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Being better informedFS regulatory, accounting and audit bulletin bulletin

PwC FS Risk and Regulation Centre of Excellence

July 2014

In this month’s edition:

What firms should be doing now for MiFID II p4

Solvency II steams ahead p22

Executive summary MiFID II: Themonster comes tolife

Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin bulletin – July 2014 PwC 1

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

Macroprudential challenges toppedmany regulators’ agendas in June, withthe ESRB, the BoE and the EBA allissuing new reports. The regulators aretentatively confident that EU banks arecontinuing to slowly turn the corner asthe real economy improves. Theircapital levels are up, profits have largelystabilised (albeit from a low base) andthe sovereign debt crisis seems to havefizzled out. But both EU and nationalregulators remain concerned abouthouses prices - in particular Belgium,Sweden, Finland, France and the UKhave been exercising attention. Theybelieve that macroprudential tools canbe used to curb the excesses in realestate or other sectors, and protectbanks from another burst. These toolsare particularly important in theEurozone, where the ECB is firmly fixedon fighting deflationary pressures andnot necessarily national housingbubbles. On the other hand, the IMF ischallenging EU regulators’ views – it isless worried about housing bubbles andmore worried that maintaining ourhistorically low levels of inflation areunsustainable. Some stability hasclearly been achieved – now thequestion is how to manage it. HymanMinsky, the Keynesian economist,suggested that stability can bedestabilising. His basic thesis is that thedynamic forces of a capitalist economyare explosive and must be contained by

institutional ceilings and floors.Agreeing where those lines should bedrawn isn’t easy.

Will fresh leadership in the EU mean achange of direction? Italy took over theItalian Presidency of the Council inJune, setting out its priorities asfinancial crime, anti-money launderingand the banking union. EU leaders arestill recovering from their recentfraught negotiations over theappointment of Jean-Claude Juncker asPresident of the EU Commission, butthey will need to adopt a morecooperative approach to finalise keyfinancial reforms. With the new EPgetting underway at the beginning ofJuly, the new ECON Committee willhave an important role to play. It isexpected to be chaired by Italiansocialist, Roberto Gualtieri (S&D), withGerman MEPs Markus Ferber (EPP)and Peter Simon (S&D) as vice-chairs(expected to be elected on 14 July 2014in Strasbourg). The UK’s representationon ECON has fallen from seven to sixrepresentatives, even though ECON willhave 11 additional members.

MiFID II sprang into life in June whenboth the amended Directive and thenew Regulation were published in theOfficial Journal, confirming theimplementation date of 2 January 2017.It targets data and marketfragmentation problems identified

under the original Directive, while alsotaking on board many lessons from thefinancial crisis. It aims to substantiallyimprove investor protection: makingfinancial markets more transparent,addressing concerns about the adventof recent technology advances andensuring that all trading venues aresubject to some form of supervisoryoversight. Financial marketparticipants face a wave of enhancedsupervision and reporting requirementsto comply with the new regime—withsignificant costs in both time andmoney. Our feature article this monthlooks at what firms should be doingnow as the countdown to the newregime begins.

On the Solvency II front, we are fullsteam ahead. EIOPA has published ahefty set of guidelines on the Directive,covering Pillar 1, internal models,systems of governance, supervisoryreview process and equivalenceassessment of national supervisoryauthorities. In the UK, the PRA wroteto life and general insurance firmshighlighting concerns about theinternal model approval process underSolvency II. Not enough firms aremaking progress on their applicationsfor model approval, so the PRA isencouraging firms to meet with theirsupervisors as soon as practical to agreejoint plans to achieve modeldevelopment.

Executive summary






The ‘too big to fail’ agenda continues toadvance in the UK. Banks and businessassociations welcomed the UKGovernment’s decision to allow ring-fenced banks to offer simple derivativetransactions to customers. TheGovernment originally proposedprohibiting banks from offering basicrisk-management services to businesscustomers, which would have put themat a significant competitivedisadvantage to their internationalpeers. It has also eased the ability ofring-fenced banks to provide finance tosmaller financial institutions, providedthey obtain special permission from thePRA.

And more than a year after the FSAsplit, we are still learning more aboutour new regulators and theirsupervisory initiatives. In June, thePRA published updated us on itsapproach to banking and insurancesupervision. The PRA continues tomove away from a rules-based, processdriven, style of supervision to a morejudgement-based regime. In thisupdate, it has introduced newFundamental Rules (replacing theprevious Principles for Businesses), andadded a requirement for PRA regulatedfirms to prepare for orderly resolution.In this update, it also begins to grapplewith its new secondary objective topromote competition in financialmarkets.

As you can see, we’ve had a busy Juneon the risk and regulatory agenda,

which is likely to be followed by anequally busy July as regulators try toclear their plates ahead of summerholidays!

Laura Cox

FS Regulatory Centre of Excellence

020 7212 1579

[email protected]

@LauraCoxPwC






How to read this bulletin?

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

ContentsExecutive summary 1

MiFID II: The monster comes to life 4

Cross sector announcements 7

Banking and capital markets 10

Asset management 15

Insurance 17

Monthly calendar 21

Glossary 26

Contacts 31






Walking alone on a dark, rainy night, you

glance back, alerted by a distant footfall.

Something large, dark and ominous seems

to be following you! It’s a long way behind

so you’re not too worried at first, but when

you look again it’s closing in fast. Here

comes MiFID II.

Don’t panic yet, but if you don’t start

considering your strategy for dealing with it,

you will – very soon – be in trouble. If

you’ve been ignoring MiFID II in favour of

other pressing regulatory issues, reconsider

your priorities. MiFID II is not a

compliance exercise: it will have far-

reaching and long-lasting impacts on the

way the financial markets in the EU operate.

You need to focus all your attention now to

assess how it will impact your business.

Without doubt, it will. If you start now, you

can optimise the 30 month implementation

period. That sounds a long time but if you

look at the extensive landscape MiFID II

covers, it definitely is not.

Entry into force

Policy makers published the Level 1 text in

the Official Journal of the European Union

on 12 June 2014. This step marked the end

of the beginning for MiFID II. We now

move on to the development of the detailed

implementing measures. The MiFID II

Directive and Regulation both came into

force on 2 July 2014. The new regime is now

law, but market participants do not have to

comply immediately.

When MiFID II came into force it triggered

a series of deadlines for developing

associated implementing measures, or

‘secondary legislation’. The full rules,

including the existing primary and the

further secondary legislation to be

developed, will apply to firms from 3

January 2017. To kick off the process,

ESMA issued over 800 pages of proposals in

its consultation paper (CP) and discussion

paper (DP) on 22 May 2014. MiFID II

requires the EC and ESMA to promulgate

over 100 secondary legislation measures -

there is still much for the policy makers to

do!

Implementing MiFID IIForward thinking firms have already begun

to assess the impact that MiFID II will have

on their businesses and to understand the

scale of the implementation challenge.

There are no definitive answers on many

issues as yet, although the feedback from

ESMA’s current consultations may fill in

some of the missing detail. But firms have

enough definite information now to make

an initial assessment.

The EC and ESMA must have detailed

secondary legislation in place by the start of

2016, twelve months before MiFID II comes

into effect. For those parts of the Directive

which must be transcribed into national

legislation, the implementation timeframe

is even tighter. National competent

authorities must write MiFID II into

national law by July 2016, leaving firms

only six months to implement changes.

To meet the 3 January 2017 deadline, firms

will have to begin implementing MiFID II

on the basis of partial information. When

the rules are finalised firms will be able to

fine tune their approach, but they must start

work by making assumptions on the basis of

the information available at the time.

Waiting for the implementing measures to

be finalised will be too late. Fans of legal

certainty will shudder at that thought. But

while draft rules may change, the process

for developing the secondary “Level 2”

legislation is sufficiently transparent that

firms can develop reasonable assumptions

about the final rules. That will enable them

to shape an implementation programme

that can adapt effectively in response to

future developments.

The Level 2 textThe Level 2 text comprises a mixture of

delegated acts and regulatory and

implementing technical standards. The EC

and ESMA respectively will draft these

measures. The process can appear

complicated, but firms need to understand

the steps in that process, the limited

opportunities for lobbying and when it is

MiFID II: The monster comes to life





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remaining five months of this year it will

finalise its advice, having digested

stakeholders’ comments.

The EC must submit the draft delegated acts

to the Council and the EP for approval no

later than 3 July 2015. They have three

months to approve or reject the delegated

acts, although they may extend that period

may be extended if either the Council or the

EP needs more time. Given the number and

complexity of the delegated acts, an

extension is likely. Policy makers must

publish the approved text in the Official

Journal no later than 3 January 2016 (18

months after MiFID II entered into force),

leaving Member States six months to

The regulatory technical standards must be

published in the Official Journal by 3

January 2016 with the delegated acts.

ESMA has to submit the implementing

technical standards to the EC by January

2016 for endorsement. Implementing

technical standards do not need approval

from the Council or EP.

The current ESMAconsultationsESMA’s CP and DP seek industry input on

draft rules for MiFID and outline ESMA’s

current thinking on many related issues.

The CP contains draft technical advice from

ESMA to the EC with regards to the

What is MiFID II?

The MiFID II Directive amends and repeals the original Markets in FinancialInstruments Directive (MiFID). As a Directive it will need to be ‘transposed’ intonational law in each Member State. It is accompanied by MiFIR which isautomatically binding on Member States.

The original MiFID aimed to create a single, pan-EU regime for firms providinginvestment services and undertaking investment activities. It standardised theauthorisation and operating regime for investment firms, set minimum levels ofinvestor protection and encouraged competition through a passporting regime thatenabled firms to offer services cross-border in the EU. It also opened up competition infinancial markets, removing the monopoly of incumbent national exchanges, byintroducing an authorisation and operating regime for Multilateral Trading Facilities(MTFs) to operate in parallel.

In MiFID II, legislators have tried to learn lessons from the financial crisis and fromdeficiencies identified in the original regime. It expands on the original MiFID topromote further competition in the EU, address data fragmentation, update marketstructures, increase transparency, enhance investor protection, improve governance

S regulatory, accounting and audit bulletin bulletin – July 2014 PwC 5

easonable for them to act on the draft

aterials.

elegated actselegated acts are the secondary legislation

ith political/policy implications beyond

imple technical issues.

he EC is empowered to draft delegated

cts. Essentially the two EU policy makers –

he Council and the EP - have delegated

pecific and clearly delineated competences

o the EC to formulate secondary legislation.

elegated acts have a political dimension,

ut generally the EC first mandates ESMA

o provide supporting technical advice as

nput into the process. The EC then

onsiders this advice when drafting the

delegated acts. The EC submits the draft

delegated acts to the Council and EP for

approval. Neither the Council nor the EP

can amend the EC proposed text, but they

can reject a delegated act in its entirety and

oblige the EC to redraft it. But doing so

would be an extreme measure to take, given

the amount of work that goes into a draft

delegated act, and the delays that would

entail.

The EC has mandated ESMA to provide

technical advice on MiFID II by 3 January

2015 (6 months after it entered into force).

In its consultation paper on 22 May 2014,

ESMA set out substantially advanced

proposals on which it is seeking feedback

from the industry by 1 August 2014. In the

incorporate the Directive’s requirements

into national law.

Technical standardsTechnical standards are just that –

secondary legislation that deals purely with

technical issues and does not involve any

interpretation of the Level 1 text.

ESMA drafts the technical standards

directly and submits them to the EC for

endorsement. There are two types technical

standard: regulatory and implementing

technical standards. ESMA must submit the

regulatory technical standards on MiFID II

to the EC for endorsement by 3 July 2015.

After the EC endorses them, the Council and

EP then subject them to scrutiny, in a

process similar to that for delegated acts. If

the Council and EP do not object, the

technical standards become law.

delegated acts. In this advice, ESMA

suggests a number of possible approaches,

provides a clear indication of its

preferences, and invites industry

stakeholders to comment. The EC is likely to

follow ESMA’s advice closely in the final

secondary legislation. But the EC is under

no obligation to adopt ESMA’s

recommendations if those

recommendations do not meet the wider

political objectives for MiFID II.

This ESMA consultation is the last

opportunity for firms to have formal input

into the delegated acts.

At over 530 pages, the DP is the larger of the

two papers and covers a raft of topics. Even

at that length, it does not cover every

required technical standard. ESMA is using

the DP to set out its preliminary thinking

in firms and enforce a more harmonised regulatory and supervisory regime.






and invites the industry to comment on the

direction of travel. Even so, ESMA’s

thinking is well advanced in many, if not

most of these areas. But in some key areas it

has stressed the need for market data to

support the final choices. The onus is on the

industry to provide evidence based

arguments where it disagrees with ESMA’s

suggested approach.

We expect ESMA to issue a further

consultation on the technical standards in

very late 2014 or early 2015. It has indicated

that it prefers to allow firms a full three

months to respond, but this cannot be

guaranteed.

ESMA may also consult further on the

implementing technical standards, perhaps

in Q2 2015.

What should firms be doingnow?The first step is to understand what MiFID

II means for your business. The potential

scale of impacts ranges from fundamentally

altering your business model to negligible.

No current MiFID firm will escape

unscathed, and even some firms which are

currently outside the scope of MiFID, such

as algorithmic traders or commodity market

participants, will find that MiFID II impacts

them. Gap analysis is a necessary first step.

After you understand the scale of change

required in your firm, you can begin to

anticipate the effort required and plan your

implementation.

From July 2015, both the delegated acts and

the regulatory technical standards will be in

their near final form – subject to rejection

by the Council or EP. Close observers of the

process will have a good idea what those

final draft rules are likely to require even

earlier. Given the shortage of time between

publication in the Official Journal and the

compliance date for MiFID II, firms will

need to be familiar with the draft rules to

support their implementation projects.

Finally, firms should resist the temptation

to assume that the 3 January 2017

compliance date is flexible. There is little or

no chance of that date slipping. The original

MiIFD was entirely a Directive, so it was

dependant on individual Member State

implementation. But MiFID II is in part a

Regulation, and much of the Level 2 text

will likewise be Regulation with direct effect

from the stated date.

By understanding the scale of the challenge

now and starting work early, you can ensure

that you stay one step ahead of the MiFID II

monster.






In this section:

Regulation 7

Capital, liquidity and funding 7

CRAs 7

Disclosure 7

Financial stability 8

Market infrastructure 8

Securities and Derivatives 8

SSM 8

Accounting 9

FRC 9

IAS 9

IFRIC 9

IFRS 9

Regulation

Capital, liquidity andfundingSetting a countercyclical buffer

The ESRB published guidance for setting

countercyclical buffer rates on 30 June

2014. It includes recommendations to help

designated authorities use the new

macroprudential instrument. Seven

principles provide guidance to designated

authorities for setting buffer rates and for

measuring and calculating the credit-to-

GDP gap.

National authorities have until 30 June

2016 to report to the ESRB, the Council and

the EC explaining the measures that they

have taken to comply with the

recommendations.

CRAsESMA hands down first CRA sanction

ESMA publically censured Standard &

Poor’s (S&P) for breaches of the CRA

Regulation on 3 June 2014. The censure

followed an investigation into an email

stating that S&P had downgraded France’s

sovereign debt, sent erroneously to

subscribers of S&P’s Global Credit Portal.

ESMA found that S&P failed to meet certain

organisational requirements set out in the

CRA Regulation, including internal control

mechanisms, effective control and

safeguard arrangements for information

processing systems and decision-making

procedures and organisational structures.

Finalising CRA disclosure andreporting

ESMA published final draft RTS under the

CRA3 Regulation on 24 June 2014, which

includes feedback from its February 2014

consultation. It clarifies the:

disclosure requirements on structured

finance instruments (SFI), focusing on

the information that the issuer,

originator and sponsor of a SFI must

publish

new European Rating Platform defining

the content and presentation of rating

information, including structure,

format, method and timing of reporting

that CRAs should submit to ESMA

content and format of periodic reporting

of the fees CRAs charge.

ESMA has submitted the draft RTS to the

EC for endorsement.

DisclosureSharing supervisory information

The EC published an implementing

regulation laying down ITS with regard to

information exchange between competent

authorities of home and host Member

Cross sector announcements

http://www.esrb.europa.eu/pub/pdf/recommendations/2014/140630_ESRB_Recommendation.pdf?9a8d4ee3140b3baea847169cbf4de88c

http://www.esrb.europa.eu/pub/pdf/recommendations/2014/140630_ESRB_Recommendation.pdf?9a8d4ee3140b3baea847169cbf4de88c

http://www.esma.europa.eu/content/Decision-adopt-supervisory-measure-taking-form-public-notice-accordance-Articles-23e5-and-24

http://www.esma.europa.eu/system/files/2014-685_draft_rts_under_cra3_regulation.pdf

http://www.esma.europa.eu/system/files/2014-685_draft_rts_under_cra3_regulation.pdf

http://www.esma.europa.eu/system/files/2014-150_consultation_paper_on_cra3_implementation_0.pdf

http://www.esma.europa.eu/system/files/2014-150_consultation_paper_on_cra3_implementation_0.pdf

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOL_2014_172_R_0001








States in the Official Journal on 12 June

2014.

The EC establishes standard forms,

templates and procedures for the

information sharing requirements under

CRD IV. The common framework for

information sharing is designed to facilitate

the monitoring of banks that operate

through a branch or cross border, in one or

more Member States.

The regulation came into force 2 July

2014.

Financial stabilityESRB implements macroprudentialrecommendations

The ESRB published recommendations on

the macroprudential mandate of national

authorities on 25 June 2014, assessing

Member States’ implementation of the

ESRB’s macroprudential recommendations.

The ESRB is aiming to create consistent

national frameworks that complement the

EU level institutional framework for

macroprudential supervision.

The ESRB has been successful in

encouraging the establishment of

institutional competence at national level

and helping to ensure the effectiveness of

the macroprudential function. Most

Member States have implemented the

macroprudential recommendations through

legislation or other measures, with no

Member State justifying reasons for

inaction.

The ESRB also released a decision on the

extension of the deadline on the

macroprudential mandate of national

authorities on 30 June 2014. This decision

formalises the extension of the reporting

deadline that it gave to national authorities

on 28 February 2014.

EU economy slowly recovers

The ESRB published its June Risk

Dashboard on 25 July 2014. It believes

economic growth is slowly improving

despite large cross-country divergences.

Most countries’ current account deficits are

shrinking as production starts to pick up

and unemployment levels have fallen from

their nadir, but the ESRB still feels

countries’ levels of indebtedness are likely

to weigh on the recovery for some time to

come.

The ESRB noted that the share of central

bank funding has fallen across Europe

except for Cyprus, Hungary and Bulgaria. It

highlighted the wide regional divergences in

EU housing markets, suggesting house

prices are most overvalued in Belgium,

Sweden, Finland and France

Market infrastructureSay Hi to Global LEI

The FSB announced completion of the

approvals and filings required to establish

the Global Legal Entity Identifier

Foundation (GLEIF) on 30 June 2014. It

endorsed the appointment of its inaugural

Board of Directors and the appointment of

Gerard Hartsink as Chairman.

The FSB has committed to establishing a

three tier structure for the Global LEI

System in the 2012 G-20 agreements.

Creating the Regulatory Oversight

Committee was the first tier, established in

January 2013 with responsibility for the

governance and oversight of the system. The

GLEIF forms the second tier and will act as

the operational arm of the system. The

federated Local Operational Units, which

supply registration and other services, form

the third tier.

Securities and DerivativesTough task of identifying risk

IOSCO published Risk Identification and

Assessment Methodologies for Securities

Regulators on 26 June 2014, reviewing the

methods that securities regulators have

developed and implemented to identify and

deal with new risks. It acknowledged that

there is not a ‘one-size-fits-all’ approach to

securities regulation, suggesting that

regulators benefit from combining a series

of methods.

Securities regulators use the following

methods to identify risk:

risk committee

risk register

regulatory collaboration

risk-focused meetings

risk surveys

risk dashboard

research and publications

data analytics and econometrics.

IOSCO noted that identifying, analysing and

monitoring systemic risk is a new discipline

for securities regulators. Consequently it

expects the identification methods to evolve.

SSMIdentifying significant banks underSSM

The ECB published a list of supervised

entities notified of its intention to consider

them significant on 27 June 2014. It has

labelled 120 institutions as significant. It

removed twelve banks from the list and

added four more. The ECB removed banks

that had either reduced their balance sheets

or had niche characteristics and business

models more in line with non-banks. The

new joiners are part of international groups

- , three have ultimate parents outside the

Eurozone.

The ECB also published the rules of

procedure of the Supervisory Board of the

ECB in the Official Journal on 21 June 2014.

The rules of procedures entered into force

on 1 April 2014. The Supervisory Board is

responsible for planning and executing the

ECB’s supervisory tasks under SSM.


http://www.esrb.europa.eu/pub/pdf/recommendations/2014/ESRB_2014.en.pdf?7216854e35c9d3967ce2d0e2308fdcf1



http://www.esrb.europa.eu/pub/pdf/recommendations/2014/140630_ESRB_Decision.pdf?2c042be637cbec3003ef3c18a1886112




https://www.esrb.europa.eu/pub/pdf/dashboard/140618_ESRB_risk_dashboard.pdf?247f84831ce17a167667253e0ef65d33

https://www.esrb.europa.eu/pub/pdf/dashboard/140618_ESRB_risk_dashboard.pdf?247f84831ce17a167667253e0ef65d33

http://www.financialstabilityboard.org/press/pr_140630.pdf

http://www.iosco.org/library/pubdocs/pdf/IOSCOPD443.pdf



http://www.ecb.europa.eu/ssm/pdf/SSM-listofdirectlysupervisedinstitutions.en.pdf?6dfe13ea9224b4f2f313c8c9dd05bc96



http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:JOL_2014_182_R_0014&from=EN








Accounting

FRCSharing your strategy

The FRC published guidance on producing

a strategic report on 3 June 2014. A firm

can give investors insights into how its

business is run and its strategic direction

through the strategic report. The FRC gave

an overview of the various components of

an annual report and considered where

firms should place information. The FRC

also encouraged companies to focus on

ensuring disclosures are material, as a key

step towards concise reporting. Our In brief

looks as the details.

Presenting true and fair statements

On 4 June 2014 the FRC published a

statement reconfirming that the

presentation of a true and fair view remains

a fundamental requirement of financial

reporting. The FRC used this update to

reflect developments in UK GAAP, the now

finalised EU audit legislation, the legal

advice that FRC published in October 2013,

and feedback from stakeholders seeking

clarity as to the primary requirement to

present a true and fair view. For further

details see our In brief.

IASIASB updates on Disclosure Initiative

The IASB issued an Update on the

Disclosure Initiative on 13 June 2014,

which is designed to improve the quality of

information provided in financial reports.

The IASB covers targeted improvements to

disclosure requirements (including

amendments to IAS 1, 'Presentation of

financial statements', reconciliation of

liabilities arising from financing activities

and accounting policies), and materiality.

IASB proposes consolidation exception

The IASB proposed amendments to IFRS 10

‘Consolidated Financial Statements’ and

IAS 28 ‘Investments in Associates and Joint

Ventures’ on 11 June 2014. It clarifies the

requirement for investment entities to

measure subsidiaries at fair value instead of

consolidating them. The IASB:

confirmed that the exemption from

presenting consolidated financial

statements continues to apply to

subsidiaries of an investment entity that

are themselves parent entities

clarified when an investment entity

parent should consolidate a subsidiary

that provides investment-related

services instead of measuring that

subsidiary at fair value

simplified the application of the equity

method for an entity that is not itself an

investment entity but that has an

interest in an associate that is an

investment entity.

The comment period ends on 15

September 2014. For further details see

our Straight away publication.

New transition resource groups begin

On 23 June 2014, the IASB created a

transition resource group to focus on the

new requirements for impairment of

financial instruments. The group will

support stakeholders by providing a

discussion forum on implementation issues

that may arise as a result of the new

impairment requirements under IFRS 9

'Financial Instruments' (2014), which is

expected to be issued later this year.

The IASB and the FASB also formed a joint

transition resource group to focus on

implementation issues associated with their

new revenue recognition standard on 3

June 2014.

IASB reviews conceptual framework

On 5 June 2014, the IASB published a staff

paper discussing how the tentative

decisions it made would affect the proposals

in the discussion paper 'A review of the

conceptual framework for financial

reporting'. The staff paper reflects the

IASB’s tentative decisions made through

April 2014.

IFRICEC endorses IFRIC 21 'Levies'

The EC endorsed IFRIC 21, 'Levies', an

interpretation of IAS 37, 'Provisions,

contingent liabilities and contingent assets'

on 13 June 2014. IAS 37 outlines criteria for

the recognition of a liability, including the

requirement for the entity to have a present

obligation as a result of a past event (an

obligating event). The EC clarified that the

obligating event which requires firms to pay

a levy is the activity described in the

relevant legislation that triggers the

payment of the levy. UK firms will use

IFRIC 21 to determine the basis of

provisioning under IFRS for financial

service levies including the FSCS levy, the

bank levy and other schemes such as the

Motor Insurance Bureau levy. Firms must

apply this interpretation for annual periods

starting on or after 1 January 2014. For

further details see our Straight away guide.

IFRSESMA assesses business combinationsdisclosures

ESMA published 'Review on the application

of accounting requirements for business

combinations in IFRS financial statements'

on 16 June 2014. It found that some

European companies provide good business

combination disclosures in their annual

financial statements, but certain areas need

improvements. ESMA based its report on a

sample of IFRS 3 disclosures in EU

companies’ 2012 annual IFRS financial

statements. It expects NCAs to take

appropriate enforcement actions where they

identify material breaches of the IFRS

requirements as part of the review, and it

will monitor NCA’s progress.

https://www.frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Policy/Guidance-on-the-Strategic-Report.pdf

https://www.frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Policy/Guidance-on-the-Strategic-Report.pdf

https://inform.pwc.com/inform2/show?action=informContent&id=1401135506149010

https://www.frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Policy/True-and-Fair-June-2014.pdf


http://www.ifrs.org/Current-Projects/IASB-Projects/Disclosure-Initiative/Project-news/Pages/Project-update-June-2014.aspx

http://www.ifrs.org/Current-Projects/IASB-Projects/Disclosure-Initiative/Project-news/Pages/Project-update-June-2014.aspx

http://www.ifrs.org/Current-Projects/IASB-Projects/IFRS-10-IAS-28-Investment-Entities/ED-June-2014/Pages/Exposure-Draft-and-Comment-letters.aspx




http://www.ifrs.org/The-organisation/Advisory-bodies/TRG-Impairment-Financial-Instrument/Pages/Call-for-nominations.aspx



http://www.ifrs.org/Alerts/ProjectUpdate/Pages/FASB-and-IASB-announce-the-formation-of-Joint-Transition-Resource-Group-for-Revenue-Recognition-June-2014.aspx

http://www.ifrs.org/Alerts/ProjectUpdate/Pages/FASB-and-IASB-announce-the-formation-of-Joint-Transition-Resource-Group-for-Revenue-Recognition-June-2014.aspx

http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Documents/Effect-of-Board-decisions-on-DP-May-2014.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Documents/Effect-of-Board-decisions-on-DP-May-2014.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Discussion-Paper-July-2013/Documents/Discussion-Paper-Conceptual-Framework-July-2013.pdf





http://www.esma.europa.eu/system/files/2014-643_esma_report_on_the_ifrs_3.pdf








In this section:

Regulation 10

Annual reports 10

Capital, liquidity & funding 10

CRD IV 11


Other regulatory 12

Recovery and Resolution 12

Securities and Derivatives 13

Supervision 14

Regulation

Annual reportsESMA publishes its annual report

ESMA published its Annual Report 2013 on

13 June 2014. ESMA compared its work in

2013 against its role and objectives, which

for last year were: financial stability,

financial consumer protection, supervision,

single rulebook and convergence. It

identified improvements in all areas,

including the consumer protection elements

of MiFID II, its authorisation and

monitoring of CRAs, CCPs and TRs, and the

publication of RTS and ITS to achieve single

rulebooks under UCITS and AIFMD. ESMA

also restated its 2014 workplan.

Capital, liquidity & fundingGetting supervisors’ disclosures right

The EC published its final ITS with regard

to the format, structure, contents list and

annual publication date of the information

to be disclosed by competent authorities in

the Official Journal on 25 June 2014.

The EC details how supervisors should:

disclose information on the texts of laws,

regulations, administrative rules and

general guidance that they have adopted

for prudential regulation

provide information on how they

exercise options and discretions

available in EU law

publish information on the general

criteria and methodologies used for

supervisory review and evaluation

process

disclose aggregate statistical data on key

aspects of the implementation of the

prudential framework.

The EC stipulates that national supervisors

should complete the templates by 31

December each year and publish them by 31

July. The Implementing Regulation will

enter into force on 15 July 2014.

EBA tightens operational riskstandards

On 12 June 2014 the EBA proposed draft

RTS on the use of internal operational risk

models which apply to regulators rather

than directly to firms. It is seeking to

harmonise the approval process for

operational risk models by specifying the

aspects that regulators must examine before

allowing a firm to use a model. Under

proposed approach, national regulators

assess the quality of firms’ internal data, IT

systems and the terms of the internal self-

assessment of their operational risk models

before approval.

Banking and capital markets

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

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

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

http://www.esma.europa.eu/system/files/esma_2013_annual_report.pdf

http://www.pwc.co.uk/financial-services/publications/esma-workplan.jhtml





http://www.eba.europa.eu/documents/10180/724762/EBA-CP-2014-08+CP+on+draft+RTS+on+AMA+assesment.pdf








The EBA welcomes comments until 12

September 2014. Once finalised, the RTS

will form part of the Single Rulebook on

Prudential Regulation in the EU.

EBA harmonises countercyclicaldisclosures

The EBA launched a consultation on draft

RTS on disclosure of information in

relation to the countercyclical capital

buffer on 26 June 2014. Institutions must

disclose the geographical distribution of

exposure value and own fund requirements

for relevant exposures. The EBA requires

institutions to disclose annually the amount

of their countercyclical capital buffer. In the

draft RTS the EBA propose two disclosure

templates for firms to complete.

The consultation closes on 27 September

2014. EBA must submit the draft RTS to

the Commission by 31 December 2014.

Firms are required to transition to

countercyclical buffer requirements over a

three year period starting 1 January 2016.

Proportionality in modelling creditrisk

The EBA launched a consultation on draft

RTS on the sequential implementation of

the IRB Approach and permanent partial

use under the Standardised Approach (SA)

on 26 June 2014. The EBA details a number

of CRR provisions which allow firms to use

both the IRB and the SA when modelling

credit risk RWAs.

The EBA proposes criteria that firms using

the IRB approach must meet if they want to

apply the SA to calculate capital

requirements. Firms can use the SA to

model their exposures:

to central governments and central

banks, where the number of material

counterparties is limited and it would be

unduly burdensome to implement a

rating system for these counterparties

to other firms, where the number of

material counterparties is limited and it

would be unduly burdensome to

implement a rating system for these

counterparties

in non-significant business units, as well

as exposures classes or types of

exposures that are immaterial in terms

of size and perceived risk profile.


2014. The EBA must submit the draft RTS

to the EC by 31 December 2014.

IT problems for EBA

The EBA revised its list of validation rules

in the supervisory reporting ITS again on 24

July 2014. It found that several validation

rules were incorrect or caused IT problems.

The EBA has deactivated some of these

rules and updated the remaining validation

rule files on its website under ‘Related

documents’ in the Supervisory Reporting

section.

The EBA informed national supervisors that

they should not validate data submitted

against the set of deactivated rules.

Achieving RWA consistency

The EBA published its second report on

consistency of RWAs for residential

mortgages on 11 June 2014, It investigating

why banks apply different risk weights to

similar pools of mortgage exposures. It

found that banks are putting varying levels

of dependence on different economic

variables when estimating borrowers’

default rates and creditworthiness.

The EBA noted that national regulators are

currently examining the consistency of

banks’ internal models. It plans to wait for

the outcome of these reviews before

determining what regulatory action it needs

to take.

CRD IVEnriching Pillar 3

The BCBS consulted on enhanced Pillar 3

disclosure in its Review of the Pillar 3

disclosure requirements published 26 June

2014. The Committee feels the existing

requirements have been inadequate,

particularly those related to RWAs. Banks

aren’t disclosing information consistently –

both in form and level of granularity..

The BCBS’ proposed new standards

promote greater consistency in banks’ risk

disclosure, and in their risk measurement

and management. It wants market

participants to be able to compare banks'

disclosed RWAs and so assess more

effectively a bank's overall capital adequacy.

In particular, the BCBS disclosure

requirements respond to concerns about the

opacity of internal model-based approaches

to determining RWAs. In most cases, banks

aren’t required to disclose additional

information but instead present

requirements in a more detailed and

prescriptive way to make them easier to

compare.

The Committee welcomes comments on this

consultative document by 26 September

2014.

Disclosing encumbered assets

The EBA is pushing for more disclosure of

encumbered and unencumbered assets in

final CRR guidelines, published 27 June

2014. These guidelines are the EBA’s first

step towards implementing a harmonised

disclosure framework of asset encumbrance

in the EU.

The EBA provided three templates for

completion on encumbrance. It believes that

disclosing asset encumbrance increases

market discipline by helping market

participants better understand the liquidity

and solvency profiles of institutions.

National supervisors should incorporate the

guidelines into their supervisory procedures

within six months of publication. The EBA

plans to review the guidelines after one year

with a view to developing binding technical

standards on more extensive disclosure by

2016.

http://www.eba.europa.eu/documents/10180/741727/EBA-CP-2014-11+%28CP+on+RTS+on+CBB+Disclosure+Art+440+CRR%29.pdf




http://www.eba.europa.eu/documents/10180/740958/EBA-CP-2014-10+CP+on+draft+RTS+on+roll+out+and+PPU+of+IRB+approach.pdf




http://www.eba.europa.eu/-/eba-issues-revised-list-of-its-validation-rules

https://www.eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standard-on-supervisory-reporting-data-point-model-

http://www.eba.europa.eu/documents/10180/15947/20140611+Fourth+interim+report+on+the+consistency+of+risk-weighted+asset.pdf



http://www.bis.org/publ/bcbs286.pdf


http://www.bis.org/publ/bcbs128c.pdf#page=23http://www.bis.org/publ/bcbs128c.pdf

http://www.bis.org/publ/bcbs128c.pdf#page=23http://www.bis.org/publ/bcbs128c.pdf






EBA consults on disclosurerequirements

The EBA proposed new regulatory

disclosures for EU banks in a Consultation

Paper on the materiality, proprietary and

confidentiality and on disclosure frequency

on 13 June 2014. The EBA permits

institutions to waive the disclosure of

requirements that are immaterial,

proprietary or confidential. But its

monitoring of disclosures since 2009 has

shown significant variations in disclosure

standards, reflecting different

interpretations of the three concepts and

raising concerns about possible incorrect

use of the waivers. The EBA therefore aims

to bring consistency and certainty to the

regime through new common waiver

frameworks. The common frameworks

cover the:

process and criteria that institutions

should follow when considering a

disclosure waiver and their need to

disclose more frequently than annually

information that institutions should

provide when using waivers or choosing

to disclose more frequently.

Where a bank decides not to disclose due to

materiality, proprietary or confidentiality,

the EBA expects senior management to

make the decision. The bank should also

assess the need to provide this information

more frequently when meeting specific

criteria.

The EBA provides no common materiality

threshold but insists that readers should be

able to understand the indicators used in a

bank’s waiver assessment. Similarly, it

allows firms to decide on frequency of

disclosure but specify a list of information

that ought to be disclosed more than

annually.

The consultation closes 13 September

2014 and the guidelines are expected to be

finalised before 31 December 2014.

Assessing pension fund volatility

The EBA published a report on the impact

on the volatility of own funds of the revised

IAS 19 and the deduction of defined pension

assets from own funds on 24 June 2014. It

considers how the CRR requirement to

deduct defined benefit (DB) pension fund

assets from capital will impact firms’ capital

resources. It also analyses whether frequent

changes in the value of pension fund assets

could lead to volatility in capital levels.

The EBA concludes that the IAS19 and CRR

changes only create limited volatility of own

funds. Own funds volatility is driven by the

existence of DB plans, their characteristics

and size compared to the capital position of

the institution. The EBA also highlights that

during economic downturns own funds may

be adversely impacted by the increase of

actuarial losses, leading to an increase in DB

pension fund deficits.

The EBA’s assessment was informed by a

discussion paper which it published on 17

February 2014.

Financial stabilityClouds still hang over EU banks

The EBA published a Risk Assessment of the

European Banking System on 25 June

2014. Echoing market sentiment it reports

strengthening confidence in the European

banking system but concedes the recovery

remains weak and fragile. European banks

have benefited from favourable market

conditions by boosting their capital levels

ahead of the forthcoming stress test and the

AQR exercise. At December 2013, the

weighted average tier 1 ratio for the largest

European banks stood at 11.6%.

Other regulatoryIOSCO finds macroprudential risks

IOSCO published its market survey on

market trends on 17 June 2014. The survey

highlights the growing leverage in securities

markets, the impact of cross-border capital

flows on emerging markets, financial risk

disclosure, collateral management, and

potential counterparty risk in central

clearing houses.

IOSCO surveyed its Expert Network and

regulatory members on risks to, and within,

the global securities markets. It was

particularly concerned with

Macroprudential issues, especially banking

vulnerabilities and capital flows. IOSCO

noted differing responses by organisational

type: regulators see risk emanating from

illegal conduct, corporate governance,

financial risk disclosure and benchmarking

issues, while market participants are more

concerned with risk attached to the hunt for

yield, resolution and resolvability plans,

CCPs and market fragmentation.

Participants saw securities markets as likely

to transmit and/or amplify shocks rather

than as a source of risk. Compared to the

2012 survey, they no longer cited sovereign

debt and the global economic slowdown as

prominent risks. But they have consistently

mentioned three risks in the past three

years: regulatory uncertainty, banking

vulnerabilities and capital flows.

Recovery and ResolutionBasel deals with weak banks

The BCBS issued draft Supervisory

guidelines for identifying and dealing with

weak banks on 18 June 2014. In 2002 BCBS

provided a toolkit for supervisory

authorities to deal with weak banks in a

timely and effective manner. This 2014

revision addresses the significant

developments in global financial markets

and regulatory landscape since the financial

crisis.

Key changes include:

emphasising the need for early

intervention and the use of recovery and

resolution tools, and updating

supervisory communication policies for

distressed banks

providing further guidance for

improving supervisory processes, such

as incorporating macroprudential

assessments, stress testing and business

http://www.eba.europa.eu/documents/10180/726375/EBA-CP-2014-09+Consultation+paper+on+Guidelines+Article+432+and+Article+433+CRR+disclosures.pdf



http://www.eba.europa.eu/documents/10180/534414/EBA+Report+on+the+impact+on+the+volatility+of+own+funds+from+defined+pension+plans.pdf




http://www.eba.europa.eu/documents/10180/583941/EBA+DP+2014+01+%28DP+on+Pensions%29.pdf

http://www.eba.europa.eu/documents/10180/556730/EBA+Risk+Assessment+Report+June+2014.pdf

http://www.eba.europa.eu/documents/10180/556730/EBA+Risk+Assessment+Report+June+2014.pdf

http://www.iosco.org/research/pdf/swp/SWP5.pdf

http://www.iosco.org/research/pdf/swp/SWP5.pdf









model analysis, and reinforcing the

importance of sound corporate

governance at banks

highlighting the issues of liquidity

shortfalls, excessive concentrations,

misaligned compensation and

inadequate risk management

expanding guidelines for information-

sharing and cooperation among relevant

authorities.

Stefan Ingves, Chairman of the BCBS, said

that weak banks are a “worldwide

phenomenon” and “early identification and

intervention by supervisors is critical in

preventing an escalation of problems”.


2014.

EC fills the resolution pot

The EC launched a Public consultation on

the contributions of credit institutions to

resolution financing arrangements under

the BRRD and the SRM on 20 June 2014.

The EC is assessing the annual amount that

individual credit institutions will have to

pay to their respective resolution funds.

While broadly defined by criteria set out in

the BRRD (based on metrics such as size

and risk profile of the firm), the criteria

have to be specified in greater detail in a

delegated act.

The EC is seeking answers to the following

questions:

what should be the level at which the

contributions of groups are calculated:

individual or consolidated level?

should small credit institutions receive a

discount to what they would pay on the

basis of an industry wide formula?

should the flat or the risk-adjusted

element of contribution be the most

prominent?

what should be the respective weight of

each risk pillar, as set out in the BRRD,

and of each risk indicator within each

risk pillar?

The consultation closes on 14 July 2014.

The EC intends to finalise the necessary

delegated acts by September 2014, ahead of

the implementation of SSM.

BRRD enters into force

The text of BRRD was published in the

Official Journal on 12 June 2014, triggering

the introduction of a pan-European

framework for bank recovery and resolution

from 2 July 2014.

Member States must adopt and publish the

measures transposing the BRRD into

national law by 31 December 2014 and must

apply those measures by 1 January 2015.

Provisions relating to the bail-in tool will

apply from 1 January 2016.

Securities and DerivativesMiFID II and MAR in the books

The Council and EP published the final text

of four key pieces of legislation in the

Official Journal on 12 June 2014, which

became law on 2 July:

Market Abuse Regulation (MAR)

Criminal Sanctions for Market Abuse

Directive (CSMAD)

Recast Markets in Financial

instruments Directive (MiFID II)

Markets in Financial Instruments

Regulation (MiFIR).

Although each piece of legislation is now in

force, firms do not have to comply with the

new rules immediately. They have to comply

with most of MAR from 3 July 2016, but

have until 3 January 2017 before having to

comply with MiFID II, MiFIR and those

sections of MAR which depend on MiFID II.

The EC and ESMA have until early January

2016 to develop much of the supporting

secondary legislation providing detailed

requirements. Whilst firms should engage

with the ongoing consultation process for

the secondary rules, they should not wait for

final rules before beginning implementation

work.

Our feature article this month provides

further detail on the secondary legislation

process and implementation timetable for

the new MiFID regime.

Guidance on EMIR valuationreporting

ESMA updated its EMIR Q&A website on

23 June 2014, which provides new guidance

on reporting contract and collateral

valuations. Entities subject to EMIR

clearing and non-centrally cleared margin

obligations need to report valuations from

11 August 2014.

ESMA clarified that counterparties should:

report the collateral that a counterparty

posts, not receives

use the end of day settlement price of

the underlying market or CCP for mark-

to-market valuation, if available - if that

is not available then they should use the

closing mid-price

rely on a reporting party's valuation for

delegated reporting

value non-cash collateral at the time of

posting, not the time of receipt

report trades which construct complex

products as separate trades, wherever

possible.

ESMA also outlined scenarios and

terminology applicable to the

collateralisation description field in the

update. Finally, it confirmed that firms do

not need to report life cycle events for

period 16 August 2012 to 12 February 2014.

ESMA stated that it does not plan to issue

further guidance on EMIR reporting.

http://ec.europa.eu/internal_market/consultations/2014/credit-institutions-contributions/docs/consultation-document_en.pdf











http://www.esma.europa.eu/system/files/2014-682.pdf






SupervisionBasel Committee encouragessupervisory consistency

The BCBS published Principles for effective

supervisory colleges on 26 June 2014, to

encourage a consistent approach for

supervisory colleges. It sees international

supervisory colleges as increasingly

important in the supervision of banking

groups that operate across national borders.

The Principles replace the Good practice

principles on supervisory colleges

published in October 2010.

The BCBS aims to promote and strengthen

the operation of colleges and revised the

Principles to reflect observations on best

practice. It underscores the importance of

continuous collaboration and information-

sharing outside the formal college meetings.

The BCBS incorporates recent supervisory

developments such as the formation of

crisis management groups and the greater

focus on macroprudential considerations.



http://www.bis.org/publ/bcbs177.htm

http://www.bis.org/publ/bcbs177.htm






Chris StuartDirector, Jersey office+44 (0) 1534 [email protected]

Mary BruenAssistant Director, Jersey+44 (0) 1534 [email protected]

In this section:

Regulation 15

AIFMD 15

Consumer protection 15

Credit ratings 16

Regulation

AIFMDEC determines open and closed funds

The EC published a Delegated Regulation

with regard to RTS determining types of

AIFMs in the Official Journal on 24 June

2014. The standards were delayed after the

EC asked ESMA to review the contents to

ensure alignment with the AIFMD regime.

The EC determined that an open-ended

fund is one in which the shares can be

purchased or redeemed prior to the AIF’s

liquidation or wind-down, in line with its

prospectus or offering documents. An AIF is

considered close-ended when shares cannot

be redeemed or purchased in this way. An

AIFM can manage both open-ended and

closed-ended funds at the same time.

AIFMD applies differently to open-ended

and closed-funds, and managers must use

the definition in the RTS to assess which

category their funds fall into.

The RTS enter into force on 14 July 2014.

Update on MoUs

ESMA published an update on which

Member States comply or intend to comply

with the AIFMD MoUs that ESMA

negotiated with other regulators on 20 June

2014. ESMA agreed MoUs with a number of

non-EU countries, including the Cayman

Islands, US and Japan. But individual EU

national regulators still needed to sign-up to

the MoUs to make them official.

ESMA revealed that only Slovenia has

stated it will not comply with the MoUs.

Slovenia has not yet implemented AIFMD

or decided which national regulator will be

responsible for implementing AIFMD. All

other Member States confirmed that they

will comply.

Consumer protectionLaw makers strengthen depositorprotection

The EP and Council published the recast

Deposit Guarantee Schemes Directive

(DGSD) in the Official Journal on 12 June

2014. They revised the DGSD to introduce

pre-funding of the schemes and a

requirement for funds to cover 0.8% of the

value of eligible deposits. A Member State

can apply to the EC to reduce this coverage

to 0.5% if its domestic banking market is

significantly concentrated.

The EP and Council amended the definition

of eligible deposits. They have extended the

guarantee to include temporary ‘high

Asset management

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

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:183:FULL&from=EN



http://www.esma.europa.eu/system/files/2014-esma-264_compliance_table_-_guidelines_esma_2013-998_aifmd_mou_200614.pdf

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.173.01.0149.01.ENG

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.173.01.0149.01.ENG






balances’ in excess of the existing €100,000

cap when linked to specific life-events (e.g.

death or marriage), or the proceeds of

property disposals. The EP and Council

require Member States to distribute

compensation within 7 days of bank failure

but allow them until 2024 to reach this

standard.

Credit ratingsIOSCO issues credit ratingrecommendations

IOSCO published Consultation report:

good practices on reducing reliance on

CRAs in asset management on 4 June 2014.

IOSCO is consulting on its implementation

of the FSB Principles for reducing reliance

on CRA ratings for asset managers and

investment funds.

Asset managers use ratings produced by

CRAs to assess the credit worthiness of a

financial instrument. Credit ratings given to

some investment funds (e.g. MMFs) also

impact investor decision-making. Investors

may use credit ratings to define acceptable

levels of risk when investing in a fund or

through a discretionary mandate. IOSCO

would like asset managers to assess credit

risks themselves and use CRA ratings to

form part of this assessment rather than

relying solely on CRAs for due diligence.

IOSCO also identifies additional good

practice which regulators and asset

managers are encouraged to follow,

including:

publishing information on how the asset

manager internally assesses credit

quality of an investment and how they

use external ratings

understanding a CRA’s methodology

and limitations when using external

ratings

using a wide range of quality parameters

when assessing the eligibility of

collateral

implementing internal processes to deal

with any external credit rating

downgrades that might not involve an

immediate fire sale.

In the EU, AIFMs and UCITS management

companies will be subject to similar

requirements from 21 December 2014.

From then,, they must not solely or

mechanistically rely on a CRA’s rating in

their decision-making process.

The consultation closes to comments on 6

September 2014.




http://www.financialstabilityboard.org/publications/r_101027.pdf

http://www.financialstabilityboard.org/publications/r_101027.pdf






In this section:

Regulation 17

Consumer protection 17


Fraud 18

Other 18

Solvency II 18

Supervision 19

Accounting 19

IFRS 19

PwC Publications 20

Regulation

Consumer protectionPPI progress recognised

EIOPA summarised Member State’s

responses to its opinion on PPI in a report

published 25 June 2014. It concluded that

the opinion had triggered significant

developments in some countries although

many developments are still in the early

stages. EIOPA’s opinion aimed to draw

attention to consumer protection issues

regarding PPI products. It analysed detailed

information on existing national practises

and summarised experience from eight

Member States. EIOPA does not intend to

take any immediate follow-up action but

will keep this option open.

Financial stabilityIAIS updates GSIIs capitalrequirement

The IAIS published its June issue of the

IAIS Newsletter on 17 June 2014. The IAIS

includes a progress update on the next Basic

Capital Requirements (BCR) for G-SIIs

consultation paper, expected to be issued in

early July.

The IAIS is developing three global

standards: the BCR, the global insurance

capital standard (ICS) and higher loss

absorbency (HLA). The BCR will apply to all

group activities, including non-insurance

subsidiaries as the foundation of the HLA

requirements. The IAIS is still developing

the final determination of capital required

for the BCR but it envisions that six factors

will be applied to six exposures, reflecting

the main categories of activity:

traditional life insurance

traditional non-life insurance

assets

asset-liability matching

non-traditional insurance

non-insurance.

The IAIS plans to develop the HLA

requirements once the BCR is finalised and

address additional capital requirements to

apply to G-SIIs, reflecting their systemic

importance in the international financial

system. It expects to complete this work by

the end of 2015.

The IAIS wants to develop a risk-based

group-wide global ICS by end 2016.

Internationally active insurance groups will

have to comply with this standard from

2019 after refinement and final calibration

Insurance

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

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

https://eiopa.europa.eu/fileadmin/tx_dam/files/publications/reports/PPI_follow-up_report_publication.pdf

http://newsletter.iaisweb.org/db/6/1141.pdf

http://newsletter.iaisweb.org/db/6/1141.pdf






in 2017 and 2018. The IAIS intends to use

the work on the BCR to help develop the

ICS.

Insurance risks remain subdued

EIOPA published its June 2014 Risk

Dashboard on 17 June 2014 following its

quarterly assessment of the main systemic

risks and vulnerabilities faced by the

European insurance industry. It found that

the risk environment for the insurance

sector had not changed much since its

March 2014 review. Evidence suggests that

the ongoing moderate recovery continued in

Q1 2014.

FraudInsurance Fraud Bureau consults onstrategy

The Insurance Fraud Bureau (IFB)

launched a consultation on new strategy on

11 June 2014. The IFB calls on the insurance

industry to help shape its future by

considering its expansion into new product

lines and its role in developing an industry-

wide intelligence management framework.

The IFB invites industry stakeholders and

the counter-fraud community to complete a

survey on its website to help direct this new

strategy.

OtherInsurers adopt LEIs

EIOPA proposed guidelines for the use of

LEIs on 27 June 2014. The LEI is designed

to enable risk managers and regulators to

identify parties to financial transactions

instantly and precisely. The international

insurance community has recognised that

the lack of a commonly used identifier has a

negative impact on the quality of data

collection, storage and dissemination,

making these processes costly and less

efficient for national and international

supervisors. EIOPA wants to facilitate the

use of LEIs for (re)insurance undertakings

and for institutions for occupational

retirement provision. The consultation

period ends on 29 August 2014.

EBA sets PII minima

The EBA set an insurance claim minimum

in its final draft RTS on professional

indemnity insurance guarantees for

mortgage credit intermediaries on 24 June

2014. The EBA specified two monetary

floors for professional indemnity insurance:

for each individual claim at €460,000 and

an aggregate amount per calendar year for

all claims at €750,000.

The EBA has submitted these RTS to the EC

for endorsement, fulfilling its

implementation requirement from the

Residential Mortgage Credit Directive. It

plans to review the minima before 21 March

2018.

Solvency IIEIOPA publishes Solvency IIGuidelines

EIOPA published a Consultation on Set 1 of

the Solvency II Guidelines on 2 June 2014.

EIOPA drafts guidelines as non-binding

instruments and addresses them to National

Competent Authorities (NCAs) or financial

institutions, with the aim of ensuring the

common, uniform and consistent

application of EU law and consistent,

efficient and effective supervisory practices.

The consultation comprises five CPs on Set 1

of the Solvency II guidelines:

1. Pillar 1, including guidelines ontechnical provisions, own funds, theStandard Formula (SCR) andGroup Solvency

2. Internal Models

3. System of governance and ownrisks and solvency assessment(ORSA)

4. Supervisory Review Process

5. Methodology for EquivalenceAssessment of National SupervisoryAuthorities.

EIOPA considered the impact of all five CPs

in a separate Impact Assessment published

at the same time. It allows stakeholders to

assess the costs, links between some issues

and to understand the common basis of the

impact assessment, in particular the choice

of the baseline.

EIOPA also published an Annex to EIOPA

consultation on the Guidelines for Solvency

II. This annex gives non-official details of

the draft Delegated Act articles

implementing the Solvency II Directive,

relating to the CPs. The EC has not yet

formally adopted these Delegated Acts. This

is not part of the consultation but is merely

for information purposes.

The comment period ends on 29 August

2014. EIOPA is due to issue the final drafts

in November 2014, with the Guidelines

taking effect from 1 April 2015.

Benefiting firms and consumers

Gabriel Bernardino, Chairman of EIOPA,

considered ‘The future of life insurance,

Solvency II and investment strategies’, in

his foreword for the 3 June 2014

Handelsblatt Newsletter. He believes that

life insurers will benefit from implementing

the new risk-based framework under

Solvency II. But until then, he encourages

insurers to deal seriously with the issues

caused by the low interest rate environment

and to actively implement measures to

https://eiopa.europa.eu/fileadmin/tx_dam/files/publications/fin-stability/Risk_Dashboard/EIOPA-FS-14-057_EIOPA_Draft_Risk_Dashboard_-_June_2014.pdf

https://eiopa.europa.eu/fileadmin/tx_dam/files/publications/fin-stability/Risk_Dashboard/EIOPA-FS-14-057_EIOPA_Draft_Risk_Dashboard_-_June_2014.pdf

http://www.insurancefraudbureau.org/files/press_release_pdfs/ifb_launches_consultation_on_new_strategy.pdf

http://www.surveymonkey.com/s/IFBstrategy

https://eiopa.europa.eu/en/fixed-width/consultations/consultation-papers/index.html?no_cache=1&cid=6551&did=42831&sechash=0fbe5149

https://eiopa.europa.eu/en/fixed-width/consultations/consultation-papers/index.html?no_cache=1&cid=6551&did=42831&sechash=0fbe5149

http://www.eba.europa.eu/documents/10180/737988/Final+Draft+RTS+on+PII+for+mortgage+credit+intermediaries.pdf



https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42089&sechash=92a27859

https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42089&sechash=92a27859

https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42100&sechash=643d324b




https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42099&sechash=aa9a024f

https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42098&sechash=845ace79



https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42118&sechash=a61537e7

https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42096&sechash=db29951b



https://eiopa.europa.eu/en/consultations/consultation-papers/index.html?no_cache=1&cid=6500&did=42103&sechash=a9973c58



https://eiopa.europa.eu/fileadmin/tx_dam/files/Press-Room/speeches/Gabriel_Bernardino_Handelsblatt_Newsletter.pdf

https://eiopa.europa.eu/fileadmin/tx_dam/files/Press-Room/speeches/Gabriel_Bernardino_Handelsblatt_Newsletter.pdf






mitigate possible worst case scenarios. He

also reminded insurers that ‘the consumer

should be at the heart of the provider’s

business, not the other way round.’

He also spoke on how ‘Smarter regulation

will benefit consumers’ at the AMICE

Congress Nice on 5 June 2014, emphasising

that mutuals will benefit from the principle

of proportionality by achieving the same

outcomes with a less burdensome solution.

Bernardino believes Solvency II will benefit

consumers, particularly through insurers

offering more sustainable promises and

products, more accurate and fair pricing,

and more transparent disclosure.

EIOPA wants to achieve these results for

consumers by implementing a system of

smarter regulation rather than making

additional unnecessary rules. Bernardino

asserted that smarter regulation takes

consumer behaviour into account,

recognises the limitations and biases in

consumer decision making and reflects

anticipated problems, rather than only

addressing past problems.

SupervisionIAIS encourages supervisoryconsistency

The IAIS published an Application paper on

supervisory colleges on 25 June 2014, to

encourage a consistent approach across

supervisory colleges. These colleges are

becoming increasingly important in the

supervision of insurance groups that

operate cross-border. The IAIS found that

insurance supervisors have different views

on the role of supervisory colleges and their

part in them. The IAIS aims to help

insurance supervisors learn from each

other’s experiences and it provides

examples of good practice to encourage a

common approach. The comment period

ends 25 July 2014.

EIOPA publishes Annual Report

EIOPA published its Annual Report 2013

on 13 June 2014, outlining its main

achievements in meeting its strategic

objectives. EIOPA’s 2013 objectives centred

on enhanced consumer protection,

development of sound regulation, improved

supervision and timely identification and

management of risks to financial stability.

Accounting

IFRSIASB discusses exposure draftcontracts

At its 17-19 June 2014 meeting the IASB

continued its discussions on the 2013

Exposure Draft Insurance Contracts. At the

meeting the IASB:

confirmed the principle that the

discount rates which are used to adjust

the cash flows in an insurance contract

for the time value of money should be

consistent with observable current

market prices for instruments with

similar cash flows

tentatively decided that an entity should

recognise in its profit or loss any

changes in cash flow estimates for a

reinsurance contract where the profit or

loss arises as a result of changes in

estimated cash flows for an underlying

direct insurance contract that are

recognised immediately in profit or loss

clarified that the proposed insurance

contracts standard is intended to

provide principles for the measurement

of an individual insurance contract, but

that an entity could aggregate insurance

contracts when applying the standard

provided that it meets that objective

agreed to change the definition of a

portfolio of insurance contracts to:

“insurance contracts that provide

coverage for similar risks and are

managed together as a single pool”

clarified that, in accordance with IAS 8,

an entity should select and apply its

accounting policies consistently for

similar contracts, considering the

portfolio in which the contract is

included and the related assets that the

entity holds.

continued discussions on participating

contracts, but didn’t decide whether or

not the contractual service margin

(CSM) should be unlocked for the

insurer’s share or the acceptance of the

‘book yield’ approach (this month’s

meeting was only to provide the staff

with direction for the mechanics of a

potential model - this model will then be

used to support future conceptual

discussions and possibly future Board

decisions) .

tentatively decided that if it were to

require an entity to adjust the CSM for

the insurer’s share of the underlying

items on the grounds that the insurer’s

share represents an implicit

management fee, then an implicit asset

management fee should be considered to

exist only when (i) the returns to be

passed to the policyholder arise from the

underlying items the entity holds, (ii)

the entity must retain a minimum

amount (either fixed or determinable)

and (iii) the policyholder will receive a

substantial share of the total return on

underlying items

tentatively decided that if it were to

require an entity to apply a book yield

approach for determining interest

expense presented in profit or loss, this

approach is only appropriate when the

returns passed to the policyholder arise

https://eiopa.europa.eu/fileadmin/tx_dam/files/Press-Room/speeches/2014-06-05_AMICE_Nice_definitive_version.pdf

https://eiopa.europa.eu/fileadmin/tx_dam/files/Press-Room/speeches/2014-06-05_AMICE_Nice_definitive_version.pdf

http://www.iaisweb.org/view/element_href.cfm?src=1/22526.pdf


https://eiopa.europa.eu/publications/annual-reports/index.html?no_cache=1&cid=6522&did=42588&sechash=9146de30

http://www.ifrs.org/Meetings/MeetingDocs/IASB/2014/June/June 2014 Board Agenda.pdf

http://www.ifrs.org/Meetings/MeetingDocs/IASB/2014/June/AP02-Insurance Contracts.pdf

http://www.ifrs.org/Meetings/MeetingDocs/IASB/2014/June/AP02-Insurance Contracts.pdf






from the underlying items the entity

holds and the policyholder will receive a

substantial share of the total return on

underlying items.

The IASB’s June Insurance Contracts

podcast provides a summary of the meeting.

See our Insurance Alert - IASB meeting on

17 June 2014 for a summary of the tentative

decisions from the meeting and preliminary

discussion on contracts with participating

features.

The IASB published an updated summary

of the effect of redeliberations on the ED

indicating where and how the proposals in

the 2013 ED would change as a result of the

tentative decisions to date and an updated

insurance contracts project overview in

June. The IASB will continue its re-

deliberations on the Insurance Contracts

project at the July 2014 meeting.

PwC PublicationsIFRS News

In its June 2014 edition of IFRS News, the

IFRS looks at:

IFRS 15, Revenue from Contracts with

Customers - a change in mindset?

IFRS 11, Joint Arrangements - how did

we get here?

Cannon Street Press

IAS 16 and IAS 38 amendments

Leasing re-deliberations

Conceptual Frameworkdiscussions

IASB equity accounting researchproject

IC discusses uncertain taxpositions

questions and answers

‘Q’ is for qualitative disclosures about

risk.

FRS 101 illustrative financialstatements

We have published FRS 101 illustrative

financial statements with examples of

disclosures under FRS 101. We have

included some additional disclosures to

assist users. But these illustrative financial

statements do not include all possible

disclosures and where necessary preparers

will need to refer to the standard itself. We

have not included an FRS 101 transition

statement but have provided an appendix

summarising key differences that entities

adopting FRS 101 from IFRS must apply to

comply with the Companies Act

requirements.

Revenue from contracts withcustomers

We published our In depth guide ‘Revenue

from contracts with customers’ on 13 June

2014. We consider the implications of the

converged standard on the recognition of

revenue from contracts with customers

issued by the IASB and FASB on 28 May

2014. The IASB and FASB standard will

improve firms’ reporting of revenue and

improve readers’ ability to compare the top

line in financial statements globally. Almost

all entities will be affected to some extent by

the significant increase in required

disclosures. But the changes extend beyond

disclosures, so firms’ responses will vary

depending on industry and current

accounting practices. Entities will need to

consider changes that might be necessary to

IT systems, processes, and internal controls

to capture new data and address changes in

financial reporting.

Firms using IFRS will be required to apply

the revenue standard for reporting periods

beginning on or after 1 January 2017,

subject to EU endorsement. Public

companies using US GAAP will be required

to apply it for annual reporting periods

from15 December 2016 (including interim

reporting periods therein).

The Digital Life Insurer

Our paper ‘The Digital Life Insurer – The

growth potential of digital in a changing

landscape’ considers the impact that digital

is having on the UK life and pensions sector

and what insurers need to do to meet the

challenges ahead.

http://media.ifrs.org/2014/Projects/Insurance-Contracts/InsuranceProject_June2014.mp3

http://media.ifrs.org/2014/Projects/Insurance-Contracts/InsuranceProject_June2014.mp3

http://www.pwc.co.uk/gx/en/insurance/ifrs/assets/pwc-insurance-alert-june2014.pdf

http://www.pwc.co.uk/gx/en/insurance/ifrs/assets/pwc-insurance-alert-june2014.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Documents/2014/Effect-Board-decisions-ED-June-2014.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Documents/2014/Effect-Board-decisions-ED-June-2014.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Documents/2014/Project-update-June-2014.pdf

http://www.ifrs.org/Current-Projects/IASB-Projects/Insurance-Contracts/Documents/2014/Project-update-June-2014.pdf

https://inform.pwc.com/inform2/content?action=resource&id=0000017891989709.pdf





http://www.pwc.com/en_GX/gx/insurance/publications/digital-life-insurer.jhtml?WT.mc_id=cs_gx-hero-home_Insurance-2020








Open consultations

Closing datefor responses

Paper Institution

25/07/14 Consultation a draft application paper on supervisory colleges IAIS

25/07/14 BCBS-IOSCO Task Force conducts a survey on securitisation markets IOSCO

08/08/14 Basic Capital Requirements for Global Systemically Important Insurers IAIS

09/08/14 EBA consults on tests, reviews and exercises that may lead to public support measures EBA

14/08/14 Consultation Paper: The Financial Policy Committee’s review of the leverage ratio BoE

18/08/14 Consultation paper Clearing Obligation no1 IRS ESMA

22/08/14 Recovering the costs of administering the regulatory gateway through application fees FCA

26/08/14 EBA consults on technical standards on the permanent and temporary uses of the IRB approach EBA

27/08/14 EBA consults on RTS on counter cyclical buffer disclosure EBA

29/08/14 EIOPA consults on the proposal for Guidelines on the use of the Legal Entity Identifier EIOPA

31/08/14 Implementing the Financial Policy Committee’s recommendation on loan to income ratios in mortgage lending PRA

01/09/14 British credit unions at 50: call for evidence HMT

Monthly calendar


http://www.iosco.org/news/pdf/IOSCONEWS337.pdf


http://www.eba.europa.eu/-/eba-consults-on-tests-reviews-and-exercises-that-may-lead-to-public-support-measures

http://www.bankofengland.co.uk/financialstability/Documents/fpc/fs_cp.pdf


http://www.fca.org.uk/news/dp14-01-regulatory-gateway-application-fees



https://eiopa.europa.eu/consultations/consultation-papers/index.html#c6551

http://www.bankofengland.co.uk/pra/Documents/publications/cp/2014/cp1114.pdf

https://www.gov.uk/government/consultations/british-credit-unions-at-50-call-for-evidence







Paper Institution

02/09/14 Review of the Money Advice Service: call for evidence HMT

05/09/14 Project Innovate: call for input FCA

12/09/14 Thematic Peer Review on Supervisory Frameworks and Approaches to SIFIs - Questionnaire for national authorities FSB

12/09/14 FSB Peer Review on Supervisory Frameworks and Approaches to SIFIs - Questionnaire for G-SIBs FSB

12/09/14 Consultation on the potential economic consequences of country-by-country reporting under Directive 2013/36/EU (CapitalRequirements Directive or CRD)

EC

18/09/14 Consultation paper Clearing Obligation no2 CDS ESMA

19/09/14 Tax-advantaged venture capital schemes: ensuring continued support for small and growing businesses HMT

26/09/14 Review of the Pillar 3 disclosure requirements BCBS

30/09/14 FCA discussion paper on fairness of changes to mortgage contracts FCA

03/10/14 Consultation paper on the implementing technical standards on joint decisions on prudential requirements EBA

07/10/14 EBA consults on draft guidelines for common supervisory procedures and methodologies EBA

09/10/14 Wholesale sector competition review FCA

09/10/14 Consultation Paper: Draft Regulatory Technical Standards on the content of resolution plans and the assessment of resolvability EBA

09/10/14 Consultation Paper: Draft Guidelines on the specification of measures to reduce or remove impediments to resolvability and thecircumstances in which each measure may be applied

EBA

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/326288/independent_review_of_the_money_advice_service_final_020714.pdf

http://www.fca.org.uk/static/documents/project-innovate-call-for-input.pdf

http://www.financialstabilityboard.org/publications/r_140704a.pdf

http://ec.europa.eu/internal_market/consultations/2014/country-by-country-crd4/index_en.htm

http://ec.europa.eu/internal_market/consultations/2014/country-by-country-crd4/index_en.htm


https://www.gov.uk/government/consultations/tax-advantaged-venture-capital-schemes-ensuring-continued-support-for-small-and-growing-businesses


http://www.fca.org.uk/news/dp14-2-fairness-of-changes-to-15/07mortgage-contracts

http://www.eba.europa.eu/news-press/calendar?p_p_id=8&_8_struts_action=%2Fcalendar%2Fview_event&_8_eventId=746164

http://www.eba.europa.eu/documents/10180/748829/EBA-CP-2014-14+%28CP+on+draft+SREP+Guidelines%29.pdf

http://www.fca.org.uk/static/documents/market-studies/wholesale-sector-competition-review-call-for-inputs.pdf

http://www.eba.europa.eu/documents/10180/751477/EBA-CP-2014-16++%28CP+on+draft+RTS+on+Content+Res++Plans+and+Assessment+of+Resolvability%29.docx.pdf

http://www.eba.europa.eu/documents/10180/751636/EBA-CP-2014-15+%28CP+on+draft+GL+on+measures+to+reduce+or+remove+impediments+to+resolvability%29.pdf

http://www.eba.europa.eu/documents/10180/751636/EBA-CP-2014-15+%28CP+on+draft+GL+on+measures+to+reduce+or+remove+impediments+to+resolvability%29.pdf







Paper Institution

10/10/14 DP14/3 - The use of dealing commission regime: Feedback on our thematic supervisory review and policy debate on the marketfor research

FCA

10/10/14 GC14/3 Retail Investment Advice: Clarifying the boundaries and exploring the barriers to market development FCA

Forthcoming publications in 2014

Date Topic Type Institution

Capital and Liquidity

TBD 2014 A new capital regime for self-invested personal pension (SIPP) operators Policy statement FCA

Client Money

TBD 2014 Review of the client money rules for insurance intermediaries Policy statement FCA

TBD 2014 Regulated client money regime for consumer credit companies Consultation paper FCA

Consumer protection

TBD 2014 National Depositor Preference and UK depositors Policy statement PRA

TBD 2014 Mortgage Market Review: Arrears and Approved Persons – final rules Policy statement FCA

Financial crime, security and market abuse

Q4 2014 Market Abuse Review Technical advice ESMA

http://www.fca.org.uk/static/documents/discussion-papers/dp14-03.pdf

http://www.fca.org.uk/static/documents/discussion-papers/dp14-03.pdf

http://www.fca.org.uk/news/guidance-consultations/gc14-03







Insurance

TBD 2014 Institutions for Occupational Retirement Provision Legislative proposals EC

TBD 2014 Advice or technical standards for IMD2 Technical advice or technical standards EIOPA

Securities and markets

Q4 2014 Harmonised transaction reporting Guidelines ESMA

Q4 2014 Exchange-traded derivatives reporting Guidelines ESMA

Q4 2014 Technical standards following the revision of MiFID (MiFID II andMiFIR)

Technical standards ESMA

Q4 2014 Transparency Directive and Prospectus regime Technical standards ESMA

Q4 2014 Credit Rating Agencies Regulation Guidelines ESMA

TBD 2014 Securities Law Directive Legislative proposals EC

TBD 2014 Revision of the Transparency Directive Discussion papers ESMA

TBD 2014 Close-out netting Legislative proposals EC

Products and investments

Q4 2014 European Social Entrepreneurship Funds Technical advice ESMA

Q4 2014 European Venture Capital Funds Technical advice ESMA

Q4 2014 Packaged Retail Investment Products Technical standards ESMA/EIOPA







Q4 2014 Undertakings For The Collective Investment of Transferable Securities V Technical advice ESMA

Q4 2014 Money market funds Technical standards ESMA

TBD 2014 Development of high level principles for the product approval process Principles ESAs

TBD 2014 A framework for the activities and supervision of personal pensionschemes

Advice EIOPA

Recovery and resolution

TBD 2014 EU framework for recovery and resolution plans Technical advice EBA

Solvency II

TBD 2014 Solvency II – draft Level 2 delegated acts Level 2 text EC

TBD 2014 Solvency II Level 3 measures Level 3 text EIOPA

Supervision, governance and reporting

Q4 2014 Alternative performance measures Guidelines ESMA

Q4 2014 Electronic reporting format and access to regulated information Regulatory technical standards ESMA

Main sources: ESMA 2014 work programme; EIOPA 2014 work programme; EBA 2014 work programme; EC 2014 work programme; FCA policy development updates






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

ABC Anti-Bribery and Corruption

ABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AIMA Alternative Investment Management Association

AML Anti-Money Laundering

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

ASB UK Accounting Standards Board

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

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

Basel III Basel III: International Regulatory Framework for Banks

BBA British Bankers’ Association

BIBA British Insurance Brokers Association

BIS Bank for International Settlements

BoE Bank of England

BRRD Bank Recovery and Resolution Directive

CASS Client Assets sourcebook

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CEBS Committee of European Banking Supervisors (predecessor of EBA)

CEIOPS Committee of European Insurance and Occupational PensionsSupervisors (predecessor of EIOPA)

CET1 Core Equity Tier 1

CESR Committee of European Securities Regulators (predecessor ofESMA)

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

CFT Counter Financing of Terrorism

CFTC Commodities Futures Trading Commission (US)

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

CIS Collective Investment Schemes

CMA Competition and Markets Authority

Glossary






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

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

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

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

CRAs Credit Rating Agencies

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

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

CRD IV Capital Requirements Directive 2013/36/EU

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

CTF Counter Terrorist Financing

DFBIS Department for Business, Innovation and Skills

DG MARKT Internal Market and Services Directorate General of the EuropeanCommission

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

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

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

ECON Economic and Monetary Affairs Committee of the EuropeanParliament

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

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

EP European Parliament

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

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

EU European Union

EURIBOR Euro Interbank Offered Rate

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

FASB Financial Accounting Standards Board (US)






FATCA Foreign Account Tax Compliance Act (US)

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

FDIC Federal Deposit Insurance Corporation (US)

FiCOD Financial Conglomerates Directive 2002/87/EC

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

FiCOD2 Proposal to overhaul the financial conglomerates regime (expected2013)

FMI Financial Market Infrastructure

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FSA Financial Services Authority

FSB Financial Stability Board

FS Act 2012 Financial Services Act 2012

FS Reform Bill2012

Financial Services (Bank Reform) Bill 2012

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FSOC Financial Stability Oversight Council

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

G-SIIs Global Systemically Important Institutions

HMRC Her Majesty’s Revenue & Customs

HMT Her Majesty’s Treasury

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICAS Individual Capital Adequacy Standards

ICB Independent Commission on Banking

ICOBS Insurance: Conduct of Business Sourcebook

IFRS International Financial Reporting Standards

IMA Investment Management Association

IMAP Internal Model Approval Process

IMD Insurance Mediation Directive 2002/92/EC

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






IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision Directive2003/43/EC

IOSCO International Organisations of Securities Commissions

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

JURI Legal Affairs Committee of the European Parliament

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

LTGA Long-Term Guarantee Assessment

MAD Market Abuse Directive 2003/6/EC

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

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

Member States countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

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

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

MMF Money Market Fund

MMR Mortgage Market Review

MTF Multilateral Trading Facility

MoJ Ministry of Justice

NAV Net Asset Value

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

NFC Non-financial counterparty under EMIR

NFC+ Non-financial counterparty over the EMIR clearing threshold

NFC- Non-financial counterparty below the EMIR clearing threshold

NSFR Net stable funding ratio

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union

OFT Office of Fair Trading

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

ORSA Own Risk Solvency Assessment

OTC Over-The-Counter






PERG Perimeter Guidance Manual

PRA Prudential Regulation Authority

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

PRIPs Regulation Proposal for a Regulation on key information documents forinvestment products COM(2012) 352/3

RAO Financial Services and Markets Act 2000 (Regulated ActivitiesOrder) 2001

RDR Retail Distribution Review

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SCR Solvency Capital Requirement (under Solvency II)

SEC Securities and Exchange Commission (US)

SFT Securities financing transactions

SFD Settlement Finality Directive 98/26/EC

SFO Serious Fraud Office

SIPP Self-invested personal pension scheme

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

TR Trade Repository

TSC Treasury Select Committee

UCITS Undertakings for Collective Investments in Transferable Securities

XBRL eXtensible Business Reporting Language





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