This review highlights regulatory interventions by supervisory authorities from around the world.
1) UNITED STATES
The Office of the Comptroller of the Currency, the Federal Reserve System and the Federal Deposit Insurance Corporation – Appraisal Threshold for Commercial Real Estate Transactions
The Office of the Comptroller of the Currency, the Federal Reserve System and the Federal Deposit Insurance Corporation adopted a final rule to increase appraisal threshold for commercial real estate (CRE) transactions from $250,000 to $500,000.
Effective April 9, 2018, transactions at or below the threshold do not require appraisals that conform to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the interagency appraisal rules.
The rule also amends the appraisal rules to reflect the higher CRE appraisal threshold as it relates to evaluations and the use of certified appraisers.
2) UNITED KINGDOM
i) Bank of England – Central Counterparties and Incident Reporting
The Bank of England (Bank) formalized a new rule for Central Counterparties (CCPs) relating to incident reporting. The rule requires CCPs to notify the Bank of certain incidents having an impact on their information technology systems.
The rule comes into effect on May 7, 2018.
ii) The Prudential Regulation Authority – Model Risk Management Principles for Stress Testing
The Prudential Regulation Authority (PRA) issued a supervisory statement (Statement) setting out the PRA’s expectations regarding model risk management practices firms should adopt when using stress test models.
Relevant to PRA authorized banks, the Statement supports firms’ development and implementation of policies and procedures to identify, manage and control the risks inherent in the use of stress test models.
The Statement expectations will become effective on June 1, 2018.
European Central Bank – Framework for Testing Financial Sector Resilience to Cyber Attacks
The European Central Bank published a Framework for Threat Intelligence-based Ethical Red Teaming (TIBER-EU) to assist European entities assess their protection, detection and response capabilities against potential cyber attacks.
The TIBER-EU framework facilitates a harmonised European approach towards intelligence-led tests which mimic the tactics, techniques and procedures of real hackers who can be a genuine threat. The tests simulate a cyber attack on an entity’s critical functions and underlying systems, such as its people, processes and technologies.
It is the first Europe-wide framework for controlled and bespoke tests against cyber attacks in the financial market.
The Monetary Authority of Singapore – Central Clearing of Over-the-Counter Derivatives
The Monetary Authority of Singapore (MAS) announced it would introduce regulations requiring over-the-counter (OTC) derivatives to be cleared through central counterparties (CCPs).
Effective October 1, 2018, the mandatory clearing requirement will apply to Singapore-Dollar and US-Dollar fixed-floating interest rate swaps. Banks whose gross notional outstanding OTC derivatives exceed $20 billion will be required to clear their trades through CCPs that are regulated by MAS.
5) HONG KONG
i)Hong Kong Special Administrative Region Government – Hong Kong Money Laundering and Terrorist Financing Risk Assessment Report
Hong Kong Special Administrative Region Government released Money Laundering and Terrorist Financing Risk Assessment Report (Report). The Report addressed results of a jurisdiction-wide assessment of money laundering and terrorist financing (ML/TF) risks and other related threats to Hong Kong.
The Report outlined prominent threats to Hong Kong banks as including fraud, tax evasion, corruption and sanctions evasion. It noted ML/TF vulnerabilities as existing in various segments and banking products/services, including private banking, retail banking, trade finance, international funds transfer, and corporate banking.
ii) Hong Kong Monetary Authority – Revised Disclosure Rules and Amendment Notice
The Banking (Disclosure) (Amendment) Rules 2018 and the Banking (Specification of Multilateral Development Bank) (Amendment) Notice 2018 were gazetted to implement some recent international standards on banking regulation.
The Disclosure Amendment Rules seek to implement the disclosure requirements the Basel Committee on Banking Supervision (BCBS), issued in March 2017. The Amendment Notice reflects October 2017 BCBS decision to specify the Asian Infrastructure Investment Bank as a multilateral development bank to which banks’ exposures will be eligible for preferential capital and liquidity treatment.
*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.