tcf2016-d1: mitigating the headaches of imminent … · q1 2016. q2-q3 2016. ... regulatory...
TRANSCRIPT
#TCF2016#TCF2016
Mitigating the headaches of imminent regulations
Temenos Risk & Compliance PanelTCF 2016 - Breakout Stream D1 – Thursday, 5/19 – 12:30 – 13:15 p.m.
#TCF2016
1. Current headaches to the industry & timeline – Lisa Hall
2. International Financial Reporting Standards (IFRS 9) – Deloitte/Phil White
3. Common Reporting Standards (CRS) & Foreign Account Tax Compliance Act (FATCA) – Phil White
4. EU Financial Transaction Tax (EU FTT), General Data Protection Act (GDPR), ISO 20022 (MX) & Payment Services Directive (PSD) – Peter Ryan
5. Markets in Financial Instruments Directive (MiFID II) – Alexis Ouzeau
6. Basel III – Shawn Doumy
Agenda
#TCF2016#TCF2016
Current Headaches
#TCF2016
Current Headaches
Regulatory fines and settlements
increased by almost
45x since 2009
Source: McKinsey&Company 2015-Compliance 20 emerging best practice model
UK watchdog fines BoA’s Merrill Lynch$20 million for reporting failures
Swiss bank tax evasion fines to US reach $1 bn
Breaking news: EU agrees 4% fines for breaching data protection regulations
4
#TCF2016
80% of respondents agree that new banking business models will force compliance to rethink its operating model.
67% say improving systems and adopting new technology will be the most important change in the next year.
84% say that turning to digital solutions and adopting industry-leading technology helps drive efficiencies and manage emerging risk.
Compliance at a Crossroads
Source: Accenture’s 2016 Compliance Risk Study, “Compliance at a Crossroads: One Step Forward, Two Steps Back?”
Survey results from the 2016 Accenture Compliance Risk Study shows: The improvement in aggregated
management information [since moving to Temenos Core Banking
and a shared service center model]has been a huge advantage during the subprime crisis. For example,
when we wanted to understand our exposure on the client and nostro
side to Lehman Brothers, it took us half an hour to understand that we
had no exposure. In contrast, at the time of the Barings collapse, we
spent significantly more time retrieving this information.
Pierre-Louis Favre –CFO - Schroder & Co Bank AG
““
5
#TCF2016
Regulation Timeline
2013 2014 2016 2017 2018 2019FATCA
July 2014GDPRMay 2018
ISO 200222013
(Optional)
CRSJan.2016
EU FTTJun. 2016
MIFID IIJan. 2017
PSD2 Jan.2018
Basel IIIMarch 2019
IFRS 9Jan. 2018
T2S (ISO
20022) 2018
6
#TCF2016#TCF2016
International Financial Reporting Standards (IFRS 9)
#TCF2016
Published by the IASB in July 2014, effective from January 2018
Worldwide more than 100 countries require, permit or are converging to IFRS
Will replace the earlier IAS 39
IFRS 9 Overview
Hold assets in order to collect contractual cash flows
Fair Value through Other Comprehensive Income achieved by both collecting contractual cash flows and selling financial assets
Includes the same option as IAS 39 that permits entities to elect to measure financial liabilities at fair value through profit or loss if particular criteria are met
Addresses the accounting for Financial Instruments with new rules
Principle-based vs. rule-based Prospectively-only Classification based on
business model and nature of cash flows
One Impairment Model Business model-driven
reclassification
Key Changes ObjectivesAdoption
8
#TCF2016
Temenos Strategy for IFRS 9
APR-MAY 2016 MAY-DEC 2016 DEC 2016-FEB 2017 MAR 2017 APR 2017
Requirements
Design, Coding, Model, Testing
Acceptance, Testing, Knowledge, Marketing
Rollout
Training & Handover
At the time of writing this roadmap is accurate and is regularly updated, however, for various reasons it may be subject to change
Effective DateJan 2018
9
#TCF2016#TCF2016
Common Reporting Standards (CRS)
#TCF2016
CRS Regulation Overview
Released by OECD in July 2014, effective from January 2016
98 countries have currently committed to implement the CRS
55 Jurisdictions Undertaking First Exchange of Information by 2017 and 43 by 2018
Adoption
Framework for the automatic exchange of information
FIs required to report financial account information on account holders that are tax residents in other participating jurisdictions
Automatic exchange of information from the source country to the residence country
Key Changes
Process to identify reportable accounts and obtain accurate, required information, financial institutions must follow a common standard with robust Due Diligence procedures
Reporting/Exchange of Information: Basic Information/Account Number Name of Reporting FIAccount BalancesIncome Details (Interest, Dividend, etc.)
Objectives
11
#TCF2016
Temenos CRS Strategy
Q1 2016 Q2-Q3 2016 Q4 2016 Q3 2017 Q4 2017
Phase I : Client Identification & Due Diligence Module: CD
Phase II: Reporting Module: CE Roll-out: Early Q1 2017
Jan. 2016: New Account Opening procedures to record the Tax Residence to be in place
Dec. 2016: Due Diligence to Identify; High Value Pre-existing Individual Accounts
Dec. 2017: Due Diligence to Identify; Low Value Pre-existing Individual Accounts & Pre-existing Entity Accounts
Sept 2017/2018: Low Value Pre-existing Individual Accounts & Pre-existing Entity Accounts
Sept 2017 New Accounts & High Value Pre-existing Individual Accounts
At the time of writing this roadmap is accurate and is regularly updated, however, for various reasons it may be subject to change
Effective DateJan 2016
Effective Date30 Sept 2017/2018
12
#TCF2016#TCF2016
Foreign Account Tax Compliance Act (FATCA)
#TCF2016
FATCA Regulation Overview
Effective July 2014
In order to reduce the administrative burden of complying with the US regulations, many countries have entered into Intergovernmental Agreement (IGA) with the US Government
Adoption
Financial institutions required to identify accounts held by US persons and report to IRS/local authorities
The agreement imposes significant reporting and disclosure obligations
Annual reporting on the identified US accounts to the tax authority
Key Changes
FATCA aims to prevent tax evasion by US persons using foreign accounts
Obtain and maintain necessary documentation for the determination of US accounts
Objectives
14
#TCF2016
Temenos FATCA Strategy
2014 Q1-Q2 2015 Q2 2016 Q1 2019 Q2 2019
Phase I: Client Identification Module : FA
Phase II: Withholding Module: FW Roll-out : Q1 2018
July 2014: New Account Due Diligence/Identification
Jul 2014: US Source FDAP payments to new Account Holders identified as NPFFIs/Recalcitrant and Passive NFFEs with undisclosed Subst US Owners
Jan 2019: Certain Gross Proceeds payments to non complaint accounts
Mar/May 2015: Form 8966 Reporting for 2013 and 2014 on Substantial US Owners & ODCFFI
Phase III: Reporting Module: FE Roll-out: Q1 2018
Mar/May 2016: Additional Income Reporting Custody/Depository Accounts
Mar/May 2019: Annual Form 8966 reporting
At the time of writing this roadmap is accurate and is regularly updated, however, for various reasons it may be subject to change
Effective DateJul 2014
Effective DateJan 2019
Effective DateMar/May 2019
15
#TCF2016#TCF2016
EU-Financial Transaction Tax (EU FTT)
#TCF2016
EU FTT Regulation Overview
Initial effective date 01 Jan 2014, postponed to Mid 2016
7 out of 27 Countries Opposing, 9 Neutral and 11 are Favouring the adoption of the EU FTT
Adoption
The European Union Financial Transaction Tax (EU FTT) is a proposal made by the European Commission
The Tax would impact Financial Transactions between Financial Institutions
Charging Tax:0.1% - Shares & Bonds0.01% - Derivatives
Key Changes Introduce FTT within some
of the member states of the European Union & Replace Local FTTs
Once EU FTT comes in to effect all the local FTTs will disappear and one common regulation will be in existence
Objectives
17
#TCF2016
Temenos EU FTT Strategy
EU FTT solution is available from AM R16 Release onwards as part of the ‘EF’ module
Note: Even if the EU FTT proposal is not passed by the member countries, the solution developed by Temenos will be still applicable to comply with the local FTTs.
Q1 2016 Q2 2016Q4 2015Q3 2015Q2 2015
Effective DateJan 2014
Postponed to Mid 2016
18
#TCF2016#TCF2016
General Data Protection Regulation (GDPR)
#TCF2016
GDPR Regulation Overview
Effective from 2018 in all EU member states
Replaces the existing Data Protection Act 1998
Impacts any organisation that gathers, processes and stores personal data
Adoption Personal Data should be
processed under the responsibility and liability of the Data Controller, who shall ensure and demonstrate for each processing operation compliance with the Regulation
Non-compliance with the GDPR can result in reputational damage, litigation and major fines
Key Changes Personal data are not made accessible to
an indefinite number of individuals Only those Personal Data should be
processed which are necessary for each specific purpose
Personal Data should not be retained beyond the minimum necessary both in terms of amount of data and the time of their storage.
Personal Data should be processed lawfully, fairly and in a transparent manner in relation to the data subject
Objectives
20
#TCF2016
Temenos GDPR Strategy
2015 April 2016 September 2016 October 2016 January 2017
EU Council and Parliament Adoption
Temenos Whitepapers on GDPR
Note: Early days of the regulation, currently Temenos is in the phase of preliminary analysis to see how the regulation will impact the business and the systems.
Impact Analysis Effective Date2018
21
#TCF2016#TCF2016
ISO 20022 (MX)
#TCF2016
ISO 20022 (MX) Overview
Widely adopted in Payments since 2013
Being rolled out in Securities Markets
Forex and Trade Services in the future
Nearly 400 messages defined and new messages being added
Adoption ISO 20022 are xml messages
with a consistent set of tags Producing single framework to
produce ISO20022 messages to support all modules
Staged roll-out across different modules starting with Securities
Future opportunities in data warehousing exist because of standard structure
Key Changes Enable communication interoperability
between financial institutions, their market infrastructures and their end-user communities, all using XML messages
Allow STP throughout between different institutions
Take advantages of opportunities to automate error processing
Objectives
23
#TCF2016
Temenos ISO 20022 (MX) Strategy
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
Begin Development for Securities Messages
New MX Messages Framework module is available
Produce Framework Specification
Document requirements for Securities
T24 Framework release (201608)Integration Framework Development
Securities Message Analysis
Produce Framework Training Materials
Complete Development of Securities Messages
Testing and release of MX Messages Framework
Adoption 2018
24
#TCF2016#TCF2016
Revised Payment Services Directive (PSD2)
#TCF2016
PSD2 Overview
All EU member states (28) plus Iceland, Liechtenstein and Norway to adopt an publish measures for PSD2 compliance by January 2018
Adoption
Revised European Union Payment Services Directive
Establishes legal basis of Third Party Payment and Account Information Service Provider
Regulatory requirement for Open API Access to Account Data – XS2A
2-factor authentication mandatory in all channels
Key Changes Introduces regulatory framework for
Third Party Payment Providers and Account Information Services
Open API Access to Account and Customer Information (XS2A)
Increase in regulations in e-payments and m-payments
Third party providers must itemise charges forwarded to payers
Objectives
26
#TCF2016
Temenos PSD2 Strategy – XS2A
Q4 2015 Q3 –Q4 2016 Q1-Q2 2017 Q3- Q4 2017 Q1 2018
End Q2 2017 Available to customers
Jan. 2018: PSD2 Go-Live
Oct. 2015: Adopted by EU ParliamentNov. 2015: Adopted by the EU CouncilDec. 2015 RTS Consultation begins (Regulatory Technical Standards)
Summer 2016: EBA Publishes RTSQ3 2016 API Functional and Technical AnalysisDec. 2016: Publish Temenos API rollout
Q2 2017 Complete Testing and Documentation
Q3 2017 Onsite testing and implementationQ3-Q4 2017 Regulatory API Compliance
Q1 2017 API Development Effective Date
Jan 2018
27
#TCF2016#TCF2016
Markets in Financial Instruments Directive (MiFID II)
#TCF2016
MIFID II Overview
Start date moves from 1st of January 2017 to 3rd of January 2018
Adoption
Increase responsibility of management body, strengthen the obligation about remuneration schema, prohibition of conflict of interest, internal governance, selection/training of personal
Record client’s order communication for 5 years. All member states allow firms to appoint tied agents Third country regime change: establishment of branch conditioned by
service and client profile Stricter obligations about product approval, client profiling, suitability/
appropriateness for services and product packages, experience, risk aversion, best execution, strategy of distribution, information to client on services/products and for transactions with eligible counterparties
Stronger restrictions about inducements and for independent advices
Key Changes
Increase investor protection
Alignment of regulation across EU & Increase power of supervisors
Increase competition across financial markets
Strengthen information relative to the services, the financial instruments, the costs and charges
Objectives
29
#TCF2016
Temenos MIFID II Strategy
WealthSuite Core BankingWealthSuite Core Banking MiFID 2scope implemented in 2017
WealthSuite Front Office
Suitability & AppropriatenessBest ExecutionClient ClassificationEligible CounterpartiesProcesses for client profiling, Investment objectives and risk aversion profilingFinancial product risk level classificationDiscretionary, Advisory, Execution Only
WealthSuite Front Office R 14.12 MiFID 2 Order PackagingSet of checks based on client profile applicable for orders, for all instruments and all type of servicesAvailable in all functions to create orders Single Order OrderSession (creation from Manual Order, Allocate Order, Rebalancing, Initiate Order) Proposal Order Generator
WealthSuite Front Office R 15.06 Questionnaire ModuleIntroduce a normalized profiling process to handle client profile and investment profilingProcesses available: Client Suitability & Appropriateness Profiling Investment Profiling Process integrated with Order Proposal
2017 2018201620152014
Effective DateJan 2018
#TCF2016#TCF2016
Basel III
#TCF2016
Basel III Overview
Effective date extended from March 2018 to March 2019
Adoption
New framework for RWA and CAD
New policies for portfolio leverage ratio
Liquidity Requirements Introduction of LCR and NSFR Intra-day and available liquidity
Key Changes
Improve the banking sector’s ability to absorb shocks arising from financial and economic stress
Improve Risk Management & Governance
Objectives
32
#TCF2016
Temenos Basel III Strategy
All Modules Historical Data Risk Metrics Trend Analysis and Reporting Analytics, Predictive and Decision support via Data Sampling
Market AnalyticsPerformance AllocationAdvanced Derivatives Modelling & Pricing
Regulatory Capital & Market AnalyticsCredit Valuation Adjustment (CVA) Models & Expected Default Frequency (EDF) modelling
Assets Liabilities ManagementCash flows Generation engine and Balance Sheet SimulationABS & Bonds Pricing for CRD IV Reporting on Liquidity
Introducing reporting cubes for all modules to allow more flexibility in on-demand reports and data manipulation. Current system provides no pre-built cubes.Insight Risk Front-End: New Design
33
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Effective DateMarch 2019
#TCF2016
Regulatory Compliance & Capital Allocation: FactsTemenos Customers reduce their capital
consumption by 37%:
Temenos Customers achieve higher level of
working capital:
Fast time to Market products packages:
Optimized capital allocation to more profitable business lines
MitigantsOptimization
Advanced RWA calculation models
6 weeks average implementation
Pre-packaged software for Basel II & III compliance
Pre-packaged risk analytics for EWRM (Liquidity, Market, Credit…)
Pre-packaged regulatory reports for Basel II & III, COREP/FINREP, etc.
Temenos customers can leverage their
capital to exposure by 1 to up to 75:
Understanding your customer (SCRV)
Understanding your transaction (STRV)
34
#TCF2016
Avoid regulatory fines, reputational damage and other risks by staying on top of regulatory changes.
Make regulatory risk a corporate IT investment priority.
Turning to digital solutions and adopting industry-leading technology will help drive efficiencies and manage emerging risk.
Pain Relief for Your Compliance Headaches 35
#TCF2016
Don’t forget!
Join the conversation – Tweet or Facebook post the #tcf2016
Download this presentation now – you can download this presentation and other TCF materials from the TCF2016 app
Have your say – take part in the 9th annual TCF survey, also available on the TCF2016 app
36
#TCF2016#TCF2016
Thank you