Banking in Financial Services UK
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Biased Expectations: Will biases in IFRS 9 models be material enough to impact accounting values, as well as other applications such as pricing?
As European IFRS reporters enter 2017, the first generation of Expected Credit Loss (ECL) models have generally been developed, and granular transitional impacts quantified.
‘We want to ensure that the process of complaining is straightforward, transparent and fair to consumers, while allowing firms to handle complaints as efficiently as possible and for consumers to have effective access to the ombudsman service if they remain dissatisfied.’ Financial Conduct Authority (FCA)
Looking ahead to 2017, one of the most important areas of regulatory development that we see in financial services is rising supervisory expectations of firms’ cyber resilience. A spate of recent incidents of cyber-crime and IT failure have sharpened the focus of firms on their cyber preparedness, but management and boards should now also expect to be more routinely challenged by their supervisors on how well they understand and what they have done to limit their exposure to cyber and IT risks.
2016 has been another difficult year for the financial sector, with economic and political uncertainty complicating the completion of the post-crisis regulatory repair agenda.
Three years on from CRD IV/CRR being finalised, the EU’s banking sector now faces a revised Capital Requirements Directive and Capital Requirements Regulation (CRD V and CRR II), and a host of other legislative amendments, in a 500+ page package published today. These revisions to CRD V/CRR II and amendments to the Bank Recovery and Resolution Directive (BRRD) are likely to stretch significant regulatory change into the next decade.
European Commission proposes 12 month PRIIPs Delay, but uncertainty around timing of the legislation means firms should maintain momentum
On 9 November, the European Commission published a legislative proposal to extend the application date of the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) by one year. PRIIPs requires the disclosure of Key Information Documents (KIDs) when PRIIPs are sold to retail investors. The delay has been widely anticipated by the market and gives manufacturers and distributors of PRIIPs products until 1 January 2018 to put implementation plans in place. The Commission did not amend any other provisions in the Level 1 text. The proposal follows a vote by the EU Parliament on 14 September to reject the EU Commission’s Regulatory Technical Standards (RTS) on PRIIPs and concerns expressed by 24 Member States in the Council in a vote by the Competitiveness Council of the EU on 20 September (see our blog of 20 September for further detail on the Parliament’s rejection of the RTS).
Assurance over bank regulatory capital | ICAEW proposes framework to support confidence in banking regulatory ratios
The ICAEW on Tuesday published its exposure draft of a technical release “Banking regulatory ratios: ICAEW assurance framework”, which proposes a flexible and modular framework for both internal and external assurance on banking regulatory ratios.
There has been no shortage of deeply damaging scandals affecting the financial services sector in recent years, all of which can be linked to governance and cultural failings. Andrew Bailey, who recently moved from CEO of PRA to lead the FCA, has on numerous occasions spoken on the importance of corporate culture and has stressed that “the culture of firms…is of the utmost importance to regulatorsi”.
In 2017 the Bank of England (BoE) will introduce the biennial exploratory scenario (BES) as part of its annual concurrent stress test of UK banks. Outlined as part of the BoE’s 2015 update to its stress testing approach, the BES complements the annual cyclical scenario (ACS), enabling the BoE to assess firms’ resilience to a wider range of threats. The BES will be designed to delve into the more complex aspects of a firm’s risk profile, in the process testing not just its resilience, but also its capacity to model and manage risk.