• Service: Advisory, Regulatory Advisory Services
  • Industry: Financial Services
  • Type: Business and industry issue, KPMG information, Regulatory update
  • Date: 23/07/2014

Financial Services Regulatory Update 

February 2014 Regulatory Update

I thought we would have a quiet summer in the period between the EU elections and the new Commission getting into action in the autumn – I was wrong. The volume of reports, consultation papers and the activation of the ECB’s SSM, starting with the Comprehensive Assessment in advance of the November start date, are keeping everyone busy.


The key things that have caught my eye this month include:


The EBA banking risk assessment which highlights continued concerns over the viability and profitability of certain banks (e.g. 39 percent of European banking assets held by firms generating <4 percent RoE). Market analysts are demanding that banks increase their RoE i.e. close sub scale and unprofitable businesses, take significant cost out of the business and avoid significant new misconduct costs.


From November 2014 onwards, the ECB taking over the responsibility for banking supervision in the Eurozone will be a milestone in the history of banking supervision in Europe. KPMG has established an ECB Centre of Excellence, located in Frankfurt, to provide insight and analysis to help member firms’ clients develop new tools and strategies to address the new regulatory architecture.


Insurers are also feeling the pressure this month, with a tight deadline from the International Association of Insurance Supervisors (IAIS) to respond to a consultation paper on the basic capital requirement (BCR) – most likely to allow time for comments to be considered before the preparations for the G20 summit in November, where the final design and calibration of the BCR will be delivered. It is important that IAIGs use this opportunity to raise any key concerns now.


A number of the big themes highlighted in past newsletters are still rumbling on e.g. the latest ECOFIN agenda which includes FTT, Financial Benchmarks, and Money Market Funds; and the new ECON met earlier this week. All of this will have implications for the industry going forward – and we will be publishing a paper on what we are looking for from the new Commission soon.


I hope you find the articles below interesting. If you would like further information on any topic or have any questions, please do not hesitate to contact me or your usual KPMG contact.




Darina Barrett
Head of FS Markets


The wider economy – do we know the real impact of banking regulatory reform?


Much has been written and said about the impact of the regulatory change agenda on the banks. Finding the balance between financial stability and returns to the investors has been the subject of many analyst reports, academic research and other informed interventions. A lot has also been said about the need to re-establish the trust of consumers and clients and the general need for the banking industry to continue to originate credit for the market – most notably the SME sector. Less has been said about the direct impact of some of the technical change on banks business model and therefore the impact on the business relationship with their clients.


Read more here


EU’s new mandate takes shape


The recent European elections may have caused a pause for breath but work still continues on the financial regulatory agenda. There was significant unfinished legislation from the last mandate which MEPs and member states will start working on again in September. Ahead of the new Commission taking shape over the coming months an indication of where the priorities will lie came from a ’10 point plan’ from the new President Jean Claude Juncker.


Read more here


EBA reporting of funding plans 


The European Banking Authority (EBA) has recently published guidelines on harmonised definitions and templates for funding plans of credit institutions. National supervisory authorities are expected to assess credit institutions plans for reducing reliance on the central bank facilities and to assess the effect that this may have on the flow of credit to the real economy. For banks across Europe, this will represent an incremental reporting requirement including the initial data parameterisation and control enhancement that will be required.


Read more here


EBA Guidelines on SREP


On 7 July 2014, the European Banking Authority (EBA) published the draft guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for public consultation. The roughly 200 page draft is addressed to Competent Authorities of all Member States of the European Union. The EBA consultation closes on 7 October 2014 and the guidelines are expected to be applied by January 2016 taking into account the results of the public consultation.


Read more here


The consumer agenda – cross-sector convergence


The current piecemeal approach to conduct regulation could be about to change as global and regional regulators try to find new ways to strengthen consumer protection and create a greater degree of convergence across national regulators.


Read more here


IAIS: Consultation on Basic Capital Requirement


The International Association of Insurance Supervisors (IAIS) launched its second consultation paper on the basic capital requirement (BCR) last week, with a tight response period to 8 August. This short time frame could be due to the September Sherpa meeting, where possible agreements are laid out in advance of the G20 conference. While the G-SIIs have been closely involved in the development of the BCR, there remains some uncertainty concerning the practical operation of this requirement when compared to other local jurisdictional solvency measures.


Read more here


Analysis of MiFID II


Following the EU Commission’s decision to review its initial Markets in Financial Instruments Directive (MiFID), in October 2011 the Commission unveiled its proposed MiFID II. The new proposals form one of the cornerstones of the ongoing global financial market reforms; accordingly they will have a fundamental affect on investment firms and the overarching European securities markets structure. The new proposals introduce a number of measures which will attempt to address many of the key issues raised by the financial crisis.


Kara Cauter, Partner, KPMG in the UK, contributes to a Financier Worldwide online discussion, analysing the features of the MiFID II proposals.


Read more here


Passing the buck


Resolution planning continues to expand in scope. First the globally systemically important banks, then all credit institutions and major investment firms – that are within the scope of the BRRD, next the globally systemic insurers, and now the potential to add asset managers if their failure would have a systemic impact. However, another, less publicised, area of resolution planning is already having an impact on the risk appetite of all buy-side and sell-side users of centrally cleared OTC derivatives.


Read more here


Cyber security – the wider European agenda


Cyber security continues to be a hot topic and is likely to be on the agenda at the forthcoming G20 summit. There has been a lot of activity in the UK around cyber, with the Bank of England (BoE) employing ethical hackers to attempt to strengthen cyber security of financial organisations. European firms that are not already engaged in this topic should be, as it is likely to be an issue for European regulators – and given the close working relationship between the BoE; the Prudential Regulatory Authority; and the ECB, this is likely to have an impact on pillar 2 capital requirements.




On the radar

  • MiFID 2 ESMA consultation deadline – 1 August
  • ECON Committee – 3/4 September, Brussels
  • EBA hearing on counter cyclical buffers – 8 September, London
  • EIOPA conference on Global Insurance Supervision – 9-10 September, Frankfurt
  • ECOFIN informal meeting – 19 September, Milan


Other news

KPMG's Global IFRS Banking Newsletter


KPMG’s latest IFRS banking newsletter ‘The Bank Statement’ is now available. This quarterly newsletter provides updates on IFRS developments which are directly affecting banks. It also considers accounting issues affecting the sector, and discusses potential accounting implications of regulatory developments.


G-20 OTC Derivatives Regulation


At the 2009 G-20 summit, all member states agreed to gradually implement OTC derivatives regulations. This has resulted in great disparity across the globe, which makes monitoring this agenda very challenging. In particular, corporates are frequently unaware of the rules they are required to adhere to in the various countries they operate in. KPMG’s global network of member firms supports corporate clients by monitoring the upcoming global regulations. The service will start with a preliminary assessment following by monthly reports and instructions for each country.


Click here to find out more.



Financial Services contacts

Darina Barrett

Darina Barrett

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Partner & Head of Financial Services Markets

+353 1 410 1376

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Financial Services

Senior decision makers in Financial Services continue to face significant challenges. Despite signs of recovery from the crisis there is a pressing need to strengthen risk management practices and the focus remains on issues such as capital & liquidity management, the changing regulatory landscape and cost reduction.


So how do you build and retain a competitive advantage?  At KPMG we have unrivalled experience and expertise across all aspects of the FS sector. We offer audit, tax and advisory services across our four sectors: aviation finance & leasing, banking, insurance and investment management.

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