General Information & Client Services
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518

The Moody’s Analytics Regulatory Radar provides an overview of the main regulatory guidelines affecting the banking industry. It is a proprietary tool developed to monitor regulations in the immediate, medium, and long term, across multiple jurisdictions.

Over the past few years, the global financial services industry has experienced an unparalleled level of regulatory reform. This trend does not show signs of changing anytime soon.

The G-20 and the Financial Stability Board are leading the overhaul of global financial services regulation that is fundamentally reshaping the industry, starting with the largest institutions. These reforms aim to reduce systemic risk, restructure banks, strengthen capital requirements, and increase transparency.

Systemic risk reforms

In November 2008, the G-20 stressed the need to review the differentiated nature of regulation in the banking, securities, and insurance sectors and to identify areas where systemic risks may not be fully captured. This has led regulators to consider new sources of systemic risk such as shadow banking, investment managers, and insurers. Hence, a worldwide program is underway to standardize regulations in these sectors.

Systemically important institutions face specific requirements:

  • Higher capital requirements with the introduction of the Total Loss Absorbing Capacity for global systemically important banks and Higher Loss Absorbency requirements for global systemically important insurers.
  • Enhanced data management and reporting requirements, such as the BCBS 239 data principles and the Financial Stability Board’s data reporting requirements.
  • Risk concentration and resolution and recovery planning requirements.

“Basel IV”

It is now nearly six years since the Basel Committee on Banking Supervision developed Basel III in response to the global financial crisis. Despite the fact that many of the Basel III requirements are not fully implemented yet, new regulatory proposals are emerging on what is starting to be called the “Basel IV” reform. These new proposals focus on improvements to the methods banks use to calculate their risk, namely:

  • The fundamental review of the trading book, which includes plans to apply a standardized approach for calculating market risk.
  • A new standardized approach to counterparty credit risk (SA-CCR).
  • A review of the standardized approach for the calculation of credit risk and revisions to the estimate of risk weightings used for determining capital adequacy requirements.
  • A new international approach to large exposures.

These proposals are expected to come into force from 2017 onwards. And given their importance, banks need to pay close attention to them.

Stress testing continues to be a key regulatory tool

Stress testing requirements are becoming tougher, not only on the quantitative side, but also on the qualitative assessment that regulators do of banks’ risk governance, processes, models, and tools.

In the Americas, the US expanded stress testing requirements to large foreign banks. In Europe, the European Central Bank/European Banking Authority and the UK’s Prudential Regulation Authority run annual stress tests. Regulators in other regions are looking at these guidelines and developing local requirements, such as in China, Australia, and New Zealand.

Regulators are also considering expanding stress testing requirements to other segments of the industry, such as asset managers and pension funds.

IFRS 9 and CECL

The International Financial Reporting Standard 9 (IFRS 9) that will enter into force on January 1, 2018, replaces the International Accounting Standard 39 (IAS 39).

The new standard will substantially affect banks’ financial statements. The new impairment model will require more attention from banks given the fundamental changes that it proposes – estimating provisions based on expected losses and not incurred losses as required in IAS 39.

In the US, the Financial Accounting Standards Board (FASB) has also been working to develop a new impairment model known as the “Current Expected Credit Loss” (or CECL) model. A final standard is expected to be released between Q4 2015 - Q1 2016.

Impact for banks

Banks will have to respond to this new wave of regulatory changes with enhanced enterprise risk management systems and processes to effectively manage risk and comply with the requirements.

They must continue transforming their risk management, finance and compliance technologies, processes, and practices, in terms of capital calculation, expected loss estimation, data management, stress testing, and reporting.

Figure 1. Moody's Analytics Global Banking Regulatory Radar
Click here to view a large version of this figure
Moody's Analytics Global Banking Regulatory Radar
Source: Moody's Analytics
As Published In:
Related Insights

IFRS 9 Survey Results

This article is a summary of the views expressed by regional banking institutions in a recent survey about IFRS 9 regulation. The survey was conducted to assess progress, potential challenges, and plans of banks with regards to IFRS 9 compliance.

June 2016 WebPage María C. Cañamero, Michael McDonald, Yagmur Uenal

Global Banking Regulatory Radar

The Global Banking Radar highlights the busy regulatory agenda that banks will face over the next couple of years. The trend of increased regulation that began in the EU and the US is now spreading to other regions, requiring banks worldwide to comply with increasingly stringent and complex requirements.

November 2014 WebPage Avinash Arun, María C. Cañamero

Regulatory Radar for Insurance: Emerging Regulations are Reshaping the Global Insurance Industry

The increased focus and attention on the insurance industry are illustrated by the acceleration of regulatory efforts across the globe. Keeping up with the pace of regulatory change in the current environment is one of the greatest challenges facing any insurance company.

May 2014 WebPage María C. Cañamero, Sandy Sharp

Target Architecture for Stress Testing (North America)

The Target Architecture for Stress Testing diagram illustrates the building blocks of a sound enterprise-wide stress testing system. The architecture highlights the need for a solution that will facilitate systems and models integration, data flow coordination, and automated reporting.

November 2013 WebPage María C. Cañamero, Alex Kang

Preparing for the Stress Tests: Regulatory Timeline and Requirements

The Moody’s Analytics Regulatory Timeline provides a high-level overview of the stress testing regulations in both the United States and European Union in the immediate and medium-term.

November 2013 WebPage María C. Cañamero

Stress Testing Best Practices: A Seven Steps Model

Implementing stress testing practices across the various bank divisions is a complex process. In order to address the need for an implementation framework, Moody’s Analytics has created a Seven Steps Model.

September 2013 WebPage Dr. Christian Thun, Sandrine Prioux, María C. Cañamero

Target Architecture for Stress Testing (Europe)

The Target Architecture for Stress Testing diagram illustrates the building blocks of a sound enterprise-wide stress testing system. The architecture highlights the need for a solution that will facilitate systems and models integration, data flow coordination, and automated reporting.

September 2013 WebPage María C. Cañamero, Alex Kang

Regulatory Radar

The Moody’s Analytics Regulatory Radar is a proprietary tool developed to monitor regulations in the immediate and medium term, across market segments and jurisdictions. This version provides an overview of key rules and regulatory guidelines recently published across Europe in several financial services segments.

September 2013 WebPage María C. Cañamero, Sandrine Prioux