Worldwide: Financial Regulatory Developments – Jul 5, 2018 Issue 26/2018

Bank Prudential Regulation & Regulatory Capital

US Office of the Comptroller of the Currency Releases Updated Supervision Booklets

On June 28, 2018, the U.S. Office of the Comptroller of the Currency announced updates to a number of supervision booklets, including the "Bank Supervision Process," "Community Bank Supervision," "Compliance Management Systems" and "Large Bank Supervision" booklets of the Comptroller's Handbook, and the "Federal Branches and Agencies Supervision" booklet. The updated booklets replace previously issued booklets of the same titles. The OCC also provided a table of previously issued bulletins and publications that have been rescinded and incorporated into the updated booklets. At a high level, the revisions and updates clarify the applicability of the booklets for financial institutions of differing size; add content with respect to asset management, including assessing Bank Secrecy Act, anti-money laundering and Office of Foreign Assets Control compliance; incorporate aspects of the Dodd-Frank Act; make technical corrections, including clarified terminology and to reflect the integration of the Office of Thrift Supervision into the OCC; include revised concepts and references; and incorporate references to OCC issuances published since each booklet's last publication date.

The full text of the OCC press release and revised booklets are available at:

US Federal Reserve Vice Chairman for Supervision Discusses the Promotion of Global Financial Stability

On June 27, 2018, U.S. Board of Governors of the Federal Reserve System Vice Chairman for Supervision, Randal Quarles, discussed the importance of the promotion of global financial stability at the Utah Bankers Association 110th Annual Convention. Vice Chairman Quarles began by discussing financial stability in the United States, noting that the implementation of post-financial crisis reform is largely complete and is now in the process of being reviewed and revised to promote efficiency and efficacy. Vice Chairman Quarles also noted how this review and revision process is easing the regulatory burden on community and regional banks, through reforms such as the passage of the Economic Growth, Regulatory Relief and Consumer Protection Act, the Bank Exams Tailored to Risk program and the implementation of a new streamlined Call Report form in 2017. With respect to global financial stability, Vice Chairman Quarles discussed the role of the Financial Stability Board, explaining that the FSB helps to improve access to information on an international scale and promote minimum standards in areas such as resolution planning. Vice Chairman Quarles also highlighted that while the FSB may set international regulatory standards, it has no enforcement powers and no legal authority to direct its members to act. Instead, the FSB promotes effective dialogue by functioning by consensus, which allows international stakeholders to have meaningful input in the decisions that are made.

The full text of Vice Chairman Quarles's speech is available at:

EU Draft Amended Technical Standards on Benchmarking of Internal Models

On June 29, 2018, the European Banking Authority published an amended draft Implementing Technical Standards specifying the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercise by those institutions that use internal approaches for market and credit risk under the EU Capital Requirements Directive. The EBA consulted on proposed changes to the ITS in Q4 2017 and Q1 2018.

The amended ITS include all the portfolios that will be used for the 2019 benchmarking exercise, provided that the amended ITS are adopted by the European Commission. For market risk benchmarking, major changes have been made to the portfolios, including the introduction of a new set of portfolios comprising vanilla instruments. Minor changes have been made to the credit risk portfolios including changes to the information requested from firms.

Regarding the 2018 benchmarking exercise, the EBA has confirmed that firms do not have to resubmit the same data as a result of the difference between the submission dates in the draft ITS published by the EBA and the final ITS published on May 18, 2018 in the Official Journal of the European Union.

The amended ITS is available at: and details of the EBA's consultation on amending the ITS is available at:

UK Prudential Regulator Confirms Changes to Large Exposures Framework

On June 28, 2018, following a consultation in October 2017 which closed on January 4, 2018, the U.K. Prudential Regulation Authority published a Policy Statement on changes to its large exposures framework.

The Policy Statement sets out the PRA's feedback on the responses received to its consultation. Respondents were largely supportive of the proposals. The PRA is implementing its proposals largely as consulted on, with only minor changes. The Policy Statement outlines the changes as follows:

  • Changes to the relevant part of the PRA Rulebook on large exposures and regulatory reporting—the text of the changes is set out in a PRA Rulebook Instrument, "CRR Firms: Large Exposures Amendment Instrument."
  • An update to the PRA's supervisory statement on large exposures (SS16/13) to reflect the PRA's expectations on the resolution exemption and to provide additional guidance to firms on Core U.K. Group and Non-core Large Exposures Group permissions.
  • An update to the PRA's supervisory statement, Guidelines for completing regulatory reports (SS34/15), to remove the requirement to submit the U.K. integrated groups—large exposures data item (FSA018).

The Policy Statement also contains a simplified worked example of the application of the large exposures limits at the level of the U.K. consolidated group when the firm has a NCLEG permission.

The changes to the rules and updates to the supervisory statements took effect on June 29, 2018.

The Policy Statement (PRA PS 14/18) is available at:, the PRA Rulebook Instrument: CRR Firms: Large Exposures Amendment Instrument 2018 (PRA 2018/14) is available at:, the update to Supervisory Statement SS16/13: Large Exposures is available at:, the update to Supervisory Statement SS34/15: Guidelines for completing regulatory reports is available at: and details of the October 2017 consultation are available at:

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