BCBS to publish high-level supervisory expectations concerning crypto-assets

The Basel Committee on Banking Supervision met at the end of February. A summary of what was discussed and agreed is available here. The Committee announced that it would publish, this month, high-level supervisory expectations relating to crypto-assets.

UK: FRC consults on revised going concern standard for auditors

The Financial Reporting Council has published for consultation proposed revisions to its current standard on going concern (ISA UK 570, pdf). A copy of the revised standard is available here (pdf) and the accompanying exposure draft is available here (pdf).

The FRC states, in its press release, that its proposals will "... increase the work required of auditors when assessing whether an entity is a going concern. The consultation ... follows concerns about the quality and rigour of audit and well-publicised corporate failures where the auditor’s report failed to highlight concerns about the prospects of entities which collapsed shortly after as well as findings recent FRC Enforcement cases.  In proposing these revisions, requirements on UK auditors will be significantly stronger than those required by international standards".

South Africa: the draft Conduct of Financial Institutions Bill

The National Treasury is seeking views on the draft Conduct of Financial Institutions Bill, following the introduction, less than a year ago, of two regulators - the Prudential Authority and the Financial Sector Conduct Authority - as part of the new twin peaks regulatory framework.

A copy of the draft Bill is available here (pdf). Chapter 3 of the Bill is titled "Culture and Governance" and this sets out the principles that financial institutions should follow, as well as requiring the adoption of a governance policy to ensure adherence to these principles. Published alongside the Bill are a policy paper and impact assessment: see, respectively, here (pdf) and here (pdf). An overview of the Bill, together with further information on how to submit a consultation response ahead of the 1 April deadline, is available here (pdf).

EU: EBA publishes revised guidelines on outsourcing arrangements

The European Banking Authority has published revised guidelines on outsourcing arrangements, which have a heavy focus on governance: see here (pdf). The guidelines enter into force on 30 September 2019 and operate alongside the EBA's guidelines on internal governance.

UK: The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019

The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 were made yesterday and come into force on exit day: see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (paras. 2.1 to 2.3):

...to address deficiencies in retained EU law in relation to the prudential regulation of the insurance sector arising from the withdrawal of the United Kingdom (UK) from the European Union (EU), ensuring the legislation continues to operate effectively once the UK leaves the EU.

The Solvency II Directive (Directive 2009/138/EC) and Delegated Regulation EU No. 2015/35 implemented a harmonised prudential framework for insurance and reinsurance firms in the EU. It is designed to provide a high level of protection for policy holders by requiring firms to provide a market-consistent valuation of their assets and liabilities, understand the risks they are exposed to, and to hold capital that is sufficient to absorb shocks. Solvency II was transposed into UK law by the Solvency II Regulations 2015 (No. 575) and through the Prudential Regulation Authority (PRA) Rulebook.

Current UK Solvency II legislation is drafted on the basis that the UK is a member of the EU, and treats countries in the EEA differently to other third countries. Once the UK has left the EU, this will no longer be appropriate. To ensure that Solvency II regulation continues to operate effectively once the UK is outside of the EU, certain deficiency fixes to the legislation are necessary".