Financial Institutions Regulation: Major Developments This Week
…regulatory developments across the globe this week that may be of interest.
REGULATORY CHANGES
1. Switzerland: Pillar 3 Disclosure Requirements – Regulatory Treatment of Accounting Provisions
The Basel Committee on Banking Supervision released a technical amendment on additional Pillar 3 disclosure requirements for jurisdictions implementing an expected credit loss (ECL) accounting model, and for those adopting transitional arrangements for the regulatory treatment of accounting provisions.
The amendment is expected to provide users with disclosures that fully reflect any transitional effects for the impact of ECL accounting on regulatory capital.
The amendment will also provide additional information on the allocation of accounting provisions in the regulatory categories of general and specific provisions for standardized exposures during the interim period.
2. United States: Regulations Implementing the Community Reinvestment Act
The Office of the Comptroller of the Currency (OCC) published an advance notice of proposed rulemaking (ANPR) on ways to transform or modernize the regulations that implement the Community Reinvestment Act (CRA).
Through the notice, the OCC is soliciting public comments on how to better achieve the statute’s original purpose, encourage increased lending and investment where it is needed most, and reduce the burden associated with reporting and evaluating CRA performance.
3. United States: Examination Guidance for Bank Secrecy Act Customer Due Diligence and Beneficial Ownership Compliance
The National Credit Union Administration (NCUA) issued a supervisory letter intimating all federally insured credit unions with the examination expectations provided to the NCUA examiners regarding the review of a credit union’s compliance with the Bank Secrecy Act Customer Due Diligence and Beneficial Ownership Compliance.
4. South Africa: Consultation Paper on Interest Rate Benchmark
The South African Reserve Bank published a consultation paper on selected interest rate benchmarks in South Africa.
The paper contains proposals on the reform of key interest rate benchmarks used in South Africa as well as proposals on a suite of new benchmarks that could potentially be used as reference interest rates. Stakeholders are to provide comments by October 26, 2018.
5. Singapore: Consultation Paper on Proposed Revisions to the Regulatory Framework for Large Exposures of Singapore-Incorporated Banks
The Monetary Authority of Singapore (MAS) has responded to feedback received on proposed revisions to the large exposures framework for Singapore-incorporated banks.
MAS has indicated it will implement revised large exposures requirements for Singapore-incorporated banks that are consistent with the final standards issued by the Basel Committee on Banking Supervision on measuring and controlling a bank’s exposures to a counterparty or counterparty group.
REGULATORY SANCTIONS
1. BNP Paribas fined $90 Million
The Commodity Futures Trading Commission (CFTC) fined BNP Paribas Securities Corp. (BNP Paribas) $90 million.
The fine was over BNP Paribas’ attempted manipulation of the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) benchmark, a global benchmark referenced in a range of interest rate products.
The CFTC found that over a five-year period, beginning by May 2007 and continuing through at least August 2012, BNP Paribas attempted to manipulate the USD ISDAFIX to benefit its derivatives positions in instruments such as cash-settled options on interest rate swaps and certain exotic structured products.
2. UBS Bank to pay $15 Million
The CFTC fined UBS AG (UBS Bank) a $15 million civil monetary penalty. The CFTC found that from January 2008 through at least December 2013, UBS Bank, by and through the acts of certain precious metals traders on the spot desk, attempted to manipulate the price of precious metals futures contracts.
The traders utilized a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc., including gold and silver, and by trading in a manner to trigger customer stop-loss orders.
3. Deutsche Bank AG and Deutsche Bank Securities Inc. fined $30 Million
The CFTC found that from at least February 2008 and continuing through at least September 2014, certain precious metals traders of both entities engaged in a scheme to manipulate the price of precious metals futures contracts.
The traders utilized a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc., and by trading in a manner to trigger customer stop-loss orders.
4. Moody’s Investors Service Inc. assessed $16.25 Million Fine
The Securities and Exchange Commission (SEC) fined Moody’s Investors Service Inc., a total of $16.25 million over internal control failures and for failing to clearly define and consistently apply credit rating symbols. This marks the first time the SEC has filed an enforcement action involving rating symbol deficiencies.
A total of $15 million out of the fine is to settle charges of Moody’s internal controls failures involving models it used in rating U.S. residential mortgage-backed securities. While Moody’s did not admit or deny the SEC’s charges, it has agreed to retain an independent consultant to assess and improve its internal controls.
5. Deutsche Bank Securities fined $70 Million
The CFTC found Deutsche Bank Securities Inc. (DBSI) to have attempted manipulation of the ISDAFIX benchmark.
Over a five-year period, beginning in at least January 2007 and continuing through May 2012, DBSI was found to have made false reports and through the acts of multiple traders, attempted to manipulate the USD ISDAFIX to benefit its derivatives positions, including positions involving cash-settled options on interest rate swaps.
*Olakunle Komolafe is a financial sector law and policy expert. He holds an LL.M. from Harvard Law School, United States of America and another LL.M. in Energy, Natural Resources and Environmental Law from the University of Calgary, Canada.