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Deutsche BankGlobal Transaction Banking
Leading the way through regulatory change June 2016
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Contents1 Editorial by Christian Westerhaus
Our Head of Product & Strategy, Institutional Cash Management explains why the topic of regulation continues to be a driving force for our industry.
2 NewsA round-up of each of the major regulatory initiatives currently underway, how they are likely to impact you and what to expect and when.
3 The regulatory wheelA one page overview as to how regulation impacts clients differently on a regional and product perspective.
4 Feature: NIRP – The new rules of the gameTwo to three years ago, negative interest rates would have been regarded as a theoretical curiosity. Within the past few years however, they have begun to emerge as policy among some central banks. Anne-Katrin Brehm from Deutsche Bank's Institutional Cash Management team looks at the potential implications.
5 Segment Focus: The Implications of the Bank Recovery and Resolution Directive to banking productsPolina Evstifeeva from our Market Advocacy Team discusses whether bail-in rules for specific products will help the resolvability of banks in the future and how this will affect European Union banks’ product offering.
6 Segment Focus Correspondent Banking – Safety and Soundness drive the access to other marketsMarko Niederheide of the Market Advocacy team looks at reasons why a number of correspondent banking relationships have been terminated in recent years and anticipates the impact on world trade.
7 The road aheadOn any journey, it pays to have a good map. We summarise the key milestones, who will be impacted and how.
8 ContactsThe Market Advocacy team is ready to discuss regulatory topics with clients and other interested parties.
9 GlossaryOur glossary provides a simple explanation of various regulatory terms.
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This edition takes a closer look at how regulation impacts clients differently from a regional as well as product perspective. We also focus on the implications of the Bank Recovery and Resolution Directive, how negative interest rates have begun to emerge as a stated policy of some central banks as well as the current state of play in the Correspondent Banking space.
Collaboration is the key to improving, safety, soundness and efficiency
One area where more information and guidance is required is in the area of Know Your Client (KYC) Compliance. This was a topic of focus at our recent Transaction Bankers’ Forum held in Frankfurt and a take-away from that event was to increase interaction through establishing specific compliance forums as well as to increase trainings and webinars.
A key issue concerning KYC regulations, of course, is that they vary considerably between jurisdictions, making compliance even more challenging. On top of this, given the ever-increasing criminal and fraudulent activities in the environment in which we are operating,
regulators have long since moved to the next phase of “Know Your Client’s Client” (KYCC) and even “Know Your Transaction” (KYT). Indeed, knowing not only our clients but also their underlying clients and the relevant activity flowing through the payment system has become a critical function that regulators are urging banks to provide.
One thing is very much apparent on the issue of regulatory compliance. We need to adopt a more collaborative focus across the industry, be that in terms of information exchange, making best use of KYC registries and engaging with clients, peers, market infrastructures and regulators themselves. Only in this way can we truly improve the safety, soundness and efficiencies in the Transaction Banking industry.
Editorial: Christian Westerhaus
While a great deal has already been achieved on the subject of regulation, it is a topic that still remains very much at the forefront of our businesses within Global Transaction Banking. In our last edition, we focused in detail on the Capital Markets Union, Payments Services in Europe and T2S.
Christian Westerhaus Global Head of Product & Strategy, Institutional Cash Management
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NewsInitiative Latest Status What’s next
Anti-Money Laundering Directive IVSafeguarding the interest of society from criminality and terrorist acts
The EC implements measures to improve cross-border transaction oversight via identification of beneficial owner information, creation of public central registries. Going forward banks are being held responsible for their KYC process
Legislation – Q2 2016 – Development of L2 standards
– Q3 2017 – Applicability of regulatory requirements
ASEAN Economic Community (AEC) Blueprint 2025One of the 3 pillars of ASEAN Community Vision 2025. Continues the work started by AEC 2015
AEC Blueprint 2025 will focus more on domestic business and SME growth, innovation and technology, governance, elimination of non-trade barriers, tax cooperation, financial services including insurance, trade in goods and services and healthcare
Planning – 2016 end – complete the implementation measures unfinished under the AEC Blueprint 2015
ASEAN cross –border bond settlement intermediaryDevelopment of deep local currency bond markets and the promotion of cross-border flows
The cross-border settlement infrastructure forum (CSIF) publishes a progress report which includes the implementation roadmap for establishment of the CSD-RTGS linkages.
Planning – 2018 – CSD-RTGS linkages to be developed
– 2020 – development of integrated solution
Asia Region Funds PassportCreation of harmonised funds regulation across Asia
Finance officials and regulators from the seven APEC economies (Australia, Japan, New Zealand, South Korea, Thailand, Singapore and the Philippines) have broadly agreed on the content of a Memorandum of Cooperation (MOC).
The APEC group is currently evaluating the taxation differences across the economies that could hinder the competitiveness of the scheme.
Implementation – Q2/Q3 2016 – Memorandum of Cooperation becomes effective
– 2017 – launch with pilot countries
Basel IIINew capital requirements for banks, introduction of liquidity coverage ratio and leverage ratio
Basel III standards have been published and are to be converted into local law. These introduce new measures that banks need to adhere to:
Liquidity Coverage Ratio (LCR) – banks need to hold sufficient High-Quality Liquid Assets (HQLA) to cover the calculated total Net Cash Outflows over a 30-day period.
Net Stable Funding Ratio (NSFR) – available stable funding has to exceed the required level.
Leverage ratio – caps the total size of a bank’s balance sheet at a multiple of its capital.
Implementation – Ongoing Consultation process on several elements of the BASEL rules
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Initiative Latest Status What’s next
Capital Markets UnionDiscussing the next steps to Growth in Europe
The European Commission following its Green Paper has outlined a plan to promote and develop the EU market. Particular focus on SME financing, long-term investments, securitization markets and approach on EU insolvency laws. The European Post Trade Forum has been set up to deliver a report on existing barriers and how those could be overcome.
Planning – During 2016 – EC to present an action plan based on the responses submitted to Call for Evidence on Rules impacting the industry
– Q2 2016 – EU Commission consult on barriers to cross-border distribution of investment funds
– Q4 2016 – Legislative proposal on insolvency
CRA3Disclosure and rating requirements in relation to "structured finance instruments"
The CRA III package comprises a directive (2013/14/EU) and a regulation (EU 462/2013) (“CRA 3”). The CRA III package came into force in June 2013, although it is not yet possible to comply with all aspects.
Implementation – Q2-Q4 2016 and 2017: Additional RTS on SFI disclosure and treatment of private/bilateral transactions
CSDRRegulation of CSDs as systemically important market infrastructures
Proposal covers elements of settlement efficiency and also CSD Governance and set-up. CSDR has entered into force in September 2014. Current focus is on the measures for settlement discipline, prescribing fines for late settlement and processes around the buy-in of late deliveries.
Implementation – Q2/Q3 2016 – Adoption of L2 measures for CSDR
– Q3 / Q4 2016 – CSD to start re-authorization process
DTCC – T+2 The Depository Trust & Clearing Corporation (DTCC) has announced its intention to shorten the settlement cycle for US securities, following the publication of a study conducted in 2012. The move to T+2 would represent a positive step towards sounder markets and would align the US settlement cycle with global market practices.
Industry initiative – 2016 – finalization of industry requirements and process alignments
– Q1 2017 – Start of testing for T+2 migration
– Q3 2017 – T+2 implementation
EMIRRegulation covering OTC derivatives (central clearing)
Initial compliance dates have already been reached. Current focus is on preparation for mandatory clearing to start. EMIR review process started by European Commission to analyse potential changes to legislation.
Compliance – Q2 / Q3 – potential further news on EMIR review
Enhanced Prudential Standards for Foreign Banking Organisations (FBO)Applies enhanced prudential standards and early remediation framework for FBOs
All large FBOs with a balance sheet of USD 50 billion of assets or more are required to create a separately capitalised top-tier US intermediate holding company (IHC) to harbour all US bank and non-bank subsidiaries (excludes branches). IHC will be subject to US capital/leverage requirements, stress testing, and liquidity management standards.
Implementation – July 2016 IHC formation
– November 2016 – First US Basel III standardized reporting submission of the IHC as of 30 Sep 2016
– January 2018 – US Basel III Leverage Ratio conformance
FDIC DIF Assessment Surcharge
Proposal to increase the Deposit Insurance Fund (DIF) to the statutorily required minimum level per the Dodd-Frank Act.
Legislation – Q2 / Q3 2016 (TBD)
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Initiative Latest Status What’s next
Financial Transaction TaxIntroduction of a Europe-wide tax on financial transactions
FTT regimes already exist in France and Italy. 10 EU countries wish to implement a harmonised regime through enhanced cooperation. There is political commitment to an FTT on equities and some derivatives but final details residence and issuer principles have yet to be fleshed out.
Legislation – Continued political negotiation
– Legislative proposal to be published
Fund RegulationRegulating the investment fund industry
Since July 2013, the alternative investment industry has been regulated through AIFMD. There is a strong focus on investor protection and increased liability for depositories. This also reflected on UCITS instruments through the fifth revision of UCTIS Directive.
Implementation (UCITS V)
Compliance (AIFMD)
– Q1 2016 – Adoption of Level 2 for UCITS V measures expected
– Q4 2016 – ESMA to issue Guidelines on Asset Segregation of AIF assets
Funds Transfer RegulationAlignment of EU standards to Global Payment standards
The EU Commission introduced an obligation on payment service providers to have transfers of funds accompanied by information on the payer and the payee. This aligns European payment process to global FATF standards.
Implementation – Q2 2016 – Work on Implementing Measures concluded
– Q2 2017 – Entry into force of regulatory requirements
Global Payments Innovation InitiativeSWIFT collaboration with the industry
Primary aim of the initiative is to improve the customer experience in correspondent banking. This will be achieved by increasing the speed, transparency and predictability of cross-border payments. Initial focus will be on a B2B payments service
Industry Initiative – Q3/Q4 2016 – Test of new message header for greater transparency
– 2HY 2016 – specification for “cloud” payment tracking
Instant Retail Payments across Europe Initiative of the European Retail Payments Board
European Payments Council (EPC) prepared a proposal for the design of an instant SEPA Credit Transfer scheme in euro which could be adhered to by EU payment service providers on a voluntary basis.
Industry Initiative – Jun 2016 –Preparation of interim progress Report
– Nov 2016 – Preparation of Rule Book for Payment Service Provider
– Nov 2017 – implementation of proposal
MiFID II/MiFIRAddresses market regulation and investor protection. Also includes new products and venues
New safeguards for algorithmic and high frequency trading have now been added. This will improve the transparency of trading activities in equity markets, including so-called ‘dark pools’. There is also stronger investor protection in the form of stricter requirements for portfolio management, investment advice and the offering of complex financial products, for the safeguarding of client assets and for clearing members. Current focus is on implementing measures.
Implementation – ESMA to define level 2 Technical Standards in early 2016
– January 2017 –MIFID II implementation into national law in Member States
Money Market Funds ReformAmendments to the rules that govern money market mutual funds
Published in August 2014, the final rule intends to (i) reduce the risk of runs in money market funds and (ii) provide tools (fees and gates) that will help protect investors and the financial system, thereby ensuring resilience and transparency in the market. There is also a requirement for institutional funds to maintain floating NAVs
Implementation – October 2016 conformance date for floating NAV, fees and gates
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Initiative Latest Status What’s next
Payment Services DirectiveThe revision of the original Directive that dealt with new developments in the payments space
The main components of the directive include the licensing of online payment initiation services performed by non-banking institutions, extended transparency, improved consumer protection against fraud through two factor authentication and secure communication measures. Current focus is on L2 measures.
Implementation – Level 2 Consultation on two factor authentication and secure communication
– 2017 – EC to adopt Level 2 measures
– Q1 2018: PSD 2 comes into force
EU Structural reform The separation of certain trading activity from deposit taking at national and EU level
Several EU countries (FR, UK, DE) have already passed legislation but have very different approaches to separation. The European structural reform proposal, published January 2014, aims to harmonise these. This is being negotiated so there is a lack of clarity as to what will actually be required.
Legislation (European Proposal
Implementation (national laws)
– Q2 – Trilogue negotiations
– Q3/ Q4 2016 –legislation adopted (est)
– 2017-18 – European proposal to come into force
Same Day ACH Enabled same day processing of all ACH transactions (debits & credits) valued at no more than US$25k.
Implementation – Q3 2016 – Phase 1 (credits transactions only)
– Q3 2017 – Phase 2 (debits will added)
– Q1 2018 – Phase 3 (introduction of faster availability requirements)
Securities Financing Transaction Regulation (SFT-R)
Regulation to increase transparency in the securities financing industry by mandatory reporting and revision of certain contracts
Regulation – Jul 2016 – Re-use of collateral rules to apply
– Jan 2017 – Reporting of SFT in UCITS reports
– Jan 2017 – ESMA to propose Implementing Standards
T2/T2S Platform adaptation“ECB Vision 2020”
European Central Bank has started a review of its system infra-structure. Long-term objective would be the consolidation of the technical infrastructure so that TARGET2 can benefit from state-of-the-art features currently available in T2S.
Industry Initiative – Consultation period of initial phase ended in Q1, ECB is currently processing responses
– Q3/Q4 2016 further consultation on T2/T2S platform consolidation expected
TARGET2-Securities (T2S) A single, harmonised, pan-Europe securities settlement platform
T2S platform went live in June 2015. Portuguese and Belgian CSD migrated to T2S in March 2016. Euroclear group CSDs have announced delay in testing activity and will have to migrate at a later stage.
Industry initiative – Jul 2016 – Meeting of the T2S Advisory Group
– Sep 2016 – Migration Wave 3
Volcker RuleAims to reduce the amount of speculative investments on larger firms’ balance sheets
The final rule prohibits banking entities from engaging in proprietary trading, as well as from investing, sponsoring, and engaging in certain other relationships with covered funds (hedge funds or private equity). The Volcker Rule effectively covers every bank with a meaningful US trading business, regardless of domicile.
Compliance – July 2016 – conformance deadline for certain covered funds and foreign funds
Status Legend:
Planning: Initiative under general discussion, no legislative text availableLegislation: Initiative in political process, legislative text availableImplementation: Legislative text agreed, Implementation measures under discussionCompliance: Compliance milestone reached, rules fully in forceIndustry initiative: No political development, but industry led change
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The Regulatory Wheel
Timeline Q2 2016
FDIC Surcharge Assessment
Q2 2016
CSDR
Introduces a surcharge assessment on banks (targeted) Publication of Level 2 standards
Infrastructure
Global Custodian
Broker Dealer
Investment Manager
Institutional
Insurance
Corporates
Basel III
T2S
AIFM
D
UC
ITS
Rights D
irective
EMIR
FTT
CSDR MiFID2
PSD 2
SFT-R
Bench
mar
ks
Ban
king
sep
arat
ion
AM
LD/F
TR
BR
RD
B
roke
red
Dep
osits
Sa
me D
ay A
CH
SSC (t+2)
Offshore RMB
Significant business impact expected
Moderate business impact expected
Low business impact expected
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Timeline
Shortened Settlement Cycle (SSC) T+2 Funds Transfer Regulation
Q2 2016 Q2 2016
Finalization of Industry requirements and alignments Finalisation of Implementing Standards
Anti-Money Laundering Directive (AMLD)
Q2 2016
Publication of L2 Standards
Two to three years ago, negative interest rates would have been regarded as a theoretical curiosity. Even in 2014, it was a measure that was only considered by a select number of small developed countries, but still viewed as highly unconventional.
However, within the past two years they have begun to emerge as a stated policy of some central banks operating in the most powerful global economies – often referred to as Negative Interest Rate Policy (NIRP). Anne-Katrin Brehm from Institutional Cash Management looks at the potential implications.
Generally speaking, it is a standard procedure by central banks to cut interest rates when economies face the prospect of deflation. That in itself is nothing unusual. What is new though is that several countries have taken the decision to cut rates below zero almost simultaneously, thereby catapulting the financial market into a new environment and challenging the architecture of financial markets that are not currently in crisis.
Central Bank reasoning on negative interest ratesTo interpret the full implications of these actions, it is important to understand the different reasons behind taking the unknown path into negative interest rate territory. For the Eurozone and Sweden, raising inflation and boosting the economy was the main rationale. In Denmark and Switzerland, the primary objective has been to prevent a steep currency increase. This is understandable given that decreasing interest rates leads to a depreciation of the home currency and thereby discourages investors from buying the local currency, which tends to push its value in the long run.
Besides the Eurozone, Sweden, Switzerland and Denmark, Japan also recently joined the ‘negative interest rate club’. In the US, the Federal Reserve is watching and examining the experience of these countries rather than seriously debating negative interest rates, according to the Federal Reserve chair Janet Yellen. In any case, many economic experts think it unlikely the Fed will seriously consider this step when inflation is moving upwards. Firstly, the economy would have to deteriorate considerably. Secondly, it would represent a sharp reversal of their December rate hike. Furthermore, there is even a question as to whether the US payment system would be compatible . In fact, many are now questioning whether the entire global financial system is compatible with such a move.
Feature NIRP – The new rules of the game
NIRP - an exceptional monetary policy tool bringing nominal target interest rates below the zero bound
7
Inte
rest
rat
e in
%
6
5
4
3
2
1
007 08 09 10 11 12 13 14 15 16
-1
-2
ECB deposit facility rate
SNB deposit rate
DNB certificate of deposit rate
Riksbank deposit rate
BoJ main policy rate
Fed target rate
BoE deposit facility rate
Key policy interest rates developments
Source: Reuters, Riksbank
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Timeline
Implications for banksThe banking sector, with its underlying payment system architecture, is clearly affected as negative interests have a fundamental affect on underlying transaction flows. Commercial banks normally hold deposits at their central banks as settlement balances for clearing purposes in order to facilitate payments on behalf of their clients and to meet legal minimum reserve requirements. Now they face costs for holding balances with their central banks overnight to follow up with their operational behaviour. These balances are mainly triggered by their institutional and corporate clients. It is now up to the banks to find ways of coping with it.
As soon as official interest rates hit zero, an area where banks have traditionally made money gets squeezed
But why does the move from close to zero rates to below zero rates make such a big difference? In a "normal" positive market environment central banks pay interest on excess deposit above minimum reserves. Financial institutions usually minimized these excess levels as central bank deposit rates were typically below market rates – there was no incentive to hold excessive cash balances with central banks as investing funds in the market was more profitable. This changed in the low interest environment as the spread between rates diminished and arbitrage opportunities increased due to risk aversion. As soon as official interest rates hit zero, an area where banks have traditionally made money gets squeezed: net interest margins. Further cuts below zero reduce banks’ lending rates but not their borrowing rates, leading to a situation whereby lending may become unprofitable.
Analysing the impactIt is evident that more and more banking businesses are placing the negative interest rate topic on their agenda and attempting to analyse the consequences. It is not only Transaction Banking that is affected. The official cut in rates also impacts money markets, the result being fewer investment opportunities for market participants. For 2016, Fitch expects euro-denominated Money Market Funds to stay in negative territory in contrast to sterling and dollar denominations. Additionally, the pension and insurance businesses may struggle to meet their long-term liabilities offered at fixed nominal rates. Looking at its overnight interest swap curve, the market expects the Swiss franc to stay in the negative interest rate territory for more than five years.
Furthermore, the impact differs among market participants.
Financial institutions have to absorb the cost or at least find ways to share the costs with their depositors. At the same time liquidity is fundamental and imperative for financial institutions to execute on their transaction flows to facilitate global economic business. Bank deposit levels have not fundamentally changed and remain stable which is a sign that the market may have found a way to come to terms with negative rates. However, this has been to the detriment of bank profitability. Financial institutions have to find ways to offset declining interest revenues such as higher lending volumes and lower risk provisioning. This too may become limited when interest rates further decrease.
Corporate treasurers face similar challenges. They also have limited opportunities to avoid negative interests as they are not able to completely substitute currencies due to their strategic orientation on specific currencies according to their underlying business and footprint. Alternative investment solutions mostly come at a cost as most product solutions reflect market situations. Changing investment strategies and the acceptance of longer investment tenors to near-zero or positive yields would be the consequence.
How far can central banks go?One of the main questions economists are now asking is how far can central banks go with their negative rate policy. Currently, most rates are in the range between zero and -1%. It is clear that the attempt on behalf of central banks to increase inflation and boost economic growth have not [yet] been achieved with the introduction of the below zero rate step.
If central banks push rates too far into negative territory, there is a danger the financial sector could face new facets of systemic risks. There is also an opinion that several large sectors of the economy may become bank-note based or that financial institutions will have to consider a tax on money. This would question the core architecture, constitution and logic of financial markets. The uncertainty about actual implications has reinforced the need for tighter communication among market participants and the need for forecasting cash flows to enable a smooth transaction flow and a cost-limited use of funds.
Collaboration among central bodies, commercial banks and their clients will be key to handling the new situation the entire market finds itself in. It is not only a question of analysing and understanding the implications of macro-economic and financial market fundamentals. It is also a question of validating the constitution and technical plumbing of systems and banking products and whether they are compatible with negative rates. Contractual arrangements as well as practice and investment guidelines may also have to be adjusted under the new lens of negative interest rates. The scope of implications on the Transaction Banking business have not yet been fully explored as the negative interest rate environment is not a business cycle expression – it’s a structural one!
Q2 2016
Instant Retail Payments
Q2 2016 Q3 2016
Asian Region Funds Passport EU Structural Reform
Preparation of interim progress Report by European Retail Payments Board Memorandum of Cooperation signing Adoption of legislative proposal
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EU Structural Reform
Adoption of legislative proposal
Timeline
Enhanced prudential standards for FBOs Same-Day ACH
Q3 2016 Q3 2016
IHC Formation (Jul 1)
IHC to meet US Basel III requirements (Jul 1)Same-day processing of credit transactions
Securities Financing Transaction Regulation (SFT-R)
Q3 2016
Re-use of collateral rules to apply
The adoption of the BRRD is part of the EU’s response to the financial crisis of 2007-2008, and especially the issue of bank resolution. EU member states had to use taxpayers' money to prevent the failure of banks deemed too big to fail (Bail-Out). Ensuring this doesn’t happen again is the purpose of BRRD.
As before (prior to the introduction of the BRRD), member states will retain their own insolvency regimes, but BRRD precedes the commencement of formal insolvency proceedings. BRRD also establishes tools that ensure the continuity of essential functions of a given bank while in resolution. This aims to minimise the impact of the bank’s failure on the financial system. To recapitalise the bank when it reaches the point of non-viability, one of the tools vested on resolution authorities, is the power to bail-in certain liabilities of the bank, either by writing them down or by converting them into equity.
BRRD also establishes tools that ensure the continuity of essential functions of a given bank
Usually, European banks are not only active in the European Union but also, offering a global service and sometimes they contract with clients in non-EU law. To ensure that all liabilities of European banks could be bailed-in, BRRD provides special measures for liabilities in scope of bail-in governed by non-EU law. It is required that such liabilities should contractually recognise the powers of EU resolution authorities to impose a bail-in As the bail-in powers are provided under EU legislation (BRRD), one might argue that legally it does not apply to liabilities governed by non-EU law. Requiring implementation of contractual recognition of bail-in powers for non-EU contracts creates a level playing field for an EU bank’s liabilities. By signing up to such terms a client recognises that the product purchased from a European bank could be subject to bail-in.
An important element of resolution regimes, contractual recognition of bail-in powers, is one of the burning questions troubling the industry. Polina Evstifeeva from our Market Advocacy team asks if this specific rule help the resolvability of European Union (EU) banks and how this will affect their product offering.
Segment Focus The Implications of the Bank Recovery and Resolution Directive to banking products
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TimelineQ3 2016 Q3 2016
Capital Markets Union TARGET2-Securities
Q3 2016 Q4 2016
CSDR Money Market Fund Reform
EC to publish potential action plan Go-Live of Wave 3 Migration
Level 2 standards entry into force
Implementation period to start
Level 2 standards entry into force
Implementation period to start
In practice, this means that each EU bank has to reach- out to its clients whose contracts are captured by this requirement and to ensure that respective contractual changes are made. As one can imagine, this is a comprehensive and difficult exercise.
As long as bail-in of a given liability can contribute to the bank’s resolvability, these measures, although challenging for implementation, would reach their goal. However, requiring the implementation of contractual recognition of bail-in provisions for contingent liabilities (e.g. banking guarantee or letter of credit) would not have the same effect. Such liabilities although according to BRRD are in scope for bail-in, from a practical perspective, could not contribute to a bank’s resolvability until being claimed, triggering a duty on the side of the bank to make the agreed payment. Besides, such liabilities do not form part of MREL (Minimum Requirement for Own Funds and Eligible Liabilities). As a contingent liability may never be claimed, the bank will probably never have to pay under its terms. But such liability is expected to be amended to incorporate contractual recognition of bail-in powers.
In practice, contribution of contingent liabilities to resolvability of a bank is unclear until they are actually claimed.
The key concern of the industry about this is the practicality of such an exercise for certain liabilities. Whereas contractual recognition of bail-in powers for liabilities resulting, for instance, from bonds issued by a bank whose bail-in would help resolvability seem logical and helpful, requiring the same for contingent liabilities with hard to define value prior to being claimed, has unclear benefits.
Such contingent liabilities as, for example, banking guarantees and letters of credit represent instruments used in trade finance for a number of years, with established terms and conditions and precise format similar across the World. Deviating from the established standards in Europe has the potential to create uneven terms for EU banks at the global level. Potentially, this might even change the shape of the well established business models.
Therefore excluding contingent liabilities from the requirements of the article 55 seems a reasonable solution which could be achieved through amending the article 55 of BBRD.
For other liabilities that require contractual recognition of bail-in, it could be that unless the way foreign liabilities are treated for the purposes of their potential bail-in is aligned on a global scale, some regions may have a legal advantage in issuing products reliant on liabilities captured by contractual recognition of bail-in requirements. This may also have knock-on effects to other banking products, with clients potentially looking for one-stop-shop solutions.
Deviating from the established standards in Europe has the potential to create uneven terms for EU banks
Clearly, banking business will benefit a lot from contractual standardisation in this area - the work done by trade associations developing standard contractual terms has the potential to simplify the transition process before IGAs are established. However, still this wouldn’t take away the issue entirely as not all of the countries would do that and that would still require contractual change to be implemented for thousands of clients.
Adjusting to new regulatory requirements is always a challenge for banks and their customers. Mandating changes to contractual terms could intervene in the existing market practices and have consequences difficult to estimate before the regulations are in full operation.
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Money Market Fund Reform
Level 2 standards entry into force
Implementation period to start
Timeline
Enhanced prudential standards for FBOs Global Payments Innovation Initiative
Q4 2016 Q4 2016
First US Basel III standardized reporting submission
Test of new message header for greater transparency
Specification of “cloud” payment tracking solution
Capital Markets Union
Q4 2016
EC publication of harmonised Insolvency regime
One of the core functions of banks since the early days has been the support of international trade relations. Through a network of correspondent banks corporates and individuals are able to make and receive international payments. These correspondent banks provide an easy access into other countries allowing trading parties to pay for exporting / importing goods or even salaries and clear cheques.
According to a recent study conducted by the World Bank, a large number of international banks indicated a decline of correspondent banking relationships between 2012 and mid-2015. This could particularly concern countries in emerging markets where there may be difficulties in accessing other financial markets. And this trend could continue when looking at the factors that influence changing relationships.
Regulatory compliance and industry initiatives adds to cost baseOver the past few years, a number of regulatory requirements have come into force to aid countries in fighting money laundering, tax evasion or terrorist financing. Correspondent banks are increasingly required to comply with
global regulations. At the same time, local regulators apply additional interpretations making it even more challenging to utilise standardised approaches across the globe.
While in the past it was sufficient to properly adopt the client with whom business was being conducted, recent developments also require banks to apply further checks on the clients of the clients and better understand the business undertaken.
Correspondent banks increasingly find themselves in the position of a policeman at the first line of defence against all sorts of criminal activity . Moreover, enhanced risk-management processes among correspondent banks leads to de-risking and closing relationships with higher risk markets and higher risk client profiles.
Correspondent Banking always has been a volume-driven business. Being present in a given country requires significant investments in infrastructure. This could be the connection to a local payment system, potential requirements to execute foreign exchange transactions or the building of letter of credit facilities. Having markets with only small volumes may be unattractive from a revenue perspective.
Segment Focus Correspondent Banking – Safety and Soundness drive the access to other markets
A November 2015 study by the World Bank, Withdrawl from Correspondent Banking, indicates that a number of correspondent banking relationships have been terminated in recent years. This reduction may eventually have negative implications to global trade. Marko Niederheide, GTB Market Advocacy looks at how these could be overcome.
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Timeline
Global Payments Innovation Initiative
Q1 2017
Go-Live of new message header for greater transparency
Q4 2016
Instant Retail Payments
Q4 2016 Q4 2016
AIFMD EDIS
Preparation of Rule Book for Payment Service Provider
ESMA to adopt guidelines onasset segregation Adoption of legislative proposal
In this context it may be difficult for banks from higher risk countries to obtain correspondent banking services as banks may have less appetite to serve them from a risk and capacity perspective.
Globally-aligned Know your Customer processes How can banks and clients comply with the increased regulatory requirements and at the same time retain the viability of the correspondent banking business? Clearly one of the keys is streamlining of documentation. Several “Know your Customer” utilities such as “SWIFT Registry” and “KYC.com” are currently piloting solutions around centrally stored key client adoption information which could be used in this process. However, at present there is no globally harmonised standard focussing on the information to be provided, the frequency of data updates and relevant data integrity controls. Such a standard should also cater for local requirements. Ideally, such global standards would be prepared by an industry working group and subsequently endorsed by a global standard setter. This would ensure swift adoption within the banking industry and help the correspondent banking business.
KYC utilities must be secure and reliable and, in order for such solutions to be successful, be mandatory for correspondent banks’ participation.
Transparency on the next level – Know your customer’s customer More recently, there have been frequent regulatory requirements to further inquire on the underlying business put through the systems of correspondent banks. As a result European lawmakers have implemented regulation that will establish central databases for the determination of beneficial ownership of legal entities. In addition, these new rules require the disclosure and identification of payer and payee in certain payments throughout the chain. Should the information not be provided in the required format, will there be a need to determine on a risk-sensitive basis whether to reject, suspend or execute funds transfers that have been identified as being incomplete from a
regulatory perspective? If the payment is not rejected, the bank must request the missing information from the Payer Bank either prior or after executing the payment.
With this information, payment service providers, the correspondent banks, will be required to analyse the underlying business and will have to monitor and report suspect transactions. Some countries apply stringent data privacy rules simply prohibiting the sharing of client information with other countries. If such a scenario, banks from these countries may be cut off from correspondent banking and subsequently, their clients. Clearly, this will require significant reworking of contracts to allow data transmission.
Something also to be considered: With corporates and banks utilising multiple service providers for their correspondent banks it may be difficult, if not impossible, for them to obtain a full overview of their business in any due diligence review.
There is no globally harmonised standard focussing on the information to be provided
In a review, regulatory standard setters are asked to determine global minimum standards for due diligence requirements on a client’s clients. The lack of clarity or certainty of such standards is potentially increasing correspondent banks’ risks of to an unacceptable level. This may subsequently lead to further de-risking and even fewer correspondent banking relationships.
The LEI in payment messages is not a routing criteria With transparency in the payment space being high on the agenda to fight money laundering and terrorist financing, another element has been brought to the table: the Legal Entity Identifier (LEI). This is already implemented in the reporting requirements stemming from derivatives transaction reporting and will
be subsequently introduced for further regulatory reporting. Here it became natural to think of the LEI as a criterion to utilise in the payment space as well.
However the way payment messages are constructed today requires all information around identifying parties being made available. Moreover, the payment industry is currently undergoing an infrastructure shift from one ISO standard (FIN 15022) to the XML based ISO 20022. In this context the SWIFT BIC codes are the predominant identifier used by correspondent banks to recognise one another. The introduction of LEI in this space may help in the transparency around the payer and payee but it will require broader adoption of the LEI as corporate, and even individuals, do not generally adopt an LEI code unless they are already active in the derivatives space.
The Future of Correspondent Banking The changes in regulation and technology will force correspondent banking to modernise. But with recent industry initiatives already on the way, one can be confident the correspondent model will modernise at every stage. The future of correspondent banking will bring faster payments, more predictability and transparency and richer information all along the payment chain. It is recognised that the regulatory pressure will certainly not be reduced over time and hence the compliance requirements will remain complex. Banks, in the future, will put more focus on the initial and ongoing due diligence. Guidance from global standard setters and industry collaboration will ensure an efficient banking business with short turn-around times, while at the same time ensure that no money is laundered or terrorists financed. Markets failing to recognise this trend might be cut adrift from the global payment scheme.
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Timeline
Shortened Settlement Cycle (SSC) T+2 Securities Financing Transaction Regulation (SFT-R)
Q1 2017 Q1 2017
Industry wide testing to commence as preparation to go-live
Industry wide testing to commence as preparation to go-live
CSDR MiFID2
Q1 2017 Q1 2017
CSDs to apply for CSDR license
Transposition of Directive into local law
The road aheadWhenwill it happen?
Whowill be impacted?
Whichregulation or initiative does it relate to?
Whatwill happen?
2016
Q2 – Insured Depository Institutions
FDIC Surcharge Assessment
– Introduces a surcharge assessment on banks (targeted)
– CSDs
– Market Participants
CSDR – Publication of Level 2 standards
– Corporates
– Financial Institutions
Anti-Money Laundering Directive (AMLD)
– Publication of L2 Standards
– Financial Institutions
– Investors
– Broker Dealer
Shortened Settlement Cycle (SSC) T+2
– Finalization of Industry requirements and alignments
– Corporates
– Financial Institutions
Funds Transfer Regulation – Finalisation of Implementing Standards
– Corporates
– Retail clients
– Financial Institutions
Instant Retail Payments – Preparation of interim progress Report by European Retail Payments Board
– CSDs
– Market Participants
– Custodians
Asian Region Funds Passport
– Memorandum of Cooperation signing)
Q3 – Financial Institutions EU Structural Reform – Adoption of legislative proposal
– Financial Institutions
– Broker / Dealer
– Fund Manager
Securities Financing Transaction Regulation (SFT-R)
– Re-use of collateral rules to apply
– Foreign Banking Organisations
Enhanced prudential standards for FBOs
– IHC Formation (Jul 1)
– IHC to meet US Basel III requirements (Jul 1)
– Corporates Same-Day ACH – Same-day processing of credit transactions
– Market Participants Capital Markets Union – EC to publish potential action plan
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TimelineQ1 2017 Q1 2017
Capital Markets Union MiFIR / MiFID2
Q1 2017 Q1 2017
TARGET2-Securities Payment Service Directive 2
European Post Trade Forum to publish final report
Main elements of Regulation are applicable
Transposition of Directive to become applicable Go-Live of Wave 4 Migration EU to adopt implementing measures
Whenwill it happen?
Whowill be impacted?
Whichregulation or initiative does it relate to?
Whatwill happen?
– CSDs,
– NCBs,
– Custodians
– Market participants
TARGET2-Securities – Go-Live of Wave 3 Migration
– CSDs
– Market Participants
CSDR – Level 2 standards entry into force
– Implementation period to start
Q4 – Financial Institutions
– Corporates
Money Market Fund Reform – Money Market Fund rule conformance (Oct 16)
– Market Participants Capital Markets Union – EC publication of harmonised Insolvency regime
– Foreign Banking Organisations
Enhanced prudential standards for FBOs
– First US Basel III standardized reporting submission
– Financial Institutions
– Corporates
Global Payments Innovation Initiative
– Test of new message header for greater transparency
– Specification of “cloud” payment tracking solution
– Corporates
– Retail clients
– Financial Institutions
Instant Retail Payments – Preparation of Rule Book for Payment Service Provider
– Fund managers
– Depositories
AIFMD – ESMA to adopt guidelines on asset segregation
– Financial Institutions EDIS – Adoption of legislative proposal
2017
Q1 – Financial Institutions
– Corporates
Global Payments Innovation Initiative
– Go-Live of new message header for greater transparency
– CSDs
– Market Participants
CSDR – CSDs to apply for CSDR license
– Financial Institutions
– Investors
– Broker Dealer
Shortened Settlement Cycle (SSC) T+2
– Industry wide testing to commence as preparation to go-live
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Payment Service Directive 2
Timeline
Shortened Settlement Cycle (SSC) T+2
Q3 2017
Implementation of a shortened US trade settlement to T+2 for financial instruments settled with DTCC.
AIFMD Funds Transfer Regulation
Q1 2017 Q2 2017
Assessment of AIFMD by EC due Entry into Force of regulatory requirements
Whenwill it happen?
Whowill be impacted?
Whichregulation or initiative does it relate to?
Whatwill happen?
– Financial institutions
– Broker, Dealer
MiFID2 – Transposition of Directive into local law
– Financial Institutions
– Broker / Dealer
– Fund Manager
Securities Financing Transaction Regulation (SFT-R)
– SFT Transparency in UCITS/AIF reporting to apply
– ESMA to propose Implementing Standards for SFT Reporting
– Market Participants Capital Markets Union – European Post Trade Forum to publish final report
– Financial Institutions
– Investors
– Broker, Dealer
MiFIR / MiFID2 – Main elements of Regulation are applicable
– Transposition of Directive to become applicable
– CSDs,
– NCBs,
– Custodians
– Market participants
TARGET2-Securities – Go-Live of Wave 4 Migration
– Banking Institutions
– Corporates
– Payment Service Provider
Payment Service Directive 2 – EU to adopt implementing measures
– Fund managers
– Depositories
AIFMD – Assessment of AIFMD by EC due
– Financial Institutions EDIS – Re-insurance scheme completing national DGS; would apply for 3 years until 2020
Q2 – Corporates
– Financial Institutions
Funds Transfer Regulation – Entry into Force of regulatory requirements
Q3 – Financial Institutions
– Investors
– Broker Dealer
Shortened Settlement Cycle (SSC) T+2
– Implementation of a shortened US trade settlement to T+2 for financial instruments settled with DTCC.
– Financial Institutions
– Broker / Dealer
– Fund Manager
Securities Financing Transaction Regulation (SFT-R)
– Further SFT Transparency in UCITS/AIF reporting to apply
– EC to potentially adopt SFT Reporting standards
– Financial Institutions
– Corporates
Anti-Money Laundering Directive (AMLD)
– Applicability of regulatory requirements
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Timeline
Anti-Money Laundering Directive (AMLD) Same-Day ACH Instant Retail Payments Asia Region Funds Passport
Q3 2017 Q3 2017 Q4 2017 Q4 2017
Applicability of regulatory requirementsSame-day processing of debit transactions
Implementation of Instant Retail Payments proposal
Participating economies to implement domestic arrangements for ARFP
Whenwill it happen?
Whowill be impacted?
Whichregulation or initiative does it relate to?
Whatwill happen?
– Corporates Same-Day ACH – Same-day processing of debit transactions
Q4 – Corporates
– Retail clients
– Financial Institutions
Instant Retail Payments – Implementation of Instant Retail Payments proposal
– CSDs
– Market Participants
– Custodians
Asia Region Funds Passport – Participating economies to implement domestic arrangements for ARFP
2018
Q1 – Foreign Banking Organisations
Enhanced prudential standards for FBOs
– IHC to meet leverage ratio requirement (Jan 1)
– Banking Institutions Basel III – Net Stable Funding Ratio (NSFR) standards expected to go live globally (Jan 1)
– Financial Institutions EU Structural Reform – Proposal to enter into force
– Banking Institutions
– Corporates
– Payment Service Provider
Payment Service Directive 2 – Transposition into local law required
– CSDs
– Market Participants
– Custodians
ASEAN Cross-border Bond Settlement Intermediary
– CSD – RTGS linkages to be developed
Q2 – Corporates Same-Day ACH – Same-day processing of all ACH transactions (Mar 16)
Q3 – Financial Institutions
– Broker / Dealer
– Fund Manager
Securities Financing Transaction Regulation (SFT-R)
– SFT Reporting to start
Beyond 2018
2020 – CSDs
– Market Participants
– Custodians
ASEAN Cross-border Bond Settlement Intermediary
– Development of an integrated solution
2022 – Banking Institutions (GSIBs)
Total Loss Absorbing Capacity (TLAC) (Fed)
– Establish minimum level of unsecured long-term debt that can be converted into equity during bank resolution (Jan 1)
2024 – Financial Institutions EDIS – Full insurance of deposits and coverage of all liquidity needs/ losses in the event of a pay-out or resolution procedure
Legend: Initiatives - APAC | AMERICAS | EUROPE | GLOBAL
Asia Region Funds Passport
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Contact our Market Advocacy team
Region Contact Focus Area
Global Angus Fletcher
+44 20 7545 [email protected]
– Prudential Regulation
– Basel III
Americas Mildred C Brown
+1 212 250 [email protected]
– US Basel III
– Volcker Rule
– Money Market Funds Reform
– FBO Rule
EMEA Tanja Schrum
+49 69 9104 [email protected]
– DGS
– Separation Law
Mike Collier
+44 20 7547 [email protected]
– T2S
– Shareholder Rights
Polina Evstifeeva
+44 20 7547 [email protected]
– AIFMD
– UCITS
– BRRD
Marko Niederheide
+49 69 9106 [email protected]
– CSDR
– EMIR
– FTT
Britta Woernle
+49 69 9106 [email protected]
– MiFID / MiFIR
– PSD
– T2S
Sebastian Brutscher
+49 69 9104 [email protected]
– FATCA
– OECD CRS
Asia Pacific Boon Hiong Chan
+65 6423 [email protected]
– Extraterritorial effects – Basel III, e-procurement, etc related to
Trade & Supply Chain Finance – Cross-border securities and funds
initiatives – Market’s Clearing and Settlement
changes – Market access, KYC/AML and
repatriation issues
Cherine Yeo
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Glossary4CB – Four Central Banks
Comprise the four Central Banks of Banca d’Italia, Banque de France, Banco de Espana and Deutsche Bundesbank which have been mandated by the ECB to build and operate the T2S platform.
A
AIFMD – Alternative Investment Fund Manager Directive
European Union directive that regulates EU alternative investment fund managers, essentially hedge funds and private equity funds, as well as fund managers that manage alternative investment funds established in the EU and those that market the units or shares of such funds in the EU. (http://www.gtb.db.com/content/en/1604_2708.html)
AMLD – Anti-Money Laundering Directive
European Union directive, the fourth revision of which is currently under negotiation and expected to be finalised in Q2 2015. The latest version intends to move to a risk-based and evidence-based approach to identifying and managing money laundering and counter-terrorist risks.
APEC – Asia Pacific Economic Cooperation
The leading forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region.
ASEAN – Association of South-East Asian Nations
A political and economic organisation of 10 countries located in Southeast Asia, including the following countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.
B
Basel III
Global, voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk. Agreed upon by the Basel Committee on Banking Supervision 2010-11. The global standards need implementation into local law, i.e. CRD for Europe.
C
CMU – Capital Markets Union
Initiative by the European Commission to promote and develop a single market in capital across the 28 member states. It aims to diversify bank funding to the economy and focuses particularly on SME lending, securitisation and long-term projects.
CCP – Central Counterparty
Financial market infrastructures that can reduce and ‘mutualise’ — that is, share between their members — counterparty credit risk in the markets in which they operate.
CTFC – Commodities Futures Trading Commission
US-based independent agency of the United States government that regulates futures and option markets. (http://www.cftc.gov/index.htm)
CRD – Capital Requirements Directive
European Union legislative package covering prudential rules for banks, building societies and investment firms. The fourth revision of the Directive proposal is transposing the BASEL III requirements into European law. CRD IV is made up of: the Capital Requirements Regulation (CRR), which is directly applicable to firms across the EU, and the Capital Requirements Directive (CRD), which must be implemented through national law.
CSD/CSDR – Central Securities Depository
A specialist financial organisation holding securities such as shares or bonds either in certified or uncertified form so that ownership can be easily transferred through a book-entry rather than the transfer of physical certificates. CSDR is the European Commission new legislation to govern CSDs, aimed at aligning settlement periods across European Economic Area countries, increased settlement discipline and CSD prudential requirements .
D
DCP – Directly Connected Participants
TARGET2-Securities participants, that connect directly to the T2S platform. This connectivity option can be only be used if the participants are authorised by the Central Securities Depository of their choice. A DCP will in any case have to maintain an account with the CSD, but can place settlement instructions directly in T2S.
Dodd-Frank Act
Legislation aimed at promoting the financial stability of the United States by improving accountability and transparency in the financial system, and also to end ‘too big to fail’. Also protects the American taxpayer by ending bailouts and to protect consumers from abusive financial services practices.
E
EAT – Eurosystem Acceptance Testing
The EAT is the testing and acceptance process of the T2S application by the ECB project team as coded and delivered by 4CB.
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EBA – European Banking Authority
European Union financial regulatory institution and European supervisory authority overall, which was set up to maintain financial stability in the EU and to safeguard the integrity, efficiency and orderly functioning of the banking sector. It took over all existing responsibilities and tasks of the Committee of European Banking Supervisors.
EC – European Commission
The executive body of the European Union responsible for proposing legislation, implementing decisions, upholding the Union's treaties and day-to- day running of the EU. (http://ec.europa.eu/index_en.htm)
ECB – European Central Bank
The central bank for the euro and administers the monetary policy of the Eurozone, which consists of 18 EU member states and is one of the largest currency areas in the world. (http://www.ecb.europa.eu/home/html/index.en.html)
EMIR – European Market Infrastructure Regulation
European Union regulation designed to increase the stability of the over-the-counter (OTC) derivative markets throughout the EU. In addition EMIR provides strict rules for CCPs and Trade Repositories active in the European Union.
ESMA – European Securities Markets Authority
European Union financial regulatory institution and European supervisory authority which contributes to the development of a single rule book for securities transactions in Europe. It replaced the Committee of European Securities Regulators. (http://www.esma.europa.eu/)
FTFR – Funds-Transfer-Regulation
The Funds Transfers Regulation lays down rules for payment service providers to send information on the payer throughout the payment chain for the purposes of prevention, investigation and detection of money laundering and terrorist financing. The requirements are based on the recommendations by the Financial Action Task Force (FATF).
FTT – Financial Transaction Tax
A levy placed on a specific type of monetary or securities transaction. Different regimes already exist in different countries.
G
G20 – Group of Twenty
The Group of Twenty (G20) is the premier forum for its members’ international economic cooperation and decision-making. Its membership comprises 19 countries plus the European Union, i.e.: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, USA. (https://www.g20.org/)
M
MiFID2 – Revised Markets in Financial Instruments Directive
European Union law that provides harmonised regulation for investment services across the European Economic Area. The main objective of the Directive is to increase competition and consumer protection in investment services. In addition to MiFID emerged MiFIR - Markets in Financial Instruments Regulation on OTC derivatives, central counterparties and trade repositories.
F
FATF – Financial Action Task Force
Intergovernmental organisation which develops policies to combat money laundering and terrorism financing. The recommendations are usually transposed into local laws like the Anti-Money Laundering Directive in Europe.
FATCA – Foreign Account Tax Compliance Act
A US federal law requiring US persons, including individuals who live outside the US, to report their financial accounts held outside of the country. Also requires financial institutions to report to the Internal Revenue Service about their US clients.
FCA – Financial Conduct Authority
UK regulatory body, formed as one of the successors to the Financial Services Authority. Operating independent of the United Kingdom government, it regulates financial firms providing services to consumers and maintains the integrity of the UK’s financial markets. (http://www.fca.org.uk/)
FFI – Foreign Financial Institution
The definition of an FFI is very broad and is expected to encompass a number of entities generally not considered to be financial institutions. In context with FATCA the term financial institution generally includes banking institutions but may include also other entities, such as hedge funds and private equity funds.
FMI – Financial Market Infrastructure
Are seen as the plumbing of the financial system as they provide the basis for getting the financial transactions finalised. Regulators distinguish between payment systems, securities settlement systems, central securities depositories, central counterparties and trade repositories.
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Money market fund reform
A revision to the currently existing rules for Money Market Funds. There are similar initiatives ongoing in the United States and the EU.
N
NAV – Net Asset Value
A mutual fund's price per share or exchange-traded fund's (ETF) per-share value. In both cases, the per-share currency amount of the fund is calculated by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.
NSFR – Net Stable Funding Ratio
The NSFR is a key component of the Basel III reforms to promote a more resilient banking sector. It limits over-reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.
O
OTC – Over-the-Counter
A security traded outside a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to on a centralised exchange. It also refers to debt securities and other financial instruments such as derivatives, which are traded through a dealer network.
P
PSD 2 – Revised Payment Services Directive
A regulatory initiative from the European Commission which regulates payment services and payment service providers as defined in the directive throughout the European Union and European Economic Area.
R
RMB Offshore
Chinese Renminbi that can be held outside of China and have the ability to flow in and out of China for the payment of goods and services and for certain investment purposes.
RTS – Regulatory Technical Standards
RTS are defined by European Supervisory Authorities as part of the so called “level 2” legislation for areas indicated in the level 1 legislation.
S
SEPA – Single Euro Payments Area
A payment integration initiative of the European Union for simplification of bank transfers denominated in euro. The project’s aim is to improve the efficiency of cross-border payments and turn the fragmented national markets for euro payments into a single domestic one. (http://www.gtb.db.com/content/en/sepa.html)
T
T2S – Target 2-Securities
T2S is an integrated settlement engine with multicurrency capabilities that will provide commoditised and harmonised securities settlement and clearing in central bank money across all participating European securities markets. (http://www.gtb.db.com/content/en/t2s.html)
U
UCITS - Undertakings in Collective Investments in Transferable Securities Directive
A set of European Union directives that aim to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state.
V
Volcker Rule
Refers to the Dodd-Frank Wall Street Reform and Consumer Protection Act, and aimed at restricting US banks from making certain kinds of speculative investments that do not benefit their customers.
This factsheet is for information purposes only and is designed to serve as a general overview regarding the services of Deutsche Bank AG, any of its branches and affiliates. The general description in this factsheet relates to services offered by Global Transaction Banking of Deutsche Bank AG, any of its branches and affiliates to customers as of June 2016 which may be subject to change in the future. This factsheet and the general description of the services are in their nature only illustrative, do neither explicitly nor implicitly make an offer and therefore do not contain or cannot result in any contractual or non-contractual obligation or liability of Deutsche Bank AG, any of its branches or affiliates.
Copyright© June 2016 Deutsche Bank AG.
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