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International regulation update: fintech, securities financing, stress test, securitisation, shadow banking
International regulation update: fintech, securities financing, stress test, securitisation, shadow banking
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International regulation update: fintech, securities financing, stress test, securitisation, shadow banking

14/06/2018

Focus on the latest international regulatory developments as of  June 2018

Fintech

Basel Committee published a report on fintech implications for banks and supervisors (19 February). Following industry-wide scenario analysis, it focuses on five potential future scenarios to describe the potential impact of fintech on banks:

  • Modernisation and digitisation of incumbent players
  • Replacement of incumbents by challenger banks
  • Fragmentation of financial services among specialised fintech firms and incumbent banks
  • Incumbent banks become commoditised service providers and customer relationships are owned by new intermediaries
  • Banks become irrelevant as customers interact directly with individual financial service providers

The European Banking Authority (EBA) published a fintech roadmap setting out its priorities for 2018/2019 (15 March). It takes account of the feedback to the EBA's 2017 discussion paper on fintech and the new mandates for the EBA set out in the EU Commission's fintech action plan, and also sets out the establishment of a fintech knowledge hub to enhance knowledge sharing and foster technological neutrality in regulatory and supervisory approaches. The EBA's priorities for 2018/2019 are:

  • Monitoring the regulatory perimeter
  • Monitoring emerging trends
  • Promoting best supervisory practices
  • Addressing consumer issues arising from fintech
  • Identifying and assessing money laundering/terrorist financing risks

The European Central Bank (ECB) published a framework for Threat Intelligence-based Ethical Red Teaming (TIB ER-EU) in order to test financial sector resilience to cyber attacks (2 May). Designed to enable European and national authorities to work with financial infrastructures and institutions to test and enhance their cyber resilience, the framework provides an overview of how TIBER-EU will be implemented and explains the key phrases, activities, deliverables and interactions involved in a TIBER-EU test. Adoption of the TIBER-EU framework at national level or by EU institutions or authorities is voluntary.

Securities financing transactions

The Financial Stability Board (FSB) published reporting guidelines for securities financing transactions (5 March). The standards addressed financial stability risks in securities financing transactions (SFTs), particularly in relation to the transparency of securities financing markets and allow the FSB to collect aggregated data on reports, securities lending and margin lending from national and regional authorities. The guidelines are addressed to authorities for reporting SFT data, including the scope, frequency, reporting deadlines, classification codes, and a data template for authorities to report to the global aggregator with the data elements envisaged by the November 2015 standards.

Stress testing of CCPs

The Committee on Payments and Market Infrastructures (CPMI) and International organization of securities commissions (IOSCO) published framework for supervisory stress testing of CCPs (10 April). The framework is designed to support tests that examine the potential macro-level impact of a common stress event affecting multiple CCPs. Such supervisory stress tests aim to help authorities better understand interdependencies between markets, CCPs and other entities such as custodians. This type of supervisory stress test differs from other stress testing that evaluates the resilience of individual CCPs.

Securitisations

The Basel Committee on Banking Supervision (BCBS) and IOSCO published criteria for identifying simple, transparent and comparable short-term securitisations (STC) (14 May). The short-term STC criteria are intended to assist the financial industry in its development of simple, transparent and comparable short-term securitisations, building on the criteria for identifying simple, transparent and comparable securitisations issued by BCBS-IOSCO in July 2015. The criteria take account of the characteristics of asset-backed commercial paper conduits, such as the short maturity of the commercial paper issued, the different forms of programme structures and the existence of multiple forms of liquidity and credit support facilities.

Shadow banking

The Financial Stability Board (FSB) published a Global Shadow Banking Monitoring report 2017 (5 March). It covers data up to end-2016 from 29 jurisdictions, including Luxembourg for the first time. The report includes an assessment of China's non-bank financial entities' involvement in credit intermediation that may pose financial stability risks from shadow banking. Among other things, the FSB observed that:

  • The monitoring universe of non-bank financial intermediation grew to an aggregate USD 160 trillion
  • Assets of other financial intermediaries grew 8% to USD 99 trillion (30% of total global financial assets)
  • The activity-based, narrow measure of shadow banking grew by 7.6% to USD 45.2 million

Collective investment vehicles with features that made them susceptible to runs (e.g. MMFs), grew 11% in 2016

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