Banks and Professionals of the Financial Sector

The financial regulatory environment is and will continue changing significantly, both at global as well as at local level. Sustainable Finance, MiFID II, AML, EMIR Refit, CSDR or IT Regulatory are just a few examples of a long list of topics that have to be treated and that as such require increased investment - in terms of time as in resources.

In order to meet the demands of this ever more complex and fast-moving regulatory requirements, we at PwC can help. Our seasoned and experienced staff are experts in their field, assisting you in understanding business, regulatory and operational impacts of any new regulations, providing you with hands-on advice, licensing and implementation support and best-practice sharing.

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Who is subject to governance rules?

As a Bank or a Professional of the Financial Sector, you are subject to corporate governance rules detailed in various regulations (depending on your status). In particular, Banks are subject to the CSSF Circular 12/552 on central administration, corporate governance and risk management (as amended by the newly issued CSSF Circular 20/759). Investment firms are, from their part, subject to the new CSSF Circular 20/759.

What is Governance all about?

Regardless of the service you provide to your clients, the aim of the regulatory framework is to define and implement:

A clear organisational structure;
An effective decision-making process;
A robust internal control framework;
Sound administrative and accounting procedures;
Consistent lines of responsibility and reporting;
Effective processes to manage and report risks.

The revised version of the CSSF Circular 12/552 strengthens the internal governance mechanisms to be implemented Banks and introduces new requirements on the individual and collective suitability of Management Bodies”.

Who is subject to EMIR?

EMIR applies to all financial counterparties such as credit institutions, investment firms or UCITS, and to non-financial counterparties such as corporates, professionals of the financial sector that do not qualify as financial counterparties or securitisation vehicles. Moreover, it applies indirectly to non-European counterparties trading with European counterparties.

What is EMIR about?

EMIR introduces, among others, the following obligations:

Report all derivative contracts to a trade repository, covering new trades, as well as daily updates on valuation and collateralisation of existing contracts;
Assess one’s own status with regard to the clearing threshold across 5 derivative types and if relevant, notify the CSSF and ESMA accordingly;
Apply risk mitigation measures and processes for OTC derivatives contracts that are not centrally cleared by central counterparties, including collateral exchange, with both initial and variation margin requirements, and portfolio reconciliation with market counterparties and clients subject to EMIR;
Central clearing of standardised OTC Derivative contracts, including major Interest Rate Swaps in G4 currencies and Credit Default Swaps.

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Who is subject to Sustainable Finance?

The publication of the new Regulation on Sustainable Financial Disclosure (Regulation (EU) 2019/2088, “SFDR”) establishes a new regulatory framework for the sustainable finance.

SFDR applies to financial market participants, i.e. credit institutions and investment firm providing portfolio management services, AIFMs and UCITS Management Companies, as well as to Investment Advisers such as insurance intermediaries or credit institutions providing investment advices.

The objective of SFDR is to increase overall transparency on ESG products (Environmental, Social and Governance) by reducing the asymmetry of information between end-investors and financial entities with the purpose to enhance transparency with regard to sustainability risks and impacts.

What is Sustainable Finance about?

The new Sustainable Finance regulatory framework introduces new transparency requirements for financial institutions regarding the environmental impact of their investment advices and decisions, mainly at two levels:

At entity level, financial institutions are required to incorporate the sustainability risks in their investment processes and to communicate on the consideration of the main negative impacts of their investments on the sustainability factors.
At product level, financial institutions are required to disclose the potential adverse impacts of the investment decisions on sustainability factors and to communicate on how sustainability risks are integrated and taken into account in their investment processes.

SFDR will entry into force on 10 March 2020 and will have significant impacts on the Banks’ investment processes and product design, as well as on the ESG information to be disclosed to their clients.

Who is subject to PSD2?

As a payment service provider located in the EEA, you are subject to PSD2 for all transactions performed within the EEA in any currency, including specific requirements when the other end of the transaction is located outside the EEA. Additional technology-related requirements apply if the payment service provider provides online access to payment accounts.

What is PSD2 all about?

The aim of framework of PSD2 is to enhance the regulatory framework for payment services within the EEA by:

Regulating and harmonising payments’ market process within the EEA (e.g. in terms of execution time frames and value dates; processes to be implemented; information disclosed, etc.)
Improving system security
Strengthening consumer rights and reducing overall costs

The CSSF has recently published three new Circulars introducing new reporting requirements for payment service providers:

Reporting on major incidents;
Reporting on frauds;
Reporting on operational and security measures.

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Contact us

Olivier Carré

Regulatory & Compliance Advisory Services Leader, PwC Luxembourg

Tel: +352 49 48 48 4174

Cécile Liégeois

Regulatory & Compliance Advisory Services - Banking - Partner, PwC Luxembourg

Tel: +352 49 48 48 2245

Isabelle Melcion-Richard

Regulatory & Compliance Advisory Services - Banking - Managing Director, PwC Luxembourg

Tel: +352 49 48 48 2469

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