Banking Regulation: The Week of April 23, 2018 in Focus

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*Olakunle Komolafe

This review highlights regulatory interventions by supervisory authorities from around the world.

1. UNITED STATES:

i) The Bureau of Consumer Financial Protection – ‘Know Before You Owe’ Mortgage Disclosure Rule

The Bureau of Consumer Financial Protection finalized amendment to its “Know Before You Owe” Mortgage Disclosure Rule. The rule addresses when mortgage lenders with valid justification may pass on increased closing costs to consumers and disclose them on a Closing Disclosure.

Intended to provide greater clarity and certainty to the mortgage industry, the update will take effect 30 days after it is published in the Federal Register.

ii) The Bureau of Consumer Financial Protection – Mortgage Disclosure Requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act

The Bureau of Consumer Financial Protection indicated it would amend Federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act that are implemented in Regulation Z.

The amendments relate to when a creditor may compare charges paid by or imposed on the consumer to amounts disclosed on a Closing Disclosure, instead of a loan estimate, to determine if an estimated closing cost was disclosed in good faith.

iii) The Financial Crimes Enforcement Network – Advisory on the FATF-Identified Jurisdictions with Anti-Money Laundering/Counter-Terrorist Financing Deficiencies

The Financial Crimes Enforcement Network (FINCEN) issued an advisory to financial institutions regarding the Financial Action Task Force’s updated list of jurisdictions with strategic anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies.

According to FINCEN, the changes might affect U.S. financial institutions’ obligations and risk-based approaches regarding relevant jurisdictions.

iv) Governance Framework Formation Team – United States Faster Payments Council Governance Framework

The US Governance Framework Formation Team, a group of industry stakeholders, released a draft governance framework for a new US Faster Payments Council.

In 2015, the Federal Reserve had put together a faster payments task force of more than 300 industry stakeholders, charging it with coming up with recommendations on the best way to achieve faster payments in the US financial industry. The task force recommended the establishment of the governance framework.

2. NIGERIA:

i) Central Bank of Nigeria – Circular on the Regulatory Framework for the Use of Unstructured Supplementary Service Data in the Nigerian Financial System

In furtherance of its mandate to develop and enhance the security of the electronic payments system in Nigeria, the Central Bank of Nigeria released the Regulatory Framework for the Use of Unstructured Supplementary Service Data in the Nigerian Financial System.

The framework will become effective on June 1, 2018.

ii) Central Bank of Nigeria – Anti-Money Laundering and Combating the Financing of Terrorism (Administrative Sanctions) Regulations 2018

The Central Bank of Nigeria introduced Anti-Money Laundering and Combating the Financing of Terrorism (Administrative Sanctions) Regulations 2018 (AML/CFT Administrative Sanctions Regime).

The AML/CFT Administrative Sanctions Regime is sequel to Financial Action Task Force’s Recommendation 35 on effective, proportionate and dissuasive sanctions and the Intergovernmental Action Group against Money Laundering in West Africa’s 2007 Mutual recommendation that Nigeria’s AML/CFT sanctions regime be reviewed and made to be proportionate and dissuasive.

The sanctions regime has been gazetted.

3. UNITED KINGDOM:

European Banking Authority – Guidelines on Disclosure of Non-performing and Forborne Exposures

Seeking to further foster transparency and market discipline, the European Banking Authority launched a consultation on its Guidelines on disclosure by credit institutions of information on non-performing and forborne exposures (Guidelines).

The Guidelines specify information related to non-performing and forborne exposures and foreclosed assets that banks should disclose.

The consultation runs until July 27, 2018.

4. SWITZERLAND:

Basel Committee on Banking Supervision – Progress Report on Adoption of the Basel Regulatory Framework

The Basel Committee on Banking Supervision provided updated progress report on adoption of the Basel regulatory framework (Basel III).

The report focused on the status of adoption of all the Basel III standards to ensure that they are transformed into national law or regulation according to the internationally agreed timelines.

Specifically, the report addressed the status of adoption of the leverage ratio, the standards for global and domestic systemically important banks and interest rate risk in the banking book, the net stable funding ratio, the large exposures framework and the disclosure requirements.

5. SINGAPORE:

Monetary Authority of Singapore – Proposed Guidelines on Individual Accountability and Conduct

The Monetary Authority of Singapore (MAS) proposed Guidelines on Individual Accountability and Conduct (Guidelines).

According to the MAS, the Guidelines are meant to reinforce financial institutions’ responsibilities in three key areas: i) promoting the individual accountability of senior managers; ii) strengthening the oversight of employees in material risk functions; and iii) embedding standards of proper conduct among all employees

Deadline for stakeholders to submit comments is May 25, 2018.

6. AUSTRALIA:

Australian Prudential Regulation Authority – Permanent Measures to Strengthen Lending Standards for Authorised Deposit-taking Institutions

The Australian Prudential Regulation Authority (APRA) announced plans to remove investor loan growth benchmark it introduced in December 2014. According to the APRA, the benchmark will be replaced with more permanent measures to strengthen lending standards for authorised deposit-taking institutions (ADIs).

The APRA expects the ADIs to develop internal portfolio limits on the proportion of new lending at very high debt-to-income levels, and policy limits on maximum debt-to-income levels for individual borrowers.

*An expert on banking law and regulation, Olakunle Komolafe holds an LL.M. from Harvard Law School, United States and another LL.M. in Energy, Natural Resources and Environmental Law from the University of Calgary, Canada.

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