Being better informedFS regulatory, accounting and audit bulletin

PwC FS Risk and Regulation Centre of Excellence

June 2015

In this month’s edition:

EBA guidelines on paying into the DepositGuarantee Scheme

ESMA guidelines on defining commodity derivativeslooking to bring consistency

a look at stress testing "super-systemicallyimportant" CCPs

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 1

Welcome to this edition of “Beingbetter informed”, our monthly FSregulatory, accounting and auditbulletin, which aims to keep you up tospeed with significant developmentsand their implications across all thefinancial services sectors.

Summer’s started and it’s all happening: we

have a new UK government, we’ve greeted a

new princess and our BBQs are sputtering

to life even though El Niño seems

determined to put a dampener on our

outdoor plans. But as we head toward

holiday season (or strife) and parliamentary

recess, there’s no holiday from the debate

about the UK’s relationship with the EU.

The government has confirmed a

referendum will take place before 2017 on

the big question: ‘Should the United

Kingdom remain a member of the

European Union?’ Lots of debate to come

on this critical question. With the

Conservatives achieving a clear majority in

the May election, the new government will

face high expectations about what it can do

to improve regulation to benefit both

businesses and consumers.

But for now, the UK / EU relationship isn’t

the only matter up for review. The EU’s

adoption of the Better Regulation Package is

poised to change the very nature of

regulation. Under this programme, the EC

strives to achieve its objectives at minimum

cost and implement policy in an open,

transparent way. It also commits to

providing further evidence of its reasons for

decisions and to engage more with

stakeholders when gathering evidence. So,

what does this mean for financial services?

Shortly after the package was announced,

signs of EMIR II began to emerge. In this

month’s edition, we consider the European

Commissioner for financial stability

Jonathan Hill’s promise of: ‘regulating

only where necessary, of being smaller on

the small things and bigger on the big

things. Of legislating less, of reviewing

more.’ With firms already struggling to meet

the EMIR transaction reporting

requirements, could there be respite ahead

or more complication? And that’s just one of

many areas that could be changing.

In the UK, the BoE is consulting on its new

resolvability powers for failing institutions.

The powers include the ability to direct

firms to limit or cease activities, to sell

assets and to change the legal or operational

structure of a group. The BoE outlines how

it intends to apply these powers and its

expectations of firms during such process.

Also, the PRA fine-tuned its position on the

continuity of service and facilities

requirements under ring-fencing

arrangements in a new policy statement.

Notably, the PRA won’t dictate the types of

subsidiary that a ring-fenced bank can own

and it will not stop owners of ring-fenced

banks from owning stakes in non-ring

fenced entities. But the end isn’t yet in sight

- the PRA expects to consult on ring-fencing

again later this year.

The FCA began its market study into

investment and corporate banking this

month, issuing its terms of reference. It’ll be

looking at competition in primary market

activities (like equities and debt capital

markets), but also how those activities are

linked to others such as corporate broking.

In the insurance sector, the FCA has also

reviewed how premium finance is provided

to general insurance customers. It found

consumers need more information about

the true cost of premium finance in

household and motor insurance.

And in our feature this month we look in

detail at stress testing of CCPs – a topic that

has been gaining momentum in the first half

of 2015. CCPs are attracting much more

regulatory focus with the growing

recognition of the critical function that they

play in our financial markets. The debate is

likely to intensify with CCP resolution and

recovery plans being discussed at an

international level.

We’re continuing to see an unabated flow of

new regulatory changes – we hope you’ll

find much to spark your interest in this

month’s edition.

Next month we’ll be evaluating the

Chancellor’s recent announcements on the

outcome of the Fair and Effective Markets

Review.

Laura Cox

FS Risk and Regulation Centre of Excellence

020 7212 1579

laura.cox@uk.pwc.com

@LauraCoxPwC

Executive summary

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

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How to read this bulletin?

Review the Table of Contents therelevant Sector sections to identify thenews of interest. We recommend yougo directly to the topic/article ofinterest by clicking in the active links

within the table of contents.

ContentsExecutive summary 1

Stressing CCPs 3

Cross sector announcements 6

Banking and capital markets 11

Asset management 15

Insurance 17

Monthly calendar 18

Glossary 22

Contacts 27

Executive summary Stressing CCPs Cross sector

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Stress testing is becoming business as usual

now for many different types of financial

firms. It’s used to shed light on potential

shortcomings in a firm’s risk management

and it forms part of regulators’ toolkit for

avoiding wide-scale market disruption

caused by failing institutions.

The scope of firms subject to stress testing

keeps expanding. 2015’s stress testing

season brings a shift in focus, from banks

and insurers to occupational pension funds

and central counterparties – ‘CCPs’. For

CCPs, there’s no sign this attention will fade

away any time soon; regulations requiring

central clearing of OTC instruments are

beginning to bite. As that happens, risks are

becoming much more concentrated in CCPs,

hence the increased regulator focus.

Market commentators, including an ECB

executive, have dubbed CCPs ‘super-

systemically important’ institutions in light

of this reallocation of risk. It’s no wonder

CCP risk management policies and

procedures are drawing interest from

market participants and regulators. But this

isn’t the only reason why CCP stress testing

is commanding attention. At present, there

is no universal approach to stress testing

that enables regulators, users and observers

to compare the risk and default

management procedures of different CCPs.

Some interested parties call for uniformity

and a global standard; for others the utility

of harmonised CCP stress testing and what

value this adds for institutions sporting

markedly diverse business models and

ownership structures is questionable.

In March 2015, CPMI and IOSCO, global

regulators of CCPs, started looking at how

CCPs have undertaken the stress testing

mandated by the PFMI. These rules were

introduced in April 2012 and they apply to

FMIs, including CCPs, trade repositories

and central securities depositories. CCPs

and industry bodies, seemingly spurred by

the review’s launch, hastened to share their

experience and outline their thoughts on

what workable stress testing for the industry

looks like.

More is sure to come on CCP stress testing

and recovery models, but at this point it’s

worth looking at the current state of affairs

in more detail and considering the

arguments for uniform and tailored stress

CCP testing models.

How do CCPs concentraterisk?A CCP manages and absorbs the

counterparty risks in trades between its

members by placing itself in between the

parties to each trade. It assumes the

responsibilities of the buyer to the seller and

of the seller to the buyer via a legal process

called novation.

Novation cancels the original agreement

between the buyer and seller and

immediately replaces it with two

agreements of identical terms:

one between the buyer and the CCP and

one between the seller and the CCP.

The seller and buyer perform their

obligations agreed under the original

agreement to the CCP and not to each other.

The CCP passes performance (e.g. the

payment of interest under an interest rate

swap) on from one party to the other,

assuming the risk itself in the process.

A CCP therefore amasses risk: if the seller or

the buyer fails to deliver their obligations to

it, the CCP is still bound to perform the

obligation – even if that involves calling

upon its own resources to do so. With an

OTC market estimated at $630 trillion and

half of that being cleared, that’s quite a lot

of risk landing with a relative small number

of CCPs globally.

In practice, a CCP manages the risk of

defaulting members through a number of

loss absorbing mechanisms that provide it

with reserves it can tap in to. These

mechanisms include collecting an initial

margin from members on each transaction

and maintaining a default fund financed by

members’ contributions. It follows that a

CCP’s own resources may not actually be at

stake (unless it puts its ‘skin in the game’ by

Stressing CCPs

Executive summary Stressing CCPs Cross sector

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contributing to the default fund, as some

CCPs are required to do). In any case, this

is where CCP stress testing comes in –

challenging risk management models to

ensure a CCP can continue to operate in the

event of member default.

Why are more trades beingcleared?Back in 2009, G20 leaders committed to

improving transparency in the derivative

markets, mitigating system risk and

protecting against market abuse (a year

after the financial crisis peaked). The

agreement, known as the Pittsburgh Accord,

provided that by the end of 2012 at the

latest:

all standardised OTC derivative

contracts should be cleared through

CCPs where appropriate and

higher capital requirements should

apply to non-centrally cleared contracts.

The US and Japan have already

implemented mandatory clearing

requirements for some types of derivatives,

increasing the volume of trades passing

through CCPs. The EU rules under EMIR

hit stumbling blocks, with draft RTS to-ing

and fro-ing between ESMA and the EC. But

it looks like progress has been made: EC

Commissioner for Financial Stability,

Financial Services and CMU Jonathan Hill

announced on 29 May2015 that the EC had

finalised discussions with ESMA on the RTS

and is starting the process of adopting the

RTS. The EMIR clearing obligation for new

OTC trades will come into force on a

staggered basis for different categories of

instruments after the RTS are published in

the OJ. Mandatory clearing will be required

for the first category of trades 6 months

after publication, for the second category of

trades in 18 months and the final category

in 3 years.

CCPs are bound to gain a more systemically

important function when the compulsory

clearing of certain instruments is

prescribed. But the increased capital

requirements for banks also serves as a

strong incentive to centrally clear their

trades. In the EU, CRR is the vehicle

carrying the G20’s goal. It requires credit

institutions and investment firms to hold

additional own funds to cover their

exposure to derivatives that are not

centrally cleared through EMIR authorised

(or equivalent third country) CCPs.

CCP stress testing rulesPrinciple 4 of the PFMIs addresses credit

risk. It provides general rules for all CCPs,

like effective monitoring and management

of credit exposures and maintaining

sufficient financial resources to cover credit

exposures for each member. It also includes

a couple of more tailored measures, the

applicability of which depend on the nature

and size of the CCP as follows:

CCPs with more complex risk profiles, or

which are systemically important across

a number of jurisdictions, should hold

enough capital to cover the default of

their two largest members (in terms of

credit exposure) in extreme but

plausible market conditions and

all other CCPs should hold enough

capital to cover the default of their single

largest member (also in terms of credit

exposure) in extreme but plausible

market conditions.

The PFMI also specify the types of stress

scenarios CCPs should use when conducting

stress tests in the ‘Considerations’ section of

Principle 4. CCPs are told to consider a

number of factors, including the impact of

defaulters’ positions, price changes in

liquidation positons, relevant peak historic

price volatilities and simultaneous

pressures in funding and asset markets.

CCPs are expected to carry out stress tests

on a daily basis and thoroughly analyse the

results each month –but in times of

irregularity in the market (like high

volatility and low liquidity) or a significant

increase in a concentration of positions, the

analysis should be more frequent. On

reporting, CCPs are required to:

have clear procedures to report the

results of its stress tests to decision

makers at the CCP and

use the results to review and adjust the

adequacy of their total financial

resources.

CPMI-IOSCO rules on stress testing are

fairly broad and not prescriptive. CCPs

retain a good degree of discretion in

formulating their risk-management models

and subsequent stress testing. But should

CCPs be following a uniform stress test?

Uniformity orindividualisation?Market participants and interested parties

were swift to respond to the launch of CPMI

and IOSCO’s stress test review. They

outlined the benefits of both uniform and

more individualised stress testing models.

The benefits of uniform stress tests include:

regulators and members can better

assess the strength of CCPs through

improved transparency and enhanced

comparability and

CCPs will benefit from harmony and a

level playing field across jurisdictions.

The benefits of individualised stress tests

include:

each CCP will have more meaningful

and granular reports – which can’t be

achieved with one stress test that fits all

CCPs and products and

CCPs will be incentivised to perform

ongoing assessments and honing stress

test methodologies, leading to

innovation.

The majority of commentators appear to

favour more granularity – but that’s not to

say there isn’t a middle way. Benoît Cœuré,

suggested one option when speaking to an

Executive summary Stressing CCPs Cross sector

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audience at the Federal Reserve Bank of

Chicago in April this year. He said that

requiring CCPs to apply a set of minimum

standards to their models could achieve an

optimal balance between individual

granularity and uniformity.

CPMI and IOSCO have remained silent

since the announcement of their review and

it’s not clear what the regulators are

thinking. Cœuré’s suggestion sounds like a

sensible compromise, but it’ll be up to CPMI

and IOSCO to ultimately determine what

they want to see in CCP stress testing.

A straightforward pathahead?Reforming CCP stress testing models can’t

be considered in insolation, alluring as it

may be to do so for reasons of simplicity. In

fact, it would be unusual for CCP stress

testing to develop in a silo and away from

the development of other risk management

tools, such as rules on loss-absorption

mechanisms for CCPs (and even banks).

The two are inherently connected: one tests

the other.

While CPMI and IOSCO have kicked-started

the debate into CCP risk management,

there’s probably still some way to go. For

instance, global variety in risk management

tools needs to be addressed on a number of

fronts – including ‘skin in the game

provisions’. Rules require CCPs in the EU

contribute 25% of their regulatory capital to

a default fund, CCPs in Singapore to

contribute 25% of the default fund itself,

whereas CCPs in the US aren’t obliged to

provide a contribution. The meaningfulness

of stress testing and comparability

assessments could be impaired by the

presence of such differences. Discussions

over harmonising risk management tools

will need to conclude before any changes are

made to the stress testing framework.

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

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In this section:

Regulation 6

Capital and liquidity 6

CMU 6

Financial stability 7

Market infrastructure 7

MiFID II 8

Operational resilience 9

Payments 9

Retail products 9

Accounting 10

IFRS 10

PwC Publications 10

Regulation

Capital and liquidityPensions get stressed

On 11 May 2015 EIOPA launched the first

IORP stress test and announced it would

carry out a further quantitative assessment

on the solvency of IORPs. National

supervisors select the IORPS to be included

and both exercises are to run concurrently

until 10 August 2015.

The stress test applies to both defined

benefit and defined contribution schemes in

17 EU member states with ‘material IORP

sectors’ - i.e. covering at least 50% of the

national market. EIOPA expects the exercise

will provide insight and raise awareness of

risks and vulnerabilities in the sector by

assessing IORP's resilience to adverse

market scenarios and ‘longevity scenarios’.

The ESRB initially supplied EIOPA with

adverse macro-financial scenarios for the

stress test on a confidential basis in March

2015 and then published its paper on 12

May 2015.

The quantitative assessment will gather data

from participating IORPs on potential uses

of a ‘holistic balance sheet’, a concept

EIOPA consulted on in 2014 that involves

market-based and risk-sensitive balance

sheets. It plans to develop its advice on

solvency rules for IORPs to the EC in light

of the results from the assessment. The

advice is due in March 2016.

CMUCMU to empower ESAs

Eurosystem published its response the EC's

Green Paper on the CMU on 21 May 2015. It

argues that the success of the initiative

hinges on expanding the scope of European-

wide financial regulation and enhancing the

oversight authority of the ESAs.

Eurosystem favours EU regulations, with

direct applicability on firms, should be the

norm instead of directives which still afford

a high degree of interpretative flexibility to

the Member States. Further, EU regulation

should minimise the opportunities for "gold

plating" by Member States keen to

distinguish themselves through more

stringent requirements.

While in the short term Eurosystem believes

ESAs should be given enhanced oversight of

Member State implementation, through

increased use of peer reviews, it believes

that ultimately there should be single, EU-

level supervision of certain market

segments. Eurosystem believes that EU-

level supervision should be expanded to

market data providers and consolidators as

well as benchmark setters, noting it already

exists for trade repositories and credit

rating agencies. However, Eurosystem

observes that supervision of financial

market infrastructures should always

include central bank involvement.

ESMA reacts to the CMU

On May 21, 2015, ESMA published its

response to the EC's Green Paper on the

CMU, signalling its strong support for both

the overarching CMU principles as well as

the EC's specific priorities and

implementation approach. It made a

number of specific suggestions that either

considerably fleshed out points made in the

Green Paper or brought up novel points,

such as:

developing a pan-European

crowdfunding regime that would include

prospectus requirements

creating uniform substantive

requirements around cost and fees for

UCITs, moving beyond simple

disclosure, so as to encourage increased

retail investment

developing harmonised rules for loan

origination by investment funds

ensuring consistent pan-European

supervision by strengthening existing

ESA authority, including clarifying the

obligation of national competent

authorities to respond to ESMA's

requests for information.

Given that the EC is still very much

sketching out the long-term scope of the

Cross sector announcements

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CMU, and ESMA's inevitably important

role, its comments and policy agenda will

likely be an important driver of CMU

developments. Unlike the Eurosystem

response, ESMA did not directly advocate

expanding its direct supervisory authority

beyond its current scope.

Financial stabilityRisks facing Europe intensify

On 5 May 2015 the EBA, ESMA and EIOPA

jointly published a Joint Committee report

on risks and vulnerabilities in the EU

financial system. The ESAs found that since

the previous report in August 2014,

financial system risks in the EU have

intensified, though the substance of the

risks remain the same. These include:

low growth, deflationary tendencies,

volatile asset prices and their

consequences for financial entities

search for yield behaviour risks

exacerbated by already materialising

and potential snapbacks

risks from deteriorating conduct of

business of financial institutions

increased concern about IT risks and

cyber-attacks.

The ESAs recommend that supervisors

strengthen product oversight and corporate

governance controls, improve the regulatory

framework applicable to conduct risks, by

establishing peer reviews, and improve

supervisory practices to address conduct

risks. To address macro-prudential conduct

risk the ESRB separately recommended that

SREP assessments take into consideration

the systemic impact of potential

misconduct, that misconduct costs are

included in future stress tests, enhancing

coordination in international fora and

extending the LEI regime to a larger range

of counterparties.

The ESAs found IT risk rose due to costs

pressures, outsourcing, the need for

additional capacities and a mounting

number of cyber-attacks. They concluded

that the systematic integration of IT risk in

overall risk management still needs to

progress.

ECB releases Financial StabilityReview

The ECB published its Financial Stability

Review on 28 May 2015. The Review

provides an overall mixed assessment of the

euro-zone area's current economic health. It

notes that while profitability has increased

marginally for euro-zone banks, return on

equity remains below the cost of capital for

many. Moreover, levels of real investment

have stayed low despite appreciating

financial asset prices. The ECB also

observes that liquidity has lessened

(demonstrated by a decline in turnover

ratios and decreasing deal sizes for euro

areas government bonds) with a

corresponding amplification of market

stress. Other risks affecting the euro market

include:

banks and insurers - weak

profitability prospects in a low nominal

growth environment, with slow progress

in resolving problem assets

sovereign and corporate sectors - a

rise in debt sustainability concerns amid

low nominal growth

shadow banking - prospective stress

and contagion effects in a rapidly

growing sector.

The ECB stressed the critical role of post-

crisis regulation in addressing these risks

and it expressed confidence that their

finalisation and calibration would address

many of the concerns laid out in the report.

Market infrastructureReforming LIBOR

ICE Benchmark Administration Ltd (IBA)

published Evolution of ICE LIBOR -

feedback statement on 1 May 2015. IBA

plans to enhance elements of LIBOR,

following changes introduced since it

assumed responsibility for administrating

the LIBOR benchmark on 3 February 2014.

IBA also responded to the FSB's report on

reforming major interest rate benchmarks.

The feedback statement summarises the

views on the initial position paper and

accompanying questionnaire on the usage of

LIBOR in specific currencies and tenors.

IBA plans to launch a formal consultation in

summer 2015 which will set out its

proposals in greater detail.

EMIR consultative issues

On 21 May 2015 the EC consulted on the

following EMIR-related issues:

providing uniform requirements for CCP

access to central bank liquidity

determining whether or not the current

clearing thresholds adequately capture

the systemic risk posed by non-financial

counterparties

obtaining stakeholder feedback on the

effectiveness of CCP colleges

strengthening requirements for CCPs to

assess procyclicality when calculating

margin requirements

assessing the adequacy of CCPs

collecting of initial and variation margin

whether market participants have

observed any notable impediments to

meeting requirements around clearing,

risk mitigation and collateral and

determining whether EMIR has

impeded EU entities from transacting on

a cross-border basis.

The consultation period closes on

13 August 2015.

Benchmark Regulation moves a stepcloser

MEPs agreed the EP's version of the

Benchmark Regulation on 19 May 2015. All

benchmark administrators will have to be

registered with ESMA and publish a

'benchmark statement' defining precisely

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what their benchmark measures and to

what extent it is reliable. The proposed

Regulation also sets out requirements for

benchmark submitters and benchmark

users. Trilogue negotiations between the

EP, Council and EC will now take place in

order to reach an agreement on the final

Level 1 legislative text.

ESMA consults on EMIR interest rateswaps

ESMA consulted on Clearing Obligations

under EMIR (no 4) for interest rate swaps

(IRS) on 11 May 2015. IRS denominated in

the currencies of six European countries

outside of the Eurozone - Czech Republic,

Denmark, Hungary, Norway, Poland and

Sweden are included. ESMA reused the

methodology and data from its similar EC

submission on clearing of IRS instruments

denominated in the G4 (EU, GBP, USD,

JPY) currencies, even though the RTS has

yet to be endorsed.

ESMA concluded that the non-euro

denominated swaps have the requisite

standardisation, liquidity and availability of

pricing information to be subject to the

EMIR clearing obligations. However, the

RTS only directly subjects three forward

rate agreement products and six fixed-to-

float products to the requirements.

ESMA uses the same phase-in periods as

the G4 currencies:

six months for clearing members of one

of the IRS classes subject to the clearing

obligation

12 - 18 months for financial

counterparties and certain alternative

investment funds

3 years for non-financial counterparties

that exceed the clearing thresholds as set

by EMIR.

Counterparties in the same category may

face two different implementation deadlines

in quick succession if the two RTS are

adopted shortly after one another. It

therefore proposes to add a 3 month

extension for latter IRS instruments if the

two RTS are adopted within 3 months of

each other.

The consultation period closes on

15 July 2015.

ESMA opinions on CCP colleges

On 7 May 2015, ESMA published an

Opinion on the composition of CCP colleges

under EMIR, to ensure supervisory

uniformity across the EU. EMIR requires

the formation of supervisory colleges to

monitor CCP compliance. Each college

consists of a CCP's national competent

authority (NCA) and NCAs from the

Member States with the largest

contributions to the CCP's default fund.

ESMA clarifies that where the ECB assumes

prudential responsibilities under the SSM,

NCAs will still remain college members

provided they retain financial conduct

oversight. In addition, both the NCA and

the ECB have seats on the college, with the

ECB enjoying a vote regardless of ongoing

NCA participation.

Lord Hill on reviewing EMIR

On 29 May 2015, Jonathan Hill announced

that EMIR, and other EU regulations, will

be reviewed as part of the EC's efforts to

assess whether the current regulatory

framework successfully addresses market

risk without compromising economic

growth.

Lord Hill specifically mentioned that

questions around data had been raised -

including whether it was the right kind and

in manageable quantities. He mentioned

many of the milestones that have been

reached - such as 17 EU CCPs and 10 non-

EU CCPs obtaining authorisation. Lord Hill

also provided updates on those components

of the regulation that have yet to be

finalised, stating:

the process to get the first clearing

obligations finalised is under way, and

could well be in place by April 2016

the transitional relief for EU pension

funds from central clearing will soon be

put in place and

the ESAs are set to deliver draft

guidelines for non-centrally cleared

margin in the next couple of months.

The review is led by First Vice President

Frans Timmermans and fits in with the EU's

Better Regulation initiative.

MiFID IIDefining commodity derivatives

ESMA published Guidelines on the

application of definitions in Sections C6 and

C7 of Annex 1 of Directive 2004/39/EC

(MiFID) on 6 May 2015. The purpose of the

Guidelines is to ensure the term 'commodity

derivatives' under MiFID is commonly

applied across Member States. ESMA notes

that the implementation of MiFID across

Member States thus far has resulted in

different interpretations among competent

authorities on what constitutes a financial

instrument and what should be classified as

a derivative contract. Differing

interpretations can lead to an inconsistent

application of MiFID, EMIR and other

Directives or Regulations that rely on

MiFID definitions of financial instruments.

ESMA's Guidelines set out that section C6 of

Annex 1 of MiFID has a broad application,

applying to all commodity derivative

contracts - including forwards - where:

they can or must be physically settled

and

they are traded on a regulated market or

multilateral trading facility (MTF).

ESMA explains that commodity derivative

contracts that can be physically settled but

which are not traded on a regulated market

or MTF may fall within the definition of

section C7 of Annex 1 provided they meet

certain conditions.

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ESMA expects competent authorities to

incorporate the Guidelines into their

supervisory practices, and notify ESMA

whether they comply or intend to comply

with them.

Operational resilienceIOSCO consults on alternatives tocredit rating agencies

On 7 May 2015, IOSCO issued a

consultation report - Alternatives to the use

of credit ratings to assess creditworthiness.

It outlines draft best practices to assist

market intermediaries to move away from

relying on CRAs and instead develop their

own robust, internal credit worthiness

assessments. The report also covers draft

corporate governance practices that are

already widely adopted across industry to

manage and monitor credit risk, both at

counterparty and instrument level.

IOSCO considered survey responses and

presentations by large market

intermediaries. It proposes a number of

'draft sound principles,' including:

establishing an independent credit

assessment function

developing a coherent oversight function

adequately informing governing

committees

incorporation of qualitative measures

subject non-investment grade financial

products to enhanced scrutiny.

The consultation closes on 8 July 2015.

EBA standardises paymentinformation

On 11 May 2015, the EBA published final

guidelines under the EU Payment Accounts

Directive, as a first step towards developing

standardised terminology for payment

accounts across the EU.

EU Member States are required to provide

provisional lists of10 to 20 payment account

services that are most commonly used by

consumers and which generate the highest

cost for consumers. The EBA will use the

lists to create templates for EU payment

services providers to use in presenting

certain fee information to EU customers.

The EBA plans to consult further on the fee

information in 2016.

PaymentsMIFs Regulation published in OJ

On 19 May 2015, the EU published the

Regulation on interchange fees for card-

based payment transactions ((EU)

2015/751) (MIF Regulation) in the Official

Journal.

The Regulation imposes a cap of 0.2% on

the amount charged for a debit card

transaction and 0.3% for a credit card

transaction. In addition to the introduction

of the fee caps, the Regulation imposes

requirements for the legal separation of

payment card scheme and processing

activities and the removal of the Honour All

Cards rule (‘HACR’).

The Regulation comes into force 20 days

after publication in the Official Journal (8

June 2015) but the caps and associated

information requirements apply from 9

December 2015 while the HACR is effective

from 9 June 2016.

EBA to harmonise payment services

On 21 May 2015, the EBA announced plans

to harmonise regulatory and supervisory

practices for payments services across the

EU in line with its mandate under the

forthcoming revised Payments Services

Directive (PSD2).

The planned measures include setting

minimum security requirements to protect

EU consumers against payment fraud on

the Internet and ensuring that payment

card schemes and processing entities are

independent from one another in terms of

accounting, organisation and decision

making processes.

The EBA will approach industry and other

interested parties to gather views following

final agreement on PSD2 by the EC, Council

and EP.

Retail productsESA's report on securitisation

On 12 May 2015 the ESAs published a Joint-

Committee report on securitisation. The

report reviews the existing legislative and

regulatory framework and implementing

measures for due diligence and disclosure

requirements. This includes the Prospectus

Directive, CRR/CRD IV, AIFMD, CRA

Regulation, Solvency II and central banks’

collateral frameworks. The ESAs wanted to

assess the existing framework and, where

inconsistencies are identified, to put

forward recommendations that could be

adopted at the EU level. The

recommendations include:

due diligence requirements should be

harmonised across different investor

types

a standardised investor report should

reflect the dynamics of structured

finance instruments (SFIs) and be

stored in a centralised public space

data providers should be allowed to fulfil

disclosure requirements

loan by loan data should be provided to

investors

all types of investors should be

empowered to effectively conduct their

own stress tests

a harmonised approach should be

developed for private and bilateral SFIs

Some of these proposals (such as for private

and bilateral SFIs) are currently being

consulted on by the ESAs. Others may form

part of the backbone for the new CMU

initiative, since a drive in good quality

securitisations will be a key goal.

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Accounting

IFRSRevised Conceptual Framework

The IASB issued ED/2015/3 - Conceptual

Framework for financial reporting on 28

May 2015. It aims to improve the

Conceptual Framework used when

developing IFRS. Proposed improvements

include:

measurement detail describing options

(historical cost, current value and fair

value) and selection criteria

guidance on when income and expenses

could be reported in other

comprehensive income

refined definitions of assets, liabilities,

equity, income and expenses.

The comment period ends on 26 October

2015.

Insurance Contracts project update

The IASB held an education session on 19

May 2015 to discuss the implications of the

variable fee approach for direct

participation contracts and the accounting

for ‘indirect participation contracts’, such as

US style universal life contracts. The Board

did not make any decisions. See our

Insurance Alert: IASB education session on

19 May 2015 for notes of the meeting.

Revenue standard deferral

The IASB published ED/2015/2 - Effective

Date of IFRS 15 (Proposed amendments to

IFRS 15) on 19 May 2015. It proposes

deferring the effective date of the revenue

standard, IFRS, 15 from 1 January 2017 to 1

January 2018, to clarify the requirements

and add examples to aid implementation.

The comment period closes on 3 July

2015.

Balance sheets explored

The IASB published The Essentials – Issue

number three on 14 May 2015.

This issue includes:

offsetting explained

when do banks report a net figure?

jargon-busting

how does this tie in with Basel III?

It also explains how investors can leverage

the notes to the financial statements to

make comparisons between the balance

sheets of banks.

PwC PublicationsIFRS News - March 2015

The May edition of IFRS News considers:

revenue recognition: proposed deferral

of effective date.

employee benefit: IASB research project.

cannon street press:

disclosure initiative.

annual improvements.

fair value of quoted instruments.

questions and answers: ‘Z’ for Zoos and

IAS 41.

Amended IFRS for SMEs

Our In brief: A look at current financial

reporting issues - Review of IFRS for SMEs

completed looks at the IASB’s amendments

to IFRS for SMEs, effective from 1 January

2017. The most significant changes are:

the option to use the revaluation model

for property, plant and equipment

alignment with IAS12, ‘Income taxes’ for

deferred income tax

default 10-year life for goodwill

amortisation.

Tax reporting update

Our In brief: A look at current financial

reporting issues - Finance (No.2) Bill 2015

sets out the main accounting implications

for current and deferred tax balances of the

Finance (No.2) Bill 2015. Although the main

rate of corporation tax was unchanged, the

bill included the following changes:

a new diverted profits tax to be applied

at 25% when multinational enterprises

artificially divert profits from the UK to

connected entities in low-tax

jurisdictions.

bank loss relief restricted to 50%

new loss refresher anti avoidance rule.

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

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In this section:

Regulation 11

Bank structures 11

Capital and liquidity 13

Compensation schemes 13

Financial stability 13

Market based finance 14

Supervision 14

Regulation

Bank structuresEC reasons over BRRD non-compliance

On 28 May 2015, the EC issued a ‘reasoned

opinion’ asking Bulgaria, the Czech

Republic, France, Italy, Lithuania,

Luxembourg, the Netherlands, Malta,

Poland, Romania and Sweden to fully

implement the BRRD.

Reasoned opinions represent the second

stage of EU infringement proceedings.

Member States have two months to comply

with the EC’s opinion, failing which the EC

may refer them to the ECJ.

Indicators that a firm is in trouble

On 6 May 2015 the EBA published

Guidelines on the minimum list of

qualitative and quantitative recovery plan

indicators. Under BRRD institutions are

required to develop and maintain recovery

plans which outline measures to be taken to

restore their financial position. The EBA

identifies points at which appropriate

actions referred to in the recovery plan

should be taken. These must be quantitative

and qualitative and should at the minimum

include actions relating to:

capital

liquidity

profitability

asset quality.

Firms should also include information on

macroeconomic and market based

indicators - unless they can justify that they

are not relevant. The EBA identifies specific

indicators to be included in each category of

recovery plan, unless an institution can

justify that the sub-indicators are not

relevant to their legal structure, risk profile,

size and/or complexity (i.e. a rebuttable

presumption).

The final guidelines allow regulators to

partially exclude applying the mandatory

recovery plan indicators if they consider

certain categories irrelevant considering the

business model of investment firms.

Similarly, supervisors can exclude certain

categories and indicators that are subject to

rebuttable presumption if they deem that

such categories and indicators cannot apply

to certain types of investment firms. These

include the minimum list of recovery plan

indicators, market based and

macroeconomic indicators.

The guidelines will apply from 31 July 2015.

Meeting the conditions for Resolution

On 26 May 2015 the EBA published its final

Guidelines on the interpretation of the

different circumstances when an institution

Banking and capital markets

Mark JamesPartner, Jersey office+44 (0) 1534 838304mark.james@je.pwc.com

James de VeulleDirector, Jersey office+44 (0) 1534 838375james.de.veulle@je.pwc.com

Nick VermeulenPartner, Guernsey office+44 (0) 14 81 752089nick.vermeulen@gg.pwc.com

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shall be considered as failing or likely to

fail under Article 32(6) of Directive

2014/59/EU. The EBA outlines

circumstances under which an institution

should be designated as ‘failing or likely to

fail’. Meeting the criteria used to make this

designation is a condition for entering a

firm into resolution. The criteria fall under 3

headings:

capital Position

liquidity Position

any other requirement for continuing

authorisation including governance

arrangements and operational capacity.

The finalised guidelines combine the

objective elements used to determine if a

firm is ‘failing or likely to fail’ so regulators

and resolution authorities use the same

criteria but maintain separate procedural

rules. The EBA also clarified that the

valuation necessary to meet the conditions

set out in the guidelines could be an a priori

valuation that doesn’t need to be performed

by an independent valuer or the resolution

authority and which follows simplified

procedures rather than the full valuation set

out in Article 36 of the BRRD.

The date of implementation was changed to

1 January 2016.

BRRD asset separation tool

The EBA published final draft guidelines on

The determination of when liquidation of

assets or liabilities under normal

insolvency proceedings could have an

adverse effect on one or more financial

markets under Article 42(14) of the BRRD

on 20 May 2015.

The guidelines build on Article 42 of the

BRRD and set out three elements that

should be considered by resolution

authorities:

whether the market for these assets is

impaired

the impact of a disposal of these assets

on the markets where they are traded

the situation of the financial markets

and the direct and indirect effects of an

impairment on the markets for these

assets.

For each of these elements, the guidelines

identify a non-exhaustive list of factors that

resolution authorities should assess having

regard to the risk of putting additional

pressure on prices and causing contagion.

In particular, where the transfer involves a

portfolio of derivatives or trading assets and

liabilities that are legally or economically

interlinked, the resolution authority should

assess the three elements with respect to the

portfolio as a whole and to comparable

portfolios. The authority should also take

into account the effect on counterparties to

these assets and liabilities, such as the

discontinuance of hedging relations and the

need to find a replacement for them, or the

impact on, or special requirements of,

central counterparties.

The EBA aims to promote a level playing

field and convergence of resolution

practices particularly where a firm under

resolution has a large cross-border

dimension. The guidelines apply from 1

August 2015 and competent authorities

must confirm their compliance status to the

EBA within two months of publication of

the guidelines in all EU languages. The EBA

will review the guidelines by 31 July 2017.

EBA guidelines for BRRD sale ofbusiness tool

The EBA published its final draft guidelines

on Factual Circumstances amounting to a

material threat to financial stability and on

the elements related to the effectiveness of

the sale of business tool under Article 39(4)

of BRRD on 20 May 2015.

The guidelines build on Article 39 of the

BBRD and set out a non-exhaustive list of

the circumstances amounting to a material

threat to financial stability and the elements

relating to the effectiveness of the sale of

business tool. For example, there may be

leeway on the principle of non-

discrimination amongst potential

purchasers; certain purchasers can, due to

their financial or market position, structure

and business model, integrate the failed

business in good time and so continue its

market critical functions and meet the

needs of counterparties, infrastructure

providers, depositors and the wider market.

The guidelines aim to promote a level

playing field and convergence of resolution

practices particularly where a firm under

resolution has a large cross-border

dimension.

The guidelines apply from 1 August 2015

and competent authorities must confirm

their compliance status to the EBA within

two months of publication of the guidelines

in all EU languages. The EBA will review

the guidelines by 31 July 2017.

Valuing derivatives in resolution

On 13 May 2015, the EBA published Draft

RTS on the valuation of derivatives under

the BRRD. The draft RTS provide resolution

authorities with a methodology for valuing

derivative liabilities of credit institutions

placed under resolution for the purpose of

bail-in.

The EBA proposes applying a statutory

valuation methodology based on the costs or

gains that would be incurred by the

counterparty in replacing the contract.

Derivative counterparties will be given the

opportunity to provide evidence of

commercially reasonable replacement

trades and to determine the close-out

amount within a certain deadline. If no

feedback is received, then resolution

authorities will apply their valuation based

on mid-market prices and bid-offer spreads.

The EBA standards also specify that

resolution authorities should establish the

value of derivative liabilities at the date of

close-out or when a price is available in the

market for the contract or the underlying

assets, which allows for a final valuation

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within a matter of days with maximum

accuracy. As early terminations of

derivatives may bring specific additional

costs, the RTS further specify the

circumstances in which resolution

authorities might exempt contracts from

close-out and bail-in where the application

of the bail-in tool is likely to bring

destruction in value that would exceed the

bail-in potential of the corresponding

liabilities.

The standards take into account the specific

regulatory framework applicable to centrally

cleared derivatives, for which EMIR has

introduced rules and procedures for valuing

derivatives in resolution. In very exceptional

circumstances, resolution authorities will

impose their own valuation where CCPs do

not deliver a close-out amount or do not

apply default procedures within an agreed

deadline.

In cases of particular emergency

constraints, in certain situations, resolution

authorities will also be able to apply

resolution actions on the basis of

preliminary valuations and even before

pricing is available in the market.

The consultation closes on

13 August 2015.

Capital and liquidityEBA retains securitisation risk-weights

The EBA consulted on an ITS on the risk-

weights applicable to securitisation

positions on 7 May 2015.

The EBA maps credit ratings used by the

main CRAs to an associated credit quality

step and risk-weight in the CRR. The EBA’s

proposed mapping tables are identical to

the interim mapping tables used by the PRA

and the FCA. So the proposed tables, if

implemented, will not lead to an increase in

capital requirements for banks and CRD IV-

scope asset managers.

The consultation closes on 7 August 2015.

Once finalised, it will form part of the Single

Rulebook on prudential regulation.

Compensation schemesPaying into the Deposit GuaranteeScheme

On 28 May the EBA published Guidelines

on methods for calculating contributions to

deposit guarantee schemes. The DGS is to

follow the Guidelines when determining its

ex ante and ex post contributions. The

Guidelines aim to incentivise firms to

operate under a less risky business model.

Under the Guidelines, calculation methods

will include a set of core indicators

capturing the main dimensions of the risk

profile of credit institutions. The indicators

fall into the following risk categories:

capital

liquidity and funding

asset quality

business model and management

potential losses for the DGS.

These obligatory indicators will represent

75% of the risk assessment, allowing the

DGS some flexibility when determining the

remaining 25%. DGSs are therefore allowed

to take the circumstances of individual

credit institutions into account. But the

Guidelines also state that the weight of any

additional indicator or increase in the

weight of a core indicator must not exceed

15%. There is an exception for qualitative

indicators in the ‘Business model and

management’ category, where full flexibility

is allowed.

The EBA expects regulators to incorporate

the Guidelines into their supervisory

processes and procedures by the end of

2015, unless they are not able to implement

the DGSD by the deadline of 3 July 2015. In

this case they must be implemented no later

than 31 May 2016.

Payment Commitments under DGSD

The EBA published Guidelines on payment

commitments under Directive 2014/49/EU

on deposit guarantee schemes (DGSD)

published on 28 May 2015. DGSD gives

DGSs the option to authorise credit

institutions to provide up to 30% of

contributions in the form of 'payment

commitments' - i.e. fully collateralised, low

risk assets that are not encumbered by third

party rights. The Guidelines elaborate on

this concept and set out:

the terms in contractual or statutory

arrangements providing for credit

institutions to make payment

commitments to a DGS

a DGS's powers to realise or appropriate

payment commitments if an

enforcement event occurs

the terms of delivery of the payment

commitment to the DGS

criteria enabling a DGS to verify a

payment commitment is unencumbered

by third-party rights

guidance on how a DGS should

formulate criteria to determine the

eligibility of proposed payment

commitments (what is a low risk asset?)

that DGSs and designated authorities

should always apply a haircut to the

value of the low-risk assets provided as

collateral and

that competent authorities are required

to mitigate any potential advantage

stemming from the prudential treatment

of payment commitments as compared

to contributions paid in case.

The Guidelines should be implemented by

31 December 2015.

Financial stabilityMore supervision of non-banks

Vítor Constâncio, ECB Chairman, called for

a strengthening of the ECB’s

macroprudential toolkit in a speech to the

Official Monetary and Financial Institutions

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Forum on 8 May 2015. In particular he

wants to see:

a monitoring framework for non-banks

macroprudential tools tailored to the

non-bank sector

a new regulatory and institutional base

in Europe to implement those changes.

Without these new tools the measures

implemented to safeguard financial stability

are incomplete and Constâncio

recommends authorities in the EU take

lessons from their US counterparts to

enhance prudential regulation of all SIFIs.

Market based financeSpecialised lending risk-weightsconsultation

The EBA consulted on draft RTS on

Assigning Risk Weights to Specialised

Lending Exposures under Article 153(9) of

CRR, on 11 May 2015. It is relevant to banks

which use IRB models to assess their

exposure to credit risk.

The draft RTS defines specialised lending as

lending to support any of the following:

project finance

real estate (i.e. mortgage lending)

object finance (e.g. car finance)

commodities finance.

The consultation sets out two proposed

approaches to determine risk-weights for

specialised lending under the IRB approach.

The EBA is seeking feedback on which

option banks prefer.

Option 1: The risk-weight for

specialised lending is determined as one

credit quality step lower than the highest

credit quality step used in the

specialised lending category. This option

is simple, but not very risk-sensitive.

Option 2: Banks would determine the

risk-weight applicable for specialised

lending by taking the weighted average

of all the underlying exposures. This

option would be more complex but also

more accurate.

The consultation closes on 11 August

2015. Once finalised, the RTS will form part

of the Single Rulebook on prudential

regulation.

SupervisionEarly Intervention under BRRD-FinalGuidelines

The EBA finalised its Guidelines on triggers

for use of early intervention measures

under BRRD on 8 May 2015. It provides

guidance for regulators on when to consider

applying early intervention measures to

institutions and how to identify triggers for

these within the proposed common SREP

framework.

The EBA recognises that early intervention

measures may be triggered by events not

covered immediately by the SREP, e.g.

material deterioration or indicator

monitoring anomalies or by ‘significant

events.' The final guidelines require that

when regulators consider applying early

intervention measures they should take

account of any recovery actions underway.

The guidelines have also been amended so

the list of significant events reflects the

specificities of investment firms.

The guidelines will apply from 1 January

2016.

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

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In this section:

Regulation 15

Alternative investment 15

Reporting 15

Regulation

Alternative investmentELTIF Regulation is now Official

On 19 May 2015, the EU institutions

published the final European Long Term

Investment Fund (ELTIF) Regulation (EU

2015/760) in the OJ. The regulation comes

into force from 8 June 2015 and applies

from 9 December 2015.

Only EU-based AIFs where both the fund

and its manager are authorized under

AIFMD will be eligible. But unlike other

categories of AIFs, an ELTIF can be

marketed to certain categories of retail

investors if at least 70% of its assets support

‘qualifying portfolio undertakings’ and it

meets additional authorization and

suitability assessment requirements. The

final regulation removes the geographic

restrictions contained in the proposal

(where at least 60% of its assets were to be

invested in EU undertakings). Further, the

final version allows funds to establish early

redemptions and to seek admission of their

shares on a regulated market or MTF, to

facilitate liquidity for investors.

By expanding the original proposals around

redemption, secondary market trading and

geographically diverse investment, the

regulation seeks to expand the capital pool

for illiquid investments in infrastructure,

small and medium sized enterprises, and

unlisted undertakings (among other

categories). As such, ELTIFs have been cited

as a core component of the proposed CMU.

ReportingMore AIFMD Q&As

ESMA published an updated Q&As:

application of the AIFMD on 12 May 2015.

It provides nine new Q&As on AIFMD

reporting and confirms that:

AIFMs should report individually on

their AIFs - there is no reporting impact

if the AIFM is related to another AIFM

(e.g. in the same group or owned by

another AIFM)

capital commitments should not be

considered as investments in an AIF but

capital drawdowns should be included

registered AIFMs that have opted-in to

AIFMD must report in the same way as

above threshold AIFMs

Asset management

John LuffPartner, Guernsey office+44 (0) 1481 752121john.luff@gg.pwc.com

Mike ByrnePartner, Jersey office+44 (0) 1534 838278michael.j.byrne@je.pwc.com

Adam GulleySenior Manager, Jersey+44 (0) 1534 8382390adam.gulley@je.pwc.com

Executive summary Stressing CCPs Cross sector

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Banking and capital

markets

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non-EU AIFMs under AIFMD

thresholds must report as required by

the Member States that they market into

where an AIF invests exclusively in

assets denominated in its base currency

it should report long and short positions

only in the AIF's base currency

AIFMs should not include income

distributions as redemptions in the AIF

sub-funds of an AIF should be treated

separately for reporting purposes

AIFMs should take account of cash (and

equivalent) investments when

calculating the main instruments an AIF

trades

AIFs should follow the same reporting

procedures as AIFMs when submitting

their first reports.

We recommend AIFMs and service

providers pay attention to these Q&A to

keep track of ongoing regulatory thinking

for operating under AIFMD.

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Banking and capital

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In this section:

Regulation 17

Capital and liquidity 17

Solvency II 17

Regulation

Capital and liquidityEIOPA Q&A updated

EIOPA published answers to three

questions on the fundamental spread

12/31/14 on 13 May 2015. The fundamental

spread is calibrated and published by

EIOPA for insurers to use in their matching

adjustment calculation to allow for expected

defaults.

Solvency IISolvency II delegated regulation

On 15 May 2015, the EP published

Commissioner Hill’s response to a letter

from Roberto Gualtieri (ECON) of 1 April

2015 about the delegated regulation

supplementing Solvency II. Commissioner

Hill agreed to various technical corrections.

He is not proposing to change the approach

to ‘sub-tiers’ agreed with EIOPA, but he

plans to review this area in three years’

time. He also confirmed that delegated acts

re third country equivalence will be adopted

as soon as possible. Gualtieri’s letter

indicated that these were expected to be in

respect of Switzerland, confirming

equivalence for reinsurance, group solvency

calculation and group supervision, and for

Australia, Bermuda, Brazil, Canada, Mexico

and the USA confirming provisional

equivalence for group solvency calculation.

EIOPA focusses on Solvency IIreporting

EIOPA published a Solvency II update on 6

May 2015 encouraging insurers to ‘focus

their efforts both on the annual reporting,

as a real test for the Solvency II application,

and on the preparatory reporting of the 3rd

quarter 2015, as a very important step for

testing their processes and systems.’ EIOPA

has also updated its Solvency II webpage to

assist insurers in their preparations. This

webpage links to key publications and

includes a timeline. In particular, EIOPA is

planning to send the final set of ITS

including those related to regular reporting

requirements to the EC for endorsement on

30 June 2015, and to publish feedback on

the second set of Solvency II ITS and

guidelines in early Q3 2015.

EIOPA Q&A updated

EIOPA published answers to three

questions on the fundamental spread

12/31/14 on 13 May 2015. EIOPA calibrates

and publishes the fundamental spread for

insurers to use in their matching

adjustment calculation to allow for expected

defaults.

Where to go for moreinformation

Read more about Solvency II UK on our

webpages at www.pwc.co.uk/solvencyII.

Insurance

Evelyn BradyPartner, Guernsey office+44 (0) 1481 752013evelyn.brady@gg.pwc.com

Adrian PeacegoodDirector, Guernsey office+44 (0) 1481 752013adrian.peacegood@gg.pwc.com

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Open consultations

Closing datefor responses

Paper Institution

04/07/15 Consultation paper – draft guidelines on passport notifications for credit intermediaries under the MCD EBA

06/07/15 Consultation paper – draft RTS on assigning risk weights to specialised lending exposures under the CRR EBA

08/07/15 Consultation report – sound practices at large intermediaries: alternatives to the use of credit ratings to assess creditworthiness IOSCO

10/07/15 Consultation paper – draft guidelines for the assessment of knowledge and competence ESMA

10/07/15 Second consultation paper: draft RTS on risk-mitigation techniques for OTC-derivatives no cleared by a CCP under Article 11(15)of EMIR

ESAs

15/07/15 Consultation paper – clearing obligation under EMIR (no.4) ESMA

21/07/15 Call for evidence – investment using virtual currency or distributed ledger technology ESMA

27/07/15 Impact of the best practice principles for providers of shareholder voting research and analysis – call for evidence ESMA

07/08/15 Consultation paper – draft ITS on the mapping of ECAI’s credit assessments for securitisation positions under the CRR EBA

13/08/15 Consultation paper – defining the valuation of derivatives liabilities for bail-in resolution EBA

13/08/15 Public consultation on EMIR EC

11/09/15 Consultative document – interest rate risk in the banking book BCBS

Monthly calendar

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Banking and capital

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Forthcoming publications in 2015

Date Topic Type Institution

Consumer protection

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

Prudential

Q2 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

Executive summary Stressing CCPs Cross sector

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Banking and capital

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Date Topic Type Institution

Securities and markets

Q2 2015 Implementing acts on third country equivalence decisions on exposuresto third country investment firms, clearing houses and exchanges treatedas exposures to an institution

Advice EBA

Q2 2015 Consultation Paper on MAR guidelines Consultation paper ESMA

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 ConsultationPaper on technical standards

Consultation or technical standards ESMA

Products and investments

Q3 2015 Advice on the application of the passport to third-country AIFMs andAIFs

Advice ESMA

TBD 2015 UCITS V Technical advice ESMA

TBD 2015 RTS on format and content of disclosures in KID for PRIPs Technical standards ESMA

Recovery and resolution

Q2 2015 Advice on the criteria for determining the number of years by which theinitial period for the build up of the SRF may be extended

Advice EBA

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 21

Date Topic Type Institution

Q2 2015 Partial transfer safeguards Advice EBA

Q3 2015 Notification requirements Technical standards EBA

Q3 2015 RTS on Contractual Bail in Technical standards EBA

Solvency II

TBD 2015 Solvency II Level 3 measures Level 3 text EIOPA

Supervision, governance and reporting

Q4 2015 Assessment of national SREP approaches Report EBA

Main sources: ESMA 2015 work programme; EIOPA 2015 work programme; EBA 2015 work programme; EC 2015 work programme;

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 22

2EMD The Second E-money Directive 2009/110/EC

ABC Anti-Bribery and Corruption

ABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AIMA Alternative Investment Management Association

AML Anti-Money Laundering

AML3 3rd Anti-Money Laundering Directive 2005/60/EC

AQR Asset Quality Review

ASB UK Accounting Standards Board

Banking ReformAct (2013)

Financial Services (Banking Reform) Act 2013

Basel Committee Basel Committee of Banking Supervision (of the BIS)

Basel II Basel II: International Convergence of Capital Measurement andCapital Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

BBA British Bankers’ Association

BCR Basic capital requirement (for insurers)

BIBA British Insurance Brokers Association

BIS Bank for International Settlements

BoE Bank of England

BRRD Bank Recovery and Resolution Directive

CASS Client Assets sourcebook

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CEBS Committee of European Banking Supervisors (predecessor of EBA)

CET1 Common Equity Tier 1

CESR Committee of European Securities Regulators (predecessor ofESMA)

Co-legislators Ordinary procedure for adopting EU law requires agreementbetween the Council and the European Parliament (who are the ‘co-legislators’)

CFT Counter Financing of Terrorism

CFTC Commodities Futures Trading Commission (US)

CGFS Committee on the Global Financial System (of the BIS)

CIS Collective Investment Schemes

Glossary

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 23

CMA Competition and Markets Authority

CMU Capital markets union

CoCos Contingent convertible securities

Council Generic term representing all ten configurations of the Council of theEuropean Union

CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009

CRA2 Regulation amending the Credit Rating Agencies Regulation (EU)No 513/2011

CRA3 proposal to amend the Credit Rating Agencies Regulation anddirectives related to credit rating agencies COM(2011) 746 final

CRAs Credit Rating Agencies

CRD ‘Capital Requirements Directive’: collectively refers to Directive2006/48/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 creditinstitutions and investment firms

CTF Counter Terrorist Financing

DFBIS Department for Business, Innovation and Skills

DG MARKT Internal Market and Services Directorate General of the EuropeanCommission

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act (US)

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECOFIN Economic and Financial Affairs Council (configuration of theCouncil of the European Union dealing with financial and fiscal andcompetition issues)

ECON Economic and Monetary Affairs Committee of the EuropeanParliament

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

EMIR Regulation on OTC Derivatives, Central Counterparties and TradeRepositories (EC) No 648/2012

EP European Parliament

ESA European Supervisory Authority (i.e. generic term for EBA, EIOPAand ESMA)

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 24

EU European Union

EURIBOR Euro Interbank Offered Rate

Eurosystem System of central banks in the euro area, including the ECB

FASB Financial Accounting Standards Board (US)

FATCA Foreign Account Tax Compliance Act (US)

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

FDIC Federal Deposit Insurance Corporation (US)

FiCOD Financial Conglomerates Directive 2002/87/EC

FiCOD1 Amending Directive 2011/89/EU of 16 November 2011

FiCOD2 Proposal to overhaul the financial conglomerates regime (expected2013)

FMI Financial Market Infrastructure

FMLC Financial Markets Law Committee

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FSA Financial Services Authority

FSB Financial Stability Board

FS Act 2012 Financial Services Act 2012

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FSOC Financial Stability Oversight Council

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

G-SIIs Global Systemically Important Institutions

HMRC Her Majesty’s Revenue & Customs

HMT Her Majesty’s Treasury

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICAS Individual Capital Adequacy Standards

ICB Independent Commission on Banking

ICOBS Insurance: Conduct of Business Sourcebook

IFRS International Financial Reporting Standards

IMA Investment Management Association

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 25

IMAP Internal Model Approval Process

IMD Insurance Mediation Directive 2002/92/EC

IMD2 Proposal for a Directive on insurance mediation (recast) COM(2012)360/2

IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision Directive2003/43/EC

IOSCO International Organisations of Securities Commissions

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

JURI Legal Affairs Committee of the European Parliament

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

MA Matching Adjustment

MAD Market Abuse Directive 2003/6/EC

MAD II Proposed Directive on Criminal Sanctions for Insider Dealing andMarket Manipulation (COM(2011)654 final)

MAR Proposed Regulation on Market Abuse (EC) (recast) (COM(2011) 651final)

MCD Mortgage Credit Directive

Member States countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

MiFID II Proposed Markets in Financial Instruments Directive (recast)(COM(2011) 656 final)

MiFIR Proposed Markets in Financial Instruments Regulation (EC)(COM(2011) 652 final)

MMF Money Market Fund

MMR Mortgage Market Review

MREL Minimum requirements for own funds and eligible liabilities

MTF Multilateral Trading Facility

MoJ Ministry of Justice

MoU Memorandum of Understanding

NAV Net Asset Value

NBNI G-SIFI Non-bank non-insurer global systemically important financialinstitution

NFC Non-financial counterparty under EMIR

NFC+ Non-financial counterparty over the EMIR clearing threshold

NFC- Non-financial counterparty below the EMIR clearing threshold

NSFR Net stable funding ratio

OECD Organisation for Economic Cooperation and Development

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – June 2015 PwC 26

Official Journal Official Journal of the European Union

OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflect LisbonTreaty and new supervisory infrastructure (COM(2011) 0008 final)– amends the Prospectus Directive (Directive 2003/71/EC) andSolvency II (Directive 2009/138/EC)

ORSA Own Risk Solvency Assessment

OTC Over-The-Counter

PPI Payment Protection Insurance

p2p Peer to Peer

PERG Perimeter Guidance Manual

PRA Prudential Regulation Authority

Presidency Member State which takes the leadership for negotiations in theCouncil: rotates on 6 monthly basis

PRIIPsRegulation

Proposal for a Regulation on key information documents forinvestment 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)

SEC Securities and Exchange Commission (US)

SFT Securities financing transactions

SFD Settlement Finality Directive 98/26/EC

SFO Serious Fraud Office

SIPP Self-invested personal pension scheme

SM&CR Senior managers and certification regime

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

Executive summary Stressing CCPs Cross sector

announcements

Banking and capital

markets

Asset management Insurance Monthly calendar Glossary

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150615-081039-SJ-OS

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Asset Management Banking & Capital Markets Insurance Local regulations & AML

John Luff

+44 (0) 1481 752121

john.luff@gg.pwc.com

Mark James

+44 (0) 1534 838304

mark.james@je.pwc.com

Evelyn Brady

+44 (0) 1481 752013

evelyn.brady@gg.pwc.com

Nick Vermeulen

+44 (0) 1481 752089

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+44 (0) 1534 838278

michael.j.bryne@je.pwc.com

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+44 (0) 1481 752089

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+44 (0) 1481 752084

adrian.peacegood@gg.pwc.com

Neil Howlett

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Adam Gulley

+44 (0) 1534 838390

adam.gulley@je.pwc.com

James de Veulle

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Contacts