 1 July 2019. The variation of standards are aimed at improving the clarity and operation of the net compensation requirements of the Standards. The Bank will also implement its proposed transitional arrangement to the varied Standards.Source: RBA

ASICAustralian Securities and Investments Commission

RBAReserve Bank of Australia

APRAAustralian Prudential Regulation Authority

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

bodies

Industry bodies

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3. Industry bodies

PwC Regulatory Update

AFCAAustralian Financial Complaints Authority

COBACustomer Owned Banking Association

ABAAustralian Banking Association

Banking industry welcomes new economic team

The ABA welcomes the reappointment of Treasurer Hon Josh Frydenberg MP and the new appointments of the Hon Michael Sukkar MP as Assistant Treasurer and Jane Hume as Assistant Minister for Superannuation, Financial Services and Financial Technology.

Source: ABA

AFCA to strengthen leadership team

David Locke, Chief Ombudsman and CEO will appoint a Deputy Chief Ombudsman and General Counsel to support AFCA through its rapid growth and the expansion of its jurisdiction on 1 July 2019, when it will start accepting complaints dating back to 2008. Prioritisation will be given to effective resolution of disputes by working with firms to improve their Internal Dispute Resolution (IRD) practices, identifying systemic issues, and serious misconduct in the financial services industry.

Source: AFCA

Legislative/Government

developments

Overseas developments

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3. Industry bodies

PwC Regulatory Update

AFCAAustralian Financial Complaints Authority

COBACustomer Owned Banking Association

ABAAustralian Banking Association

Unfair tax hike proposed for smaller banks

COBA strongly criticised a Treasury proposal to hike levies on smaller banks while cutting levies for the four major banks. The proposition by Treasury is to increase levies on customer owned banks and smaller listed banks while the big four received a $3 million levy reduction.

The levies are aimed at covering higher regulatory costs for the banking regulator APRA flowing from the Financial Services Royal Commission.

Source: COBA

COBA commissions an independent report on the home lending regulatory framework

COBA has commissioned an independent report, Reconciling Prudential Regulation with Competition, which proposes changes to the home lending regulatory framework to promote competition in banking, including:

• Ensuring competition considerations are given due deliberation in prudential regulatory policy decisions by creating a statutory secondary competition objective for Australian Prudential Regulation Authority (APRA);

• Compelling banks using the ‘self-regulation’ internal ratings-based capital framework to hold more capital to strengthen stability and ensure the benefits achieved from injecting greater competition into the banking system can be realized, and;

• Increasing granularity for risk weights for banks using the standardisedapproach to improve competition in home lending.

Source: COBA

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

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Overseas developments

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4. Overseas developments – Global

Basel Committee reports on Basel III implementation progress

BIS has issued the 16th progress report on adoption of the Basel regulatory framework.

The progress report sets out the adoption status of Basel III standards for each Committee member jurisdiction as of end-March 2019. It includes the Basel III post-crisis reforms published by the Committee in December 2017 and the finalised market risk framework published in January 2019.

The reforms take effect from 1 January 2022 and the Committee will continue to closely monitor the implementation of Basel standards including the finalised Basel III reforms.

Source: BIS

FSB launches evaluation of too-big-to-fail reforms and invites feedback from stakeholders

The FSB is actively seeking feedback on its evaluation of the effects of the too-big-to-fail (TBTF) reforms for banks that were agreed by the G20 after the global financial crisis.

The evaluation is geared toward assessing the effectiveness of the implemented reforms and that they are reducing the systemic and moral hazard risks associated with systemically important banks (SIBs). Further to this, they are to examine the broader effects of the reforms to address TBTF for SIBs on the overall functioning of the financial system.

Source: FSB

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PwC Regulatory Update

IOSCO requests feedback on key considerations for regulating crypto-asset trading platforms

IOSCO recently published the consultation paper, Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms, which describes risks and issues that IOSCO has identified regarding CTPs. The report also sets out key considerations to assist regulatory authorities in addressing these issues.

Submissions are due by 29 July 2019.

Source: IOSCO

Legislative/Government

developments

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PwC publications ContactsIndustry

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4. Overseas developments – Europe

ECB amends monetary policy implementation guidelines

The ECB has published amendments to its guidelines on the implementation of monetary policy in the Eurosystem. The following are the amendments to the new guidelines:

• Guideline on the implementation of the Eurosystem monetary policy framework;

• Guideline on the valuation haircuts applied in the implementation of the Eurosystemmonetary policy framework; and

• Guideline on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.

The ECB has further harmonised the definition of agencies as issuers or guarantors of debt instruments and incorporated the transparency requirements of the EU Securitisation Regulation into its collateral framework.

Source: ECB

EBA launches consultation on technical standards on the standardised approach for counterparty credit risk

The EBA is consulting on four draft Regulatory Technical Standards (RTS) on the Standardised Approach for Counterparty Credit Risk (SA-CCR), specifying key aspects of the SA-CCR and ensuring a structured and a consistent implementation across the EU.

Source: EBA

ESMA consults on tiering, comparable compliance and fees under EMIR 2.2

ESMA has released three consultation papers under the European Market Infrastructure Regulation (EMIR) 2.2 on:

• Tiering;

• Comparable compliance; and

• Fees.

ESMA is seeking feedback on its proposal to amend EMIR’s regulatory and supervisory regime for central counterparties (CCPs).

EMIR 2.2 enhances the recognition regime for third country CCPs (TC-CCPs) and introduces a dedicated regime for the third country CCPs which are determined to be, or likely to become systemically important for the financial stability of the Tier 2 CCPs.

EMIR 2.2 also introduces a fee system for TC-CCPs to fund the relevant activities.

Submissions are due by 29 July 2019.

Source: ESMA

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Legislative/Government

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Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

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PwC

4. Overseas developments – UK

FCA: Recent announcements

The Financial Conduct Authority (FCA) confirmed a deadline extension of 30 October 2019 for notifications for the temporary permissions regime (TPR). This would allow European Economic Area (EEA) based businesses to continue operations in the UK for a limited period while they seek full FCA authorisation. New and existing regulated businesses under UK passports will be able to continue business operations while the UK transitions away from the EU.

Source: FCA

FCA: Recent consultations

The FCA is seeking feedback on proposed changes to their sales requirements for mortgages, which will increase customers’ options around purchasing a mortgage. The FCA aims to clarify its advice rules and subsequently develop tools for customers searching for available mortgages, as use of these tools may have previously been considered as advice.

Submissions are due by 7 July 2019.

Source: FCA

PRA: Recent announcements

The Prudential Regulatory Authority (PRA) has released a consultation paper, Maintenance of the ‘transitional measure on technical provisions’ under Solvency II, seeking feedback on its proposal to update the Supervisory Statement. The proposals aim to:

• Provide further guidance for institutions intending to use a proportionate approach to the transitional measure on technical provisions recalculation methodology; and

• Clarify the consistency of Solvency I and II methodologies

Submissions are due by 21 August 2019.

Source: Bank of England

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PwC

4. Overseas developments – ASIA

Hong Kong: Recent announcement

The Hong Kong Monetary Authority (HKMA) has entered into a Memorandum of Understanding (MoU) with the Bank of Thailand (BOT) to facilitate financial innovation between the two regulatory bodies.

As part of the agreement, the HKMA and BOT will collaborate on multiple joint innovation projects which may include information and experience sharing and referral of innovative businesses. One such potential collaboration includes a joint Central Bank Digital Currency (CBDC) research project, where they can apply shared knowledge and experience from their own independent research studies.

Source: HKMA

Hong Kong: Recent announcement

The Securities and Futures Commission (SFC) has signed a MoU with the Dutch Authority for the Financial Markets (AFM) on Mutual Recognition of Funds. This agreement will facilitate information sharing, regular dialogue and regulatory cooperation of eligible Hong Kong Collective Investment Schemes (CIS) and Dutch Undertakings for Collective Investment in Transferable Securities (UCITS) across borders.

Source: SFC

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PwC Regulatory Update

Singapore: Recent announcement

The Monetary Authority of Singapore (MAS) and the People’s Bank of China (PBC) have renewed the Bilateral Currency Swap Arrangement (BCSA) for another three years to strengthen financial stability and economic resilience within the region.

As per the agreement, MAS and PBC are able to access liquid foreign currency for investment financing and trade support requirements. Through the BCSA, financial institutions in Singapore will be able to access a maximum of CNY300 billion in Chinese Yuan liquidity.

Source: MAS

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4. Overseas developments – US

SEC: Recent consultationThe Securities and Exchange Commission (SEC) have proposed amendments to improve financial disclosures that relate to acquisitions and dispositions of organisations. These amendments aim to reduce complexity and compliance costs and enable timely access to capital of these disclosures.

Submissions are due by 29 July 2019.

Source: SEC

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PwC Regulatory Update

SEC: Recent consultationThe SEC has voted to propose amendments to the accelerated filer and large accelerated filer definitions. These amendments aim to appropriately tailor the types of companies that fall into the accelerated and large accelerated filer categories. This would result in a cost reduction for lower-revenue companies, whilst continuing to maintain effective investor protections.

Source: SEC

SEC: Recent consultationThe SEC proposed amendments and guidance for the framework which regulates cross-border security-based swaps transactions and market participants. These actions aim to address implementation and efficiency concerns of the regulatory framework. This proposal also intends to harmonise the regulatory regime governing swaps administered by the Commodity Futures Trading Commission (CTFC) with the regulatory regime that governs security-based swaps administered by the SEC.

Submissions are due by 23 July 2019.

Source: SEC

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5. PwC publications

PwC: 22nd CEO Survey - Financial services talent trends 2019PwC has released a report, 2019 CEO Survey talent trends, exploring the results from PwC’s 22nd Annual Global CEO Survey. The survey discussed how pushing business to the forefront of innovation and digital transformation, reasserting that vital roles within communities and economies can help make the business a magnet for talent.

The report further highlighted the significance of putting contract, contingent, and other forms of partnership and independent talent at the centre of workforce strategies as traditional sources of talent are becoming scarcer. This comes as a result of the mounting pressure on businesses to curb fixed costs and the emergence of highly specialised areas.

See publication

PwC US: The commercial banking business model is changingPwC US has released a report, The commercial banking business model is changing, which discusses the viability of the traditional service model that is grounded in local relationships and extensive technology spending. As the structural shifts continue in core areas such as corporate, the accelerated growth of the largest US banks in comparison to their regional competitors will reshape the previously well-established dynamics of the industry.See publication

PwC US: Digital Intelligence – Not all deposits are created equalPwC US has released a report, Digital intelligence - Not all deposits are created equal, which analyses the top digital developments that influence financial services. The report discusses the evolution of the bank-consumer relationship with both established retail banks and new entrants seeking to capitalise on technology for virtual on-boarding and out-of-footprint deposit collection.

The report highlights how banks are testing numerous ways to establish and develop relationships with or without the presence of a physical branch, as customers are making decisions less on price-led factors and placing increasing value on non-rate factors such as convenience, product type and branding.

See publication

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Contacts

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6. Contacts

PwC Regulatory Update

Nicole SalimbeniPartnerEmail: [email protected]: (02) 8266 1729

Edwina StarPartnerEmail: [email protected]: (02) 8266 4940

Amrita JebamoneyPartnerEmail: [email protected]: (02) 8266 1826

Sarah HofmanPartnerEmail: [email protected]: (02) 8266 2231

Craig StaffordPartnerEmail: [email protected]: (02) 8266 3725

Legislative/Government

developments

Overseas developments

What have the regulators been up to?

PwC publications ContactsIndustry

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