The SEC Proposes Joint Data Standards Under the Financial Data Transparency Act of 2022 / SEC
On August 2nd, 2024, the U.S. Securities and Exchange Commission (SEC), proposed joint data standards under the Financial Data Transparency Act of 2022 that would establish technical standards for data submitted to certain financial regulatory agencies. Eight additional agencies have proposed or are expected to propose the joint standards: the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Financial Protection Bureau, the Department of the Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency.
The proposed joint standards would promote interoperability of financial regulatory data across the agencies by establishing common identifiers for entities, geographic locations, dates, and certain products and currencies. The proposal would establish a principles-based joint standard with respect to data transmission and schema and taxonomy formats, which would enable financial institutions to submit high-quality, machine-readable data to the agencies.
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The FCA progresses framework to drive long-term value for workplace pension savers / FCA
On August 8th, 2024, the Financial Conduct Authority (FCA), which regulats financial services firms and financial markets in the UK, issued joint framework that would be used by pension providers and those making decisions on behalf of savers to provide greater transparency over how schemes are performing.
Schemes will be compared on public metrics that demonstrate value – not just costs and charges, but also investment performance and service quality. They would, once the final framework is decided, be publicly rated red, amber or green. Poorly performing schemes will be required to improve or ultimately protect savers by transferring them to better schemes. This should lead to better value pensions, without savers themselves having to take action.
The proposals will also support the FCA’s secondary growth and competitiveness objective. Focusing on value rather than costs will enable providers to invest in assets which could deliver greater long-term returns but have higher management costs, such as infrastructure or venture capital.
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The EBA publishes final draft technical standards on market risk as part of its roadmap for the implementation of the Banking Package in the EU / EBA
On August 13th, 2024, The European Banking Authority (EBA) published final amendments to its Regulatory Technical Standards (RTS) on the fundamental review of the trading book (FRTB). The revisions mostly aim to align these RTS with the Capital Requirements Regulation (CRR3) and ensure stability in the applicable regulatory framework. The RTS are part of the roadmap on the Banking Package.
The CRR3 introduced a number of changes to the FRTB and included mandates for the EBA to amend existing RTS for them to fit with the new Level 1 text. In particular, the EBA has been mandated to review the RTS on the treatment of foreign-exchange and commodity risk in the banking book, the RTS on profit and loss attribution test and the RTS on risk factor modellability assessment.
As regards the details on the profit and loss attribution test, the RTS remove the aggregation formula for computing the total own funds requirements for market risk for an institution using the alternative internal model approach as this formula has been now introduced in the CRR3. As regards the risk factors’ modellability assessment, the RTS ensure that institutions are able to identify how far they rely on a third-party vendor for the purpose of assessing the modellability of a risk factor. As regards the treatment of foreign exchange and commodity risk in the non-trading book, the RTS ensure that translation risk is duly captured by institutions.
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The EBA and ECB release a joint report on payment fraud / EBA, ECB
On August 1st, 2024, The European Banking Authority (EBA) and the European Central Bank (ECB) published a joint Report on payment fraud data. The report assesses payment fraud reported by the industry across the European Economic Areas (EEA), which amounted to €4.3bn in 2022 and €2.0bn in the first half of 2023. The Report confirms the beneficial impact of strong customer authentication (SCA) on fraud levels.
The Report examines the total number of payment transactions and the subset of fraudulent transactions in terms of value and volume. In addition to the aggregated values, the Report also presents data based on volumes and also sorted by type of payment instruments, i.e. credit transfers, direct debits, card payments, cash withdrawals, and e-money transactions.
SCA-authenticated transactions featured lower fraud rates than non-SCA transactions, especially for card payments, both in terms of values and volumes. Furthermore, fraud shares for card payments, both in terms of values and volumes, were 10 times higher when the counterpart is located outside the EEA, where the application of SCA is not legally required and may therefore not have been requested. Hence, the report confirms the beneficial impact of the SCA requirements that were introduced by the The Payment Service Directive 2 and the supporting technical standards that the EBA had issued in 2018 in close cooperation with the ECB.
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The PSR sets out next steps on expanding variable recurring payments in the UK / PSR
On August 15th, 2024, the Payment Systems Regulator (PSR) has published a response to its December call for views. This call for views set out initial proposals on how the PSR could support the Phase 1 expansion of Variable Recurring Payments (VRPs) to regulated financial services, regulated utilities sectors, and local and central government.
Enabled through open banking, VRPs allow customers to safely set up recurring payments of varying amounts (for household bills for example) with greater visibility and control compared to existing payment methods.
PSR publication summarises stakeholder feedback on key areas around VRP expansion, including: coordinating expansion through a multilateral agreement, the supporting in mandated participation for VRPs with realisation of the need for a broader focus beyond the CMA9, and pricing principles and possible price intervention.
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