Being better informed FS regulatory, accounting and audit bulletin

Being better informed
FS regulatory, accounting and audit bulletin
PwC FS Risk and Regulation Centre of Excellence
February 2015
In this month’s edition:

ECB supervision reviewing bank dividend payments
and variable remuneration

Number of important CMU developments

HMT explores open data for banking

FCA sets out final recovery and resolution rules for
investment firms

Analysis of the new TLAC and MREL requirements
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Executive summary
challenging environment, driving
productivity, and getting ahead of risk
and regulatory management.
Welcome to this edition of “Being
better informed”, our monthly FS
regulatory, accounting and audit
bulletin, which aims to keep you up to
speed with significant developments
and their implications across all the
financial services sectors.
Our annual survey of business leaders
from around the world was launched at
Davos in January. The overwhelming
majority of CEOs surveyed believe that
regulation is still the biggest threat to
growth prospects in 2015. CEOs see
regulation as creating upheaval and
more costs on the one hand, while
diverting attention from other strategic
challenges on the other. In
conversations our financial service
clients tell us they have three major
priorities – finding growth in a
Fewer CEOs than last year think global
economic growth will improve over the
next 12 months, but confidence in their
ability to achieve revenue growth in
their own companies remains stable.
The situation in Europe is particularly
concerning. The austerity/stimulate
debate kicked-off again in January
following Syriza’s election victory in
Greece. But while debate continues
about the optimal fiscal path to
recovery, the necessity of having a wellfunctioning financial system remains
sacrosanct.
In the EU, policy makers’ focus this
year will be unlocking additional
investment from the financial systems
to help increase growth and jobs. On 28
January 2015, the EC kicked-off its
CMU following a “positive” orientation
debate of its college of commissioners.
It expects to launch a Green Paper on
CMU in February 2015, and a full
action plan by the third quarter of this
year. Elsewhere, EIOPA recently
announced plans to start a new work
stream on insurers’ infrastructure
investments while the EBA, BoE and
Federal Reserve are continuing to
investigate ways to stimulate “prudent”
securitisation.
FS regulatory, accounting and audit bulletin – February 2015
On 27 January 2015, ECON finalised its
view of the new MIF Regulation: a large
majority of members voted in favour.
The EP will now vote on the Regulation
at an April plenary, after which it needs
to be endorsed by the Council.
Elsewhere in the EU, the ECB sent a
letter to big Eurozone banks on
dividend distribution policies on 29
January 2015. The letter calls on banks
to adopt a conservative policy when
distributing dividends, taking into
account the challenging economic and
financial conditions. Banks which failed
the comprehensive assessment have
been told not to distribute dividends
and instead focus on replenishing their
balance sheets. The ECB also notified
all Eurozone banks that variable
remuneration will be “thoroughly
reviewed” in the coming months.
In the derivatives space, the EC’s
Olivier Guersent briefed the ECON
Committee on a recent EU/US
Financial Services Dialogue meeting on
27 January 2015. Progress has now
been made on the derivatives dilemma.
Although EU firms will still need to be
registered in the US, substituted
compliance will be applied to a number
of the requirements.
January. This topic is hot right now,
with a large number of firms looking to
find ways to offer customers simpler,
lower cost ways to access investments
and pensions compared with traditional
full financial advice services. See our
blog for Lee Clarke’s thoughts on the
key points.
In the month ahead we’ll be keeping an
eye on the evolving situation in Greece,
and the risks that may pose for firms.
We’re eagerly awaiting the CMU
roadmap to see what that holds for the
EU and London as a financial centre.
And as the UK elections approach, we’ll
be looking to learn more about the
parties’ respective platforms and how
various coalition combinations may
impact businesses and consumers,
including the key issue of whether the
UK should stay in the EU.
Laura Cox
FS Risk and Regulation Centre of Excellence
020 7212 1579
[email protected]
@LauraCoxPwC
At home, the FCA published its muchanticipated finalised guidance on the
boundary around regulated advice in
PwC  1
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Contents
How to read this bulletin?
Review the Table of Contents the
relevant Sector sections to identify the
news of interest. We recommend you
go directly to the topic/article of
interest by clicking in the active links
within the table of contents.
Executive summary
1
Saving the taxpayer – ending ‘too big to fail’
3
Cross sector announcements
6
Banking and capital markets
15
Asset management
18
Insurance
19
Monthly calendar
21
Glossary
27
Contacts
32
FS regulatory, accounting and audit bulletin – February 2015
PwC  2
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Saving the taxpayer – ending ‘too big to fail’
the cost of recapitalisation rather than
taxpayers.
and resolution plan, its risk profile and
systemic footprint.
Both initiatives aim at ensuring firms have
sufficient capacity to absorb losses in case of
failure but they vary in their approach.
Regulatory capital will count toward TLAC
but capital buffers will not. Non-regulatory
capital and Tier 1 and Tier 2 instruments in
the form of debt will need to constitute at
least 33% of TLAC, limiting the amount that
can be met by regulatory capital. To count
towards TLAC, liabilities need to be
unsecured, subordinated to non-TLAC
eligible liabilities, not subject to netting
rights and have a remaining maturity of at
least one year. Structured notes are not
eligible for TLAC in the current proposals,
something the industry flagged as a major
concern in the consultation process.
What is TLAC?
Preventing another taxpayer funded bailout
of financial firms is one of the most vital
tasks facing policymakers today. Voters
across the world remain incensed that it fell
to the taxpayer to shoulder the burden of an
economic downturn that they attribute to
‘greedy bankers.’ The financial community
is also keen to draw a line under the crisis.
Doing so requires a credible solution to the
’too-big-to fail’ (TBTF) problem. With
pressure for a solution emanating from all
sides, the FSB has developed a proposal
which Mark Carney described as a
‘‘watershed’’ in ending the problem,
ensuring shareholders and creditors are not
let off the hook. The FSB has labelled this
the TLAC. G-SIBs are now starting to digest
what TLAC this means in practice for them.
Meanwhile, in the EU the BRRD introduces
the concept of MREL, to be applied more
widely to credit institutions and 730k
investment firms as defined under the CRR.
MREL is part of a broader range of
measures outlined in the BRRD which
should ease the path to orderly resolution
and ensure shareholders and creditors meet
TLAC is a global standard for minimum
amounts of Total Loss Absorbing
Capacity (TLAC) to be held by G-SIBs. It
was proposed by the FSB in November
2014 and will probably be implemented
in 2016 and 2019.
TLAC will apply to 27 of the 30 the firms
identified by the FSB in November 2014 as
G-SIBs. The Chinese G-SIBs are exempted
under an ‘Emerging Markets’ provision.
Banks can meet the TLAC requirement with
both equity and debt. It comprises two
elements, a minimum Pillar 1 standard for
all G-SIB’s and Pillar 2 firm-specific
requirement.
The Pillar 1 requirement is calculated at
16%-20% of RWAs, with the precise
percentage to be determined following a
Quantitative Impact Study (QIS). The
minimum Pillar 1 requirement is at least
twice the Basel III Tier 1 Leverage Ratio,
which translates into 6% of total assets. This
calculation sets a floor for the requirement
that aims to adjust for any inconsistencies
in the G-SIBs’ reported RWAs. Bank
regulators will determine the Pillar 2
requirement based on each firm’s recovery
FS regulatory, accounting and audit bulletin – February 2015
The proposal envisages that external TLAC
is held at the level of the top company in
each consolidated resolution group. Ideally,
a consolidated group will consist of a single
consolidated resolution group (known as a
‘Single Point of Entry’ resolution strategy)
under a resolution entity. More complex
firms may instead comprise multiple
resolution groups (Multiple Points of Entry)
with a separate operating or holding
company acting as the resolution entity for
each resolution group. The resolution entity
will then issue capital internally to the
material subsidiaries of the resolution
group. This process is referred to as ‘prepositioning.’ The capital required for prepositioning will likely be in the range of 7590% of the Pillar 1 Minimum TLAC
requirement, but this is not final. This intragroup debt from the parent resolution entity
would be forgiven in the event of a material
subsidiary entering resolution.
G-SIBs must deduct exposure to eligible
TLAC liabilities issued by other G-SIBs from
their own TLAC, which is in line with Basel
provisions on the management of Large
Exposures. This deduction is designed to
limit inter-connectedness and enhance
systemic resilience.
While this is still at proposal stage, we
expect the FSB to phase in TLAC from
January 2016 with full implementation by
January 2019.
And MREL?
MREL is an EU wide minimum
requirement for own funds and eligible
liabilities (MREL) which applies to
credit institutions and investment firms
in the scope of BRRD. The EBA issued a
consultation on the criteria for setting
MREL on 28 November 2014 and it will
be implemented four years after it is
finalised.
In Europe each firm’s resolution authority
will set MREL on a case by case basis after
consulting the regulator. There are six
considerations for determining a firm’s
MREL:

the institution can be resolved with the
application of the resolution tools

the Common Equity Tier 1 ratio can be
restored to the level necessary to meet
the conditions for authorisation and
restore market confidence in the firm
PwC  3
Executive summary
Saving the taxpayer –
ending ‘too big to fail’

eligible liabilities are sufficient to cover
excluded liabilities

the size, business model, funding model
and risk profile of the firm

the extent to which the Deposit
Guarantee Scheme (DGS) could
contribute to the financing of resolution

the systemic risk posed by the firm.
Unlike TLAC, capital instruments can
simultaneously meet MREL and capital
buffer requirements. Eligible liabilities must
be unsecured, issued and fully paid up, easy
to value in resolution and have a remaining
maturity of at least one year. The BRRD also
sets an MREL floor equal to 8% of
liabilities. The Directive stipulates that
firms must bail in these liabilities before any
other arrangement is made, such as use of
the resolution fund which can only be done
in exceptional circumstances.
Under the BRRD, the bail-in requirement
comes into force in January 2016. But given
the significant impact on firms’ funding
structures and costs, the EBA RTS proposes
a period of 4 years (i.e. up until 2020) for
firms to comply.
A global level playing field?
The new TLAC requirement is a minimum
standard. Regulators across the world have
the option to gold plate the rules, which
could create an unlevel playing field for GSIBs. The US has already indicated it will
impose more stringent requirements than
the proposal suggests. One likely deviation
is the stipulation that eligible debt must
comprise 50% of RWAs rather than the 33%
set out in the proposal. This change reflects
the US view that resolution will wipe out
most equity. Similarly, the PRA and FCA
Cross sector
announcements
Banking and capital
markets
could decide to gold plate the requirements
by using the UK minimum Leverage Ratio
standard to calculate TLAC.
At the opposite end of the spectrum,
Chinese G-SIBs are currently exempt from
the TLAC requirements. China now has the
world’s second biggest economy and houses
three of the world’s largest banks. Their
failure would almost certainly have a global
impact even if those banks are largely
domestically focused. This situation raises
the question of how much longer it will be
appropriate for China to rely on the
Emerging Markets exemption. Our
economists project that it will become the
leading global economy before 2030.
The pre-positioning provision may also
threaten the long-term sustainability of the
‘global banking’ business model. It
conforms to the emerging trend of
‘balkanisation’ with more capital held
locally, the establishment of intermediary
holding companies in the US, and the
increasing push for subsidiarisation of
branches in the EU. This fragmentation
could impede global trade flows, which in
turn decreases the scope for economies of
scale for banks and may potentially lead to
increased costs for customers.
Unintended consequences?
TLAC requirements will have an impact on
G-SIBs’ structures and funding models.
Some firms have expressed the view that
TLAC requirements are easier to implement
for G-SIBs structured with a holding
company as preferred in Anglo-Saxon
countries, rather than as a group of
operating companies. The requirement to
hold 33% of TLAC as non-regulatory capital
has also attracted criticism because it
effectively penalises those G-SIBs which are
FS regulatory, accounting and audit bulletin – February 2015
Asset management
Insurance
mostly deposit funded and do not
traditionally raise wholesale funding in the
market. This is especially the case for EU
banks.
The additional cost of funding involved in
raising fresh debt and equity poses a
challenge to all firms - it will reduce
profitability and put further pressure on
Return on Equity (RoE). Meeting TLAC
requirements may translate into less
financing available for the real economy,
while at the same time investors may push
firms to engage in riskier activities to
restore margin.
Pre-positioning TLAC so that material
subsidiaries can substantially meet their
requirements on a stand-alone basis may
create an incentive for local regulators to
bail-in earlier than they would have done
otherwise. It could even prove a barrier to
swift recapitalisation if losses occur where
they are not expected. Co-operation through
detailed agreements between home and
host regulators will be crucial to prevent
this. These issues illustrate the challenge for
firms in adequately preparing for financial
difficulty without significantly
compromising their ability to react to
unexpected circumstances or significantly
harm their business model, which could
result in increased costs for end users of
financial products and services. It is too
early to tell which side the current proposals
best accommodate.
Will there be enough
demand?
One big uncertainty surrounding the
proposals concerns the buyers of the debt
and capital instruments which firms will
need to issue to satisfy these regulatory
requirements. The volume of TLAC needed
Monthly calendar
Glossary
is estimated to be between €300 -500
billion, at a time of considerable uncertainty
for banks and for the global economy. The
provisions restricting the TLAC exposure of
one G-SIB to another also reduces the pool
of potential investors. Recent issuances of
convertible debt have revealed tight spreads
but this situation could reflect the current
low interest environment which analysts do
not expect to continue indefinitely.
Even if G-SIBs attain the requisite level of
funding, it is not clear that sufficient
investor demand exists for mid-sized EU
banks and investment firms subject to
MREL requirements. The FCA sent a strong
signal to the investor community in late
2014 when it banned the sale of CoCos to
retail investors. Even if sufficient demand
exists among institutional investors, a
question remains over pension funds and
insurers becoming too concentrated in
TLAC/MREL eligible instruments and
absorbing losses in the event of a firm’s
failure. This suggests that financial sector
losses will still pass to the real economy and
the general public, albeit through a different
avenue.
Operational impacts
Affected firms will need a much more robust
internal capital adequacy process to ensure
they are not triggering recovery indicators
and bite into capital as this may eventually
push them into a state where they are likely
to fail and the supervisor can intervene.
They will need to monitor the eligibility of
liabilities and the sufficiency of these in
meeting the new requirements, as liabilities
become ineligible when their maturity
shortens to under one year . Any shortfall
will need to be met with a new issuance of
eligible debt/equity. Accordingly, firms
PwC  4
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
must improve their systems/processes and
develop comprehensive management
information for asset-liability management.
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
produce a safer, self-sustaining financial
system.
Better links between Risk, Finance and
Treasury will be necessary to connect
normal business activity to the recovery
stage and remediation, whilst managing
communications with the regulators and
externally with investors, at that point.
Smaller firms may find themselves more
challenged by these changes than larger
firms which already have more
sophisticated systems and scale in their
processes.
Looking ahead
TLAC and MREL are only a part of the new
capital framework facing financial
institutions. Firms will need to form a
strategic view of their business and
organisational structure in light of all the
new capital regulations. The ongoing
regulatory push for more capital and the
resulting pressure on funding costs calls for
a more rigorous review of revenue
generation, profitability and the cost of
capital required to do business. Firms must
consider these costs at a granular level.
As acknowledged at the G20 Brisbane
meeting, policy makers and the industry
alike have made good progress on ending
TBTF but uncertainties remain, including
how to ensure co-operation between
supervisory colleges and harmonise the
home-host approach to resolution for
globally active firms and to build the trust
needed to underpin a credible resolution
regime. Only the next financial crisis will
reveal whether the measures envisaged
adequately address these issues and
FS regulatory, accounting and audit bulletin – February 2015
PwC  5
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Cross sector announcements
In this section:
Regulation
6
AML
6
Capital and liquidity
6
Competition
7
CMU
7
Data
8
Financial crime
8
Other regulatory
8
Pensions
9
Recovery and resolution
10
Retail advice
11
Securities and derivatives
11
Regulation
use to calculate minimum regulatory capital
requirements.
AML
Firms will have to disclosure and attest that
disclosures have been prepared in
accordance with board-agreed internal
control processes. The revised requirements
take effect from end-2016.
ECOFIN reaches agreement on
AMLD4
ECOFIN endorsed the agreement reached
with the EP on the AMLD4 on 27 January
2015. The Council and the EC have also
agreed on the need to take decisive actions
against terrorist financing. ECOFIN calls for
further efforts to strengthen co-operation
on terrorist financing between Member
States' financial intelligence units.
Accounting
13
Audit
13
Corporate governance
13
ECOFIN added an anti-abuse clause to the
parent-subsidiary directive to prevent tax
avoidance and aggressive tax planning by
corporate groups. This amendment was
published in the Official Journal on 28
January 2015.
Financial accounting
13
Capital and liquidity
PwC Publications
14
Basel Committee revising Pillar 3
The Basel Committee published Revised
Pillar 3 disclosure requirements on 28
January 2015. The most significant changes
relate to the use of templates for
quantitative disclosure. The Basel
Committee wants to enhance comparability
of bank’s disclosures, both between banks
and over time for an individual bank. It also
focuses on improving the transparency of
internal model based approaches that banks
FS regulatory, accounting and audit bulletin – February 2015
Tweaking supervisory reporting
The EC adopted two Implementing
Regulations amending Commission
Implementing Regulation 680/2014 on
supervisory reporting under CRD IV on 12
January 2015.
The EC makes minor changes to reporting
templates and provides instructions to
correct errors and reflect the revised data
point entry and taxonomy for Asset
encumbrance, single data point model and
validation rules and Forbearance and nonperforming exposures and certain minor
amendments.
Both Implementing Regulations will enter
into force after they are published in the
Official Journal.
Finalising CRD IV’s technical
provisions
The Implementing Regulation laying down
ITS with regard to supervisory reporting of
institutions according to the CRR as
regards asset encumbrance, single data
point model and validation rules was
published in the Official Journal on 21
January 2015. The Implementing
Regulation relates to Articles 99(5) and 100
of the CRR.
The Implementing Regulation entered into
force on 10 February 2015.
Banking on capital markets
The BoE released Trends in Lending:
January 2015 on 21 January 2015.
Businesses are increasingly turning to
capital markets to fund investment, as
concerns about the ability of banks to keep
pace with demand continues. While average
monthly net lending flow to UK businesses
was negative in the three months to
November, net capital market issuance was
the highest in five years.
Mortgage approvals for UK house purchases
have fallen in recent months and were lower
than at the start of the year. The consumer
credit annual growth rate increased to 6.9%
in November. Pricing on lending to small
and medium-sized enterprises was broadly
unchanged in the three months to
November.
Respondents to the BoE’s 2014 Q4 Credit
Conditions Survey reported that spreads on
new lending to large businesses fell
significantly. The quoted interest rates on
some two-year fixed-rate mortgages, such as
those at 75% and 90% loan to value ratios,
fell in 2014 Q4.
PwC  6
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
HMT adopts CRD IV buffers
HMT published draft capital buffers
legislation on 12 January 2015. Regulators
can apply additional capital requirements to
banks and investment firms if they believe
these firms to be so large that they pose a
risk to the financial system. The draft
statutory instrument transposes the
systemic risk buffer (SRB) provisions into
UK law and comes into force on 31 May
2016 and 1 January 2019.
The FPC will be responsible for defining a
framework to assess whether a bank poses a
systemic risk. The PRA will then assess
individual banks against that framework in
order to determine if the SRB should apply.
PRA overhauling Pillar 2
The PRA published CP1/15 – assessing
capital adequacy under Pillar 2 on 19
January 2015. The PRA proposes that at
least 56% of Pillar 2 capital requirements
(sometimes called the individual capital
guidance (ICG)) must be met using CET1
capital. Tier 2 capital cannot be used for
more than 25% of the ICG requirement.
This ensures consistency with the quality of
capital used to cover Pillar 1 capital
requirements.
The PRA confirmed that the PRA Buffer will
replace the Capital Planning Buffer from
January 2016. The PRA Buffer will be an
additional requirement, separate to the ICG.
Firms that are judged to have poor risk
management and governance arrangements
will also be subject to a special PRA Buffer
Cross sector
announcements
Banking and capital
markets
‘add-on’. The PRA Buffer will apply
concurrently with the systemic risk buffers
and the capital conservation buffer, so will
not give rise to any additional capital
requirement if it less than the CRD IV
buffers.
Firms will be able to disclose their ICG. The
PRA expects that the markets will be
increasingly interested in banks’ individual
ICG requirements over other capital
measures.
The consultation closes on 17 April 2015.
New third country equivalence rules
The PRA repealed its guidance on
equivalence of third country regulatory
regimes for credit risk purposes on 23
January 2015, which had been in force
during 2014. Banks with exposures to nonEU entities could treat them as exposures to
EU entities for credit risk purposes if certain
conditions were met.
The PRA’s guidance has been superseded by
the EC’s December 2014 Implementing
Decision on equivalent regulatory regimes.
The EC lists countries that have regulatory
regimes at least equivalent to the EU. The
Decision replaces all national regulators’
guidance on equivalence. It took effect
throughout the EU from 1 January 2015.
Competition
Competitive interventions
On 15 January 2015 the FCA published
CP15/1 – competition concurrency
guidance and Handbook amendments,
FS regulatory, accounting and audit bulletin – February 2015
Asset management
Insurance
setting out how it will use the new
competition powers from 1 April 2015.
The FCA sets out the new legal framework
and the relationship between its concurrent
competition powers under the Competition
Act 1998, its forthcoming powers under the
Enterprise Act 2002 (EA02) and its existing
competition powers under FSMA. It also
explains its proposed approach to selecting,
conducting and concluding investigations.
The FCA will use market studies to inform
its views on competition in a particular
market and can carry out market studies
under FSMA or the EA02. Both studies use
the same six stages of launch, research,
analysis and interim report, final report and
remedies. The FCA expects both types of
study to take 6 – 12 months to complete but
is under a statutory deadline to finish
studies under the EA02 within 12 months.
The FCA has stronger information gathering
powers under the EA02 than under FSMA.
Under the EA02, the FCA can request
information from any person - whether or
not they carry out regulated activities.
Where it considers that a person hasn’t
complied with its requirement it has the
power to impose a penalty.
Both FSMA and the EA02 give the FCA a
number of remedies that it can use to fix
competition in a market, ranging from
making policy or regulatory changes, using
enforcement or, as an extreme measure,
forcing a firm to divest some assets or part
of its business to increase competition. The
Monthly calendar
Glossary
FCA is also bound to consider competition
issues before taking other action, such as
varying a firm’s permission. It is also able to
pursue individual enforcement action in
addition to market or sector-wide
competition remedies, utilising information
captured during a competition
investigation.
The consultation closes on 13 March 2015.
CMU
Juncker fund moves closer
The EC published its proposed Regulation
on the European Fund for Strategic
Investments (EFSI) on 13 January 2015.
The EFSI aims to raise €315 billion public
and private investment to invest in small
and medium companies (fewer than 3000
employees) and infrastructure investments.
It is part of EC President Juncker’s plan to
boost growth and increase provision of
alternative investment financing.
The EFSI will be governed by a Steering
Board, made up initially of members of the
EC and the European Investment Bank
(EIB). Member States contributing to the
EFSI will get a proportionate representation
on the Steering Board, giving greater
opportunity to promote local projects for
investment. The EIB will separately
establish a European Investment Advisory
Hub (EIAH), which will be tasked with
identifying suitable investment
opportunities for the EFSI. The EIAH will
be expected to develop more detailed
PwC  7
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
criteria setting out how suitable projects will
be identified.
The EFSI should be launch by mid-2015.
Up-Hill challenge
The EC commenced its work on CMU on 28
January 2015 by holding an orientation
debate at the college of Commissioners.
CMU is one of the flagship projects of the
new EC and aims to meet the EC’s primary
objective, to boost jobs and growth in the
EU.
The orientation debate focused on the key
challenges and priorities for the integration
of capital markets. The EC expects to launch
a Green Paper on CMU on 18 February
2015, with a full action plan by Q3 2015.
The challenge the EC faces is to open
additional refinancing channels without
creating possibilities to arbitrage financial
sector stabilisation.
Data
Opening up banking data
HMT called for evidence on data sharing
and open data in banking on 28 January
2015. Following its December 2014 report
which explored how fintech firms can use
application programming interfaces (APIs)
and open data to make better use of bank
data on behalf of customers, HMT is now
seeking views from interested parties on
how the recommendations set out in the
report should be developed.
Many organisations currently access data
through manual downloads, screen scraping
Cross sector
announcements
Banking and capital
markets
and manual entry which are hard to use,
expensive, and have limited capabilities.
HMT believes that APIs, a set of
instructions allowing software systems to
connect with one another, and open data
which anyone is free to use will improve
competition and innovation in UK banking
and create a richer banking experience for
customers. HMT also believes that
introducing APIs and open data should
increase competition between banks.
HMT estimates costs of around £1 million
per bank to develop an open API standard,
with work complete within a year. Firms
believe it will take considerable effort and
coordination to achieve this.
The consultation closes on 25 February
2015.
Financial crime
Protecting your information
The EU Agency for Network and
Information Security (ENISA) published its
latest research on network and information
security (NIS) for the EU’s Finance Sector
on 20 January 2015. It evaluated the scope
of NIS obligations in the regulatory
landscape (both at EU and Member State
level), and compared it with the industry’s
prospects.
ENISA found that large international
banking groups demonstrated a good
understanding of the risk landscape and
available security schemes. But medium
sized stakeholders demonstrated limited
FS regulatory, accounting and audit bulletin – February 2015
Asset management
Insurance
senior management involvement or capacity
to be certified against current international
standards, and the de-prioritisation of
security investments.
Keeping hackers at bay
As part of “Keeping the UK safe in cyber
space” GCHQ, the Centre for the Protection
of National Infrastructure, DfBIS and the
Cabinet Office reissued cyber security
guidance for businesses on 16 January 2015.
DfBIS found that 81% of large organisations
had experienced a security breach in 2014
costing organisations, on average, between
£600,000 and £1.5 million. The bodies have
provided practical steps to help businesses
improve their network security.
The guidance has been updated to ensure it
continues to be relevant with the growing
cyber threat and operates alongside existing
schemes such as Cyber Essentials and the
Cyber Incident Response schemes, launched
as part of the National Cyber Security
Programme.
Other regulatory
Tentative recovery remains on-track
The ESRB published its Risk Dashboard:
Issue 10 on 5 January 2015. The ESRB
found that the perception of systemic risk
remains in line with pre-crisis levels,
despite some renewed bouts of volatility in
July and August. Financing conditions for
new private sector loans improved in the
third quarter of 2014, although some
countries had tightened credit standards
(e.g. mortgage credit in the UK).
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Glossary
Financial market conditions overall remain
buoyant. Money market spreads and
financial market liquidity indicators have
been stable at low levels throughout 2014.
But volatility has increased significantly in
some market segments. Uncertainty
regarding Eurozone interest rates has
recently increased again without any sign of
reversal.
Despite continued low levels of profitability,
banks were able to improve their solvency.
In the second quarter of 2014, large EU
banking groups were able to increase Tier 1
capital to total assets, benefitting from
favourable equity market conditions.
CMU tops Latvia’s wish list
The Latvian Presidency of the EU Council
published its Work Programme: 1 January
to 30 June 2015 on 6 January 2015.
The Presidency will “ensure a broad
exchange of views” on the CMU ahead of
Commissioner Hill’s proposals, expected in
February. Banking Union is also a high
priority, with the Presidency committing to
ensuring timely implementation and
smooth functioning of banking union. It will
also attempt to push forward negotiations
on a number of tabled proposals, including
bank structural reform, the SFT Regulation,
PSD2, the Benchmark Regulation, IMD2
and AML4.
The Presidency will also prioritise reaching
agreement on wider issues of relevance to
the financial services industry, including the
General Data Protection Regulation and
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Cross sector
announcements
Banking and capital
markets
Directive and finalising negotiations on the
proposed Cyber-Security Directive.
credit complaints. The FOS plans to meet
these challenges by:
The FOS plans for 2015

The FOS published its plans and budget for
2015/2016 on 12 January 2015,
summarising its financial performance and
its proposed work for 2015.
modernising its IT and case-handling
infrastructure to increase efficiency

developing new ways of working that
meet the needs of its customers

improving information flow between its
own operation and firms to increase the
speed with which it resolves complaints
The FOS’ workload is dominated by PPI
complaints, accounting for 87% of its work.
Packaged bank accounts, high cost short
term lending and investments and pensions
complaints have also increased. Despite this
the FOS expects to operate on a reduced
budget of £220.7m in 2015/16, a 13%
reduction. Its financial levy to firms and the
cost of a case remain unchanged.
The consultation closes on 16 February
2015.
FSCS annual funding consultation
The FCA and PRA jointly published CP15/2
(FCA)/CP2/15 (PRA): FSCS – Management
Expenses Levy Limit (MELL) 2015/16 on 19
January 2015. The FSCS budget is set
annually, with the MELL meeting noncompensation expenses such as staff and IT
costs. For 2015/16 the regulators are
proposing a £74.4m levy. The consultation
closes on 16 February 2015.
FOS 2015 plans
The FOS consulted on its plans and budget
for 2015/16 on 6 January 2015. It foresees a
challenging year, with PPI complaints
continuing to dominate its workload and
rises expected in banking and consumer

improving data sharing to prevent
similar complaints in the future.
The FOS expects to operate on a reduced
budget and will collect 13% less in fees from
financial businesses. It has also frozen case
fees and levies for another year.
Firms can comment on the plan and budget
until 16 February 2015.
FCA publishes bulletin
On 29 January 2015 the FCA published its
Data Bulletin January 2015. The Bulletin
reports that:

authorisation timelines are increasing
for retail firms but reducing for
wholesale firms

the FCA has received 83 requests
through Project Innovate

82% of approved persons are men

FCA reviewed over 3,000 financial
promotions in the second half of 2014,
leading to action against 181
advertisements.
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Insurance
Promoting regulatory co-operation
The FCA published three separate MoUs
with the Information Commissioners
Office, Advertising Standards Authority
and Cifas (on Immigration Act
responsibilities) on 28 January 2015.
Each MoU establishes a framework for cooperation between each authority and the
FCA on:

roles and responsibilities

policy and rule-making powers

information exchange mechanisms

investigation and enforcement.
Each MoU is subject to annual review by the
FCA and the relevant authority.
Monthly calendar
January 2015. This report considers the
choices available to members of
occupational DC pension schemes. EIOPA
found that in most EU states, occupational
DC pension scheme members have no or
limited ability to make investment choices.
In states where schemes made available
investment choices, members generally had
a default investment option as well.
EIOPA found that the IORP was important
in developing the investment strategy for
schemes but, in most cases the employer
was involved in setting the default
investment option. It identified the
following areas for possible further
attention:

methods of improving suitability of
investment options compared to target
members’ risk and return characteristics

methods of supporting third parties (e.g.
employers) who make or frame
investment decisions on behalf of
members

mechanisms for providing relevant
standardised and comparable
information to help members making
better investment decisions, in case they
have to make such decisions.
Pensions
EU pensions’ data published
EIOPA published a statistical database for
pensions on 30 January 2015. The database
includes pensions’ statistics from 21 EEA
jurisdictions for the period 2004 to 2013. It
covers mainly IORPs and some ‘1st Pillar
bis’ (mandatory statutory) occupational
funds. EIOPA plans to complete and update
the database on a yearly basis. EIOPA has
collected this data to help it monitor
developments in the market and identify
trends, potential risks and vulnerabilities.
Investment options for DC pensioners
EIOPA published a Report on investment
options for occupational defined
contribution (DC) scheme members on 29
Glossary
Transfers of supplementary
occupational pension rights
The EP and Council adopted a ‘Directive on
minimum requirements for enhancing
worker mobility by improving the
acquisition and preservation of
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Cross sector
announcements
Banking and capital
markets
supplementary pension rights’ on 16 April
2014. This directive encourages Member
States to improve the transferability of
vested pension rights. Subsequently, EIOPA
published Consultation paper on a report
on good practices on individual transfers of
supplementary occupational pension rights
on 29 January 2015 in response to the EC’s
call for advice to EIOPA regarding
transferability of supplementary pension
rights.
for resolution plans under the BRRD on 14
January 2015. Resolution authorities will
initially seek information on a firm’s
resolution plan from the firm’s regulator,
but will directly seek information from the
firm if this is not forthcoming. Firms should
complete the EBA’s templates when asked
for more information on:
In the draft report, EIOPA identifies the
main impediments to transfers of
supplementary pension rights and good
practices to overcome them, including
establishing voluntary agreements covering
as many providers as possible, layering
information and using appropriate tools to
provide relevant information. EIOPA also
considers it good practice to aid scheme
member's access to advice. EIOPA believes
transferability could also be improved when
schemes communicate directly, without
involving the scheme members, on the
practicalities of the transfer execution and
maintain reasonable time limits for the
execution of transfers.
EIOPA expects Member States to refer to
this report when transposing the Directive.
The consultation closes on 10 April 2015.
Recovery and resolution
Templates for resolution planning
The EBA published Consultation paper draft ITS on procedures, forms and
templates for the provision of information

organisational structure

governance and management

critical functions and core business lines

critical counterparties

structure of liabilities

funding sources

off balance sheet

payment systems

information systems

interconnectedness

authorities and legal framework.
The consultation closes on 27 February
2015.
Pre-funding resolution costs
On 17 January 2015 the Commission
Delegated Regulation supplementing RRD
with regard to ex ante contributions to
resolution financing arrangements was
published in the Official Journal. The
Regulation sets out the methodology for
calculating firms’ contributions to
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Insurance
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resolution financing arrangements and the
adjustment to the risk profile of institutions.

remove any duplication of the rules
where they overlap with the PRA’s rules
The contribution is calculated as a fixed
amount according to a firm’s liabilities to
reflect the fact that larger firms are
considered more risky. The contribution is
adjusted through the use of risk pillars and
risk indicators which are assigned relative
weights. In the case of groups the
contribution should take into account the
interconnectedness of the group to avoid
double counting of intragroup exposures.

amend the transitional provisions with
regard to EU and EEA application.
The Regulation applied from 1 January 2015
and the Commission will review the risk
adjustment before 1 June 2016.
Recovery and resolution for
investment firms
The FCA published PS15/2 - Recovery and
Resolution Directive: Feedback on CP14/15
and final rules on 16 January 2015,
implementing BRRD for investment firms.
The new rules will apply to investment firms
that have the FCA as their sole regulator
and that are IFPRU 730k firms, as well as to
entities in a group that contains an IFPRU
730k firm or a credit institution.
The finalised rules:

remove the communication and
disclosure element from the recovery
planning requirements for firms subject
to the simplified obligations

retract any application to unregulated
entities
The FCA has not made any significant policy
changes to previous proposals. It has
included some guidance on intra-group
financial support agreements and agreed to
discuss with the BoE concerns that firms
reporting under US GAAP (rather than UK
GAAP or IFRS) enjoy an advantage when
calculating MREL due to the laxer netting
requirements.
The finalised rules entered into force on 19
January 2015, except for the rules on the
contractual recognition of bail-in which will
come into force on 1 January 2016.
Updated RRP guidance
The PRA updated its December 2013
supervisory statements: SS18/13 –
Recovery planning and SS19/13 Resolution
Planning on 16 January 2015. The PRA set
out its expectations on the content of
recovery plans and group recovery plans, to
complement existing RTS, rules and
guidance. Firms which are members of an
international group headquartered in third
countries should assess and demonstrate
how the UK plan submitted to the PRA fits
with the group recovery plan in addressing
UK operations.
The PRA also outlined the two stages of
resolution planning. Phase 1 will see the
PRA request baseline information to
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establish a resolution strategy. All firms are
required to submit Phase 1 information by
April 2016 and every two years thereafter
unless they experience a material change to
their structure or business activities. Phase
2 contains the detailed information needed
to support the preferred resolution strategy,
chosen by the PRA in conjunction with the
BoE, while ensuring that critical functions
are maintained. Firms may be required to
submit information relating to more than
one resolution strategy to assess the
feasibility of different options.
The final PRA rules came into force on 19
January 2015, except for contractual
recognition of MREL which comes into
force on 19 February 2015.
Tweaking BRRD implementation
The PRA published PS1/15: Implementing
the BRRD - response to CP13/14 on 16
January 2015. The PRA now proposes that:

the recovery plan rules are extended to
capture holding companies

firms undertake scenario testing

intragroup financial support is captured
by a new framework

BRRD firms must notify the PRA if they
consider they meet the conditions for
failing or likely to fail

BRRD firms include a term in
contractual provisions governing eligible
liabilities governed by the law of a third
Cross sector
announcements
Banking and capital
markets
country which states the liability is
subject to UK bail in powers.
The final PRA rules came into force on 19
January 2015 except for contractual
recognition of MREL which comes into
force on 19 February 2015.
Asset management
expectation gap by clarifying where the
boundaries lie between:

UK Parliament published The FSMA 2000
(Regulated Activities) (Amendment) (No. 2)
Order 2015 on 29 January 2015.
The Order makes providing advice on the
conversion or transfer of a class of pension
benefits known as “safeguarded benefits” a
regulated activity. This follows the Budget
2014 pension freedoms, which allows those
with defined contribution pensions more
flexibility in accessing their pension pot.
The explanatory memorandum states that
the Order mirrors, or copies out, four
definitions set out in the Pensions Bill 201415 (around flexible benefits, safeguarded
benefits, subsisting rights and survivors).
The UK government expects the Pensions
Bill 2014-15 to receive Royal Assent in
February or March 2015, and take effect on
6 April 2015.
Clarifying advice boundaries
The FCA published feedback and FG15/1 –
Retail investment advice: clarifying the
boundaries and exploring the barriers to
market development on 22 January 2015.
FCA responded to a perceived regulatory
FS regulatory, accounting and audit bulletin – February 2015
offering personal recommendations
(advice caught under MiFID suitability
requirements)

providing regulated advice under the
RAO

providing information that is not
regulated advice.
Retail advice
Advising on pension transfers
Insurance
The FCA also clarified the application of
suitability requirements when firms provide
focused advice, including how much
indirectly relevant client information
advisers need
But firms might find that the guidance does
not answer all their questions. Advisers still
need to identify their own risk appetite
when carrying out suitability checks on a
client and decide how much additional
information they need to provide. Firms
looking to provide automated or simplified
models will welcome the advice on filtering
and risk profiles within systems, but might
still have outstanding questions. See our
blog for more details on the main issues we
have identified from the guidance.
Securities and derivatives
IOSCO promotes derivative certainty
IOSCO outlined nine standards to reduce
uncertainties in derivatives markets in its
final report on Risk Mitigation Standards
for Non-centrally Cleared OTC Derivatives
on 28 January 2015. It published these to
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Glossary
support the capital requirements for noncentrally cleared OTC derivatives
published jointly with the Basel Committee
in 2013.
IOSCO’s recommendations cover all major
players in the non-centrally cleared OTC
derivatives market. Financial entities and
systemically important non-financial
entities that use non-centrally cleared OTC
derivatives should employ the risk
mitigation techniques IOSCO recommends.
It proposes these firms establish policies
and procedures to:

document the trading relationship with
their counterparties before executing a
non-centrally cleared OTC derivatives
transaction, including all material terms
governing the relationship

ensure the material terms of all noncentrally cleared OTC derivatives
transactions are confirmed as soon as
practical

reconcile with counterparties the
material terms and valuations of all
transactions in a non-centrally cleared
OTC derivatives portfolio

regularly assess and engage in portfolio
compression.
Firms must agree and document the process
for determining the value of each
transaction at any time, and the process for
determining when discrepancies in material
terms or valuations should be considered
disputes. IOSCO wants regulatory
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authorities to collaborate to minimise
inconsistencies in risk mitigation
requirements across jurisdictions, and to
implement the standards as soon as
possible.
LEI goes online
On 26 January 2015 the Global Legal Entity
Identifier Foundation (GLEIF) launched its
new website in a further step to make LEI
information available. The GLEIF,
established by the FSB in 2014, manages the
worldwide development of LEIs.
The site enables communication with the
GLEIF and sets out instructions for
obtaining an LEI from local operating units.
In late 2015 the GLEIF expects the website
functionality will allow LEI participants to
access to the database of all LEIs issued
globally and their associated reference data.
Clearing regime for IRS
ESMA published Opinion on Draft RTS on
the Clearing Obligation on Interest Rate
Swaps (IRS) on 29 January 2015. ESMA
must specify the class of OTC derivatives
that should be subject to the clearing
obligation under EMIR, and submitted a
draft RTS on the clearing obligation on
interest rate swaps on 1 October 2014.
The EC signalled its intent to endorse the
draft RTS with some amendments on 18
December 2014. The EC modified the RTS,
amending the start date of the frontloading
obligation and adding a new provision on
Cross sector
announcements
Banking and capital
markets
the treatment of non-EU intragroup
transactions.
ESMA agreed with the ultimate objectives of
the EC’s modifications but believes that the
change relating to non-EU intragroup
transactions is not appropriate from a legal
perspective. ESMA indicated a desire to
work with the EC to explore an alternative
to that provision.
Matching transparency to markets
In Occasional Paper 6: Transparency in
the UK Bond Markets: An Overview,
published on 16 January, 2105, the FCA
discusses key features of the UK bond
market and how proposed MiFIR
transparency requirements may impact
these segments. It proposes that the EU
should not follow a “one size will fit all”
approach in applying MiFIR transparency
requirements to diverse fixed-income
(bond) markets.
BIS statistics reveal that the global bond
market is twice the size of the global equity
market, and that the UK is home to 70% of
all secondary trading. As a key stakeholder
in MiFIR rule developments, the FCA
reviewed UK listed bond transaction reports
submitted from 2008 to 2011 to analyse the
market. The FCA found significant diversity
in the UK bond markets. Unlike equities,
bonds are traded sporadically, with only 35
bonds representing 50% of secondary
trading activity. Only a small sub-set of
bonds are liquid and frequently traded at
established trading venues.
FS regulatory, accounting and audit bulletin – February 2015
Asset management
Insurance
The survey also revealed that:

bonds’ liquidity profiles vary widely
during their lifetime

transactions in UK-listed bonds are
largely executed off-exchange

liquidity is provided by a small number
of broker and market maker services

trading costs vary by transaction size,
credit risk and maturity.
The FCA recommends that EU law makers
calibrate MiFIR pre- and post-trade
transparency requirements by segment.
This will ensure that the rules achieve the
aim of increased competition but do not
impair liquidity in certain segments. ESMA
launched a consultation on its MiFIR preand post-trade transparency requirements
proposals on 19 December 2014: responses
are due by 2 March 2015.
Fair and effective market support
grows
Jerome H. Powell, Member of the Board of
Governors of the Federal Reserve System
expressed his support for the UK’s Fair and
Effective Markets Review in a speech
delivered on 20 January 2015. Powell
highlighted specific US measures aimed at
making markets fairer and more effective.
Powell said that the importance of FICC
markets extends far beyond their
participants and that proper market
functioning is actually a public good that
relies on confidence and trust among
Monthly calendar
Glossary
market participants and the public. He
argued that bad conduct, weak internal firm
governance, misaligned incentives and
flawed market structure can all place this
trust at risk.
A number of US firms have already
reformed compensation packages to better
align incentives. US financial regulators are
preparing a new rule on incentive
compensation that will codify and
strengthen these initiatives.
On benchmarks, Powell explained that the
Federal Reserve has asked a group of the
largest global dealers to form the
Alternative Reference Rates Committee. The
Committee will work with the Federal
Reserve to promote alternatives to US dollar
LIBOR that better reflect the current
structure of funding markets.
Sponsors face toughened rules
The FCA published its tenth Primary
Market Bulletin on 30 January 2015. Two
new technical notes have been added to the
UKLA Knowledge Base and set out the
FCA's approach to sponsor competence:

UKLA Technical 714.1 delineates the
types of skills, knowledge and expertise
that the FCA expects a sponsor to
consider when assessing its ability as a
firm to show an understanding of each
competency set.

UKLA Technical 715.1 sets out questions
and answers to assist sponsors or
applicants in considering whether the
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firm meets, or continues to meet, the
rules requiring sponsors to be
competent to provide sponsor services at
all times.
Sponsors must effectively monitor and
mitigate against conflicts of interest that
arise from their roles. The two new
technical notes applied from 1 February
2015.
Accounting
Audit
Presenting negative interest rates
On 7 January 2015 the EBA requested that
the IFRS Interpretations Committee
reconsider how financial instruments with a
negative yield should be presented in
financial statements. The IFRS had
previously agreed to refrain from finalising
its decision on this issue until the
completion of the IFRS 9 redeliberations
(which happened in July 2014).
As the ECB has applied negative interest on
the amount of deposits which are above a
certain limit, and given poor growth
prospects in the Eurozone, clarity on the
presentation of negative interest in IFRS in
important. The EBA is concerned that
divergence of accounting practices on this
matter could emerge.
Cross sector
announcements
Banking and capital
markets
Corporate governance
FRC governance update
Our in brief publication looks at the FRC’s
priorities for corporate governance and
reporting coming from its recent
publications ‘Developments in Corporate
Governance and Stewardship 2014’ , ’Draft
Plan & Budget and Proposed Levies
2015/16’ and ‘Year-end advice to
preparers’.
Levels of compliance with the UK Corporate
Governance Code have continued to
increase. Reporting has become more
transparent and informative, with audit
committee reports and diversity reporting
particularly improved. The FRC's annual
review of developments in Corporate
Governance and Stewardship for 2014 has
seen an increase in signatories to the
Stewardship Code with signs of better
engagement with large companies by
investment managers. But the FRC believes
that more needs to be done to ensure asset
owners and managers follow-through on
their commitments to the principles set out
in the Code.
Financial accounting
Consolidated financial statements
Q&As
IFRS 10 ‘Consolidated financial statements’
and IFRS 12 ‘Disclosure of interests in other
entities’ were issued in May 2011. IFRS 10
retains the key principle of IAS 27 and SIC
12: all entities that are controlled by a
parent are consolidated. But some of the
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Asset management
Insurance
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Glossary
detailed guidance is new and may result in
changes in the scope of consolidation for
some parent companies. Experience
suggests that the new requirements will
have the greatest impact on consolidation
decisions for structured entities (i.e. SPVs)
and for pooled funds managed by a third
party.
includes discussion of judgements and
estimates in revenue recognition.

IASB meetings on the comprehensive
review of the IFRS for SMEs
Our In depth publication IFRS 10 and 12 Questions and answers sets out our views
on some of the most common issues that
arise during the implementation of the new
standards. For further guidance on IFRS 10,
see our ‘Practical guide to IFRS:
Consolidated financial statements –
redefining control’ and the supplement for
the asset management industry.

adopting the IFRS for SMEs in Uruguay

upcoming ‘train the trainers’ workshops

IFRS for SMEs translations: status
report

where to obtain IFRS for SMEs
materials.
Hedging in practice
The EU has endorsed the amendments to
IAS 19 'Employee benefits', on defined
benefit plans, issued in November 2013.
These narrow scope amendments apply to
contributions from employees or third
parties to defined benefit plans. The
objective of the amendments is to simplify
the accounting for contributions that are
independent of the number of years of
employee service, for example, employee
contributions that are calculated according
to a fixed percentage of salary.
Many companies are now considering IFRS
9, the new accounting standard on financial
instruments. IFRS 9 addresses all the
relevant aspects on the accounting for
financial instruments, including
classification and measurement,
impairment of financial assets and general
hedge accounting.
Our publication ‘IFRS 9 Hedging in
Practice - Frequently asked questions’
presents a number of frequently asked
questions and focuses on just one topic in
IFRS 9: general hedge accounting.
IASB Investor Update - January 2015
IASB Investor Update - Our newsletter for
the investment community - January 2015
IFRS for SMEs - January 2015
Our January update on IFRS for SMEs
includes the following discussions:
EU endorses IAS 19 amendments
The IASB effective date is 1 July 2014, but
the EU has endorsed the amendments for
annual periods starting on or after 1
February 2015. For further details of the
amendment see our Straight away guide IASB issues amendment to IAS 19R.
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EU endorses annual improvements
The EU has endorsed the annual
improvements 2010-2012 cycle issued in
December 2013. These amendments affect
seven standards:

IFRS 2 ‘Share-based payment’

IFRS 3 ‘Business combinations’

IFRS 8 ‘Operating segments’

IFRS 13 ‘Fair value measurement’

IAS 16 ‘Property, plant and equipment’

IAS 38 ‘Intangible assets’

IAS 24 ‘Related party disclosures’.
Consequential amendments are also made
to IFRS 9 'Financial instruments', IAS 37
'Provisions, contingent liabilities and
contingent assets', and IAS 39 'Financial
instruments - Recognition and
measurement'. The IASB effective date is 1
July 2014, but the EU has endorsed the
amendments for annual periods starting on
or after 1 February 2015. For further details
of the amendments see our Straight away
guide - IASB publishes final standard on
Annual Improvements 2010-12 cycle.
PwC Publications
Impairment review considerations
Many companies consider impairment tests
at the year end, either on a one-off basis due
to a triggering event, or as part of an annual
impairment test for indefinite lived
intangibles and goodwill. Bond yields in
many major currencies (e.g. Sterling, US
Cross sector
announcements
Banking and capital
markets
Dollar, Euro) are lower at 31 December
2014 than they were at 31 December 2013.
This situation might lead you to believe that
discount rates have fallen and therefore that
the risk of impairment has reduced. Please
be aware that this is not the case. For
further details see our In brief publication
‘Discount rates and cash flows for
impairment reviews’.
Impairment reviews of non-financial
assets
Asset management
Insurance
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balance sheet date whose nature and
estimated financial effect will have to be
disclosed if significant. This could be an
impairment indicator in 2015 accounts for
entities with exposure to Swiss activities. In
some cases, the going concern basis may no
longer be appropriate. Our In brief guide
‘Swiss National Bank's decision on the
CHF/EUR rate’ includes an overview of the
potential issues and the relevant guidance
under IFRS.
Recent months have been marked by
increased volatility in global markets. This
environment could lead to revised budgets
and forecasts with an expectation of lower
cash-flows from existing non-financial
assets. Our In brief publication ‘Top 5 tips
for impairment reviews of non-financial
assets’ highlights the top 5 tips to focus on
when completing impairment review for
non-financial assets.
Implications of movements in the
Swiss Franc rate
On 15 January 2015, the Swiss National
Bank (SNB) stopped trying to peg the Swiss
Franc to the Euro. As a result, the Swiss
Franc appreciated 15% against the Euro and
then stabilised close to parity (SFr1:€1) as at
29 January 2015. The immediate
consequences were significant for some
entities - in the UK some currency brokers
were forced into administration.
For the December 2014 year end, the
foreign currency movements triggered by
the SNB's decision are events after the
FS regulatory, accounting and audit bulletin – February 2015
PwC  14
Executive summary
Saving the taxpayer –
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Banking and capital markets
Regulation
In this section:
Regulation
15
Capital and liquidity
Conduct
Consumer credit
15
16
17
Accounting
17
Capital and liquidity
Restoring confidence in capital
The Basel Committee published its Work
Programme for 2015 and 2016 on 21
January 2015. Much of its work will be
geared towards reviewing existing methods
of measuring risk-weighted assets. It will
consider the use of simple, transparent and
comparable criteria for securitisations, the
fundamental review of the trading book and
interest rate, credit and operational risk in
the banking book.
The Basel Committee also plans new
initiatives to:

review the regulatory treatment of
sovereign risk

assess the interaction, coherence and
overall calibration of the reform policies

assess the role of stress testing in the
regulatory framework in light of national
developments.
The Basel Committee will continue to
monitor its members’ implementation of the
Basel framework via the Regulatory
Consistency Assessment Programme
(RCAP). This year the RCAP will be
expanded to also cover liquidity standards
and the frameworks for G-SIBs and D-SIBs.
FS regulatory, accounting and audit bulletin – February 2015
Banks struggle with risk management
principles
The Basel Committee published its second
report on Progress in adopting the
principles for effective risk data
aggregation and risk reporting
(“Principles”) on 23 January 2015. The 2013
Principles strengthen risk data aggregation
and risk reporting at banks to improve risk
management practices and decision-making
processes. Firms designated as G-SIB are
required to implement the Principles in full
by 2016.
The Basel Committee outlines the measures
G-SIBs took to improve their overall
preparedness for compliance with the
Principles during 2014. While G-SIBs are
increasingly aware of the importance of
implementing the Principles, 14 of the 31
participating banks reported that they will
be unable to fully comply by the 2016
deadline, compared with 10 G-SIBs in 2013.
Activating emergency prudential
powers
The ESRB Chairman, Mario Draghi, sent a
letter on 7 January 2015 to the EC on the
systemic risk conditions in the EU. The EC
requested input from the ESRB in its annual
review of its CRR powers. Under CRR, the
EC can adopt delegated acts imposing
stricter prudential requirements on banks
where CRD IV powers are insufficient to
address the prudential risks.
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The ESRB found no need for the EC to use
these powers based on current conditions.
But it suggests that there are two instances
where, in theory, these powers might help to
address specific systemic threats:


systemic fragilities in financial markets
that might call for comprehensive,
uniform and swift policy responses
indirect contagion that might easily
spread to other states, necessitating
broad preventative measures across the
EU.
The ESRB believes that the EC could
enhance systemic stability by requiring
firms to improve public disclosures on
exposures, indicators or practices of
systemic relevance.
Calculating DGS needs
On 12 January 2015, the EBA published
slides from its public hearing on methods
for calculating contributions to the deposit
guarantee scheme (DGS), held on 8
January 2015. EU banks must contribute
annually to the new DGS. The contribution
will be dependent on the institution’s
covered deposits, aggregate risk weight and
contribution rate. The EBA will also add an
adjustment coefficient to ensure the DGS
reaches annual target levels.
At the public hearing the EBA described:

the calculation formula

specific indicators

risk classes for members
Cross sector
announcements


Banking and capital
markets
thresholds for risk weights assigned to
specific risk classes
other necessary elements to pre-fund
the DGS.
A bank’s contribution will mostly be
determined by its risk class so the EBA
provided a list of core risk indicators that it
will assess, with most heavy weight placed
on its non-performing loan ratio and
covered deposits.
The DGS consultation closed on 11 February
2015. Banks will contribute from 3 July
2015.
Relaxing the volatility test
The EBA revised its Final draft RTS on
prudent valuation the CRR on 23 January
2015. The EBA has replaced references to
“volatility” in Articles 9 and 10 of the initial
final draft RTS with “variance” for the
purposes of computing market price
uncertainty and close-out costs additional
valuation adjustments.
The change will only affect institutions
using the “core approach”. It will result in a
slight relaxation of the calibration of the
volatility test performed under the two
articles, and is intended to avoid unwanted
side-effects during the first year
implementation of the core approach.
The RTS is now with the EC to be finalised
and published in the Official Journal.
FS regulatory, accounting and audit bulletin – February 2015
Asset management
Insurance
Limiting dividend payments
ECB Banking Supervision wrote to
significant Eurozone banks on dividend
distribution policies on 29 January 2015.
Banks should adopt a conservative policy
when distributing dividends, taking into
account the current challenging economic
and financial conditions. Banks with a
residual capital shortfall following the
comprehensive assessment in 2014 should
not distribute dividends at all. Moreover,
work on building banks’ capital base needs
to continue in line with CRD IV
requirements.
The ECB also notified banks that variable
remuneration will be thoroughly reviewed
in the coming months.
PRA transition to new DGS
The PRA published CP4/15: Depositor,
dormant account and policyholder
protection policies - amendments on 27
January 2015. The PRA proposes
transitional provisions, new rules and
amendments to the PRA Handbook
following feedback to the Depositor
Protection and Policyholder Protection
consultations published in October 2014.
The PRA proposes transitional rules for
depositor protection, including expectations
for the single customer view, account
marking and information requirements. To
protect dormant accounts, the PRA wants to
change compensation arrangements,
outlining how it expects the FSCS to operate
the Dormant Account Scheme and interact
Monthly calendar
Glossary
with a dormant account fund operator. It
also proposes new transitional rules to
clarify what circumstances and measures
will continue to fall under the current
compensation and fees rules, or under the
new rules from 3 July 2015.
The consultation closes on 27 February
2015. The PRA plans to publish policy
statements alongside final rules and
supervisory statements in the first half of
2015 with the new rules planned to take
effect from July.
Conduct
Teaser rates to continue
The FCA published its findings and
recommended remedies from MS14/2.3 –
cash savings market study report on 20
January 2015. FCA focused on interestbearing cash savings accounts and analysed
seven main types of savings accounts,
including easy access accounts, fixed term
bonds and cash ISAs. It concluded that the
cash savings market is not working well for
many consumers. In particular:

significant numbers of accounts opened
more than five years ago paying lower
interest rates than those opened more
recently

consumers receiving little information
about alternative products

consumers are put off switching by the
expected hassle and perceived low gains
from opening another account
PwC  16
Executive summary

Saving the taxpayer –
ending ‘too big to fail’
large personal current account providers
have considerable advantages because
they can attract most easy access
balances despite offering lower interest
rates.
The FCA is not proposing to ban
introductory teaser rates or require
providers to offer all customers the same
interest rate. But it does want providers to
improve communications on interest rate
changes and bonus rate expiry. Under the
proposals, firms are required to warn
customers of accounts with low interest
rates, emphasise the interest rate on
statements, explain how to switch and the
potential benefits of switching and remind
consumers of interest rate changes,
including bonus rate expiry.
The FCA welcomes comments by 18
February 2015 and will then consult if
rule changes are required.
Time-barred PPI complaints?
On 30 January 2015 the FCA announced its
intention to gather evidence on current
trends in PPI complaints to decide if further
intervention is required. This could include:

a consumer communication campaign

possible time limit on complaints

other rule changes or guidance.
The FCA also believes that a continuation of
the current process may be the preferred
outcome. It expects to commence the
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance

poor practice in the credit broking
market in relation to transparency of
fees and customer outcomes
Reporting requirements

inadequacy of affordability checks
On 21 January 2015, the FCA published a
reporting framework for firms to report
consumer credit financial data. It plans to
use this data to:

the fair treatment of customers in
financial difficulties

governance and controls which should
ensure organisational changes are
effectively embedded.
evidence gathering shortly and give its view
on the evidence collected in the summer.
Consumer credit

build an overall picture of the size of the
consumer credit market and how
revenue is generated

analyse the on-going viability of a firm

verify that debt management firms are
complying with their prudential
requirements

understand the size of the debt
collection market and identify where
there is a risk of consumer detriment.
The information provides a basis for the
FCA’s supervisory activities. All fully
authorised firms, except those that only
provide credit references, must report.
Firms with limited permissions that provide
credit not as their main business are subject
to reduced reporting requirements.
FCA concerned with payday lenders
On 21 January 2015 the FCA published a
“Dear CEO” letter to high cost short term
credit providers (HCSTC) holding an
interim permission. FCA sets out concerns
including:
FS regulatory, accounting and audit bulletin – February 2015
Monthly calendar
Glossary
internal management reporting and
investor communications will also likely
deliver significant benefits. Our In depth
publication ‘IFRS 9: Expected credit loss
disclosures for banking’ sets out key
considerations and what they will mean in
practice.
FCA also highlights the consequences of
firms failing to submit an application for
authorisation before their authorisation slot
deadline. These firms will be acting illegally
and will be unable to grant further loans or
accept or recover payments from existing
loans.
Accounting
Expected credit loss disclosures
IFRS 9 introduces significant additional
disclosure requirements relating to credit
risk and expected credit loss allowances.
Understanding the data and systems needed
to meet these new requirements will be
critical to ensuring the completeness of
IFRS 9 project scopes, thereby avoiding
revisions later in the project that could be
costly and jeopardise project timings.
Simply replicating the illustrative
disclosures included in IFRS 9 risks missing
key information requirements.
Considering these disclosure requirements
as part of the broader consideration of
PwC  17
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Asset management
Regulation
In this section:
Regulation
18
AIFMD
Retail products
18
18
AIFMD
Updated AIFMD Q&A
ESMA updated its Q&A – application of the
AIFMD on 9 January 2015. It added more
information about the AIFMD reporting
templates:



AIFMs should report the value, not
number, of subscriptions and
redemptions in a reporting period
the fund NAV should be calculated after
subscriptions, redemptions and
investment performance are taken into
account over a month
AIFMs with fund-of-funds as well as
other funds should report twice – a
month after the end of the reporting
period for the funds and 45 days after
the end of the period for the fund-offunds.
The FCA cannot offer guidance on AIFMD
reporting, as this is defined in a Delegated
Regulation. Instead the FCA offers guidance
on how to use the FCA’s reporting system
(GABRIEL), the specific AIFM forms that
firms need to submit and details on how to
ensure information is validated correctly.
The update confirmed that AIFMs unable to
report on GABRIEL due to technical issues
or those who do not yet have a PRN will not
face enforcement action as long as they
report as soon as possible.
Firms authorised after July 2014 with later
reporting deadlines should note the FCA’s
guidance.
Retail products
Updated UCITS Q&A
ESMA updated the Q&A – ESMA’s
guidelines on ETFs and other UCITS issues
on 9 January 2015, focusing on collateral
management. ESMA confirms that:

in some circumstances derivatives
counterparties can implement rules set
out by the UCITS management company
without being seen to have discretion
over the investment portfolio

any short-term MMFs that funds
invested into for collateral purposes
should meet the UCITS definition of a
short-term MMF.
FCA clarifies reporting expectations
The FCA published a Q&A for AIFMs
reporting on the FCA’s GABRIEL system on
20 January 2015 and a further update for
firms on 29 January 2015. Most AIFMs
were authorised by the FCA on or around 21
July 2014, so must have reported under
AIFMD for the first time at the end of
January 2015.
FS regulatory, accounting and audit bulletin – February 2015
PwC  18
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Insurance
In this section:
Regulation
19
Solvency II
UK Updates
19
20
Regulation

rules for the eligibility of insurers' own
fund items
Solvency II

methodology and calibration of the
minimum capital requirement and of the
standard formula for the SCR
calculation

standards that undertakings applying to
use an internal model to calculate their
SCR must meet as a condition for
authorisation

criteria for supervisory approval of the
scope of the authorisation of SPVs
taking on reinsurance risk, and
requirements related to their operation

rules related to insurance groups, such
as the methods for calculating the group
solvency capital requirement, the
operation of branches, coordination
within supervisory colleges

criteria to assess whether or not a
solvency regime in a third country is
equivalent.
New Solvency II fact sheet
The EC published Solvency II Overview –
Frequently asked questions on 12 January
2015. This publication looks at the
development of Solvency II and its key
requirements and is a useful learning guide.
Implementing rules come into force
The Delegated Regulation on the taking-up
and pursuit of the business of insurance
and reinsurance (Solvency II) was
published in the Official Journal and
entered into force on 18 January 2015. The
Delegated Regulation sets out more detailed
requirements for individual insurance
undertakings as well as for groups. They will
make up the core of the single prudential
rulebook for insurance and reinsurance
undertakings in the EU, and are based on 76
empowerments in the Solvency II Directive.
The Delegated Regulation considers:

FS regulatory, accounting and audit bulletin – February 2015
rules for market-consistent valuation of
assets and liabilities, including technical
provisions and details of the long-term
guarantee measures
In addition, the EP published a letter from
Roberto Gualtieri (ECON), to Jonathan Hill
(European Commissioner for Financial
Stability, Financial Services and Capital
Markets Union) on the proposed Delegated
Regulation supplementing the Solvency II
PwC  19
Executive summary
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Cross sector
announcements
Directive (2009/138/EC) on 9 January
2015 and Jonathan Hill’s response to this
letter on 29 January 2015. These letters
address a number of corrections to the text,
additional empowerments and further work
required.
Additional transitional measures
published
The PRA published CP3/15 Solvency II:
transitional measures and the treatment of
participations on 23 January 2015. This
document proposes draft rules to
implement Solvency II’s transitional
measures for risk-free rates and technical
provisions in the UK.
Firms can apply to the PRA for approval to
use these transitional measures to:


Move from their current discount rate
requirements to the corresponding
Solvency II requirements. The
transitional measure applies for 16 years
and is an adjustment to the relevant
risk-free interest rate term structure
used to discount admissible insurance
obligations (i.e. those existing at the
Solvency II transition date).
Move from current requirements for
technical provisions to the Solvency II
requirements. The transitional measure
also applies for 16 years, and is a
deduction from the amount of Solvency
Banking and capital
markets
II technical provisions. The deduction is
initially calculated as the difference
between current technical provisions
and Solvency II technical provisions at
the Solvency II transition date, and
decreases linearly during the 16-year
transitional period.
The PRA sets out its expectations on the
application process and calculations for
these transitional measures in a draft
supervisory statement. Firms wishing to use
these transitional measures should notify
their supervisor as soon as possible and
submit an application to the PRA
electronically from 1 April 2015. When
applying, firms should inform the PRA of
any other approvals that they have applied
for or plan to apply for during the next
twelve months. The PRA may ask firms to
obtain an external validation of their
calculations. In such cases, it will agree the
scope and timescales for the validation with
firms on a case-by-case basis.
The consultation also includes a draft
supervisory statement on the internal model
treatment of participations in (re)insurance
firms and how they are reflected in the SCR
at the solo level.
The PRA is required to transpose Solvency
II into its rules by 31 March 2015, and it will
apply to firms from 1 January 2016. The
consultation closes on 20 February 2015.
FS regulatory, accounting and audit bulletin – February 2015
Asset management
Insurance
Monthly calendar
Glossary
Submitting information to NCAs
Transferring insurance business
EIOPA updated its Answers to questions on
Submission of Information to National
Competent Authorities (NCAs) on 28
January 2015, providing answers to a range
of technical questions on completing the
reporting templates for supervisors.
The PRA published letter on transfers of
insurance business under FSMA on 21
January 2015. The PRA is aware that a
significant number of firms are seeking to
complete transfers of insurance business
before Solvency II is implemented on 1
January 2016, which poses a resource
challenge for the PRA.
Where to go for more
information
Read more about Solvency II UK on our
webpages at www.pwc.co.uk/solvencyII
UK Updates
Regulating the insurance industry
On 22 January 2015, the PRA published
‘Regulation and the future of the insurance
industry’ a speech given by Paul Fisher,
Deputy Head of the PRA and Executive
Director, Insurance Supervision.
As well as the new Solvency II regime,
Fisher looked at the role insurance plays in
the wider economy and the broader
challenges facing the insurance industry. He
considered the impact of the prevailing low
interest rate environment and consequent
influx of alternative capital, especially into
reinsurance markets, the transformation to
the ‘at retirement’ taxation system in the UK
and competition in general insurance from
overseas locations, possibly linked to
regulatory arbitrage.
The letter explains what firms need to do,
and the timescales, to ensure that the PRA
accepts their application. The PRA intends
to continue to progress those insurance
transfers where:

the fee has been paid (or where a special
project fee has been agreed)

the firm has indicated its intention to
complete the transfer in 2015

the firm is on track to complete the
transfer.
All other cases will be considered on a case
by case basis.
PwC  20
Executive summary
Saving the taxpayer –
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Monthly calendar
Open consultations
Closing date
for responses
Paper
Institution
16/02/15
CP15/2 and CP2/15: FSCS – management expenses levy limit
PRA and FCA
16/02/15
Consultation paper – plans and budget for 2015/16
FOS
17/02/15
Discussion paper: key information documents for PRIIPs
ESAs
18/02/15
MS14/2.3 – cash savings market study report: final findings and proposed remedies
FCA
19/02/15
Consultation paper on Guidelines on Access to a CCP or a Trading Venue by a CSD
ESMA
19/02/15
Consultation paper on Technical Advice under the CSD Regulation
ESMA
19/02/15
Consultation paper on Technical Standards under the CSD Regulation
ESMA
20/02/15
FSCS plan and budget 2015/16
FSCS
20/02/15
CP3/15 – Solvency II: transitional measures and the treatment of participations
PRA
20/02/15
Fundamental review of the trading book: outstanding issues
BCBS
25/02/15
Call for evidence on data sharing and open data in banking
HMT
27/02/15
Strengthening accountability in banking: forms, consequential and transitional aspects
PRA/FCA
FS regulatory, accounting and audit bulletin – February 2015
PwC  21
Executive summary
Saving the taxpayer –
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Closing date
for responses
Paper
Institution
27/02/15
CP4/15: depositor, dormant account and policyholder protection - amendments
PRA
27/02/15
Discussion Paper The Use of Credit Ratings by Financial Intermediaries Article 5(a) of the CRA Regulation
JCESA
27/02/15
Consultation paper: draft RTS on criteria for determining the minimum requirement for own funds and eligible liabilities under
the BRRD
EBA
27/02/15
CP27/14 – CRD IV: liquidity
PRA
02/03/15
Public consultation on the Solvency II standards and guidelines
EIOPA
02/03/15
Consultation Paper: MiFID II/MiFIR
ESMA
02/03/15
Consultation Paper on the proposal for draft ITS on the equity index for the symmetric adjustment of the equity capital charge
EIOPA
06/03/15
Consultative Document: Net Stable Funding Ratio disclosure standards
Basel
Committee
09/03/15
Lending Code review
LSB
12/03/15
Consultation paper: draft RTS on the specification of the assessment methodology for competent authorities regarding compliance
of an institution with the requirements to use the IRB approach under the CRR
EBA
12/03/15
Draft requirements on passport notifications for credit intermediaries under the Mortgage Credit Directive
EBA
13/03/15
Improving complaints handling
FCA
13/03/15
Guaranteed Asset Protection insurance: a competition remedy
FCA
FS regulatory, accounting and audit bulletin – February 2015
PwC  22
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Closing date
for responses
Paper
Institution
13/03/15
CP15/1: FCA competition concurrency guidance and Handbook amendments
FCA
20/03/15
Auditing and ethical standards Implementation of the EU Audit Directive and Audit Regulation
FRC
22/03/15
Joint Committee Consultation Paper on guidelines for cross-selling practices
JCESA
27/03/15
Revisions to the Standardised Approach for credit risk
Basel
Committee
27/03/15
Capital floors: the design of a framework based on standardised approaches
Basel
Committee
27/03/15
Discussion Paper Share classes of UCITS
ESMA
31/03/15
Call for evidence – competition, choice and conflicts of interests in the CRA industry
ESMA
10/04/15
Consultation paper – rethinking the UK financial services trade association landscape
FS trade
associations
10/04/15
Consultation paper on a report on good practices on individual transfers of supplementary occupational pension rights
EIOPA
14/04/15
Consultation paper: draft ITS on procedures, forms and templates for the provision of information for resolution plans under the
BRRD
EBA
17/04/15
CP1/15: assessing capital adequacy under Pillar 2
PRA
30/04/15
Consultative document – guidance on accounting for expected credit losses
Basel
Committee
FS regulatory, accounting and audit bulletin – February 2015
PwC  23
Saving the taxpayer –
ending ‘too big to fail’
Executive summary
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Forthcoming publications in 2015
Date
Topic
Type
Institution
Policy statement
FCA
Client Money
Q1 2015
Review of the client money rules for insurance intermediaries
Consumer protection
Q1 2015
National Depositor Preference and UK depositors
Policy statement
PRA
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
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
Prudential
FS regulatory, accounting and audit bulletin – February 2015
PwC  24
Executive summary
Date
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Topic
Asset management
Insurance
Monthly calendar
Glossary
Type
Institution
Securities and markets
Q1 2015
Implementing acts on third country equivalence decisions on exposures
to third country investment firms, clearing houses and exchanges treated
as exposures to an institution
Advice
EBA
Q2 2015
Consultation Paper on MAR guidelines
Consultation paper
ESMA
Q2 2015
Feedback and Policy Statement on CP14/02, consultation on joint
sponsors and call for views on sponsor conflicts – PS to CP14/21
Policy statement
FCA
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 Consultation
Paper on technical standards
Consultation or technical standards
ESMA
Products and investments
Q2 2015
Restrictions on the retail distribution of regulatory capital instruments –
PS to CP14/23
Policy statement
FCA
Q3 2015
Advice on the application of the passport to third-country AIFMs and
AIFs
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
FS regulatory, accounting and audit bulletin – February 2015
PwC  25
Executive summary
Date
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Topic
Asset management
Insurance
Monthly calendar
Glossary
Type
Institution
Recovery and resolution
Q2 2015
Advice on the criteria for determining the number of years by which the
initial period for the build up of the SRF may be extended
Advice
EBA
Q2 2015
Partial transfer safeguards
Advice
EBA
Q3 2015
Notification requirements
Technical standards
EBA
Q3 2015
RTS on Contractual Bail in
Technical standards
EBA
TBD 2015
Recovery and Resolution Directive – PS to CP14/15
Policy statement
FCA
TBD 2015
Strengthening the Alignment of Risk and Reward: New Remuneration
Rules – PS to CP14/14
Policy statement
FCA
TBD 2015
Strengthening accountability in banking: a new regulatory framework
for individuals – PS to CP14/13
Policy statement
FCA
Q1 2015
Solvency II
changes – PS
Policy statement
FCA
TBD 2015
Solvency II Level 3 measures
Level 3 text
EIOPA
Report
EBA
Solvency II
Supervision, governance and reporting
Q4 2015
Assessment of national SREP approaches
Main sources: ESMA 2015 work programme; EIOPA 2015 work programme; EBA 2015 work programme; EC 2015 work programme; FCA policy development updates
FS regulatory, accounting and audit bulletin – February 2015
PwC  26
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Glossary
2EMD
The Second E-money Directive 2009/110/EC
BCR
Basic capital requirement (for insurers)
ABC
Anti-Bribery and Corruption
BIBA
British Insurance Brokers Association
ABI
Association of British Insurers
BIS
Bank for International Settlements
ABS
Asset Backed Security
BoE
Bank of England
AIF
Alternative Investment Fund
BRRD
Bank Recovery and Resolution Directive
AIFM
Alternative Investment Fund Manager
CASS
Client Assets sourcebook
AIFMD
Alternative Investment Fund Managers Directive 2011/61/EU
CCD
Consumer Credit Directive 2008/48/EC
AIMA
Alternative Investment Management Association
CCPs
Central Counterparties
AML
Anti-Money Laundering
CDS
Credit Default Swaps
AML3
3rd Anti-Money Laundering Directive 2005/60/EC
CEBS
Committee of European Banking Supervisors (predecessor of EBA)
AQR
Asset Quality Review
CET1
Core Equity Tier 1
ASB
UK Accounting Standards Board
CESR
Committee of European Securities Regulators (predecessor of
ESMA)
Banking Reform
Act (2013)
Financial Services (Banking Reform) Act 2013
Co-legislators
Basel Committee
Basel Committee of Banking Supervision (of the BIS)
Ordinary procedure for adopting EU law requires agreement
between the Council and the European Parliament (who are the ‘colegislators’)
CFT
Counter Financing of Terrorism
Basel II
Basel II: International Convergence of Capital Measurement and
Capital Standards: a Revised Framework
CFTC
Commodities Futures Trading Commission (US)
Basel III
Basel III: International Regulatory Framework for Banks
CGFS
Committee on the Global Financial System (of the BIS)
BBA
British Bankers’ Association
CIS
Collective Investment Schemes
FS regulatory, accounting and audit bulletin – February 2015
PwC  27
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
CMA
Competition and Markets Authority
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act (US)
CMU
Capital markets union
D-SIBs
Domestic Systemically Important Banks
CoCos
Contingent convertible securities
EBA
European Banking Authority
Council
Generic term representing all ten configurations of the Council of the
European Union
EC
European Commission
CRA1
Regulation on Credit Rating Agencies (EC) No 1060/2009
ECB
European Central Bank
CRA2
Regulation amending the Credit Rating Agencies Regulation (EU)
No 513/2011
ECJ
European Court of Justice
ECOFIN
Economic and Financial Affairs Council (configuration of the
Council of the European Union dealing with financial and fiscal and
competition issues)
ECON
Economic and Monetary Affairs Committee of the European
Parliament
EEA
European Economic Area
EEC
European Economic Community
EIOPA
European Insurance and Occupations Pension Authority
EMIR
Regulation on OTC Derivatives, Central Counterparties and Trade
Repositories (EC) No 648/2012
EP
European Parliament
ESA
European Supervisory Authority (i.e. generic term for EBA, EIOPA
and ESMA)
CRA3
proposal to amend the Credit Rating Agencies Regulation and
directives related to credit rating agencies COM(2011) 746 final
CRAs
Credit Rating Agencies
CRD
‘Capital Requirements Directive’: collectively refers to Directive
2006/48/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 credit
institutions and investment firms
CTF
Counter Terrorist Financing
DFBIS
Department for Business, Innovation and Skills
ESCB
European System of Central Banks
DG MARKT
Internal Market and Services Directorate General of the European
Commission
ESMA
European Securities and Markets Authority
ESRB
European Systemic Risk Board
FS regulatory, accounting and audit bulletin – February 2015
PwC  28
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
EU
European Union
FSCS
Financial Services Compensation Scheme
EURIBOR
Euro Interbank Offered Rate
FSI
Financial Stability Institute (of the BIS)
Eurosystem
System of central banks in the euro area, including the ECB
FSMA
Financial Services and Markets Act 2000
FASB
Financial Accounting Standards Board (US)
FSOC
Financial Stability Oversight Council
FATCA
Foreign Account Tax Compliance Act (US)
FTT
Financial Transaction Tax
FATF
Financial Action Task Force
G30
Group of 30
FC
Financial counterparty under EMIR
GAAP
Generally Accepted Accounting Principles
FCA
Financial Conduct Authority
G-SIBs
Global Systemically Important Banks
FDIC
Federal Deposit Insurance Corporation (US)
G-SIFIs
Global Systemically Important Financial Institutions
FiCOD
Financial Conglomerates Directive 2002/87/EC
G-SIIs
Global Systemically Important Institutions
FiCOD1
Amending Directive 2011/89/EU of 16 November 2011
HMRC
Her Majesty’s Revenue & Customs
FiCOD2
Proposal to overhaul the financial conglomerates regime (expected
2013)
HMT
Her Majesty’s Treasury
FMI
Financial Market Infrastructure
IAIS
International Association of Insurance Supervisors
IASB
International Accounting Standards Board
FOS
Financial Ombudsman Service
FPC
Financial Policy Committee
ICAS
Individual Capital Adequacy Standards
FRC
Financial Reporting Council
ICB
Independent Commission on Banking
FSA
Financial Services Authority
ICOBS
Insurance: Conduct of Business Sourcebook
FSB
Financial Stability Board
IFRS
International Financial Reporting Standards
IMA
Investment Management Association
FS Act 2012
Financial Services Act 2012
IMAP
Internal Model Approval Process
FS regulatory, accounting and audit bulletin – February 2015
PwC  29
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
IMD
Insurance Mediation Directive 2002/92/EC
Member States
countries which are members of the European Union
IMD2
Proposal for a Directive on insurance mediation (recast) COM(2012)
360/2
MiFID
Markets in Financial Instruments Directive 2004/39/EC
MiFID II
IMF
International Monetary Fund
Proposed Markets in Financial Instruments Directive (recast)
(COM(2011) 656 final)
IORP
Institutions for Occupational Retirement Provision Directive
2003/43/EC
MiFIR
Proposed Markets in Financial Instruments Regulation (EC)
(COM(2011) 652 final)
IOSCO
International Organisations of Securities Commissions
MMF
Money Market Fund
ISDA
International Swaps and Derivatives Association
MMR
Mortgage Market Review
ITS
Implementing Technical Standards
MREL
Minimum requirements for own funds and eligible liabilities
JCESA
Joint Committee of the European Supervisory Authorities
MTF
Multilateral Trading Facility
JMLSG
Joint Money Laundering Steering Committee
MoJ
Ministry of Justice
JURI
Legal Affairs Committee of the European Parliament
MoU
Memorandum of Understanding
LCR
Liquidity coverage ratio
NAV
Net Asset Value
LEI
Legal Entity Identifier
NBNI G-SIFI
Non-bank non-insurer global systemically important financial
institution
LIBOR
London Interbank Offered Rate
NFC
Non-financial counterparty under EMIR
MA
Matching Adjustment
NFC+
Non-financial counterparty over the EMIR clearing threshold
MAD
Market Abuse Directive 2003/6/EC
NFC-
Non-financial counterparty below the EMIR clearing threshold
MAD II
Proposed Directive on Criminal Sanctions for Insider Dealing and
Market Manipulation (COM(2011)654 final)
NSFR
Net stable funding ratio
MAR
Proposed Regulation on Market Abuse (EC) (recast) (COM(2011) 651
final)
OECD
Organisation for Economic Cooperation and Development
Official Journal
Official Journal of the European Union
MCD
Mortgage Credit Directive
FS regulatory, accounting and audit bulletin – February 2015
PwC  30
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
OFT
Office of Fair Trading
SEC
Securities and Exchange Commission (US)
Omnibus II
Second Directive amending existing legislation to reflect Lisbon
Treaty and new supervisory infrastructure (COM(2011) 0008 final)
– amends the Prospectus Directive (Directive 2003/71/EC) and
Solvency II (Directive 2009/138/EC)
SFT
Securities financing transactions
SFD
Settlement Finality Directive 98/26/EC
SFO
Serious Fraud Office
SIPP
Self-invested personal pension scheme
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
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 the
Council: rotates on 6 monthly basis
PRIIPs
Regulation
Proposal for a Regulation on key information documents for
investment 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)
FS regulatory, accounting and audit bulletin – February 2015
PwC  31
Executive summary
Saving the taxpayer –
ending ‘too big to fail’
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Contacts
Laura Cox
020 7212 1579
[email protected]
@LauraCoxPwC
Andrew Strange
020 7804 6669
[email protected]
Retail distribution, asset
management and reg reform
Liz Gordon
020 7212 6493
[email protected]
Asset management, accounting
issues
Ian Kelly
020 7804 1929
[email protected]
Prudential regulation and
reporting
Andrew Hawkins
020 7212 5270
[email protected]
Banking, prudential regulation
and shadow banking
Sharon-Marie Fernando
020 7804 3062
sharon-marie.fernando
@uk.pwc.com
Investment funds and insurance
David Brewin
020 7212 5274
[email protected]
Client assets and prudential
regulation
Mike Vickery
011 7923 4222
[email protected]
Insurance, Solvency II
Betsy Dorudi
020 7213 5270
[email protected]
EMIR, MiFID II and OTC rules
Kareline Daguer
020 7804 5390
[email protected]
Insurance, Solvency II
Simon Andrews
020 7212 3796
[email protected]
Securities and derivatives, reg
reform and commodities
Paul Minter
020 7213 1839
John Newsome
020 7804 1168
[email protected]
Asset management regulatory
and conduct issues
Vincent O’Sullivan
020 7212 3544
[email protected]
Basel III, structural reform and
Central Banks
Isabella Rodgers
020 7804 5240
[email protected]
MiFID II, structural reform
Luke Nelson
020 7213 4631
[email protected]
Securities and derivatives,
financial crime and shadow
banking
Babar Hayat
020 7212 6914
[email protected]
FS Technology transformation,
development and client delivery
Dominic Muller
020 7213 2905
[email protected]
Asset management, US and
cross-border regulation
Tania Lee
079 7668 7547
[email protected]
Insurance, Solvency II
[email protected]
Basel III, capital markets, FS
economics
Hortense Huez
020 7213 3869
[email protected]
Prudential regulation, Basel III,
Liquidity and funding
Megan P Charles
020 7804 0904
[email protected]
Consumer credit
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