IOSCO Publishes Good Practices on Processes for Deference
IOSCO published a series of eleven good practices on processes for deference to assist regulatory authorities in mitigating the risk of unintended, regulatory-driven market fragmentation and to strengthen international cooperation. The aim of the good practices identified in the report is to help members in establishing and operating efficient deference processes. They are underpinned by the philosophy that deference processes should be outcomes-based, risk-sensitive, transparent, sufficiently flexible, and supported by strong cooperation. IOSCO drew on the experience of the EC and members of the Committee on Payments and Market Infrastructures (CPMI)-IOSCO to develop these good practices.
Over time, the use of deference between regulators has significantly increased, in parallel with enhanced cross-border capital flows. In June 2019, IOSCO published a report on market fragmentation and cross-border regulation, suggesting that it should identify good practices to enhance the processes for deference determinations further. The good practices identified in the report cover all phases of deference assessments—from the initial stages to the processes put in place once an assessment determination has been made. These practices focus on several key issues, including the following:
- Arrangements for ensuring transparency of deference processes, including the scope, steps, and criteria
- The criteria for making an outcomes-based assessment of the assessed authority and/or firm, including the nature of the supervisory and enforcement practices in the assessed jurisdiction
- Important factors such as the nature and degree of risks that entities from another jurisdiction may pose in their markets
- The level of engagement, cooperation, and communication between the assessing authority and the assessed authority and/or firm throughout the process and once deference has been granted
- Revocation of a deference determination
Related Links
Keywords: International, Banking, Securities, Good Practices, Deference Processes, Cross-Border Activities, Market Fragmentation, Systemic Risk, IOSCO
Featured Experts
Dr. Samuel W. Malone
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous Article
IASB Decides on Effective Date for Phase 2 Benchmark Reform ProposalRelated Articles
ECB Allows Temporary Relief in Leverage Ratio Amid COVID-19 Pandemic
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs Launch Survey on Templates for Product Disclosures Under SFDR
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB Proposes Integrated Reporting Framework to Reduce Burden for Banks
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
EBA Provides Opinion on Definition of Credit Institution in CRR
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
APRA Consults on Alignment of Daily Liquidity Report for Banks
APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.
FED Releases Scenarios for Second Round of Stress Tests on Banks
FED released hypothetical scenarios for a second round of stress tests for banks.
FED to Temporarily Revise FR Y-14 Reports to Conduct Stressed Analysis
FED is proposing to temporarily revise the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes necessary to conduct stressed analysis in connection with the re-submission of capital plans, using data as of June 30, 2020.
FED Revises Information Collection Under Market Risk Capital Rule
FED adopted a proposal to extend for three years, with revision, the information collection under the market risk capital rule (FR 4201; OMB No. 7100-0314).
EBA Seeks Input on ESG Disclosure Practices of Banks
EBA published a voluntary online survey seeking input from credit institutions on their practices and future plans for Pillar 3 disclosures on the environmental, social, and governance (ESG) risks.
