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Being better informedFS regulatory, accounting and audit bulletin

PwC FS Risk and Regulation Centre of Excellence

April 2015

In this month’s edition:

Basel Committee and IOSCO announce nine monthdelay on margin requirements for non-centrallycleared derivatives

IOSCO and FSB consult on systemically importantnon-bank non-insurance firms

PRA publishes number of Solvency II final rules

FCA releases Business Plan for 2015/16

Analysis of the new senior managers regime andEBA consultation on CRD IV remunerationguidelines

FS regulatory, accounting and audit bulletin – April 2015 PwC 1

Welcome to this edition of “Beingbetter informed”, our monthly FSregulatory, accounting and auditbulletin, which aims to keep you up tospeed with significant developmentsand their implications across all thefinancial services sectors.

Spring has finally sprung, and we saw the

regulators reinvigorating their efforts

during March. The ESAs had a particularly

busy month. ESMA finalised draft technical

standards on the assessment of acquisitions

and increases in qualifying holdings in

MiFID investment firms. The EBA

consulted on exposures to shadow banking.

EIOPA published its end 2014 risk

dashboard. But their ongoing work may be

subject to some delays because the ESAs

have more restricted budgets to work with

than they hoped for. So ESMA has extended

some of its deadlines and the EBA has

dropped the 2015 EU-wide banking stress

test.

But regulatory delays aren’t confined to

Europe. The Basel Committee and IOSCO

announced a nine-month delay (to

September 2016) in implementing margin

requirements for non-centrally cleared

derivative contracts, which will be welcome

news for some firms. The regulators stated

that they are working with the industry, in

particular ISDA, to agree new margin

calculation models that will comply with

their principles.

While the rest of the world was delaying

action and dealing with shrinking budgets,

the UK added a new regulator on 1 April -

the Payment Systems Regulator (PSR) - for

the £75 trillion payment systems industry.

The PSR got off to a quick start. The week

before its official launch, it detailed its plans

for the new regulatory framework for

payment systems, released its indicative

work policy programme, and launched two

market reviews, on the supply of indirect

access to payment systems and looking at

the ownership and competitiveness of

infrastructure provision.

The PRA helped insurers towards

implementing Solvency II for 1 January

2016 by issuing a number of final rules and

supervisory statements (17 at the last count)

along with three new supporting webpages.

Clearly the PRA is currently devoting a lot of

effort to Solvency II and will be expecting

the same from firms.

The FCA was also busy establishing itself for

a new financial year, publishing its business

plan and proposing its regulated fees and

levies for 2015/16. The business plan is an

important document to gauge where the

FCA will focus its supervisory efforts and

what sectors might be hardest hit. See our

blogs analysing the impact on asset

managers, insurers and pension providers

and consumer credit firms for more

information.

Another big focus for FCA, PRA, banks and

insurers over the next year will be

implementing the new senior managers

regime. Both regulators issued more

information on the new regime in March,

including a roadmap to implementation.

See our feature article for the latest

proposals, when it will hit and who is

caught.

Regulatory scrutiny of financial services

sector compensation and remuneration

remains a hot topic. The international and

regional rules that govern remuneration

have evolved rapidly over the past few years.

We explore the latest approach of the EU

regulators in this month’s second feature

article, looking at the EBA’s recent

consultation on new remuneration

guidelines and how this could change

existing pay practices. In particular, this

change could have a substantial impact on

smaller banks as well as asset managers of

all sizes.

Hope you are all enjoying the lovely spring

weather!

Laura Cox

FS Risk and Regulation Centre of Excellence

020 7212 1579

[email protected]

@LauraCoxPwC

Executive summary

http://pwc.blogs.com/fsrr/2015/03/what-does-the-fcas-business-plan-mean-for-asset-managers.html

http://pwc.blogs.com/fsrr/2015/03/what-does-the-fcas-business-plan-mean-for-asset-managers.html

http://pwc.blogs.com/fsrr/2015/03/fcas-business-plan-what-it-means-for-the-investment-and-pensions-market.html

http://pwc.blogs.com/fsrr/2015/03/the-fcas-business-plan-what-consumer-credit-firms-can-draw-from-it.html

Executive summary Individual

accountability takes

More firms caught by

bonus cap?

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary


How to read this bulletin?

Review the Table of Contents therelevant Sector sections to identify thenews of interest. We recommend yougo directly to the topic/article ofinterest by clicking in the active links

within the table of contents.

ContentsExecutive summary 1

Individual accountability takes shape 3

More firms caught by bonus cap? 6

Cross sector announcements 8

Banking and capital markets 12

Asset management 15

Insurance 17

Monthly calendar 20

Glossary 25

Contacts 30




bonus cap?

Cross sector

announcements

Banking and capital

markets



Since the FCA and PRA consulted on the

new Senior Managers and Certification

regimes (SM&CR) in July 2014, there has

been much speculation on the final

structure and implementation timetable.

During March the regulators jointly issued a

number of important stepping stones to the

final regime, namely a roadmap and

refinements to the final rules. This

information makes the scope of impending

changes far clearer for banks, building

societies, credit unions and PRA-designated

investment firms.

The FCA also underlined the significance it

places on individual accountability in its

business plan on 24 March 2015. The FCA

identified five priorities; this year giving

equal billing to ‘protecting consumers’

(which is a regulatory statutory objective)

the regulator also cited ‘individual

accountability’. This approach covers a

broad scope of individual accountability,

including not only the SM&CR but also

whistleblowing, remuneration and

incentives. But the presence of this key

pillar in its approach sets a new tone.

Key changes to the regimesBoth the FCA and PRA published near final

and final rules on parts of the regime. The

FCA published Strengthening

accountability in banking: a new

regulatory framework for individuals on 16

March 2015, and the PRA published

PS3/15: Strengthening individual

accountability in banking and insurance –

responses to CP14/14 and CP26/14 on 23

March 2015. These publications build on the

disapplication of the Senior Manager (SM)

regime to ‘standard NEDs’ which the FCA

and PRA consulted on in February.

Both the FCA and PRA have made a number

of changes to the scope and application of

the SM&CR in the final rules. Specific roles

now included as a SM Function (SMF)

include:

a wider financial crime SMF, for an

individual with overall responsibility for

the firm’s policies and procedures for

countering financial crime (in addition

to the MLRO)

an individual responsible for developing

and overseeing the firm’s remuneration

policies and practices and for the firm’s

CASS compliance (previously CF10a)

for large firms, the person responsible

for stress testing.

While these additional roles superficially

appear to tweak the regime, they may pose

new challenges. Currently a CF10a typically

sits in an operational role, but under the SM

regime the new CASS SMF may have to be

held by a more senior board or executive

board committee member.

The PRA has simplified the approach for

smaller firms. Previous proposals exempted

credit unions from the full weight of the

regime. The PRA now plan to apply a more

proportionate regime for firms with less

than £250 million in gross assets. Credit

unions will continue to be exempt, but other

small firms (such as challenger entities) will

now be partially exempt.

Joint and role-specificprescribed responsibilitiesThe PCBS called for the regulators to

achieve absolute clarity for individual

function ownership. But the PRA hasn’t

entirely followed that approach. It now

intends to allow two individuals to share a

prescribed responsibility (PR). The PRA

makes the distinction that where a firm

allocates a PR to more than one SM, each

individual will be deemed wholly

responsible for the entire PR. In the event of

a breach, each SM would then have an

opportunity to explain how the shared PR

was discharged in practice when trying to

demonstrate that he or she took reasonable

steps to avoid the breach.

Also, firms in scope of the retail ring-fence

will also be subject to a ring-fenced bank

(RFP) PR. Each and every SM in the ring-

fenced bank with responsibility for an area

covered by the ring-fencing requirements

would be allocated the RFB PR, in addition

Individual accountability takes shape

http://www.fca.org.uk/news/cp15-09-strengthening-accountability-in-banking-a-new-regulatory-framework-for-individuals



http://www.bankofengland.co.uk/pra/Pages/publications/ps/2015/ps315.aspx






bonus cap?

Cross sector

announcements

Banking and capital

markets



to their core SM PRs. The PRA wants to

‘underscore’ its expectations in this area.

The PRA also signposts the specific PRs that

must be allocated to NEDs, rather than

executive board members.

Certification regime andconduct rulesBoth the FCA and PRA intend to apply the

certification regime (CR) and conduct rules

as previously consulted. But they are

considering how to apply the CR to

wholesale firms. The regulators have

identified that some traders are neither

caught by the ‘material risk taker’ (MTR)

definition nor the qualification

requirements even though those individuals

have scope to cause ‘significant harm’ to the

firm. The FCA and PRA are considering this

issue further and may consult to formally

increase the scope of the CR during spring

2015. Also, the final rules will allow

uncertified individuals to cover a certified

role in exceptional circumstances for four

weeks (increased from two weeks).

Application to branchesThe FCA and PRA published Strengthening

accountability in banking: UK branches of

foreign banks on 16 March 2015. HMT

confirmed in a written statement on 3

March 2015 that new regime would apply to

both EEA and non-EEA branches.

EEA branchesThe PRA is limited in its ability to apply

requirements to incoming EEA-branches

because they are subject to home country

requirements. But the FCA has more

flexibility (as branches are subject to host

state conduct rules). It is planning to

require EEA branches to appoint:

a senior manager to the MLRO function

a tailored ‘EEA Branch Senior Manager’

function to cover each individual

responsible for the management and

conduct of certain regulated activities of

the branch.

The FCA intends to apply the CR to MTRs

and to individuals whose roles require a

qualification (or where the UK equivalent of

that role would require a qualification). The

FCA is planning to limit the certification

functions so that they apply only in relation

to the branch activity, and only when the

individual is based in the UK. But the final

scope is still subject to the ongoing

consultation on wholesale traders and the

regulators are likely to align these

requirements.

The FCA will apply the conduct rules to the

extent that they comply with EU legislation.

Conduct rules for staff who are not SMs will

only apply to individuals based in the UK,

although this territorial limitation will not

apply to SMs.

Non-EEA branchesFor incoming non-EEA branches, the

regime will be a hybrid between the scope of

the EEA branch regime and the full-UK

bank regime.

Non-EEA branches must have:

at least one SMF as the ‘Head of

Overseas Branch’ held by the individual

performing the function akin to branch

CEO

any other individuals with direct

management or decision making

responsibilities over the branch’s UK-

regulated activities will hold the SMF of

‘Group Entity Senior Manager’

an Overseas Branch Senior Manager

(OBSM) function which will capture

senior individuals (except the Head of

Overseas Branch) with responsibility for

a business area, activity or management

function of the branch, and who will

typically report to the Head of Overseas

Branch, but only in relation to their

responsibilities in the UK branch.

a MLRO

a SM responsible for Compliance

Oversight.

In larger complex branches, the PRA would

also expect the firm to have dedicated

individuals performing certain executive

SMFs such as a CFO, CRO and Head of

Internal Audit.

The PRA and FCA have created a bespoke

list of 13 PRs which must be allocated

amongst individuals in the firm who hold

SMFs. All SMs will need to be pre-approved,

will operate under a reverse burden of proof

although not with equivalent criminal

sanctions and will have a Statement of

Responsibility. The Statement of

Responsibility will formally set out an

individual’s role and responsibilities, the

division for those sharing a PR and will map

to the firm’s Responsibilities Map.

The scope of the CR for branches will be

aligned to the scope for UK firms, for

individuals who have are MRTs or who have

a qualification, but the scope may be

restricted to the branch activity. Individuals

with line management responsibility for

other individuals who fall in the CR may

also be caught, regardless of whether they

are based in the UK or abroad, in relation to

the firm’s activities for UK clients. The PRA

conduct rules will apply to all SM&CR

individuals, while the FCA will apply its

conduct rules to all branch staff, except

individuals with specific ancillary roles.

TimelineFirms now have three dates to focus on. By

8 February 2016, each firm must identify

all of its SMs and CRs, and notify the

regulators of any individuals who are being

grandfathered into SMFs. We expect the

regulators to finalise their work on fitting

other wholesale traders into the CR soon.

The broad regime then comes into force on

7 March 2016. At that point firms will

have one year to transition their certified

individuals into the CR (through a one cycle

of an annual appraisal process) by 7 March

2017.

http://www.fca.org.uk/news/cp15-10-strengthening-accountability-in-banking






bonus cap?

Cross sector

announcements

Banking and capital

markets



SMs’ responsibilities, including the reverse

burden of proof and criminal sanctions, take

effect from 7 March 2016, along with the

broad requirements of the regime such as

the Responsibility Map and individual

Statements of Responsibility.

Getting implementationrightFirms are still considering the full

implications of the regimes, with both

operational and more strategic issues to

address. The impact on the recruitment and

retention of talented individuals for the

senior roles, including NEDs remains a

concern for many firms, as does the

potential implications of a two-tier NED

structure. Firms are also concerned at the

potential for NEDs to stray into executive

functions and actions as they look for

information about and reassurance as to the

scope of their roles and responsibilities.

The potential for slower action as

individuals look for additional evidence to

ensure they are comfortable with decisions

being made is also a challenge, as is the

jurisdictional complexity of dealing with an

overseas parent and their influence over UK

governance and operations.

But with the broad scope of the regimes and

timeline now clear, firms are beginning the

first stages of their implementation plans.

Many firms have created first drafts of their

Responsibilities Maps, working across HR,

Legal and Compliance functions to tackle

questions of scope, or interaction with other

MRT remuneration obligations.

Firms must then consider testing their draft

plans. Testing the robustness of the map

against scenarios allows firms to consider

whether the allocation of responsibilities

stands up to non-standard events and is

truly fit for purpose.

Firms need also consider the wider CR and

conduct rules. The breadth of scope and

nuance of an individual firm makes a one-

size-fits-all solution difficult, with some

firms focusing on governance arrangements

for wholesale transactions, and others

considering the cultural impacts of the

conduct rules – and how best to make the

obligations ‘real’ for the large population of

staff caught by the conduct rules.

Whatever your approach, the effort required

to implement the regime should not be

underestimated. As firms analyse the

different elements of the regime, the

breadth of work – and limited timescales –

becomes clear. Firms cannot afford to miss

the February 2016 deadline to grandfather

SMs, and may need to amend existing roles

and structures in advance of that date.

Further, when firms give wider

consideration of the CR and conduct

regimes, the sheer size of the task at hand

becomes clear. Acting now will be critical to

a firm’s success.




bonus cap?

Cross sector

announcements

Banking and capital

markets



The level of European remuneration has

been a hot topic for politicians and

regulators since the onset of the financial

crisis. The latest development to impact

banks and MiFID investment firms came

when CRD IV was implemented in January

2014. CRD IV requires firms to apply

remuneration requirements to staff whose

activities can have a material impact on its

risk profile (usually known as ‘material risk

takers’ staff).

Further, CRD IV introduced a cap on the

amount of bonus an individual could receive

(linked to their fixed salary). National

regulators have allowed smaller banks and

asset managers to continue applying

remuneration rules applicable under CRD

III, arguing proportionality These set out

rules on when and how bonuses are paid but

crucially don’t limit the amount.

But this is set to change. In March the EBA

released its consultation on the proposed

guidelines for ‘sound remuneration policies’

across the EU. If agreed (and the EBA has

said it plans to finalise the guidelines in the

second half of 2015), the guidelines will

replace those set out by the EBA’s

predecessor (CEBS) in December 2010.

What might change?Proportionality

The EBA’s draft guidelines focus most

attention on the idea of proportionality and

how it is applied. The EBA notes that in its

view (with which, it confirms, the EC has

already agreed) the concept of

proportionality for variable remuneration is

“neutralised” by CRD IV and that it is not

possible under CRD IV to waive the variable

remuneration requirements.

Instead the EBA argues that the rules could

only be applied proportionally to very small

and non-complex firms that do not

extensively rely on variable remuneration,

or where material risk takers receive a low

amount of variable remuneration. This

means more firms should be brought into

scope of the full CRD IV variable

remuneration rules relating to the bonus

cap, deferral requirements, payment in

instruments and the application of malus

and clawback.

Deferral

The guidelines suggest that it is appropriate

to retain variable remuneration paid in

instruments for a year. Typically (e.g. in the

UK) regulators have required only a 6

month holding period. The guidelines also

propose further requirements for

individuals on the management body or in a

firm’s senior management group through

either increasing the retention period of

upfront awards to that of the deferral period

or by increasing the percentage of deferred

pay that is paid in instruments. Further if

these individuals work in significant CRD IV

firms then the deferral period would also be

increased (5 years vesting no faster than pro

rata).

Instruments

The EBA does not propose a prescriptive list

on the use of alternative capital and debt

instruments. Instead the power remains

with firms which can use instruments where

they have already issued such instruments

in significant amounts to make awards

practical.

Allowances

The EBA has not changed its views on fixed

allowances, still viewing them as part of an

individual’s fixed rather than variable pay.

It has also expanded its definitions of fixed

pay and variable pay in the guidelines,

partly to align with its views on fixed

allowances. The EBA also confirms (as per

AIFMD) that carried-interest plans do not

form part of variable remuneration where

payments do not represent a pro rata return

on an investment.

Long-term incentive plans (LTIPs)

The new guidance here could be significant

for firms operating LTIPs since the EBA

suggests performance-based LTIPs will be

counted towards variable remuneration

(and so an individual’s bonus cap) in the

year the LTIP vests rather than the year it is

awarded. This may mean firms need to

change existing programmes for LTIPs

More firms caught by bonus cap?

http://www.eba.europa.eu/documents/10180/1002374/EBA-CP-2015-03+%28CP+on+GLs+on+Sound+Remuneration+Policies%29.pdf




bonus cap?

Cross sector

announcements

Banking and capital

markets



which focus on share awards with forward-

looking performance conditions since these

will be difficult to value at vesting point.

What’s next?As these are guidelines that the EBA is

consulting on, regulators will eventually

need to either comply with them or explain

why they are choosing not to comply. Given

the chance of regulatory arbitrage if some

countries choose not to comply and the

political focus on bonuses it seems unlikely

that any regulator will choose not to comply.

Certainly regulators have always complied

with similar remuneration guidelines

previously.

The EBA is holding a public hearing on the

consultation on 4 May 2015 and the

consultation closes on 4 June 2015.

What does this mean forfirms?The remuneration rules faced by CRD IV

firms are already very complicated with

different rules for how bonuses are paid,

how much is paid and when bonuses are

paid. These guidelines add another layer of

complexity in certain areas.

All firms caught by CRD IV should be

concerned by the direction of these new

proposals. Clearly the EBA’s interpretation

of how the proportionality principle can be

applied in the case of CRD IV will impact a

large number of European firms and may

force firms or individuals to move outside

the EU to escape the ongoing bonus focus.

For some firms (particularly MiFID

investment firms) it may mean

reconsidering what activities the firm

carries out and whether it needs existing

permissions. Narrowing activities could

affect the bottom line but also could allow a

firm to operate under CRD III rather than

CRD IV (as is allowed by the FCA in the

UK). Such a change would negate the

impact of the changes the EBA proposes

here. We have a number of clients that are

considering such business changes.

The formalisation of the earlier EBA

opinion on allowances may be no surprise,

but will impact many. The extension of the

guidance relating to the definition of fixed

and variable pay, and in particular the

specific criteria for mapping all

remuneration components into either fixed

or variable pay, could have an impact on all

firms; we think that many questions remain,

though, around some of the definitions

included in the proposals, for example

concerning the treatment of some types of

expatriate allowance.

The other notable changes in the proposed

guidance include clarification that the

appropriate period to meet requirements for

the retention of variable remuneration paid

in instruments should be one year, rather

than the six months currently applied in the

UK. And firms that run long-term incentive

schemes could be affected by proposals

which suggest that performance-based LTIP

awards will be counted towards the bonus

cap in the year of vesting rather than in the

year of award. This could mean that many

LTIP schemes will have to be looked at

carefully and may well have wider

implications for bank’s pay models.




bonus cap?

Cross sector

announcements

Banking and capital

markets



In this section:

Regulation 8

Capital and liquidity 8

CRAs 8

Financial stability 8

Market infrastructure 9

MiFID II 9

Other regulatory 10

Securities and derivatives 10

Accounting 11

IFRS 11

Regulation

Capital and liquidityRedefining fixed overheads

On 24 March 2015, a new Delegated

Regulation amending an existing

Delegated Regulation as regards own

funds requirements for firms based on fixed

overheards was published in the Official

Journal.

For most asset managers and certain other

types of investment firms, capital

requirements are determined as the

equivalent of three months fixed

expenditure. This Delegated Regulation

introduces a new list of items of variable

expenditure that must be subtracted from

the total expenditure figure to arrive at the

fixed expenditure cost for CRD IV

investment firms (IFPRU firms in UK).

Some asset managers had expressed

concern that the list of variable expenditure

items in the new definition is more

restrictive than under the old rule which will

lead to a higher final figure for fixed

overheads (and therefore capital

requirements) than was previously the case.

The new definition came into effect on 13

April 2015. It is relevant for calculating

capital requirements, COREP reporting and

applications for authorisation as an IFPRU

firm from that date. BIPRU firms and firms

applying for authorisation as a BIPRU firm

are not affected by this change.

CRAsIOSCO amends CRA code of conduct

On 24 March 2015, IOSCO published

amendments to its CRA code of conduct.

IOSCO aims to:

ensure CRAs are independent and avoid

conflicts of interest

improve the transparency and timeliness

of credit ratings disclosures

improve communication with market

participants

strengthen treatment of confidential

information.

The amendments support the wider

international push to hold CRAs to a level of

accountability commensurate with their role

in the financial system. CRAs have widely

adopted previous versions of the code of

conduct and we expect them to adopt this

updated version in due course.

Keeping ESMA informed on CRAs

ESMA published its Final report -

guidelines on periodic information to be

submitted to ESMA by CRAs (dated 19

March 2015) on 23 March 2015. Registered

CRAs are already required to submit

information to ESMA in response to CESR

2010 guidance on the enforcement practices

and activities conducted under the CRA

Regulation. ESMA's new guidelines update

(and replace) the CESR guidance on the

nature and timing of information that CRAs

must submit.

In future CRAs must submit:

quarterly information on financial

revenues and costs, staff changes (such

as turnover or promotions) and details

on internal complaints submitted to

compliance

half-yearly information on board

minutes (which includes independent

NED opinions), and dispute or court

proceedings, any potential or actual

non-compliance with CRA Regulation

requirements and remedial steps to

comply and organisational charts.

The guidelines must now be translated into

the EU's official languages. CRAs will then

have two months to comply or explain why

they are not complying.

Financial stabilityWho's systemically important?

The FSB and IOSCO published a second

Consultative document on assessment

methodologies for identifying non-bank

non-insurer (NBNI) G-SIFIs on 4 March

2015. A similar methodology already exists

for banks (G-SIBs) and insurers (G-SIIs).

Cross sector announcements

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:JOL_2015_078_R_0001&from=EN





https://www.iosco.org/library/pubdocs/pdf/IOSCOPD482.pdf

http://www.esma.europa.eu/system/files/2015-609_cra_guidelines_on_periodic_reporting.pdf



http://www.financialstabilityboard.org/wp-content/uploads/2nd-Con-Doc-on-NBNI-G-SIFI-methodologies.pdf






bonus cap?

Cross sector

announcements

Banking and capital

markets



The FSB and IOSCO propose methodologies

to identify NBNIs (finance companies,

market intermediaries, asset managers and

investment funds) whose distress or

disorderly failure, because of their size,

complexity and market interconnectedness,

could lead to larger financial instability.

Because most NBNIs are primarily

regulated from a conduct perspective,

IOSCO and FSB propose a universal set of

methodological principles to address the

data and information gaps that currently

exist around systemic risk.

NBNI G-SIFIs have different forms of legal

entities and come from various industries.

Their business models and risk dynamics

also vary, so the proposed methodology

combines cross-sector risk factors along

with sector-specific criteria. The basic

impact factors include:

size

interconnectedness

substitutability

complexity

cross-jurisdictional activities.

One notable difference between the initially

proposed methodology and the current

version is that leverage is now a bigger

consideration for determining whether

investment funds meet the size criteria

thresholds.

The consultation closes on 29 May 2015.

FSB and IOSCO aim to finalise the

assessment methodologies by the end of

2015. Then they will seek to identify the

consequences of being classified as a NBNI

G-SIFI, such as requiring additional capital

or other measures. Finally IOSCO and FSB

will identify which firms and investment

funds should be identified as NBNI G-SIFIs.

Market infrastructureCCPs get stressed

On 11 March 2015, IOSCO and the

Committee on Payments and Market

Infrastructures announced that they will be

stress testing CCPs. Noting the important

role CCPs play in the global financial

system, IOSCO and the CPMI plan to check

that CCPs have the financial resources to

manage both credit and liquidity risk, which

entails incorporating a number of extreme

but plausible scenarios.

Results of the stress tests are expected later

in 2015.

FSB wants FX progress report

In his capacity as FSB Chair, Mark Carney

wrote to the Chairman of the London

Foreign Exchange Joint Standing

Committee on 20 March 2015.

Carney requested the Committee's support

in reporting on market participant's

progress in implementing the FSB's

recommendations on FX benchmarks,

published on 30 September 2014. The

Committee must report on the status of its

members as at 30 June 2015, and provide

this report to the FSB no later than 31 July

2015.

Supervising automated trading

ESMA published the findings of a Peer

Review on Automated Trading Guidelines

on 18 March 2015. It reviewed the

supervision of automated trading across 30

national competent authorities, though

focused on the 12 authorities supervising

platforms with the most significant

automated trading volumes.

ESMA assessed how regulators have

implemented its Guidelines on Automated

Trading, published in 2012. The majority of

authorities have implemented the

guidelines into their supervisory approaches

and therefore the level of supervision of

automated trading activity has increased.

ESMA also highlighted a number of

challenges in supervising automated

trading, particularly because the speed and

complexity of high frequency trading

increases the need for supervisors to

improve their IT expertise. It also suggested

that supervisors should have an appropriate

level of engagement with trading platforms,

and that on-site inspections should be used

to ensure trading platforms are sufficiently

challenged.

MiFID IIThe appropriateness of complexity

On 24 March 2015, ESMA published Draft

guidelines on complex debt instruments

and structured deposits. Firms may only

provide execution-only services to clients,

without performing a MiFID

appropriateness test, when dealing in non-

complex instruments. MiFID II has

significantly reduced the number of

instruments which can be defined as non-

complex. ESMA is required to provide

further clarity on which debt instruments

and structured deposits should be

considered complex.

Debt instruments are complex if they embed

a derivative or incorporate a structure which

makes it difficult for the client to

understand the risk of the product. Debt

instruments which fit this description

include asset backed securities, perpetual

bonds and subordinated debt instruments.

Structured deposits are now within the

scope of MiFID II investment products,

though deposits linked solely to interest

rates are excluded. ESMA identifies which

structured deposits:

incorporate a structure which makes it

difficult for the client to understand the

risk and return such as more than one

variable affecting the return received or

where a complex relationship exists

between the relevant variable and return

make it difficult for the client to

understand the cost of exiting before the

term has finished such as an exit penalty

which is not a fixed sum or percentage of

the original investment.

Structured products meeting these criteria

will be considered complex under MiFID II.

http://www.iosco.org/news/pdf/IOSCONEWS372.pdf

http://www.bankofengland.co.uk/markets/Documents/forex/fxjsc/fxjscletter.pdf

http://www.esma.europa.eu/system/files/esma-2015-592-automated_trading_peer_review_report_publication.final_.pdf

http://www.esma.europa.eu/system/files/esma-2015-592-automated_trading_peer_review_report_publication.final_.pdf

http://www.esma.europa.eu/system/files/esma_2012_122_en.pdf

http://www.esma.europa.eu/system/files/esma_2012_122_en.pdf

http://www.esma.europa.eu/system/files/2015-610_cp_mifid_guidelines_complex_products.pdf






bonus cap?

Cross sector

announcements

Banking and capital

markets



The consultation closes on 15 June 2015

and ESMA expects to publish the final

guidelines in Q4 2015.

Updated MiFID RTS to correct error

ESMA published its Final report - draft

RTS under MiFID on the assessment of

acquisitions and increases in qualifying

holdings in investment firms on 27 March

2015. These RTS were required as a result of

an amendment introduced to MiFID by the

Omnibus I Directive. However, a reference

error in that Directive required a

corrigendum to be adopted, and the RTS

submitted to the EC in December 2013 to be

amended, before they could be endorsed.

In the revised version, ESMA has also

introduced a new Article 6 to the RTS

looking at information on the persons that

will effectively direct the business of the

target entity. MiFID II contains identical

empowerments to the requirements

introduced by the Omnibus I Directive, so

these RTS once adopted, will apply both

under the MiFID and the MiFID II regimes.

Other regulatoryRegulation out, growth in?

Lord Hill, Financial Services Commissioner,

spoke on 17 March 2015 about a number of

"reality checks" needed by politicians and

the financial services industry to move the

EU away from the financial crisis towards

growth. Hill believes we have now moved on

from needing to develop new regulation to

cope with yesterday's problems. So the EC

will consider what can be done to promote

jobs and growth. This will include

examining whether the regulation

implemented to respond to the financial

crisis achieves what it set out to do and

whether it does this through imposing the

minimum of burdens on firms.

But Hill recognises that there are some new

risks that have emerged more recently so he

called for a swift conclusion to the

outstanding proposals on MMFs,

benchmarks and bank structural reform. He

also confirmed plans to release a new

proposal by the autumn to develop a

resolution regime for non-bank financial

institutions - in particular CCPs, which now

take on much of the risk under EMIR.

Finally Hill moved on to his pet project, the

CMU. He believes this will drive growth and

create jobs by recreating a thriving

securitisation market in the EU and by

increasing funding from across financial

services into infrastructure and SMEs. As

part of this Hill noted that the review into

the success of CRR will focus on whether the

rules imposed on banks are appropriate to

meet the long-term financing requirements

that their clients need.

Lessening disclosure to protect secrets

ESMA published its Call for evidence - the

extension of the disclosure requirements to

private and bilateral transactions for

Structured Finance Instruments (SFIs) on

20 March 2015. Issuers, originators and

sponsors of SFIs must publicly disclose

certain information under the CRA

Regulation, allowing investors to assess the

creditworthiness of the transaction.

But these requirements are not adapted for

different types of SFI transaction. ESMA

recognises that for private and bilateral

transactions in SFIs it might be prudent for

less information to be disclosed, e.g. to

protect the issuer's trade secrets. Adequate

disclosure needs to be achieved to meet the

CRA Regulation's objective of providing

investors with enough information. So

ESMA calls for input on how to:

define private and bilateral transactions

in SFIs and establish whether different

disclosure requirements should be

established for each type of transaction

assess whether the disclosure

requirements should be copied across

identically for private and bilateral

transactions or whether they should be

amended.

The call for evidence closes on 20 May

2015.

Securities and derivativesBilateral margin delayed until 2016

BCBS and IOSCO announced a nine month

delay to the globally agreed implementation

date for non-centrally cleared margin when

they published the amended Margin

Requirements for Non-centrally Cleared

Derivatives on 18 March 2015. The new

schedule delays implementation of both

initial margin (IM) and variation margin

(VM) requirements from 1 December 2015

to 1 September 2016. The full phase-in

schedule for IM has been adjusted

accordingly in the BCBS/IOSCO margin

standards.

BCBS and IOSCO state that they are

working with the industry to agree new IM

calculation models that will comply with the

BCBS/IOSCO principles. EU rule makers

are expected to amend the draft EMIR rules

for non-centrally cleared margin to align

them to the international schedule.

Updated EMIR Q&A

ESMA published the 12th update to its Q&A

on EMIR on 31 March 2015. The update

includes new questions on:

the status of sovereign wealth funds

under EMIR

outsourced assets under the Article 89

pension scheme exemption

frontloading and the intragroup

exemption to the clearing obligation

third country contracts

CCP authorisation

variation margin.

The questions and answers provide

guidance for regulators and firms to help

interpret various technical aspects of EMIR.

http://www.esma.europa.eu/system/files/2015-613_final_report_and_assessment_rts_its.pdf




http://europa.eu/rapid/press-release_SPEECH-15-4616_en.htm

http://www.esma.europa.eu/system/files/esma-2015-558_call_for_evidence_on_private_and_bilateral_sfis.pdf




http://www.bis.org/bcbs/publ/d317.htm



http://www.esma.europa.eu/system/files/2015_655_qa_xii_on_emir_implementation_october_2014.pdf

http://www.esma.europa.eu/system/files/2015_655_qa_xii_on_emir_implementation_october_2014.pdf




bonus cap?

Cross sector

announcements

Banking and capital

markets



Accounting

IFRSNew revenue standard discussionscontinue

The IASB has published notes from its

meeting with the FASB on 18 March 2015,

to discuss the following implementation

issues related to the new revenue standard:

practical expedients upon transition—

contract modifications and completed

contracts

sales tax presentation: gross versus net

non-cash consideration

collectability considerations

principal versus agent considerations.

Both boards agreed to propose a new

practical expedient to provide relief from

evaluating contract modifications prior to

the date of initial application of the

standard. The boards also agreed to propose

other practical expedients and clarifications

to the standard, although they were not fully

aligned on their approach. The IASB plans

to include the agreed-upon changes in a

package of proposed amendments it expects

to issue later this year.

See In Transition ‘FASB and IASB decide on

additional changes to revenue standard’ for

our overview of the implementation issues

discussed and the tentative decisions

reached.

Proposed amendments to statement ofcash flows

The IASB issued Investor perspective:

Helping Investors Better Understand Cash

Flow on 23 March 2015. This paper looks at

the merits of proposed amendments to IAS

7,'Statement of cash flows', to provide more

information about changes in debt.

New leases standard project update

The IASB published a project update

‘Leases: Practical implications of the new

Leases Standard’ on 16 March 2015. It

outlines the likely practical effects of the

new leases standard, which will require

companies to bring leases onto the balance

sheet, as well as providing details on the

similarities and differences between the

IASB’s requirements and those of the US

FASB.

New IFRSs for 2015

Our In depth guide ‘New IFRSs for

2015’outlines the new IFRS standards and

interpretations that come into effect for

2015 year ends. The IASB has issued three

new standards: IFRS 9 ‘Financial

instruments’, IFRS 14 ‘Regulatory deferral

accounts’, IFRS 15 ‘Revenue from contracts

with customers’.

The IASB has also made a few narrow scope

amendments to existing standards effective

for 1 July 2014, that have been endorsed by

the EU as effective on or after 1 January

2015, and various other amendments that

are still subject to endorsement.

Reminder of Listing Rule disclosures

The FCA’s Listing Rules (Listing Regime

Enhancements) Instrument 2014 require

premium listed companies to make certain

disclosures ranging from related party

transactions to certain long-term incentive

schemes (as well as new disclosures for

companies with controlling shareholders) in

one place in the annual report, or to provide

a cross-reference table.

Our In brief guide ‘Profit forecasts and

unaudited financial information –

reminder of Listing Rule disclosure

requirements’ considers how firms have

implemented these requirements and issues

encountered re disclosures relating to profit

forecasts and unaudited financial

information.

Impairment of financial assets – Q & A

The IASB published the complete version of

IFRS 9 ‘Financial instruments’ in July 2014.

This replaces most of the guidance in IAS 39

and contains a new impairment model

which will result in earlier recognition of

impairment losses.

Our In depth guide ‘A look at current

financial reporting issues IFRS 9:

Impairment of financial assets – Questions

and answers’ includes our views on some of

the most common issues that have been

raised by preparers and reviewers of

financial statements as part of

implementation of the new standard in

relation to impairment.

Impairment of non-financial assets

Following our In brief guide ‘Top 5 tips for

impairment reviews of non-financial

assets’ published in January 2015, we have

published an In depth guide: ‘A look at

current financial reporting issues:

Impairment of non-financial assets –

Expanding on the top 5 tips for impairment

testing. This considers in more detail the

five key areas of focus when completing

impairment review for non-financial assets.

Capitalisation of borrowing costs


financial reporting issues: IAS 23 -

Capitalisation of borrowing costs considers

the practical implementation of IAS 23 in

areas of uncertainty including specific

versus general borrowings, when to start

capitalisation, total borrowing costs eligible

for capitalisation, and whether foreign

exchange differences should be capitalised.

IFRS 8 ‘Operating segments’


financial reporting issues: A fresh look at

IFRS 8, ‘Operating segments’ explains why

segment reporting is important, the key

requirements of IFRS 8, ‘Operating

segments’, and discusses practical issues

that have evolved over time including

disclosure requirements that are often

overlooked or misunderstood.

http://www.ifrs.org/Current-Projects/IASB-Projects/Revenue-Recognition/Project-news-history/Pages/Project-news-March-2015.aspx

http://www.ifrs.org/Current-Projects/IASB-Projects/Revenue-Recognition/Project-news-history/Pages/Project-news-March-2015.aspx

https://inform.pwc.com/inform2/content?action=resource&id=0000018228368257.pdf


http://www.ifrs.org/Investor-resources/2015-Investor-Perspectives/Documents/Investor-Perspective-Debt-March-2015.pdf



http://www.ifrs.org/Current-Projects/IASB-Projects/Leases/Documents/Practical-implications-Leases-Standard-Project-Update-March-2015.pdf













https://inform.pwc.com/inform2/show?action=informContent&id=1510161601133943

















bonus cap?

Cross sector

announcements

Banking and capital

markets



In this section:

Regulation 12

Capital and liquidity 12

Other regulatory 13

Recovery and resolution 13

Reporting 14

Regulation

Capital and liquidityNo EBA stress tests in 2015

The EBA confirmed that it will not perform

bank stress tests in 2015 in a letter to the

EP, EC and Council on 2 March 2015.

Instead it plans to run a transparency

exercise in line with its 2013 exercise to

provide detailed data on EU banks' balance

sheets and portfolios, and to prepare for the

next stress test in 2016.

The EBA decided not to run 2015 stress

tests because it feels comfortable with

banks' capital raising following on from the

2014 comprehensive review. It also

acknowledged the burden that the

comprehensive review imposed on banks

last year.

Basel III FAQs

On 11 March 2015, the Basel Committee

published an updated list of FAQs for banks

participating in the Basel III monitoring

exercise.

A sample of banks complete a questionnaire

on the impact of Basel III and submit it to

the Basel Committee twice a year. The FAQ

document lists those questions that banks

most frequently raise when completing the

questionnaire. The questions cover the full

range of Basel III initiatives but there is a

particularly high volume of questions and

answers on liquidity and the NSFR.

Approving market risk model changes

The EC published a new Delegated

Regulation amending an existing

Delegated Regulation as regards RTS for

assessing the materiality of extensions and

changes of internal approaches when

calculating own funds requirements for

market risks on 4 March 2015.

The Delegated Regulation sets out certain

qualitative tests for determining whether or

not a change or extension to a market risk

model is 'material' and therefore requires

prior regulatory approval. Any amendment

that would cause a significant change in

capital requirements is likely to require

regulatory approval.

An annex to the Delegated Regulation sets

out quantitative thresholds to help firms

determine whether or not a change or

extension is material. Firms won't need

approval for non-material model changes.

But they will still have to notify national

regulators in a prescribed format set out in

the delegated act, and provide supporting

documentation.

The Delegated Regulation should be

published in the Official Journal shortly. It

will then form part of the single rulebook on

prudential regulation.

Banking and capital markets

Mark JamesPartner, Jersey office+44 (0) 1534 [email protected]

James de VeulleDirector, Jersey office+44 (0) 1534 [email protected]

Nick VermeulenPartner, Guernsey office+44 (0) 14 81 [email protected]

http://www.eba.europa.eu/documents/10180/999733/EBA+letter+to+EP++EC++and+Council+-+Decision+EU-wide+stress+test+2015.pdf

http://www.bis.org/bcbs/qis/biiiimplmonifaq_mar15.pdf

http://ec.europa.eu/transparency/regdoc/rep/3/2015/EN/3-2015-1365-EN-F1-1.PDF










bonus cap?

Cross sector

announcements

Banking and capital

markets



Limiting exposure to the shadows

The EBA launched a consultation on draft

guidelines on limits on exposures to

shadow banking activities which carry out

banking activities outside a regulated

framework under the CRR on 19 March

2015. The EBA seeks comments on its

definition of shadow banking entities which

focuses on those firms carrying out credit

intermediation activities outside the scope

of prudential requirements. In this

definition, the EBA incorporates the four

features of credit intermediation identified

by the FSB:

maturity transformation - borrowing

short and lending/investing on longer

timescales

liquidity transformation - using cash-

like liabilities to buy less liquid assets

leverage

credit risk transfer.

The EBA proposes that all investment funds

would fall into the scope of the definition of

shadow banking entities, except non-MMF

UCITS. Despite the security of the UCITS

brand, the EBA believes that the systemic

risks posed by MMFs have not been

adequately addressed through existing

regulation.

Most banks would be subject to the

principal approach, requiring them to set

tailored exposure limits for both individual

shadow banking entities and aggregated

exposures. Under the principal approach,

individual exposure limits would

incorporate an understanding of the

regulatory status, financial situation,

portfolio composition and credit

assessments of the shadow banking

institution.

The consultation closes for comments on

19 June 2015.

Other regulatoryRisk dashboard showing higher capital

On 16 March 2015 the EBA published its

Risk Dashboard Q4 2014 which

summarises the main risks and

vulnerabilities in the EU banking sector,

based on the evolution of key risk indicators

from 55 banks. The dashboard confirms the

positive trend of EU banks' capital

positions, with the CET1 ratio reaching

12.1% per cent in Q3 2014 compared to

11.8% in Q2. This is the highest level since

2009 and was driven by an increase in

retained earnings and capital issuances that

outpaced a more modest growth of RWAs. It

also reveals the levels of non-performing

loans to be stable, but still generally very

high, despite divergences across banks. As a

result the EBA stresses the need for

continuous monitoring of credit quality,

accompanied by consistent transparency of

banks' exposures.

Profitability levels remain volatile and

predominantly at low levels throughout the

sector. Returns continue to be subdued.

Profitability dispersion across banks and

jurisdictions is material, but continues to

narrow. The dashboard also shows that

balance sheets' structures continue to shift

towards less indebtedness with the loan-to-

deposit ratio at an all-time low of 109.3 per

cent. Similarly, the share of customer

deposit to total liabilities is at 49.2 per cent,

a record high for the available data.

Recovery and resolutionEBA consults on financial contractsrecords

On 6 March 2015, the EBA published a

consultation paper on draft RTS for a

minimum set of the information on

financial contracts that should be

contained in the detailed records of a bank

or other relevant entity and the

circumstances in which the requirement to

maintain records should be imposed.

Resolution authorities can temporarily

suspend a party's termination rights to a

contract with an institution which is under

resolution under the BRRD. To support this

power, resolution authorities may require a

bank or other relevant entity to maintain

detailed records of its financial contracts.

The EBA proposes that banks and other

relevant entities which are likely to be

subject to resolution actions (as determined

by their resolution plans) collect the

information in advance. They will then need

to make this information available to the

resolution authorities upon request.

Conversely, banks and other relevant

entities that are likely to be placed into an

insolvency procedure (rather than

resolution) are not automatically subject to

the requirement to maintain detailed

records of financial contracts. This is

intended to ensure proportionality. The

EBA specifies a minimum list of

information that should be contained in the

records of financial contracts to strike a

balance between the need to achieve an

appropriate level of convergence in record-

keeping, while allowing competent

authorities and resolution authorities to

impose additional requirements.

Where possible, the EBA uses the same

language and structure as that in the EMIR

RTS for reporting data to trade repositories

to ensure consistency between different

regulatory requirements and reduce the

reporting burden.

The consultation closes on 6 June 2015.

EBA finalises technical advice

On 6 March 2015 the EBA published three

technical advice papers under BRRD on:

critical functions and core business

lines

deferral of extraordinary ex-post

contributions

the circumstances when exclusions

from the bail-in tool are necessary.

The technical advice on critical functions

and core business lines reflects the FSB’s

“Guidance on Identification of Critical

Functions and Critical Shared Services”. It

also reflects its own benchmarking exercise

https://www.eba.europa.eu/documents/10180/1019894/EBA+CP+2015+06+%28CP+on+GL+on+shadow+Banking%29.pdf





http://www.eba.europa.eu/documents/10180/1014348/EBA+Dashboard+-+Q4+2014.pdf

http://www.eba.europa.eu/documents/10180/1006126/EBA-CP-2015-04+%28CP+on+Detailed+records+of+financial+contracts%29.pdf







http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-05+Technical+Advice+on+critical+functions+and+core+business++++.pdf

http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-05+Technical+Advice+on+critical+functions+and+core+business++++.pdf

http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-06+Technical+Advice+on+deferral+of+ex+post+contributions.pdf

http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-06+Technical+Advice+on+deferral+of+ex+post+contributions.pdf

http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-07+Tehcnical+Advice+on+exclusion+from+the+bail-in+tool.pdf

http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-07+Tehcnical+Advice+on+exclusion+from+the+bail-in+tool.pdf




bonus cap?

Cross sector

announcements

Banking and capital

markets



reviewing the recovery plans of 27 European

cross-border banking groups (published in

conjunction with the technical advice as

“Comparative report on the approach to

determining critical functions and core

business lines in recovery plans”).

The comparative report illustrates the

preferred assessment criteria used by banks

to determine critical functions and core

business lines and the most common set of

indicators to support this assessment. The

EBA suggests that banks should review the

report to identify best practice and their

positioning in relation to peers so as to

ensure that their recovery plans correctly

assess critical functions and core business

lines.

Under BRRD all EU banks shall contribute

towards resolution funds in their member

states by annual ex-ante contributions and,

if such ex-ante contributions are

insufficient, by extraordinary ex-post

contributions. A resolution authority may

defer the payment of an ex-post

contribution by an individual bank for so

long as such payment would jeopardise the

bank’s liquidity or solvency. The second

technical advice aims to specify the meaning

of the likelihood that a payment would

“jeopardise” a bank’s financial condition

and the circumstances in which this could

lead to a deferral. The EBA recommends

that resolution authorities analyse the

impact on solvency and liquidity of a bank

before allowing deferral of ex-post

contributions and that this should only be

permitted in exceptional cases.

Finally the third piece of technical advice

looks at when the bail-in tool might not be

applied. The EBA suggests that use of the

exclusion should be limited to the minimum

necessary to achieve the objective which

justifies the exclusion.

The technical advice is now with the EC to

approve and adopt into BRRD delegated

acts.

Constructing reorganisation plans

The EBA published Draft RTS and

guidelines on Business Reorganisation

Plans under BRRD on 9 March 2015. The

EBA specifies the minimum elements to be

included in the business reorganisation plan

which is required when the competent and

resolution authority applies the bail-in tool.

The EBA requires the reorganisation plan to

set out the cause of failure, how failures will

be corrected and show that the organisation

can operate viably in the long-term. The

reorganisation strategy should rely on

prudent assumptions and the relevant

market and macro-economic situation. It

should also include projections on the

financial performance of the institution

during the reorganisation period with

relevant milestones and indicators for a

base-case, as well as best and worst case

scenarios.

The EBA requires the competent and

resolution authorities to assess the

credibility of the plan and its assumptions

in addition to the appropriateness of the

strategy and measures. The authorities also

need to ensure the plan is consistent with

other policy objectives.

The consultation closes on 9 June 2015.

ReportingMore regulatory reporting inEurozone

The ECB published Feedback statement:

Responses to the public consultation on the

draft ECB Regulation on reporting of

supervisory financial information on 26

March 2015. The Governing Council of the

ECB adopted the ECB Regulation on 17

March 2015 and it was published in the

Official Journal on 31 March 2015 (entering

into force on 1 April 2015).

CRD IV introduced FINREP, the European

regulatory reporting of financial

information. Current FINREP reporting is

restricted to consolidated reporting by

groups that prepare their financial

statements under IFRS. The ECB is

extending FINREP reporting to include

consolidated reporting by non-IFRS

reporting banking groups, to solo reporting

by subsidiaries incorporated in the

Eurozone of both non-IFRS and IFRS

reporting banking groups and Eurozone

branches of non-Eurozone banking groups.

This includes Eurozone subsidiaries and

branches of the non-Eurozone banking

groups, such as Eurozone subsidiaries and

branches of UK and US banking groups.

The extent of reporting is tiered ranging

from, 'Full FINREP' reporting for

consolidated reporting by banking groups

supervised directly by ECB termed as

'significant' to 'Supervisory financial

reporting data points' for subsidiaries and

branches deemed 'less significant' and with

total assets less than €3bn.

The first reporting date for significant

groups is 31 December 2015 and for less

significant groups is 30 June 2017.

http://www.eba.europa.eu/documents/10180/1008804/EBA-CP-2015-05+%28CP+on+RTS+and+GL+on+Business+reorganisation+plan%29.pdf



https://www.bankingsupervision.europa.eu/press/pr/date/2015/html/sr150326.en.html








bonus cap?

Cross sector

announcements

Banking and capital

markets



In this section:

Regulation 15

Alternative investments 15

Retail products 16

Regulation

Alternative investmentsUpdated AIFMD Q&As

ESMA updated Q&As - application of the

AIFMD on 26 March 2015, setting out new

and updated Q&As on:

non-EU AIF reporting - frequency is

determined by AIFMs aggregating all

AIFs marketed in the EU, rather than in

each Member State

currency hedging - should be reported in

the AIF's base currency

stress tests - non-EU AIFMs should

report stress tests results only where

local national private placement regimes

require stress tests to be conducted

launching new AIFs - new notifications

are not required to regulators when

launching an additional AIF in a

Member State

leverage calculations - cash held in an

AIF's base currency should be excluded

from gross method calculations

own fund requirements - investments in

other AIFs under the same AIFM when

calculating additional own fund initial

capital requirements should be excluded

but not when calculating professional

indemnity insurance requirements.

AIFMs and associated service providers

should review the updated Q&As.

Regulators sharing AIFMDinformation

On 27 March 2015 the Commission

Delegated Regulation on the information to

be provided by competent authorities to

ESMA under AIFMD was published in the

Official Journal. Member State regulators

must provide information to ESMA on:

the use of the EU marketing passport by

AIFs

non-EU AIFs and non-EU AIFMs

making use of any local private

placement rules.

The Delegated Regulation sets out the exact

data requirements on national regulators

and comes into force on 16 April 2015.

Widening CIS exemptions

On 19 March 2015, Parliament published

The Financial Services and Markets Act

2000 (Collective Investment Schemes)

(Amendment) Order 2015. The Order

corrects a mistake in the original FSMA

(CIS) Order by replacing "refusing" with

Asset management

John LuffPartner, Guernsey office+44 (0) 1481 [email protected]

Mike ByrneDirector, Jersey office+44 (0) 1534 [email protected]

Adam GulleySenior Manager, Jersey+44 (0) 1534 [email protected]

http://www.esma.europa.eu/system/files/2015-630_qa_aifmd_march_update.pdf

http://www.esma.europa.eu/system/files/2015-630_qa_aifmd_march_update.pdf





http://www.legislation.gov.uk/uksi/2015/754/pdfs/uksi_20150754_en.pdf%0ahttp:/www.legislation.gov.uk/uksi/2015/754/pdfs/uksiem_20150754_en.pdf






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"reducing" in relation to EIS. Social

investment schemes are exempted from

being considered as a CIS under section 235

of FSMA. To qualify as exempt a social

investment scheme must:

invest only in shares or debentures that

comply with the social investment

scheme requirements set out in the

Income Tax Act 2007

allow each participant in the scheme to

be entitled to a part of the scheme

property but ensure they only able to

withdraw from the scheme after seven

years

participants must invest at least

Â£2,000.

The Order came into force on 13 April 2015.

Retail productsUpdated KIID Q&As

ESMA published updated Q&As - key

investor information documents (KIIDs)

for UCITS on 26 March 2015. ESMA

confirmed that where two UCITS merge and

the receiving UCITS is newly established,

the KIID can use the past performance

information of the other UCITS - if the

receiving UCITS' regulator believes the

merger does not impact the past

performance information.

If the investment strategy of the continuing

UCITS is different from the merging UCITS

then the UCITS' regulator may not believe it

is appropriate to show past performance

information for the merging UCITS as the

continuing fund will be investing

differently.

http://www.esma.europa.eu/system/files/2015-631_ucits_kiid_march_update.pdf






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In this section:

Regulation 17

Solvency II 17

Conduct 19

EU update 19

Accounting 19

Regulation

Solvency II‘Set 1’ of implementing regulationspublished

Three Solvency II implementing regulations

were published in the Official Journal on 20

March 2015, and came into force on 21

March 2015:

Approval of an internal model

The process to reach a joint decision on

the application to use a group internal

model

The procedures for supervisory

approval to establish special purpose

vehicles (SPVs), for the cooperation and

exchange of information between

supervisory authorities regarding SPVs

as well as to set out formats and

templates for information to be

reported by SPVs

A further three Solvency II implementing

regulations were published in the Official

Journal on 25 March 2015, coming into

force on 26 March 2015:

The supervisory approval procedure to

use undertaking-specific parameters

The procedures to be used for granting

supervisory approval for the use of

ancillary own-fund items

The procedures to be followed for the

supervisory approval of the application

of a matching adjustment

These implementing regulations are based

on drafts EIOPA submitted to the EC in

October 2014.

Supervisors exchanging information

EIOPA published a Proposal for ITS on the

procedures and templates for the

submission of information to the group

supervisor as well as the exchange of

information between supervisory

authorities on 27 March 2015. This draft

ITS deals with how supervisors in a

supervisory college exchange information

between themselves. Firms may be

impacted if supervisors need to share new

information they do not currently collect.

The consultation closes on 22 May 2015.

EIOPA plans to send this ITS to the EC by

30 June 2015 for final endorsement.

Further to this, members of EIOPA’s Board

of Supervisors and EIOPA’s Chair, Gabriel

Bernardino, signed coordination

arrangements for all colleges of supervisors

of insurance groups with internal models on

Insurance

Evelyn BradyPartner, Guernsey office+44 (0) 1481 [email protected]

Adrian PeacegoodDirector, Guernsey office+44 (0) 1481 [email protected]





















https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-15-002_ITS_Info_exchange.pdf






https://eiopa.europa.eu/Pages/News/Coordination-Arrangements-signed-for-Colleges-of-supervisors-of-insurance-groups-with-internal-models-important-step.aspx




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27 March 2015. These arrangements lay the

basis for future cooperation within colleges

including their decision making procedures.

Progress on internal model pre-applications

EIOPA published its Progress Report on the

Follow-up to the Peer Reviews on Pre-

application for Internal Models on 20

March 2015. It concludes that the vast

majority of recommendations for assessing

internal models in the Solvency II pre-

application process have already been

followed-up and the remainder should be

implemented by mid-2015.

EIOPA reviews Solvency II equivalence

EIOPA published its Final Report on full

equivalence assessment of Bermuda, Final

Report on full equivalence assessment of

Japan and Final Report on full equivalence

assessment of Switzerland on 11 March

2015. Under Solvency II the EC may

determine whether the solvency regime of a

third country is equivalent to Solvency II in

three areas – reinsurance activities where

the insurer is based in a third country, third

country insurers part of an EEA group and

EEA insurers with non-EEA parents.

EIOPA concludes that:

Bermuda meets the criteria for

equivalence in respect of commercial

insurer in all three areas with a number

of caveats. EIOPA’s assessment relates

specifically to the supervision of

commercial insurers in Bermuda, and

not to captives.

Japan meets the criteria for equivalence

for reinsurance activities with a number

of caveats.

Switzerland meets the criteria for

equivalence in all three areas with a

number of caveats. These caveats would

be mainly addressed by a pending

revision of the Insurance Supervisory

Ordinance (ISO) assuming the current

draft is implemented and enters into

force in 2015.

The final reports are largely unchanged

from those consulted on in December 2014.

The equivalence assessment of Bermuda has

been updated for future developments and

limited changes have been made to the

assessment of the Japanese supervisory

system. The equivalence assessment of the

Swiss supervisory system has remained

unchanged.

Deteriorating financial conditions

EIOPA published its Final Report on the

advice to the EC in response to the call for

advice on recovery plan, finance scheme

and supervisory powers in deteriorating

financial conditions on 28 March 2015.

Under Solvency II, if a firm fails to comply

with their SCR they have to submit a

realistic recovery plan to their supervisor

within two months. Similarly, if they fail to

comply with their Minimum Capital

Requirement (MCR) they have a month in

which to submit a short term realistic

finance scheme to their supervisor and they

are allowed a maximum of three months to

comply with the MCR.

EIOPA’s advice to the EC:

describes the information companies

must submit when they do not comply

with the SCR or MCR

suggests companies should submit a

combined recovery plan and finance

scheme when companies fail to comply

with both the SCR and MCR at once

highlights the criteria for the

supervisory approval of the submitted

recovery plan or finance scheme

provides a list of some measures

supervisors can take if a company’s

solvency position deteriorates further

describes the circumstances to be taken

into account by supervisors when

deciding on the measures to be adopted.

The draft RTS should now be reviewed and

adopted by the EC in due course.

Infrastructure investments by insurers

Following the EC’s request for technical

advice in February 2015, EIOPA published a

discussion paper on infrastructure

investments by insurers on 27 March 2015.

EIOPA is exploring both the possibility of

introducing a specific standard formula

treatment for infrastructure investments

and also how partial internal models could

be used in the context of investing in

infrastructure projects. The discussion

paper sets out initial ideas on the following

topics:

defining infrastructure investments that

offer predictable long-term cash-flows

and whose risks can be properly

identified, managed and monitored by

insurers

possible criteria for this new class of

long-term lower risk infrastructure

assets covering issues such as

standardisation and transparency

prudentially sound treatment of the

identified investments within a risk

based supervisory system, focusing on

their specific risk profile

effectiveness of the current Solvency II

risk management requirements in

ensuring that the risks of this complex

and, for insurers, relatively new asset

class, are properly managed.

http://eiopa.europa.eu/Pages/Newsletter/Newsletter.aspx?jg=1f8b7202-0f4c-4e1f-bc53-d8190abc6313&eg=d98134a1-2f4f-4bb6-9dee-84ab09ab742d&lg=c7ebbb52-7757-4d53-9b8f-f111499b817e&ltp=c



http://eiopa.europa.eu/Pages/Newsletter/Newsletter.aspx?jg=27278c71-b965-4fd7-80fe-474c05b7a1a3&eg=f06709e0-24b2-46a8-b0ae-74218b075b60&lg=a27d3658-0ab5-46f6-9887-7c77e7808fd0&ltp=c




http://eiopa.europa.eu/Pages/Newsletter/Newsletter.aspx?jg=27278c71-b965-4fd7-80fe-474c05b7a1a3&eg=f06709e0-24b2-46a8-b0ae-74218b075b60&lg=7d05d1a2-d0b8-4898-a239-caab2346b0e8&ltp=c

http://eiopa.europa.eu/Pages/Newsletter/Newsletter.aspx?jg=27278c71-b965-4fd7-80fe-474c05b7a1a3&eg=f06709e0-24b2-46a8-b0ae-74218b075b60&lg=7d05d1a2-d0b8-4898-a239-caab2346b0e8&ltp=c

http://eiopa.europa.eu/Pages/Newsletter/Newsletter.aspx?jg=b274a647-07ae-4016-8735-a5506d26fe46&eg=fe7a664f-270a-4602-912b-a5dbb6a6e04f&lg=429e63eb-106d-47f9-9027-8e6dde05bcbb&ltp=c





https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-15-003_Discussion_paper_on_Infrastructure_Investments_for_public.pdf#search=discussion%20paper

https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-15-003_Discussion_paper_on_Infrastructure_Investments_for_public.pdf#search=discussion%20paper




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The discussion paper closes to comments on

26 April 2015.

Credit quality under Solvency II

The Joint Committee of the ESAs published

a Joint Consultation Paper on Draft ITS on

the allocation of credit assessments of

External Credit Assessment Institutions

(ECAIs) to an objective scale of credit

quality steps under Solvency II on 6 March

2015. The draft ITS contains a mapping of

ECAI’s credit ratings to Solvency II’s Credit

Quality Steps. This mapping is useful for

calculating Solvency II capital requirements

under the Standard Formula and aids risk

management of EU insurers.

The consultation closed on 10 April 2015.

ConductRegulating insurance conduct

On 12 March Katja Wurtz, EIOPA's head of

Cross-Sectoral and Consumer Protection

Unit, spoke about The future of European

market conduct regulation. She described

three issues which she believes will have an

important impact on the next period of

conduct regulation:

Regulators will use 'smart regulation' in

the future by taking more account of real

consumer behaviour.

The importance of effective product

oversight and governance, with firms

taking a holistic approach, looking at the

entire life cycle of products, covering

product design and testing, the

identification of target markets and

suitability assessments, the choice of

distributors, the setting up of

remuneration, commissions and other

incentives so as to ensure customer

interests are put foremost.

The effect of digitalisation and how it

will change how products are developed

and distributed to the public.

EU updateDeteriorating financial conditions

EIOPA published its Final Report on CP-14-

062 on the advice to the EC in response to

the call for advice on recovery plan, finance

scheme and supervisory powers in

deteriorating financial conditions on 28

March 2015. This report includes feedback

from the consultation process, which ended

on 18 February 2015, and EIOPA's advice on

regulatory technical standards for EC

adoption.

Under Solvency II, if a firm fails to comply

with their Solvency Capital Requirement

(SCR) they have to submit a realistic

recovery plan to their supervisor within two

months. Similarly, if they fail to comply with

their Minimum Capital Requirement (MCR)

they have a month in which to submit a

short term realistic finance scheme to their

supervisor and they are allowed a maximum

of three months to comply with the MCR.

EIOPA's advice to the EC:

describes the information required from

companies when they do not comply

with the SCR or MCR

advocates the submission of a combined

recovery plan and finance scheme when

companies fail to comply with both the

SCR and MCR at once

highlights the criteria for the

supervisory approval of the submitted

recovery plan or finance scheme

provides a list of some measures

supervisors can take if a company's

solvency position deteriorates further

describes the circumstances to be taken

into account by supervisors when

deciding on the measures to be adopted.

March risk assessment

EIOPA published its Risk Dashboard for

March 2015 based on Q4 2014 data on 20

March 2015. EIOPA concludes that the risk

environment facing the insurance sector

remains challenging. The risk of

interlinkages and imbalances has increased

since the previous quarter - EIOPA believes

that increased derivative holdings are likely

due to increased exchange rate movements.

Accounting

Insurance Contracts project update

The IASB published Investor Perspectives -

February 2015 on 3 March 2015 to update

investors on the progress of its insurance

contracts project and proposals to address

the only remaining issue to be resolved, the

pattern of profit recognition for

participating contracts. The IASB met on 19

March 2015 to continue discussions on

participating contracts and specifically

discussed whether the contractual service

margin (‘CSM’) should be adjusted for the

insurer’s share of investment returns, scope,

how interest expense should be recognised

and how the CSM should be allocated in

profit or loss. The Board did not make any

decisions. See our Insurance alert ‘IASB

education session on 19 March 2015’ for

details.

The IASB published a Project update:

Insurance Contracts without Participation

Features on 16 March 2015. This paper

gives an overview of the IASB’s tentative

decisions on the general model that would

apply to insurance contracts without

participation features, and its reasons for

reaching those decisions.

https://eiopa.europa.eu/Publications/Consultations/JC CP 2015 001 (Joint CP on draft ITS on mapping of ECAIs under SII).pdf





https://eiopa.europa.eu/Publications/Speeches and presentations/2015-03-12 KW Consumer Protection Conference Bucharest.pdf

https://eiopa.europa.eu/Publications/Speeches and presentations/2015-03-12 KW Consumer Protection Conference Bucharest.pdf

http://eiopa.europa.eu/Pages/Newsletter/Newsletter.aspx?jg=b274a647-07ae-4016-8735-a5506d26fe46&eg=fe7a664f-270a-4602-912b-a5dbb6a6e04f&lg=429e63eb-106d-47f9-9027-8e6dde05bcbb%3cp=c





https://eiopa.europa.eu/Publications/Standards/EIOPA-FS-15-209-PUBLIC_20032015.pdf

https://eiopa.europa.eu/Publications/Standards/EIOPA-FS-15-209-PUBLIC_20032015.pdf



http://www.pwc.com/gx/en/insurance/ifrs/assets/pwc-notes-of-iasb-meeting-19-march-2015.pdf

http://www.pwc.com/gx/en/insurance/ifrs/assets/pwc-notes-of-iasb-meeting-19-march-2015.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Documents/2015/Insurance-Contracts-without-Participation-Features-March-2015.pdf






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Banking and capital

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Open consultations

Closing datefor responses

Paper Institution

26/04/15 Discussion paper on infrastructure investments by insurers EIOPA

27/04/15 Consultation paper – draft RTS on prudential requirements for central securities depositories under the CSDR EBA

30/04/15 Consultative document – guidance on accounting for expected credit losses BaselCommittee

05/05/15 Discussion paper – future of the IRB approach EBA

13/05/15 Green paper – building a CMU EC

13/05/15 Consultation document – review of the Prospectus Directive EC

13/05/15 Consultation document – an EU framework for simple, transparent and standardised securitisation EC

20/05/15 Call for evidence: the extension of the disclosure requirements to private and bilateral transactions for structured financeinstruments

ESMA

22/05/15 Consultation paper on the draft ITS on the procedures and templates for the submission of information to the group supervisor aswell as the exchange of information between supervisory authorities

EIOPA

29/05/15 Assessment methodologies for identifying non-bank non-insurer global systemically important financial institutions FSB andIOSCO

Monthly calendar

https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-15-003_Discussion_paper_on_Infrastructure_Investments_for_public.pdf

http://www.eba.europa.eu/documents/10180/995469/EBA-CP-2015-02+%28CP+on+RTS+on+prudential+requirements+for+CSDs%29.pdf

http://www.bis.org/bcbs/publ/d311.pdf

http://www.eba.europa.eu/documents/10180/1003460/EBA-DP-2015-01+DP+on+the+future+of+IRB+approach.pdf

http://ec.europa.eu/finance/consultations/2015/capital-markets-union/docs/green-paper_en.pdf

http://ec.europa.eu/finance/consultations/2015/prospectus-directive/docs/consultation-document_en.pdf

http://ec.europa.eu/finance/consultations/2015/securitisation/docs/consultation-document_en.pdf





http://www.iosco.org/library/pubdocs/pdf/IOSCOPD479.pdf




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Banking and capital

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Closing datefor responses

Paper Institution

04/06/15 Consultation paper – draft guidelines on sound remuneration policies under CRD IV and the CRR EBA

06/06/15 Consultation report – market intermediary business continuity and recovery planning IOSCO

06/06/15 Consultation report – mechanisms for trading venues to effectively manage electronic trading risks and plans for businesscontinuity

IOSCO

06/06/15 Consultation paper – draft RTS on a minimum set of the information on financial contracts that should be contained in thedetailed records and the circumstances in which the requirement should be imposed under the BRRD

EBA

09/06/15 Consultation paper – draft RTS and guidelines on business reorganisation plans under BRRD EBA

15/06/15 Consultation paper – draft guidelines on complex debt instruments and structured deposits ESMA

19/06/15 Consultation paper – draft guidelines on limits on exposures to shadow banking entities which may carry out banking activitiesoutside a regulated framework under the CRR

EBA

http://www.eba.europa.eu/documents/10180/1002374/EBA-CP-2015-03+%28CP+on+GLs+on+Sound+Remuneration+Policies%29.pdf








http://www.eba.europa.eu/documents/10180/1019894/EBA+CP+2015+06+%28CP+on+GL+on+shadow+Banking%29.pdf

http://www.eba.europa.eu/documents/10180/1019894/EBA+CP+2015+06+%28CP+on+GL+on+shadow+Banking%29.pdf




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Forthcoming publications in 2015

Date Topic Type Institution

Consumer protection

Q3 2015 Calculation of contributions to DGSs Guidelines EBA

Financial crime, security and market abuse

Q2 2015 Draft MAR technical standards Technical standards ESMA

TBD 2015 Advice to Commission on Benchmark legislation Advice ESMA

Prudential

Q1 2015 Update on ITS on reporting of the leverage ratio Technical standards EBA

Q2 2015 LGD floors for mortgage lending Consultation EBA

Q2 2015 RTS on PD estimation Technical standards EBA

Q4 2015 Report on NSFR methodologies Report EBA




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Securities and markets

Q1 2015 Implementing acts on third country equivalence decisions on exposuresto third country investment firms, clearing houses and exchanges treatedas exposures to an institution

Advice EBA

Q2 2015 Consultation Paper on MAR guidelines Consultation paper ESMA

Q2 2015 Technical advice to the Commission on the review of EMIR Technical advice ESMA

Q2 2015 MiFID/MiFIR Draft Regulatory Technical Standards Technical standards ESMA

Q2 2015 Draft technical standards on CSDR Technical standards ESMA

Q4 2015 MiFID/MiFIR Draft Implementing Technical Standards Technical standards ESMA

Q4 2015 Securities Financing Transactions Regulation Discussion or ConsultationPaper on technical standards

Consultation or technical standards ESMA

Products and investments

Q3 2015 Advice on the application of the passport to third-country AIFMs andAIFs

Advice ESMA

TBD 2015 Undertakings For The Collective Investment of Transferable Securities V Technical advice ESMA

TBD 2015 RTS on format and content of disclosures in KID for PRIPs Technical standards ESMA

Recovery and resolution

Q2 2015 Advice on the criteria for determining the number of years by which theinitial period for the build up of the SRF may be extended

Advice EBA




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Q2 2015 Partial transfer safeguards Advice EBA

Q3 2015 Notification requirements Technical standards EBA

Q3 2015 RTS on Contractual Bail in Technical standards EBA

Solvency II

TBD 2015 Solvency II Level 3 measures Level 3 text EIOPA

Supervision, governance and reporting

Q4 2015 Assessment of national SREP approaches Report EBA

Main sources: ESMA 2015 work programme; EIOPA 2015 work programme; EBA 2015 work programme; EC 2015 work programme; FCA policy development updates

Executive summary Individual accountability

takes

Cross sector

announcements

Banking and capital

markets



2EMD The Second E-money Directive 2009/110/EC

ABC Anti-Bribery and Corruption

ABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AIMA Alternative Investment Management Association

AML Anti-Money Laundering

AML3 3rd Anti-Money Laundering Directive 2005/60/EC

AQR Asset Quality Review

ASB UK Accounting Standards Board

Banking ReformAct (2013)

Financial Services (Banking Reform) Act 2013

Basel Committee Basel Committee of Banking Supervision (of the BIS)

Basel II Basel II: International Convergence of Capital Measurement andCapital Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

BBA British Bankers’ Association

BCR Basic capital requirement (for insurers)

BIBA British Insurance Brokers Association

BIS Bank for International Settlements

BoE Bank of England

BRRD Bank Recovery and Resolution Directive

CASS Client Assets sourcebook

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CEBS Committee of European Banking Supervisors (predecessor of EBA)

CET1 Core Equity Tier 1

CESR Committee of European Securities Regulators (predecessor ofESMA)

Co-legislators Ordinary procedure for adopting EU law requires agreementbetween the Council and the European Parliament (who are the ‘co-legislators’)

CFT Counter Financing of Terrorism

CFTC Commodities Futures Trading Commission (US)

CGFS Committee on the Global Financial System (of the BIS)

CIS Collective Investment Schemes

Glossary


takes

Cross sector

announcements

Banking and capital

markets



CMA Competition and Markets Authority

CMU Capital markets union

CoCos Contingent convertible securities

Council Generic term representing all ten configurations of the Council of theEuropean Union

CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009

CRA2 Regulation amending the Credit Rating Agencies Regulation (EU)No 513/2011

CRA3 proposal to amend the Credit Rating Agencies Regulation anddirectives related to credit rating agencies COM(2011) 746 final

CRAs Credit Rating Agencies

CRD ‘Capital Requirements Directive’: collectively refers to Directive2006/48/EC and Directive 2006/49/EC

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

CRD IV Capital Requirements Directive 2013/36/EU

CRR Regulation (EU) No 575/2013 on prudential requirements for creditinstitutions and investment firms

CTF Counter Terrorist Financing

DFBIS Department for Business, Innovation and Skills

DG MARKT Internal Market and Services Directorate General of the EuropeanCommission

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act (US)

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECOFIN Economic and Financial Affairs Council (configuration of theCouncil of the European Union dealing with financial and fiscal andcompetition issues)

ECON Economic and Monetary Affairs Committee of the EuropeanParliament

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

EMIR Regulation on OTC Derivatives, Central Counterparties and TradeRepositories (EC) No 648/2012

EP European Parliament

ESA European Supervisory Authority (i.e. generic term for EBA, EIOPAand ESMA)

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board


takes

Cross sector

announcements

Banking and capital

markets



EU European Union

EURIBOR Euro Interbank Offered Rate

Eurosystem System of central banks in the euro area, including the ECB

FASB Financial Accounting Standards Board (US)

FATCA Foreign Account Tax Compliance Act (US)

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

FDIC Federal Deposit Insurance Corporation (US)

FiCOD Financial Conglomerates Directive 2002/87/EC

FiCOD1 Amending Directive 2011/89/EU of 16 November 2011

FiCOD2 Proposal to overhaul the financial conglomerates regime (expected2013)

FMI Financial Market Infrastructure

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FSA Financial Services Authority

FSB Financial Stability Board

FS Act 2012 Financial Services Act 2012

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FSOC Financial Stability Oversight Council

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

G-SIIs Global Systemically Important Institutions

HMRC Her Majesty’s Revenue & Customs

HMT Her Majesty’s Treasury

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICAS Individual Capital Adequacy Standards

ICB Independent Commission on Banking

ICOBS Insurance: Conduct of Business Sourcebook

IFRS International Financial Reporting Standards

IMA Investment Management Association

IMAP Internal Model Approval Process


takes

Cross sector

announcements

Banking and capital

markets



IMD Insurance Mediation Directive 2002/92/EC

IMD2 Proposal for a Directive on insurance mediation (recast) COM(2012)360/2

IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision Directive2003/43/EC

IOSCO International Organisations of Securities Commissions

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

JURI Legal Affairs Committee of the European Parliament

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

MA Matching Adjustment

MAD Market Abuse Directive 2003/6/EC

MAD II Proposed Directive on Criminal Sanctions for Insider Dealing andMarket Manipulation (COM(2011)654 final)

MAR Proposed Regulation on Market Abuse (EC) (recast) (COM(2011) 651final)

MCD Mortgage Credit Directive

Member States countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

MiFID II Proposed Markets in Financial Instruments Directive (recast)(COM(2011) 656 final)

MiFIR Proposed Markets in Financial Instruments Regulation (EC)(COM(2011) 652 final)

MMF Money Market Fund

MMR Mortgage Market Review

MREL Minimum requirements for own funds and eligible liabilities

MTF Multilateral Trading Facility

MoJ Ministry of Justice

MoU Memorandum of Understanding

NAV Net Asset Value

NBNI G-SIFI Non-bank non-insurer global systemically important financialinstitution

NFC Non-financial counterparty under EMIR

NFC+ Non-financial counterparty over the EMIR clearing threshold

NFC- Non-financial counterparty below the EMIR clearing threshold

NSFR Net stable funding ratio

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union


takes

Cross sector

announcements

Banking and capital

markets



OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflect LisbonTreaty and new supervisory infrastructure (COM(2011) 0008 final)– amends the Prospectus Directive (Directive 2003/71/EC) andSolvency II (Directive 2009/138/EC)

ORSA Own Risk Solvency Assessment

OTC Over-The-Counter

p2p Peer to Peer

PERG Perimeter Guidance Manual

PRA Prudential Regulation Authority

Presidency Member State which takes the leadership for negotiations in theCouncil: rotates on 6 monthly basis

PRIIPsRegulation

Proposal for a Regulation on key information documents forinvestment and insurance-based products COM(2012) 352/3

PSR Payment Systems Regulator

QIS Quantitative Impact Study

RDR Retail Distribution Review

RFB Ring Fenced Bank

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SCR Solvency Capital Requirement (under Solvency II)

SEC Securities and Exchange Commission (US)

SFT Securities financing transactions

SFD Settlement Finality Directive 98/26/EC

SFO Serious Fraud Office

SIPP Self-invested personal pension scheme

SM&CR Senior managers and certification regime

SOCA Serious Organised Crime Agency

Solvency II Directive 2009/138/EC

SSM Single Supervisory Mechanism

SSR Short Selling Regulation EU 236/2012

T2S TARGET2-Securities

TLAC Total Loss Absorbing Capacity

TR Trade Repository

TSC Treasury Select Committee

UCITS Undertakings for Collective Investments in Transferable Securities

XBRL eXtensible Business Reporting Language




bonus cap?

Cross sector

announcements

Banking and capital

markets


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150409-123124-JN-OS

Laura Cox020 7212 [email protected]@LauraCoxPwC

Asset Management Banking & Capital Markets Insurance Local regulations & AML

John Luff

+44 (0) 1481 752121

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Mark James

+44 (0) 1534 838304

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Evelyn Brady

+44 (0) 1481 752013

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Nick Vermeulen

+44 (0) 1481 752089

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Mike Byrne

+44 (0) 1534 838278

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Nick Vermeulen

+44 (0) 1481 752089

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Adrian Peacegood

+44 (0) 1481 752084

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Neil Howlett

+44 (0) 1534 838349

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Adam Gulley

+44 (0) 1534 838390

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James de Veulle

+44 (0) 1534 838375

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Chris van den Berg

+44 (0) 1534 838308

[email protected]

Contacts