www.pwc.com.au

PwC Regulatory Update

February 2014

PwC

1. Legislative/Government developments

Delivering a more efficient Government – Superannuation

The Government has announced the streamlining of consultation arrangements for superannuation as part of the Government's efficiency reforms. This includes the cessation of three non-statutory bodies that are no longer required: the SuperStream Advisory Council, Superannuation Advisory Committee and the Superannuation Roundtable.

With reforms to the superannuation sector in recent years largely implemented, the work of these bodies has also been completed. Remaining issues are being taken up by forums chaired by the Australian Taxation Office (ATO).

The SuperStream project is well into the implementation phase. The Government remains committed to SuperStream and the ATO will continue to work closely with superannuation funds, fund administrators, employers, and software developers as SuperStream continues to be implemented.

See media release

2

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

Amendments to the Farm Management Deposits Scheme

Government has announced that the Government will amend the Farm Management Deposit (FMD) scheme to exclude FMDs from the operation of the unclaimed money provision in the Banking Act 1959. This treatment will apply from the date of Royal Assent of the amending legislation.

The authority has also released for public consultation exposure draft legislation and accompanying explanatory material that gives effect to the proposal and to the Government’s decision to:

• Increase the off-farm income threshold from $65,000 to $100,000, allowing farmers to earn more income from non-primary production sources in an income year before being prevented from making new FMDs; and

• Facilitate the consolidation of FMDs, by eliminating tax consequences arising when multiple FMDs are consolidated into a single deposit.

Submissions have closed.

See media release

PwC

1. Legislative/Government developments (cont’d)

Public Consultation on Consumer Credit Regulations

The Government has released for public consultation draft regulations to enhance consumer protection for Australians who may need to borrow 'payday' loans. These are small amount loans, often for very short periods of time, but can be high risk for vulnerable or low-income consumers.

From 1 July 2013 there has been a cap on costs for small amount credit contracts, which are loans of less than $2,000 cash in hand to the consumer, with a maximum term of 12 months.

The exposure draft and accompanying explanatory material can be found on the Treasury website.

Submissions have closed.

See media release

Offshore Banking Unit reforms

The Assistant Treasurer, Hon Arthur Sinodinos, has said that 1 July 2015 will be the start date for reforms to the Offshore Banking Unit regime that were originally announced in the 2013-14 Budget.

Senator Sinodinos said that this step will provide business with certainty by allowing targeted integrity rules together with other Offshore Banking Unit reforms such as reviewing the activities eligible for the OBU concession, to be fully considered and implemented in one complete package.

The Offshore Banking Unit regime provides a concessional tax rate to encourage genuine offshore banking activity in Australia.

See media release

3

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

Stability for the SuperStream gateway network

Government has announced arrangements to provide certainty and stability to the superannuation industry by setting in place a governance structure for the SuperStream gateway network.

SuperStream is a project to introduce e-commerce to the ‘back office’ of the superannuation industry, reducing transaction costs and processing times. SuperStream reforms are estimated to deliver savings of $1b annually to industry. The gateway network is a key part of the infrastructure required to ensure that SuperStream delivers maximum benefits to employers, superannuation funds and fund members.

See media release

Consultation on central clearing of OTC derivatives – next step for G20 reforms

The Assistant Treasurer, Hon Arthur Sinodinos has released a proposals paper canvassing the introduction of a limited obligation for central clearing of certain over-the-counter (OTC) derivatives for public consultation.

The Government is also seeking feedback on making the end-user exemption from trade reporting permanent. The changes are expected to significantly reduce the regulatory burden and contribute to improving business opportunities in Australia.

Central clearing is one of the three key reforms agreed by the G20 Finance Ministers in respect of OTC derivatives, along with trade reporting and trading on platforms.

Submissions close on 10 April 2014.

See media release

PwC

1. Legislative/Government developments (cont’d)

Treasury 2014 Regulatory Update

The Assistant Treasurer, Hon Arthur Sinodinos has released a speech that provides an overview of the Government’s priorities and broad policy agenda which will impact on the industry. He explores areas such as financial services regulation, insurance affordability, actuary studies, taxation and Future of Financial Advice (FOFA) and other priorities.

See speech

FIRB Annual Report 2013

The Foreign Investment Review Board (FIRB) has released an annual report in accordance with the Board’s responsibility to advise the Government on foreign investment matters. It outlines the activities of the Board, provides a summary of the year’s foreign investment proposals, contains an overview of the main provisions of the Foreign Acquisitions and Takeovers Act 1975 and a copy of Australia’s Foreign Investment Policy.

The Board examines significant foreign investment applications and advises on potential national interest concerns. In 2012-13, the Board examined a range of high profile investment applications, including in the resources sector which made up the majority of business applications, continuing the trend from previous years.

See media release

4

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC 5

2. What have the regulators been up to?

ASIC information sheet on whistleblowers and whistleblower protection

ASIC has released information about its approach to dealing with whistleblower reports.

The information sheet (INFO 52 ) is part of ASIC’s commitment to improve its communication and handling of information brought to its attention by whistleblowers.

It explains:

• Reporting important information to ASIC

• How we will communicate with whistleblowers

• Who is a whistleblower

• The protections available to whistleblowers under the law

• How ASIC deals with information from whistleblowers.

See media release

ASIC extends shorter PDS regime

ASIC has extended interim class order relief from the shorter Product Disclosure Statement (PDS) regime for multi-funds, superannuation platforms and hedge funds.

Class Order [CO 14/23] extends the relief in Class Order [CO 12/749] Relief from the Shorter PDS regime for a further 12 months, to 30 June 2015. The relief was due to expire on 22 June 2014.

The full PDS requirements under the Corporations Act 2001 apply to products that have been excluded from the shorter PDS regime.

See media release

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

PwC 6

2. What have the regulators been up to? (cont’d)

ASIC updates hybrid information for investors

ASIC has updated information on its consumer finance website, MoneySmart, to help investors understand the risks and complexities of hybrid securities.

The updated information on ASIC’s MoneySmart:

• Explains the differences between hybrids issued by banks and hybrids offered by other companies

• Highlights the features and risks of these securities and includes information on the new ‘non-viability’ clauses found in recent bank hybrids

• Compares the typical features of two forms of hybrid security - a capital note issued by a bank and a subordinated note issued by a company - to shares, corporate bonds and bank term deposits, to identify the additional risks investors may be taking on

• Breaks down the common terms found in hybrid prospectuses, so readers can understand what ‘interest deferral’ or ‘loss absorption’ could really mean for them. Case studies are used to demonstrate how these terms operate in practice.

See media release

ASIC seeks to levy banks, big business

ASIC is pushing to move to a user-pays system of regulation by levying banks $350 million each year, opening the possibility of a $6 billion sale of its business registration arm. The Federal Government could privatise the business registration division of ASIC, as part of its push to reduce the Budget deficit.

Source: The Australian Financial Review

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

PwC

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

7

Implementation of the Basel III liquidity framework in Australia

APRA has released a note for authorised deposit-taking institutions (ADIs) that provides further detail on the operation of the committed liquidity facility (CLF).

In 2013, APRA undertook a trial exercise to determine the appropriate size of the CLF for each ADI subject to the Liquidity Coverage Ratio (LCR) requirement. The note provides some observations arising from the exercise, as well as some changes to the process going forward.

The main observations are:

• The RBA determined that the amount of Australian dollar HQLA that could reasonably be held by LCR ADIs was equivalent to around 30 per cent of the outstanding stock of Commonwealth Government Securities and securities issued by state and territory governments

• The aggregate Australian dollar net cash outflow projected by the 35 ADIs for 2014 was approximately $418 billion

• Had the LCR been implemented from 1 January 2014, the total notional CLF granted for 2014 would have been $282 billion.

See media release

Consultation on proposed Modification Declaration – Superannuation Industry (Supervision) Regulations 1994, r. 4.07E(8)

APRA proposes to issue a declaration to modify the operation of r. 4.07E(8) by adding two new sub-regulations ((8A) and (8B)) to allow an Registrable Superannuation Entity (RSE) licensee to receive an SFT (successor fund transfer) of members of DB funds with self-insurance arrangements, subject to an application to APRA to vary RSE licence Condition B.1. This condition states that if the RSE licensee undertakes to provide any benefits that are life insurance (including disability) benefits to members, those benefits must be wholly determined by reference to life policies issued to the trustee from a company registered under the Life Insurance Act 1995.

See consultation letter

2. What have the regulators been up to? (cont’d)

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC 8

Modifications to the governance-related Listing Rule amendments

ASX has issued a supplementary consultation paper inviting comments from listed entities, their advisers and other stakeholders on modifications to the governance-related Listing Rule amendments that it consulted upon in August-November 2013.

The supplementary consultation paper is accompanied by a document with the modified changes to the ASX Listing Rules now proposed by ASX, together with a mark-up identifying how the modified rule changes vary from those originally proposed.

See media release

Amendment to Dividend Reinvestment Plan Rules

ASX Board has advised the rules of the Dividend Reinvestment Plan (DRP) in line with Listing Rule 3.10.8.

The amendments to the DRP are primarily designed to:

• Address changes to the Listing Rules (in particular, Appendix 6A) which comes into effect in April 2014

• Allow online applications to participate (or vary participation) for holdings with a market value less than $50,000

• To align the DRP with current market best practice.

See media release

2. What have the regulators been up to? (cont’d)

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

PwC 9

ASX to launch a new managed funds settlement service

ASX has received regulatory clearance to launch its new managed funds settlement solution - mFund Settlement Service. It will be launched in the first half of this calendar year following the completion of customer connectivity.

mFund is an electronic processing service that allows investors to use an ASX broker when they buy and sell units in unlisted managed funds. CHESS will automate and track the process of these transactions and remove much of the paperwork.

See media release

ASX Listing Rules: Reissued Guidance Note 15

ASX has released a Guidance Note that explains how listing fees are calculated and other administrative matters regarding the payment of listing fees for the purpose of Chapter 16 of the Listing Rules. It should be read in conjunction with Guidance Note 15A, which sets out ASX’s Schedule of Listing Fees.

The listing fees payable under the ASX Listing Rules broadly fall into four categories:

• Initial listing fees – the fees payable when an entity first lists on ASX

• Annual listing fees – the fees payable each year

• Subsequent listing fees – the fees payable for quotation of additional securities

• Additional fees – ancillary and general fees.

2. What have the regulators been up to? (cont’d)

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

PwC 10

ASX consultation on T+2 settlement cycle for Australia

ASX has issued consultation paper for the introduction of a T+2 settlement cycle for cash market trades in Australia. The proposal would shorten the current settlement period of trade-day-plus-three-days (T+3) by one business day, creating capital and margin savings for industry, and a faster settlement of transactions for investors.

ASX is seeking feedback on the benefits, industry readiness, timetable for implementation and other issues that would need to be addressed to enable the transition to T+2. T+2 already operates in a number of major markets, including Germany and Hong Kong, and will shortly be introduced throughout Europe.

The potential benefits of shortening the settlement cycle by one business day include:

• Reduced counterparty risk for individual investors, participants and the central counterparty (clearing house), resulting in lower systemic risk for the market as a whole

• Less regulatory capital required to be held by market participants to mitigate risk

• Standardised regional and global settlement practices

• Improved post-trade operational and process efficiencies, and associated cost savings.

See media release

2. What have the regulators been up to? (cont’d)

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

PwC 11

Statement on monetary policy february 2014

RBA Statement on Monetary Policy states that in the second half of 2013, growth in Australia’s major trading partners has continued to remain near the average of the past decade. Average trading partner growth in 2014 is expected to be more than 2013, at around 4½ per cent, driven by a recovery in the advanced economies. It is expected to return to an average of around 4 per cent in 2015.

While global demand for commodities is expected to continue to expand, commodity prices, and hence Australia’s terms of trade, are likely to decline gradually over coming years on the back of strong growth in global production of bulk commodities.

GDP growth is likely to strengthen a little in 2014. Growth is then expected to pick up an above-trend pace by mid 2016. The outlook for the next year reflects the substantial fall in mining investment and planned fiscal restraint. Resource exports are expected to continue to make a significant contribution to output growth as resource investment projects reach completion. The Reserve Bank has maintained the cash rate target at 2.50 per cent since August 2013.

See publication

Recovery and resolution of central counterparties

RBA has published an article Recovery and Resolution of Central Counterparties in the bulletin. The increasing importance of central counterparties (CCPs) to financial stability has prompted regulators to take steps to ensure that critical CCP services can continue in circumstances of financial distress. This article discusses the key components that are expected to form part of CCPs’ recovery plans, including the power of a CCP to apply ‘haircuts’ to variation margin payments.

See publication

2. What have the regulators been up to? (cont’d)

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

RBA Reserve Bank of Australia

ASIC Australian Securities and Investments Commission

APRA Australian Prudential and Regulatory Authority

ASX Australian Securities Exchange

PwC

3. Industry bodies

Submission to the 2014-15 Federal Budget

FSC has made submission to the 2014-15 Budget, the submission undertakes two core tasks:

• Budget sustainability – they consider ways in which the insurance and superannuation industries can reduce the pressure on public finances as the government pursues a surplus within a decade

• Exporting and growing financial services – they make recommendations to grow Australia’s largest industry through policy and taxation changes that can improve competitiveness and drive financial services exports.

The FSC is pleased that federal budgets will now include four to 10 year forward estimates for line items where it makes sense to project 10 years ahead. They support the government’s objective to achieve sustainable fiscal settings.

Australia’s comparative advantage lies in the services economy. With the right policy settings, services will deliver stronger growth in the future.

See media release

FSC slams Fair Work Commission (FWC) involvement in My Super

FSC is briefing government and Treasury on the excessive costs associated with the FWC process for selecting MySuper default funds and is calling for the end of the FWC’s role in selecting superannuation funds in Modern Awards.

John Brogden, CEO of the FSC said that Australia’s superannuation industry is paying $45 million just to comply with the FWC default fund selection process with no benefit. The system has delivered more red-tape and unnecessary regulatory costs for employers and the super industry. MySuper funds are approved in a detailed process by the prudential regulator, APRA. The role of the Fair Work Commission is a duplication of an existing process by the appropriate body.

See media release

12

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies

Australia has the right investment mix for superannuation

New research for the Financial Services Council by Mercer has benchmarked Australia’s asset allocation for superannuation against 11 other comparable private pension schemes around the world. The research shows that Australia has one of the most diverse asset allocations of the surveyed countries. The Mercer report has found Australia should be expected to have a high allocation of superannuation investment in equities for reasons which include:

• 11 per cent of superannuation funds under management in Australia are in defined benefit schemes. Many of the other countries reviewed have a high number of guaranteed pensions or annuities which require matching assets.. They are therefore more heavily weighted towards bonds or fixed income.

• Australia has a higher ratio of younger to older fund members than other countries so it is appropriate that a scheme with a younger demographic invests more heavily in growth assets.

• Our small corporate bond market combined with home country bias, manifests itself in higher allocation to equities for want of other asset classes to invest in.

See media release

13

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

FPA leads with pragmatic, positive FoFA recommendations to Treasury

The FPA has submitted its recommendations to Treasury outlining positive measures to ensure that the FoFA legislation is drafted in the best interests of the Australian public.

The FPA’s recommendations were drafted specifically in relation to key aspects of:

• General advice: the FPA does not support commissions via this proposed amendment

• Scaled advice: the FPA believes greater tightening is required for the appropriate delivery of scaled advice to avoid unintended consequences

• Best Interests Duty: the FPA endorses the removal of sub-section s961B(2)(g)

• Conflicted Remuneration: the FPA has recommended stronger consumer protection mechanisms by way of removal of unnecessary proposed Corporations Law amendments and clearer guidelines pertaining to the treatment of general advice exemptions, while banning conflicted remuneration for complex financial products

• Opt In and Annual Fee Disclosure Statements: the FPA supports the repeal of opt-in and also supports prospective Fee Disclosure Statements.

See media release

14

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

Submission to Treasury with respect to: Better regulation and governance, enhanced transparency and improved competition in superannuation

ASFA has submitted response to Treasury’s Discussion Paper: Better regulation and governance, enhanced transparency and increased competition in superannuation proposes:

• Specific areas where regulatory reform could be undertaken to reduce compliance costs

• Improvements to the regulatory reform process - including adequate consultation, clear drafting, appropriate requirements, adequate implementation timeframes, regulator guidance, and post implementation reviews - which will serve to reduce unnecessary costs

• A definition of ‘independent trustee’ that incorporates the major elements from the current Superannuation Industry (Supervision) Act definition and ASX guidelines

• Flexibility to appoint independent directors with support for a third of the trustee board being independent 9-12 year tenure, independent chairs and a ban on multiple directors (unless circumstances are exceptional)

• Deferral of the dashboard for choice products until current concerns with the MySuper dashboard have been addressed, and there has been consultation on the need for, and appropriate design of, the choice dashboard

• A modified portfolio holdings disclosure regime, with partial look through and a materiality threshold - however we would prefer a more innovative, consumer-friendly approach to disclosure

• Suggestions of alternative processes for the Fair Work Commission, to address transparency and cost issues with the current requirements.

15

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

Superannuation: Increases to the Lost Member Small Account threshold

ASFA responded to the Treasury request for comments on exposure draft legislation to increase from $2,000 to $6,000, the account threshold below which small lost member accounts will be required to be transferred to the Commissioner of Taxation.

The ASFA submission:

• Notes the considerable changes in the management of lost superannuation accounts in recent years which, viewed collectively, largely have enhanced the situation of fund members and particularly the class of members with lost accounts

• Raises concerns with the proposal to increase the thresholds

• Seeks an amendment to the Superannuation (Unclaimed Money and Lost Members) Act 1999, (SUMLM Act) so as to permit the Commissioner of Taxation to pay a lost member account amount to a complying superannuation plan where the Commissioner is satisfied as to the identity of the lost member account owner and that the person holds an account in the proposed destination fund

• Recommends that the two proposed increases in the threshold not be enacted or otherwise, that the increases be deferred, until such time as the Commissioner’s capacity to pro-actively repatriate these accounts under the SUMLM Act has been granted and given an opportunity to take effect.

Letter: Future of Financial Advice (FOFA) Legislative Amendments Consultation

ASFA has written a letter to the Assistant Treasurer in regards to the FOFA Legislative Amendments Consultation Process. ASFA’s primary focus in regards to FOFA is to ensure that members of superannuation funds continue to have access to affordable advice through the existing intrafund advice (fee charging) arrangements.

ASFA was pleased to see that the FOFA Legislative Amendments do not alter the way funds can collectively charge members for the provision of advice pursuant to section 99F of the Superannuation Industry Supervision Act.

16

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

Proper gateway governance a crucial step for SuperStream implementation

ASFA is seeking Government’s review on the governance arrangements for the SuperStream transaction network.

Currently there are no formal governance arrangements in place for the gateway network. The process for accepting new gateways into the network and gateway technical capability certification arrangements is also not established.

ASFA CEO Ms Pauline Vamos says this is a significant emerging risk across the whole superannuation system, which if not addressed, could jeopardise the effective delivery of the SuperStream reforms. Ms Vamos says that such action could be implemented with no impact on the Budget bottom line.

See media release

17

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

Consultation on proposed Modification Declaration – SIS Regulations regarding self-insurance

ASFA’s submission welcomed the consultation by APRA on the proposed Modification Declaration and supports the aim of enabling an RSE licensee to receive a successor fund transfer (SFT) of members of defined benefit (DB) funds with self-insurance arrangements, subject to an application to APRA to vary Condition B.1 of the RSE licence.

They also provided a number of comments in relation to the proposed wording of the Modification Declaration, including:

• Ensuring that the Modification Declaration allows the continuation of self-insurance arrangements where more than one SFT takes place

• Ensuring the Modification Declaration does not preclude self-insurance where there has been a change of category of an existing DB member who moves, for example, from a category without a temporary disability income benefit to a category with a self-insured temporary disability income benefit

• Pointing out that the footnote to the letter to all RSE licensees dated 5 February 2014 (which accompanied the Modification Declaration) was inconsistent with the decision to permit disability insurance to be provided by general insurers.

18

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

Submission to the Fair Work Commission on the 2014 Review of default fund terms

ASFA notes that the draft notices and draft forms follow very closely the requirements of the provisions of the Fair Work Act in regard to the inclusion of MySuper products in the default fund term of awards.

ASFA suggests that it would be helpful to applicants if:

• There was a specific, optional question in the forms which seeks information on the award or awards a fund is particularly interested in being considered for.

• The term "net returns" is clarified if possible to avoid different funds reporting returns on different bases, for example net of fees, or net of both fees and taxes, or net returns using the assumptions in product dashboards/APRA returns.

• More detail is provided in Forms FA and FC. These reflect the legislative criteria of “the appropriateness of the fees and costs.

• Forms FA and FC also reflect the legislative criteria of "the administrative efficiency of the superannuation fund". It would be helpful to clarify what aspects of "administrative efficiency" will be considered.

See submission

19

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

Improved Code of Banking Practice has started

The improved Code of Banking Practice started on 1 February 2014 and all the ABA retail banks, which are current Code subscribers, have adopted the new Code. The revised code is contractually binding on subscribing banks and sets out minimum standards banks have agreed to follow when dealing with personal and small business customers.

Significant changes to the Code include:

• New and stronger financial hardship provisions - banks are more alert to people who may be in financial difficulty when meeting their repayments, staff to respond promptly to requests for assistance, and banks to ensure staff are trained in understanding the bank’s financial hardship commitments;

• A commitment not to combine accounts or assign the customer’s debt when a bank is actively considering whether the customer is in financial difficulty;

• A commitment to provide information about no or low-fee accounts to customers if the bank becomes aware the customer has a Commonwealth concession card, such as a Seniors Health Card, Health Care Card or Pensioner Concession Card;

• Clarification that chargeback rights exist for disputed transactions on relevant debit cards, including debits under recurrent payment arrangements;

• New provisions for customers in remote Indigenous communities, including making relevant information accessible, providing assistance to customers to meet identification requirements and appropriately training relevant staff to be culturally aware;

• A commitment that banks only sell debts to third parties that agree to comply with the ‘Debt Collection Guideline: for Collectors and Creditors’; and

• A commitment to send customers with a mortgage, on a primary place of residence or residential investment property, an annual reminder about their insurance obligations.

The Code of Banking Practice also covers small business customers.

See media release

20

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

COBA calls for D-SIB levy in Federal Budget

COBA is calling for a levy on Australia’s four “domestic systemically important banks” (D-SIBs) as part of a package of fiscally responsible budget measures that will deliver ongoing savings to the Federal Government of more than $1.4 billion a year.

The recommendation is one of three made by COBA in its 2014-15 pre-budget submission. COBA also recommends:

• Fairer taxation of interest earned by Australian depositors

• A modest government contribution to the costs of regulator APRA to promote efficiency.

COBA CEO Louise Petschler said these measures would reduce risk in the financial system and promote banking competition.

See media release

21

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC

3. Industry bodies (cont’d)

CreditSmart.org.au empowers consumers to take control of their credit history

ARCA has launched a new website CreditSmart.org.au. The site provides a range of tools and tips to help educate consumers about the basics of credit reports and how they can proactively manage their credit history.

In March 2014, reforms to Australia’s Privacy Act will see extensive changes in the credit reporting system including the introduction of the Credit Reporting Privacy Code. The reforms will:

• Provide a clearer picture of a consumer’s ability to repay debts, which may enable providers to make more accurate and better informed lending decisions

• Enable better matching of consumer credit needs, which may reduce the risk that consumers commit to repay more credit than they can afford

• Give fairer access to credit and increased consumer protection.

The launch of CreditSmart.org.au is the first step in ARCA’s consumer education campaign, aimed at helping all Australians take more control over their credit reports by providing unbiased and fair information.

See media release

22

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

ABA Australian Bankers Association

FPA Financial Planning Association of Australia

ASFA Association of Superannuation Funds of Australia

FSC Financial Services Council

COBA Customer Owned Banking Association

ARCA Australian Retail Credit Association

PwC 23

4. Overseas developments – Global

FSB: Public responses to consultation: Guidance on Supervisory Interaction with Financial Institutions on Risk Culture

The Financial Stability Board (FSB) published on 7 February 2014 the public responses to its November 2013 consultative document on Supervisory Interaction with Financial Institutions on Risk Culture. The paper identifies the foundational elements that contribute to the promotion of a sound risk culture within a financial institution . It aims to assist supervisors in identifying those core practices and attitudes that may be indicators of the institution’s risk culture. Differences in risk culture might be driven in part by differences in corporate and also national cultures

Source: FSB

Basel Committee: Banking on leverage

The Basel Committee on Banking Supervision (Basel Committee) Chairman Stefan Ingves has provided a keynote address to the 10th Asia-Pacific High-Level Meeting on Banking Supervision which focuses on the Basel III leverage ratio and its role in the regulatory framework.

Leverage is an inherent and essential part of modern banking systems. Banks have a range of financial incentives to operate with high leverage and those benefits flow through to society more when that leverage is managed well. Leverage becomes dangerous beyond a point. For this reason, sound prudential controls are needed to ensure that private incentives do not result in excessive leverage.

The leverage ratio, by placing an absolute cap on borrowings relative to a bank's capital, is an important component of the Basel III framework, and complements the risk-based capital adequacy regime. Neither of these parts of the framework stands alone. It is important to look at Basel III as a package of constraints that mutually reinforce prudent behaviour. Even though the leverage ratio has been designed as a backstop, it must be a meaningful backstop if it is to serve its intended purpose. Getting the calibration right is therefore a critical part of the Committee's remaining work on the post-crisis reforms.

Recent agreement on leverage ratio marks the development of an internationally agreed leverage ratio that is largely independent of national differences in accounting standards. Most attention was focused on the changes from a set of proposals the Committee issued in mid-2013. These, in turn, involved changes to the agreement on the leverage ratio that was reached in 2010.

Source: BIS

FSB: Guidance on Supervisory Interaction with Financial Institutions on Risk Culture

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Overseas developments Industry bodies PwC

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Legislative/ Government

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Basel Committee: Banking on leverage

PwC 24

4. Overseas developments – Global (cont’d)

OECD: 2014 Review of the OECD Principles of Corporate Governance

The OECD is planning to review its “2004 Principles of Corporate Governance” in 2014 with a view of completing the process within one year. The OECD Principles are one of the 12 key standards for international financial stability of the Financial Stability Board (FSB) and form the basis for the corporate governance component of the Report on the Observance of Standards and Codes of the World Bank Group.

The rationale for the review is to ensure the continuing high quality, relevance and usefulness of the Principles taking into account recent developments in the corporate sector and capital markets. The outcome should provide policy makers, regulators and other rule-making bodies with a sound benchmark for establishing an effective corporate governance framework

Source: OECD

ISDA publishes ISDA 2014 Credit Derivatives Definitions

The 2014 Credit Derivatives Definitions introduces several new terms as well as several amendments to standard credit derivatives trading terms as compared to 2003.

The 2014 ISDA Credit Derivatives Definitions introduce several new terms, including:

• Bail-in/financial terms for credit default swap (CDS) contracts on financial reference entities: incorporates a new credit event triggered by a government-initiated bail-in and a provision for delivery of the proceeds of bailed-in debt or a restructured reference obligation, and more delineation between senior and subordinated CDS.

• Sovereign CDS asset package delivery for CDS contracts on sovereign reference entities: introduces the ability to settle a credit event by delivery of assets into which sovereign debt is converted.

• Standard reference obligation: allows for the adoption of a standardized reference obligation across all market-standard CDS contracts on the same reference entity and seniority level.

In addition to these new terms, the 2014 ISDA Credit Derivatives Definitions contain several amendments to standard credit derivatives trading terms

Source: ISDA

OECD: 2014 Review of the OECD Principles of Corporate Governance

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Overseas developments Industry bodies PwC

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Legislative/ Government

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ISDA publishes 2014 Credit Derivatives Definitions

PwC 25

4. Overseas developments – Global (cont’d)

ISDA: Interest Rates Derivatives: A progress report on clearing and compression (Research Note)

Significant changes in the OTC derivatives market in recent years are altering its size and composition. Central clearing, for example, increases notional amounts outstanding, as one bilateral trade becomes two cleared transactions. Compression of both bilateral and cleared trades, on the other hand, reduces notional outstanding. New requirements related to margin for non-cleared trades may drive users of these instruments to cleared products or to other alternatives. Given these dynamics, ISDA conducted an analysis of the interest rate derivatives (IRD) market.

Key findings include:

• Approximately 90 percent of the IRD market that is clearable or has been mandated for clearing has in fact been cleared.

• Conversely, less than 10 percent of outstanding IRD notional consists of transactions that are potentially clearable but were not cleared.

• Approximately $73 trillion, or 13 percent of the IRD market at June 30, consisted of non-clearable transactions. This includes $65 trillion in products that cannot be cleared, and $8 trillion in products that can be cleared but are denominated in currencies that cannot.

• An estimated $29 trillion of IRD transactions were conducted with non-financial corporates that do not face clearing mandates.

Source: ISDA

ISDA: Interest Rates Derivatives: A progress report on clearing and compression (Research Note)

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC 26

4. Overseas developments – Global (cont’d)

IOSCO consults on Code of Conduct Fundamentals for Credit Rating Agencies

The International Organization of Securities Commissions (IOSCO) has published for consultation a revised edition of its Code of Conduct Fundamentals for Credit Rating Agencies (CRA code) which was first published in 2004.

The proposed revisions are designed to strengthen the IOSCO CRA Code by:

• Enhancing provisions regarding protecting the integrity of the credit rating process, managing conflicts of interest, providing transparency, and safeguarding non-public information

• Adding measures regarding governance, training, and risk management

• Seeking to improve the clarity of the IOSCO CRA Code.

The consultation runs until 28 March 2014.

Source: IOSCO

IOSCO consults on Code of Conduct Fundamentals for Credit Rating Agencies

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC 27

4. Overseas developments – Europe

JCESAs consult on draft technical standards on the mapping of ECAIs credit assessments

The Joint Committee of the three European Supervisory Authorities (JCESAs) has launched a consultation on draft Implementing Technical Standards (ITS) on the mapping of the credit assessments to risk weights of External Credit Assessment Institution (ECAIs). These ITS will be part of the Single Rulebook in banking aimed at enhancing regulatory harmonisation across the European Union (EU). The consultation runs until 5 May 2014.

In particular, the following elements have been taken into account in the mapping process:

• Specific requirements have been established for the calculation of the default rate, which should improve the objectivity and consistency of the ‘mappings’

• Default experience obtained from external ratings of other ECAIs or credit scores produced by the ECAIs themselves have been considered

• In case no external or internal default rate data is available, an estimate of the quantitative factor has been required based on the assessment provided by the ECAIs.

Source: EBA

Europe-wide investor alert issued on complex product dangers

The European Securities and Markets Authority (ESMA) has issued an opinion warning investors about buying complex investment products from investment firms when they don’t understand the risks.

In a separate warning, ESMA urges providers of these products to be vigilant and ensure compliance with selling practices under MiFID.

Its concerns relate mainly to the suitability and appropriateness of complex products that are "increasingly within the grasp of retail investors".

Source: IFAonline

Europe-wide investor alert issued on complex product dangers

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

JCESAs consult on draft technical standards on the mapping of ECAIs credit assessments

PwC 28

4. Overseas developments – Europe (cont’d)

EBA publishes risk dashboard of EU banking sector

The EBA published its risk dashboard for Q4 2013, summarising the main risks and vulnerabilities in the banking sector in the European Union (EU). The dashboard looks at the evolution of Key Risk Indicators (KRI) from 55 banks across the EU in the third quarter of 2013.

Data in the EBA dashboard illustrates that EU banks' capital positions were fairly stable, although declining RWAs contributed to higher capital ratios. The quality of banks' loan portfolios is still a source of concern. Profitability remains at low levels, as the low interest rates environment along with declining lending volumes continue to affect net interest margins. Deleveraging is still progressing, although at a slower pace.

Source: EBA

UCITS V: Agreement Reached By European Parliament and Council

The European Parliament and the Council reached political agreement on the UCITS V Directive for investment funds which covers rules on remuneration and bonus policies, depository functions and sanctions.

Following final endorsement by the European Parliament and the Council, the legislation will come into force later this year and will apply in 2016.

Source: MONDAQ

UCITS IV - Brussels in talks with China over fund access

Brussels has held talks with China over the mutual recognition of funds in each other’s markets in a move that could give UCITS funds access to one of the world’s largest untapped retail markets.

Source: Ignites Europe

EBA publishes risk dashboard of EU banking sector

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

UCITS V: Agreement Reached By European Parliament and Council

UCITS IV - Brussels in talks with China over fund access

PwC 29

4. Overseas developments – UK

Bank of England publishes report into cyber-resilience exercise

The Bank of England has published the findings of the Waking Shark II exercise, which tested the wholesale banking sector’s response to a sustained and intensive cyber-attack. The exercise supports the recommendation by the Financial Policy Committee to improve and test resilience against cyber-attacks. The report shows that considerable progress has been made since the previous exercises in 2011 and highlights areas which could be further improved.

Waking Shark II was organised by the Securities Industry Business Continuity Management Group which drew on extensive cyber expertise to design a scenario in which a cyber-attack caused disruption to wholesale markets and the financial infrastructure supporting those markets.

The Bank of England and other financial authorities will continue to work with the sector to test collective resilience to cyber-attack as part of its ongoing programme of work.

Source: Bank of England

Prudential Regulation Authority: News on Solvency II

The Prudential Regulation Authority (PRA) has published a consultation paper on a draft supervisory statement for all firms within the scope of the Solvency II (SII) Directive. The statement sets out the PRA’s expectations of firms in relation to the recognition of deferred tax in the SII regime.

PRA also produced a timetable to early May 2014. This sets out key activity which may be helpful to firms as they make preparations for the new regime.

The PRA has also published feedback on the data collection exercises issued in May 2013. By the end of Q1 2014 the PRA will give an indication of its plans for Solvency II data collection exercises in 2014 and 2015 for both standard formula and internal model firms. All preparatory documents are available on the Bank of England website.

Source: Bank of England

UK: Prudential Regulation Authority: News on Solvency II

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

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UK: Bank of England publishes report into cyber-resilience exercise

PwC 30

4. Overseas developments – UK (cont’d)

Bank of England approach to supervising international banks

Bank of England released a consultation paper which sets out how the Prudential Regulation Authority (PRA) will supervise UK branches of banks based outside the European Economic Area (EEA) and also explains in more detail the PRA’s approach to EEA branches and subsidiaries.

The PRA has a clear framework for all types of firm it supervises, which takes into account the different legal requirements for branches and subsidiaries. For branches from outside the EEA, this framework focuses on two main tests:

• Whether the supervision of the firm in its home state is equivalent to that of the PRA

• Whether the PRA has assurance from the home supervisor over the firm’s resolution plan in a way that reduces the impact on financial stability in the UK.

PRA will determine whether the firm undertakes any critical economic functions in the UK based on these tests. PRA will make a judgement about whether it is content for the firm to operate as a branch in the UK depending on what these are, and their potential impact on UK financial stability. This will impact both new and existing branches of non EEA banks.

Source: Bank of England

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

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UK: Bank of England approach to supervising international banks

PwC 31

4. Overseas developments – US

New York regulator moving ahead on bitcoin regulation

New York's financial services superintendent Benjamin Lawsky, has revealed new details on his agency's plans to govern virtual currency firms in the state in order to protect consumers and combat money laundering. He expects to adopt enhanced consumer disclosure rules, capital requirements and a framework for permissible investments with consumer money.

Lawsky said he plans to issue a "BitLicense" for businesses that use the new currencies, and he intends to provide regulations this year, which could make New York the first U.S. state to regulate virtual currencies such as bitcoins.

Lawsky said consumers need to know that virtual currency transactions are generally irreversible, and that they could lose their principal if they hold onto bitcoins for an extended period.

Source: Reuters

Data brokers come under fresh scrutiny - Consumer profiles marketed to lenders

Regulators and lawmakers are stepping up scrutiny of a burgeoning business in which data brokers compile profiles of financially troubled consumers from social media and other sources and market them as sales leads to lenders.

The Federal Trade Commission, Consumer Financial Protection Bureau and lawmakers concerned about the identification of financially at-risk consumers are examining the practice and intensifying efforts to police data brokers who may skirt federal law.

Source: The Wall Street Journal

New York regulator moving ahead on bitcoin regulation

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

Data brokers come under fresh scrutiny - Consumer profiles marketed to lenders

PwC 32

4. Overseas developments – US (cont’d)

Regulators close to finalizing tougher leverage ratio

Federal regulators have emphasized their attempt to press ahead with a new leverage ratio rule for large banks that is likely to impose tougher requirements than the Basel III global leverage standard which was finalised last month.

The three banking agencies released the proposal in the summer while finalizing new capital standards as part of the Basel III accord. Under the plan, the biggest banks would have to comply with a 5% leverage ratio, while their insured subsidiaries would adhere to a 6% ratio.

Collectively, banks would have to shore up an additional $89 billion in capital to meet the higher leverage requirement, while their insured subsidiaries will have to fill a shortfall of $63 billion.

Those requirements would be in addition to a 4% leverage ratio for all banks that is already part of the finalized Basel III package.

Source: NewsEdge

OCC: Heightened standards for large banks; integration of 12 CFR 30 and 170 - NPR

The Office of the Comptroller of the Currency (OCC) has issued a notice of proposed rulemaking that would establish minimum standards for the design and implementation of a risk governance framework. It is applicable for large insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $50 billion or more.

The proposal also would establish minimum standards for an institution’s board of directors in overseeing the framework’s design and implementation.

In addition, the OCC is requesting comment on its proposal to make 12 CFR 30 and all of its respective appendixes applicable to federal savings associations and to remove part 170 of the OCC’s regulations as unnecessary.

The comment period for the proposed rule ends 29 March 2014.

Source: Office of the Comptroller of the Currency

Regulators close to finalizing tougher leverage ratio

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

OCC: Heightened standards for large banks; integration of 12 CFR 30 and 170 - NPR

PwC 33

4. Overseas developments – US (cont’d)

Treasury Department releases last substantial rules package to combat Offshore Tax Evasion

The U.S. Department of the Treasury and Internal Revenue Service (IRS) released the last substantial package of regulations necessary to implement the Foreign Account Tax Compliance Act (FATCA). The Foreign Account Tax Compliance Act (FATCA) is due to go into effect on 1 July 2014. The Treasury’s latest rules package make additions and clarifications to previously issued FATCA regulations and provide guidance to coordinate FATCA rules with pre-existing due diligence, reporting, and withholding requirements under other provisions of the Internal Revenue Code.

Treasury and the IRS have facilitated a smooth implementation by:

• Extending the start of withholding and account due diligence requirements by six-months to July 1, 2014

• Opening the FATCA portal in August 2013

• Issuing a final FFI Agreement for financial institutions in January 2014

• Engaging in active discussions with stakeholders worldwide.

Source: US Department of the Treasury

Fed adopts tough capital rules for foreign banks

The Federal Reserve adopted a final rule to tighten supervision for foreign banks with sizeable operations on Wall Street to shield the US taxpayer from costly bailouts. Despite protest from abroad, the Federal Reserve left the rule largely unchanged from when it was first proposed in December 2012.

The reform is designed to address concerns that U.S. taxpayers will need to foot the bill if European and Asian regulators treat U.S. subsidiaries with low priority when rescuing one of their banks.

US bank holding companies subject to the rule will need to comply by 1 January 2015.

Source: Reuters

Treasury Department releases last substantial rules package to combat Offshore Tax Evasion

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

Fed adopts tough capital rules for foreign banks

PwC 34

4. Overseas developments – Asia

China to streamline securities watchdog in efficiency drive

China is planning to restructure its securities regulator, merging some departments and creating four units to fill existing gaps, as it looks to reduce unnecessary red tape and create more effective oversight of its fast-developing markets.

The China Securities Regulatory Commission (CSRC) will merge departments overseeing areas from initial public offerings (IPOs) to futures trading, as well as boosting its oversight of illegal trading activity.

China is looking to attract increased investment in its domestic markets, long plagued by concerns over inefficiency, regulator meddling and a lack of transparency.

Source: Reuters

China: Banks ordered to raise liquidity coverage ratios

The China Banking Regulatory Commission issued a new liquidity management regulation taking effect on 1 March, requiring Chinese commercial banks to gradually phase in liquidity coverage ratios by 2018. The target ratio is set at 60 percent this year, rising by 10 percentage points annually until 2018 (in line with Basel III requirements).

Chinese commercial banks' liquidity coverage ratios must reach 100 percent by 2018 to strengthen them against the risks of credit crunches.

The CBRC has also specified that banks' loan-to-deposit ratios can't exceed 75 percent. The liquidity ratio must be at least 25 percent. The regulation is applicable to all Chinese commercial banks, including foreign and Chinese-foreign joint stock banks, with more than 200 billion yuan ($33 billion) in assets.

Source: China Daily

China: Streamline securities watchdog in efficiency drive

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Overseas developments Industry bodies PwC

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Legislative/ Government

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China: Banks ordered to raise liquidity coverage ratios

PwC 35

4. Overseas developments – Asia (cont’d)

Singapore: MAS and SGX propose measures to strengthen the securities market

The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) released a joint consultation paper setting out proposals to strengthen the securities market in Singapore.

The proposals follow an extensive review by MAS and SGX of the securities market in Singapore. The review recommended three areas for improvement:

• Promoting orderly trading and responsible investing

• Improving the transparency of market intervention measures

• Strengthening the process for admitting new listings and enforcing against listing rule breaches.

Given the breadth of the proposals, MAS and SGX have set the consultation period at 12 weeks. Consultations open until 2 May 2014.

Source: MAS

Singapore: MAS and SGX propose measures to strengthen the securities market

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

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PwC 36

5. PwC publications

PwC Australia: Australian Privacy Principles – What you need to know

The Australian Privacy Principles (APP) come into effect on 12 March 2014. They will apply to most organisations and Federal government agencies. This publication outlines the key differences in the APP compared to the previous regulatory environment and looks at

- Key changes in framework and requirements

- What it means t o you

- Opportunity to leverage existing frameworks

- How PwC can help

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

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PwC Australia: Australian Privacy Principles – What you need to know

PwC 37

5. PwC publications

PwC Global: Retail banking 2020 evolution or revolution

This PwC report explores powerful forces that are reshaping the banking industry. Customer expectations, technological capabilities, regulatory requirements, demographics and economics are together creating an imperative to change. Banks need to get ahead of these challenges and retool to win in the next era. Banks must not only execute on today’s imperatives, but also radically innovate and transform themselves for the future.

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

PwC Global: OECD publishes common reporting standard

This PwC publication reports on the Organisation of Economic Cooperation and Development (OECD) in releasing releasing the Common Reporting Standard (CRS) on February 13, 2014 , which seeks to establish a new global standard for automatic exchange of financial account information between Governments. As with the US Foreign Account Tax Compliance Act (FATCA) the CRS model imposes obligations on financial institutions (FIs) to identify reportable accounts and obtain the account holder identifying information that is required to be reported for such accounts with their local tax administration. It also provides the scope of the information to be collected and exchanged with the account holder's residency country.

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

What have the regulators been up to?

Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC Global: Retail banking 2020 evolution or revolution

PwC Global: OECD publishes common reporting standard

PwC 38

5. PwC publications

PwC US: First take – Enhanced prudential standards

This PwC publication explores the ten things banks need to know about the Federal Reserve's enhanced prudential standards final rule.

Areas covered in this publication include:

1. Delayed effective date and higher threshold

2. Advanced Approaches gone

3. Insurers scoped out

4. Harder for Foreign Banking Organizations (FBOs) to clear the enhanced prudential standards (EPS) hurdle

5. Consolidating risk governance

6. Harder for FBOs (again)

7. Intermediate Holding Company (IHC) implementation plan

8. Getting below $50 billion

9. Liquidity matters

10. Rule omissions

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

PwC US: First take - Enhanced prudential standards

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC 39

5. PwC publications

PwC US: FATCA – A perspective on service providers

This PwC publication assesses how FATCA’s requirements may impact the relationship between companies and their service providers, and discusses how service providers can work with their clients to understand their FATCA related needs and prepare to provide information to enable their clients to certify FATCA compliance.

Service providers need to be aware of FATCA requirements and understand the relationship to the services they offer to their clients. Changes to services offered, contract terms, liability provisions and/or internal controls reporting requirements are all possible effects of the FATCA regulation. Service providers must be knowledgeable about the challenges their clients are facing associated with FATCA and be prepared to respond to their clients’ changing needs as a result of the regulation.

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

PwC US: FATCA –A perspective on service providers

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC 40

5. PwC publications

PwC UK: FCA finalises Consumer Credit rules

This PwC publication focuses on the Financial Conduct Authority (FCA) finalising the conduct of business rules for consumer credit firms. With the FCA assuming responsibility for the regulation of all consumer credit firms on 1 April 2014, the final rules provide much-needed clarity to firms. Now the final rules are clear it is crucial for firms to consider both their preparedness for interim authorisation, and the FCA regime on 1 April, but also the application for full authorisation which could be required as soon as October 2014.

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

PwC UK: FCA calls for more oversight and controls in transition managers

This PwC publication focuses on the FCA recently publishing its findings from its thematic review transition management firms. The FCA was concerned about poor practices at some transition managers, including overcharging, not managing conflicts of interest effectively, poor governance and insufficient oversight. It also recently fined a global custody bank for controls and oversight failings in this area.

The FCA found a number of areas where transition managers need to improve. Whilst it doesn’t propose to make wholesale changes to the way it regulates this sector it does set out the problem areas its supervisors will focus on over the year ahead. Firms should take this as a warning - the FCA will be looking to spot any poor conduct in this sector in the future and is unlikely to be forgiving of any future poor practices it discovers.

For a copy of the publication, please contact Yuan Pang at yuan.pang@au.pwc.com

PwC UK: FCA finalises Consumer Credit rules

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Overseas developments Industry bodies PwC

publications

Legislative/ Government

developments

PwC UK: FAC calls for more oversight and controls in transition managers

Contacts

41

Nicole Salimbeni Partner

E: nicole.salimbeni@au.pwc.com P: (02) 8266 1729

Edwina Star Director

E: edwina.star@au.pwc.com P: (02) 8266 4940

www.pwc.com.au

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