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In November 2018, the IASB announced a proposed amendment to the IFRS 17 standard revising the effective date from 1st Jan 2021 to 1st Jan 2022. The proposed twelve month delay is based on case study and industry feedback to the IASB and allows insurers more time to assess and implement changes required to meet the IFRS 17 requirements as set out in the standard. As mentioned in ‘IFRS 17 implementation – What are insurers doing to prepare’ [Ref] amendments to the standard are expected to be confirmed later in 2019. IFRS 17 programme leadership are being thoughtful on how to adapt their programmes and optimise the programme's effort during this interim period to the IASB confirming any outlined changes to IFRS 17, whilst progressing with the current implementation plan.
We do not currently expect there to be an extension to the Term Funding Scheme [“TFS”] nor a replacement scheme. Therefore, the ending of the scheme will require a significant change in the funding plans of many UK lenders, some of whom have become reliant on central bank funding to drive growth. As a result we expect securitisation markets to revive and deposit rates to increase in the near term, especially around peaks in the scheme’s maturity profile. The notional value of UK covered bond schemes is also likely to rise for smaller, less highly rated issuers seeking attractive spreads. To avoid sharp increases in their underlying cost of funds, Treasurers will have to move early and look to develop their funding infrastructure well in advance of their contractual maturity payments to the Bank in order to avoid costly funding issues and potential headwinds to future growth.
Reinsurance continues to be one of the most contentious aspects of the standard for our clients. The key question remains - will the standard setters finally resolve the issues highlighted by reinsurers and direct insurers in terms of the measurement model for reinsurance?
As a key determinant of bank solvency and therefore a critical component of financial system stability, a banking applicant’s capital assessments receive significant scrutiny from regulators as part of the application process.
Alongside the Regulatory Business Plan (RBP), The Internal Capital Adequacy Assessment Process (ICAAP) is therefore one of the most important pieces of work you will need to perform in the run up to receiving your authorisation, and thereafter on an on-going basis.
In mid-November, the IASB confirmed its intention to propose a 12-month deferral of IFRS 17 along with a parallel shift of the deferral of IFRS 9 for insurers if those insurers use the option to defer IFRS 9. They recently discussed potential amendments to IFRS 17 ‘Insurance Contracts’ across thirteen topics at their London meeting on 11-13 December 2018. Of these, the Board decided to amend for one topic (balance sheet presentation), deferred one topic (on transition) but agreed not to amend the remaining eleven. A further twelve topics are expected to be discussed in early 2019.
The FCA recently published two Consultation Papers (CPs); CP18/42 which proposes changes to overdraft regulation; and CP18/43 which proposes changes to the regulation of various high cost credit products.
Attention has focussed, in particular, on the proposed changes to overdrafts, which would:
- end the distinction between arranged and unarranged overdrafts;
- stop firms charging fixed fees for overdrafts; and
- require firms to apply APR pricing to their overdrafts.
This blog summarises the package of changes proposed in the two CPs and explores their potential implications for firms.
On 12 November 2018, approximately 6 months after the adoption of the 5th EU Anti-Money Laundering Directive (5AMLD), the European Parliament published further rules to strengthen the fight against money laundering through the 6th EU Money Laundering Directive (6AMLD).
Member States are required to transpose the 6AMLD into national law by 3 December 2020. After which, relevant regulations must be implemented by firms within Member States by 3 June 2021.
This article represents the first in a Deloitte UK Risk Advisory series on the new age of Basel Pillar 2 Economic Capital (‘EC’) modelling in banking with a particular focus on Credit Risk models. In article 1 we look at the changing use of this well-seasoned model type, starting with an overview of the resurgence of EC, challenges for both retail and corporate parameterisation, and the Concentration Risk question. We finish by considering the best way to prioritise development effort between model design & parameterisation, how EC can be used and some of our EC expert’s considerations for enhancing an EC framework.
As we enter 2019, firms will naturally ask themselves what they should be doing to prepare for the year ahead. When it comes to the all-important subject of regulation, firms will want to know what issues and concerns are at the top of the regulatory agenda and how they can best respond. To help firms with these vital questions, Deloitte publishes its annual Financial Markets Regulatory Outlook. The Outlook’s perspective is deliberately strategic, both in analysing regulatory strategies and priorities and in considering the implications for firms’ strategies and business models.