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FS Regulatory Insights

FS Regulatory Insights

From cyber-attacks to warnings from Svein Andresen, who heads the FSB, about diverging supervision of financial markets, it has been a demanding month for regulators and firms alike.

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From cyber-attacks to warnings from Svein Andresen, who heads the FSB, about diverging supervision of financial markets, it has been a demanding month for regulators and firms alike.

The ‘ransomware’ cyber-attacks affected organisations in over 150 countries and will only reinforce cyber security as a priority issue for regulators and as a key systemic risk for the financial services industry. Our lead article discusses how new technologies bring positive innovation and efficiencies at the same time as exposing firms to new risks, and how regulators are responding to these new challenges. Prior to these recent attacks, the Financial Stability Board (FSB) had begun investigating the risks of FinTech and will be presenting its findings at the G20 meeting in July.

Andresen, speaking at a conference in Lisbon in early May, called for the private sector to ‘make a clear case’ for the benefit of effective international standards, to avoid financial vulnerabilities remaining unaddressed and new weaknesses arising. This was predominantly in response to a call from a number of EU policymakers who are urging the US to continue to work with the Basel Committee on international standards for major banks.

The European Commission is consulting on the powers and operations of the three European Supervisory Authorities (ESAs). The key question is whether now is the right time to make any significant changes to the ESAs, or whether it would be better to wait to see how the future of Europe and of Capital Markets Union develops.

In other cross-sector news, the FSB has published a thematic review of FSB members’ compliance with the G20/OECD principles of corporate governance for regulated financial institutions (across all sectors). Six themes have emerged, suggesting where the FSB and some national supervisors may focus their efforts over the next year or so. We also look at the results of ESMA’s thematic review of notification frameworks and home-host responsibilities under UCITS and AIFMD.

The European Insurance and Occupational Pensions Authority (EIOPA) has now published the results of a thematic review on the potential conflicts of interest created in unit-linked products by monetary incentives and remuneration paid to the insurance undertakings by asset managers. The findings of which are unsurprising but nevertheless salutary. Read John O’Donnell’s article for a summary of the key points, and what firms need to reflect on.

Moving on to banking, the EBA has released its guidelines on credit risk management practices and accounting for expected credit losses; the Basel Committee has published its two-year work programme for 2017-2018; and the Bank of England has finalised the MREL requirements for major UK banks. We also flag that the Bank of International Settlements has issued an FX Code, which sets out a common set of conduct standards for the FX market, supported by market participants globally and the central banks, including the Central Bank of Ireland.
We are happy to provide more information on any of these topics, our contact details are included in the articles.  

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