1. Art and Diseño

Being better informed
FS regulatory, accounting and audit bulletin
PwC FS Risk and Regulation Centre of Excellence
January 2015
In this month’s edition:

BCBS reviews credit and market risk frameworks

ESMA consults on MiFID II details

EIOPA releases 16 consultations on Solvency II

FCA extends regulation of benchmarks
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Executive summary
Welcome to this edition of “Being
better informed”, our monthly FS
regulatory, accounting and audit
bulletin, which aims to keep you up to
speed with significant developments
and their implications across all the
financial services sectors.
Since 2008 the solution to addressing
the structural and institutional
weaknesses exposed by the financial
crisis, and the following fraud and
market abuse scandals, has been
creating more regulation. But market
sentiment towards regulation remains
hostile, the public doesn’t see it as
effective and politicians seem weary of
the process. According to participants
in our latest Banking Banana Skins
survey, regulation remains the biggest
threat to banks, ahead of the economy,
devaluation of the Euro, geopolitical
tensions or threats to cyber security,
each which are each very serious
concerns. Respondents cited political
interference and the backlash against
financial institutions as the second
largest threat, with one respondent
feeling there is a “gotcha attitude”
against banks.
consultation on MiFID II, the EBA
published a couple of consultations on
the Mortgage Credit Directive and
EIOPA released 16 consultations on
various standards and guidelines for
Solvency II. We’ll continue to see this
trend across 2015 – the EC and the
ESAs intend to progress work more
than 350 RTS and ITS year.
Compare this sentiment to that in our
2005 Banking Banana Skins survey.
Back then participants also believed
that the greatest risk to the financial
industry was “too much regulation”.
They felt “regulatory overkill” was
endangering the health of banks. One
senior banker went as far as claiming
regulation was “out of control”. If only
we had known what was coming!
But globally, the economic growth
agenda is likely to get more attention in
2015, with new regulation becoming a
means to an end rather than being the
primary focus. In its November 2014
Communique, the G20 used the word
“growth” 32 times (compared to 12
times in 2011) e, but did not mention
“regulation” at all (2011: five times).
The Turkish G20 Presidency mantra of
“inclusiveness, implementation, and
investment for growth” will prioritise
the financial system’s role in
stimulating growth in the real economy.
It’s clear that the yardstick of what is
considered “too much” regulation has
entirely shifted in the last decade.
While preparing for Basel II might have
been a big challenge in 2005, it pales in
comparison to the reforms financial
institutions are dealing with in 2015.
Last year firms and regulators struggled
to meet implementation deadlines, a
tendency that could continue over the
next several years. In December we saw
further evidence that the focus on
implementing very detailed technical
regulation will continue for the next
several years. In December, ESMA
published a walloping 2,100 page
FS regulatory, accounting and audit bulletin – January 2015
EU Commissioner Hill believes that
“right now, there is something else that
threatens financial stability…a lack of
growth”. This sentiment is supported
by his boss EC President, Jean-Claude
Juncker, who has put jobs and growth
at the top of his priorities for next five
years. Juncker has said he will be
looking at everything “through the
prism of jobs and growth” and sees a
“successful, competitive financial
services sector” as essential. Juncker
wants financial services to be seen as
part of the economic mainstream, not
cut off from society at large, with a
particular focus on funding the EU’s
maligned SME market. This agenda is
likely present a number of
opportunities for the financial industry
as it continues to recover, as the
regulators seek to open up new
channels for financial activity.
Our first feature this month focuses on
climate change, which is moving up
regulators’ agendas. In our second
feature, we provide an update on where
we are on the long haul towards MiFID
II implementation in early 2017.
We hope you find these articles helpful,
and would very much welcome any
feedback you may have on how we can
improve your experience as readers.
Laura Cox
FS Risk and Regulation Centre of Excellence
020 7212 1579
[email protected]
@LauraCoxPwC
PwC  1
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Contents
How to read this bulletin?
Review the Table of Contents the
relevant Sector sections to identify the
news of interest. We recommend you
go directly to the topic/article of
interest by clicking in the active links
within the table of contents.
Executive summary
1
MiFID II are we nearly there yet?
3
A changing climate for regulation?
5
Cross sector announcements
7
Banking and capital markets
13
Asset management
20
Insurance
22
Monthly calendar
27
Glossary
34
Contacts
39
FS regulatory, accounting and audit bulletin – January 2015
PwC  2
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
MiFID II are we nearly there yet?
ESMA was extraordinarily generous this
Christmas, offering us an early gift of
technical advice and a consultation on the
Level 2 measures for MiFID II on 19
December 2014, just before the holidays:

ESMA’s Technical Advice to the EC on
MiFID II and MiFIR (446 pages)

Consultation Paper on the RTS on
MiFID II/MiFIR (645 pages of
consultation and a further 520 pages of
draft legislation).
Over the past few weeks we and others
across the industry have been very busy
digesting these tombs and drafting our
‘thank you’ letters (i.e. consultation
responses). Understandably, many
interested parties are hoping that these
latest missives contain the rest of the detail
required to implement MiFID II.
The following is a brief update on where we
are in the legislative process, what remains
to be done and when we expect those pieces
to fall into place. Although we’re still
awaiting some details, firms should begin
implementing MiFID II now, if they haven’t
started already.
Technical advice
ESMA’s technical advice to the EC contains
its final recommendations on those parts of
MiFID II where the EC is empowered to
adopt delegated acts. These delegated acts
provide necessary detail on the
FS regulatory, accounting and audit bulletin – January 2015
implementation of the high level
requirements set out in the Level 1 text
published in June 2014 (i.e. the MiFID II
directive and regulation). For example,
MiFID II requires firms to establish a best
execution policy taking into account certain
factors (Directive Art 27). The associated
delegated acts establish the relative
importance of those execution factors,
taking into account the size and type of
client orders and whether the firm is
executing the trade for a retail or
professional client.
In its most recent advice, ESMA follows the
same format as its consultation in May 2014
(ESMA/2014/549). Throughout the
technical advice, it summarises the feedback
it received and explains how it has taken
those points into consideration in reaching
its conclusions. It has not invited firms to
comment further at this stage.
The EC is not obliged to accept ESMA’s
advice. Given the breadth and nature of the
advice, we can safely assume that the EC
will not let it all pass unchallenged - subtle
changes may also appear as the advice
metamorphoses into legislation. The EC has
to turn the ESMA advice, which is fairly
unstructured in places, into EU law recitals, articles and so on. So we will need
to keep an eye on the detailed wording as
that process progresses.
The EC should produce draft legislation in
the form of delegated acts by early July this
year. Both the Council and the EP then have
the right to object to the delegated acts
before they become EU law (i.e. publication
in the Official Journal). But we are getting
down to the wire on the timetable so,
unusually, the EC, EP and Council are
working together far earlier than usually
occurs in the formal process to try to ensure
that no nasty surprises arise that could
derail proceedings. Let’s hope it works.
If all goes well, we should expect the final
text to be published in the Official Journal
well before the end of 2015. This timetable
should give EU countries time to take the
delegated acts fully into account when
transposing the Directive, which they are
required to do by 3 July 2016.
Consultation
In areas where implementing MiFID II
requires further information of a purely
technical nature, ESMA is obliged to
produce RTS and/or ITS. Broadly speaking,
RTS are more complex and touch on issues
which may involve a degree of
interpretation. ITS typically cover more
finite issues with no room for interpretation
and which do not require scrutiny from the
Council or EP.
The CP follows ESMA’s May 2014
Discussion Paper, and includes ESMA’s
feedback for firms that responded to the DP.
PwC  3
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Annex B to the CP contains the draft RTS
and ITS texts – which are set out in the CP
as EU legislation, complete with recitals.
The CP also raises 245 specific questions for
firms about ESMA’s proposed approach.
The consultation closes on 2 March 2015.
and identify, articulate and evidence their
concerns. That’s a tall order, but it is critical
that firms do so now. They will have very
limited opportunity to influence the debate
once ESMA submits the final draft RTS to
the EC.
possible, if they had not already done so.
Both the FCA and ESMA stressed that firms
must implement MiFID II on time. Starting
late is no excuse for not doing meeting the
deadline – firms should begin work now if
they haven’t done so already.
Having digested the feedback to the
consultation, ESMA must revise its
proposals and submit final versions of the
RTS to the EC by 3 July 2015. Given the
advanced state of the texts, we believe it
may submit them sooner.
ESMA will have to review and assess the
responses it receives and make any
appropriate amendments in time to submit
its final draft RTS to the EC by early July.
We expect changes between the CP and the
final text to focus on a limited number of
critical flaws (where firms identify them)
rather than a number of more nuanced
changes. 305 firms, market operators and
industry associations responded to the May
2014 CP, and this CP is likely to attract a
similar amount of responses, so ESMA will
have its work cut out for it.
In summary, we aren’t there yet. But the
end is in sight, and ESMA has given us a
clear road map. Perhaps we really should
send a ‘thank you’ letter.
The EC then has three months to endorse
ESMA’s RTS proposals. Like the delegated
acts, they are also subject to a ‘no objection’
review from the Council and the EP. If the
EC makes no changes to ESMA’s proposals
this period is relatively short (one month)
but if the EC makes amendments that
period will be extended to 3 months (with
the possibility of an additional 3 months).
So again, we could be close to the wire on
getting the RTS completed. We expect to see
a similar process of early collaboration
between the Council, EP and EC during the
endorsement period on these RTS to that
which is happening on the delegated acts
mentioned above.
Although this is a consultation and the draft
RTS and ITS are not yet final text, it is
reasonable to ask whether ESMA has much
scope to make changes at this point. With
the Christmas period, firms practically only
have two months to read the response,
digest the implications of the proposed rules
Monthly calendar
Glossary
So, are we there yet?
Nearly. Aside from the MiFID II Directive
and Regulation, none of the new rules are
final yet. But both ESMA’s technical advice
and the CP clearly show the current views of
EU policy makers and the extent to which
industry lobbying has influenced policy
makers’ views on key topics.
But we now have enough information for
firms to complete impact assessments and
gap analysis, and begin planning
implementation projects. Regulators expect
firms to be getting started now. At its MiFID
II conference in September, the FCA made
it clear to attendees that it expected UK
firms to begin work on MiFID II as soon as
FS regulatory, accounting and audit bulletin – January 2015
PwC  4
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
A changing climate for regulation?
The PRA recently surveyed 30 insurers on
how they perceive and manage the risks of
climate change, the findings of which it
plans to publicise soon. The survey is the
first part of the PRA’s investigation into
climate change, providing the UK
Department for the Environment, Food and
Rural Affairs (DEFRA) with a Climate
Change Adaptation Report (due July 2015)
for the FS sector. DEFRA’s 2015 report will
in turn inform its next UK Climate Change
Risk Assessment, due to Parliament in 2017.
The second part of the PRA’s investigation
will involve deeper interviews with a similar
group of firms to explore the roles of the
industry and the PRA in addressing global
issues arising from climate change.
interlinked that regulators will need to
consider all parts of the market, including
banks and investors. Although the BoE has
not made any formal announcement, public
comments suggest that it plans to extend
the survey to banks and asset managers in
future.
The PRA’s survey represents a departure
from the financial concerns it more typically
deals with, but we expect that financial
regulators will have to increasingly consider
climate change, as the agenda of reduction
and preparation advances. The PRA started
with the insurance industry as it has the
more obvious links to the risks of climate
change.
As climate change leads to more extreme
weather events, the insurance sector will
naturally expect to receive more weather
related claims. But the financial system is so
FS regulatory, accounting and audit bulletin – January 2015
The PRA Survey
In its survey the PRA asked insurers about
risks to investments from climate change,
including:

current risks to the continued safety and
soundness of the business

top identified risks and their likelihood
and impact

identified opportunities

future risks

how firms managed the risk they
identified

the role of the industry, insurance
regulation and the PRA adapting to
climate change.
The PRA’s underlying question is what role,
if any, does regulation have in driving
climate risk management in the insurance
industry? The PRA suggested that
regulation might be an option where it finds
that firms ignoring the risks associated with
climate change. But if the PRA is satisfied
that firms are already considering the risks
and managing them adequately it may opt
for a softer approach through issuing
guidance, or even feel no need to act at all.
Exploring other options
Regulation may not be the best answer to
ensuring institutions manage climate
change risks effectively. US insurance
regulators have taken a different approach
that relies on disclosure to generate investor
pressure through comparing peers across
the industry. The National Association of
Insurance Commissioners (NAIC) recently
published the results of the third Climate
Risk Disclosure Survey which it produced
in conjunction with insurance regulators in
California, Connecticut, Minnesota, New
York and Washington states. The survey
includes responses from 330 insurers which
the NAIC makes publicly available alongside
a qualitative assessment of the contents of
each response.
This level of public disclosure helps
investors in insurance companies assess
how prepared individual US insurers are for
climate risks. The responses enable
advocacy groups, such as the US investor
coalition Ceres, to produce benchmarking
PwC  5
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
surveys to monitor performance and
progress. This softer way of encouraging
firms to take action without the need for
regulation may be an option for the PRA to
consider.
More investor activity
It is still early days for financial regulation
on climate change but it is clear that
regulators in the UK and the US have begun
to set the direction of travel. Investors are
increasingly vocal about the risks of climate
change to asset values, particular in respect
of the so-called “stranded assets” of carbon
intensive sectors where developing
regulation and changes to pricing may make
such assets unviable. A small but growing
group of investors, supported by academics,
think tanks and environmental groups, has
been calling for divestment of carbon
intensive companies. But for now most
investors prefer to remain invested and
instead engage companies on how they
intend managing these risks.
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
PRA will expand the current consultation to
other industries.
Firms should anticipate requests for
information from regulators about how they
are assessing and mitigating the risks that
climate change may pose to their
businesses. Now is the time to ensure your
firm’s risk framework takes this important
issue into account, and to consider how you
will respond to such requests from the
regulators.
What the future holds
Jon Williams is a partner in PwC’s
sustainability and climate change team,
and an expert on sustainable finance,
including climate risk.
Whatever the views of investors, climate
risks are transferring to the financial
services sector, and the regulators are
beginning to focus attention on the way
firms manage those risks. Regulators are
right to consider these risks across the
whole financial system rather than one part
of it in isolation, given the connectivity of
risks between insurers, asset managers and
banks. So it is reasonable to expect that the
Further information on how the
insurance industry is managing climate
risk can also be found through the
ClimateWise initiative, a group of
industry members committing to follow
six principles on climate risk
management. Since 2010 PwC has acted
as independent reviewer of the
performance of the members against
the principles.
FS regulatory, accounting and audit bulletin – January 2015
PwC  6
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Cross sector announcements
Regulation
In this section:
Regulation
7
Benchmarks
7
Capital, liquidity & funding
7
Conduct
8
Consumer protection
8
Enforcement
9
FICOD
9
Financial stability
9
Other regulatory
9
Payment systems
11
RDR
11
Regulator process
12
Securities and derivatives
12
Accounting
12
Audit
12
Benchmarks
Regulating seven more benchmarks
On 22 December 2014, HMT published its
response to the Fair and Effective Markets
Review’s recommendation on regulating
financial benchmarks. Despite some debate
over the RONIA and the LMBA Silver Price
benchmarks, it has brought all seven
proposed benchmarks into the UK
regulatory regime.
HMT made minor changes from its earlier
proposals, to ensure that developments in
the London Gold Fixing are reflected in the
draft legislation and that the ICE Brent
Index is named as the regulated benchmark
rather than the ICE Brent Futures price.
Simultaneously the FCA consulted on
bringing additional benchmarks into the
regulatory and supervisory regime. The
FCA wants to use the LIBOR regulatory
framework for the seven additional
benchmarks.
The FCA recognises the different calculation
methodologies for the benchmarks.
Administrators of benchmarks that do not
have submitters, or rely on other
information in addition to submissions, will
need to treat any data or information used
to determine the benchmark in the same
manner as a ‘submission’. The FCA
FS regulatory, accounting and audit bulletin – January 2015
proposed that the definition of a submission
would include data or information that was
made available to the administrator (even if
it was not necessarily used).
comparing simple and transparent
securitisations.
The FCA does not want to make any
changes to the current benchmark
submitters’ requirements. It believes the
practices and arrangements in place are
sufficiently general, high level and universal
to apply to the benchmark submitters
coming into regulatory scope. The
consultation closes 30 January 2015.
The BCBS and IOSCO have asked market
participants to answer four questions
regarding the criteria and the goals they are
trying to achieve by 13 February 2015.
Firms don’t have to take any regulatory
action following the release of these criteria.
The BCBS agreed at its September 2014
meeting to consider how to incorporate the
finalised BCBS-IOSCO criteria into the
securitisation capital framework.
Capital, liquidity & funding
Harmonising Pillar 3 disclosures
BCBS and IOSCO simplify
securitisations
The EBA published final guidelines on
materiality, proprietary and
confidentiality and on disclosure frequency
under Pillar 3 of CRD IV on 23 December
2014. can rely on waivers to avoid
disclosing information that is immaterial,
proprietary or confidential. But the EBA’s
monitoring has shown significant variations
in how institutions use waivers and comply
disclosure standards, reflecting different
interpretations of the three concepts and
raising concerns about possible incorrect
use of the waivers. So it has set out a new
common waiver framework covering the:
The BCBS and IOSCO defined Criteria for
identifying simple, transparent and
comparable securitisations on 11 December
2014. In 2014, they established the Task
Force on Securitisation Markets, charged
with identifying factors hindering the
development of sustainable securitisation
markets and developing criteria for
identifying simple, transparent and
comparable securitisations.
Building on the task force’s work, the BCBS
and IOSCO have identified 14 nonexhaustive and non-binding criteria. These
criteria aren’t a substitute for investor due
diligence but aim to assist the financial
industry in identifying, developing and

process and criteria institutions should
follow when considering using a
disclosure waiver to disclose more
frequently than annually
PwC  7
Executive summary

MiFID II are we nearly
there yet? & A changing
climate for regulation?
information that institutions should
provide when using waivers or choosing
to disclose more frequently.
The EBA doesn’t provide a common
materiality threshold but insists that senior
managers should be able to understand the
indicators used in a bank’s waiver
assessment. Firms can decide on the
frequency of disclosure, as long as it is more
frequent than annually.
The guidelines will come into effect six
months after publication in the Official
Journal.
Conduct
Improving cross-selling practices
On 22 December 2014, the JCESA consulted
on guidelines for cross-selling practices. It
outlined conduct requirements for all firms
to ensure that they treat their customers
fairly.
Competent authorities should check that
firms comply with the standards expected of
them when cross-selling products to
customers. Specifically the JCESA wants
firms to:


improve disclosures on price, costs and
other non-price features when different
products are cross-sold with one another
communicate all relevant information in
a timely and prominent manner,
improving customer understanding of
whether the purchase of the individual
products is possible
Cross sector
announcements

Banking and capital
markets
improve their assessments of customers’
individual demands and needs, and the
suitability and appropriateness of the
cross-sold product.
The JCESA also clarified the customer’s
post-sale cancellation rights after
purchasing financial products. The deadline
for comments is 22 March 2015.
Transitioning to the new senior
manager regime
The FCA and PRA jointly published a
consultation on Strengthening
accountability in banking: forms,
consequential and transitional aspects of
the Senior Manager and Certification
Regimes on 19 December 2014. They have
outlined their transitional approaches
before HMT formally commences the
relevant provisions of the Banking Reform
Act. These approaches include how in-flight
applications and grandfathering will work in
practice, and draft regulatory forms.
The PRA has proposed more frequent
reporting for conduct rule breaches.
Previously, reporting was quarterly except
for those in Senior Manager functions, who
would need to report within seven days; the
PRA has now extended the seven day
reporting obligation to PRA-designated
Certification functions (material risk takers
under CRD IV).
The FCA and PRA expect to publish a Policy
Statement for the wider consultation during
2015, which could alter the transitional
arrangements. They expect to publish their
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
final approach to non-EEA branches during
Q1 2015. The consultation is open for
comment until 27 February 2015.
Wheatley underlines culture’s
importance
On 2 December 2014, Martin Wheatley,
Chief Executive of the FCA, spoke at the
FCA’s Enforcement Conference on the
commercial importance of culture to
industry. He concentrated on the link
between firm culture and FCA enforcement,
highlighting how cultural complacency can
negatively impact firms, such as in the FX
market. He also considered how firms can
foster cultural change and the importance of
doing the right thing.
Wheatley underlined that enforcement will
always be a key tool for the FCA, but
recognised that rehabilitation is integral to
improving customer outcomes. He feels the
FCA needs to intervene early to prevent
consumer detriment, and reminded firms
that they need to reduce the frequency and
scale of the cultural and governance
failures.
Consumer protection
SEC discusses bad actor prohibitions
SEC Commissioner Kara Stein touched on
the importance of the “bad actor”
prohibitions for private offerings in a speech
on investor protection on 4 December 2014.
Dodd-Frank disqualifies individuals and
firms that have committed past US
securities law violations from relying on
Monthly calendar
Glossary
private placement exemptions from SEC
registration requirements to raise funding
(e.g. under Rule 506 of Regulation D). The
SEC has the power to grant waivers from
this disqualification. Stein feels that the
SEC has been overly lenient in granting
such waivers in the past,, so she supported
the SEC adopting a more nuanced approach
to disqualification waiver applications – in a
recent order the SEC granted a conditional
waiver imposing a strict probationary
period and required the firm to use an
independent compliance consultant.
New FCA complaints handling
proposals
The FCA proposed new policies for firms
when handling complaints on 11 December
2014. It is extending the informal resolution
time from one to three business days before
the formal escalation procedures are
triggered. The FCA believes that consumers
will benefit from more complaints being
handled informally.
To monitor all complaints, the FCA is
extending the reporting obligations to all
complaints, and firms must inform
consumers of their referral rights to the FOS
irrespective of whether the complaint is
formal or not.
Firms must also provide complaint data at a
product and service level, including speed to
response and redress. Firms may not use
premium telephone numbers for postcontractual calls.
PwC  8
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Enforcement
FICOD
HMT reviews enforcement decisions
JCESA harmonises FICOD supervision
HMT published its Review of enforcement
decision-making at the financial services
regulators on 18 December 2014. It follows
the Government’s May 2014 consultation on
the processes used by the FCA and PRA for
enforcement cases.
The JCESA published final guidelines on
the convergence of supervisory
coordination arrangements for financial
conglomerates on 22 December 2014. It
clarifies and enhances cooperation
arrangements between competent
authorities for cross-border financial
conglomerates.
HMT makes a number of recommendations
to ensure that they continue to make fair,
transparent and efficient enforcement
decisions:


a new independent enforcement
decision-making committee for the PRA
with a dedicated and independent chair

mapping corporate structures and
written agreements

coordinating information exchange,
supervisory planning and supervisory
activities in going concern and
emergency situations
a new, sign-posted, expedited procedure
to access the Upper Tribunal

regular independent reviews of the
regulators’ settlement processes

measures to enhance the accountability
of the FCA and PRA decision makers

larger penalties for parties being
investigated if they delay settlement

steps to encourage parties being
investigated to make early admissions to
resolve cases more quickly

The JCESA outlines guidelines for:
enhanced disclosure about the criteria
for commencing investigations and the
enforcement process.
Both the PRA and FCA will need to consider
HMT’s recommendations..

coordinating supervisory assessments

unifying decision-making processes
among the competent authorities.
Competent authorities will need to follow
the new guidelines from 23 February
2015.
Identifying significant intra-group
transactions
The JCESA published final draft RTS on
risk concentration and intra-group
transactions under FICOD on 18 December
2014. It wants to clarify which risk
concentrations and intra-group transactions
within a financial conglomerate should be
considered significant. It provides
supervisory measures for coordinators and
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Insurance
Monthly calendar
Glossary
other relevant national supervisors when
identifying types of significant risk
concentration and intra-group transactions,
their associated thresholds and reports.
monitor the impacts of these rules as they
are implemented, to drive potential
improvements and address unintended
consequences.
Financial stability
Finding alternatives to credit ratings
FPC concerned about your debt
The JCESA discussed the use of credit
ratings by financial intermediaries on 23
December 2014. It identified the current
use, and users, of credit ratings, including
the rules and guidelines that have been
adopted to reduce “mechanistic” reliance on
ratings and the various alternatives adopted
by financial intermediaries. It recognises
that smaller firms may face additional
challenges and difficulties in building
sufficient resources to perform internal
credit risk assessments.
The FPC published its latest Financial
Stability Report on 16 December 2014. The
FPC thinks that the global economic outlook
has weakened since its last Report in June
2014, citing increased concerns over
persistent weak nominal growth,
geopolitical risk and high UK household
debt.
But the FPC believes that UK banks are
becoming more resilient, having
significantly increased their capital over the
last year. It welcomed international
agreement on TLAC requirements and UK
adoption of the leverage ratio. The FPC
decided to maintain the countercyclical
capital buffer rate for UK exposures at 0%.
Other regulatory
Turkish delight in growth
The Turkish G20 Presidency published its
Priorities for 2015 on 1 December 2014. The
Presidency’s mantra of “inclusiveness,
implementation, and investment for
growth” will prioritise the financial systems’
role in stimulating economic growth. It will
seek to finalise the near-completed
regulatory framework and ensure timely,
full and consistent implementation of
agreed commitments. The Presidency will
The JCESA asked banks, other financial
institutions and ‎intermediaries about their
reliance on credit ratings outside of cases in
which reliance on ratings is required by the
existing regulatory framework. The
consultation closes on 27 February 2015.
The JCESA plans to combine responses with
an independent study to present a first draft
of possible alternatives to credit ratings in
Q2 2015.
Virtual currency, real crime
The SEC sanctioned computer programmer
Ethan Burnside for establishing virtual
currency websites that violated US
securities laws on 8 December 2014. He
had unlawfully:
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enlisted two virtual currency enterprises
to operate an unregistered securities
exchange
solicited the public to open accounts and
trade securities without registering as a
broker-dealer.
Burnside cooperated with the SEC in its
investigation and promptly wound down the
two websites, so the SEC only imposed a
disgorgement payment.
Creating beneficial ownership
registers
The EP and Council negotiators agreed
amendments to the AML directive on 17
December 2014. Establishing central
registers of beneficial owners will end the
anonymity of offshore accounts and other
structures used for tax evasion and money
laundering.
Member States will have to establish central
registers showing the beneficial owners of
domestically registered companies which
are accessible to:



competent authorities and their
financial intelligence units
regulated entities conducting due
diligence
individuals demonstrating a “legitimate
interest”, e.g. investigative journalists.
The registers will contain information on
the beneficial owner’s name, month and
year of birth, nationality, residency and
details of ownership. The register operators
Cross sector
announcements
Banking and capital
markets
will also need to adhere to additional rules
surrounding business dealings with
“politically-exposed persons”, which require
additional information about the
individual’s source of wealth and funds.
Autumn Statement regulatory impact
George Osborne, Chancellor of the
Exchequer, delivered the Autumn
Statement on 3 December 2014 in which he
mentioned a small number of regulatory
initiatives.
He welcomed the ongoing financial system
reform, recapping existing initiatives such
as the FPC’s new powers and the G20 TLAC
proposals. He noted that the Government
was putting a new focus on banking
competition. He also discussed measures to
support P2P platforms, including reviewing
financial regulation and the pre-announced
extension of ISA eligibility to investments
made through P2P platforms.
Osborne also announced an increase in
scope of the existing seven day Current
Account Switch Service to include almost all
SMEs, and he asked the FCA to examine
whether a five day switching period would
deliver significant benefits.
HMT has also restricted loss-relief for
banks, publishing a statement on 3
December 2014.
From 1 April 2015 banks can only use
carried-forward losses to offset up to 50% of
their annual profits. HMT implemented
anti-avoidance measures immediately.
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Insurance
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Maintaining the Lending Code
On 4 December 2014 the Lending Standards
Board (LSB) appointed Professor Russell
Griggs to conduct an independent review of
the Lending Code. The Lending Code
contains good practice for the major
providers of personal loans, credit and
charge cards, current account overdrafts
and lending to micro-enterprises.
The LSB notes the number of improvements
made since the last review of the Lending
Code in 2010. In particular firms’ improved
protection of customers facing financial
difficulties has prompted the LSB to
reconsider the contents of the Code.
Professor Griggs plans to request views on
any gaps or deficiencies from interested
stakeholders. He wants to ensure the Code
will continue to provide customers with
appropriate levels of protection and
complement the FCA statutory regime. The
deadline for submissions is 9 March 2015
and Professor Griggs plans to publish the
review in autumn 2015.
Minor FCA Handbook changes
The FCA published Quarterly consultation
No.7 on 5 December 2014, outlining four
minor proposed Handbook amendments:

removing the requirement for
occupational pension scheme firms to
send FCA compliance reports

amending the Prospectus Rules to
require issuers to send final terms to any
host Member States (until 31 December
Glossary
2015, after which it will be the FCA’s
responsibility as home Member State
regulator) and requiring issuers to
publish final terms (if possible) before
securities are listed on a regulated
market

removing the Building Societies
Regulatory Guide because it is replicated
in the PRA’s Handbook

amending the list of approved
qualifications for financial advisers in
the Training and Competence (TC)
sourcebook.
The consultation closes on 5 February
2015, except the TC changes which closed
on 5 January 2015.
Mutuals could help UK economy
Mutuo Chief Executive Peter Hunt
published The Hunt Review: an
independent review of the contribution that
mutuals can make to growth, prosperity
and fairness on 19 December 2014. Her
Majesty’s Opposition commissioned Peter
Hunt to write an independent report on the
role of the mutual sector in the UK.
Hunt recommends growing the mutual
sector and fostering a greater role for
mutual businesses in key areas of the
economy. He makes 37 policy
recommendations including:

creating new opportunities for
consumers to invest in major
infrastructure projects through mutuals
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boosting employee ownership of
mutuals
improving government coordination on
policy affecting mutuals.
Hunt believes that his recommendations
will help ensure mutuals play their full part
in the UK’s economy and society.
Payment systems
ECB sets security guidelines
On 19 December 2014, the ECB issued final
guidelines on minimum standards on
security for internet payments made by
card, electronic mandate and for credit and
e-money transfers. It excludes telephone,
mobile and SMS-based technology
payments from the guidelines.
All payment services providers should:
Cross sector
announcements
Banking and capital
markets
Insurance
PSD, due to come into effect in 2017 or
2018. The ECB may amend the guidelines at
that time.
a market review of access to the payment
services sponsor market.
PSR Chief shares payments vision
Charging for ongoing advice services
Speaking at the European Payments
Regulation Conference on 3 December
2014, Hannah Nixon of the PSR outlined
her vision to create a world class payment
system for the UK that operates in the best
interests of service users and the wider
economy.
Nixon said that reliable and innovative
payment systems are imperative to keeping
up with the way people spend, move and
manage their money. She called for an
industry that is focused on the needs of
users and consumers, prepared to meet the
challenges of the future and to invest for the
long term.

have a security policy

carry out detailed risk assessments
The PSR has three immediate focus areas to
help achieve these goals:

put in place mechanisms to protect
against fraudulent transactions

developing an industry-wide strategy
forum

implement clear procedures for
responding to and dealing with security
incidents

ensuring fair representation for all
service users and transparent decision
making

have robust customer identification and
authentication procedures


have measures to protect sensitive
payment data.
The guidelines take effect from 1 August
2015, but are subject to the security
requirements to be agreed under the revised
Asset management
ensuring fair and open access to
payment systems for new market
entrants.
She reminded the audience to participate in
the FCA’s PSD 2 consultation which closed
12 January 2015. The FCA will also conduct
FS regulatory, accounting and audit bulletin – January 2015
RDR
The FCA published its second review on
retail investment advice: adviser charging
and services on 16 December 2014
alongside its post-implementation review of
RDR. It gathered information from 110
firms and carried out a detailed assessments
of 12 firms to understand how they have
adapted their strategies to implement RDR
and how they disclose ongoing services to
consumers.
Monthly calendar
RDR on course
The FCA published its Post-implementation
review of the RDR – Phase 1 on 16
December 2014. It assessed whether or not
the RDR is achieving its objectives, and
found that:

removing commission payments has
resulted in less product bias as
evidenced by lower sales of products
that had the highest pre-RDR fees

product prices have fallen by at least the
cost of commission due to increased
availability of simpler products and
increased buying power of platforms
forcing asset managers to lower fees

longer-term analysis is needed to
determine whether consumers are
getting a better deal now than pre-RDR

the vast majority of advisers are now
qualified to at least the minimum
standards

some consumers are now hesitant to
seek advice because they believe they
don’t get value for money

more evidence is required to determine
whether the increased standard of
advisers has led to better advice.
The FCA found that:



most firms have improved their
consumer disclosures on the cost of
advice, scope of service being provided
and nature of services
some firms are still failing to provide
clear individual disclosures for
consumers (in cash terms) of the
ongoing fees they will need to pay to the
firm
some firms are charging consumers
ongoing fees but failing to deliver a
genuine ongoing service.
The FCA has referred one firm to the
enforcement division. The FCA expects all
firms (including those not involved in this
or the previous RDR thematic reviews) to
note the findings and act on any poor
practices identified in their own business.
Glossary
The FCA believes there is still a gap in the
market for innovation. Simplified or
automated advice models could help
consumers who are unwilling to pay for full
adviser charging access. The FCA plans to
conduct a second post-implementation
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Cross sector
announcements
Banking and capital
markets
review of RDR in 2017, to analyse its
medium-term impacts.
yet sufficiently mature as a committee to
impose transparency demands.
Regulator process
FCA publishes the Davis review
Old Lady opens up
On 10 December 2014, the FCA released a
Report of the Inquiry into the events of
27/28 March 2014. Simon Davis of Clifford
Chance conducted an independent inquiry
into how the FCA handled the press briefing
on its Business Plan, in particular its work
on the fair treatment of long-standing life
insurance customers.
On 11 December 2014, the BoE announced
that it will change the way it communicates
records of MPC meetings in response to the
Warsh review of its transparency. The TSC
commissioned ex-Fed governor Kevin
Warsh to evaluate the MPC’s transparency
practices, specifically the benefits of
creating and disseminating MPC meeting
transcripts.
From 1 January 2015 the BoE will publish:



voting details, meeting minutes and the
quarterly inflation report at the same
time as MPC decisions on interest rates
and market interventions
full conversational transcripts of MPC
meetings eight years later
minutes of the BoE Court from 19141987 and 2007-2009.
It will also reduce the number of MPC
meetings from monthly to eight per year.
The BoE believes these measures will
enhance transparency and public
accountability in light of the recent increase
in its powers.
Warsh did not recommend applying the
same transparency requirements to the FPC
or PRA. He felt that PRA decisions were
based on information too sensitive and too
private to make public, and the FPC is not
Davis criticised the way the FCA handled
the announcement. He notes that there
were errors by individuals and
shortcomings in the FCA’s systems and
ways of working, but he believes that the
FCA’s strategy was well intentioned. He
recommended changes to the regulator’s
systems, processes and ways of working to
mitigate the situation reoccurring.
FCA unveils new strategy
In Our Strategy, released on 8 December
2014, the FCA sets out how it proposes to
meet the regulatory challenges it is facing as
it moves into 2015.
The FCA published its strategy paper in the
wake of a detailed internal review of its
strategy, priorities and ways of working. The
FCA outlines seven key points about how it
will operate, including revising its
supervision model, better data sharing, a
new risk division and a more pro-active
approach to FCA’s involvement in the
international arena.
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
The FCA outlined organisational changes to
complement its new approach. It started
making the changes on 5 January 2015,
which will take full effect from 1 April 2015.
Monthly calendar

include non-audit services provided by
the auditor’s network firms in the
calculation of the fees cap

extend the prohibitions on non-audit
fees to cover group entities outside the
EU.
Securities and derivatives
US court overturns insider trading
convictions
In a blow to the enforcement efforts by the
SEC and the US Attorney’s Office, the Court
of Appeals overturned the convictions in an
insider trading case on 10 December 2014.
The Court of Appeals found that the insiders
who disclosed the information didn’t benefit
from providing it, and the individuals who
traded on the information didn’t realise that
it wasn’t public information, so they were
not guilty of insider trading. This case
demonstrates again how difficult it is to
successfully prosecute insider trading cases.
Accounting
Audit
Reforming the UK Audit market
The FRC and the DFBIS consulted on the
implementation of the EU Audit Directive
on 17 December 2014. The FRC sought
views on auditing and ethical standards of
the EU Audit Directive, including whether it
should:

reduce the relative cap of non-audit to
statutory audit fees below the proposed
70%
Glossary
The FRC proposed maintaining more
stringent audit rotation requirements than
the Directive requires. It also proposed two
methods of communicating to firms the
services they can offer: either creating a
black list of prohibited services, with other
services permitted subject to approval by
the audit committee, or creating a white list
of permitted services with all other services
prohibited.
The DFBIS considered the implications of
the EU Audit Directive and wider reforms.
It proposed:

allowing a ten year extension to the
maximum auditor appointment period
where a tender is held after the first ten
years

empowering the FRC as the single audit
regulator in the UK with discretion to
delegate certain elements to others,
notably the ICAEW

delegating its responsibility for
implementing non-audit requirements
to the FRC.
Both consultations close on 20 March
2015.
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Banking and capital markets
Regulation
In this section:
Regulation
13
Capital, liquidity & funding
Disclosure
Financial stability
Mortgages
Other regulatory
Resolution
Securities & Derivatives
Stress testing
Structural reform
Supervision
13
16
16
17
17
17
17
19
19
19
loan-to-value ratio and the borrower's
loan-to-income ratio
Capital, liquidity & funding

BCBS overhauls standardised credit
risk
two new options for commercial
mortgage risk-weighting

reducing the number of approaches to
credit risk mitigation, including
updating the corporate guarantor
eligibility criteria.
The BCBS proposed revising the Credit Risk
Standardised Approach on 22 December
2014. The proposed revisions are wide
ranging and may require banks to hold
more capital.
The BCBS wants to reduce CRAs’ role in
determining capital requirements, instead
requiring banks to determine the riskiness
of exposures themselves, by examining their
counterparty’s financial circumstances. For
interbank exposures the BCBS proposes
forbidding banks from basing their riskweights on CRA ratings, suggesting they
consider the counterparty’s capital
adequacy and asset quality. Similarly for
corporate exposures it proposes forbidding
banks from basing their risk-weights on
CRA ratings, suggesting they consider the
corporate entity’s revenue and leverage.
The BCBS proposes:

tightening the criteria for banks to apply
a 75% risk-weight to retail exposures

abolishing the 35% risk-weight for
residential mortgages, and replacing it
with a risk-weight proportionate to the
The consultation closes 27 March 2015.
The BCBS plans to run a QIS to further
develop its proposals but has not suggested
an implementation date.
Laying new capital floors
The BCBS consulted on capital floors: the
design of a framework based on
standardised approaches on 22 December
2014. It proposed that banks use a capital
floor based on revised standardised
approaches for credit, market and
operational risk (each of which it is
currently consulting on), replacing the
floors from the Basel I framework.
The BCBS wants to mitigate model risk and
measurement error stemming from
internally-modelled approaches. It feels the
new floors would ensure that the level of
capital across the banking system does not
fall below an aggregate minimum and could
assist investors when comparing banks’
capital positions.
The consultation closes 27 March 2015.
FS regulatory, accounting and audit bulletin – January 2015
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climate for regulation?
Cross sector
announcements
Banking and capital
markets
BCBS tweaks trading book review
Testing countries’ Basel III compliance
The BCBS consulted on the outstanding
issues in its fundamental review of the
trading book on 19 December 2014. It has
revised its 2013 market risk proposal to
address perceived weaknesses in banks’ risk
measurement under the internal modelsbased and standardised approaches.
The BCBS published an Assessment of Basel
III regulations in the European Union on 3
December 2014. It tested 14 components
across nine EU BCBS members and found
eight components were “compliant” with
the minimum Basel III provisions. Four
components (definition of capital, credit
risk framework, securitisation and
standardised approach) were assessed as
“largely compliant”, reflecting the fact that
most, but not all, of the conditions were
satisfied.
The BCBS reviewed responses to the 2013
consultation, feedback from a hypothetical
portfolio exercise, and the results of a
comprehensive QIS conducted to assess the
proposed trading book framework.
Based on this, it outlined three broad areas
for refinement:



treatment of internal risk transfers of
equity and interest rate risks between
the banking and trading books, to
supplement the existing treatment of
internal transfers of credit risk
a revised standardised approach using
changes in the value of an instrument
based on sensitivity to underlying risk
factors
a simpler method for incorporating
liquidity horizons in the internal models
approach.
The BCBS wants to see consistent
implementation of the trading book rules to
produce comparable levels of capital across
jurisdictions. The consultation closes on 20
February 2015.
The BCBS found one component - the IRB
approach for credit risk – to be “materially
non-compliant” due primarily to the
treatment of exposures to SMEs, corporates
and sovereigns. It found the EU's exemption
for certain derivatives in the counterparty
credit risk framework as “non-compliant”.
The BCBS also published its Assessment of
Basel III regulations – United States of
America on 3 December. It found that
seven of the 13 components tested met the
minimum Basel III provisions. It assessed
two components - the securitisation
framework and the standardised approach
for market risk - as “materially noncompliant”. But the US may passively
achieve future compliance on the
securitisation component. The FSB and
BCBS want to reduce any banks’
mechanistic reliance on external credit
ratings, and the US approach limits the use
of these ratings. So they will probably
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
amend the Basel securitisation framework
to match the US usage in the future.
Calculating counterparty credit risk
exposures
The EC adopted final draft RTS on the
margin periods of risks (MPOR) used for
the treatment of clearing members'
exposures to clients under the CRD IV on 18
December 2014.
Clearing members must determine the
MPOR by reference to a derivative
transaction’s liquidity, before using the
MPOR value to calculate their capital
requirements for counterparty credit risk.
Firms can use either this value as input
under the Internal Model Method or as a
multiplier for the exposure at default under
the other counterparty credit risk methods.
The EP and Council are reviewing the
finalised RTS, and if they don’t make any
amendments to, it will be published in the
Official Journal after 18 January 2015. The
RTS will then form part of the EU’s Single
Rulebook.
Reviewing CRD IV implementation
The EBA published its review of the
implementation and transposition of CRD
IV on 10 December 2014. It covers Rules
and Guidance adopted in Member States,
the use of Options and National Discretions
and the Supervisory Review and
Evaluation process (SREP).
The EBA also published Aggregate
statistical data on the EU banking sector,
Monthly calendar
Glossary
providing data on most Member States’
banking sectors, credit, operational and
market risks, and supervisory actions and
measures.
EBA repeals capital recommendation
The EBA announced the repeal of its July
2013 Recommendation on the preservation
of CET1 capital on 18 December 2014. In its
2013 recommendation the EBA expected
EU banks to maintain the capital
accumulated as a result of the 2011 EU-wide
stress tests and ensure a smooth transition
towards the new CRD IV capital
requirements.
As EU banks have significantly
strengthened their capital position since
2011, many already meet the minimum CRD
IV ‘end-point’ capital requirements (i.e.
without the benefit or transitional
arrangements) and the 2.5% CET1 capital
conservation buffer.
Approving data waivers
The EBA published final draft RTS
specifying the conditions competent
authorities may permit data waivers on 23
December 2014. Banks using the internal
ratings based (IRB) approach to model risk
weights should use data covering a five year
time series but competent authorities can
waive this requirement and permit banks to
use shorter-time series. The EBA thinks that
such waivers increase the likelihood of
inaccuracies so it has proposed new
conditions that limit the application of such
waivers to a small proportion of assets. In
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particular it wants to exclude low-default
portfolios from the data waiver. The EBA
also believes that banks should demonstrate
that relevant datasets covering longer time
series are not available when claiming the
waiver.
Cross sector
announcements
Banking and capital
markets
2015 and for the leverage ratio templates
before 10 February 2015.
EBA permits partnership capital
The EBA has proposed that competent
authorities apply these RTS to new data
waiver requests because it concluded most
major EU banks have been using the IRB
Approach for several years.
The EBA published a revised list of items
that are eligible for inclusion as CET1
capital on 23 December 2014. These
instruments are additional to the items
already outlined in CRD IV. For UK firms
any partnership capital remains eligible as
CET1. The EBA plans to routinely update
the list.
Prepare for LCR reporting
EBA seeks stricter originator definition
The EBA published two draft ITS for the
LCR and leverage ratio reporting
requirements under CRD IV on 16
December 2014. Firstly, it published draft
ITS following the EC’s Delegated Act
specifying the LCR for banks reporting the
LCR, provides reporting templates (Annex
XXIV), and instructions on completing
reports on liquid assets, collateral swaps,
inflows, outflows and calculations reporting
in Annex XXV.
The EBA issued an opinion on the
effectiveness of the securitisation risk
retention rules on 22 December 2014. It
considers the current CRD IV risk retention
rules adequate. But it recommends that the
definition of ‘originator’ be tightened to
prevent firms from using other legal entities
as the ‘retainer’ of risk and evading the
spirit of the rules. The EBA wants to ensure
the securitisation originator retains some
risk.
Secondly, for banks reporting the leverage
ratio, the EBA published draft ITS
following the EC’s Delegated Act on the
leverage ratio which introduces the draft
revised version of the templates in Annex X
with instructions on completing these
templates in Annex XI.
The EBA recommends introducing an
‘exceptional circumstances’ exemption
which would allow firms to change the
retainer during the life of a securitisation
transaction in specific instances, such as
insolvency of the originator, sponsor or
original lender.
The EBA also published an LCR calculation
tool under the format of the new LCR
templates. The EBA welcomes comments on
the LCR templates before 27 January
No buffers for FCA investment firms
The ESRB published two exemption
notification templates for the FCA on 8
December 2014: the Capital conservation
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
Monthly calendar
Glossary
buffer exemption notification template and
the Countercyclical capital buffer
exemption notification template. The FCA
must use these templates to notify the EBA
of all capital buffer exemptions it is granting
to firms. It plans to exempt all small and
medium sized investment firms from
maintaining these two capital buffers.
The FCA also drew attention to the EBA’s
guidelines of 20 December 2013 on foreign
currency lending. All CRD IV investment
firms should consider holding additional
capital against exposures with currency
mismatches, particularly where the
borrower’s income stream is in a different
currency to the loan.
PRA issues COREP guidance
Revamping MIPRU
The PRA published guidance notes for firms
completing the COREP templates on 23
December 2014. UK banks will file a nil
return in certain rows of the template due to
the PRA’s approach to Pillar 2 capital
requirements and should exclude the capital
planning buffer and PRA buffer
requirements. The PRA also explains how
firms should report deductions for
significant holdings in financial sector
entities on the own funds templates.
The FCA initiated a consultation on
simplifying the prudential sourcebook for
Mortgage and Home Finance Firms, and
Insurance Intermediaries (MIPRU) on 8
December 2014. MIPRU contains the
prudential rules for mortgage and insurance
intermediaries and non-bank lenders
(NBLs) which provide loans but do not
accept deposits.
FCA issues CRD IV investment firm
guidance
The FCA published a new page on its
website collating its guidance on the
application of CRD IV to investment firms
on 18 December 2014. It noted that the EBA
has recommended adopting the LEI system,
and that firms must include counterparties’
LEIs in certain COREP returns. The FCA
reminded firms that it expects them to
obtain their LEIs from their Local Operating
Unit (LOU) and submit these to the FCA.
The London Stock Exchange is currently the
only LOU in the UK.
The FCA is simplifying the content and layout of the MIPRU sourcebook, removing the
extensive references to the BIPRU rules so
that MIPRU will function as a standalone
sourcebook. It wants to simplify the
approach to calculating capital
requirements in line with NBLs’ business
models by reducing the existing fourteen
exposure classes to just five.
The FCA is consulting on two changes to
NBL capital requirements. It proposes
introducing appropriate risk-weights for
assets not included in the five new exposure
classes. Firms would apply these risk
weights to determine the capital
requirements of holding ‘other items’ in the
same way as banks. The FCA believes this
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approach would be more risk-sensitive than
the current 1% flat capital charge for other
items in MIPRU.
The FCA is also seeking views on new
graduated risk-weights for the secured
portion of mortgage loans. Graduation
would make capital requirements more risksensitive by applying lower capital charges
to the portion of the loan that is secured by
property.
The consultation closes 19 January 2015.
The FCA plans to issue a Policy Statement
in March 2015, and to apply the revised
rules from 26 April 2015.
Ensuring CRD IV data quality
The FCA published a new CRD IV reporting
validations webpage on 4 December 2014.
The FCA and PRA activated 317 new
validations on 17 December 2014. The FCA
also listed some common errors in CRR
reporting, such as incorrect format for filing
indicators, missing filing indicators and
duplicate data points, with a view to
improving data submission.
Disclosure
More liquidity disclosure requirements
The BCBS launched a consultation on NSFR
disclosure requirements on 9 December
2014. If national regulators implement the
disclosure requirements, they will be
effective from the first reporting date after 1
January 2018. All international banks will
have to publish their NSFR on a
consolidated basis, with the same
Cross sector
announcements
Banking and capital
markets
publication frequency as financial
statements.
Banks will have to disclose quarter end
numbers with weighted and unweighted
components of their NSFR numerator and
denominators. It provides a common
disclosure template and other quantitative
and qualitative information for banks to
consider as potential voluntary disclosure
options.
Harmonising banks’ capital buffer
disclosures
The EBA published final RTS on disclosure
of information in relation to the
countercyclical capital buffer on 23
December 2014.
EU banks, building societies and complex
investment firms will be required to publish
the amount of their countercyclical capital
buffers from 2016 as part of their Pillar 3
disclosure requirements. Each bank will
also have to disclose the geographical
distribution of its exposures that give rise to
its countercyclical capital buffer
requirement. The EBA provides two
harmonised disclosure templates for firms
to complete.
The EBA submitted the final RTS to the EC
for scrutiny, which the EC is expected to
review and subsequently publish in the
Official Journal. Firms will need to disclose
their buffer information six months after
the RTS are published in the Official
Journal or 1 January 2016, whichever is
earlier.
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
Regulators relax asset encumbrance
disclosure
The PRA published a Supervisory
Statement on banks’ disclosure of asset
encumbrance on 19 December 2014. The
FCA published similar guidance for CRD IV
investment firms simultaneously.
The regulators outlined how they will apply
the new asset encumbrance disclosure
requirements in light of the EBA’s
guidelines on asset encumbrance disclosure
of 27 June 2014. The asset encumbrance
disclosure requirements are a new
component of the Pillar 3 disclosure rules
under CRD IV.
The PRA and FCA confirmed that they will
use a national discretion (provided for in
the EBA guidelines) to exempt UK firms
from having to disclose Template B of the
asset encumbrance disclosure forms. They
want to prevent the disclosure of
information that might reveal whether a
firm has been receiving liquidity assistance
from the central bank. Firms that meet one
or more of the following conditions will
receive the exemption:

the reported amounts of debt security
collateral received in the past year is less
than £100bn

the size of the trading book is below
certain thresholds.
All CRD IV firms will still have to apply the
other disclosure templates (A, C and D).
They will not need to apply for a waiver to
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benefit from this exemption but they must
be prepared to demonstrate that they meet
one of the conditions. Other general
requirements around Pillar 3 disclosures –
such as the option to omit non-material
information – also apply to all asset
encumbrance disclosures.
Financial stability
Bank capital high and rising
The EBA published its Risk Dashboard Q3
2014 on 11 December 2014, presenting its
latest findings on the risks and
vulnerabilities in the EU banking sector.
The EBA confirmed the positive trend in EU
banks’ CET1 capital positions, which peaked
at 11.8% in Q2 2014 ahead of the ECB’s
comprehensive assessment. The EBA found
the level of banks’ non-performing loans
remained stable but still very high,
prompting it to call for thorough
assessments of credit quality. It found
profitability had been severely affected by
the clean-up of some major banks' balance
sheets and litigation costs.
FPC reveals December discussions
The FPC published a record of its two
December meetings on 22 December 2014.
The FPC concluded that the results of the
BoE’s banking stress tests did not require
any system-wide macro-prudential action.
But some committee members considered
the procyclical behaviour of risk-weights to
be a potential source of structural
vulnerability, so the BoE is considering
possible mitigating actions.
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In November 2014, the FPC asked HMT to
grant it the power of direction on residential
mortgage caps and leverage ratio
requirements. The FPC committed to
reviewing the ongoing legislative progress of
its requests at its next meeting, scheduled
for 24 March 2015.
Mortgages
Raising standards in mortgage
lending
The EBA published draft Guidelines on
creditworthiness assessment under the
MCD on 12 December 2014. The EBA wants
to establish aspects of ‘best practice’ credit
assessment. Mortgage lenders will have to
document and retain information when
verifying consumers’ income, to identify
misrepresented information when assessing
the consumer's ability to meet their debt
obligations.
The EBA also published draft Guidelines on
arrears and foreclosure on 12 December
2014, outlining how it believes banks should
manage arrears and foreclosures, from
engagement with consumer, forbearance
and initiating foreclosure proceedings.
The EBA welcomes comments until 12
February 2015, and expects to publish the
final guidelines in Q2 2015. The guidelines
should apply from the MCD transposition
date of 21 March 2016.
Cross sector
announcements
Banking and capital
markets
Other regulatory
Banks should share data
The Open Data Institute published a report
for HMT on data sharing and open data for
banks on 3 December 2014. The Institute
feels that helping customers share their
transaction data with third parties could
improve competition and consumer
outcomes. Amongst its recommendations, it
suggests banks should agree an open
standard, with independent guidance on
data security and protection standards and
make credit data available as open data.
The Open Data Institute concluded that
current policy interventions to promote
access to data could be enhanced by
applying more widely‐used technologies and
standards for data sharing. It noted that
banks outside the UK are ahead in adopting
this new technology.
Resolution
Resolution colleges facilitate resolution
On 18 December 2014, the EBA published
draft RTS on resolution colleges under the
BRRD. It provides procedures for the
resolution colleges to facilitate cooperation
between national supervisors of
multinational firms.
The EBA outlined the proposed process for
establishing resolution colleges and their
functioning, including how to make joint
decisions on a financial group’s resolution
plan and resolvability assessment, measures
to address any substantive impediments to
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Asset management
Insurance
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Glossary
resolvability and for setting minimum
requirements for firms’ own funds and
eligible liabilities. It also set out a proposed
process for assessing the need for a group
resolution scheme and mutualising finance
arrangements if a firm is determined to be
‘failing or likely to fail’.
through the first stage of EMIR recognition,
US CCPs have not yet. Until the US and EU
agree standards for mutual recognition, EU
and US CCPs must either establish
businesses in both jurisdictions or risk
losing clients in jurisdictions where they are
not recognised.
The EBA also set out a proposed decision
process for colleges to follow when
resolution authorities disagree on resolution
matters. The consultation closes 18 March
2015.
ESMA consults on CSD requirements
Securities & Derivatives
CCP exposure transitional provisions
extended
The EC extended capital transitional
provisions for CCP exposure in
Implementing Regulation on 11 December
2014. It has extended the transition period
six months from 15 December 2014 to 15
June 2015, following the previous six month
extension in June 2014. Eventually, EU
banks will need to hold twice the capital
against exposures to
unauthorised/unrecognised CCPs than
authorised/recognised CCPs, but EU
regulators have been slow to provide CCP
authorisation or recognition.
The extension allows ESMA more time to
authorise CCPs in the EU. Equally, nonEEA CCPs have longer to work through the
two part EMIR recognition process.
While CCPs in Hong Kong, Japan,
Singapore and Australia have passed
On 18 December 2014, ESMA provided
technical advice, technical standards, and
launched a consultation on the remaining
elements of the CSD regulation. Although
the CSD Regulation has been in force since
September 2014, the implementation dates
of some elements are staggered into 2015
and beyond.
CSDs must settle securities trades within
two days of execution from 1 January 2015,
with proposed penalties for settlement
failures. ESMA outlines draft technical
standards on settlement discipline, CSD
requirements, and internalised settlement.
It is consulting on which risks a CCP or
trading venue should consider when
assessing a CSD’s access request.
ESMA held an open hearing on the CSD
consultation papers on 13 January 2015,
and is accepting comments until 19
February 2015.
ESMA to recognise Asia-Pac CCPs
ESMA agreed two MoUs with Australian
regulators on 4 December 2014, in advance
of recognising Australian authorised CCPs
under EMIR. ESMA negotiated the first
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MoU with the Australian Securities and
Investments Commission (ASIC) and
Reserve Bank of Australia to establish
cooperation and information sharing
arrangements in relation to Australian
regulated CCPs that have applied for EMIR
recognition. Australian CCPs must send
ESMA information to enable monitoring of
their on-going compliance with EMIR
recognition conditions.
ASIC and ESMA agreed a second MoU on
Cooperation Arrangements to access
information on derivatives contracts held
in EU TRs. Australia doesn’t have any trade
repositories, but under the MoU ASIC may
request access to information relevant to its
supervisory duties.
ESMA is expected to start recognising
Australian CCPs soon and plans to complete
cooperation agreements with regulators in
Japan, Singapore and Hong Kong in 2015.
The EC has granted EMIR equivalence to
CCP rules in Australia, Japan, Singapore
and Hong Kong.
HFT pervasive in EU equity markets
ESMA published the results of its review of
HFT activity in EU equity markets on 17
December 2014. It found HFT accounts for
24% to 43% of value and 58% to 76% of
trade orders in EU equity markets. ESMA
calculated the lower bounds by measuring
the activity of HFT firms, and the upper
bound by counting trades where a shorter
than average time elapses before the trade is
modified or cancelled. It feels the lower
Cross sector
announcements
Banking and capital
markets
bound is likely to underestimate the true
figure as it excludes the activity of
investment banks; the upper bound is likely
to overestimate HFT trading as it includes
the slower trading activities of investment
banks.
CFTC discusses CCPs
CFTC Commissioner Wetjen outlined three
areas where he feels the CFTC could provide
more robust oversight of CCPs in his speech
to the FIA Asia Derivative Conference on 4
December 2014: transparency, defaults, and
recovery.
Wetjen advocated standardised CCP stress
tests for transparency and argued that the
current discretion in the design and
implementation of their stress tests offered
by the CFTC should be reconsidered.
Wetjen wants the CFTC to consider whether
a CCP’s contribution to the default
guarantee fund should always be used
before the contributions of non-defaulting
clearing members and how to calculate the
size of the CCP’s capital contribution. He
also questioned whether collateral provided
by non-defaulting members to a clearing
house should ever be part of a CCP’s
recovery plan. Finally, he proposed that the
CFTC should consider extending the
requirements around recovery and winddown plans beyond systemically important
CCPs.
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
CFTC Chairman on CCP disagreements
In his 10 December 2014 testimony to the
US Senate, CFTC Chairman Timothy
Massad discussed the current impasse
between the US and Europe over CCP
recognition. He blamed the conflict on EU
objections to US requirements on dual
registration for overseas CCPs. Massad
explained the US dual registration
requirements are designed to ensure
effective oversight of foreign CCPs clearing
for US customers.
He was optimistic that they could overcome
these differences, noting that the EU has
agreed that the current US framework of
dual registration and cooperative
supervision should not be dismantled. In
return, the CFTC has committed to
considering rule changes to facilitate further
harmonisation with the EU’s CCP rules.
Congress softens Dodd-Frank
requirements
Both houses of the US Congress passed an
amendment to the Dodd-Frank Act as part
of a critical government spending bill on 11
December 2014 which was signed into law
by Barack Obama on 16 December 2014.
Previously, any banking entity receiving
FDIC deposit insurance or with access to the
Federal Reserve credit facility was required
to spin off their swap trading activities into
separately capitalised entities, known as the
“swaps push out rule”. Through this
amendment, Congress has significantly
limited the swaps that need to be
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Glossary
segregated, leaving only unregulated assetbacked securities to be housed in affiliates.
Proponents of the amendment, including
former Fed Chairman Paul Volcker, argued
that the Volcker Rule addressed
problematic swaps behaviour, so the swaps
push out rule was both duplicative and
unnecessarily complex. They were also
concerned it may hinder orderly bank
resolution and lead to volatility from fire
sales because subsidiaries would sit outside
the FDIC resolution procedures.
FCA urges MTFs to comply
The FCA published a Dear CEO Letter and
FCA Good Practice Observations on MTF
Rulebooks on 1 December 2014, containing
proposed guidance for MTF operators on:

the MTF rulebook

instrument eligibility criteria

participant eligibility and access criteria

finalisation of transactions

monitoring compliance with MTF rules

reporting requirements.
It published these recommendations
following its review of whether or not firms
operating an MTF have transparent and
non-discretionary rules and procedures for
fair and orderly trading.
The FCA requires MTF operators to have a
clearly labelled rulebook made publicly
available on their website. The FCA clarified
that the rulebook should contain eligibility
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criteria explaining the type and nature of
instruments the MTF will trade.
MTF operators must ensure they can
monitor compliance with all aspects of its
rulebook. To this end, the FCA expects an
MTF compliance function to be able to
demonstrate how it monitors participants.
All MTF operators must be able to
demonstrate that they have considered the
good practice observations when
determining their approach to compliance
with Handbook requirements.
The guidance consultation closes 16
January 2015.
Stress testing
BoE announces first stress testing
results
The BoE published results of its first stress
testing exercise on 16 December 2014,
which most UK banks passed. The BoE
determined that the UK banking system
could maintain its core functions in an
extreme stress scenario. Although Lloyds
Banking Group and RBS passed the test, the
BoE said they needed to strengthen their
capital positions. Co-operative Bank failed
the test and was required to submit revised
capital plans.
The BoE designed the stress test to examine
the resilience of banks’ end 2013 balance
sheets to a ‘tail risk’ scenario including:

a 35% drop in UK house prices

a devaluation of the Pound by 30%
Cross sector
announcements
Banking and capital
markets

a fall in UK share prices by 30%

an inflationary peak of 6.6%

an interest rate rise to 4.2%

a GDP fall of 3.5%.
Banks had to apply these six events to their
balance sheets and then supplement them
with additional bank specific stresses. The
BoE presented the stress test results to show
capital positions both before and after
remedial management actions.
The BoE plans to repeat the exercise
annually and expects the population of
participating banks to remain the same in
2015. It has committed to announcing the
scenario for the 2015 stress testing exercise
in early 2015, which is rumoured to include
exposure to emerging markets.
Structural reform
ECOFIN reviews structural reform
ECOFIN published a progress report on the
structural reforms of EU credit institutions
on 23 December 2014. It collected feedback
on the EC’s structural reform proposals
from the Working Party on Financial
Services, the European Economic and Social
Committee and the ECB. It found the
majority of member states are in favour of
separating, rather than banning, bank
proprietary trading activity but many felt
the proposed prohibition on holding AIF
units too restrictive and unclear. To remedy
the structural concerns ECOFIN proposed
separation of only highly leveraged AIFs.
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
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Glossary
Member states are also concerned about the
economic impact of proposed structural
reform, in particular that banks might
choose to concentrate their activities in one
jurisdiction which could harm host state
economies. ECOFIN proposed redrafting
the framework for cooperation between the
resolution authority and supervisor, by
including the host supervisor in joint
decisions where trading activities comprise
a significant proportion of a subsidiary’s
balance sheet.
Supervision
Coordinating supervisory colleges’
work
The EBA published final draft RTS and ITS
on colleges of supervisors in accordance
with CRD IV on 19 December 2014. Colleges
plan and perform co-ordinated supervisory
tasks for bank groups operating across the
EU. The EBA specifies general conditions
for the establishment and functioning of the
supervisory colleges, and outlines
procedures to structure and facilitate the
interaction and co-operation between a
consolidating supervisor and relevant
competent authorities.
PwC  19
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climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Asset management
Regulation
In this section:
Regulation
AIFMD
Financial stability
Other regulatory
Retail products
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20
21
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AIFMD
Asset segregation options
ESMA began a consultation on asset
segregation under the AIFMD on 1
December 2014. AIFMD depositaries are
responsible for safekeeping the financial
instruments held for AIFs and must
segregate those assets from all other assets
in line with MiFID requirements.
The EC outlined the type of information
that national authorities must send to
ESMA, which includes:

Because depositaries can sub-delegate this
responsibility to a custodian, ESMA is
proposing that sub-custodians either:
number of AIFMs authorised in their
home country

number of AIFs registered to market
(under the passport)

keep all assets from a single depositary
segregated from all other AIFMD and
non-AIFMD assets held or


keep all AIFMD assets (whether from
one or several different depositaries)
segregated from all other non-AIFMD
assets held.
whether a national private placement
regime exists and (if it does) the number
of AIFs marketed through this
mechanism

systemic risk data

number of requests for assistance
received from other regulators (for
cross-border AIFM/AIF structures)

details of investor complaints relating to
AIFs marketed in their country.
The consultation closes on 30 January
2015.
Sharing AIFMD information
The EC published Delegated Regulation on
the information to be provided to ESMA
under AIFMD on 18 December 2014. ESMA
FS regulatory, accounting and audit bulletin – January 2015
needs certain information to determine the
success of the AIFMD marketing passport
and whether or not it should be extended to
non-EU AIFMs. It also called for evidence
from industry participants in November
2014. ESMA must advise the EC on these
issues in 2015.
The EC notes this information request
should not place any additional burden on
industry participants as regulators should
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there yet? & A changing
climate for regulation?
already possess this data. If neither EP nor
Council objects to the Delegated Regulation
it should be published in the Official
Journal and become effective in the first
half of 2015.
Financial stability
SEC signals new mutual rules
In a speech on 11 December 2014, SEC
Chair Mary Jo White indicated the SEC is
assessing the appropriateness of mutual
funds liquidity management and their use
of derivatives. She noted that open-ended
investment companies and ETFs that fail to
adequately manage liquidity risk may be
unable to provide redemption proceeds to
shareholders within seven days. Likewise,
distressed mutual funds could pose
contagion and market-wide risks if they
have to fire-sell securities.
White stated that mutual funds might be
required to implement broad risk
management programmes related to their
liquidity and use of derivatives. They may
have to comply with more specific
requirements around liquidity standards,
disclosures of liquidity risks and leverage
limitations around derivatives usage. The
SEC is also considering increased reporting
by all fund types (mutual, hedge, private
equity, etc.) and fund managers around
their securities lending and derivatives
usage.
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
SEC discusses Exchange-Traded
Managed Funds
Retail products
SEC Director Norman Champ welcomed the
SEC’s decision to provide relief from some
mutual fund requirements for exchangetraded managed funds (ETMFs) in a speech
on 10 December 2014. The SEC has
previously provided exemptions for ETFs
but has now addressed the unique share
pricing issues posed by ETMFs.
ESMA published a discussion paper on the
share classes of UCITS on 23 December
2014. UCITS schemes are permitted to have
different share classes but the UCITS
Directive does not outline how such share
classes may differ from one another. ESMA
is concerned that allowing significant
variations between share classes of the same
UCITS scheme (or sub-fund) can create
inconsistency. UCITS commonly impose
different fees or minimum investment
requirements for different share classes, but
ESMA found that some UCITS also have
share classes with different investment
strategies.
The Investment Company Act forces openended funds, their principal underwriters
and dealers, to sell and redeem units at a
price based on the current net asset value.
ETMFs do not have a fixed relationship
between share trading prices and the fund
net asset value, so the SEC has exempted
these managers from using premiums and
discounts when pricing their funds.
Other regulatory
Investment managers receive FSCS
rebate
On 12 December 2014, the FSCS has
recovered £50m from Keydata Investment
Services after its collapse, so it has refunded
investment managers part of the 2010/11
levy raised to pay for that. The FSCS plans
to make a further repayment in 2015, and
provide more details about monies paid out
and recovered.
FS regulatory, accounting and audit bulletin – January 2015
ESMA pushes UCITS consistency
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share classes offering different levels of
capital protection or interest-rate hedging
because these features provide different
investment strategies.
ESMA welcomes comments by 27 March
2015.
ESMA believes that all share classes in the
same UCITS should have the same
investment strategy and that no share class
should have features that might impact
other share classes of the same UCITS. It
also thinks that firms should alert investors
to any differences between share classes.
Under ESMA’s proposed approach, firms
could launch share classes with different
voting rights, currencies (including currency
hedged share classes) and those share
classes could target different types of
investors (with different minimum
investment limits and fees). But ESMA
wants to prevent firms from launching
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Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Insurance
In this section:
Regulation
22
Customer protection
EU
Solvency II
UK
International developments
22
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25
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Accounting
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Corporate governance
UK GAAP
IFRS
PwC publications
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Regulation
EU
Customer protection
EIOPA published its quarterly Financial
Stability Report on 16 December 2014. It
concluded that overall downside risks have
increased though it has seen some positive
developments in equity markets and further
improvements in sovereign spreads.
Mind the GAP
The FCA consulted on a competition
remedy for the Guaranteed Asset Protection
(GAP) insurance market on 12 December
2014. In its market study into general
insurance add-ons, the FCA found that
where products were sold as add-ons,
competition was not effective – resulting in
those markets not serving consumers well.
The FCA proposes banning firms from
introducing and selling add-on GAP
insurance at the same time, requiring a four
day delay for the consumer to consider the
insurance product. It also wants firms to
offer customers improved information
about shopping around. The FCA believes
this measure will increase the options
available to customers for the purchase of
GAP insurance.
The consultation closes 13 March 2015.
The FCA intends to consider feedback and
publish final rules by June 2015, with the
rules coming into force 1 September 2015.
FS regulatory, accounting and audit bulletin – January 2015
EIOPA sees undulating risks
Following this report EIOPA published its
December risk dashboard on 31 December
2014. Created from Q3 2014 indicators from
32 large insurance groups, EIOPA found
that market risk remains unchanged since
its last dashboard but sees a tougher
outlook for macroeconomic risks. It saw an
overall improvement in insurance risk over
the last quarter but recognises that
insurance firms are still operating in a
challenging environment.
Pensions pay-out practices
EIOPA published a fact finding report on
decumulation practices on 3 December
2014. It analysed the common practices EU
pension funds use in the decumulation
(pay-out) phase and hopes that some
member states find the report useful when
assessing practices in their jurisdictions.
EIOPA may also use its findings in future
work.
PwC  22
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climate for regulation?
Solvency II
Enhancing reporting and disclosure
clarity
EIOPA published a cover note for the draft
consultation papers on the Guidelines and
ITS for Solvency II (set 2) on 3 December
2014. It summarises the second cluster of
Guidelines and ITS that EIOPA published
for public consultation on the same day
(except where noted). It consulted on:
Pillar I – Quantitative
requirements

ITS on regional governments and local
authorities treated as exposures
Cross sector
announcements
Banking and capital
markets
Pillar II – Governance and
supervision

ITS on supervisory transparency and
accountability

ITS on capital add-on

ITS on risk management: procedures
when assessing external credit
assessments

Guidelines on extension of the recovery
period
Pillar III - Reporting and
disclosure

ITS on regular supervisory reporting

ITS on public disclosure: procedures,
formats and templates

Guidelines on methods to determine the
market share for the purpose of
exemptions to supervisory reporting

ITS on equity index for the equity
dampener (published on 23 December
2014)

ITS on adjustment for pegged
currencies

ITS on health risk equalisation systems
standard deviations

Guidelines on financial stability
reporting

ITS on the application of the equity
transitional

Guidelines on reporting and disclosure

Guidelines on Valuation assets and
liabilities

Guidelines on exchange of information
on a systematic basis within colleges

Guidelines on long term guarantees and
transitional measures

Guidelines on third country branches
To accompany the Pillar III consultations
EIOPA published Navigating through the
Solvency II reporting and disclosure
package Note accompanying the public
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
consultation on the GL and ITS on 19
December 2014. Here it provides
background information and includes
details of changes made to the reporting
requirements compared to its previous
published drafts.
EIOPA has provided these requirements
and guidance for all three pillars of Solvency
II and extensive new drafts of the
requirements on reporting and disclosure,
including a full updated set of quantitative
reporting templates (QRTs).These are
aimed at insurers finalising their
preparations for Pillar 3. But it has updated
templates from the previous versions, which
may challenge insurers as they source data,
update systems and put quality and control
processes in place. All insurers will need to
review the new templates and analyse their
impact before the end of the consultation.
These consultations all close on 2 March
2015.
See our Hot Topic: EIOPA publishes
updated QRTs in its second consultation on
ITS and Guidelines for further details.
Common Application Package for
Internal Models
EIOPA published a common application
package (CAP) for internal models with an
explanatory note on 4 December 2014. It
developed this package for insurers to use in
Monthly calendar
Glossary
both the pre-application and application
processes for internal models to encourage
consistency across the EU. It replaces the
PRA’s self-assessment template and UK
insurers should use it as part of their formal
application for model approval. The PRA is
considering whether UK insurers will be
required to complete the ‘background
information’ spreadsheet in the CAP and
plans to issue guidance on this early in
2015.
EIOPA proposes sanctions for breaches
EIOPA consulted on its advice to the EC on
recovery plan, finance schemes and
supervisory powers in deteriorating
financial conditions on 3 December 2014.
Under Solvency II, if a firm breaches its
SCR it has two months to submit a recovery
plan to its supervisor. If it breaches its
minimum capital requirement (MCR) it has
one month to submit a short term finance
scheme that it must comply with in three
months. EIOPA outlines its views on further
information and powers supervisors will
need when firms breach an SCR or MCR. It
also provides draft RTS for the recovery
plan, finance scheme and supervisor powers
in deteriorating financial conditions. The
consultation closes 18 February 2015.
PwC  23
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Assessing equivalence - Bermuda,
Japan and Switzerland
On 19 December 2014, EIOPA consulted on
the Solvency II equivalence of the
Bermudian, Japanese and Swiss
supervisory system. It has updated its
equivalence advice for the legislative and
supervisory changes that have taken place
since EIOPA’s first assessment in 2011.
EIOPA uses the consultations to summarise
its assessments and details areas where the
country meets the Solvency II criteria for
equivalence.
EIOPA believes that all three countries meet
the criteria for equivalence with a number of
caveats, and noted that
Switzerland will probably address the
remaining concerns about its equivalence
through a pending revision of the Insurance
Supervisory Ordinance.
The consultations close for comment on 23
January 2015.
PRA offers Solvency II update
The PRA published a Solvency II Insurance
Directors' update letter on 19 December
2014, addressing the role of non-executive
directors, MA pre-application and risk
classification for income protection claims.
It also outlines an updated timetable to Q2
2015.
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
The PRA clarified its expectations of nonexecutive directors when considering their
firm’s internal model. Whilst board
members do not need to be technical
experts in modelling techniques, board
members senior executives must
understand and be able to explain:
of ratings, governance of ratings process
and the process for review of the ratings.
Insurers that didn’t include this information
in the pre-application submission should
contact their supervisor and agree a date by
which they will deliver the missing
information to the PRA.
The PRA concluded the update letter with a
revised timetable for the period to Q2 2015.
It plans to consult on transitional
arrangements and on volatility adjustment
in January 2015, and on EIOPA guidelines
in February 2015.

the key strengths, limitations, and
judgements within the model

assumptions and judgements that have
the most material impact on the model
output

the key sources of information and
advice that the board has relied on to
satisfy itself about the appropriateness
of both the model design and the model
output.
The PRA is aware that firms are taking
different approaches to the classification of
recovery/termination risk on income
protection claims being paid by instalment.
It has clarified that firms should classify the
risk that such claims persist for longer than
expected under the disability-morbidity
sub-module and not the revision risk submodule.
The PRA published feedback from the
standardised risk information (SRI) data
assessment for general insurance firms on
12 December 2014. In May 2014 the PRA
issued various data requests to life and
general insurance firms as part of an SRI
data collection exercise to support
preparations for, and the transition to,
Solvency II. The PRA is using the
information to prioritise the areas for the
IMAP pre-application and application
phases. Supervisors plan to discuss
particular areas of focus identified during
reviews with individual firms.
As part of the model approval process, the
PRA may speak to non-executive directors
to gauge their understanding.
Firms were required to submit their MAs for
pre-application by 6 January 2015, which
will enable the PRA to give firms feedback
in March 2015. Firms which use internal
ratings methodologies to assign ratings to
unrated assets included in their MA
portfolio(s) should have provided suitable
documentation to allow the PRA to assess
their appropriateness. This documentation
should have included details of rating
methodologies, calibration and back-testing
FS regulatory, accounting and audit bulletin – January 2015
In a letter to all firms that are in-scope for
the preparatory phase of regulatory
reporting, the PRA asked the CEOs to
nominate an appropriate person to act as a
principal user. The principal user will have
full access to the PRA’s data collection
system and will upload, edit and submit
data on behalf of the firm. The PRA sent an
accompanying readiness survey for firms to
complete. It plans to use the results of the
survey to understand the progress firms are
making towards regulatory reporting
readiness and discover any problems in
advance. Firms need to provide the
principal user details and complete the
readiness survey by Friday 16 January
2015.
Risk feedback for insurance firms
Reporting on non-December year ends
The PRA published reporting schedules for
firms with non-December year ends on the
regulatory reporting page on 19 December
2014. It provides affected firms with
reporting requirements for day one returns,
quarterly and annual reporting and their
final Solvency I annual return dates.
Further PwC Solvency II analysis
In December 2014 we published:
PwC  24
Executive summary


MiFID II are we nearly
there yet? & A changing
climate for regulation?
What the PRA expects and how to
deliver it’ – A webcast summarising the
key messages from the PRA’s Solvency II
implementation conference
‘Senior Insurance Managers Regime:
The regulatory spotlight turns to senior
managers in insurance companies’ – A
summary of the PRA and FCA proposed
framework for the new Senior Insurance
Managers Regime.
Where to go for more
information
Read more about Solvency II UK on our
webpages at www.pwc.co.uk/solvencyII
UK
Evaluating the retirement income
market
The FCA published its interim report:
provisional findings and proposed
remedies into the retirement income market
on 11 December 2014. In February 2014 the
FCA concluded the annuities market was
not working well for most consumers so
launched a market study of the entire
retirement income market. The FCA
outlines its provisional findings on how the
current market is operating and a series of
recommendations to improve the way firms
communicate with customers about their
options. It wants annuities providers to alert
customers to all the options available to
them in the retirement income market. In
Cross sector
announcements
Banking and capital
markets
addition, the FCA has also identified some
future risks and set out what it will be
looking for as the market develops.
Also on 11 December 2014, the FCA
published its thematic review of annuities
sales practices. Its review follows its
thematic review of annuities published
February 2014, which found many
consumers were buying an annuity from
their current pension provider without
shopping around and therefore could be
missing out on obtaining a higher
retirement income.
In its latest review of sales practices, the
FCA looked at the non-advised sales
practices of pension providers offering
annuities to their existing customers. The
FCA found evidence of firms’ sales practices
decreasing a consumer’s likelihood of
shopping around and switching. It found
some consumers were buying the wrong
type of annuity, in particular not purchasing
an enhanced annuity when they were
eligible for one. So it concluded consumers
may be missing out on a potentially higher
income in retirement. The FCA is planning
further investigations to see if its findings in
relation to enhanced annuities are
indicative of a more widespread problem or
have led to poor consumer outcomes when
buying annuities.
FS regulatory, accounting and audit bulletin – January 2015
Asset management
Insurance
Bailey looking to resolve insurers
Andrew Bailey, CEO of the PRA spoke on
changes in insurance regulation globally at
the Bermuda Monetary Authority Seminar
on 4 December 2014. Bailey provided an
overview of why and how the PRA regulates
the insurance industry for prudential
purposes and concluded that there is a case
for enabling special resolution powers in
respect of insurers.
International developments
IAIS progresses global capital
standards
The IAIS consulted on a risk-based global
Insurance Capital Standard (ICS) on 17
December 2014, the first of three
consultations it plans to publish. It wants to
develop the ICS, a group-wide, consolidated
insurance capital standard applicable to
internationally active insurance groups
(IAIGs) and G-SIIs. IAIS seeks feedback on
valuation, qualifying capital resources, an
example of a standard method for
determining the ICS capital requirement
and other potential methods for
determining the ICS capital requirement.
The consultation closes on 16 February
2015.
EIOPA provides crisis frameworks
EIOPA published an opinion on sound
principles for crisis prevention
management and resolution preparedness
Monthly calendar
Glossary
of competent authorities on 1 December
2014. Following the financial crisis and
initiatives by the FSB and IAIS, many
competent authorities are updating their
crisis prevention, management and
resolution frameworks. EIOPA has
published an opinion to help promote
consistency and adequacy of these new
frameworks. It provides 14 principles
reflecting prudent practices and references
for the insurance sector, for competent
authorities to consider when reviewing and
developing their frameworks.
Accounting
Corporate governance
FRC advises first time reporters
The FRC has issued advice to preparers
highlighting recent changes to annual
reporting requirements which may affect
companies for the first time and the best
practice lessons learnt from early adopters
of other changes.
UK GAAP
FRC amends FRS 101
The FRC has issued draft amendments to
FRS 101, 'Reduced disclosure framework'.
In FRED 57 the FRC proposes a small
number of changes to the disclosure
exemptions in FRS 101, based on changes to
PwC  25
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
IFRS since the 2013/14 annual review. The
consultation closes 20 March 2015.
2016, subject to EU endorsement. Our In
brief publication looks at the details.
New distributions rules for 2015
PwC publications
New UK GAAP (FRS 101 or FRS 102) or
IFRS (together, 'New GAAP') will be
mandatory for all UK companies for
accounting periods beginning on or after 1
January 2015. Any UK company that is
intending to declare or pay a distribution in
2015 will need to carefully consider the
impact of transition to New GAAP. Our In
brief publication looks at the details.
IFRS News
IFRS
IASB applies the consolidation
exception
The IASB published amendments to IFRS
10 Consolidation financial statements and
IAS 28 (2011) Investments in associates and
joint ventures on 18 December 2014. The
amendments clarify the application of the
consolidation exception for investment
entities and their subsidiaries. See our In
brief publication for further details.
IASB amends IAS 1
The IASB amended IAS 1, 'Presentation of
financial statements', as part of its major
initiative to improve presentation and
disclosure in financial reports. These
amendments are effective for annual
periods beginning on or after 1 January
Our publication IFRS News - December
2014/January 2015 covers:
Asset management
Insurance

IFRS GAAP Plc – consolidated financial
statements for a listed group reporting
under IFRS.

New UK GAAP Limited – single-entity
financial statements, including
transition disclosures for a company
reporting under FRS 101.

Joint arrangements: IFRS
Interpretations Committee tentative
agenda decisions

A present from Santa: New revenue
standard
Our publication Illustrative IFRS
consolidated financial statements 2014 Investment Property provides an
illustrative set of consolidated financial for a
fictional investment property group.

Year-end reporting: Top ten reminders
Current financial reporting issues

Cannon Street Press:
In this publication we look at how a sample
of European real estate companies have
responded to IFRS 13 disclosure
requirements in relation to investment
properties, specifically, the quantitative
information disclosed about significant
unobservable inputs used in fair value
measurement and the sensitivity of the fair
value measurement to significant changes in
those unobservable inputs.


Investment entities: Amendments to
IFRS 10, and IAS 28

IAS 1 narrow scope amendments

IFRS 2 proposed amendments

IAS 7 proposed amendments
Questions and answers: ‘V’ for vesting
conditions.
We provide illustrative FR101
statements
Our publication UK illustrative financial
statements IFRS and UK GAAP (FRS 101)
example accounts for 2014 year ends
provides two example set of accounts for the
year ended 31 December 2014:
FS regulatory, accounting and audit bulletin – January 2015
Monthly calendar
Glossary
Autumn statement muddies tax
positions
The Government published its autumn
statement on 3 December 2014. See our In
brief publication for details of the proposed
financial reporting changes and their
implementation.
PwC  26
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Monthly calendar
Open consultations
Closing date
for responses
Paper
Institution
16/01/15
Consultation paper: implementation by the BoE of ESMA’s guidelines and recommendations on CCP interoperability
arrangements
BoE
16/01/15
GC14/9: MTFs – dear CEO letter and FCA good practice observations on MTF rulebooks
FCA
19/01/15
MIPRU Simplification
FCA
23/01/15
CP25/14 – the PRA rulebook: part 2
PRA
23/01/15
CMA annual plan 2015/16 - consultation
CMA
30/01/15
Consultation paper: guidelines on asset segregation under the AIFMD
ESMA
30/01/15
Consultation – regulating individual conduct in banking: UK branches of foreign banks
HMT
30/01/15
CP24/14 – Solvency II: further measures for implementation
PRA
30/01/15
Bringing additional benchmarks into the regulatory and supervisory regime
FCA
02/02/15
Consultative document: adequacy of loss-absorbing capacity of G-SIBs in resolution
FSB
02/02/15
CP14/25 – changes to the approved persons regime for Solvency II firms
FCA
02/02/15
CP14/26 – regulatory fees and levies: policy proposals for 2015/16
FCA
FS regulatory, accounting and audit bulletin – January 2015
PwC  27
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Closing date
for responses
Paper
Institution
02/02/15
CP26/14 – senior insurance managers regime: a new regulatory framework for individuals
PRA
05/02/15
Consultation paper: draft RTS on the contractual recognition of write-down and conversion powers under the BRRD
EBA
05/02/15
CP14/27 – Quarterly Consultation No. 7 (chapters 2-4)
FCA
06/02/15
Consultation paper: draft RTS on valuation under the BRRD
EBA
06/02/15
Consultation paper: draft guidelines on the rate of conversion of debt to equity in bail-in
EBA
06/02/15
Consultation paper: draft guidelines on the treatment of shareholders in bail-in or the write-down and conversion of capital
instruments
EBA
06/02/15
GC14/7: proposed guidance on financial crime systems and controls
FCA
10/02/15
Consultation paper: draft guidelines on product oversight and governance arrangements for retail banking products
EBA
11/02/15
Consultation paper: draft guidelines on methods for calculating contributions to deposit guarantee schemes
EBA
12/02/15
Consultative document: standards and processes for global securities financing data collection and aggregation
FSB
12/02/15
Draft Guidelines on creditworthiness assessment
EBA
12/02/15
Draft Guidelines on arrears and foreclosure
EBA
13/02/15
Criteria for identifying simple, transparent and comparable securitisations
BCBS/IOSCO
13/02/15
Consultation paper: review of the technical standards on reporting under Article 9 of EMIR
ESMA
FS regulatory, accounting and audit bulletin – January 2015
PwC  28
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Closing date
for responses
Paper
Institution
17/02/15
Discussion paper: key information documents for PRIIPs
ESAs
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
Fundamental review of the trading book: outstanding issues
BCBS
27/02/15
Strengthening accountability in banking: forms, consequential and transitional aspects
PRA/FCA
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 under
the 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
BCBS
FS regulatory, accounting and audit bulletin – January 2015
PwC  29
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Closing date
for responses
Paper
Institution
09/03/15
Lending Code review
Lending
Standards
Board
12/03/15
Consultation paper: draft RTS on the specification of the assessment methodology for competent authorities regarding compliance
of 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
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
BCBS
27/03/15
Capital floors: the design of a framework based on standardised approaches
BCBS
27/03/15
Discussion Paper Share classes of UCITS
ESMA
FS regulatory, accounting and audit bulletin – January 2015
PwC  30
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Forthcoming publications in 2015
Date
Topic
Type
Institution
Policy statement
FCA
Client Money
Q1 2015
Review of the client money rules for insurance intermediaries
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
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
Prudential
FS regulatory, accounting and audit bulletin – January 2015
PwC  31
Executive summary
Date
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Topic
Asset management
Insurance
Monthly calendar
Glossary
Type
Institution
Securities and markets
Q1 2015
Implementing acts on third country equivalence decisions on exposures
to third country investment firms, clearing houses and exchanges treated
as 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 joint
sponsors 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 Consultation
Paper 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 and
AIFs
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
FS regulatory, accounting and audit bulletin – January 2015
PwC  32
Executive summary
Date
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Topic
Asset management
Insurance
Monthly calendar
Glossary
Type
Institution
Recovery and resolution
Q2 2015
Advice on the criteria for determining the number of years by which the
initial 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 Remuneration
Rules – PS to CP14/14
Policy statement
FCA
TBD 2015
Strengthening accountability in banking: a new regulatory framework
for individuals – PS to CP14/13
Policy statement
FCA
Q1 2015
Solvency II
changes – PS
Policy statement
FCA
TBD 2015
Solvency II Level 3 measures
Level 3 text
EIOPA
Report
EBA
Solvency II
Supervision, governance and reporting
Q4 2015
Assessment of national SREP approaches
Main sources: ESMA 2015 work programme; EIOPA 2015 work programme; EBA 2015 work programme; EC 2015 work programme; FCA policy development updates
FS regulatory, accounting and audit bulletin – January 2015
PwC  33
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Glossary
2EMD
The Second E-money Directive 2009/110/EC
BCR
Basic capital requirement (for insurers)
ABC
Anti-Bribery and Corruption
BIBA
British Insurance Brokers Association
ABI
Association of British Insurers
BIS
Bank for International Settlements
ABS
Asset Backed Security
BoE
Bank of England
AIF
Alternative Investment Fund
BRRD
Bank Recovery and Resolution Directive
AIFM
Alternative Investment Fund Manager
CASS
Client Assets sourcebook
AIFMD
Alternative Investment Fund Managers Directive 2011/61/EU
CCD
Consumer Credit Directive 2008/48/EC
AIMA
Alternative Investment Management Association
CCPs
Central Counterparties
AML
Anti-Money Laundering
CDS
Credit Default Swaps
AML3
3rd Anti-Money Laundering Directive 2005/60/EC
CEBS
Committee of European Banking Supervisors (predecessor of EBA)
AQR
Asset Quality Review
CET1
Core Equity Tier 1
ASB
UK Accounting Standards Board
CESR
Committee of European Securities Regulators (predecessor of
ESMA)
Banking Reform
Act (2013)
Financial Services (Banking Reform) Act 2013
Co-legislators
Basel Committee
Basel Committee of Banking Supervision (of the BIS)
Ordinary procedure for adopting EU law requires agreement
between the Council and the European Parliament (who are the ‘colegislators’)
CFT
Counter Financing of Terrorism
Basel II
Basel II: International Convergence of Capital Measurement and
Capital Standards: a Revised Framework
CFTC
Commodities Futures Trading Commission (US)
Basel III
Basel III: International Regulatory Framework for Banks
CGFS
Committee on the Global Financial System (of the BIS)
BBA
British Bankers’ Association
CIS
Collective Investment Schemes
FS regulatory, accounting and audit bulletin – January 2015
PwC  34
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
CMA
Competition and Markets Authority
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act (US)
CMU
Capital markets union
D-SIBs
Domestic Systemically Important Banks
CoCos
Contingent convertible securities
EBA
European Banking Authority
Council
Generic term representing all ten configurations of the Council of the
European Union
EC
European Commission
CRA1
Regulation on Credit Rating Agencies (EC) No 1060/2009
ECB
European Central Bank
CRA2
Regulation amending the Credit Rating Agencies Regulation (EU)
No 513/2011
ECJ
European Court of Justice
ECOFIN
Economic and Financial Affairs Council (configuration of the
Council of the European Union dealing with financial and fiscal and
competition issues)
ECON
Economic and Monetary Affairs Committee of the European
Parliament
EEA
European Economic Area
EEC
European Economic Community
EIOPA
European Insurance and Occupations Pension Authority
EMIR
Regulation on OTC Derivatives, Central Counterparties and Trade
Repositories (EC) No 648/2012
EP
European Parliament
ESA
European Supervisory Authority (i.e. generic term for EBA, EIOPA
and ESMA)
CRA3
proposal to amend the Credit Rating Agencies Regulation and
directives related to credit rating agencies COM(2011) 746 final
CRAs
Credit Rating Agencies
CRD
‘Capital Requirements Directive’: collectively refers to Directive
2006/48/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 credit
institutions and investment firms
CTF
Counter Terrorist Financing
DFBIS
Department for Business, Innovation and Skills
ESCB
European System of Central Banks
DG MARKT
Internal Market and Services Directorate General of the European
Commission
ESMA
European Securities and Markets Authority
ESRB
European Systemic Risk Board
FS regulatory, accounting and audit bulletin – January 2015
PwC  35
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
EU
European Union
FSCS
Financial Services Compensation Scheme
EURIBOR
Euro Interbank Offered Rate
FSI
Financial Stability Institute (of the BIS)
Eurosystem
System of central banks in the euro area, including the ECB
FSMA
Financial Services and Markets Act 2000
FASB
Financial Accounting Standards Board (US)
FSOC
Financial Stability Oversight Council
FATCA
Foreign Account Tax Compliance Act (US)
FTT
Financial Transaction Tax
FATF
Financial Action Task Force
G30
Group of 30
FC
Financial counterparty under EMIR
GAAP
Generally Accepted Accounting Principles
FCA
Financial Conduct Authority
G-SIBs
Global Systemically Important Banks
FDIC
Federal Deposit Insurance Corporation (US)
G-SIFIs
Global Systemically Important Financial Institutions
FiCOD
Financial Conglomerates Directive 2002/87/EC
G-SIIs
Global Systemically Important Institutions
FiCOD1
Amending Directive 2011/89/EU of 16 November 2011
HMRC
Her Majesty’s Revenue & Customs
FiCOD2
Proposal to overhaul the financial conglomerates regime (expected
2013)
HMT
Her Majesty’s Treasury
FMI
Financial Market Infrastructure
IAIS
International Association of Insurance Supervisors
IASB
International Accounting Standards Board
FOS
Financial Ombudsman Service
FPC
Financial Policy Committee
ICAS
Individual Capital Adequacy Standards
FRC
Financial Reporting Council
ICB
Independent Commission on Banking
FSA
Financial Services Authority
ICOBS
Insurance: Conduct of Business Sourcebook
FSB
Financial Stability Board
IFRS
International Financial Reporting Standards
IMA
Investment Management Association
FS Act 2012
Financial Services Act 2012
IMAP
Internal Model Approval Process
FS regulatory, accounting and audit bulletin – January 2015
PwC  36
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
IMD
Insurance Mediation Directive 2002/92/EC
Member States
countries which are members of the European Union
IMD2
Proposal for a Directive on insurance mediation (recast) COM(2012)
360/2
MiFID
Markets in Financial Instruments Directive 2004/39/EC
MiFID II
IMF
International Monetary Fund
Proposed Markets in Financial Instruments Directive (recast)
(COM(2011) 656 final)
IORP
Institutions for Occupational Retirement Provision Directive
2003/43/EC
MiFIR
Proposed Markets in Financial Instruments Regulation (EC)
(COM(2011) 652 final)
IOSCO
International Organisations of Securities Commissions
MMF
Money Market Fund
ISDA
International Swaps and Derivatives Association
MMR
Mortgage Market Review
ITS
Implementing Technical Standards
MREL
Minimum requirements for own funds and eligible liabilities
JCESA
Joint Committee of the European Supervisory Authorities
MTF
Multilateral Trading Facility
JMLSG
Joint Money Laundering Steering Committee
MoJ
Ministry of Justice
JURI
Legal Affairs Committee of the European Parliament
MoU
Memorandum of Understanding
LCR
Liquidity coverage ratio
NAV
Net Asset Value
LEI
Legal Entity Identifier
NBNI G-SIFI
Non-bank non-insurer global systemically important financial
institution
LIBOR
London Interbank Offered Rate
NFC
Non-financial counterparty under EMIR
MA
Matching Adjustment
NFC+
Non-financial counterparty over the EMIR clearing threshold
MAD
Market Abuse Directive 2003/6/EC
NFC-
Non-financial counterparty below the EMIR clearing threshold
MAD II
Proposed Directive on Criminal Sanctions for Insider Dealing and
Market Manipulation (COM(2011)654 final)
NSFR
Net stable funding ratio
MAR
Proposed Regulation on Market Abuse (EC) (recast) (COM(2011) 651
final)
OECD
Organisation for Economic Cooperation and Development
Official Journal
Official Journal of the European Union
MCD
Mortgage Credit Directive
FS regulatory, accounting and audit bulletin – January 2015
PwC  37
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
OFT
Office of Fair Trading
SEC
Securities and Exchange Commission (US)
Omnibus II
Second Directive amending existing legislation to reflect Lisbon
Treaty and new supervisory infrastructure (COM(2011) 0008 final)
– amends the Prospectus Directive (Directive 2003/71/EC) and
Solvency II (Directive 2009/138/EC)
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
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 the
Council: rotates on 6 monthly basis
PRIIPs
Regulation
Proposal for a Regulation on key information documents for
investment 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)
FS regulatory, accounting and audit bulletin – January 2015
PwC  38
Executive summary
MiFID II are we nearly
there yet? & A changing
climate for regulation?
Cross sector
announcements
Banking and capital
markets
Asset management
Insurance
Monthly calendar
Glossary
Contacts
Laura Cox
020 7212 1579
[email protected]
@LauraCoxPwC
Andrew Strange
020 7804 6669
[email protected]
Retail distribution, asset
management and reg reform
Liz Gordon
020 7212 6493
[email protected]
Asset management, accounting
issues
Ian Kelly
020 7804 1929
[email protected]
Prudential regulation and
reporting
Andrew Hawkins
020 7212 5270
[email protected]
Banking, prudential regulation
and shadow banking
Sharon-Marie Fernando
020 7804 3062
sharon-marie.fernando
@uk.pwc.com
Investment funds and insurance
David Brewin
020 7212 5274
[email protected]
Client assets and prudential
regulation
Mike Vickery
011 7923 4222
[email protected]
Insurance, Solvency II
Betsy Dorudi
020 7213 5270
[email protected]
EMIR, MiFID II and OTC rules
Kareline Daguer
020 7804 5390
[email protected]
Insurance, Solvency II
Simon Andrews
020 7212 3796
[email protected]
Securities and derivatives, reg
reform and commodities
Paul Minter
020 7213 1839
John Newsome
020 7804 1168
[email protected]
Asset management regulatory
and conduct issues
Vincent O’Sullivan
020 7212 3544
[email protected]
Basel III, structural reform and
Central Banks
Isabella Rodgers
020 7804 5240
[email protected]
MiFID II, structural reform
Luke Nelson
020 7213 4631
[email protected]
Securities and derivatives,
financial crime and shadow
banking
Babar Hayat
020 7212 6914
[email protected]
FS Technology transformation,
development and client delivery
Dominic Muller
020 7213 2905
[email protected]
Asset management, US and
cross-border regulation
Tania Lee
079 7668 7547
[email protected]
Insurance, Solvency II
[email protected]
Basel III, capital markets, FS
economics
Hortense Huez
020 7213 3869
[email protected]
Prudential regulation, Basel III,
Liquidity and funding
Megan P Charles
020 7804 0904
[email protected]
Consumer credit
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