PwC Regulatory Update
March 2019
PwC 2
Contents
PwC Regulatory Update
3Legislative/Government
developments
7What have
the regulators been up to?
10Industry bodies
12Overseas
developments
17PwC publications
20Contacts
Legislative/Government developments
PwC 4
1. Legislative/Government developments
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
Government responds to Royal Commission recommendations
The Government has released a statement outlining how the Government has
responded to Commissioner’s Hayne’s final report into Misconduct in the
Banking, Superannuation and Financial Service Industry to date.
Source: Treasury
Government consults on “Protecting Your Super” package
The Government has released exposure draft regulations and explanatory
material to implement its Protecting Your Super package, announced in the
2018-19 budget for public consultation.
Source: Treasury
An exposure draft of the Treasury Laws Amendment (Miscellaneous
Amendments) Bill 2019 and the Treasury Laws Amendment (Miscellaneous
Amendments) Regulations 2019 was released by the Government to correct
unintended outcomes relating to the (Fair and Sustainable Superannuation) Bill
2016.
The draft legislation contains provisions to:
• Correct an error in the way that market-linked pensions are valued under the
transfer balance cap when they are commuted or rolled over, resulting in a
nil debit; and
• Ensure that death benefits that include life insurance proceeds are not
subject to tax when they are rolled over to a new superannuation fund.
The draft regulations:
• Fix the valuation of defined benefit pensions under the transfer balance cap
to reflect when pensions are permanently reduced following an initial higher
payment;
• Change the definition of life-expectancy period for innovative income stream
products to account properly for the number of days in a leap year; and
• Maintain the capped defined benefit treatment of market-linked pensions
under the transfer balance cap where they have been rolled over as a result
of a successor fund transfer.
Source: Treasury
PwC 5
1. Legislative/Government developments (cont’d)
PwC Regulatory Update
Government introduces legislation to modernise business registers in the
House
The Commonwealth Registers Bill 2019 was introduced in the House of
Representatives with the intention of making business data current, accurate
and accessible. The legislation will enable the Australian Business Register and
the business registers administered by ASIC to be moved to a modern registry
platform.
Source: Treasury
New penalties Bill for banking misconduct passes Senate
A draft Bill, Treasury Laws Amendment (Strengthening Corporate and Financial
Sector Penalties) Bill 2018 has been released by the Government to better
protect Australian consumers from corporate and financial sector misconduct.
Source: Treasury
Government strengthens whistleblower protections
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill
2018, has passed through Parliament. The legislation is designed to strengthen
corporate and tax whistleblower protections through the establishment of a
single whistleblower protection regime for the corporate, financial and credit
sectors. The reforms expand whistleblower protections to a broader class of
persons and expand the type of disclosures that can be protected.
Source: Treasury
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
PwC 6
1. Legislative/Government developments (cont’d)
PwC Regulatory Update
Government takes action to combat phoenixing
The Government continues its efforts to combat phoenixing through the
introduction of a package of reforms, which gives regulators additional
enforcement and regulatory powers to detect and disrupt phoenixing activity.
The reforms also give regulators powers to prosecute directors and other
professional advisers who engage in or facilitate phoenixing activity.
Source: Treasury
Other key updates
Responding to Recommendation 4.8 of Commissioner Hayne’s final report, the
Government has released a consultation paper, Insurance Claims Handling,
focussed on removing the exemption of insurance claims handling from the
definition of ‘financial services’ under the Corporations Act.
Source: Treasury
The Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 has
been introduced into Parliament to protect Australians from paying premiums
for insurance they don’t need, want or even know they have. The Bill requires
insurance in superannuation for under 25 year olds and members with low
balance accounts to only be offered on an opt-in basis from 1 October 2019.
Source: Treasury
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
What have the regulators been up to?
PwC 8
2. What have the regulators been up to?
PwC Regulatory Update
ASIC’s response to the Royal Commission final report
ASIC has provided an update on its future actions in response to the final report
of the Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry, which includes:
• Royal Commission related enforcement work, referrals and
recommendations directed at ASIC;
• ASIC extended remit and strengthened powers and penalties;
• ASIC’s broader strategic change program;
• Reforms advocated by ASIC
Source: ASIC
Recent consultation
ASIC has released a consultation paper, CP 309: Update to RG 209: Credit
licensing: Responsible lending conduct, seeking feedback on its proposals to
update its guidance on responsible lending. The proposal aims to update the
guidance to consider:
• ASIC regulatory and enforcement actions, including court decisions;
• Royal Commission into Misconduct in the Banking, Superannuation and
Financial Services Industry;
• Recent and upcoming initiatives such as comprehensive credit reporting and
open banking; and
• Changes in technology.
Submissions are due by 20 May 2019.
Source: ASIC
ASIC and Abu Dhabi Global Market sign agreement
The Registration Authority (RA) of the Abu Dhabi Global Market (ADGM) and
the ASIC have signed an agreement to strengthen collaboration between the
two territories by streamlining company registration and facilitating the
exchange of information, expertise and secondment opportunities in both
jurisdictions.
Source: ASIC
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
ASICAustralian Securities and Investments Commission
RBAReserve Bank of Australia
ASXAustralian Securities Exchange
PwC 9
2. What have the regulators been up to? (cont’d)
PwC Regulatory Update
ASX releases the fourth edition of its Corporate Governance Principles
and Recommendation
The ASX Corporate Governance Council has released the fourth edition of its
Corporate Governance Principles and Recommendations. The principles and
recommendations are structured around eight central principles to be followed
by a listed entity, which are as follows:
• Clearly highlight the respective roles and responsibilities of its board and
management and regularly review their performance.
• Structure the board to have appropriate size, skills and capacity to discharge
its duties effectively and to add value.
• Instil a culture across the organisation of acting lawfully, ethically and
responsibly.
• Appropriate processes to verify the integrity of its corporate reports.
• Make timely and balanced disclosure of matters that have a material
effect on the price or value of its securities.
• Provide its security holders with appropriate information and facilities to
allow them to exercise their rights as owners.
• Establish a sound risk management framework and periodically review of
the framework.
• Remunerate its directors and executives fairly and responsibly.
It is effective for an entity’s first full financial year commencing on or after 1
January 2020
Source: ASX
The FSC welcomed the fourth edition of the ASX Corporate Governance
Principles and Recommendations and stated that it will promote high standards
of governance in member organisations through its standards and guidance.
Source: FSC
RBA consults on the operations of the Interchange Standards
The RBA has released a consultation paper, The Operation of the Interchange
Standards, and is seeking views from stakeholders on proposed variations to
the standards related to the setting of interchange fees in designated card
schemes and net payments to issuers in those schemes.
Submissions are due by 28 March 2019.
Source: RBA
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
ASICAustralian Securities and Investments Commission
RBAReserve Bank of Australia
ASXAustralian Securities Exchange
Industry bodies
PwC 11
3. Industry bodies
PwC Regulatory Update
COBA makes a submission to APRA on proposal to increase total loss-
absorbing capacity of ADIs
The Customer Owned Banking Association (COBA) has made a submission to
APRA in response to its proposal to increase the total loss-absorbing capacity
(TLAC) of authorised deposit-taking institutions (ADIs). The COBA has urged
APRA to tackle the ‘too big to fail’ problem that provides significant advantage
to major banks over smaller competitors in funding markets.
The key points in COBA’s submission include:
• APRA’s proposed “simple” approach is supported subject to a proportion of
the additional TLAC capital for domestic systemically important banks (D-
SIBs) being Tier 1 capital;
• This proportion should be 1.5% of risk weighted assets, increasing the
minimum Tier 1 capital requirement for D-SIBs from 6% to 7.5%, and;
• APRA should firmly commit to implementation by no later than 2023.
Source: COBA
COBACustomer Owned Banking Association
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
Overseas developments
PwC
4. Overseas developments – Europe
EBA: Recent guidelines
The European Banking Authority (EBA) has
published its final revised guidelines on
outsourcing arrangements setting out specific
provisions for the governance frameworks of all
financial institutions, within the scope of the EBA's
mandate.
Effective from 30 September 2019.
Source: EBA
EBA: Recent guidelines
The EBA is seeking feedback on its proposed
guidelines to clarify the credit risk mitigation
framework (CRM) in the context of the Advanced
Internal Rating-Based Approach (A-IRB).
Submissions are due by 25 May 2019.
Source: EBA
EBA: Recent announcements
The European Insurance and Occupational Pensions
Authority (EIOPA) has issued recommendations for the
insurance sector to minimise the loss to insurance
policyholders and beneficiaries in case of a no
withdrawal agreement between the United Kingdom
and the European Union (EU).
The recommendation provide guidance on the
treatment of UK insurance undertakings and
distributors with regard to cross-border services in the
European Union. The recommendations relate to:
• Authorisation of third country-branches;
• The lapse of authorization;
• The cooperation between the national competent
authorities;
• The communication to policyholders and
beneficiaries to distribution activities.
Source: EIOPA
13
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
PwC
4. Overseas developments – UK
PRA: Recent supervisory statements
The Prudential Regulation Authority (PRA) has
released the following supervisory statements to
deliver the general approach to be taken to
ensure there is a legal framework in place when
the UK leaves the EU:
• PRA approach to interpreting reporting and
disclosure requirements and regulatory
transactions forms (SS2/19) setting out the
approach expected to be followed by firms
when interpreting EU-based references found
in reporting and disclosure requirements and
regulatory transactions forms.
• Non-binding PRA materials (SS1/19) setting
how firms should interpret existing non-binding
PRA regulatory and supervisory materials.
• Depositor and dormant account protection
(SS18/15) setting out the expectations on
deposit-takers with regards to the depositor
protection rules.
PRA: Recent policy statement
The PRA released a policy statement (CP28/18)
in response to consultation paper, PRA fees and
levies: Changes to periodic and transaction fees.
The statement provides final policy on:
• A revised approach to periodic fees for
designated investment firms (DIFs);
• Amending the approach to periodic fees for life
insurers;
• Updating the regulatory transaction fees for
insurers;
• Updating the internal model application fees
for insurers;
• Updating the internal model application and
model maintenance fees for DIFs; and
• Updates to supervisory statement (SS3/16)
Fees: PRA approach and application.
Source: Bank of England
PRA: Recent policy statement
The PRA has released a policy statement
(PS4/19) in response to consultation paper,
Solvency II: Adjusting for the reduction of loss
absorbency where own fund instruments are
taxed on write down. It has also released an
update to the supervisory statement (SS3/15)
Solvency II: The quality of capital instruments.
SS3/15 covers the following topics:
• Prohibition on redemption of instruments within
five years of the date of issue;
• Liability management and capital reduction;
• Principal loss-absorbency mechanism for Tier
1 instruments subject to limitation (‘restricted
Tier 1’), and;
• Additional considerations for instruments
intended to contribute to group own funds.
Source: Bank of England
14
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
PwC
4. Overseas developments – ASIA
Singapore: Recent consultations
The Monetary Authority of Singapore (MAS) has
released a consultation paper, Proposed
Amendments to the Banking Act. These
amendments aim to strengthen the licensing and
regulation of banks and credit card or charge card
licensees, formalise existing supervisory
requirements and clarify other technical and
administrative issues.
Some of the amendments include:
• Expansion of grounds for revocation of bank
licences;
• Revision to requirement for auditors to report
material adverse developments affecting
banks’ financial soundness to MAS;
• Revision to requirement for banks to publish
audited accounts;
• Strengthen the oversight powers of the MAS
over outsourcing arrangements of banks; and
• Streamline outsourcing requirements.
Source: MAS
Singapore: Recent consultations
MAS has released a consultation paper,
Outsourcing by Banks and Merchant Banks,
seeking feedback on proposed changes to the
outsourcing arrangements by governing banks
and merchant banks, including proposed
amendments to the Banking Act. MAS will issue
an Outsourcing Notice to set identical
requirements for banks and merchant banks in
respect of material outsourcing arrangements.
Source: MAS
South Korea: Recent announcements
The Financial Services Commission (FSC) has
proposed its plan to establish an open banking
system to grant fintech firms access to banks’
payment network and overhaul the current
regulatory framework on electronic financial
business. The open banking system would
encourage development of new payment services
and greater competition in the financial sector.
Banks will finalise details about their voluntary
agreement on the open banking system in the first
half of 2019. The FSC will submit its proposal to
amend the Electronic Financial Transaction Act in
the third quarter of 2019.
Source: FSC
15
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
PwC
4. Overseas developments – US
SEC: Recent announcement
The Securities and Exchange Commission (SEC)
is seeking feedback on its proposal to expand the
"test-the-waters" modernisation reform to all
issuers, including investment company issuers.
The rule is currently available to emerging growth
companies (EGCs), and aims to provide
increased flexibility to issuers with respect to their
communications with institutional investors about
contemplated registered securities offerings, as
well as a cost-effective means for evaluating
market interest before incurring the costs
associated with such an offering.
The reform would allow the issuers to determine
market interest in a proposed registered securities
offering or initial public offering prior to the filing of
a registration statement.
Submissions are due by 29 April 2019.
Source: SEC
16
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
PwC publications
PwC
5. PwC publications
PwC HK: Insurance Authority Guideline on
Cybersecurity
Hong Kong's Insurance Authority has issued a
draft guideline on cybersecurity, setting out the
minimum standard of cybersecurity that is
expected of an Authorised Insurer. The final
version will be issued in Q1 of 2019. Authorised
insurers are expected to comply starting from 1
July 2019.
PwC HK has released a report, Insurance
Authority Guideline on Cybersecurity — Are you
ready? The report highlights the key requirements
of the Cybersecurity guideline and how PwC can
help the firms affected by it.
See publication
PwC HK: Insurance trends 2019
PwC HK has released a report, Insurance trends
2019, discussing how digital transformation shifts
from threat to opportunity, as part of PwC’s 22nd
CEO Survey trends series. Some of the key
insights include:
• Leading companies recognise that it takes
more than just technology to drive innovation
and differentiation.
• Companies are envisioning customer needs
beyond traditional insurance and have adopted
a proactive approach to talent development.
• Companies are also defined by their readiness
to embrace new business models, recognition
of data as their organisation’s most critical
asset, and agile approach to execution and
change management.
See publication
PwC US: 3 billion reasons voice can transform
banking
PwC US has released a report, 3 billion reasons
voice can transform banking, discussing how
voice interaction can revolutionise the future of
financial services. The report touches upon the
ways organisations can reap the benefits arising
from opportunities to utilise voice interaction
technology beyond the front-end voice interaction.
For example, voice interaction can be beneficial in
creating value for customers and shareholders
through the rapid shift in consumer behavior and
expectations, the potential for improving loyalty
scores, and the economics of cost savings.
See publication
18
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
PwC
5. PwC publications (cont’d)
PwC US: Digital Intelligence – choose-your-
own-adventure model in financial services
PwC US has released a report, Digital intelligence
- choose-your-own-adventure model in financial
services, analysing the top digital developments
influencing financial services.
The report discusses how financial services firms
should shape consumer behaviour rather than
respond to it. Financial institutions that
appropriately respond will expand revenue
opportunities and build loyalty in a space where
customers can freely switch between financial
providers. Personalisation, convenience, and
voice technologies are all methods that can help
restore strong connections and help firms shape
rather than respond to customer preferences.
See publication
PwC US: FINRA SEC 2019 priorities
The Financial Industry Regulatory Authority
(FINRA) and the Securities and Exchange
Commission (SEC) have recently published their
2019 examination priority letters, highlighting
areas of focus and nuances for broker-dealers to
consider.
PwC US has published a report, bringing out the
ten key points from FINRA and SEC’s 2019
examination priorities. Key points from the report:
• Broker-dealers increasingly using online
platforms to market and distribute securities,
leading to new risks related to suitability
requirements, demanding special attention.
• Broker-dealers needing to demonstrate that
they perform reasonable due diligence in
directing their customer orders to the best
market.
• Broker dealers should review aggregation
limits for compliance with short sale
requirements.
• Digital asset participants need to monitor
associated risks.
See: publication
PwC US: Digital intelligence - time to
transform the transformation office
PwC has released a report, Time to transform the
transformation office, highlighting how
organisations must evolve their capabilities to
help define and drive a new transformation
agenda with potentials for mergers and
technology accelerating the rate of change. Key
points from the report are:
• The ability to leverage emerging technology for
financial services companies is the greatest
differentiator between leaders and laggards.
• Transformation offices’ roles may become
more important as organisations look for these
teams to add value as business partners to
their internal stakeholders by being innovators,
problem solvers and strategic advisors.
• Transforming the business model to drive
growth represents the greatest area of
anticipated investment amongst large
corporations.
See publication
19
PwC Regulatory Update
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
Contacts
PwC 21
6. Contacts
PwC Regulatory Update
Nicole Salimbeni
Partner
Email: [email protected]
Tel: (02) 8266 1729
Edwina Star
Partner
Email: [email protected]
Tel: (02) 8266 4940
Amrita Jebamoney
Partner
Email: [email protected]
Tel: (02) 8266 1826
Sarah Hofman
Partner
Email: [email protected]
Tel: (02) 8266 2231
Craig Stafford
Partner
Email: [email protected]
Tel: (02) 8266 3725
Legislative/
Government
developments
Overseas
developments
What have
the regulators
been up to?
PwC
publicationsContacts
Industry
bodies
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