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Being better informedFS regulatory, accounting and audit bulletin

PwC FS Risk andRegulation Centre ofExcellence

May 2014

In this month’s edition:

EP signs-off on number ofkey texts, includingBanking Union

EC consults on FXforward transactions

Stress testingmethodology revealed forbanks and insurers

In-depth look at newPRIIPs Regulation

Executive summary Feature articles Cross sectorannouncements

Banking and capitalmarkets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – May 2014 PwC 2

Welcome to this edition of “Being better informed”, ourmonthly FS regulatory, accounting and audit bulletin,which aims to keep you up to speed with significantdevelopments and their implications across all thefinancial services sectors.

Laura CoxLead PartnerFS Risk and Regulation Centre of Excellence

We are on the verge of a new EuropeanParliament, with elections set to take place acrossthe EU from 22 to 25 May 2014. The new MEPs,particularly the members appointed to the newECON committee will have a tough act to follow.The current committee negotiated over 60legislative texts with the Council, oftenintroducing radical amendments to the EC’sproposals and holding their ground to ensure keyamendments were adopted in the face ofsometimes strong opposition. ECON membersparticipated in hundreds of workshops, hearings,coordinators’ meetings and trilogue negotiations.They introduced something in the region of35,000 amendments to proposals within theirremit.

The current EP will be a hard act to follow – ithas radically reshaped the financial serviceslandscape following the financial crisis. Complexlegislative texts and intense negotiations resultedin countless late-night meetings and last minuteagreements as MEPs took on the difficult task ofre-shaping the financial industry. Theyformulated new prudential rules for banks (CRDIV) and insurers (Solvency II). They launched aregulatory regime for hedge funds, real estatemanagers and private equity firms (AIFMD).They have agreed rules to curb speculativetrading and make financial markets moretransparent (MiFID II), a clearing requirementfor standardised OTC derivatives (EMIR) andrules to protect retail consumers (PRIIPs).

While many of the texts were anticipated well inadvance, some were conceived as a response tothe crisis, notably the Banking Union packagelaunched in June 2012, which saw the creation ofthe Single Supervisory Mechanism and the SingleResolution Mechanism in record time. The EPsigned-off on the last three important elementsof the plan during the last plenary on 15 April –BRRD, the SRM and confirmation of the EU-wide guarantee scheme for deposits under€100,000.

New MEPs will still be faced with a mountain ofproposed legislation when they take their seats inJuly. Many reforms remain to be finalised: anti-money laundering, shadow banking (including

MMFs), bank restructuring etc. In parallel, theEP has taken on a significant oversight role inrespect of the economic reform process inMember States, which remains critical given thetentative financial recovery throughout the EU.

In our feature article this month we explore thenew PRIIPs legislation this month, which takesforward consumer product disclosure byrequiring a common form of key informationdocument for products from by differentfinancial sectors.

We hope you’ll find the articles that followinformative. Staying current on new regulatorydevelopments remains challenging, and despitethe EP taking a hiatus for elections, we expect abusy summer ahead on the regulatory front.

Laura CoxFS Risk and Regulation Centre of Excellence020 7212 [email protected]@LauraCoxPwC

Executive summary





How to read this bulletin?

Review the Table of Contents the relevantSector sections to identify the news ofinterest. We recommend you go directly tothe topic/article of interest by clicking in theactive links within the table of contents.

Contents

Executive summary 2

PRIIPs: the new KID on the block 4

Cross sector announcements 6

Banking and capital markets 12

Asset management 14

Insurance 16

Monthly calendar 20

Glossary 24

Contacts 29





The EP adopted the PRIIPs Regulation on 15 April2014, as part of the “super Tuesday” bundle oflegislation approved by the EP ahead of the EUelections in May 2014.

BackgroundIn an April 2009 Communication, the EC undertookto improve the consistency of disclosures acrossdifferent financial products offered in the retailmarket. It hoped to reduce disparities between theinformation provided to retail consumers in differentcountries before they invest in a packaged productand the associated potential for regulatory arbitrage.

More than three years later, the EC finally publishedthe initial legislative proposals on 3 July 2012, as partof the EC’s “retail package”, including the draft textsfor UCITS V and IMD2. Progress by the Council andthe EP on the text was relatively slow, due to morepressing legislative priorities (e.g. CRD IV and theBanking Union), but also because legislators hadfundamentally different views on key amendments tothe proposal.

The EP wanted to widen the scope of the proposal tocapture more products offered to retail investors andmore of the product lifecycle (e.g. product design andrisk management), rather than focusing purely on thedisclosure provided to retail investors. But neither theCouncil nor the EC supported these extensions, so the

text has not changed significantly from the EC’soriginal proposals in 2012. The EP, Council and ECfinally reached political agreement on 1 April 2014,enabling the EP to approve the measure in the finalplenary session of this parliament.

What products are in scope?PRIIPs takes a broad-brush approach, excluding alimited number of products rather than defining theproducts that are in scope. Legislators did this to“future proof” the legislation and prevent firms fromcircumventing the requirements by designing newproducts that fell outside a limited definition

Products that are definitely out of scope include:

non-life insurance products included in Annex I ofSolvency II

life insurance contracts where the benefits are onlypayable on death or incapacity

deposits (other than structured deposits)

securities listed in the Prospectus Directive

certain pension products, including occupationalpension schemes.

All other retail products that are “packaged” (i.e. theamount repayable to the investor is subject tofluctuations due to the performance of underlyingassets) are in scope. The EC sees four broad types ofPRIIPs:

investment funds (e.g. UCITS and other non-UCITS funds sold to retail investors – such as non-UCITS retail schemes in the UK)

insurance-based investment products

retail structured securities

structured term deposits.

PRIIPs is sufficiently clear about what products are inscope, so product manufacturers should not wait forfurther guidance. They should begin carrying outtheir own analysis to identify which of their retailproducts (offered directly or through intermediaries)will be in scope.

KID contentsPRIIPs adopts the same approach as the KIID forUCITS products. It strictly mandates the layout andcontents of the Key Information Document (KID).Details will be further fleshed-out by Level 2Delegated Acts, including how regularly the KIDneeds to be reviewed and updated.

The KID must not be longer than three pages, andmust include:

standard title and introduction sentence

product name, manufacturer contact details, nameof the local regulator and date

a “comprehension alert” stating that “you areabout to purchase a product that is not simple andmay be difficult to understand” (where applicable)

type of PRIIP, its objective and policy, what typesof investors it is being aimed at and any insurancebenefits included

a summary risk indicator (like the UCITS syntheticrisk and reward indicator) with a narrative

PRIIPs: the new KID on the block

John NewsomeManager020 7804 1168

[email protected]





explanation of the indicator and relevant risks(including the maximum loss possible)

a description of whether a guarantee or investorcompensation scheme applies (e.g. FSCS)

information about direct and indirect costs paid bythe investor, both the one-0ff and recurring costsand a statement that (where applicable)intermediaries’ fees will be disclosed separately bythe adviser

details of any cooling off or cancellation period,how long an investor should stay invested and anyfees and penalties charged for early exit

complaints information

other relevant information (e.g. any additionaldocuments that might be provided pre and post-investment).

The KID is not a marketing document and should notrefer to other products from the manufacturer ordistributor. Any marketing documents must explainthat the KID is available and where it can be found. Itmust be a factual document written in plain language.

Impact on product distributionAlthough product manufacturers need to takeresponsibility for producing the KID, distributors areresponsible for disseminating it to investors.Generally the distributors must provide the KID ingood time before an investment – they can onlyprovide it after investment if the transaction meetscertain requirements (e.g. if the investor contacts thedistributor on their own initiative).

In practice, distributors are likely to need a writtenaudit trail demonstrating how they’ve met this

requirement. Alternatively, they could use tick-boxconfirmations on websites to demonstrate that theinvestor has seen the KID before deciding to invest.

Distributors still have to meet other obligations, suchas requirement to consider whether a particularproduct is suitable for an investor and to disclose anyother costs they charge.

New intervention powers forinsurance productsPRIIPs introduces new product intervention powers,both for EIOPA and local regulators. Both will be ableto temporarily ban or restrict certain insurance-basedproducts from being marketed in the EU where theysee potential for consumer detriment. EIOPA’spowers are similar to the FCA’s current productintervention powers.

EU-wide sanctions regimePRIIPS proposes a number of administrativesanctions, including:

publicly identifying and censuring a firm

suspending or prohibiting marketing a PRIIP

prohibiting the use of a KID that doesn’t meetPRIIPs requirements

temporarily or permanently banning individualsfrom performing similar roles in future

imposing fines of at least €5m (or equivalent localcurrency) for a firm or a maximum of €700,000for an individual.

Member States can opt out of applying any of theadministrative sanctions if criminal sanctions applyfor the same offence.

Final legislative stepsWe expect PRIIPs to be published in the OfficialJournal in June and enter into force by July 2014.That means product providers will to produce needKIDs by July 2016. UCITS managers will also have toprovide retail investors with KID meeting the PRIIPsrequirements, but have a 5 year grace period duringwhich they can continue to use the current KIID.

The EC will review the implementation of PRIIPsregime after four years. It wants the industry toproduce an online fund charge calculator to supportproduct comparison. If the industry doesn’t developone before the 2018 review, the EC might mandate theESAs to do so.

What should firms be doing now?Now the PRIIPs rules are nearly final, firms shouldbegin assessing the impact on their products anddistribution channels. Each product manufacturershould identify all of their in-scope products andbegin considering the KID design for each product.Distributors and product manufacturers need to beginliaising about how the KID will be distributed to retailinvestors. Firms should consider the KIDdevelopment alongside other product distributionchanges arising from MiFID II, RDR and the newplatforms regulation. To ensure effective and efficientimplementation, firms need to take a holisticapproach to distribution changes rather than lookingat individual legislative and regulatory changes inisolation. Starting now may give early adopters astrategic advantage.





In this section:

Regulation 7

Capital and liquidity 7

Controlling large exposures 7

Finalising CCP exposure capital requirements 7

Advising on CRD IV 7

Financial stability 7

Stability risks still persist 7

Pensions 8

Establishing a single personal pensions market 8

Remuneration 8

Continued focus on pay 8

Reporting 8

COREP reporting delayed 8

Securities & derivatives 8

FSB urges G20 to complete margin rules 8

Europe faces €200bn margin bill 9

Unblocking the ABS market 9

Supervising TRs 9

Clarity needed on FX forwards 9

SSM 10

Supervising under SSM 10

Tax 10

UK’s FTT challenge rejected - for now 10

Other regulatory 10

Preparing for Brisbane 10

FSB looks at supervision 11

Harmonising point of sale disclosures 11

Accounting 11

Discussion paper on macro hedging 11

Cross sector announcements





Regulation

Capital and liquidityControlling large exposures

The Basel Committee published itsSupervisory framework for measuringand controlling large exposures (largeexposure regime) on 15 April 2014.

The large exposure regime is designedto protect banks from significant lossescaused by the sudden default of a singlecounterparty or group of connectedcounterparties.

Under new rules, a bank's exposures toa single counterparty cannot exceed25% of Tier 1 capital. This limit alsoapplies to a bank’s exposure toidentified groups of connectedcounterparties. A tighter limit of 15% ofTier 1 capital will apply to exposuresbetween banks that have beendesignated G-SIBs.

This final standard reflects feedback onthe original March 2013 proposals:

increasing the definition and thereporting thresholds to 10% of theeligible capital base (instead of the5% initially proposed)

modifying the treatment of a limitedrange of credit default swaps used ashedges in the trading book to align itmore closely with the risk-basedcapital framework

replacing the granularity thresholdinitially proposed for exposures tosecuritisation vehicles with amateriality threshold related to thecapital base of the bank (calibratedat 0.25% of the capital base).

The new rules will take effect from 1January 2019.

By 2016 the Basel Committee plans toreview the appropriateness of setting alarge exposure limit for exposures toqualifying central counterpartiesrelated to clearing activities, which arecurrently exempted. It also intends toreview the impact of the largeexposures framework on monetarypolicy implementation.

Finalising CCP exposure capitalrequirements

The Basel Committee published itscapital requirements for bankexposures to CCPs on 10 April 2014. Ithas revised the interim framework toreflect conclusions from the jointquantitative impact study and thefeedback received from its June 2013draft consultation.

The final policy includes:

a new approach for determining thecapital requirements for bankexposures to QCCPs

an explicit cap on the capital chargesapplied to bank exposures to QCCPs

detailed treatment for multi-levelclient structures

answers to frequently askedquestions about the revised policyframework.

Firms are required to hold £1 of capitalfor every £1 of exposure to a non-QCCP.

The new capital requirements applyfrom 1 January 2017. Until then theinterim capital requirements remain ineffect.

Advising on CRD IV

EBA published an addendum to its2014 work plan following a series ofcalls for advice from the EC on 16 April2014. The additional work is mostlytechnical advice on topics related toprovisions in the CRR/CRD IV,including:

own funds requirements for coveredbonds

capital requirements on exposuresto transferred credit risk

implementation of the ICAAP andPillar 2 requirements

scope of application and exemptionof Pillar 1 requirements

longer-term refinancing operations

consistency of macro-prudentialrules

prudential filter for fair value gainsand losses

implementing acts on third countryequivalence decisions

appropriateness of the definition ofeligible capital related to the LargeExposures regime

long term financing.

The technical advice will mostly buildon work already being done by the EBA,to inform the EC in preparing reportsand legislatives acts for the EP andCouncil.

Financial stabilityStability risks still persist

The ESAs published the JointCommittee Report on Risks andVulnerabilities in the EU FinancialSystem on 2 April 2014.

The report identifies a number ofpotential vulnerabilities and cross-sectoral risks to the stability of theEuropean financial system, including:

weak and uneven economic recovery

uncertain outlook in a number ofglobal emerging economies

asset price imbalances and risks of asharp adjustment

increased search for yield in aprotracted low interest rateenvironment





conduct of business risks

IT-related operational risks.

Andrea Enria, Chairman of the EBAand current Chairman of the JointCommittee, said that this analysis willhelp focus the scenarios of the stresstests for banks and insurancecompanies which will be conductedlater this year.

PensionsEstablishing a single personal pensionsmarket

In a speech on 14 April 2014, GabrielBernardino reaffirmed EIOPA’scommitment to an EU single market forpersonal pensions:

‘We believe a strong case is made for afuture EU Directive that wouldestablish a single market for personalpensions inter alia through thealignment across the EU of personalpension holder protection measures,capturing also any personal pensionproviders that are not currentlyregulated at EU level.’

Bernadino’s speech followed the EC 27March 2014 publication of a proposalto amend the IORP Directive (IORP II).

RemunerationContinued focus on pay

The EBA launched consultations onupdating two remuneration reportingrequirements on 7 April 2014. In its

consultation on draft guidelines on theremuneration benchmarking exercise,the EBA proposes a more granularcollection of remuneration data fordifferent business areas, control andcorporate functions. Previously thisdata was included in the ‘All other’functions section of the template.

The second consultation on draftguidelines on the data collectionexercise regarding high earnersrequires national regulators to collectremuneration information of thosebank staff earning more than €1m (in€1m increments). The EBA proposescollecting information on:

job responsibilities

the business area

main elements of the salary, bonus,long-term award and pensioncontribution.

The €1m bands and job responsibilityare supplementary to the previousframework. The EBA provides areporting template for firms to use.

Both consultations closed on 7 May2014.

ReportingCOREP reporting delayed

On 16 April 2014, the EBA postponedthe date for banks to submit the first setof supervisory reports under CRD IV tothe end of June 2014, because the EC

adopted the associated ITS later thanexpected. The postponement givesfirms a two month grace period fromthe original date.

It concerns banks' submissions of:

quarterly reports on own funds,large exposures, leverage ratio, andnet stable funding ratio, withreference dates as of 31 March 2014to end June 2014 (as opposed to endMay 2014)

monthly liquidity reports withreference dates as of 31 March 2014and 30 April 2014 to end June 2014(as opposed to April 2014).

The EBA also delayed theimplementation of the draft ITS onreporting asset encumbrance. The firstreporting reference date for assetencumbrance will be 31 December2014, and the first remittance date willbe 11 February 2015. Furtherinformation on new timetable forCOREP submissions can be found here.

Securities & derivativesFSB urges G20 to complete marginrules

The FSB published its OTC DerivativesMarket Reforms: Seventh ProgressReport on Implementation on 8 April2014.

The FSB finds that key internationalpolicy standards are complete in most

commitment areas but detailedimplementation requirements andeffective dates vary considerablybetween jurisdictions:

Trade reporting - the FSB expectsthat only three jurisdictions will nothave rules in place by end of 2014.

Capital - 15 FSB members haveimplemented Basel III standards.Remaining standards on thetreatment of banks’ exposures toCCPs are nearly complete.

Central clearing - only sixjurisdictions are expected to havecentral clearing rules in effect byend of 2014.

Non-centrally cleared marginrequirements - a limited number ofjurisdictions have starteddeveloping rules to implement theBasel Committee/IOSCO MarginStandards for Non-centrallyDerivatives.

Organised platform trading - onlythree jurisdictions have rules inforce.

The FSB believes that overlapping,duplicative, inconsistent, conflictinginternational requirements areundermining implementation and theefficiency of the reforms. The FSBsupports the work of the OTCDerivative Regulators Group to





continue to coordinate and resolveextra-territorial issues.

The FSB urges all jurisdictions tocomplete remaining implementationrules by the November 2014 G20Leaders Summit.

Europe faces €200bn margin bill

The JCESA launched a consultation ondraft RTS for risk-mitigationtechniques for OTC-derivativecontracts not cleared by a CCP underEMIR on 14 April 2014.

The consultation covers:

calculation of initial and variationmargin

collateral eligible for exchange ofmargin, including measures toensure diversification and haircutsto take account of market and FXrisk

operational and risk managementprocedures around calculation,exchange, documentation, etc. ofmargins

specific treatment for certainproducts, such as physically settledFX swaps

procedures for intragroup derivatecontracts

phased introduction of initialmargin requirements (allcounterparties with exposures over

€8bn will only be subject to therequirements from 1 December2019).

The JCESA proposals have beenadjusted to also adhere closely tointernational standards issued by theBasel Committee and IOSCO inSeptember 2013, while remainingconsistent with CRR.

The consultation closes 14 July 2014.After considering the consultationfeedback the ESAs plan to submit theirfinal proposals to the EC before the endof 2014.

Unblocking the ABS market

The ECB and the BoE published a jointpaper on The impaired EUsecuritisation market: causes,roadblocks and how to deal with themon 11 April 2014. They outline:

the aims and benefits ofsecuritisation

the current situation in Europe

some policy solutions for advancingthe securitisation market.

The y are very supportive ofsecuritisation, arguing that it canprovide a source of funding for SMEsand provide capital relief to banks bytransferring risk to non-bankinstitutions.

The ECB and BoE note that publicissuances of ABS remain very low in the

EU. Most of them originate in a limitednumber of countries such as Germany,Netherlands and the UK. Securitisationhas been stigmatised as a consequenceof misaligned incentives in the yearsprior to the crisis. Among the problemscurrently associated with securitisationare:

regulatory treatment, such as highcapital charges

a reliance on CRAs, particularlyissues such as sovereign ratingsimpacting ABS downgrades

lack of transparency andharmonisation.

The ECB and BoE believe that theBCBS’ and IOSCO’s plans to reviewdevelopments in securitisation marketsand to promote the concept of ‘high-quality securitisation’ will helprevitalise the securitisation market.They also argue that authorities shouldcontinue to improve the availability ofdata, to facilitate investment in all ABSacross a broader base of investors.

Supervising TRs

ESMA published its Trade RepositorySupervision Work Plan 2014 on 1 April2014. TRs play an important role inenhancing the transparency ofderivative markets and reducing risksto financial stability. From 12 February2014, CCPs are required report their

derivative trades to registered TRs inline with EMIR.

ESMA is responsible for supervisingand authorising TRs and has registeredsix firms so far to collect and maintainthe records of derivative trades. ESMAis currently in the process of developinga risk-based approach to supervisionfor TRs which should be completedlater this year. It believes that the bulkof its supervisor duties will be desk-based in 2014, including:

monitoring and assessing periodicinformation received from TRs

monitoring and assessing TR’snotifications of material changes totheir conditions for registration

analysing external informationreceived from authorities orcomplainants.

However, ESMA will also use its on-siteinspections and investigations powers ifit identifies specific problems thatrequire intervention.

Clarity needed on FX forwards

The EC published a Consultationdocument on FX forward transactionson 11 April 2014. ESMA and the ECrecently exchanged letters aboutMember State regulators takingdifferent interpretations of the MiFIDdefinition of financial instruments.These differences have given rise todifferent views on the scope of EMIR





because some Member States, includingthe UK, consider FX forwards enteredinto for commercial purposes to beoutside the scope of MiFID.

The EC has previously expressed theview that the commercial purposeexemption is intended to apply only tocommodity derivatives but it is seekingmore information about the use of FXforwards in this consultation. Theconsultation closed on 9 May.

SSMSupervising under SSM

The ECB published its Regulationestablishing the framework forcooperation within the SingleSupervisory Mechanism between theEuropean Central Bank and nationalcompetent authorities and withnational designated authorities on 25April 2014.

The Regulation details the institutionalframework underpinning decisions onauthorisation, assessment ofacquisitions and disposals of qualifyingholdings when the ECB takes charge ofprudential supervision of Eurozonebanks from 4 November 2014. It alsosets out day-to-day supervisory tasks inthe framework covering theestablishment and workings of jointsupervisory teams. The frameworkaddresses direct supervision and co-operation procedures between the ECBand national supervisors on issues such

as macro-prudential tasks and tools,supervisory reporting, supervisorydecisions and sanctioning powers.

In a related press release, the ECBindicates that it will announce names ofsignificant banks which will be subjectto direct supervision by in September2014.

TaxUK’s FTT challenge rejected - for now

The ECJ rejected the UK’s challengeagainst the proposed FTT on technicalgrounds on 30 April 2014. The UKobjects to the proposed scope of theFTT (which eleven Member States arecurrently developing using EUEnhanced Cooperation Procedure) onthe grounds that it allowed thoseMember States to tax UK firms andactivities taking place in the UK.

Because the FTT is not yet finalised theECJ found that it was premature for theUK to challenge the scope. The ECJ didnot rule out the possibility of the UKmaking a further challenge, once theFTT has been finalised. The currentruling does not prejudice the outcomeof any future ruling.

Other regulatoryPreparing for Brisbane

On 4 April 2014 the FSB chairman senta letter to G20 Finance Ministers andCentral Bank Governors on their plans

for the November 2014 G20 summit inBrisbane.

The FSB intends to publish aconsultation on ‘gone-concern loss-absorbing capacity’ (GLAC), an exercisewhich assesses the capacity of G-SIFIsto absorb losses when they fail. TheFSB will be seeking agreement at theBrisbane Summit on three issues:

the criteria that liabilities shouldmeet to be considered as GLAC

the appropriate amount of GLACbanks should hold

where this should be held in thebanks’ group structure.

The new framework will be applied tothe list of 29 G-SIFIs after theconsultation is completed and a‘comprehensive’ impact assessment isfinalised. For the insurance industry,the IAIS will use the Brisbane Summitto finalise the basic capital requirementon which high loss absorbency for G-SIIs will be built.

On cross-border resolution, the FSB isworking with the financial industry toestablish a contractual approach totemporary stays ahead of the Brisbanesummit. It is going to call on NationalFinance Ministers to ‘empower’ theirresolution authorities to ‘co-operatefully’ with their counterparts in othercountries, partly by recognising foreignresolution actions and ensuring that

debt issued under foreign law includescontractual recognition provisions sothat bail-in is effective in a cross-bordercontext.

Reiterating the importance of co-operation, the FSB plans to startinformation sharing on shadowbanking with authorities in May and toreport initial findings in Brisbane. Itintends to finalise the framework forhaircuts and haircut floors in repo andsecurities financing transactions beforethe summit. The FSB will launch a peerreview on national implementation ofits Policy Framework forStrengthening Oversight andRegulation of Shadow BankingEntities (August 2013) after thesummit.

The OTC Derivatives Regulators Group(ODRG) will report in September andNovember on how it will approachproblems on the cross-borderimplementation of reforms. The FSBplans to publish a report in Septemberon the ‘established processes’ in eachcountry to enable deferral to the OTCderivative rules of others where theseachieve similar outcomes. Finally, theFSB intends to publish a report onapproaches to aggregating and sharingderivatives data amongst authorities.

The FSB surveyed its members andfound little appetite to change itsmembership structure to a consistency-





based membership structure. Membersfeared this type of structure wouldmake discussions more ‘rigid’. Thesurvey found little support forconsidering the exit of any membercountry or making room for new typesof institutions.

FSB looks at supervision

On 7 April 2014 the FSB publishedFinal Guidance on SupervisoryInteraction with Financial Institutionson Risk Culture: A Framework forAssessing Risk Culture to help nationalsupervisors strengthen riskmanagement practices in financialinstitutions. The guidance should assistboth financial institutions and theirsupervisors in understanding whetherfirms’ risk cultures support appropriatebehaviours and judgments.

The FSB also published SupervisoryIntensity and Effectiveness: Progressreport on enhanced supervision on 7April 2014. This report describes thechanges in supervisory practices sincethe financial crisis and identifies areasthat require further work. For example,the FSB wants supervisors to continueto stress the importance ofstrengthening risk management andmeasurement to financial institutionseven in the current environment ofregulatory reform. It also wantssupervisors to develop methods tojudge supervisory effectiveness in the

light of the changes implementedwithin supervision so far.

Both papers form part of the FSB'sinitiative to increase the intensity andeffectiveness of supervision. The FSBaims to support well-informed andforward-looking risk decisions byinstitutions.

Harmonising point of sale disclosures

The Joint Forum (BCBS, IAIS andIOSCO) published a final report onpoint of sale disclosure in theinsurance, banking and securitiessectors on 30 April 2014. The JointForum identified differences in point ofsale disclosure requirements acrossdifferent sectors and jurisdictions.

In light of its findings, the Joint Forumissued eight recommendations,including that firms should:

provide customers with point of saleinformation free of charge beforethe time of purchase

include the same type ofinformation to facilitate thecomparison of products.

Recognising the diverse nature ofpractices observed, the Joint Forum isaiming for the recommendations aim toapply in a wide range of sectors andjurisdictions.

Accounting

Discussion paper on macro hedging

On 17 April 2014 the IASB published adiscussion paper exploring anapproach to better reflect entities’dynamic risk management activities intheir financial statements (known asmacro hedging). The paper is relevantfor all entities that use dynamic riskmanagement strategies for openportfolios. The outcome of this projectwill replace the current fair value hedgeaccounting of interest rate risk in IAS39.

The discussion paper closes forcomments on 17 October 2014. Seeour Straight away publication for moredetails.





In this section:

Regulation 13

Capital and liquidity 13

New Basel FAQs on LCR 13

Mortgage risk-weighting confirmed 13

Other regulatory 13

Regulating Bitcoin 13

Competing on card payments 13

Stress testing 13

Banks get stressed 13

Banking & Capital Markets

Mark James

+44 (0) 1534 [email protected]

Nick Vermeulen


James de Veulle


Banking and capital markets





Regulation

Capital and liquidityNew Basel FAQs on LCR

On 16 April 2014, the Basel Committeeissued frequently asked questions(FAQs) on Basel III's liquidity coverageratio (LCR), elaborating on the textpublished in January 2013. To promoteconsistent global implementation ofthose requirements, the Committee hasagreed to periodically review FAQs andpublish answers along with technicaldetails on the rules and interpretativeguidance.

Mortgage risk-weighting confirmed

On 4 April 2014, the EBA confirmedhow lenders should assign apreferential risk weight to the part of aloan that is secured by a mortgage.Under CRR, lenders should assign a35% risk weight to the net exposure(net of credit risk adjustments andcollateral). But if a default hasoccurred, the 35% risk weight no longerapplies, and the lender should apply a100% risk weight to the net exposure.

Other regulatoryRegulating Bitcoin

EU authorities are considering how torespond to virtual crypto-currencies,such as Bitcoin. In a response to aparliamentary question on 7 April2014, Commissioner Barnier indicated

that the EBA is leading a dedicatedtaskforce on the matter supported byrepresentatives from ESMA, EC andECB. The taskforce will investigate howsuch currencies should be defined andassess whether regulation is required.

So far, authorities have remained waryof virtual currencies. Some havebanned them (e.g. China and Brazil),some have declared them propertyrather than currencies, and many areconsidering the appropriate taxtreatment for persons trading thesecurrencies.

In December 2013, the EBA issued awarning on a series of risks derivingfrom buying, holding or trading virtualcurrencies such as Bitcoin, which wasfollowed by similar announcements bymany EU central banks and financialsupervisors.

Competing on card payments

The ECB released a report on cardpayments in Europe on 29 April 2014,providing an overview of the status ofcard payments in the EU. It also lookedat the rationale behind the new SEPAregime, which is to create aharmonised, integrated andcompetitive EU card payments area.

Separating card schemes and cardpayment processing entities is a coreelement in increasing competition andefficiency in card payments. The ECBalso believes business practices and

rules need to change andinteroperability has to improve toincrease competition.

Stress testingBanks get stressed

The EBA published the methodologyand the macroeconomic scenarios forits 2014 EU-wide stress test on 29 April2014. The macroeconomic scenariosinclude the baseline, adverse, marketrisk and securitisation scenarios.

The common methodology covers awide range of risks including:

credit and market risks

exposures towards securitisation

sovereign and funding risks.

The adverse scenario, designed by theESRB, reflects the systemic risks thatare viewed as the most “pertinentthreats” to financial stability, such as anincrease in bond yields, deterioration incredit quality and a lack of progress inbalance sheet repairs. The negativeimpact of the shocks is substantiallyglobal in scope.

The test, which will be conducted thissummer, is designed to assess banks'resilience to hypothetical externalshocks, and will identify remainingvulnerabilities in the EU bankingsector. It will be conducted on a sampleof 124 EU banks which cover at least50% of each national banking sector,

and will be run at the highest level ofconsolidation.

Directly following the EBA’sannouncement, the BoE published,Stress testing the UK banking system:key elements of the 2014 stress test on29 April 2014. While the BoE’sdiscussion paper in October, Aframework for stress testing the UKbanking system indicated that it mightuse its own methodology, the UK stressexercise will now be “built” on the EU-wide stress test. The BoE plans to add anumber of additional UK layers to theEBA stress test (UK variant) whichexplore particular vulnerabilities facingthe UK banking system. For example,banks will be tested against a numberof shocks including a 35% fall inresidential property prices and a 30%slump in commercial property prices,after a sharp rise in interest rates. Itwill also increase the scope of theexercise beyond the four banks whichare caught under the EBA’s exercise toinclude eight of the largest UK banksand building societies.





In this section:

Regulation 15

Too big to fail 15

Asset managers - too big to do nothing 15

Asset Management

John Luff


Chris Stuart


Mary Bruen


Asset management





Regulation

Too big to failAsset managers - too big to do nothing

Andrew Haldane, Executive Director atthe BoE spoke about the age of assetmanagement on 4 April 2014,emphasising the importance of assetmanagers to the current and futureeconomy. We recently predicted assetmanagers will have assets undermanagement (AUM) of $100 trillion by2020. Haldane suggests this figure willincrease to $400 trillion by 2050.

Haldane considers whether or not assetmanagers are too big to fail. He admitsthat the failure of asset managers is nota concern, stating that whilst they arenot “insolvency-immune” (due toreputational and organisational risks)they are “insolvency-remote”. But heconcludes that they are perhaps “toobig”, noting that Blackrock, the biggestasset manager, is a third larger than theICBC, the largest bank.

Like banks, asset managers canexperience a “run” if investor sentimentturns against them or they are focusedon a particular asset class. Largeredemptions or sales from a fund couldcause market instability through the

sale of assets in quick succession.Haldane admits that history does notshow failing funds wreaking havoc inmarkets – but he also noted that pastperformance is no indicator of thefuture.

So Haldane considers three regulatorytools that could be used to tackle assetmanagers being too big:

tools focused on the liquidity riskposed by asset managers, such asimposing minimum liquid assetrequirements or redemptionrestrictions

widening macro-prudential policy tocapture the impact asset managershave on market swings by actingtogether to invest/divest in aparticular asset class

introducing a new high-qualitysecuritisation product whichreceives preferential regulatorytreatment to increase asset managerincentives to invest in long-termfinancing and decreasingcompanies’ reliance on banks forthis investment.

Some of these measures may beintroduced through the FSB/IOSCOwork on non-bank non-insurer G-SIFIs.Haldane also outlined current

international efforts to bring about thenew securitisation product, which theBoE supports. We’ll be watching to seehow regulators balance the competinggoals of incentivising asset managers toprovide banking-like financing andmore closely regulating shadowbanking activities.





In this section:

Regulation 17

Solvency II 17

Stress testing insurers 17

Getting more Solvency II detail 17

Solvency II webcast 17

Other regulatory 18

Operating colleges of supervisors 18

Highlighting future EU developments 18

Accounting 18

IFRS 18

Reviewing the Insurance Contracts project 18

IASB March meeting 18

…and its April meeting 18

IASB insurance contracts paper 19

IFRS News 19

Insurance

Evelyn Brady


Adrian Peacegood


Insurance





Regulation

Solvency IIStress testing insurers

On 30 April 2014, EIOPA published thedetailed technical specifications forSolvency II interim reporting during2014 and 2015, offering crucial insightinto the likely final Solvency IIrequirements. Significantly, thetechnical specifications includefundamentally new requirementsaround the long-term guaranteepackage. Whilst the technicalspecifications have increased clarity insome areas, a significant number ofsignificant questions remainunanswered. Addressing thesequestions is vital when assessing theimpact of the long-term guaranteepackage, and firms will have to developtheir own "house view" around the keyareas of subjectivity.

Alongside these technical specificationsEIOPA also formally launched a stresstesting exercise to be conducted in Q2and Q3 2014, with results expected inNovember 2014. This exercise willinvolve participants from life andgeneral insurance, and the PRA is likelyto ask many of the largest and mediumsized insurance groups to take part.

EIOPA's announcement of their nextstress testing exercise is anotherimportant milestone in the journeytowards Solvency II implementation.The technical specifications it releasedwill form the basis for the forthcomingstress-testing exercise, and for SolvencyII interim reporting during 2014 and2015. This announcement had beeneagerly anticipated by the insuranceindustry, which had hoped that claritywould emerge on key remaining areasof uncertainty, most notably aroundhow insurers should interpret andapply the long-term guarantee package.

The technical specifications have notchanged significantly from those usedfor the long-term guarantee assessmentin January 2013. This is good news formany insurers which will not need tosignificantly re-build existing models oralter existing methodologies. But it alsomeans that individual firms will have todevelop and apply their own ‘houseview’ on remaining key areas ofuncertainty, such as the admissibility ofcallable bonds and mortgage assets forthe matching adjustment.

This stress testing exercise is the firstone EIOPA has conducted since 2011.Market risk remains a key area of focus.Firms will be particularly interested inthe addition of a sovereign spread

stress, because to date many firms havetreated sovereign debt as equivalent torisk-free instruments with theirinternal models. Now that EIOPA hasfinalised the long-term guaranteepackage, these stress tests will be moreinsightful for firms as well asregulators.

See our Hot Topic publication fordetails.

Getting more Solvency II detail

EIOPA published a Public consultationon Set 1 of the Solvency II ITS on 1April 2014. Under powers granted bythe Omnibus II Directive, EIOPA canissue ITS to assist firms and supervisorsin preparations for the Solvency IIapproval processes planned to start on1 April 2015. This consultation covers:

approval process for matchingadjustment

approval process for internal models

joint decision process for groupinternal models

approval process for undertaking-specific parameters

approval process for the use ofancillary own-fund items

special purpose vehicles.

The consultation closes on 30 June2014.

Solvency II webcast

According to our recent poll, 68% ofinsurers are still less than half waythrough their Pillar 3 reporting journey.They see technology, data sources andreporting time frames as their top threechallenges for the coming year.

Join our Solvency II webcast onMonday 19 May 2014 to find out more.Our expert panel will share their viewson these key issues and how they willimpact your ability to report underPillar 3 in 2015. Drawing upon ourdiscussions at our last breakfastbriefing we will explore:

the key Pillar 3 and Balance Sheetpriorities when preparing forSolvency II reporting

the main considerations whenchoosing the right technologysolution

how Pillar 3 could change the way inwhich your firm is viewed by themarket.

Where to go for more information

Read more about Solvency II UK on ourwebpages atwww.pwc.co.uk/solvencyII





Other regulatoryOperating colleges of supervisors

EIOPA published CP-14/010 ‘CP on theGuidelines on the operationalfunctioning of colleges of supervisors’on 2 April 2014 (dated 14 March 2014).The Guidelines aim to clarify andimprove cooperation among competentauthorities supervising cross-borderinsurance or reinsurance groups and toaid the running of supervisory colleges.

They address issues such ascooperation between competentsupervisory authorities for cross-bordergroups, information-sharing amongsupervisors and communication to(re)insurance groups.

The consultation closes on 30 June2014.

Highlighting future EU developments

EIOPA’s Gabriel Bernardino set out hisvision of how a true European singlemarket in financial services will becomea reality in his speech ‘The road to atrue single market in financialservices’, at the AILO 2014 conference.He considered the obstacles to unityand how to address them.

Eurofi published a newsletter fromtheir 2014 high level seminar in Athenscovering European financial services

regulatory issues includingimplementing Solvency II and definingglobal insurance regulations. Itincludes a number of insurance articlesfrom EIOPA’s Gabriel Bernardino(Infrastructure projects – improveddata is needed to support thereassessment of risk and Global capitalstandards will reinforce theinternational level playing field) andEIOPA’s Carlos Montalvo (The Re-calibration dilemma).

Accounting

IFRSReviewing the Insurance Contractsproject

On 7 April 2014, the IASB published aProject Overview for the insurancecontracts project, including tentativedecisions from the latest IASB meetingin March 2014. The presentation setsout steps the IASB took in 2013 andwhat we should expect over the comingmonths.

IASB March meeting

At their March education session andmeeting (published in April 2014) theIASB discussed two of the five key areasfor re-exposure: unlocking thecontractual service margin (CSM) and

recognising changes in discount rates inother comprehensive income (OCI).

The IASB confirmed the proposals inthe revised ED to unlock the CSM forchanges in cash flows related to futurecoverage and other services. Revisingthe ED, the IASB decided thatfavourable changes in estimates thatrelate to future coverage or otherservices and arise after losses have beenrecognised in profit or loss should berecognised immediately in profit or lossto the extent that they reverse thoseprior losses. It agreed to anotherrevision to the ED whereby the CSMwould be unlocked for changes in therisk adjustment related to futurecoverage and other services.

The IASB also revised its view onrecognising changes in cash flows dueto changes in discount rates. While theED mandated OCI treatment, the Boardtentatively voted to allow an optionbetween OCI and profit or loss. But theBoard raised questions about theappropriate unit of account for theoption and whether the portfolio levelsuggested by the staff was at toogranular a level. The chairman directedthe staff to work on the wording toensure that there would be disciplinearound the option and sufficient

restrictions around changes in theoption.

…and its April meeting

At their April 2014 education sessionand meeting the IASB discussed theproposal for insurance contract revenueand a list of topics that will be discussedat future meetings. The Boardconfirmed the proposal in the revisedED to require the presentation ofinsurance contract revenue for allinsurance contracts in accordance witha prescribed calculation. Investmentcomponents are excluded from revenuebecause these amounts will have to berepaid to the policyholder.

The Board also tentatively decided toprohibit the presentation of premiuminformation in the statement ofcomprehensive income, because it isnot consistent with commonlyunderstood notions of revenue. Thisdecision implies that entities will not beable to start the statement ofcomprehensive income with premiumswritten or due and then reconcile thatnumber to revenue as proposed in therevised ED.

The IASB agreed the list of topics(outside the five key areas for re-exposure) to be re-debated at futuremeetings:





fixed fee service contracts

significant insurance risk guidance

the portfolio definition and unit ofaccount

the discount rate for long termcontracts and unobservable marketdata

asymmetrical treatment ofreinsurance contracts

the recognition of contracts acquiredthrough portfolio transfer orbusiness combination

the allocation pattern for thecontractual service margin (CSM).

The Board doesn’t plan to reopendiscussions on other topics voluntarilycommented on by respondents to therevised ED (e.g. other aspects of thedetermination of the discount rate andthe confidence level disclosurerequirement).

IASB insurance contracts paper

The IASB published a staff paper ‘Effectof redeliberations on the ED insurancecontracts’ on 16 April 2014, discussingwhere and how the proposals in the EDon insurance contracts would change asa result of the IASB’s tentativedecisions to date. So far, only three of

the five points in the exposure drafthave been re-deliberated:

adjusting the unearned profit frominsurance contracts.

presentation of insurance contractrevenue and expenses.

presentation of interest expensebetween profit or loss and the othercomprehensive income.

IFRS News

The April 2014 edition of IFRS newsconsiders:

Leases: A nail in the coffin forconvergence

Have you lost control? IFRS 10practise issues

OCI - here to stay? Feedback fromthe Conceptual FrameworkDiscussion Paper

Cannon Street Press (including EUbacks IFRS foundation, jointagreement implementation issuesand equity method in separatefinancial statements).





Open consultations

Closing datefor responses

Paper Institution

30/05/14 ESMA consults on major shareholders disclosures ESMA

07/06/14 Consultation on draft technical standards on data waiver EBA

10/06/14 IOSCO Report compares, analyses prudential standards in the securities sector IOSCO

12/06/14 EBA, ESMA and EIOPA consult on supervisory practices for financial conglomerates JointCommittee ofthe ESAs

30/06/14 EIOPA consults on Set 1 of its Implementing Technical Standards for Solvency II EIOPA

30/06/14 EIOPA consults on operational functioning of colleges of supervisors EIOPA

14/07/14 Draft RTS on risk mitigation techniques for OTC Derivatives contracts not cleared by a CCP under Article 11(15) of EMIR JointCommittee ofESAs

Forthcoming publications in 2014

Date Topic Type Institution

Consumer protection

Q2 2014 An EU framework for collective redress Legislative proposals EC

Monthly calendar






Q2 2014 Investor Guarantee schemes – revision Legislative proposals EC

Financial crime, security and market abuse

Q4 2014 Market Abuse Review Technical advice ESMA

Insurance

Q2 2014 Technical standards for Omnibus II Technical standards ESMA

TBD 2014 Institutions for Occupational Retirement Provision Legislative proposals EC

TBD 2014 Advice or technical standards for IMD2 Technical advice or technical standards EIOPA

Securities and markets

Q2 2014 OTC Derivatives, CCP Requirements, Trade Repositories andCCP Interoperability (EMIR)

Guidelines ESMA

Q2 2014 Guidelines on the enforcement of EMIR provisions on OTCderivatives

Guidelines ESMA

Q2 2014 Joint technical standards on Article 11 of EMIR (exchange ofcollateral)

Technical standards ESAs

Q2 2014 Bilateral margins Technical standards ESMA

Q4 2014 Harmonised transaction reporting Guidelines ESMA

Q4 2014 Exchange-traded derivatives reporting Guidelines ESMA

Q4 2014 Technical standards following the revision of MiFID (MiFID IIand MiFIR)

Technical standards ESMA

Q4 2014 Transparency Directive and Prospectus regime Technical standards ESMA

Q4 2014 Credit Rating Agencies Regulation Guidelines ESMA

TBD 2014 Securities Law Directive Legislative proposals EC






TBD 2014 Revision of the Transparency Directive Discussion papers ESMA

TBD 2014 Close-out netting Legislative proposals EC

Products and investments

Q4 2014 European Social Entrepreneurship Funds Technical advice ESMA

Q4 2014 European Venture Capital Funds Technical advice ESMA

Q4 2014 Packaged Retail Investment Products Technical standards ESMA/EIOPA

Q4 2014 Undertakings For The Collective Investment of TransferableSecurities V

Technical advice ESMA

Q4 2014 Money market funds Technical standards ESMA

TBD 2014 Development of high level principles for the product approvalprocess

Principles ESAs

TBD 2014 A framework for the activities and supervision of personalpension schemes

Advice EIOPA

Recovery and resolution

Q2 2014 Rescue and restructuring of financial institutions in Europe Guidelines EC

TBD 2014 EU framework for recovery and resolution plans Technical advice EBA

Solvency II

TBD 2014 Solvency II – draft Level 2 delegated acts Level 2 text EC

TBD 2014 Solvency II Level 3 measures Level 3 text EIOPA

Supervision, governance and reporting

Q2 2014 Corporate reporting Guidelines/recommendations ESMA






Q2 2014 EU corporate governance and company law Action plan EC

Q2 2014 The equivalence of CRA rules in a number of third countries Technical advice ESMA

Q2 2014 Framework on the establishment of the common supervisoryculture on financial information

Guidelines ESMA

Q4 2014 Alternative performance measures Guidelines ESMA

Q4 2014 Electronic reporting format and access to regulated information Regulatory technical standards ESMA

Main sources: ESMA 2014 work programme; EIOPA 2014 work programme; EBA 2014 work programme; EC 2014 work programme.





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

BaselCommittee

Basel Committee of Banking Supervision (of the BIS)

Basel II Basel II: International Convergence of Capital Measurementand Capital Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

BBA British Bankers’ Association

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 ofEBA)

CEIOPS Committee of European Insurance and OccupationalPensions Supervisors (predecessor of EIOPA)

CET1 Core 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 arethe ‘co-legislators’)

CFT Counter Financing of Terrorism

CFTC Commodities Futures Trading Commission (US)

Glossary





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

CIS Collective Investment Schemes

CMA Competition and Markets Authority

Council Generic term representing all ten configurations of theCouncil of the European Union

CRAs Credit Rating Agencies

CRD ‘Capital Requirements Directive’: collectively refers toDirective 2006/48/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 forcredit institutions and investment firms

CTF Counter Terrorist Financing

DFBIS Department for Business, Innovation and Skills

DG MARKT Internal Market and Services Directorate General of theEuropean Commission

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer ProtectionAct (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 andfiscal and competition 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 andTrade Repositories (EC) No 648/2012

EP European Parliament

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

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

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(expected 2013)

FMI Financial Market Infrastructure

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

FS Reform Bill2012

Financial Services (Bank Reform) Bill 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 Insurers

HMRC Her Majesty’s Revenue & Customs

HMT Her Majesty’s Treasury

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICAAP Internal Capital Adequacy Assessment Process

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

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

LTGA Long-Term Guarantee Assessment

MAD Market Abuse Directive 2003/6/EC

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

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

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

MTF Multilateral Trading Facility

MoJ Ministry of Justice

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 clearingthreshold

NSFR Net stable funding ratio





OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union

OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflectLisbon Treaty and new supervisory infrastructure(COM(2011) 0008 final) – amends the Prospectus Directive(Directive 2003/71/EC) and Solvency II (Directive2009/138/EC)

ORSA Own Risk Solvency Assessment

OTC Over-The-Counter

PCBS Parliamentary Commission on Banking Standards

PRA Prudential Regulation Authority

PPI Payment Protection Insurance

Presidency Member State which takes the leadership for negotiations inthe Council: rotates on 6 monthly basis

PRIIPsRegulation

Proposal for a Regulation on key information documents forinvestment and insurance-based products COM(2012) 352/3

RAO Financial Services and Markets Act 2000 (RegulatedActivities Order) 2001

RDR Retail Distribution Review

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

SII Solvency II Directive 2009/138/EC

SIPP Self-invested personal pension scheme

SOCA Serious Organised Crime Agency

SREP Supervisory Review and Evaluation Process

SSM Single Supervisory Mechanism

SSR Short Selling Regulation EU 236/2012

T2S TARGET2-Securities

TR Trade Repository

TSC Treasury Select Committee

UCITS Undertakings for Collective Investments in TransferableSecurities

XBRL eXtensible Business Reporting Language




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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation orwarranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, neither PricewaterhouseCoopers LLP nor PricewaterhouseCoopers Legal LLP, nor their members,employees and agents accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is a member firm of PricewaterhouseCoopers International Limited, each memberfirm of which is a separate legal entity. "PwC Legal" refers to PricewaterhouseCoopers Legal LLP (the limited liability partnership registered in the United Kingdom), which is a member firm of PricewaterhouseCoopers International Limited.

140428-100555-JN-OS

Laura Cox020 7212 [email protected]@LauraCoxPwC

Asset Management Banking & Capital Markets Insurance Local regulations & AML

John Luff


Mark James


Evelyn Brady


Nick Vermeulen


Chris Stuart


Nick Vermeulen


Adrian Peacegood


Chris Stuart


Mary Bruen


James de Veulle


Neil Howlett


Chris van den Berg


Contacts

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