Regpulse Newsletter December 14, 2020 – January 8, 2021

Financial Services RegPulse Newsletter December 14, 2020 – January 8, 2021

Recent developments

› COVID-19 economic stimulus bill, known CARES 2.0, is signed into law

› Federal Reserve formally joins the Network of Central Banks and Supervisors for Greening the Financial System

› Federal banking agencies announce a proposed rule that would require prompt notification of any “computer-security incident”

› OCC clarifies that federally chartered banks and thrifts may participate in public blockchain networks and use stablecoins for payment activities

› SEC requests comment regarding the custody of digital asset securities by special purpose Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 1 broker-dealers Introduction The Deloitte Center for Regulatory Strategy (DCRS) is a source of critical insight and advice, designed to help clients anticipate change and respond with confidence to the strategic and aggregate impact of national and international regulatory policy. The RegPulse Newsletter is a bi-weekly distribution that features the latest regulatory news and issues that are impacting the financial services and fintech industries.

For a deeper analysis and discussion of regulatory developments, make sure to check out our RegPulse blog series, which are a collection of blogs that are contributed by our powerful team of former regulators, industry specialists, and trusted business advisors.

US regulatory developments

Congress Derivatives

Banking & Capital Markets Investment Management

Consumer Protection Insurance

BSA/AML Fintech

EMEA regulatory developments

Featured DCRS content

Key:

Cross-sector The development covers multiple financial services sub-sectors or other industries.

FBO The development pertains to or affects foreign banking organizations (FBOs).

Blog/POV The development has been covered or is currently being analyzed by our team to be produced into either a RegPulse blog or broader point of view (POV). For more information, please refer to the featured DCRS content section.

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 2 US regulatory developments

Congress

House Members send letter to OCC on its NPR on Congress passes COVID-19 stimulus bill fair access to financial services On December 22, 2020, Congress passed the On December 30, 2020, House Financial Services Coronavirus Response and Relief Supplemental Chairwoman Maxine Waters (D-CA) and 22 other Appropriations Act, a $900 billion COVID-19 relief Committee Democrats sent a letter to Office of the package, as part of the Consolidated Appropriations Act Comptroller of the Currency’s (OCC) Brian Brooks urging of 2021. The bill was signed into law on December 29, the OCC to withdraw a Notice of Proposed Rulemaking 2020. regarding "fair access to financial services.“ Source: US House of Representative Committee on Rules Source: US House of Representatives Committee on Financial Services

Banking & Capital Markets

SBA and Treasury release interim final rule on PPP Christopher Waller swears in as a member of the Loans Under Economic Aid Act Board of Governors of the Federal Reserve System

On January 7, 2021, The Small Business Administrator On December 18, 2020, Christopher J. Waller swore an (SBA) and the US Department of the Treasury released oath of office virtually as a member of the Board of an Interim Final Rule that governs new Paycheck Governors of the Federal Reserve System. Protection Program (PPP) loans made under the Source: Federal Reserve Board Economic Aid Act. The Interim Final Rule is effective upon publication in the Federal Register and comments are due Agencies announces proposal for requirement of 30 days after publication in the Federal Register. computer security incident notification Source: Small Business Administrator On December 18, 2020, the FRB, Federal Deposit OCC proposes rule regarding permissible bank Insurance Corporation (FDIC) and OCC announced a premises proposal that would require supervised banking organizations to promptly notify their primary On January 4, 2021, the OCC proposed a rulemaking to federal regulator in the event of a computer security codify permissibility standards for real estate used as incidents that could result in a banking organization's national bank or federal savings association premises. inability to deliver services to a material portion of its customer base, jeopardize the viability of key operations Source: Office of the Comptroller of the Currency of a banking organization, or impact the stability of the financial sector. Federal Reserve Board extends termination date of Main Street Lending Program facilities Source: Federal Reserve Board

On December 29, 2020, the Federal Reserve Board (FRB) Governor Lael Brainard delivers speech on climate extended of the termination date of the Main Street change-related challenges to the financial system Lending Program facilities to January 8, 2021 to allow for more time to process and fund loans that were submitted On December 18, 2020, the FRB Governor Lael Brainard to the Main Street lender portal on or before December delivered a speech entitled "Strengthening the Financial 14, 2020. System to Meet the Challenge of Climate Change."

Source: Federal Reserve Board Source: Federal Reserve Board

Fed issues final rule amending Regulation D and Governor Lael Brainard delivers speech on invites public comment on the proposed modernizing and strengthening of CRA regulations amendments On December 17, 2020, the FRB Governor Lael Brainard On December 22, 2020, the FRB (or Fed) issued a notice delivered a speech on modernizing and strengthening of of proposed rulemaking on Regulation D (Reserve CRA regulations at the Consumer Bankers Association. Requirements of Depository Institutions) and requested comments on proposed amendments. Source: Federal Reserve Board

Source: Federal Reserve Board

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 3 US regulatory developments (continued)

Banking & Capital Markets (continued) Investment Management

FRB announces it has formally joined the NGFS SEC announces Roisman as its Acting Chairman

On December 15, 2020, the FRB announced that it has On December 28, 2020, the Securities and Exchange formally joined the Network of Central Banks and Commission (SEC) announced that the President Supervisors for Greening the Financial System, or NGFS, designated Elad L. Roisman as Acting Chairman. which supports the exchange of ideas, research, and best practices on the development of environment and Source: Securities and Exchange Commission climate risk management for the financial sector. SEC proposes amendments to Rule 144 and Form Source: Federal Reserve Board 144

FDIC approves rule to ensure safety and On December 22, 2020, the SEC proposed an soundness of industrial banks amendment to Rule 144 to revise the holding period determination for securities acquired upon the On December 15, 2020, the FDIC approved a final rule conversion or exchange of certain market-adjustable that will require certain conditions and commitments for securities. The SEC also voted to update and simplify the each deposit insurance application approval, non- Form 144 filing requirements. objection to a change in control notice, and merger application approval that would result in an insured Source: Securities and Exchange Commission industrial bank becoming a subsidiary of a company that is not subject to consolidated supervision by the FRB. SEC issues updates regarding substituted compliance requirements Source: Federal Deposit Insurance Corporation On December 22, 2020, the SEC issued following actions Federal banking agencies announce availability of to advance implementation of security-based swap 2019 small business, small farm, and community regulation: 1. A final substituted compliance order in development lending data response to an application by Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); 2. A notice of On December 14, 2020, three federal banking agency application and proposed substituted compliance order in members of the Federal Financial Institutions response to an application by France’s Autorité des Examination Council (FFIEC) with Community Marchés Financiers (AMF) and Autorité de Contrôle Reinvestment Act (CRA) responsibilities announced the Prudential et de Résolution (ACPR). availability of data on small business, small farm, and community development lending reported by certain Source: Securities and Exchange Commission commercial banks and savings associations, pursuant to the CRA. SEC announces the creation of the Security-Based Swaps Joint Venture Source: Financial Stability Board On December 18, 2020, the SEC announced Security- Based Swaps Joint Venture, a venture among several Comment deadline approaches on CFPB, FDIC, SEC divisions and offices that will be responsible for NCUA and OCC proposed rule on interagency coordinating functions related to the regulation of statement clarifying the role of supervisory security-based swaps and oversight of certain entities guidance that will be required to register with the SEC.

On November 5, 2020, the Consumer Financial Source: Securities and Exchange Commission Protection Bureau (CFPB), FDIC, FRB, National Credit Union Administration (NCUA) and OCC published in the BSA/AML Federal Register a proposed rule that would codify interagency statement clarifying the role of supervisory FinCEN invites comments on proposed change that guidance issued by the agencies on September 11, require casinos to develop and implement written 2018. Comments are due January 4, 2021. anti-money laundering programs

Source: US Government Publishing Office On December 22, 2020, the Financial Crimes Enforcement Network (FinCEN) invited comments on the proposed renewal, without change, of a currently approved information collection found in existing Bank Secrecy Act regulations that require casinos to develop and implement written anti-money laundering programs to ensure and monitor compliance with the requirements set forth in the Bank Secrecy Act regulations.

Source: Financial Crimes Enforcement Network

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 4 US regulatory developments (continued)

Consumer Protection

CFPB releases report on implementing the Dodd- IOSCO publishes report on education of retail Frank Act’s small business lending data collection investors regarding risks of crypto-assets requirement On December 22, 2020, Board of the IOSCO published a On December 15, 2020, the CFPB released a panel report that seeks to help regulators inform retail report as part of its rulemaking process under Dodd- investors about the risks and characteristics of crypto- Frank Act Section 1071 governing the collection and assets. reporting of small business lending data. Source: International Organization of Securities Commission Source: Consumer Financial Protection Bureau FinCEN proposes rule aimed at closing anti-money Fintech laundering regulatory gaps for certain convertible virtual currency and digital asset transactions OCC clarifies that federally chartered banks and thrifts may participate in independent node On December 18, 2020, FinCEN proposed a rule to verification networks and use stablecoins for require banks and money service businesses (‘‘MSBs’’) payment activities to submit reports, keep records, and verify the identity of customers in relation to transactions involving On January 4, 2021, the OCC clarified on national banks’ convertible virtual currency and federal savings associations’ authority to participate in independent node verification networks (INVN) and Source: Financial Crimes Enforcement Network use stablecoins to conduct payment activities and other FDIC Board approves final rule on brokered deposit bank-permissible functions. and interest rate restrictions

Source: Office of the Comptroller of the Currency On December 15, 2020, FDIC Board of Directors approved a final rule to establish a new framework for SEC issues statement and requests comment analyzing whether deposits made through deposit regarding the custody of digital asset securities by arrangements qualify as brokered deposits, including special purpose broker-dealers those between insured depository institutions (IDIs) and third parties, such as financial technology companies. On December 23, 2020, the SEC issued a statement and requested comments regarding the custody of digital Source: Federal Deposit Insurance Corporation asset securities by broker-dealers in order to encourage innovation around the application of Securities Exchange Act Rule 15c3-3 to digital asset securities.

Source: Securities and Exchange Commission

PWG releases statement on key regulatory and supervisory issues relevant to certain stable coins

On December 23, 2020, the President’s Working Group on Financial Markets (PWG) released a statement providing an initial assessment of key regulatory and supervisory considerations for participants in significant stable coin arrangements with a US nexus that are primarily used for retail payments.

Source: US Treasury

Fed releases FEDS note on Tokens and Accounts in the Context of Digital Currencies

On December 23, 2020, the FRB released a FEDS Notes article entitled "Tokens and Accounts in the Context of Digital Currencies.“

Source: Federal Reserve Board

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 5 EMEA regulatory developments

Banking & Capital Markets

• European Union (EU) & United kingdom (UK) - The • BOE – The BOE and PRA have jointly published a EU & UK have agreed on a Trade and Cooperation statement of policy on their approach to interpret EU Agreement which talks about the cross-border provision guidelines and recommendations. Read more here. of financial services and have also agreed for a Joint Declaration to establish a framework for regulatory • Prudential Regulation Authority (PRA) - The PRA has cooperation. Read more here; here. published a statement on the EU requirement on prudential treatment of software assets. Read more here. • Financial Conduct Authority (FCA) - The FCA has published a statement on the use of the Temporary • PRA – The PRA has published its final policies on the Transitional Power to modify the UK’s Derivatives Trading Capital Requirements Directive (CRD) V and Bank Obligation. Read more here. Recovery and Resolution Directive (BRRD) II. Read more here; here. • FCA - The FCA has published the final onshoring instruments, related guidance & TTP directions. Read • PRA – The PRA also published three supervisory more here. statements, one setting out how firms should interpret existing non-binding PRA regulatory and supervisory • FCA – The FCA has published the Handbook Notice 83 materials; second, outlining the approach it expects firms which consists of final instruments. Read more here. to take when interpreting EU-based references and third, setting out its expectations on deposit-takers. Read more • FCA – The FCA has published a Supervisory Statement here; here; here. on the Operation of the MiFID Markets Regime. Read more here. • PRA – The PRA has published a policy statement on CRD5 implementation. Read more here. • FCA – The FCA and PRA have confirmed their expectation that firms’ application of the SM&CR rules returns to • PRA – Letter from Anna Sweeney and Charlotte Gerken normal. Read more here. outlining the PRA's Insurance Supervision 2021 Priorities. Read more here. • FCA – The FCA expects that firms' application of the SM&CR rules returns to normal. Read more here. • PRA – Letter from David Bailey, Executive Director, on 2021 supervisory priorities for International Banks. Read • FCA – The FCA has published a new regime to streamline more here. prudential requirements for solo-regulated investment firms in the UK. Read more here. • PRA – Letter from Sarah Breeden, Executive Director, on 2021 supervisory priorities for UK Deposit Takers. Read • FCA – The FCA has published a Policy statement which more here. talks about Proposals to enhance climate-related disclosures by listed issuers and clarification of existing • PRA – The PRA has published a report on the Evaluation disclosure obligations. Read more here. of the Senior Managers and Certification Regime (SM&CR). Read more here. • HM Treasury (HMT) - HMT has published guidance on the open access regime for exchange traded derivatives. • PRA – The PRA has published a Supervisory Statement Read more here. on its expectations regarding how firms should comply with the requirements of the Renumeration Part of the • HMT – HMT published a policy paper titled ‘Call for PRA Rulebook. Read more here. Evidence on the Overseas Framework’. Read more here. • Commissione Nazionale per le Società e la Borsa • HMT – HMT has published a revised code of practice (CONSOB) – The CONSOB states that British banks and which reflects changes arising from the UK's withdrawal investment firms may carry out their investment services from the EU. Read more here. and activities. Read more here.

• Bank of England (BOE) - The BoE has published • Commission de Surveillance du Secteur Financier amendments under the European Union (Withdrawal) Act (CSSF) - The CSSF has published Regulation No. 20-09 2018. Read more here. on the equivalence of the United Kingdom for the purpose of the MiFIR third country national regime. Read more • BOE – The BOE announced an Update on the Bank’s here. approach to the Climate Biennial Exploratory Scenario in selected areas. Read more here. • Single Resolution Board (SRB) - SRB issues update on Permission Regime for the Reduction of Eligible Liabilities. • BOE – The BOE published a Discussion paper reviewing Read more here. the bank’s approach to setting Minimum Requirements for Eligible Liabilities (MREL). Read more here.

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 6 EMEA regulatory developments (continued)

Banking & Capital Markets (continued)

• International Organization of Securities • European Council of the European Union (ECOFIN) - Commissions (IOSCO) – IOSCO has published a European Council confirms targeted amendments to EU Report on retail market conduct risks during COVID-19. capital market rules. Read more here.

• European Central Bank - Single Supervisory • European Insurance and Occupational Pensions Mechanism (ECB-SSM) – The ECB recommends Authority (EIOPA) – EIOPA has published ‘Opinion on dividend distributions during the COVID-19 pandemic. the 2020 review of Solvency II’. Read more here. Read more here. • EIOPA - EIOPA outlines key financial stability risks and • ECB-SSM – Remuneration policies in the context of the vulnerabilities for insurance and pension sector. Read coronavirus (COVID-19) pandemic. Read more here. more here.

• European Banking Authority (EBA) - The EBA • European Securities and Markets Authority (ESMA) published additional clarifications on the application of the - ESMA published a consultation report on procedural prudential framework in response to issues raised rules for penalties imposed on Benchmark Administrators. because of the COVID-19 pandemic. Read more here. Read more here.

• EBA - Opinion to the European Commission on proposed • ESMA - ESMA has published draft technical standards amendments to the EBA final draft RTS on IRB under EMIR REFIT. Read more here. assessment methodology. Read more here. • ESMA – ESMA has published cloud outsourcing • EBA - EBA updates its Basel III impact study following guidelines. Read more here. the EU Commission's call for advice (CFA). Read more here. • ESMA – ESMA has published a Consultation Paper MiFID II/MiFIR review report on Algorithmic Trading. Read more • EBA - The EBA has urged banks to refrain from here. distributing capital outside the banking system. Read more here. • ESMA – ESMA appoints two new members to its Management Board. Read more here. • EBA – The EBA has published a Final draft that talks about Technical standards on the contractual recognition • ESMA –ESMA has published final guidance to address of stay powers under the BRRD. Read more here. leverage risk in the AIF sector. Read more here.

• EBA – Consultation on technical standards to calculate risk weights of collective investment undertakings. Read more here.

• EBA – EBA has published a Consultation paper on benchmarking of internal models. Read more here.

• EBA – EBA has published a final report for estimating own fund and combined buffer capital requirements. Read more here.

• EBA – Consultation on EBA guidelines on internal For more information in regards to EMEA regulatory developments, governance for investment firms. Read more here. please visit the FS Risk and Regulation Monthly page.

• EBA – Consultation on new guidelines on remuneration policies for investment firms. Read more here.

• EBA – EBA proposes appropriate methodology to calibrate O-SII buffer rates. Read more here.

• EBA – EBA has published a final draft which talks about Technical standards on capital requirements of non- modellable risks under the FRTB. Read more here.

• EBA – EBA has published final technical standards on reporting of MREL decisions from authorities to EBA. Read more here.

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 7 Featured DCRS content

FDIC approves final rule on expectations for ILCs and their parents

On December 15, 2020, the Federal Deposit Insurance Corporation (FDIC) approved a final rule that provides a clearer process regarding expectations for industrial loan companies (ILC) and their parents, which should make the approval process clearer.

The final rule requires certain conditions and commitments for each deposit insurance application approval, non-objection to a change in control notice, and merger application approval that would result in an insured industrial loan company becoming, on or after the effective date of the final rule, a subsidiary of a company that is not subject to consolidated supervision by the Federal Reserve Board.

In our latest POV (attached to this email), we identify the key changes in the final rule compared to the proposed rule. We also assess several themes from the rule and their likely degree of impact (high, medium, and low) on certain marketplace activities.

FRB and FDIC issue guidance for Resolution Plan Submissions of Certain Foreign-Based Covered Companies

On December 9, 2020, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) announced certain resolution planning actions, including providing finalized guidance for the resolution plans of large foreign banking organizations (FBOs). The final guidance supersedes previous guidance and is meant to assist these firms in developing their resolution plans, which are required to be submitted according to Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

It applies to FBOs that are Category II firms according to their combined US operations under the Board’s tailoring rule and are required to have a US intermediate holding company (IHC) under the Board’s Regulation YY (the Specified FBOs). For example, this guidance applies to Barclays, Credit Suisse, and Deutsche Bank starting in 2021 and to MUFG in 2024. (Category III FBOs were included in the proposed guidance but removed following the comment period.)

In our latest analysis (attached to this email), we assess the implications of the finalized guidance. This is part of our ongoing series of offering insight into major regulatory developments and how they might impact the financial services industry.

Regulatory Roundup | Deloitte Center for Regulatory Strategy, Americas 8 Contacts

Regulatory & Legal Support

Ed Powers Monica O’Reilly Regulatory and Legal Support Leader US Advisory Financial Services Industry Leader Principal | Deloitte Risk & Financial Advisory Principal | Deloitte Risk & Financial Advisory Deloitte & Touche LLP Deloitte & Touche LLP [email protected] [email protected]

Banking & Capital Markets Insurance

Vikram Bhat Richard Godfrey US Advisory Banking & Capital Markets Leader US Advisory Insurance Leader Principal | Deloitte Risk & Financial Advisory Principal | Deloitte Risk & Financial Advisory Deloitte & Touche LLP Deloitte & Touche LLP [email protected] [email protected]

Garrett O’Brien David Sherwood Principal | Deloitte Risk & Financial Advisory Managing Director | Deloitte Risk & Financial Advisory Deloitte & Touche LLP Deloitte & Touche LLP [email protected] [email protected]

Investment Management Deloitte Center for Regulatory Strategy

Krissy Davis Irena Gecas-McCarthy US Advisory Investment Management Leader FSI Director, Deloitte Center for Regulatory Strategy, Americas Partner | Deloitte Risk & Financial Advisory Principal | Deloitte Risk & Financial Advisory Deloitte & Touche LLP Deloitte & Touche LLP [email protected] [email protected]

Maria Gattuso Austin Tuell Principal | Deloitte Risk & Financial Advisory Manager | Deloitte Risk & Financial Advisory Deloitte & Touche LLP Deloitte & Touche [email protected] [email protected]

Kyle Cooke Senior Consultant | Deloitte Risk & Financial Advisory Deloitte & Touche [email protected]

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