Tuesday November 7 2017
News Source: Fund Regulation
Focus: Money Market Funds
Type: General
Country: International
On 3rd November 2017, the International Organization of Securities Commissions (IOSCO) published two updated reports titled “Update to the IOSCO Peer Review of Regulation of Money Market Funds” and “Update to the IOSCO Peer Review of Implementation of Incentive Alignment Recommendations for Securitisation.”
The reports summarise IOSCO’s ongoing efforts in monitoring implementation of reforms for money market funds (MMF) and securitization since IOSCO published its two peer reviews in September 2015.
The MMF report covers three topics (valuation, liquidity management and MMFs that offer a stable NAV) and finds that most jurisdictions have implemented the fair value approach for the valuation of MMF portfolios, but progress in liquidity management is less advanced and less even.
Members from 24 participating FSB jurisdictions were asked to report any regulatory reforms in these areas by 8 June 2016 for the 2016 Update Review; and by 7 February 2017 for the 2017 Update Review.
In 2016, it was found that changes in implementation status were warranted for China, Japan and Saudi Arabia (Reform Areas (c) Valuation and (d) Liquidity Management). The Update Review also found that reforms were underway in Brazil, the EU, Russia, Hong Kong, Indonesia and South Africa, however, these did not warrant a change in implementation status.
In 2017, it was found that changes in implementation status were warranted for Japan, Saudi Arabia (Reform Area (d) Liquidity Management) and United States. The Update Review also found that significant reforms took place in Russia, Switzerland and the EU which did not warrant changes in implementation status. Additional implementation efforts were also reported in Australia, Hong Kong, India, Indonesia, Republic of Korea and South Africa.
The Securitisation Report covers two topics (incentive alignment arrangements and disclosure requirements) and finds that overall, progress remains mixed across participating jurisdictions in implementing the recommendations for incentive alignment for securitization.
The Securitisation Report provides an update on the status of implementation of the two Reviewed Reform Areas for 2016 and 2017, respectively.
In 2016, it was found that changes in implementation status were warranted for Australia (Reform Area 1), Germany, Hong Kong and Russia. Implementation status for France, Italy, the Netherlands, Spain and the United Kingdom had changed in the insurance sector, but the overall implementation status had not changed.
In all jurisdictions but Australia, these changes are advances in the extent of implementation. In Australia, the implementation status has been downgraded. The Update Review also found that reforms were underway in Brazil, India and South Africa, however, these did not warrant a change in implementation status. In 2017, it was found that changes in implementation status were warranted for Hong Kong, Republic of Korea and United States.
The Update Review also found that significant reforms took place in Saudi Arabia and the EU which did not warrant changes in implementation status. Additional implementation efforts were also reported in Argentina, Brazil, Indonesia, South Africa and Turkey. Of the three Participating Jurisdictions which reported completed reforms in the two Reform Areas since 2016, two jurisdictions (United States and Republic of Korea) account for approximately 79% of the global market.
In 2017, changes to implementation status were required for three jurisdictions: Hong Kong, Republic of Korea and United States. For Hong Kong, implementation status for both Reform Areas was upgraded from “Draft adoption measures published” in 2016 to “Final adoption measures taken and in force” in 2017. This follows supervisory guidance on credit risk transfer issued by the Hong Kong Monetary Authority (HKMA) coming in to force.
In 2017, the Republic of Korea reported an incentive alignment approach that involves disclosure requirements in combination with prevailing market practice and credit incentives for ABS originators to retain parts of the asset-backed securitisation (ABS). Consequently, the implementation status for both Reform Areas was upgraded from “Draft adoption measures not published” in 2015 to “Final adoption measures taken and in force” in 2017. The United States similarly saw all Risk Retention Rules coming in to force from 24 December 2016. The status was consequently upgraded for both Reform Areas from “Final adoption measures published but not taken or in force” to “Final adoption measures taken and in force”.
Another seven jurisdictions (Argentina, Brazil, India, Indonesia, Saudi Arabia, South Africa and Turkey) reported planned or additional reforms in relation to securitisation. However, there was no change to implementation status on the basis that the proposed reforms are not yet published; they do not affect the Reviewed Reform Areas; or they appear to add to the existing adoption measures (which were already reflected in the implementation status).
Five EU jurisdictions (France, Italy, the Netherlands, Spain and the United Kingdom) also reported domestic legislative or regulatory changes in the insurance sector as a consequence of the EU’s Solvency II Directive coming into effect. While the insurance sector ratings were changed accordingly, the overall ratings for these jurisdictions remain unchanged due to previously noted reforms for Undertakings for Collective Investments in Transferable Securities Directive (UCITS) not progressing. In 2017, EU member jurisdictions confirmed that UCITS sector regulation has not progressed.
The updated reports also takes note of new regulations yet to come into force or into application in various jurisdictions that may contribute towards more complete implementation of IOSCO’s recommendations
Please see below links to the Reports.
Please click on the above link for more information.