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  • Permission to reprint or distribute any content from this presentation requires the prior

    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Todays Regulatory Landscape: Complying with Multiple Regulations Simultaneously

    Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market

    Intelligence. Not for distribution to the public. Copyright 2016 by S&P Global Market Intelligence. All rights reserved.

    Hans Crockett

    Vice President

    Innovation and Thought Leadership

    Global Risk Services

    Munich, May 10th, 2016

  • Permission to reprint or distribute any content from this presentation requires the prior

    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Overview

    The global regulatory landscape and regulatory convergence

    Regulatory reporting: Common data challenges

    Risk-focused regulations: Overview of Basel III, Solvency II, and

    IFRS 9

    Staying up-to-date with regulatory developments

    Appendix: Relevant S&P Global Market Intelligence offerings

    2

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    The Global Regulatory Landscape And Regulatory Convergence

    3

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    A Sea Of Acronyms And Expressions

    EMIR

    CVA

    FINREP COREP

    MIFID

    II

    RWA

    CCP

    CRD IV CCAR

    UCITS MAR

    MAD

    FASB

    AIFMD MIFIR

    SIFI

    "Regulatory Arbitrage"

    "Substituted Compliance"

    Solvency

    II

    Basel

    II & III

    IFRS

    FATCA

    4

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    Conscious efforts of the G20, FSB, CESR, EBA-ESMA-EIOPA, BCBS, IAIS etc.,

    Main themes: Risk-based capital, stress testing, credit risk assessments, transparency,

    independent multifactor pricing, macroeconomic scenarios, provisions, liquidity

    management

    Risk-based capital adequacy and reporting Basel, Solvency II, IORP II, CCAR, Swiss Solvency Test for Insurers

    Scenarios and stress testing Basel, CCAR, DFAST, Solvency II (Pillar 2 / ORSA), AIFMD, UCITS IV/V, IFRS 9

    Systematic credit quality assessments Basel, Solvency II, IORP II, AIFMD, IFRS, CRA3

    Credit-sensitive valuations IFRS 13, Basel, Solvency II

    Provisions against expected losses IFRS 9, FASBs CECL

    Global Regulatory Convergence (1) Regulatory Backdrop

    5

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Measuring and managing liquidity AIFMD, UCITS IV/V, Basel (LCR, NSFR), 40 Act

    Electronification, OTC derivatives trading and transaction reporting Dodd-Frank Title VII, EMIR, MiFIR/MiFID II

    Transparency and reporting (to regulators and to investors) EMIR, Dodd-Frank, MiFID II, Solvency II, Basel III

    Data quality and governance BCBS 239, Solvency II

    Equivalence / cross-border harmonisation EMIR / Dodd-Frank, MiFID II, Solvency II, tax disclosure, and data sharing e.g., FATCA, OECD tax

    data sharing

    Global Regulatory Convergence (2) Regulatory Backdrop

    6

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Global banking regulation Basel II (including ICAAP), III, IV (soon) and regional implementations (e.g., CRD IV in the EU);

    DFAST, CCAR, EBA stress testing and structure of banking operations, Swiss too big to fail regime

    General themes: Risk-based capital, scenarios and stress testing, funding provisions, liquidity

    provisions, data governance

    Global OTC derivatives reform EMIR, Dodd-Frank Title VII and national derivative trading, trade reporting and clearing regimes

    General themes: Transparency, electronification, central clearing, collateralisation and margining

    Global insurance regulation EUs Solvency II, Chinas C-ROSS, South Africas SAM, Australias Prudential Standards, Swiss

    solvency test

    General themes: Risk-based capital requirements, internal governance and supervision, data

    governance, reporting

    Accounting standards IFRS 9, IFRS 13, FASBs CECL

    General themes: Credit-sensitive valuation of derivatives, provisions against credit impairment, asset

    classifications

    Families Of Regulation (1) Regulatory Backdrop

    7

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Fund-centric regulation (hedge funds and mutual funds) AIFMD, UCITS, 40 Act, PRIIPS

    General themes: Risk management, governance, disclosures and reporting, liquidity

    Global trading environment MiFID II/MiFIR, Volcker Rule, MAD

    General themes: Electronification (including centralised platforms), transparency, reporting

    Global tax rules and tax transparency US FATCA, OECD Automatic Exchange of Information, BEPS

    General themes: Sharing of tax position details between governments and jurisdictions, elimination of

    double non-taxation

    Investor protection rules AIFMD, UCITS, PRIIPS, 40 Act, local regulator/supervisor rules

    General themes: Transparency, marketing and periodic reporting

    Families Of Regulation (2) Regulatory Backdrop

    8

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Regulatory Reporting: Common Data Challenges

    9

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    New types of data required Much needs to be sourced externally from multiple parties (asset managers, vendors, fund

    administrators, custodians, regulators etc.,)

    Vast quantities of data required Challenges with data ingestion, storage, linking and aggregation

    Detailed investment/asset data requirements for all three pillars

    Emphasis on data quality, transparency and traceability Look-through carries specific challenges: availability, timeliness, cost

    Requirements for robust data management processes and consistent use of data

    Different approaches, choices and results are possible for certain required data

    elements

    e.g., asset classifications, CQS, ultimate parents, industry sectors, prices, credit scores, PDs etc.,

    Common Data Challenges (1) Global Regulation

    10

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Licensing and redistribution issues for certain data types (e.g., credit ratings,

    evaluated pricing, CUSIPs)

    Where some data is free/in the public domain, there can be misconceptions

    Credit ratings IP, instrument identifier IP, consultation vs databasing, challenges gathering and

    maintaining data up-to-date, challenges mapping to correct entities and securities

    Managements decisions are impacted by data and how these change

    Credit ratings, classifications, ownership/corporate hierarchies, pricing availability

    Common Data Challenges (2) Global Regulation

    11

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Basel III

    12

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    written approval of S&P Global Market Intelligence. Not for distribution to the public.

    Basel Regulation began in 1988 and has continued to evolve:

    BASEL I (1988): Defined Tier 1 and Tier 2 capital, introduced risk-weighted assets and the solvency

    ratio. Focused mainly on credit risk (risk-weighted approach); market risk (VaR) model introduced in

    1996

    BASEL II (2006): Introduced the 3-Pillar approach: Capital requirements, supervisory review and market

    discipline. Major changes related to credit risk (Internal Ratings-Based Approach, IRB) and counterparty

    risk on OTC derivatives (potential future exposure, IRB approach)

    BASEL 2.5 (2009): Revision of Basel II norms. Introduced stressed VaR, the Incremental Risk Charge

    [IRC] to capture default and credit migration risk, and the Comprehensive Risk Measure [CRM] to

    capture correlation risk. Introduced standardised charges for securitisations

    BASEL III (2010-11): Introduced multiple new components, including the addition of CVA for

    counterparty ri