United States: Financial Regulatory Developments Focus - 13 May 2014

In this newsletter, we provide a snapshot of the principal European, US and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.


ESMA Advances Intention to Ease Frontloading Requirements under EMIR

On 8 May 2014, the European Securities and Markets Authority ("ESMA") sent a letter to the European Commission in relation to its intention to ease certain frontloading requirements under the European Market Infrastructure Regulation ("EMIR"). Frontloading refers to clearing obligations under EMIR, which require counterparties to centrally clear certain derivative trades entered into after a central counterparty has been authorized under EMIR to clear such transactions but before the EMIR clearing obligation comes into force. ESMA has informed the Commission that it plans to establish the frontloading requirements in a way that will minimize uncertainty. ESMA believes that the frontloading procedure can create uncertainties for derivatives end-users in situations where precise terms of a clearing obligation have not yet been defined, which can cause an adverse impact on risk hedging and financial stability.

ESMA's letter to the Commission is available here: http://www.esma.europa.eu/system/files/2014-483_letter_to_european_commission_re_frontloading_requirement_under_emir.pdf.


EBA Consultation on RTS to Specify Treatment of Equity Exposure under the IRB Approach

On 7 May 2014, the European Banking Authority ("EBA") initiated a consultation on draft Regulatory Technical Standards ("RTS") to specify the treatment of equity exposures under the Internal Ratings-Based ("IRB") approach. The RTS propose that a temporary exemption from IRB treatment of certain equity exposures is given by the national regulators to institutions if such an exemption was applied on the last day of application of the Capital Requirements Directive I ("CRD I") (i.e. 31 December 2007). This exemption was introduced in CRD I to partly relieve institutions' capital requirement for equity exposures under the IRB approach. The consultation runs until 7 July 2014.

The draft consultation paper is available here: http://www.eba.europa.eu/documents/10180/684133/EBA+CP+2014+06+Draft+consultation+paper+on+RTS+on+the+IRB+equity+exemption.

ECB Publishes Second SSM Quarterly Report

On 6 May 2014, the ECB published its second Single Supervisory Mechanism ("SSM") quarterly report on the supervision of Eurozone banks by the ECB. The report, which is required under the Single Supervisory Mechanism Regulation ("SSM Regulation") summarizes the ECB's operational progress in establishing the SSM Regulation between 4 February and 3 May 2014.

The report contains key messages relating to the ECB's SSM initiative, including details on:

  1. The establishment of the SSM governance structures, which have largely been completed.
  2. An update on the ECB's progress conducting the comprehensive assessment, which is designed to establish transparency surrounding the condition of banks and identify and implement corrective actions where necessary.
  3. The adoption of the SSM Framework Regulation (published on 25 April 2014) by the Governing Council on a proposal of the Supervisory Board. The framework sets out practical arrangements for the implementation of Article 6 of the SSM Regulation (concerning cooperation between the ECB and National Competent Authorities ("NCAs")).
  4. The approval by the Supervisory Board of a Supervisory Reporting Manual, which will provide the data framework to support the conduct of supervision.
  5. Developments to the supervisory model of the SSM (as reflected in the draft Supervisory Manual), made in response to feedback from the NCAs.
  6. The establishment of Joint Supervisory Teams, who will directly supervise approximately 130 banking groups considered 'significant' in accordance with the SSM Regulation.

On 6 May, the ECB also published answers to frequently asked questions about the SSM.

The ECB Report is available here: http://www.ecb.europa.eu/pub/pdf/other/ssmqr20142en.pdf.

The ECB FAQs page is available here: http://www.ecb.europa.eu/ssm/html/ssm-faq.en.html.

ECB Publishes Decision Concerning the Establishment of the SSM Administrative Board of Review

On 5 May 2014 the ECB published a decision (ECB/2014/16) concerning the establishment of the Administrative Board of Review and its operating rules.

The purpose of the Administrative Board of Review is to carry out internal administrative reviews of the decisions taken by the ECB in the exercise of its powers under the SSM Regulation. The decision sets out provisions relating to the governance of the board and the procedures that should be followed by the board and the ECB relating to administrative reviews required under Article 24 of the Regulation.

The decision will enter into force the day after it is published in the Official Journal of the EU.

The ECB decision is available here: http://www.ecb.europa.eu/ecb/legal/pdf/en_dec_2014_16_f_sign.pdf.

EBA Publishes Quarter 1 "Dashboard" on EU Banking Sector

On 6 May 2014, the EBA published its "risk dashboard" (based on data from the fourth quarter of 2013) for the first quarter of 2014.

The dashboard summarizes the main risks and vulnerabilities in the EU banking sector, including a set of key risk indicators from 55 EU banks which the EBA has been collecting each quarter since 2009. The EBA dashboard is available here: http://www.eba.europa.eu/documents/10180/679742/EBA+Dashboard+-+Q1+2014.pdf.

FSB Launches Phase 2 of its Data Gaps Initiative

On 6 May 2014, the Financial Stability Board ("FSB") issued a paper regarding the launch of Phase 2 of its Data Gaps initiative to implement a common data template to collect key data from Global Systemically Important Banks (G-SIBs) regarding their assets and liabilities. The intention is for national regulatory authorities to have a strong framework through which to assess the links among the largest banks and the concentration of these institutions in different sectors and markets. Banks will be required to report monthly in respect of any data collected, but will later be expected to improve their capability to report more frequently and periodic assessments will determine how banks should move from monthly to weekly reporting.

The Phase 2 template is made up of two parts: the first requires banks to report their largest wholesale secured and unsecured funding providers (excluding traded debt securities), and given that reporting banks are not typically able to identify the current holders of their traded debt securities, the second part requires the institution to report its holdings of tradable debt securities issued by any other G-SIBs' consolidated banking group. The FSB also reviewed a roadmap for Phase 3, when the common template will include granular and comparable institution-to-aggregate (I-A) consolidated balance sheet data broken down by country, sector, instrument, currency and maturity.

The FSB paper is available here: http://www.financialstabilityboard.org/publications/r_140506.pdf.

Federal Reserve Board Invites Comment on Proposed Rulemaking Implementing Section 622 of the Dodd-Frank Act

On 8 May 2014, the Board of Governors of the Federal Reserve System ("Federal Reserve Board") issued a notice of proposed rulemaking that would implement section 622 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), which prohibits a financial company from combining with another company if the ratio of the resulting financial company's liabilities exceeds 10 percent of the aggregate consolidated liabilities of all financial companies. Financial companies subject to the concentration limit would include insured depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and nonbank financial companies designated by the Financial Stability Oversight Council ("FSOC") for Federal Reserve Board supervision.

Comments on the proposal should be submitted by 8 July 2014.

The full text of the proposed rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20140508a1.pdf


ECB Publishes Proposals for Best Practice on T2S Markets Migrating to T+2 Settlement Cycle

On 6 May 2014, the European Central Bank ("ECB") published the TARGET2-Securities ("T2S") Harmonisation Steering Group ("HSG") proposals in relation to best practices for T2S markets migrating on 6 October 2014 to the T+2 settlement cycle. The HSG has established a task force on T+2 to ensure suitable co-ordination relating to the change in settlement cycle, and to minimize the impact of moving to T+2 for market participants. Section 1 of the proposal deals with the scope of the T+2 settlement cycle, section 2 covers the migration plans of markets to move to the T+2 rule and section 3 discusses ideas relating to timely completion of the post-trade and pre-settlement activities, as well as the monitoring of matching timelines and settlement fails.

The proposals are available here: http://www.ecb.europa.eu/paym/t2s/progress/pdf/taskforcet2/2014-05-02_HSG_proposals.pdf??56f9ebc5f33842ba6deb57dd94a483bb.


European Commission's Implementing Decisions on Credit Rating Agencies Published in the Official Journal

On 3 May 2014, the Official Journal of the EU (issue L132) published five European Commission implementing decisions relating to the equivalence of jurisdictions' legal and supervisory frameworks to the requirements of the Credit Rating Agencies Regulation (Regulation 1060/2009). These implementing decisions were adopted by the Commission on 28 April 2014. The decisions relate to:

  1. Argentina (2014/246/EU, at page 68);
  2. Brazil (2014/245/EU, at page 65);
  3. Hong Kong (2014/249/EU, at page 76);
  4. Mexico (2014/247/EU, at page 71); and
  5. Singapore (2014/248/EU, at page 73).

Issue L132 of the Official Journal is available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:132:FULL&from=EN.

European Commission Publishes Report on Feasibility of Network of Smaller CRAs

On 5 May, the Commission published its report to the Council and European Parliament on the feasibility of a network of smaller Credit Rating Agencies ("CRAs"). The publication of this report was a requirement under the Credit Rating Agencies Regulation (Regulation 1060/2009) and the proposed network was intended to facilitate competition. The Commission's analysis identified multiple market obstacles for the establishment of an integrated network and the consultation showed that there is no industry support to establish such a network. The Commission refers to the CRA III Regulation (Regulation 462/2013) and its aims, specifically to boost competitiveness and support the growth of smaller CRAs on the rating market. The Commission proposes to establish a regulatory dialogue consisting of one or more events each year at which views can be expressed by stakeholders on the state of the market and at which regulatory issues of particular interest for smaller CRAs can be discussed with the Commission.

The Commission's report is available here: http://ec.europa.eu/transparency/regdoc/rep/1/2014/EN/1-2014-248-EN-F1-1.Pdf.


CFPB Proposes Rule to Promote More Effective Privacy Disclosures

On 6 May 2014, the Consumer Financial Protection Bureau ("CFPB") proposed a rule to promote more effective privacy disclosures from financial institutions to their customers. The rule would allow companies that limit their consumer data-sharing and meet other requirements to post their annual privacy notices online rather than delivering them individually. Under the proposal, if an institution qualifies for and wants to rely on the online disclosure method, it will have to inform consumers annually about the availability of the disclosures. Currently, institutions must send consumers a separate communication about privacy disclosures. Under the proposed rule, financial institutions may include an insert in regular consumer communication, such as a monthly billing statement for a credit card, letting consumers know that the annual privacy notice is available online and in paper by request at a toll-free telephone number. If an institution chooses not to use the online disclosure method, it will need to continue to deliver annual privacy notices to its customers.

The full text of the proposed rule is available at: http://www.consumerfinance.gov/f/201405_cfpb_annual-privacy-notice-proposal.pdf.


HM Treasury Launches Consultation on Processes for Enforcement at FCA and PRA

On 6 May 2014, HM Treasury launched a consultation to review the processes for enforcement decision-making at the Financial Conduct Authority ("FCA") and the Prudential Regulation Authority ("PRA"). The consultation will seek views on whether the provisions currently in place assist in the fair and effective use of enforcement powers. It sets out the review's terms of reference and considers the design and governance of arrangements and processes at the FCA and PRA. The deadline for responses to the consultation is 4 July 2014. The review will report to the Chancellor of the Exchequer in autumn 2014.

The consultation paper is available here: https://www.gov.uk/government/consultations/review-of-enforcement-decision-making-at-the-financial-services-regulators-call-for-evidence/review-of-enforcement-decision-making-at-the-financial-services-regulators-call-for-evidence.


Public Hearing on Consultation on Draft RTS to Specify Treatment of Equity Exposure under IRB Approach

A public hearing on the consultation paper on draft RTS on the treatment of equity exposures under the IRB approach will take place at the EBA premises at Tower 42, Level 18, 25 Old Broad Street, London, EC2N 1HQ on 27 May 2014 from 10am to 12pm GMT.

Public Hearing on Consultation on Draft RTS on Risk-Mitigation Techniques for OTC-Derivative Contracts not Cleared by a CCP

A public hearing on the consultation paper on draft RTS on risk-mitigation techniques for OTC-derivative contracts not cleared by a CCP will take place at the EBA premises at Level 5, 30 Old Broad Street, London EC2N 1HT from 9am to 7pm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Barnabas W.B. Reynolds
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions