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Basel Committee Meets to Discuss Covid-19 Impact on Banks

On June 4, 2021, the Basel Committee on Banking Supervision met to cover the following issues related to the effect of Covid-19 on the current banking system:

  • Discussion on “Covid-19 risks to banking system, reviews provisioning practices and stresses importance of using capital and liquidity buffers.
  • Review of interim report evaluating impact of Basel framework during Covid-19.”
  • Agreement “to hold public consultation on prudential treatment of cryptoasset exposures.”

While the world is beginning to re-open, the Committee cautioned that banks and supervisors should still remain watchful for Covid-19 risks and vulnerabilities by using, among other things, “Basel III capital and liquidity buffers to absorb shocks and maintain lending to creditworthy households and businesses”, and strengthening operational resilience. The committee also evaluated post-crisis reforms by reviewing an interim report, which gave a preliminary assessment of the impact that Basel III standards had during the pandemic. Cryptoassets market developments were also covered during the meeting, as well as “next steps in developing its prudential treatment for banks' cryptoasset exposures.”

More information on the June 4th Basel Committee meeting is available here.

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Basel

Bank for International Settlements Releases Executive Summary on Cyber Resilience Practices

The Bank for International Settlements (BIS) published their Cyber resilience practices – Executive Summary, with the aim of strengthening cyber resilience within financial firms. Citing the Financial Stability Board’s (FSB) definition, cyber resilience consists of "the ability of an organisation to continue to carry out its mission by anticipating and adapting to cyber threats and other relevant changes in the environment and by withstanding, containing and rapidly recovering from cyber incidents."  

The Executive Summary covers the following topics:

  • Regulation and supervision
  • Cyber incident response and recovery
  • Third party discrepancies
  • Information-sharing arrangements
  • Cyber resilience metrics

Additional information on the Executive Summary is available here.

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Bank of International Settlements

Financial Stability Board Requests Response to Public Consultation on Cross-Border Payments

On May 31, 2021, the Financial Stability Board (FSB) announced they were seeking response to their public consultation, Targets for Addressing the Four Challenges of Cross-Border Payments. The global targets proposed are intended to improve cost, speed, transparency and access to cross-border payments via the FSB’s Roadmap for Enhancing Cross-border Payments. “The quantitative targets proposed are a foundational step in the G20 Roadmap for Enhancing Cross-border Payments, which was endorsed by G20 Leaders in November 2020."

The FSB expects individual targets to be met by end of 2027, however, remittance cost targets are set for 2030 by the United Nations Sustainable Development Group Goal (UN SDG), which is endorsed by the G20.

The FSB anticipates that a final report consisting of final targets will be completed by October of this year. By this date the FSB states they will have developed an “implementation approach for monitoring the targets that will set out:

  1. how targets will be measured and data sources and data gaps to be filled;
  2. how progress towards meeting the targets will be monitored; and
  3. the frequency of data collection and publication.”

More information on the FSB public consultation on cross-border payments can be found here and here.

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Financial Stability Board

Financial Stability Board Supports End of LIBOR by End of 2021

LIBOR is coming to an end. While many USD settings will continue until the end of 2023, the majority of LIBOR panel of global banks will cease by the end of 2021. In March, the ICE Benchmark Administration (IBA) and the Financial Conduct Authority (FCA) made confirmation of the dates that all LIBOR settings will discontinue. In response, the Financial Stability Board (FSB) has published several reports and publications supporting a “smooth transition” away from LIBOR by the end of 2021.

The FSB made recommendations for financial, non-financial sector firms, and authorities to consider by publishing the following statements and reports:

  • “An updated global transition roadmap that, drawing on national working group recommendations, summarises the high-level steps firms will need to take now and over the course of 2021 to complete their transition.
  • A paper reviewing overnight risk-free rates and term rates, building on the concept that the tools necessary to complete the transition are currently available. The FSB cautions market participants against waiting for the development of additional tools, in particular forward-looking term risk-free rates.
  • A statement on the use of the ISDA spread adjustments in cash products, to support transition particularly in loan markets, which remains an area of concern with much new lending still linked to LIBOR.
  • statement encouraging authorities to set globally consistent expectations that regulated entities should cease the new use of LIBOR in line with the relevant timelines for that currency, regardless of where those trades are booked.”

Additional information on the FSBs recommendations for LIBOR transition is available here.

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Financial Stability Board

Network for Greening the Financial System Works to Meet 2015 Paris Agreement Goals

In an effort to meet goals for the 2015 Paris Agreement, The Network for Greening the Financial System (NGFS) released a summary of their May 2020, Guide for Supervisors – Integrating climate-related and environmental risks into prudential supervision. The Climate and environmental risks - guide for supervisors - Executive Summary, summarizes the five key recommendations to “provide authorities with a roadmap to integrate climate-related and environmental risks in supervisory frameworks”.

The recommendations include:

Image via: Bank for International Settlements website: https://www.bis.org/fsi/fsisummaries/climate_env_risks.htm


A detailed summary of each recommendation is available here.

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Bank of International Settlements

Financial Stability Institute Issues Paper on Supervising Cryptoassets

The Financial Stability Institute issued its insights on supervising cryptoassets for anti-money laundering.  The paper noted that although certain cryptoassets have the potential to make payments and transfers more efficient, some of their features may heighten money laundering/terrorist financing (ML/TF) risks. In particular, the speed of transactions, global reach, potential for anonymous activity and the potential for transactions to take place without financial intermediaries make cryptoassets vulnerable to misuse. In fact, the scale of illicit use of cryptoassets is already significant, highlighting the importance of AML/CFT regulation and supervision, as well as law enforcement, in this area.

The paper discusses emerging regulatory approaches and supervisory practices and identifies policy priorities to address common challenges faced by regulatory authorities.  It also notes the efforts of hte Financial Action Task Force in this area to prevent the misuse of cryptoassts for ML/TF.

A copy of the paper can be viewed here.

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Basel

Financial Conduct Authority Develops Consumer Duty to Increase Level of Consumer Protection

The Financial Conduct Authority (FCA) is currently establishing plans for a new Consumer Duty to bolster their existing rules and principles in order to enhance consumer protection in retail financial markets. In the FCA’s 2020 Financial Lives survey, 1 in 4 respondents said they “lack confidence in the financial services industry and only 35% of respondents agreed that firms are honest and transparent in their dealings with them.” The Consumer Duty will be a requirement for firms to adhere to and is subject to regulatory enforcement for non-compliance. Its three key elements include:

  1. “The Consumer Principle, which will reflect the overall standards of behaviour the FCA expects from firms. The wording being consulted on is: 'a firm must act in the best interests of retail clients' or 'a firm must act to deliver good outcomes for retail clients'.
  2. Cross-cutting rules which would require 3 key behaviours from firms, which include taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives and to act in good faith.
  3. It will also be underpinned by a suite of rules and guidance that set more detailed expectations for firm conduct in relation to 4 specific outcomes – communications, products and services, customer service and price and value.”

More information on the FCA’s Consumer Duty is available here.

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Financial Conduct Authority

Basel Committee 2021-22 Work Programme and Strategic Priorities Released

On April 16, 2021, the Basel Committee on Bank Supervision published it’s 2021-22 work programme outlining the Committee’s strategic priorities and “reflects the outcome of a recent strategic review by the Committee to ensure that it continues to effectively promote global financial stability and strengthen the regulation, supervision and risk management practices of banks worldwide.” The key themes of the work programme cover Covid-19 resilience and recovery; horizon scanning, analysis of structural trends and mitigation of risks; and strengthening supervisory coordination and practices. The Committee’s oversight body, Group of Governors and Heads of Supervision (GHOS), will be focusing on these themes in the following ways:

  • Covid-19 resilience and recovery: Ongoing monitoring and assessment of risks and vulnerabilities to the global banking system; and additional policy and/or supervisory measures to mitigate these risks where relevant.
  • Horizon scanning and mitigation of medium-term risks and trends: Identifying, assessing and mitigating medium-term risks and structural trends to the banking system, including efforts towards the digitalisation of finance, climate-related financial risks, and the impact on banks' business models resulting from a "low-for-long" interest rate environment.
  • Strengthening supervisory coordination and practices: Pursue “initiatives aimed at strengthening supervisory coordination and practices, with a focus on the role of artificial intelligence / machine learning in banking and supervision, data and technology governance by banks, operational resilience, and the role of proportionality in bank regulation and supervision.”

More information on the Basel Committee’s 2021-22 work programme can be viewed here.

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Basel

Basel Committee Releases Two Reports on Climate-Related Financial Risks

On April 14, 2021, the Basel Committee on Banking Supervision published two reports on climate-related financial risks entitled,  Climate-related risk drivers and their transmission channels and Climate-related financial risks – measurement methodologies. According to the Bank for International Settlements’ press release:

  • The two reports discuss transmission channels of climate-related risks to the banking system, and the measurement methodologies of climate-related financial risks.
  • Climate risk drivers can be captured in traditional financial risk categories, but additional progress is needed to better estimate these risks.
  • The reports provide a conceptual foundation for the Basel Committee's next phase of work to identify potential gaps in the Basel Framework and consider measures to address them.

The report on Climate-related risk drivers and their transmission channels, discusses how climate-related risks come to fruition and how they affect banks and the banking system as a whole, while the report on Climate-related financial risks – measurement methodologies, covers “conceptual issues” surrounding climate-related financial risk measurements, as well as related bank and supervisory practices. There is still a way to go to identify and improve on risk mitigation and the Basel Committee is currently working on how to incorporate climate-related financial risk into their Basel Framework. “While a range of methodologies is currently in use or being developed, challenges remain in the estimation process, including data gaps and uncertainty associated with the long-term nature and unpredictability of climate change.” 

More information on the Basel Committee’s climate-related financial risk reports can be viewed here.

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Basel

Financial Stability Board Addresses G20 Regarding Covid-19, Too-Big-To-Fail and Climate Change

In anticipation of the April 7th meeting with the G20, on April 6, 2021, the Financial Stability Board (FSB) published a letter from Chair, Randall K. Charles entitled, To G20 Finance Ministers and Central Bank Governors. The letter discusses Covid-19 support ramifications, FSB's support of the progress made on Too-Big-To-Fail (TBTF) reforms for banks, and emphasizes the importance of focusing on climate change issues as they relate to financial services.

The letter includes mention of the report the FSB and delivered to the G20 on April 6, entitled, COVID-19 support measures Extending, amending and ending. Notably, the report states that “withdrawal of support measures before the macroeconomic outlook has stabilised could be associated with significant immediate risks to financial stability.” The FSB, however, maintains that support measures could exist past the point of being helpful and that financial stability risks will start to grow; but admittedly, the FSB acknowledges that “most authorities currently believe that the costs of premature withdrawal of support could be more significant than maintaining support for too long”, and that flexibility and a “state-contingent approach” could minimize risks.

The letter goes on to endorse TBTF reforms but highlights vulnerabilities within non-bank financial intermediation or NBFI (insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops); and lastly, discusses sustainable finance and climate change issues. FSB deliverables to the G20 (due in July) include two reports “on ways to promote consistent, high-quality climate disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures; and on the data necessary for the assessment of financial stability risks and related data gaps.” The FSB will also present a roadmap to the G20 on climate-related financial risk, and coordinate with the G20 in developing their sustainable finance roadmap.

More information on the FSB’s letter, To G20 Finance Ministers and Central Bank Govenors; and report on COVID-19 Support Measures Extending, Amending an Ending, can be viewed here.

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Financial Stability Board

Basel Oversight Group Discuss Global initiatives on Non-Bank Financial Intermediation

On March 31, 2021, the Basel Committee on Banking Supervision’s oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), met to endorse the Basel Committee’s 2021-22 work programme and strategic priorities. The work programme “places high priority on the implementation and evaluation of previously agreed reforms, on assessing emerging risks and vulnerabilities, and increasing supervisory cooperation.” Part of that endorsement included and discussion surrounding global initiatives for non-bank financial intermediation (NBFI).

Regulators are taking notice that NBFI has a substantial impact on the market: banks and non-banks (such as like insurance companies, pension funds, investment funds, etc) are “interconnected through multiple channels”, and non-banks take up nearly half of the “global financial system”. Following the Financial Stability Board’s lead on tackling NBFI initiatives, the GHOS suggest taking a “holistic approach” when addressing areas needed to improve NBFI resilience.

More information on the GHOS meeting can be viewed here.

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Basel

Financial Stability Board Publishes Evaluation of Too Big to Fail Reforms for Systemically Important Banks

On March 31, 2021, the Financial Stability Board (FSB) published its final report entitled, Evaluation of the Effects of Too-Big-To-Fail Reforms, focusing their attention mainly on systemically important banks (SIBs). The objective of the evaluation is to examine “the extent to which the reforms have reduced the systemic and moral hazard risks associated with SIBs, as well as their broader effects on the financial system.”

While the report included mention of non-bank institutions, it largely focused on SIB reforms and how non-bank institutions function in proximity to them, stating that: “As SIBs face more stringent requirements, other banks and non-bank financial institutions would pick up market share and improve profitability relative to SIBs.”

The report goes on to articulate that “other intermediaries” including both banks and non-banks have contributed more than global systemically important banks to growth in the ratio of credit to GDP and hypothesized that “additional impact of the TBTF reforms on G-SIBs could have left space for growth by other intermediaries”; and that non-bank financial intermediation (NBFI) has substantial growth in total assets after the TBTF reforms. However, credit unions typically remain stable during economic hardship with no bearing on whether SIBs perform satisfactorily. The report waivers on its opinion of non-bank institutions and hypothesizes that more diversity within the financial system could support financial stability, but then conjectures that “a shift of credit provision activities to non-bank financial intermediaries could raise financial stability concerns.” Ultimately, the FSB concedes that the implications of non-bank institutions have not been fully evaluated and that they will work to address financial stability risks. World Council agrees and urges the FSB to study the impact of the “Too-Big-To-Fail” reforms on smaller financial institutions.  

FSB voiced the need to improve the resiliency of NBFI, asserting that “the events of March 2020 suggested that some parts of the NBFI system acted as propagators rather than mitigants of the stress.”  What the FSB should consider is that smaller, not-for-profit cooperative institutions such as credit unions, are more stable during times of economic hardship.  This is due to their not-for-profit status and ability to provide necessary services to the underserved community typically forgotten or ignored by SIBs. Credit unions provide a direct benefit to the financial market and should be given some deference as to the needs of these institutions by providing proportional reforms so that they can continue to thrive and contribute to market buoyancy.

More information on the final report can be viewed here and here.

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Financial Stability Board

World Council Advocated Proportionality Included in Basel Operational Resilience Guidance

The Basel Committee on Banking Supervision issued two guidance documents concerning Operational Resilience including the Principles of Operational Resilience and  Revisions to the Principles for the Sound Management of Operational Risk.  Both documents take a principled approach which allows for a risk-based and proportional application to any requirements implemented. 

Specifically, the Principles of Operational Resilience state “By building upon existing guidance and current practices, the Committee is issuing a principles-based approach to operational resilience that will help to ensure proportional implementation across banks of various size, complexity and geographical location.”

Further, the Principles for Sound Management of Operational Risk states “Thus, the review of the Principles is also the opportunity to stress that this model should be adequately and proportionally used by financial institutions to manage every kind of operational risk subcategory, including ICT risk” (emphasis added).

World Council advocated for the inclusion of this emphasis on proportionality in its comment letters to the Basel Committee filed during their consultation period (here and here).  WOCCU applauds the Basel Committee on this principles based and proportional approach which will help increase credit unions’ capacity to withstand disruptions due to severe events, but in a manner commensurate with their size, risk, and complexity.

A copy of the Principles of Operational Resilience can be viewed here; and the Principles for Sound Management of Operational Risk can be viewed here.

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Basel

IASB Extends Application Period of Practical Expedient in IFRS 16 Leases

In response to stakeholders and in light of the continuing Covid-19 pandemic, on March 31, 2021, the International Accounting Standards Board (Board) prolonged aid to lessees accounting for Covid-19-related rent concessions by extending, for one year, the application period of the practical expedient in IFRS 16 Leases.

The amendment was implemented to alleviate lessees accounting of Covid-19 related rent concessions, “such as rent holidays and temporary rent reductions, while continuing to provide useful information about their leases to investors.” The amendment, which was originally issued in May 2021, will now apply to rent concessions reducing lease payments due on or before June 30, 2022.

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International Accounting Standards Board

Financial Conduct Authority Publishes Feedback on Open Finance

In December of 2019, the FCA published a Call for Input, to “explore the opportunities and risks arising from open finance”, and have now published a Feedback Statement to summarize the responses they received. Some of the feedback highlighted that:

  • Open finance could be a significant undertaking for firms. This is particularly important given the change in operating environment as a result of Covid-19 and its ongoing impact. 
  • The implementation of open finance should be proportionate, phased and driven by consideration of how consumers will use and interact with it. 
  • There is a degree of consensus around the key building blocks needed for open finance to develop in the interests of consumers. These include a legislative and regulatory framework, common standards and an implementation entity. 

The feedback also showed that “open finance could potentially offer significant benefits to consumers, including increased competition, improved advice and improved access to a wider and more innovative range of financial products and services." It could, however, also generate or increase existing risks, therefore fostering questions surrounding data ethics which will require additional regulation to manage risk and boost consumer confidence.

More information on the FCA’s Call for Input on open finance can be found here.

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Financial Conduct Authority

EU Council Adopts Conclusions on Retail Payments Strategy

On March 22, 2021, the European Council adopted conclusions on the retail payments strategy for the EU presented by the European Commission in efforts to develop the retail payments market in the EU; and “make it easier for consumers to pay in shops, and to make e-commerce transactions widely available, convenient and safe across the EU”. Improving instant payments and innovation in retail payments, as well as creating EU-wide payment solutions to decrease outside dependency are key objectives the Council hopes to address.

The Council conclusions on the Commission Communication on a ‘Retail Payments Strategy for the European Union’, details priorities under four ‘pillars’ for strategic action:

  • addressing issues related to increasingly digital and instant payment solutions
  • innovation and competitiveness issues
  • ensuring access to and interoperability of retail payment systems and other support infrastructures
  • improving payments with countries outside the EU

The Council also acknowledged challenges to addressing market regulation and development as it pertains to financial inclusion, security and consumer protection, data protection and anti‑money laundering aspects. 

More information on the Council's adopted conclusions on retail payments strategy can be found here.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a Retail Payments Strategy for the EU, can be found here.  

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Council of the European Union

EU Council Adopts Conclusions on Cybersecurity Strategy

On March 22, 2021, the European Council adopted conclusions on the European cybersecurity strategy in their Draft Council conclusions on the EU’s Cybersecurity Strategy for the Digital Decade, which was presented by the European Commission. The Council’s aim is to create a framework that will: protect citizens and businesses from cyber threats, secure information systems and cyberspace, create strategic autonomy and an open economy, all of which will conceivably establish “a resilient, green and digital Europe.” Further, the Council urges the Commission and the High Representative to institute a detailed implementation plan.

Some of the Council’s action items include:

  • the plans to create a network of security operation centres across the EU to monitor and anticipate signals of attacks on networks
  • the definition of a joint cyber unit which would provide clear focus to the EU's cybersecurity crisis management framework
  • its strong commitment to applying and swiftly completing the implementation of the EU 5G toolbox measures and to continuing efforts made to guarantee the security of 5G networks and the development of future network generations
  • the need for a joint effort to accelerate the uptake of key internet security standards, as they are instrumental to increase the overall level of security and openness of the global internet while increasing the competitiveness of the EU industry
  • the need to support the development of strong encryption as a means of protecting fundamental rights and digital security, while at the same time ensuring the ability of law enforcement and judicial authorities to exercise their powers both online and offline
  • increasing the effectiveness and the efficiency of the cyber diplomacy toolbox giving special attention to preventing and countering cyberattacks with systemic effects that might affect supply chains, critical infrastructure and essential services, democratic institutions and processes and undermine economic security
  • the proposal on the possible establishment of a cyber intelligence working group to strengthen EU INTCEN's dedicated capacity in this domain
  • the importance of strengthening cooperation with international organisations and partner countries in order to advance the shared understanding of the cyber threat landscape
  • the proposal to develop an EU external cyber capacity building agenda to increase cyber resilience and capacities worldwide

More information on the Council's adopted conclusions on cybersecurity can be found here.

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Council of the European Union

FATF President Supports Financial Inclusion at G20 Central Bank Governors and Finance Ministers Meeting

Financial Action Task Force President, Marcus Pleyer, spoke at the G20 Finance Ministers and Central Bank Governors Meeting on February 26, 2021. The FATF President commended the Italian G20 Presidency on their priorities regarding digitalization, and “people, planet and prosperity”; as well as their objective for “a resilient, inclusive and sustainable recovery”. The FATF President ensured that, “FATF stands ready to help [protect] our economies from illicit funds”, and made a commitment to contribute to financial inclusion, digitalization in financial services, and the G20’s Roadmap for Enhancing Cross-Border Payment.

President Pleyer highlighted three of FATF’s achievements in digitalization and assured that FATF will continue to align these achievements with the G20 Presidency’s objectives. They include:

  • FATF’s guidance on digital ID as an “important resource for ensuring access to essential and secure financial services- especially during the pandemic.”
  • FATF’s “adopted standards on virtual assets and stablecoins as the first international standard setter and the launch of a second review of the global implementation of these standards.” An update to the G20 will be provided during the year.
  • FATF currently analyzing “the opportunities and challenges of digital transformation for anti-money laundering”, with an offer to share insights from their work on data protection, privacy and responsible innovation.

The FATF President also expressed FATF’s commitment “to support the G20 through work on environmental and climate crime, such as illegal deforestation and illegal wildlife trade”; and “ensuring transparency of beneficial ownership is critical for everything from a fair tax system to stopping money laundering.” Notably, FATF’s President implored the G20 to implement FATF standards to combat illicit financial flow.

President Pleyer’s full speech can be found here.

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FATF

WOCCU Applauds FATF’s Risk-Based/Proportional Approach in Guidance for AML/CFT Supervision

On March 4, 2021, the Financial Action Task Force published its Guidance for Applying a Risk-Based Approach to AML/CFT Supervision. According to FATF, the Guidance helps supervisors address a broad range of risks while using resources to tackle higher risk areas; and notable for World Council is that an objective of the Guidance is to create a risk-based approach that supports financial inclusion by creating a regulatory environment that is “less burdensome on lower risk sectors or activities”. The Guidance further includes proportionality language throughout the document and advises that, “Supervisors should also consider transparency, consistency and proportionality in applying remedial actions or sanctions…”

The guidance is comprised of three parts:

  • “Part 1 – The high-level guidance on risk-based supervision, which explains how supervisors should assess the risks their supervised sectors face and prioritise their activities, in line with the FATF Standards’ risk-based approach.
  • Part 2 – Strategies to address common challenges in risk-based supervision & jurisdictional examples, including examples of strategies for supervising non-financial businesses and professions and virtual asset service providers.
  • Part 3 – Country examples from across the global network, of supervision of the financial sector, virtual asset service providers and other private sector entities.”

World Council commends FATF’s risk-based and proportionate approach to AML/CFT Supervision and looks forward to FATF’s continued efforts to improve financial inclusion.

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FATF

Financial Stability Board Publishes 2021 Key Priorities

In anticipation of the FSB’s virtual meeting with the G20 Finance Ministers and Central Bank Governors on February 25, 2021, Chair, Randall K. Quarles drafted a letter outlining the FSB’s key priorities for 2021, which “address vulnerabilities directly related to COVID-19 and to increase resilience of non-bank financial intermediation (NBFI). It also aims to support strong, sustainable, and balanced growth in a post-COVID world.”

The FSB’s key priorities include:

  • Addressing COVID-19 related vulnerabilities. Including: Assessment of initial lessons learned from the COVID Event for financial stability; an April report on factors needed for an orderly unwinding of support measures; and publishing the final version of its evaluation of too-big-to-fail reforms for banks in April.
  • Increasing the resilience of NBFI. Includes: Examining and addressing specific risk factors that contributed to amplification of the March 2020 market turmoil; enhancing understanding of systemic risks in NBFI; investigating policies to address these risks; and delivering policy proposals to enhance the resilience of money market funds in July for public consultation.
  • Improving efficiency and access in cross-border payments. Including: October progress report on the implementation of the FSB roadmap to enhance cross-border payments; and an update on regulatory and supervisory approaches to global ‘stablecoins’.
  • Bettering our understanding of climate-related risks. Including: Expansion on report on the financial stability implications of climate change; coordinating with other SSBs to promote globally comparable, high-quality, and auditable standards of disclosure; and review of regulatory and supervisory approaches to address climate-related risks at financial institutions.
  • Addressing other financial stability topics of ongoing importance. Includes: Enhancing central counterparty resilience, recovery, and resolvability; exploring areas to harmonize cyber incident reporting; and ensuring a smooth transition away from LIBOR by end-2021 to more robust benchmarks.

More information on the FSB’s 2021 work program and key priorities can be found here.

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Financial Stability Board

European Council Plans Update to ePrivacy Rules

As innovation in technology increases, so does the demand on individual privacy rights. The European Council has now taken steps to manage the relationship between privacy and new technology “such as Voice over IP, web-based email and messaging services, and techniques for tracking users’ online behavior", by updating the ePrivacy Directive of 2002. On February 10, 2021, “member states agreed on a negotiating mandate for revised rules on the protection of privacy and confidentiality in the use of electronic communications services.”

The Commission’s draft regulation on ePrivacy will not only repeal the current ePrivacy directive, but it will “complement” the GDPR by filling in gaps, for example, including provisions applicable to both natural and legal persons. The Council’s mandate, in short, will apply to electronic communications content transmitted using publicly available services and networks, metadata related to the communication, and machine-to-machine data transmitted via a public network.

More details on the draft ePrivacy mandate and what it covers can be found here.

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European Commission

IFRS Foundation Trustees Meet to Address Questions on Sustainability Reporting

In December of 2020, the IFRS requested comment on their Consultation Paper on Sustainability Reporting. The Trustees met on February 1, 2021 to review the responses to the first three questions in the consultation paper:

  1. Is there a need for a global set of internationally recognised sustainability reporting standards? (a) If yes, should the IFRS Foundation play a role in setting these standards and expand its standard-setting activities into this area?
  2. Is the development of a sustainability standards board (SSB) to operate under the governance structure of the IFRS Foundation an appropriate approach to achieving further consistency and global comparability in sustainability reporting?
  3. Do you have any comment or suggested additions on the requirements for success as listed in paragraph 31 (including on the requirements for achieving a sufficient level of funding and achieving the appropriate level of technical expertise)?

Upon review of the feedback it was clear that there is a “growing and urgent demand to improve the global consistency and comparability in sustainability reporting, as well as strong recognition that urgent steps need to be taken and broad demand for the IFRS Foundation to play a role in this.“ As a response, the Trustees have committed to forming a Trustee Steering Committee, as well as continued analysis of the consultation responses to determine whether to establish a new board. It is expected that the Trustees will draft a proposal including a roadmap and timeline by the end of September 2021, with a possible announcement of a sustainability standards board at the United Nations Climate Change Conference in November 2021.

More information on the Trustee's meeting and sustainability efforts can be found here.

World Council's response to the IFRS' Consultation Paper on Sustainability Reporting can be found here.

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IFRS

BIS Innovation Hub Announces Key Priorities to Advance Financial Technology

On January 22, 2021, the Bank for International Settlements Innovation Hub (BISIH) announced a work programme focusing on six key areas to address “international collaboration among central banks on innovative financial technology”. These areas include: suptech and regtech; next-generation financial market infrastructures; central bank digital currencies; open finance; green finance; and cyber security.

In addition to launching the Innovation Network to support their priorities, BISIH plans to launch a series of projects including:

  • “a proof of concept solution for a regulatory reporting platform employing data analytics and data visualisation to provide supervisors with deeper and more timely insights to address risks;
  • a proof of concept platform using multiple wholesale CBDCs to explore the feasibility of faster and cheaper cross-border payments;
  • a technological research project and associated prototype(s) for tiered retail CBDC distribution architectures; and
  • a distributed ledger technology prototype for distribution of tokenised green bonds to retail investors.”

More information regarding the Bank for International Settlements Innovation Hub work programme and the Innovation Network can be found here.

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Bank of International Settlements

BIS Highlights Covid-19 Cyber Risks

The Bank for International Settlements (BIS) highlighted cyber risks in the financial sector in its recent issued BIS Bulletin.  The conclusions of this document notes the following:
  • The financial sector has been hit by hackers relatively more often than other sectors during the Covid-19 pandemic.
  • While this has not yet led to significant disruptions or a systemic impact, there are substantial risks from cyber attacks for financial institutions, their staff and their customers going forward.
  • Financial authorities are working to mitigate cyber risks, including through international cooperation.
A copy of BIS Bulletin No. 37 can be viewed here.
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Bank of International Settlements

World Council Comments on IASB Discussion Paper on Business Combinations

The International Accounting Standards Board requested comment on their Discussion Paper regarding Business Combinations – Disclosures, Goodwill and Impairment. World Council supported the adoption of the scheduled goodwill amortization as well as simplifications offered for the impairment test, but urged the disclosure of scheduled goodwill amortization as a separate item outside of the operating result. World Council expressed concern that this disclosure would “require the disclosure of internal confidential information that, if disclosed, could operate to the detriment of a company.”

World Council’s comments on IASB’s Discussion Paper on Business Combinations – Disclosures, Goodwill and Impairment, can be found here.

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International Accounting Standards Board, Comment Letter