Monthly Regulatory Tracker – January 2012 
Published: Mar-04-12
 
The regulatory tracker is a monthly initiative aimed at updating the community at large with the most recent regulatory changes impacting Banks & Capital Markets firms.  Our Accenture comprehensive regulatory database tracks more than 30 regulatory and industry bodies covering North America, EALA and APAC.  Every month, we will highlight approximately 10 regulations shortlisted on the basis of geography of coverage, and potential business impacts.
Edition Highlights:
  • The FDIC requires insured banks and savings associations, subject to a threshold in terms of consolidated asset size, to conduct annual capital-adequacy stress tests with varying degrees of severities.

  • The CFTC’s final rules mandate implementation of real-time public reporting of swap transactions and pricing data across major asset classes.

  • Realizing the ever increasing importance of Credit Concentration Risk, the FSA (UK) provides guidance on aggregating exposures to connected counterparties and exposures to structured finance vehicles under the Large Exposures Regime.

Current coverage period: Through 31st January, 2012

Note: Anticipated business impact for covered regulations is shown using the following rating legend:
(Low) (Medium) (High)

CURRENT REGULATIONS:

HM Treasury (UK) (): 
A new approach to financial regulation: securing stability, protecting consumers

Publication Date:  27 January 2012

Risks Covered: Systemic Risk, Business Cycle Risk, Credit Risk, Credit Concentration Risk, Counterparty Risk (CCR), Liquidity Risk

Business Processes Impacted: Risk Management & Stress Testing, Consumer Protection, Audit, Legal & Compliance

The UK Government's Financial Services Bill fundamentally alters the structure of financial regulation in the UK. The Financial Services Authority (FSA) is replaced with two new bodies, the Financial Conduct Authority (FCA) to regulate the conduct of business, and the Prudential Regulation Authority (PRA), a subsidiary of the Bank of England, with the responsibility of macro-prudential regulation. The bill establishes the Financial Policy Committee (FPC) within the Bank of England and entrusts it with the responsibility of macro-prudential oversight to monitor and respond to systemic risks.

Financial Services Authority(FSA,UK)():  Large Exposures Regime - groups of connected clients and connected counterparties

Publication Date: 26 January 2012

Risks Covered: Credit Concentration Risk

Business Processes Impacted: Lending & Investment, Trading

Purpose of the consultation paper is to provide guidance & clarity on a) the basis for aggregating exposures to Connected Counterparties under Large Exposure limits, and b) how exposures to structured finance vehicles, such as Asset Backed Commercial Paper (ABCP) conduits, Credit Card and Mortgage Master Trusts (MT), Covered Bonds (CB), Commercial Mortgage Backed Securities (CMBS), Collateralized Loan Obligations (CLO) and certain other standalone securitization vehicles should be aggregated under the Large Exposures regime.

Federal Deposit Insurance Corporation(FDIC)():  FDIC Systemic Resolution Advisory Committee Meeting: Issues related to the resolution of systemically important financial companies 

Publication Date: 25 January 2012

Risks Covered: Systemic Risk

Business Processes Impacted: Recovery & Resolution planning

Major topics covered in the second meeting were a) Resolution Strategy under Title II of the Dodd-Frank Act, b) Preparations on "living will' under Title I of the Dodd-Frank Act, and c) international coordination efforts including progress made with foreign counterparts.

Commodity Futures Trading Commission(CFTC,US)():  Real-time Public Reporting of Swap Transactions Data

Publication Date: 20 January 2012

Risks Covered: Compliance Risk

Business Processes Impacted: Trading

In accordance with the Dodd-Frank Act, this finalized regulation from CFTC seeks to implement a framework for real-time public reporting of swap transactions and pricing data for all swap transactions. All major asset classes namely, Interest Rate, Foreign Exchange, Commodity, Equity and Credit are covered by the regulation.

The Committee of Sponsoring Organizations of the Treadway Commission(COSO)
(): 
Enterprise Risk Management: Understanding and Communicating Risk Appetite 

Publication Date: 20 January 2012

Risks Covered: Credit Risk, Market Risk, Liquidity Risk, Operational Risk, Strategic Risk

Business Processes Impacted: Risk Management & Stress Testing

Defining Risk Appetite is an essential component of Enterprise Risk Management practiced by a number of firms worldwide. Purpose of the paper is to help firms define; use metrics to articulate and to put into practice Risk Appetite. Emphasis is on the clarity of definition, communication across firm, firm-wide adoption, periodic monitoring and update.

International Organization Of Securities Commissions(IOSCO),Bank for International Settlements(BIS)():  Report on OTC derivatives data reporting and aggregation requirements

Publication Date: 18 January 2012

Risks Covered: Compliance Risk

Business Processes Impacted: Netting & Collateral Management, Clearing & Settlement - Exchange Traded & OTC

The final report recommends collection, storage and dissemination of OTC derivatives data by Trade Repositories and faster development of a standardized Legal Entity Identifier. This is to enable transparency through accurate and timely reporting on the OTC derivatives markets to prevent market abuse and to promote financial stability.

Bank for International Settlements (BIS) ():  Stress-testing macro stress testing: does it live up to expectations?

Publication Date: 18 January 2012

Risks Covered: Systemic Risk

Business Processes Impacted: Risk Management & Stress Testing

The BIS working paper provides a critical assessment of strengths and weaknesses of macro stress testing. Conclusions drawn suggest that macro stress tests are ill-suited as early warning devices given the current level of sophistication of models used. However, this does not take away its benefits as crisis management and resolution tools and as a disciplined way of thinking about vulnerabilities that can affect financial stability.

Federal Deposit Insurance Corporation (FDIC) ():  Annual Stress Test 

Publication Date: 17 January 2012

Risks Covered: Compliance Risk

Business Processes Impacted: Risk Management & Stress Testing

The proposed rule requires FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $ 10 billion to conduct annual capital-adequacy stress tests. This would require each bank covered by the rule to use at least three sets of economic and financial conditions including baseline, adverse, and severely adverse scenarios.

European Systemic Risk Board(ESRB) ():  The macro-prudential mandate of national authorities 

Publication Date: 16 January 2012

Risks Covered: Systemic Risk

Business Processes Impacted: Risk Management & Stress Testing, Recovery & Resolution planning

The proposed regulation mandates the national authorities of the European Union Member states to designate an authority for conducting macro-prudential policy in their respective national legislations with a view to ensuring stability of the financial system. The regulation recommends full access to national authorities to all necessary statistical information and policy instruments to enable their tasks of addressing potential risks to financial stability.

Commodity Futures Trading Commission(CFTC,US) ():  Swap Data Recordkeeping and Reporting Requirements 

Publication Date: 13 January 2012

Risks Covered: Compliance Risk

Business Processes Impacted: Trading

The finalized regulation mandates swap data recordkeeping and reporting requirements on swap data repositories, derivatives clearing organizations, designated contract markets, swap execution facilities, swap dealers, major swap participants, and swap counterparties who are neither swap dealers nor major swap participants under the Dodd-Frank Act. Coverage of the regulation include Unique Product Identifiers, Mandatory Reporting and Voluntary Supplemental Reporting.

FORTHCOMING REGULATIONS:

Securities and Exchange Commission (US): 
Implementing Dodd-Frank Wall Street Reform and Consumer Protection Act - Upcoming Activity Estimated January – June 2012

Some of the significant rulemaking planned by the Securities and Exchange Commission (SEC) in the first half of 2012 are a) Risk-retention by Securitizes of asset-backed securities, b) Rules for Clearing Agencies designated as Systemically Important, c) Adopt rules relating to registration, mandatory clearing and end-user exception to mandatory clearing of security-based swaps, d) Oversight of Investment Advisors & Broker-Dealers, and e) Report to Congress on Short Sales.

Board of Governors of Federal Reserve System (the Fed):  Dodd-frank initiatives planned: January to March 2012 
The Fed is responsible for implementing a number of provisions of the Dodd-Frank Act. Some of the significant rulemaking initiatives planned for the first quarter of 2012 are: a) The Volcker Rule: Financial Sector Concentration Limit, b) Minimum Leverage and Risk-Based Capital Requirements (Collins Amendment), c) Financial Market Utilities: Risk Management Standards, Advance Notice Requirements, and d) Source of Strength Requirement.

This blog is produced by Accenture as general information on the subject. It is not intended to provide advice on your specific circumstances. If you require advice or further details on any matters referred to, please contact Accenture.  Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information.
©2012 Accenture All Rights Reserved

 
 
 

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