Being better informedFS regulatory, accounting and audit bulletin

PwC FS Risk and Regulation Centre of Excellence

February 2015

In this month’s edition:

ECB supervision reviewing bank dividend payments

and variable remuneration

Number of important CMU developments

HMT explores open data for banking

FCA sets out final recovery and resolution rules for

investment firms

Analysis of the new TLAC and MREL requirements

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 1

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

Our annual survey of business leadersfrom around the world was launched atDavos in January. The overwhelmingmajority of CEOs surveyed believe thatregulation is still the biggest threat togrowth prospects in 2015. CEOs seeregulation as creating upheaval andmore costs on the one hand, whilediverting attention from other strategicchallenges on the other. Inconversations our financial serviceclients tell us they have three majorpriorities – finding growth in a

challenging environment, drivingproductivity, and getting ahead of riskand regulatory management.

Fewer CEOs than last year think globaleconomic growth will improve over thenext 12 months, but confidence in theirability to achieve revenue growth intheir own companies remains stable.The situation in Europe is particularlyconcerning. The austerity/stimulatedebate kicked-off again in Januaryfollowing Syriza’s election victory inGreece. But while debate continuesabout the optimal fiscal path torecovery, the necessity of having a well-functioning financial system remainssacrosanct.

In the EU, policy makers’ focus thisyear will be unlocking additionalinvestment from the financial systemsto help increase growth and jobs. On 28January 2015, the EC kicked-off itsCMU following a “positive” orientationdebate of its college of commissioners.It expects to launch a Green Paper onCMU in February 2015, and a fullaction plan by the third quarter of thisyear. Elsewhere, EIOPA recentlyannounced plans to start a new workstream on insurers’ infrastructureinvestments while the EBA, BoE andFederal Reserve are continuing toinvestigate ways to stimulate “prudent”securitisation.

On 27 January 2015, ECON finalised itsview of the new MIF Regulation: a largemajority of members voted in favour.The EP will now vote on the Regulationat an April plenary, after which it needsto be endorsed by the Council.

Elsewhere in the EU, the ECB sent aletter to big Eurozone banks ondividend distribution policies on 29January 2015. The letter calls on banksto adopt a conservative policy whendistributing dividends, taking intoaccount the challenging economic andfinancial conditions. Banks which failedthe comprehensive assessment havebeen told not to distribute dividendsand instead focus on replenishing theirbalance sheets. The ECB also notifiedall Eurozone banks that variableremuneration will be “thoroughlyreviewed” in the coming months.

In the derivatives space, the EC’sOlivier Guersent briefed the ECONCommittee on a recent EU/USFinancial Services Dialogue meeting on27 January 2015. Progress has nowbeen made on the derivatives dilemma.Although EU firms will still need to beregistered in the US, substitutedcompliance will be applied to a numberof the requirements.

At home, the FCA published its much-anticipated finalised guidance on theboundary around regulated advice in

January. This topic is hot right now,with a large number of firms looking tofind ways to offer customers simpler,lower cost ways to access investmentsand pensions compared with traditionalfull financial advice services. See ourblog for Lee Clarke’s thoughts on thekey points.

In the month ahead we’ll be keeping aneye on the evolving situation in Greece,and the risks that may pose for firms.We’re eagerly awaiting the CMUroadmap to see what that holds for theEU and London as a financial centre.And as the UK elections approach, we’llbe looking to learn more about theparties’ respective platforms and howvarious coalition combinations mayimpact businesses and consumers,including the key issue of whether theUK should stay in the EU.

Laura Cox

FS Risk and Regulation Centre of Excellence

020 7212 1579

laura.cox@uk.pwc.com

@LauraCoxPwC

Executive summary

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 2

How to read this bulletin?

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

within the table of contents.

ContentsExecutive summary 1

Saving the taxpayer – ending ‘too big to fail’ 3

Cross sector announcements 6

Banking and capital markets 15

Asset management 18

Insurance 19

Monthly calendar 21

Glossary 27

Contacts 32

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 3

Preventing another taxpayer funded bailoutof financial firms is one of the most vitaltasks facing policymakers today. Votersacross the world remain incensed that it fellto the taxpayer to shoulder the burden of aneconomic downturn that they attribute to‘greedy bankers.’ The financial communityis also keen to draw a line under the crisis.Doing so requires a credible solution to the‘too-big-to fail’ (TBTF) problem. Withpressure for a solution emanating from allsides, the FSB has developed a proposalwhich Mark Carney described as a‘‘watershed’’ in ending the problem,ensuring shareholders and creditors are notlet off the hook. The FSB has labelled this‘TLAC’. G-SIBs are now starting to digestwhat TLAC means in practice for them.

Meanwhile, in the EU the BRRD introducesthe concept of MREL, to be applied morewidely to credit institutions and 730kinvestment firms as defined under the CRR.MREL is part of a broader range ofmeasures outlined in the BRRD whichshould ease the path to orderly resolutionand ensure shareholders and creditors meet

the cost of recapitalisation rather thantaxpayers.

Both initiatives aim at ensuring firms havesufficient capacity to absorb losses in case offailure but they vary in their approach.

What is TLAC?

TLAC is a global standard for minimum

amounts of Total Loss Absorbing

Capacity (TLAC) to be held by G-SIBs. It

was proposed by the FSB in November

2014.

TLAC will apply to 27 of the 30 firmsidentified by the FSB in November 2014 asG-SIBs. The Chinese G-SIBs are exemptedunder an ‘Emerging Markets’ provision.Banks can meet the TLAC requirement withboth equity and debt. It comprises twoelements, a minimum Pillar 1 standard forall G-SIB’s and a Pillar 2 firm-specificrequirement.

The Pillar 1 requirement is calculated at16%-20% of RWAs, with the precisepercentage to be determined following aQuantitative Impact Study (QIS). Theminimum Pillar 1 requirement is at leasttwice the Basel III Tier 1 Leverage Ratio,which translates into 6% of total assets. Thiscalculation sets a floor for the requirementthat aims to adjust for any inconsistenciesin the G-SIBs’ reported RWAs. Bankregulators will determine the Pillar 2requirement based on each firm’s recoveryand resolution plan, its risk profile andsystemic footprint.

Regulatory capital will count toward TLACbut capital buffers will not. Non-regulatorycapital and Tier 1 and Tier 2 instruments inthe form of debt will need to constitute atleast 33% of TLAC, limiting the amount thatcan be met by regulatory capital. To counttowards TLAC, liabilities need to beunsecured, subordinated to non-TLACeligible liabilities, not subject to nettingrights and have a remaining maturity of atleast one year. Structured notes are noteligible for TLAC in the current proposals,something the industry flagged as a majorconcern in the consultation process.

The proposal envisages that external TLACis held at the level of the top company ineach consolidated resolution group. Ideally,a consolidated group will consist of a singleconsolidated resolution group (known as a‘Single Point of Entry’ resolution strategy)under a resolution entity. More complexfirms may instead comprise multipleresolution groups (Multiple Points of Entry)with a separate operating or holdingcompany acting as the resolution entity foreach resolution group. The resolution entitywill then issue capital internally to thematerial subsidiaries of the resolutiongroup. This process is referred to as ‘pre-positioning.’ The capital required for pre-positioning will likely be in the range of 75-90% of the Pillar 1 Minimum TLACrequirement, but this is not final. This intra-group debt from the parent resolution entitywould be forgiven in the event of a materialsubsidiary entering resolution.

G-SIBs must deduct exposure to eligibleTLAC liabilities issued by other G-SIBs fromtheir own TLAC, which is in line with Basel

provisions on the management of LargeExposures. This deduction is designed tolimit inter-connectedness and enhancesystemic resilience.

While this is still at proposal stage, weexpect the FSB to phase in TLAC fromJanuary 2016 with full implementation byJanuary 2019.

And MREL?

MREL is an EU wide minimum

requirement for own funds and eligible

liabilities (MREL) which applies to

credit institutions and investment firms

in the scope of BRRD. The EBA issued a

consultation on the criteria for setting

MREL on 28 November 2014.

In Europe each firm’s resolution authoritywill set MREL on a case by case basis afterconsulting the regulator. There are sixconsiderations for determining a firm’sMREL:

the institution can be resolved with theapplication of the resolution tools

the Common Equity Tier 1 ratio can berestored to the level necessary to meetthe conditions for authorisation andrestore market confidence in the firm

eligible liabilities are sufficient to coverexcluded liabilities

the size, business model, funding modeland risk profile of the firm

Saving the taxpayer – ending ‘too big to fail’

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 4

the extent to which the DepositGuarantee Scheme (DGS) couldcontribute to the financing of resolution

the systemic risk posed by the firm.

Unlike TLAC, capital instruments cansimultaneously meet MREL and capitalbuffer requirements. Eligible liabilities mustbe unsecured, issued and fully paid up, easyto value in resolution and have a remainingmaturity of at least one year. The BRRD alsosets an MREL floor equal to 8% ofliabilities. The Directive stipulates thatfirms must bail in these liabilities before anyother arrangement is made, such as use ofthe resolution fund which can only be donein exceptional circumstances.

Under the BRRD, the bail-in requirementcomes into force in January 2016. But giventhe significant impact on firms’ fundingstructures and costs, the EBA RTS proposesa period of 4 years (i.e. up until 2020) forfirms to comply.

A global level playing field?The new TLAC requirement is a minimumstandard. Regulators across the world havethe option to gold plate the rules, whichcould create an unlevel playing field for G-SIBs. The US has already indicated it willimpose more stringent requirements thanthe proposal suggests. One likely deviationis the stipulation that eligible debt mustcomprise 50% of RWAs rather than the 33%set out in the proposal. This change reflectsthe US view that resolution will wipe outmost equity. Similarly, the PRA and FCAcould decide to gold plate the requirementsby using the UK minimum Leverage Ratiostandard to calculate TLAC.

At the opposite end of the spectrum,Chinese G-SIBs are currently exempt from

the TLAC requirements. China now has theworld’s second biggest economy and housesthree of the world’s largest banks. Theirfailure would almost certainly have a globalimpact even if those banks are largelydomestically focused. This situation raisesthe question of how much longer it will beappropriate for China to rely on theEmerging Markets exemption. Oureconomists project that it will become theleading global economy before 2030.

The pre-positioning provision may alsothreaten the long-term sustainability of the‘global banking’ business model. Itconforms to the emerging trend of‘balkanisation’ with more capital heldlocally, the establishment of intermediaryholding companies in the US, and theincreasing push for subsidiarisation ofbranches in the EU. This fragmentationcould impede global trade flows, which inturn decreases the scope for economies ofscale for banks and may potentially lead toincreased costs for customers.

Unintended consequences?TLAC requirements will have an impact onG-SIBs’ structures and funding models.Some firms have expressed the view thatTLAC requirements are easier to implementfor G-SIBs structured with a holdingcompany as preferred in Anglo-Saxoncountries, rather than as a group ofoperating companies. The requirement tohold 33% of TLAC as non-regulatory capitalhas also attracted criticism because iteffectively penalises those G-SIBs which aremostly deposit funded and do nottraditionally raise wholesale funding in themarket. This is especially the case for EUbanks.

The additional cost of funding involved inraising fresh debt and equity poses achallenge to all firms - it will reduceprofitability and put further pressure onReturn on Equity (RoE). Meeting TLACrequirements may translate into lessfinancing available for the real economy,while at the same time investors may pushfirms to engage in riskier activities torestore margin.

Pre-positioning TLAC so that materialsubsidiaries can substantially meet theirrequirements on a stand-alone basis maycreate an incentive for local regulators tobail-in earlier than they would have doneotherwise. It could even prove a barrier toswift recapitalisation if losses occur wherethey are not expected. Co-operation throughdetailed agreements between home andhost regulators will be crucial to preventthis. These issues illustrate the challenge forfirms in adequately preparing for financialdifficulty without significantlycompromising their ability to react tounexpected circumstances or significantlyharm their business model, which couldresult in increased costs for end users offinancial products and services. It is tooearly to tell which side the current proposalsbest accommodate.

Will there be enoughdemand?One big uncertainty surrounding theproposals concerns the buyers of the debtand capital instruments which firms willneed to issue to satisfy these regulatoryrequirements. The volume of TLAC neededis estimated to be between €300 -500billion, at a time of considerable uncertaintyfor banks and for the global economy. Theprovisions restricting the TLAC exposure of

one G-SIB to another also reduces the poolof potential investors. Recent issuances ofconvertible debt have revealed tight spreadsbut this situation could reflect the currentlow interest environment which analysts donot expect to continue indefinitely.

Even if G-SIBs attain the requisite level offunding, it is not clear that sufficientinvestor demand exists for mid-sized EUbanks and investment firms subject toMREL requirements. The FCA sent a strongsignal to the investor community in late2014 when it banned the sale of CoCos toretail investors. Even if sufficient demandexists among institutional investors, aquestion remains over pension funds andinsurers becoming too concentrated inTLAC/MREL eligible instruments andabsorbing losses in the event of a firm’sfailure. This suggests that financial sectorlosses will still pass to the real economy andthe general public, albeit through a differentavenue.

Operational impactsAffected firms will need a much more robustinternal capital adequacy process to ensurethey are not triggering recovery indicatorsand biting into capital as this mayeventually push them into a state wherethey are likely to fail and the supervisor canintervene. They will need to monitor theeligibility of liabilities and the sufficiency ofthese in meeting the new requirements, asliabilities become ineligible when theirmaturity shortens to less than one year. Anyshortfall will need to be met with a newissuance of eligible debt/equity.Accordingly, firms must improve theirsystems/processes and developcomprehensive management informationfor asset-liability management.

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

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FS regulatory, accounting and audit bulletin – February 2015 PwC 5

Better links between Risk, Finance andTreasury will be necessary to connectnormal business activity to the recoverystage and remediation, whilst managingcommunications with the regulators andexternally with investors.

Smaller firms may find themselves morechallenged by these changes than largerfirms which already have moresophisticated systems and scale in theirprocesses.

Looking aheadTLAC and MREL are only a part of the newcapital framework facing financialinstitutions. Firms will need to form astrategic view of their business andorganisational structure in light of all thenew capital regulations. The ongoingregulatory push for more capital and theresulting pressure on funding costs calls fora more rigorous review of revenuegeneration, profitability and the cost ofcapital required to do business. Firms mustconsider these costs at a granular level.

As acknowledged at the G20 Brisbanemeeting, policy makers and the industryalike have made good progress on endingTBTF but uncertainties remain, includinghow to ensure co-operation betweensupervisory colleges and harmonise thehome-host approach to resolution forglobally active firms and to build the trustneeded to underpin a credible resolutionregime. Only the next financial crisis willreveal whether the measures envisagedadequately address these issues andproduce a safer, self-sustaining financialsystem.

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 6

In this section:

Regulation 6

AML 6

Capital and liquidity 6

Competition 7

CMU 7

Data 8

Financial crime 8

Other regulatory 8

Pensions 9

Recovery and resolution 10

Retail advice 11

Securities and derivatives 11

Accounting 12

Audit 12

Corporate governance 13

Financial accounting 13

PwC publications 14

Regulation

AMLECOFIN reaches agreement onAMLD4

ECOFIN endorsed the agreement reached

with the EP on the AMLD4 on 27 January

2015. The Council and the EC have also

agreed on the need to take decisive actions

against terrorist financing. ECOFIN calls for

further efforts to strengthen co-operation

on terrorist financing between Member

States' financial intelligence units.

ECOFIN added an anti-abuse clause to the

parent-subsidiary directive to prevent tax

avoidance and aggressive tax planning by

corporate groups. This amendment was

published in the Official Journal on 28

January 2015.

Capital and liquidityBasel Committee revising Pillar 3

The Basel Committee published Revised

Pillar 3 disclosure requirements on 28

January 2015. The most significant changes

relate to the use of templates for

quantitative disclosure. The Basel

Committee wants to enhance comparability

of bank’s disclosures, both between banks

and over time for an individual bank. It also

focuses on improving the transparency of

internal model based approaches that banks

use to calculate minimum regulatory capital

requirements.

Firms will have to disclosure and attest that

disclosures have been prepared in

accordance with board-agreed internal

control processes. The revised requirements

take effect from end-2016.

Tweaking supervisory reporting

The EC adopted two Implementing

Regulations amending Commission

Implementing Regulation 680/2014 on

supervisory reporting under CRD IV on 12

January 2015.

The EC makes minor changes to reporting

templates and provides instructions to

correct errors and reflect the revised data

point entry and taxonomy for Asset

encumbrance, single data point model and

validation rules and Forbearance and non-

performing exposures and certain minor

amendments.

Both Implementing Regulations will enter

into force after they are published in the

Official Journal.

Finalising CRD IV’s technicalprovisions

The Implementing Regulation laying down

ITS with regard to supervisory reporting of

institutions according to the CRR as

regards asset encumbrance, single data

point model and validation rules was

published in the Official Journal on 21

January 2015. The Implementing

Regulation relates to Articles 99(5) and 100

of the CRR.

The Implementing Regulation entered into

force on 10 February 2015.

Banking on capital markets

The BoE released Trends in Lending:

January 2015 on 21 January 2015.

Businesses are increasingly turning to

capital markets to fund investment, as

concerns about the ability of banks to keep

pace with demand continues. While average

monthly net lending flow to UK businesses

was negative in the three months to

November, net capital market issuance was

the highest in five years.

Mortgage approvals for UK house purchases

have fallen in recent months and were lower

than at the start of the year. The consumer

credit annual growth rate increased to 6.9%

in November. Pricing on lending to small

and medium-sized enterprises was broadly

unchanged in the three months to

November.

Respondents to the BoE’s 2014 Q4 Credit

Conditions Survey reported that spreads on

new lending to large businesses fell

significantly. The quoted interest rates on

some two-year fixed-rate mortgages, such as

those at 75% and 90% loan to value ratios,

fell in 2014 Q4.

Cross sector announcements

Executive summary Saving the taxpayer –

ending ‘too big to fail’

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announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 7

HMT adopts CRD IV buffers

HMT published draft capital buffers

legislation on 12 January 2015. Regulators

can apply additional capital requirements to

banks and investment firms if they believe

these firms to be so large that they pose a

risk to the financial system. The draft

statutory instrument transposes the

systemic risk buffer (SRB) provisions into

UK law and comes into force on 31 May

2016 and 1 January 2019.

The FPC will be responsible for defining a

framework to assess whether a bank poses a

systemic risk. The PRA will then assess

individual banks against that framework in

order to determine if the SRB should apply.

PRA overhauling Pillar 2

The PRA published CP1/15 – assessing

capital adequacy under Pillar 2 on 19

January 2015. The PRA proposes that at

least 56% of Pillar 2 capital requirements

(sometimes called the individual capital

guidance (ICG)) must be met using CET1

capital. Tier 2 capital cannot be used for

more than 25% of the ICG requirement.

This ensures consistency with the quality of

capital used to cover Pillar 1 capital

requirements.

The PRA confirmed that the PRA Buffer will

replace the Capital Planning Buffer from

January 2016. The PRA Buffer will be an

additional requirement, separate to the ICG.

Firms that are judged to have poor risk

management and governance arrangements

will also be subject to a special PRA Buffer

‘add-on’. The PRA Buffer will apply

concurrently with the systemic risk buffers

and the capital conservation buffer, so will

not give rise to any additional capital

requirement if it less than the CRD IV

buffers.

Firms will be able to disclose their ICG. The

PRA expects that the markets will be

increasingly interested in banks’ individual

ICG requirements over other capital

measures.

The consultation closes on 17 April 2015.

New third country equivalence rules

The PRA repealed its guidance on

equivalence of third country regulatory

regimes for credit risk purposes on 23

January 2015, which had been in force

during 2014. Banks with exposures to non-

EU entities could treat them as exposures to

EU entities for credit risk purposes if certain

conditions were met.

The PRA’s guidance has been superseded by

the EC’s December 2014 Implementing

Decision on equivalent regulatory regimes.

The EC lists countries that have regulatory

regimes at least equivalent to the EU. The

Decision replaces all national regulators’

guidance on equivalence. It took effect

throughout the EU from 1 January 2015.

CompetitionCompetitive interventions

On 15 January 2015 the FCA published

CP15/1 – competition concurrency

guidance and Handbook amendments,

setting out how it will use the new

competition powers from 1 April 2015.

The FCA sets out the new legal framework

and the relationship between its concurrent

competition powers under the Competition

Act 1998, its forthcoming powers under the

Enterprise Act 2002 (EA02) and its existing

competition powers under FSMA. It also

explains its proposed approach to selecting,

conducting and concluding investigations.

The FCA will use market studies to inform

its views on competition in a particular

market and can carry out market studies

under FSMA or the EA02. Both studies use

the same six stages of launch, research,

analysis and interim report, final report and

remedies. The FCA expects both types of

study to take 6 – 12 months to complete but

is under a statutory deadline to finish

studies under the EA02 within 12 months.

The FCA has stronger information gathering

powers under the EA02 than under FSMA.

Under the EA02, the FCA can request

information from any person - whether or

not they carry out regulated activities.

Where it considers that a person hasn’t

complied with its requirement it has the

power to impose a penalty.

Both FSMA and the EA02 give the FCA a

number of remedies that it can use to fix

competition in a market, ranging from

making policy or regulatory changes, using

enforcement or, as an extreme measure,

forcing a firm to divest some assets or part

of its business to increase competition. The

FCA is also bound to consider competition

issues before taking other action, such as

varying a firm’s permission. It is also able to

pursue individual enforcement action in

addition to market or sector-wide

competition remedies, utilising information

captured during a competition

investigation.

The consultation closes on 13 March 2015.

CMUJuncker fund moves closer

The EC published its proposed Regulation

on the European Fund for Strategic

Investments (EFSI) on 13 January 2015.

The EFSI aims to raise €315 billion public

and private investment to invest in small

and medium companies (fewer than 3000

employees) and infrastructure investments.

It is part of EC President Juncker’s plan to

boost growth and increase provision of

alternative investment financing.

The EFSI will be governed by a Steering

Board, made up initially of members of the

EC and the European Investment Bank

(EIB). Member States contributing to the

EFSI will get a proportionate representation

on the Steering Board, giving greater

opportunity to promote local projects for

investment. The EIB will separately

establish a European Investment Advisory

Hub (EIAH), which will be tasked with

identifying suitable investment

opportunities for the EFSI. The EIAH will

be expected to develop more detailed

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criteria setting out how suitable projects will

be identified.

The EFSI should be launch by mid-2015.

Up-Hill challenge

The EC commenced its work on CMU on 28

January 2015 by holding an orientation

debate at the college of Commissioners.

CMU is one of the flagship projects of the

new EC and aims to meet the EC’s primary

objective, to boost jobs and growth in the

EU.

The orientation debate focused on the key

challenges and priorities for the integration

of capital markets. The EC expects to launch

a Green Paper on CMU on 18 February

2015, with a full action plan by Q3 2015.

The challenge the EC faces is to open

additional refinancing channels without

creating possibilities to arbitrage financial

sector stabilisation.

DataOpening up banking data

HMT called for evidence on data sharing

and open data in banking on 28 January

2015. Following its December 2014 report

which explored how fintech firms can use

application programming interfaces (APIs)

and open data to make better use of bank

data on behalf of customers, HMT is now

seeking views from interested parties on

how the recommendations set out in the

report should be developed.

Many organisations currently access data

through manual downloads, screen scraping

and manual entry which are hard to use,

expensive, and have limited capabilities.

HMT believes that APIs, a set of

instructions allowing software systems to

connect with one another, and open data

which anyone is free to use will improve

competition and innovation in UK banking

and create a richer banking experience for

customers. HMT also believes that

introducing APIs and open data should

increase competition between banks.

HMT estimates costs of around £1 million

per bank to develop an open API standard,

with work complete within a year. Firms

believe it will take considerable effort and

coordination to achieve this.

The consultation closes on 25 February

2015.

Financial crimeProtecting your information

The EU Agency for Network and

Information Security (ENISA) published its

latest research on network and information

security (NIS) for the EU’s Finance Sector

on 20 January 2015. It evaluated the scope

of NIS obligations in the regulatory

landscape (both at EU and Member State

level), and compared it with the industry’s

prospects.

ENISA found that large international

banking groups demonstrated a good

understanding of the risk landscape and

available security schemes. But medium

sized stakeholders demonstrated limited

senior management involvement or capacity

to be certified against current international

standards, and the de-prioritisation of

security investments.

Keeping hackers at bay

As part of “Keeping the UK safe in cyber

space” GCHQ, the Centre for the Protection

of National Infrastructure, DfBIS and the

Cabinet Office reissued cyber security

guidance for businesses on 16 January 2015.

DfBIS found that 81% of large organisations

had experienced a security breach in 2014

costing organisations, on average, between

£600,000 and £1.5 million. The bodies have

provided practical steps to help businesses

improve their network security.

The guidance has been updated to ensure it

continues to be relevant with the growing

cyber threat and operates alongside existing

schemes such as Cyber Essentials and the

Cyber Incident Response schemes, launched

as part of the National Cyber Security

Programme.

Other regulatoryTentative recovery remains on-track

The ESRB published its Risk Dashboard:

Issue 10 on 5 January 2015. The ESRB

found that the perception of systemic risk

remains in line with pre-crisis levels,

despite some renewed bouts of volatility in

July and August. Financing conditions for

new private sector loans improved in the

third quarter of 2014, although some

countries had tightened credit standards

(e.g. mortgage credit in the UK).

Financial market conditions overall remain

buoyant. Money market spreads and

financial market liquidity indicators have

been stable at low levels throughout 2014.

But volatility has increased significantly in

some market segments. Uncertainty

regarding Eurozone interest rates has

recently increased again without any sign of

reversal.

Despite continued low levels of profitability,

banks were able to improve their solvency.

In the second quarter of 2014, large EU

banking groups were able to increase Tier 1

capital to total assets, benefitting from

favourable equity market conditions.

CMU tops Latvia’s wish list

The Latvian Presidency of the EU Council

published its Work Programme: 1 January

to 30 June 2015 on 6 January 2015.

The Presidency will “ensure a broad

exchange of views” on the CMU ahead of

Commissioner Hill’s proposals, expected in

February. Banking Union is also a high

priority, with the Presidency committing to

ensuring timely implementation and

smooth functioning of banking union. It will

also attempt to push forward negotiations

on a number of tabled proposals, including

bank structural reform, the SFT Regulation,

PSD2, the Benchmark Regulation, IMD2

and AML4.

The Presidency will also prioritise reaching

agreement on wider issues of relevance to

the financial services industry, including the

General Data Protection Regulation and

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Directive and finalising negotiations on the

proposed Cyber-Security Directive.

FSCS annual funding consultation

The FCA and PRA jointly published CP15/2

(FCA)/CP2/15 (PRA): FSCS – Management

Expenses Levy Limit (MELL) 2015/16 on 19

January 2015. The FSCS budget is set

annually, with the MELL meeting non-

compensation expenses such as staff and IT

costs. For 2015/16 the regulators are

proposing a £74.4m levy. The consultation

closes on 16 February 2015.

FOS 2015 plans

The FOS consulted on its plans and budget

for 2015/16 on 6 January 2015. It foresees a

challenging year, with PPI complaints

continuing to dominate its workload and

rises expected in banking and consumer

credit complaints. The FOS plans to meet

these challenges by:

modernising its IT and case-handling

infrastructure to increase efficiency

developing new ways of working that

meet the needs of its customers

improving information flow between its

own operation and firms to increase the

speed with which it resolves complaints

improving data sharing to prevent

similar complaints in the future.

The FOS expects to operate on a reduced

budget and will collect 13% less in fees from

financial businesses. It has also frozen case

fees and levies for another year.

Firms can comment on the plan and budget

until 16 February 2015.

FCA publishes bulletin

On 29 January 2015 the FCA published its

Data Bulletin January 2015. The Bulletin

reports that:

authorisation timelines are increasing

for retail firms but reducing for

wholesale firms

the FCA has received 83 requests

through Project Innovate

82% of approved persons are men

FCA reviewed over 3,000 financial

promotions in the second half of 2014,

leading to action against 181

advertisements.

Promoting regulatory co-operation

The FCA published three separate MoUs

with the Information Commissioners

Office, Advertising Standards Authority

and Cifas (on Immigration Act

responsibilities) on 28 January 2015.

Each MoU establishes a framework for co-

operation between each authority and the

FCA on:

roles and responsibilities

policy and rule-making powers

information exchange mechanisms

investigation and enforcement.

Each MoU is subject to annual review by the

FCA and the relevant authority.

PensionsEU pensions’ data published

EIOPA published a statistical database for

pensions on 30 January 2015. The database

includes pensions’ statistics from 21 EEA

jurisdictions for the period 2004 to 2013. It

covers mainly IORPs and some ‘1st Pillar

bis’ (mandatory statutory) occupational

funds. EIOPA plans to complete and update

the database on a yearly basis. EIOPA has

collected this data to help it monitor

developments in the market and identify

trends, potential risks and vulnerabilities.

Investment options for DC pensioners

EIOPA published a Report on investment

options for occupational defined

contribution (DC) scheme members on 29

January 2015. This report considers the

choices available to members of

occupational DC pension schemes. EIOPA

found that in most EU states, occupational

DC pension scheme members have no or

limited ability to make investment choices.

In states where schemes made available

investment choices, members generally had

a default investment option as well.

EIOPA found that the IORP was important

in developing the investment strategy for

schemes but, in most cases the employer

was involved in setting the default

investment option. It identified the

following areas for possible further

attention:

methods of improving suitability of

investment options compared to target

members’ risk and return characteristics

methods of supporting third parties (e.g.

employers) who make or frame

investment decisions on behalf of

members

mechanisms for providing relevant

standardised and comparable

information to help members making

better investment decisions, in case they

have to make such decisions.

Transfers of supplementaryoccupational pension rights

The EP and Council adopted a ‘Directive on

minimum requirements for enhancing

worker mobility by improving the

acquisition and preservation of

supplementary pension rights’ on 16 April

2014. This directive encourages Member

States to improve the transferability of

vested pension rights. Subsequently, EIOPA

published Consultation paper on a report

on good practices on individual transfers of

supplementary occupational pension rights

on 29 January 2015 in response to the EC’s

call for advice to EIOPA regarding

transferability of supplementary pension

rights.

In the draft report, EIOPA identifies the

main impediments to transfers of

supplementary pension rights and good

practices to overcome them, including

establishing voluntary agreements covering

as many providers as possible, layering

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information and using appropriate tools to

provide relevant information. EIOPA also

considers it good practice to aid scheme

member's access to advice. EIOPA believes

transferability could also be improved when

schemes communicate directly, without

involving the scheme members, on the

practicalities of the transfer execution and

maintain reasonable time limits for the

execution of transfers.

EIOPA expects Member States to refer to

this report when transposing the Directive.

The consultation closes on 10 April 2015.

Recovery and resolutionTemplates for resolution planning

The EBA published Consultation paper -

draft ITS on procedures, forms and

templates for the provision of information

for resolution plans under the BRRD on 14

January 2015. Resolution authorities will

initially seek information on a firm’s

resolution plan from the firm’s regulator,

but will directly seek information from the

firm if this is not forthcoming. Firms should

complete the EBA’s templates when asked

for more information on:

organisational structure

governance and management

critical functions and core business lines

critical counterparties

structure of liabilities

funding sources

off balance sheet

payment systems

information systems

interconnectedness

authorities and legal framework.

The consultation closes on 27 February

2015.

Pre-funding resolution costs

On 17 January 2015 the Commission

Delegated Regulation supplementing RRD

with regard to ex ante contributions to

resolution financing arrangements was

published in the Official Journal. The

Regulation sets out the methodology for

calculating firms’ contributions to

resolution financing arrangements and the

adjustment to the risk profile of institutions.

The contribution is calculated as a fixed

amount according to a firm’s liabilities to

reflect the fact that larger firms are

considered more risky. The contribution is

adjusted through the use of risk pillars and

risk indicators which are assigned relative

weights. In the case of groups the

contribution should take into account the

interconnectedness of the group to avoid

double counting of intragroup exposures.

The Regulation applied from 1 January 2015

and the Commission will review the risk

adjustment before 1 June 2016.

Recovery and resolution forinvestment firms

The FCA published PS15/2 - Recovery and

Resolution Directive: Feedback on CP14/15

and final rules on 16 January 2015,

implementing BRRD for investment firms.

The new rules will apply to investment firms

that have the FCA as their sole regulator

and that are IFPRU 730k firms, as well as to

entities in a group that contains an IFPRU

730k firm or a credit institution.

The finalised rules:

remove the communication and

disclosure element from the recovery

planning requirements for firms subject

to the simplified obligations

retract any application to unregulated

entities

remove any duplication of the rules

where they overlap with the PRA’s rules

amend the transitional provisions with

regard to EU and EEA application.

The FCA has not made any significant policy

changes to previous proposals. It has

included some guidance on intra-group

financial support agreements and agreed to

discuss with the BoE concerns that firms

reporting under US GAAP (rather than UK

GAAP or IFRS) enjoy an advantage when

calculating MREL due to the laxer netting

requirements.

The finalised rules entered into force on 19

January 2015, except for the rules on the

contractual recognition of bail-in which will

come into force on 1 January 2016.

Updated RRP guidance

The PRA updated its December 2013

supervisory statements: SS18/13 –

Recovery planning and SS19/13 Resolution

Planning on 16 January 2015. The PRA set

out its expectations on the content of

recovery plans and group recovery plans, to

complement existing RTS, rules and

guidance. Firms which are members of an

international group headquartered in third

countries should assess and demonstrate

how the UK plan submitted to the PRA fits

with the group recovery plan in addressing

UK operations.

The PRA also outlined the two stages of

resolution planning. Phase 1 will see the

PRA request baseline information to

establish a resolution strategy. All firms are

required to submit Phase 1 information by

April 2016 and every two years thereafter

unless they experience a material change to

their structure or business activities. Phase

2 contains the detailed information needed

to support the preferred resolution strategy,

chosen by the PRA in conjunction with the

BoE, while ensuring that critical functions

are maintained. Firms may be required to

submit information relating to more than

one resolution strategy to assess the

feasibility of different options.

The final PRA rules came into force on 19

January 2015, except for contractual

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recognition of MREL which comes into

force on 19 February 2015.

Tweaking BRRD implementation

The PRA published PS1/15: Implementing

the BRRD - response to CP13/14 on 16

January 2015. The PRA now proposes that:

the recovery plan rules are extended to

capture holding companies

firms undertake scenario testing

intragroup financial support is captured

by a new framework

BRRD firms must notify the PRA if they

consider they meet the conditions for

failing or likely to fail

BRRD firms include a term in

contractual provisions governing eligible

liabilities governed by the law of a third

country which states the liability is

subject to UK bail in powers.

The final PRA rules came into force on 19

January 2015 except for contractual

recognition of MREL which comes into

force on 19 February 2015.

Retail adviceAdvising on pension transfers

UK Parliament published The FSMA 2000

(Regulated Activities) (Amendment) (No. 2)

Order 2015 on 29 January 2015.

The Order makes providing advice on the

conversion or transfer of a class of pension

benefits known as “safeguarded benefits” a

regulated activity. This follows the Budget

2014 pension freedoms, which allows those

with defined contribution pensions more

flexibility in accessing their pension pot.

The explanatory memorandum states that

the Order mirrors, or copies out, four

definitions set out in the Pensions Bill 2014-

15 (around flexible benefits, safeguarded

benefits, subsisting rights and survivors).

The UK government expects the Pensions

Bill 2014-15 to receive Royal Assent in

February or March 2015, and take effect on

6 April 2015.

Clarifying advice boundaries

The FCA published feedback and FG15/1 –

Retail investment advice: clarifying the

boundaries and exploring the barriers to

market development on 22 January 2015.

FCA responded to a perceived regulatory

expectation gap by clarifying where the

boundaries lie between:

offering personal recommendations

(advice caught under MiFID suitability

requirements)

providing regulated advice under the

RAO

providing information that is not

regulated advice.

The FCA also clarified the application of

suitability requirements when firms provide

focused advice, including how much

indirectly relevant client information

advisers need

But firms might find that the guidance does

not answer all their questions. Advisers still

need to identify their own risk appetite

when carrying out suitability checks on a

client and decide how much additional

information they need to provide. Firms

looking to provide automated or simplified

models will welcome the advice on filtering

and risk profiles within systems, but might

still have outstanding questions. See our

blog for more details on the main issues we

have identified from the guidance.

Securities and derivativesIOSCO promotes derivative certainty

IOSCO outlined nine standards to reduce

uncertainties in derivatives markets in its

final report on Risk Mitigation Standards

for Non-centrally Cleared OTC Derivatives

on 28 January 2015. It published these to

support the capital requirements for non-

centrally cleared OTC derivatives

published jointly with the Basel Committee

in 2013.

IOSCO’s recommendations cover all major

players in the non-centrally cleared OTC

derivatives market. Financial entities and

systemically important non-financial

entities that use non-centrally cleared OTC

derivatives should employ the risk

mitigation techniques IOSCO recommends.

It proposes these firms establish policies

and procedures to:

document the trading relationship with

their counterparties before executing a

non-centrally cleared OTC derivatives

transaction, including all material terms

governing the relationship

ensure the material terms of all non-

centrally cleared OTC derivatives

transactions are confirmed as soon as

practical

reconcile with counterparties the

material terms and valuations of all

transactions in a non-centrally cleared

OTC derivatives portfolio

regularly assess and engage in portfolio

compression.

Firms must agree and document the process

for determining the value of each

transaction at any time, and the process for

determining when discrepancies in material

terms or valuations should be considered

disputes. IOSCO wants regulatory

authorities to collaborate to minimise

inconsistencies in risk mitigation

requirements across jurisdictions, and to

implement the standards as soon as

possible.

LEI goes online

On 26 January 2015 the Global Legal Entity

Identifier Foundation (GLEIF) launched its

new website in a further step to make LEI

information available. The GLEIF,

established by the FSB in 2014, manages the

worldwide development of LEIs.

The site enables communication with the

GLEIF and sets out instructions for

obtaining an LEI from local operating units.

In late 2015 the GLEIF expects the website

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functionality will allow LEI participants to

access to the database of all LEIs issued

globally and their associated reference data.

Clearing regime for IRS

ESMA published Opinion on Draft RTS on

the Clearing Obligation on Interest Rate

Swaps (IRS) on 29 January 2015. ESMA

must specify the class of OTC derivatives

that should be subject to the clearing

obligation under EMIR, and submitted a

draft RTS on the clearing obligation on

interest rate swaps on 1 October 2014.

The EC signalled its intent to endorse the

draft RTS with some amendments on 18

December 2014. The EC modified the RTS,

amending the start date of the frontloading

obligation and adding a new provision on

the treatment of non-EU intragroup

transactions.

ESMA agreed with the ultimate objectives of

the EC’s modifications but believes that the

change relating to non-EU intragroup

transactions is not appropriate from a legal

perspective. ESMA indicated a desire to

work with the EC to explore an alternative

to that provision.

Matching transparency to markets

In Occasional Paper 6: Transparency in

the UK Bond Markets: An Overview,

published on 16 January, 2105, the FCA

discusses key features of the UK bond

market and how proposed MiFIR

transparency requirements may impact

these segments. It proposes that the EU

should not follow a “one size will fit all”

approach in applying MiFIR transparency

requirements to diverse fixed-income

(bond) markets.

BIS statistics reveal that the global bond

market is twice the size of the global equity

market, and that the UK is home to 70% of

all secondary trading. As a key stakeholder

in MiFIR rule developments, the FCA

reviewed UK listed bond transaction reports

submitted from 2008 to 2011 to analyse the

market. The FCA found significant diversity

in the UK bond markets. Unlike equities,

bonds are traded sporadically, with only 35

bonds representing 50% of secondary

trading activity. Only a small sub-set of

bonds are liquid and frequently traded at

established trading venues.

The survey also revealed that:

bonds’ liquidity profiles vary widely

during their lifetime

transactions in UK-listed bonds are

largely executed off-exchange

liquidity is provided by a small number

of broker and market maker services

trading costs vary by transaction size,

credit risk and maturity.

The FCA recommends that EU law makers

calibrate MiFIR pre- and post-trade

transparency requirements by segment.

This will ensure that the rules achieve the

aim of increased competition but do not

impair liquidity in certain segments. ESMA

launched a consultation on its MiFIR pre-

and post-trade transparency requirements

proposals on 19 December 2014: responses

are due by 2 March 2015.

Fair and effective market supportgrows

Jerome H. Powell, Member of the Board of

Governors of the Federal Reserve System

expressed his support for the UK’s Fair and

Effective Markets Review in a speech

delivered on 20 January 2015. Powell

highlighted specific US measures aimed at

making markets fairer and more effective.

Powell said that the importance of FICC

markets extends far beyond their

participants and that proper market

functioning is actually a public good that

relies on confidence and trust among

market participants and the public. He

argued that bad conduct, weak internal firm

governance, misaligned incentives and

flawed market structure can all place this

trust at risk.

A number of US firms have already

reformed compensation packages to better

align incentives. US financial regulators are

preparing a new rule on incentive

compensation that will codify and

strengthen these initiatives.

On benchmarks, Powell explained that the

Federal Reserve has asked a group of the

largest global dealers to form the

Alternative Reference Rates Committee. The

Committee will work with the Federal

Reserve to promote alternatives to US dollar

LIBOR that better reflect the current

structure of funding markets.

Sponsors face toughened rules

The FCA published its tenth Primary

Market Bulletin on 30 January 2015. Two

new technical notes have been added to the

UKLA Knowledge Base and set out the

FCA's approach to sponsor competence:

UKLA Technical 714.1 delineates the

types of skills, knowledge and expertise

that the FCA expects a sponsor to

consider when assessing its ability as a

firm to show an understanding of each

competency set.

UKLA Technical 715.1 sets out questions

and answers to assist sponsors or

applicants in considering whether the

firm meets, or continues to meet, the

rules requiring sponsors to be

competent to provide sponsor services at

all times.

Sponsors must effectively monitor and

mitigate against conflicts of interest that

arise from their roles. The two new

technical notes applied from 1 February

2015.

Accounting

AuditPresenting negative interest rates

On 7 January 2015 the EBA requested that

the IFRS Interpretations Committee

reconsider how financial instruments with a

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negative yield should be presented in

financial statements. The IFRS had

previously agreed to refrain from finalising

its decision on this issue until the

completion of the IFRS 9 redeliberations

(which happened in July 2014).

As the ECB has applied negative interest on

the amount of deposits which are above a

certain limit, and given poor growth

prospects in the Eurozone, clarity on the

presentation of negative interest in IFRS in

important. The EBA is concerned that

divergence of accounting practices on this

matter could emerge.

Corporate governanceFRC governance update

Our in brief publication looks at the FRC’s

priorities for corporate governance and

reporting coming from its recent

publications ‘Developments in Corporate

Governance and Stewardship 2014’ , ’Draft

Plan & Budget and Proposed Levies

2015/16’ and ‘Year-end advice to

preparers’.

Levels of compliance with the UK Corporate

Governance Code have continued to

increase. Reporting has become more

transparent and informative, with audit

committee reports and diversity reporting

particularly improved. The FRC's annual

review of developments in Corporate

Governance and Stewardship for 2014 has

seen an increase in signatories to the

Stewardship Code with signs of better

engagement with large companies by

investment managers. But the FRC believes

that more needs to be done to ensure asset

owners and managers follow-through on

their commitments to the principles set out

in the Code.

Financial accountingConsolidated financial statementsQ&As

IFRS 10 ‘Consolidated financial statements’

and IFRS 12 ‘Disclosure of interests in other

entities’ were issued in May 2011. IFRS 10

retains the key principle of IAS 27 and SIC

12: all entities that are controlled by a

parent are consolidated. But some of the

detailed guidance is new and may result in

changes in the scope of consolidation for

some parent companies. Experience

suggests that the new requirements will

have the greatest impact on consolidation

decisions for structured entities (i.e. SPVs)

and for pooled funds managed by a third

party.

Our In depth publication IFRS 10 and 12 -

Questions and answers sets out our views

on some of the most common issues that

arise during the implementation of the new

standards. For further guidance on IFRS 10,

see our ‘Practical guide to IFRS:

Consolidated financial statements –

redefining control’ and the supplement for

the asset management industry.

Hedging in practice

Many companies are now considering IFRS

9, the new accounting standard on financial

instruments. IFRS 9 addresses all the

relevant aspects on the accounting for

financial instruments, including

classification and measurement,

impairment of financial assets and general

hedge accounting.

Our publication ‘IFRS 9 Hedging in

Practice - Frequently asked questions’

presents a number of frequently asked

questions and focuses on just one topic in

IFRS 9: general hedge accounting.

IASB Investor Update - January 2015

IASB Investor Update - Our newsletter for

the investment community - January 2015

includes discussion of judgements and

estimates in revenue recognition.

IFRS for SMEs - January 2015

Our January update on IFRS for SMEs

includes the following discussions:

IASB meetings on the comprehensive

review of the IFRS for SMEs

adopting the IFRS for SMEs in Uruguay

upcoming ‘train the trainers’ workshops

IFRS for SMEs translations: status

report

where to obtain IFRS for SMEs

materials.

EU endorses IAS 19 amendments

The EU has endorsed the amendments to

IAS 19 'Employee benefits', on defined

benefit plans, issued in November 2013.

These narrow scope amendments apply to

contributions from employees or third

parties to defined benefit plans. The

objective of the amendments is to simplify

the accounting for contributions that are

independent of the number of years of

employee service, for example, employee

contributions that are calculated according

to a fixed percentage of salary.

The IASB effective date is 1 July 2014, but

the EU has endorsed the amendments for

annual periods starting on or after 1

February 2015. For further details of the

amendment see our Straight away guide -

IASB issues amendment to IAS 19R.

EU endorses annual improvements

The EU has endorsed the annual

improvements 2010-2012 cycle issued in

December 2013. These amendments affect

seven standards:

IFRS 2 ‘Share-based payment’

IFRS 3 ‘Business combinations’

IFRS 8 ‘Operating segments’

IFRS 13 ‘Fair value measurement’

IAS 16 ‘Property, plant and equipment’

IAS 38 ‘Intangible assets’

IAS 24 ‘Related party disclosures’.

Consequential amendments are also made

to IFRS 9 'Financial instruments', IAS 37

'Provisions, contingent liabilities and

contingent assets', and IAS 39 'Financial

instruments - Recognition and

measurement'. The IASB effective date is 1

July 2014, but the EU has endorsed the

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amendments for annual periods starting on

or after 1 February 2015. For further details

of the amendments see our Straight away

guide - IASB publishes final standard on

Annual Improvements 2010-12 cycle.

PwC publicationsImpairment review considerations

Many companies consider impairment tests

at the year end, either on a one-off basis due

to a triggering event, or as part of an annual

impairment test for indefinite lived

intangibles and goodwill. Bond yields in

many major currencies (e.g. Sterling, US

Dollar, Euro) are lower at 31 December

2014 than they were at 31 December 2013.

This situation might lead you to believe that

discount rates have fallen and therefore that

the risk of impairment has reduced. Please

be aware that this is not the case. For

further details see our In brief publication

‘Discount rates and cash flows for

impairment reviews’.

Impairment reviews of non-financialassets

Recent months have been marked by

increased volatility in global markets. This

environment could lead to revised budgets

and forecasts with an expectation of lower

cash-flows from existing non-financial

assets. Our In brief publication ‘Top 5 tips

for impairment reviews of non-financial

assets’ highlights the top 5 tips to focus on

when completing impairment review for

non-financial assets.

Implications of movements in theSwiss Franc rate

On 15 January 2015, the Swiss National

Bank (SNB) stopped trying to peg the Swiss

Franc to the Euro. As a result, the Swiss

Franc appreciated 15% against the Euro and

then stabilised close to parity (SFr1:€1) as at

29 January 2015. The immediate

consequences were significant for some

entities - in the UK some currency brokers

were forced into administration.

For the December 2014 year end, the

foreign currency movements triggered by

the SNB's decision are events after the

balance sheet date whose nature and

estimated financial effect will have to be

disclosed if significant. This could be an

impairment indicator in 2015 accounts for

entities with exposure to Swiss activities. In

some cases, the going concern basis may no

longer be appropriate. Our In brief guide

‘Swiss National Bank's decision on the

CHF/EUR rate’ includes an overview of the

potential issues and the relevant guidance

under IFRS.

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In this section:

Regulation 15

Capital and liquidity 15

Conduct 16

Consumer credit 17

Accounting 17

Regulation

Capital and liquidityRestoring confidence in capital

The Basel Committee published its Work

Programme for 2015 and 2016 on 21

January 2015. Much of its work will be

geared towards reviewing existing methods

of measuring risk-weighted assets. It will

consider the use of simple, transparent and

comparable criteria for securitisations, the

fundamental review of the trading book and

interest rate, credit and operational risk in

the banking book.

The Basel Committee also plans new

initiatives to:

review the regulatory treatment of

sovereign risk

assess the interaction, coherence and

overall calibration of the reform policies

assess the role of stress testing in the

regulatory framework in light of national

developments.

The Basel Committee will continue to

monitor its members’ implementation of the

Basel framework via the Regulatory

Consistency Assessment Programme

(RCAP). This year the RCAP will be

expanded to also cover liquidity standards

and the frameworks for G-SIBs and D-SIBs.

Banks struggle with risk managementprinciples

The Basel Committee published its second

report on Progress in adopting the

principles for effective risk data

aggregation and risk reporting

(“Principles”) on 23 January 2015. The 2013

Principles strengthen risk data aggregation

and risk reporting at banks to improve risk

management practices and decision-making

processes. Firms designated as G-SIB are

required to implement the Principles in full

by 2016.

The Basel Committee outlines the measures

G-SIBs took to improve their overall

preparedness for compliance with the

Principles during 2014. While G-SIBs are

increasingly aware of the importance of

implementing the Principles, 14 of the 31

participating banks reported that they will

be unable to fully comply by the 2016

deadline, compared with 10 G-SIBs in 2013.

Activating emergency prudentialpowers

The ESRB Chairman, Mario Draghi, sent a

letter on 7 January 2015 to the EC on the

systemic risk conditions in the EU. The EC

requested input from the ESRB in its annual

review of its CRR powers. Under CRR, the

EC can adopt delegated acts imposing

stricter prudential requirements on banks

where CRD IV powers are insufficient to

address the prudential risks.

Banking and capital markets

Mark JamesPartner, Jersey office+44 (0) 1534 838304mark.james@je.pwc.com

James de VeulleDirector, Jersey office+44 (0) 1534 838375james.de.veulle@je.pwc.com

Nick VermeulenPartner, Guernsey office+44 (0) 14 81 752089nick.vermeulen@gg.pwc.com

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The ESRB found no need for the EC to use

these powers based on current conditions.

But it suggests that there are two instances

where, in theory, these powers might help to

address specific systemic threats:

systemic fragilities in financial markets

that might call for comprehensive,

uniform and swift policy responses

indirect contagion that might easily

spread to other states, necessitating

broad preventative measures across the

EU.

The ESRB believes that the EC could

enhance systemic stability by requiring

firms to improve public disclosures on

exposures, indicators or practices of

systemic relevance.

Calculating DGS needs

On 12 January 2015, the EBA published

slides from its public hearing on methods

for calculating contributions to the deposit

guarantee scheme (DGS), held on 8

January 2015. EU banks must contribute

annually to the new DGS. The contribution

will be dependent on the institution’s

covered deposits, aggregate risk weight and

contribution rate. The EBA will also add an

adjustment coefficient to ensure the DGS

reaches annual target levels.

At the public hearing the EBA described:

the calculation formula

specific indicators

risk classes for members

thresholds for risk weights assigned to

specific risk classes

other necessary elements to pre-fund

the DGS.

A bank’s contribution will mostly be

determined by its risk class so the EBA

provided a list of core risk indicators that it

will assess, with most heavy weight placed

on its non-performing loan ratio and

covered deposits.

The DGS consultation closed on 11 February

2015. Banks will contribute from 3 July

2015.

Relaxing the volatility test

The EBA revised its Final draft RTS on

prudent valuation the CRR on 23 January

2015. The EBA has replaced references to

“volatility” in Articles 9 and 10 of the initial

final draft RTS with “variance” for the

purposes of computing market price

uncertainty and close-out costs additional

valuation adjustments.

The change will only affect institutions

using the “core approach”. It will result in a

slight relaxation of the calibration of the

volatility test performed under the two

articles, and is intended to avoid unwanted

side-effects during the first year

implementation of the core approach.

The RTS is now with the EC to be finalised

and published in the Official Journal.

Limiting dividend payments

ECB Banking Supervision wrote to

significant Eurozone banks on dividend

distribution policies on 29 January 2015.

Banks should adopt a conservative policy

when distributing dividends, taking into

account the current challenging economic

and financial conditions. Banks with a

residual capital shortfall following the

comprehensive assessment in 2014 should

not distribute dividends at all. Moreover,

work on building banks’ capital base needs

to continue in line with CRD IV

requirements.

The ECB also notified banks that variable

remuneration will be thoroughly reviewed

in the coming months.

PRA transition to new DGS

The PRA published CP4/15: Depositor,

dormant account and policyholder

protection policies - amendments on 27

January 2015. The PRA proposes

transitional provisions, new rules and

amendments to the PRA Handbook

following feedback to the Depositor

Protection and Policyholder Protection

consultations published in October 2014.

The PRA proposes transitional rules for

depositor protection, including expectations

for the single customer view, account

marking and information requirements. To

protect dormant accounts, the PRA wants to

change compensation arrangements,

outlining how it expects the FSCS to operate

the Dormant Account Scheme and interact

with a dormant account fund operator. It

also proposes new transitional rules to

clarify what circumstances and measures

will continue to fall under the current

compensation and fees rules, or under the

new rules from 3 July 2015.

The consultation closes on 27 February

2015. The PRA plans to publish policy

statements alongside final rules and

supervisory statements in the first half of

2015 with the new rules planned to take

effect from July.

ConductTeaser rates to continue

The FCA published its findings and

recommended remedies from MS14/2.3 –

cash savings market study report on 20

January 2015. FCA focused on interest-

bearing cash savings accounts and analysed

seven main types of savings accounts,

including easy access accounts, fixed term

bonds and cash ISAs. It concluded that the

cash savings market is not working well for

many consumers. In particular:

significant numbers of accounts opened

more than five years ago paying lower

interest rates than those opened more

recently

consumers receiving little information

about alternative products

consumers are put off switching by the

expected hassle and perceived low gains

from opening another account

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 17

large personal current account providers

have considerable advantages because

they can attract most easy access

balances despite offering lower interest

rates.

The FCA is not proposing to ban

introductory teaser rates or require

providers to offer all customers the same

interest rate. But it does want providers to

improve communications on interest rate

changes and bonus rate expiry. Under the

proposals, firms are required to warn

customers of accounts with low interest

rates, emphasise the interest rate on

statements, explain how to switch and the

potential benefits of switching and remind

consumers of interest rate changes,

including bonus rate expiry.

The FCA welcomes comments by 18

February 2015 and will then consult if

rule changes are required.

Time-barred PPI complaints?

On 30 January 2015 the FCA announced its

intention to gather evidence on current

trends in PPI complaints to decide if further

intervention is required. This could include:

a consumer communication campaign

possible time limit on complaints

other rule changes or guidance.

The FCA also believes that a continuation of

the current process may be the preferred

outcome. It expects to commence the

evidence gathering shortly and give its view

on the evidence collected in the summer.

Consumer creditReporting requirements

On 21 January 2015, the FCA published a

reporting framework for firms to report

consumer credit financial data. It plans to

use this data to:

build an overall picture of the size of the

consumer credit market and how

revenue is generated

analyse the on-going viability of a firm

verify that debt management firms are

complying with their prudential

requirements

understand the size of the debt

collection market and identify where

there is a risk of consumer detriment.

The information provides a basis for the

FCA’s supervisory activities. All fully

authorised firms, except those that only

provide credit references, must report.

Firms with limited permissions that provide

credit not as their main business are subject

to reduced reporting requirements.

FCA concerned with payday lenders

On 21 January 2015 the FCA published a

“Dear CEO” letter to high cost short term

credit providers (HCSTC) holding an

interim permission. FCA sets out concerns

including:

poor practice in the credit broking

market in relation to transparency of

fees and customer outcomes

inadequacy of affordability checks

the fair treatment of customers in

financial difficulties

governance and controls which should

ensure organisational changes are

effectively embedded.

FCA also highlights the consequences of

firms failing to submit an application for

authorisation before their authorisation slot

deadline. These firms will be acting illegally

and will be unable to grant further loans or

accept or recover payments from existing

loans.

Accounting

Expected credit loss disclosures

IFRS 9 introduces significant additional

disclosure requirements relating to credit

risk and expected credit loss allowances.

Understanding the data and systems needed

to meet these new requirements will be

critical to ensuring the completeness of

IFRS 9 project scopes, thereby avoiding

revisions later in the project that could be

costly and jeopardise project timings.

Simply replicating the illustrative

disclosures included in IFRS 9 risks missing

key information requirements.

Considering these disclosure requirements

as part of the broader consideration of

internal management reporting and

investor communications will also likely

deliver significant benefits. Our In depth

publication ‘IFRS 9: Expected credit loss

disclosures for banking’ sets out key

considerations and what they will mean in

practice.

Executive summary Saving the taxpayer –

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Cross sector

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Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

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In this section:

Regulation 18

AIFMD 18

Retail products 18

Regulation

AIFMDUpdated AIFMD Q&A

ESMA updated its Q&A – application of theAIFMD on 9 January 2015. It added moreinformation about the AIFMD reportingtemplates:

AIFMs should report the value, notnumber, of subscriptions andredemptions in a reporting period

the fund NAV should be calculated aftersubscriptions, redemptions andinvestment performance are taken intoaccount over a month

AIFMs with fund-of-funds as well asother funds should report twice – amonth after the end of the reportingperiod for the funds and 45 days afterthe end of the period for the fund-of-funds.

FCA clarifies reporting expectations

The FCA published a Q&A for AIFMsreporting on the FCA’s GABRIEL system on20 January 2015 and a further update forfirms on 29 January 2015. Most AIFMswere authorised by the FCA on or around 21July 2014, so must have reported underAIFMD for the first time at the end ofJanuary 2015.

The FCA cannot offer guidance on AIFMDreporting, as this is defined in a DelegatedRegulation. Instead the FCA offers guidanceon how to use the FCA’s reporting system(GABRIEL), the specific AIFM forms thatfirms need to submit and details on how toensure information is validated correctly.The update confirmed that AIFMs unable toreport on GABRIEL due to technical issuesor those who do not yet have a PRN will notface enforcement action as long as theyreport as soon as possible.

Firms authorised after July 2014 with laterreporting deadlines should note the FCA’sguidance.

Retail productsUpdated UCITS Q&A

ESMA updated the Q&A – ESMA’sguidelines on ETFs and other UCITS issueson 9 January 2015, focusing on collateralmanagement. ESMA confirms that:

in some circumstances derivativescounterparties can implement rules setout by the UCITS management companywithout being seen to have discretionover the investment portfolio

any short-term MMFs that fundsinvested into for collateral purposesshould meet the UCITS definition of ashort-term MMF.

Asset management

John LuffPartner, Guernsey office+44 (0) 1481 752121john.luff@gg.pwc.com

Mike ByrnePartner, Jersey office+44 (0) 1534 838278Michael.j.byrne@je.pwc.com

Adam GulleySenior Manager, Jersey+44 (0) 1534 8382390adam.gulley@je.pwc.com

Executive summary Saving the taxpayer –

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Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 19

In this section:

Regulation 19

Solvency II 19

UK Updates 20

Regulation

Solvency IINew Solvency II fact sheet

The EC published Solvency II Overview –

Frequently asked questions on 12 January

2015. This publication looks at the

development of Solvency II and its key

requirements and is a useful learning guide.

Implementing rules come into force

The Delegated Regulation on the taking-up

and pursuit of the business of insurance

and reinsurance (Solvency II) was

published in the Official Journal and

entered into force on 18 January 2015. The

Delegated Regulation sets out more detailed

requirements for individual insurance

undertakings as well as for groups. They will

make up the core of the single prudential

rulebook for insurance and reinsurance

undertakings in the EU, and are based on 76

empowerments in the Solvency II Directive.

The Delegated Regulation considers:

rules for market-consistent valuation of

assets and liabilities, including technical

provisions and details of the long-term

guarantee measures

rules for the eligibility of insurers' own

fund items

methodology and calibration of the

minimum capital requirement and of the

standard formula for the SCR

calculation

standards that undertakings applying to

use an internal model to calculate their

SCR must meet as a condition for

authorisation

criteria for supervisory approval of the

scope of the authorisation of SPVs

taking on reinsurance risk, and

requirements related to their operation

rules related to insurance groups, such

as the methods for calculating the group

solvency capital requirement, the

operation of branches, coordination

within supervisory colleges

criteria to assess whether or not a

solvency regime in a third country is

equivalent.

In addition, the EP published a letter from

Roberto Gualtieri (ECON), to Jonathan Hill

(European Commissioner for Financial

Stability, Financial Services and Capital

Markets Union) on the proposed Delegated

Regulation supplementing the Solvency II

Insurance

Evelyn BradyPartner, Guernsey office+44 (0) 1481 752013evelyn.brady@gg.pwc.com

Adrian PeacegoodDirector, Guernsey office+44 (0) 1481 752013adrian.peacegood@gg.pwc.com

Executive summary Saving the taxpayer –

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Cross sector

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Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 20

Directive (2009/138/EC) on 9 January

2015 and Jonathan Hill’s response to this

letter on 29 January 2015. These letters

address a number of corrections to the text,

additional empowerments and further work

required.

Additional transitional measurespublished

The PRA published CP3/15 Solvency II:

transitional measures and the treatment of

participations on 23 January 2015. This

document proposes draft rules to

implement Solvency II’s transitional

measures for risk-free rates and technical

provisions in the UK.

Firms can apply to the PRA for approval to

use these transitional measures to:

Move from their current discount rate

requirements to the corresponding

Solvency II requirements. The

transitional measure applies for 16 years

and is an adjustment to the relevant

risk-free interest rate term structure

used to discount admissible insurance

obligations (i.e. those existing at the

Solvency II transition date).

Move from current requirements for

technical provisions to the Solvency II

requirements. The transitional measure

also applies for 16 years, and is a

deduction from the amount of Solvency

II technical provisions. The deduction is

initially calculated as the difference

between current technical provisions

and Solvency II technical provisions at

the Solvency II transition date, and

decreases linearly during the 16-year

transitional period.

The PRA sets out its expectations on the

application process and calculations for

these transitional measures in a draft

supervisory statement. Firms wishing to use

these transitional measures should notify

their supervisor as soon as possible and

submit an application to the PRA

electronically from 1 April 2015. When

applying, firms should inform the PRA of

any other approvals that they have applied

for or plan to apply for during the next

twelve months. The PRA may ask firms to

obtain an external validation of their

calculations. In such cases, it will agree the

scope and timescales for the validation with

firms on a case-by-case basis.

The consultation also includes a draft

supervisory statement on the internal model

treatment of participations in (re)insurance

firms and how they are reflected in the SCR

at the solo level.

The PRA is required to transpose Solvency

II into its rules by 31 March 2015, and it will

apply to firms from 1 January 2016. The

consultation closes on 20 February 2015.

Submitting information to NCAs

EIOPA updated its Answers to questions on

Submission of Information to National

Competent Authorities (NCAs) on 28

January 2015, providing answers to a range

of technical questions on completing the

reporting templates for supervisors.

Where to go for moreinformation

Read more about Solvency II UK on our

webpages at www.pwc.co.uk/solvencyII

UK UpdatesRegulating the insurance industry

On 22 January 2015, the PRA published

‘Regulation and the future of the insurance

industry’ a speech given by Paul Fisher,

Deputy Head of the PRA and Executive

Director, Insurance Supervision.

As well as the new Solvency II regime,

Fisher looked at the role insurance plays in

the wider economy and the broader

challenges facing the insurance industry. He

considered the impact of the prevailing low

interest rate environment and consequent

influx of alternative capital, especially into

reinsurance markets, the transformation to

the ‘at retirement’ taxation system in the UK

and competition in general insurance from

overseas locations, possibly linked to

regulatory arbitrage.

Transferring insurance business

The PRA published letter on transfers of

insurance business under FSMA on 21

January 2015. The PRA is aware that a

significant number of firms are seeking to

complete transfers of insurance business

before Solvency II is implemented on 1

January 2016, which poses a resource

challenge for the PRA.

The letter explains what firms need to do,

and the timescales, to ensure that the PRA

accepts their application. The PRA intends

to continue to progress those insurance

transfers where:

the fee has been paid (or where a special

project fee has been agreed)

the firm has indicated its intention to

complete the transfer in 2015

the firm is on track to complete the

transfer.

All other cases will be considered on a case

by case basis.

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

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Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 21

Open consultations

Closing datefor responses

Paper Institution

16/02/15 CP15/2 and CP2/15: FSCS – management expenses levy limit PRA and FCA

16/02/15 Consultation paper – plans and budget for 2015/16 FOS

17/02/15 Discussion paper: key information documents for PRIIPs ESAs

18/02/15 MS14/2.3 – cash savings market study report: final findings and proposed remedies FCA

19/02/15 Consultation paper on Guidelines on Access to a CCP or a Trading Venue by a CSD ESMA

19/02/15 Consultation paper on Technical Advice under the CSD Regulation ESMA

19/02/15 Consultation paper on Technical Standards under the CSD Regulation ESMA

20/02/15 FSCS plan and budget 2015/16 FSCS

20/02/15 CP3/15 – Solvency II: transitional measures and the treatment of participations PRA

20/02/15 Fundamental review of the trading book: outstanding issues BCBS

25/02/15 Call for evidence on data sharing and open data in banking HMT

27/02/15 Strengthening accountability in banking: forms, consequential and transitional aspects PRA/FCA

Monthly calendar

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Cross sector

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Banking and capital

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Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 22

Closing datefor responses

Paper Institution

27/02/15 CP4/15: depositor, dormant account and policyholder protection - amendments PRA

27/02/15 Discussion Paper The Use of Credit Ratings by Financial Intermediaries Article 5(a) of the CRA Regulation JCESA

27/02/15 Consultation paper: draft RTS on criteria for determining the minimum requirement for own funds and eligible liabilities underthe BRRD

EBA

27/02/15 CP27/14 – CRD IV: liquidity PRA

02/03/15 Public consultation on the Solvency II standards and guidelines EIOPA

02/03/15 Consultation Paper: MiFID II/MiFIR ESMA

02/03/15 Consultation Paper on the proposal for draft ITS on the equity index for the symmetric adjustment of the equity capital charge EIOPA

06/03/15 Consultative Document: Net Stable Funding Ratio disclosure standards BaselCommittee

09/03/15 Lending Code review LSB

12/03/15 Consultation paper: draft RTS on the specification of the assessment methodology for competent authorities regarding complianceof an institution with the requirements to use the IRB approach under the CRR

EBA

12/03/15 Draft requirements on passport notifications for credit intermediaries under the Mortgage Credit Directive EBA

13/03/15 Improving complaints handling FCA

13/03/15 Guaranteed Asset Protection insurance: a competition remedy FCA

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 23

Closing datefor responses

Paper Institution

13/03/15 CP15/1: FCA competition concurrency guidance and Handbook amendments FCA

20/03/15 Auditing and ethical standards Implementation of the EU Audit Directive and Audit Regulation FRC

22/03/15 Joint Committee Consultation Paper on guidelines for cross-selling practices JCESA

27/03/15 Revisions to the Standardised Approach for credit risk BaselCommittee

27/03/15 Capital floors: the design of a framework based on standardised approaches BaselCommittee

27/03/15 Discussion Paper Share classes of UCITS ESMA

31/03/15 Call for evidence – competition, choice and conflicts of interests in the CRA industry ESMA

10/04/15 Consultation paper – rethinking the UK financial services trade association landscape FS tradeassociations

10/04/15 Consultation paper on a report on good practices on individual transfers of supplementary occupational pension rights EIOPA

14/04/15 Consultation paper: draft ITS on procedures, forms and templates for the provision of information for resolution plans under theBRRD

EBA

17/04/15 CP1/15: assessing capital adequacy under Pillar 2 PRA

30/04/15 Consultative document – guidance on accounting for expected credit losses BaselCommittee

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Banking and capital

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Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 24

Forthcoming publications in 2015

Date Topic Type Institution

Client Money

Q1 2015 Review of the client money rules for insurance intermediaries Policy statement FCA

Consumer protection

Q1 2015 National Depositor Preference and UK depositors Policy statement PRA

Q3 2015 Calculation of contributions to DGSs Guidelines EBA

Financial crime, security and market abuse

Q2 2015 Draft MAR technical standards Technical standards ESMA

TBD 2015 Advice to Commission on Benchmark legislation Advice ESMA

Prudential

Q1 2015 Update on ITS on reporting of the leverage ratio Technical standards EBA

Q2 2015 LGD floors for mortgage lending Consultation EBA

Q2 2015 RTS on PD estimation Technical standards EBA

Q4 2015 Report on NSFR methodologies Report EBA

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Cross sector

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Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 25

Date Topic Type Institution

Securities and markets

Q1 2015 Implementing acts on third country equivalence decisions on exposuresto third country investment firms, clearing houses and exchanges treatedas exposures to an institution

Advice EBA

Q2 2015 Consultation Paper on MAR guidelines Consultation paper ESMA

Q2 2015 Feedback and Policy Statement on CP14/02, consultation on jointsponsors and call for views on sponsor conflicts – PS to CP14/21

Policy statement FCA

Q2 2015 Technical advice to the Commission on the review of EMIR Technical advice ESMA

Q2 2015 MiFID/MiFIR Draft Regulatory Technical Standards Technical standards ESMA

Q2 2015 Draft technical standards on CSDR Technical standards ESMA

Q4 2015 MiFID/MiFIR Draft Implementing Technical Standards Technical standards ESMA

Q4 2015 Securities Financing Transactions Regulation Discussion or ConsultationPaper on technical standards

Consultation or technical standards ESMA

Products and investments

Q2 2015 Restrictions on the retail distribution of regulatory capital instruments –PS to CP14/23

Policy statement FCA

Q3 2015 Advice on the application of the passport to third-country AIFMs andAIFs

Advice ESMA

TBD 2015 Undertakings For The Collective Investment of Transferable Securities V Technical advice ESMA

TBD 2015 RTS on format and content of disclosures in KID for PRIPs Technical standards ESMA

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Cross sector

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Banking and capital

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Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 26

Date Topic Type Institution

Recovery and resolution

Q2 2015 Advice on the criteria for determining the number of years by which theinitial period for the build up of the SRF may be extended

Advice EBA

Q2 2015 Partial transfer safeguards Advice EBA

Q3 2015 Notification requirements Technical standards EBA

Q3 2015 RTS on Contractual Bail in Technical standards EBA

TBD 2015 Recovery and Resolution Directive – PS to CP14/15 Policy statement FCA

TBD 2015 Strengthening the Alignment of Risk and Reward: New RemunerationRules – PS to CP14/14

Policy statement FCA

TBD 2015 Strengthening accountability in banking: a new regulatory frameworkfor individuals – PS to CP14/13

Policy statement FCA

Solvency II

Q1 2015 Solvency II

changes – PSPolicy statement FCA

TBD 2015 Solvency II Level 3 measures Level 3 text EIOPA

Supervision, governance and reporting

Q4 2015 Assessment of national SREP approaches Report EBA

Main sources: ESMA 2015 work programme; EIOPA 2015 work programme; EBA 2015 work programme; EC 2015 work programme; FCA policy development updates

Executive summary Saving the taxpayer –

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Cross sector

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Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 27

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

ABC Anti-Bribery and Corruption

ABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AIMA Alternative Investment Management Association

AML Anti-Money Laundering

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

AQR Asset Quality Review

ASB UK Accounting Standards Board

Banking ReformAct (2013)

Financial Services (Banking Reform) Act 2013

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

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

Basel III Basel III: International Regulatory Framework for Banks

BBA British Bankers’ Association

BCR Basic capital requirement (for insurers)

BIBA British Insurance Brokers Association

BIS Bank for International Settlements

BoE Bank of England

BRRD Bank Recovery and Resolution Directive

CASS Client Assets sourcebook

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CEBS Committee of European Banking Supervisors (predecessor of EBA)

CET1 Core Equity Tier 1

CESR Committee of European Securities Regulators (predecessor ofESMA)

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

CFT Counter Financing of Terrorism

CFTC Commodities Futures Trading Commission (US)

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

CIS Collective Investment Schemes

Glossary

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FS regulatory, accounting and audit bulletin – February 2015 PwC 28

CMA Competition and Markets Authority

CMU Capital markets union

CoCos Contingent convertible securities

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

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

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

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

CRAs Credit Rating Agencies

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

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

CRD IV Capital Requirements Directive 2013/36/EU

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

CTF Counter Terrorist Financing

DFBIS Department for Business, Innovation and Skills

DG MARKT Internal Market and Services Directorate General of the EuropeanCommission

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

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

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

ECON Economic and Monetary Affairs Committee of the EuropeanParliament

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

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

EP European Parliament

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

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

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FS regulatory, accounting and audit bulletin – February 2015 PwC 29

EU European Union

EURIBOR Euro Interbank Offered Rate

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

FASB Financial Accounting Standards Board (US)

FATCA Foreign Account Tax Compliance Act (US)

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

FDIC Federal Deposit Insurance Corporation (US)

FiCOD Financial Conglomerates Directive 2002/87/EC

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

FiCOD2 Proposal to overhaul the financial conglomerates regime (expected2013)

FMI Financial Market Infrastructure

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FSA Financial Services Authority

FSB Financial Stability Board

FS Act 2012 Financial Services Act 2012

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FSOC Financial Stability Oversight Council

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

G-SIIs Global Systemically Important Institutions

HMRC Her Majesty’s Revenue & Customs

HMT Her Majesty’s Treasury

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICAS Individual Capital Adequacy Standards

ICB Independent Commission on Banking

ICOBS Insurance: Conduct of Business Sourcebook

IFRS International Financial Reporting Standards

IMA Investment Management Association

IMAP Internal Model Approval Process

Executive summary Saving the taxpayer –

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Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 30

IMD Insurance Mediation Directive 2002/92/EC

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

IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision Directive2003/43/EC

IOSCO International Organisations of Securities Commissions

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

JURI Legal Affairs Committee of the European Parliament

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

MA Matching Adjustment

MAD Market Abuse Directive 2003/6/EC

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

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

MCD Mortgage Credit Directive

Member States countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

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

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

MMF Money Market Fund

MMR Mortgage Market Review

MREL Minimum requirements for own funds and eligible liabilities

MTF Multilateral Trading Facility

MoJ Ministry of Justice

MoU Memorandum of Understanding

NAV Net Asset Value

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

NFC Non-financial counterparty under EMIR

NFC+ Non-financial counterparty over the EMIR clearing threshold

NFC- Non-financial counterparty below the EMIR clearing threshold

NSFR Net stable funding ratio

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – February 2015 PwC 31

OFT Office of Fair Trading

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

ORSA Own Risk Solvency Assessment

OTC Over-The-Counter

p2p Peer to Peer

PERG Perimeter Guidance Manual

PRA Prudential Regulation Authority

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

PRIIPsRegulation

Proposal for a Regulation on key information documents forinvestment and insurance-based products COM(2012) 352/3

PSR Payment Systems Regulator

QIS Quantitative Impact Study

RDR Retail Distribution Review

RFB Ring Fenced Bank

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SCR Solvency Capital Requirement (under Solvency II)

SEC Securities and Exchange Commission (US)

SFT Securities financing transactions

SFD Settlement Finality Directive 98/26/EC

SFO Serious Fraud Office

SIPP Self-invested personal pension scheme

SOCA Serious Organised Crime Agency

Solvency II Directive 2009/138/EC

SSM Single Supervisory Mechanism

SSR Short Selling Regulation EU 236/2012

T2S TARGET2-Securities

TLAC Total Loss Absorbing Capacity

TR Trade Repository

TSC Treasury Select Committee

UCITS Undertakings for Collective Investments in Transferable Securities

XBRL eXtensible Business Reporting Language

Executive summary Saving the taxpayer –

ending ‘too big to fail’

Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

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Asset Management Banking & Capital Markets Insurance Local regulations & AML

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Mark James

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