The Bank of England has has today issued a new Statistical Notice to Reporting Banks 2008/04

April 22nd, 2008- The Bank of England has has today issued a new Statistical Notice to Reporting Banks 2008/04

This includes information on the following:

• Cash Ratio Deposits (effective immediately)
• Form WO validations (effective immediately)
• Classification of accounts guide (update)
• Form DQ definitions (update)
• Form BT/CA cross-form validations (update)
• Form CX definitions (clarification)
• Form CC validations (effective from end-June 2008 reporting)
• Reporting schedule (effective from July 2008)

For further details and for all Statistical Notices to Reporting Institutions for 2008 please visit: http://www.bankofengland.co.uk/statistics/reporters/snotice/2008.htm

CEBS PUBLISHES ADVICE ON THE REVIEW OF THE LARGE EXPOSURES REGIME

April, 2008- The Committee of European Banking Supervisors (CEBS) publishes its Advice on the review of the large exposures regime

The Committee of European Banking Supervisors (CEBS) publishes its Advice on the review of the large exposures regime, in response to the European Commission's Second Call for Advice. The Advice focuses mainly on the issues raised in the second part of the Commission's Second Call for Advice, but it also summarizes the key findings from the first part of CEBS's Advice, published at
http://www.c-ebs.org/advice/documents/LE_Part1adviceonlargeexposures.pdf.

In keeping with the European Commission's better regulation agenda, the Advice is supported by a high-level market failure/regulatory failure analysis of the issues under review. In developing its proposals, CEBS has benefited from views gathered from a broad range of market participants. Input was provided in two public hearings and in the industry's responses to the public consultation on CP14 and CP16, which are published at
http://www.c-ebs.org/Consultation_papers/CP14_responses.htm and
http://www.c-ebs.org/Consultation_papers/LE_Part2_responses.htm.

CEBS's overall conclusion is that the risk of major losses that a credit institution might incur in case of failure of a counterparty to which it is overly exposed is not adequately addressed by the Basel's II three pillars, which justifies regulatory intervention. CEBS considers more specifically that a regime based on limits is the most appropriate regulatory tool, even though several features of the current framework have to be improved, as highlighted hereafter. After considering the comments received, CEBS has decided to clarify the concept of connected clients and to broaden the definition of 'connectedness' to include common sources of funding between counterparties as an indicator of economic interconnectedness. The objective of the rule on connected clients is to identify clients that are so closely linked that it is prudent to treat them as a single risk.

Consistent with the solvency requirements of the CRD, exposure values for on-balance sheet items should be based on relevant accounting standards. This means that exposure values should be calculated net of accounting specific provisions and value adjustments. In keeping with the notion that large exposures rules should serve as a 'back-stop' against unforeseen traumatic losses, CEBS considers it appropriate that both institutions using the standardised approach and those using IRB approaches should apply a 100% conversion factor to all of the off-balance sheet items listed in Annex II of Directive 2006/48/CE. CEBS is proposing to develop further guidance on the calculation of exposure values for various types of structured instruments.

CEBS's Advice discusses ways of dealing with unsecured interbank exposures, which can give rise to systemic risk and moral hazard problems. Subject to a further thorough impact assessment CEBS proposes that all interbank exposures should be subject to a limit equal to the greater of 25% of own funds and a specified value in Euros (or other Member State currency equivalent). CEBS believes that the current proposal, also by taking maturity of the exposures into account, could strike the right balance between prudential concerns and the concerns expressed by small and medium sized institutions.

CEBS's Advice also discusses the cost and benefits of imposing limits on intra-group exposures. CEBS notes that limiting these exposures would have significantly different impact on the functioning of different Member States' banking systems. CEBS concludes that removing the national discretion that allows the exemption of these exposures from large exposure limits is not appropriate at this stage, and therefore that the national discretion set out in Article 113.2 of Directive 2006/48/EC should be maintained. CEBS is also proposing to extend this national discretion to exposures that meet the conditions of Article 80.8 (i.e. exposures to entities within the same institutional protection scheme), since these are in certain respects equivalent to intra-group exposures.

CEBS is proposing that credit risk mitigation techniques should be accorded the same treatment for large exposures purposes as for solvency purposes, but only if the associated instruments are considered sufficiently liquid. Physical collateral other than real estate collateral will not be considered eligible for large exposures purposes. CEBS proposes exempting investment firms with limited licence and limited activity from the regime as the market failure analysis does not in CEBS' view justify continued regulation in this area.

CEBS's Advice also addresses a number of other issues like the scope of application of the large exposures rules with a continued differentiated approach for trading book exposures, the exemption from the limits of exposures to certain sovereigns, the appropriate supervisory reaction to breaches of limits in the banking and trading books, and harmonized reporting across Member States based on reports defined by the supervisors.

Read more:
http://www.c-ebs.org/Advice/advice.htm
http://www.c-ebs.org/press/20080403_LE.htm

HM Treasury warns of higher risk of money laundering and terrorist financing

February 29, 2008- HM Treasury warns of higher risk of money laundering and terrorist financing

Important: This constitutes advice issued by HM Treasury about the heightened risks of money laundering or terrorist financing in the jurisdictions identified. All UK businesses within the financial sector should therefore factor this heightened risk into account and consider applying increased scrutiny and due diligence to transactions associated with these jurisdictions, in line with the FATF recommendations.

The Financial Action Task Force (FATF) issued a warning on 28 February 2008 of the higher risks of money laundering and terrorist financing posed by deficiencies in Uzbekistan, Iran, Pakistan, Turkmenistan, São Tomé and Príncipe and the northern part of Cyprus.

The FATF statement says:

Uzbekistan

The FATF is particularly concerned that a series of presidential decrees in Uzbekistan has effectively repealed the anti-money laundering/combating the financing of terrorism (AML/CFT) regime in that country and generates a money laundering/financing of terrorism (ML/FT) vulnerability in the international financial system. The FATF calls upon Uzbekistan to restore its AML/CFT regime and to work with the Eurasian Group to establish an AML/CFT regime that meets international standards. The FATF calls on its members and urges all jurisdictions to advise their financial institutions to take the risk arising from the deficiencies in Uzbekistan's AML/CFT regime into account for enhanced due diligence.

Iran

Since its October 2007 Plenary meeting, the FATF has engaged with Iran and welcomes the commitment made by Iran to improve its AML/CFT regime. Consistent with its Statement on Iran, dated 11 October 2007, the FATF confirms its call to its members and urges all jurisdictions to advise their financial institutions to take the risk arising from the deficiencies in Iran's AML/CFT regime into account for enhanced due diligence. Iran is encouraged to continue its engagement with the FATF and the international community to address, on an urgent basis, its AML/CFT deficiencies.

Pakistan

The FATF notes Pakistan's recent progress in adopting AML legislation. However, financial institutions should be aware that the remaining deficiencies in Pakistan's AML/CFT system constitute a ML/FT vulnerability in the international financial system. Pakistan is urged to continue its efforts to improve its AML/CFT laws to come into closer compliance with international AML/CFT standards and to work closely with the Asia Pacific Group to achieve this.

Turkmenistan

The FATF is concerned with deficiencies in the AML/CFT regime of Turkmenistan. The FATF welcomes the recent steps this jurisdiction has taken to address these concerns and calls upon Turkmenistan to continue to engage with the international community on these issues.

São Tomé and Príncipe

The FATF is concerned with deficiencies in the AML/CFT regime of São Tomé & Príncipe. The FATF welcomes the recent steps this jurisdiction has taken to address these concerns and calls upon São Tomé & Príncipe to continue to engage with the international community on these issues.

Transactions with financial institutions operating in the northern part of Cyprus

The FATF welcomes the recent progress in policies and practices to combat money laundering and terrorist financing in the northern part of Cyprus. However, given the existing deficiencies, the FATF calls on its members and urges all jurisdictions to advise their financial institutions to pay special attention to the ML/FT risks in transactions with financial institutions operating in the northern part of Cyprus. The FATF encourages further progress to address the deficiencies."

The UK fully supports the work of the FATF on this matter and HM Treasury agrees with the FATF's assessment.

All UK businesses within the financial sector should be aware of the anti-money laundering and counter-terrorist financing deficiencies in these regimes. They should therefore factor the heightened risks associated with these countries into account, and consider applying increased scrutiny and due diligence to transactions where that is recommended by the FATF.

The Money Laundering Regulations 2007 require firms to put in place policies, procedures or systems that prevent money laundering or terrorist financing. The Joint Money Laundering Steering Group guidance encourages financial institutions to make appropriate use of any FATF findings, especially when a country's regime has been found to be deficient.

Financial institutions in the regulated sector should treat transactions associated with these countries as situations that by their nature can present a higher risk of money laundering or terrorist financing and apply a higher level of scrutiny to those transactions.

This advice is effective immediately.

This press release and other Treasury publications and information are available on the Treasury website.

Bank of England issue Statistical Notice 2008/02 to reporters

February 26, 2008- The Bank of England has issued a Statistical Notice to reporting banks - SN 2008/02

The Statistical Notice covers:

• Northern Rock (clarification)
• Subscription facility (reminder)
• Form BT to Forms CA and HF cross-form validations (effective immediately)
• Form BE/AD cross-form validations (effective end-June 2008 reporting)
  
  If you have any queries relating to this, please contact the BoE Help Desk on 020 7601 5360.
  
  Statistical Notice 2008/02 is available from the Bank of England website here:
  
  http://www.bankofengland.co.uk/statistics/reporters/snotice/sn200802/sn200802.doc
  
  Statistical Notices issued by the Bank of England are available from:

www.bankofengland.co.uk/statistics/reporters/snotice/index.htm

The Moneylaundering.com and Money Laundering Alert 13th Annual International Conference & Exhibition

The Moneylaundering.com and Money Laundering Alert 13th Annual International Conference & Exhibition

March 17-19, 2008

The Westin Diplomat Resort & Spa, Hollywood, Florida, USA.

Join 1,500 AML colleagues and officials from 60 nations to learn from 55 experts who share their knowledge on the key issues in the AML field. Thirty-three sessions providing focused content for various industry sectors and government officials. For complete conference details click here.

Pop in and see us on Booth # 512.

To register for this event please contact:

Andrea Winter
Sponsorship & Advertising Manager
Alert Global Media, Inc.
Brickell Bayview Center
80 SW 8th St. Suite 2300
Miami, FL 33130
+1-786-871-3030
awinter@moneylaundering.com

FSA publishes its Business Plan for 2008/9

February 06, 2008- The Financial Services Authority (FSA) today published its Business Plan for 2008/9

The Financial Services Authority (FSA) today (06 February 2008) published its Business Plan for 2008/9. The plan sets out the FSA's programme of work for the year ahead to address the risks highlighted by the Financial Risk Outlook, published last week (29 January).

The document outlines specific FSA initiatives regarding heightened supervisory oversight in areas such as firms' liquidity, adequacy of stress testing and their general operational preparedness for unexpected events.

Hector Sants, chief executive of the FSA, said: "This Business Plan reflects the less benign economic environment we face and our determination to implement the lessons learnt from the events of the second half of 2007. I believe those lessons support our underlying regulatory philosophy, but nevertheless do require some special initiatives, which are incorporated in the Plan.

"Overall, there is much we at the FSA wish to accomplish and the Business Plan is correspondingly ambitious although the uncertainty in the marketplace means we must be flexible and ready to reprioritise our plans, shifting resources should the need arise.

"A successful regulator needs to be both nimble in its reaction to immediate events and determined in embedding, into its institutional memory, the lessons learnt from the past. I believe in executing this year's business plan the FSA will demonstrate these characteristics.

" Alongside the initiatives mentioned above, the FSA will continue to focus on longstanding, deep-seated risks to its objectives with the area of greatest concern being the retail market. The Business Plan details the FSA's continuing commitment to the Treating Customers Fairly programme (TCF), the Retail Distribution Review (RDR) and the Financial Capability Programme. The FSA will also publish a report on firms' systems and controls for managing the risk of consumers' personal data being lost or stolen, with feedback to the industry on good practice and areas of improvement.

The FSA, together with the Bank of England, will continue work on the regulatory framework for liquidity, the publication of a Discussion Paper in December 2007 being the first step. Following the Financial Stability and Depositor Protection Consultation Paper published on 30 January 2008 the FSA will work with HM Treasury and the Bank of England to improve the depositor protection regime and reform insolvency law for financial institutions.

Within the Enforcement division, the strategy is to achieve credible deterrence. The FSA will seek to increase penalties to achieve this goal.

The 2008/9 budget shows an overall increase of 7.1%, resulting in a rise in the Annual Funding Requirement (the amount raised from firms) of 6.9%. The major components of the budget increase are an investment of £5.9 million in the enhanced supervisory strategy for small firms and an investment of £3.5 million in the European Alternative Instrument Identifier. Underlying costs have increased by £11.5 million primarily due to increase in staff costs.

Published alongside the Business Plan, the 2008/9 Fees Consultation paper (CP08/02) explains how the FSA proposes to raise the annual funding requirement from fee payers and provides an opportunity for comment on the fee and policy proposals.

Firms can get an indication of the FSA and Financial Ombudsman Service (FOS) fees and levies they may actually pay in 2008/09 by using the fee calculator on the FSA website, and will be able to make comparisons with previous years' rates. The Financial Services Compensation Scheme (FSCS) element of the fee calculator is currently being developed to incorporate the restructuring of the FSCS funding model, and firms will not be able to use this facility until mid-April 2008. To help firms estimate their FSCS levy in the interim, the FSA will be publishing some examples of the likely levy for typical firms on the fees section of its website.

Download available here

FSA publishes its 2008 Financial Risk Outlook

January 29, 2008- The Financial Services Authority (FSA) today published its Financial Risk Outlook

The Financial Services Authority (FSA) today published its Financial Risk Outlook (FRO) warning firms and consumers of the risks inherent in a significantly less benign economic environment. Its central scenario identifies the following five priority risks:

• Existing business models of some financial institutions are under strain as a result of adverse market conditions;
• Increased financial pressures may lead to financial firms shifting their efforts away from focusing on conduct of business requirements and from maintaining and strengthening business-as-usual processes;
• Market participants and consumers may lose confidence in financial institutions and in the authorities’ ability to safeguard the financial system;
• A significant minority of consumers could experience financial problems because of their high levels of borrowing;
• Tighter economic conditions could increase the incidence or discovery of some types of financial crime or lead to firms’ resources being diverted away from tackling financial crime.

The FRO focuses on the risks arising from the events of the second half of 2007 and the less benign economic outlook expected over the next 18 months.

Callum McCarthy, the Chairman of the FSA, said:

"To be clear, these are not firm predictions about what we think will actually happen but are a prudent attempt to highlight the risks that could impact consumers and firms in a less benign economy."

"Firms and consumers need to recognise there are both short and long term risks and should think about the implications."

"Firms are clearly more aware of these risks now and should continue to consider how they would respond to a crystallisation of these risks particularly those relating to capital and liquidity."

The FRO informs the FSA's supervisory activities and helps to promote greater understanding of the thinking behind these actions. The FSA's Business Plan for 2008, which will be published next month, sets out the FSA's priorities for the year ahead.

The FRO sets out some key messages to help firms consider how to respond to both the priority and any sector specific risks. The paper also highlights the need for consumers to understand how possible changes connected with the priority risks could affect their finances and spending.

1. The Financial Risk Outlook 2008 highlights significant developments in the environment within which the FSA operates. It aims to draw out the links between these developments and the risks to the FSA's statutory objectives. This analysis is then used to help shape the FSA's strategy for the coming year.

2. By publishing this document, the FSA seeks to raise awareness of the key issues facing it and the regulated industry and to place the actions and decisions the FSA makes in context. The Outlook's conclusions are a key element in the FSA's priority-setting arrangements which will be set out in its Business Plan due to be published on February 5th 2008.

Bank of England issue Statistical Notice 2008/01 to reporters

January 25, 2008- The Bank of England has issued a Statistical Notice to reporting banks - SN 2008/01

The Statistical Notice covers:

• Reporting of business denominated in Maltese liri and Cypriot pounds (effective end-January 2008 reporting)
• Form CL - form and validation form (amendment)

Form BT defintions (information) .

Reporting of business denominated in Maltese liri and Cypriot pounds (effective end-January 2008 reporting)

On 1 January 2008 Malta and Cyprus adopted the euro as their official currency. From that date, reporting institutions should report all business previously denominated in Maltese liri and Cypriot pounds in the euro boxes of all statistical returns. Business denominated in Maltese liri and Cypriot pounds has so far been reported in the “other currencies” boxes of these returns.

If reporting institutions have difficulty complying with this for end-January 2008 reporting, they should contact the Help Desk on 020 7601 5360.

Form CL - form and validation form (amendment)

An error has been found within Form CL, Section A (Supplementary Items); a row for Cambodia and Cameroon should have been included. Both the form and validation form have been updated and are available to download from the BoE website.

If you have any queries relating to Form CL, please contact Nick Butt (Tel. 020 7601 5573).

Form BT defintions (information)

www.bankofengland.co.uk/statistics/reporters/snotice/index.htm

FSA publishes a review of the liquidity requirements for banks and building societies

December 19, 2007- The Financial Services Authority (FSA) has today published a Discussion Paper (DP) reviewing liquidity requirements for banks and building societies.

The paper draws some early lessons from recent market turbulence, suggests how future liquidity policy should develop, and sets out key issues for discussion with the banking industry and other stakeholders.

The FSA's preliminary conclusions are that a principles-based approach is right, but that the application of existing high-level standards needs to be toughened and some form of quantitative liquidity requirements remains necessary. The DP re-emphasises the primary responsibility of firms' boards and management for maintaining adequate liquidity and managing their liquidity risk. It also looks at the market failure and cost-benefit issues involved.

Acting Managing Director of Wholesale Markets, FSA, Thomas Huertas said:
"Assuring adequate liquidity at all times is critical for a bank, and in this paper we recommend that banks take a belt and braces approach. The 'belt' is a comprehensive view of all the demands for funds that a bank could face as well as a plan to meet those demands. The 'braces' are a quantity of cash or assets that can be turned into cash at short notice even under stressed market conditions.

"This paper draws important lessons from how we saw banks and building societies coping with the recent market turbulence. We also analyse the liquidity risks inherent in some of the newer structures such as SIVs, and other off balance sheet or contingent arrangements. Nor is it a one-sided review – we also challenge our own existing policies, as well as firms' liquidity management.

"We already know, following the events of the late summer, that individual firms' stress testing and contingency funding plans need improvement, and our ongoing supervision is addressing this. Banks and building societies need to achieve a higher level of resilience to funding stress.

"But we also want to have a constructive and intelligent debate with the industry about how - in the longer term - liquidity requirements can best, and most cost-effectively, achieve our objectives of consumer protection and market confidence."

The DP delivers on a commitment in the Chancellor's statement of 11 October. The closing date for responses is 31 March 2008. The DP will be followed up with consultation on firmer proposals next summer.

The FSA intends to develop UK policy in line with international work being undertaken by the Basel Committee and the Committee of European Banking Supervisors (CEBS).

The FSA's Discussion paper 07/7 is entitled 'Review of the liquidity requirements for banks and building societies'.

http://www.fsa.gov.uk/pubs/discussion/dp07_07.pdf

Bank of England issue Statistical Notice 2007/12 to reporters

November 26, 2007 - The Bank of England has issued a Statistical Notice to reporting banks - SN 2007/12

The Statistical Notice covers changes to the form BT for end January 2008 reporting.

Form BT Item 47: Retail Deposits (effective end-January 2008 reporting)

Since the introduction of Form BT in September 1997, item 47 (Retail deposits) has only been reported by those institutions specifically requested to do so by the Bank of England. However, with effect from January 2008 reporting, all institutions are required to report this item.

An explanation of what should be classified as a "retail" deposit is given on page 35 of the BT definitions (available at www.bankofengland.co.uk/statistics/reporters/defs/index.htm). The classification itself has not been changed, so there will be no change to the requirements for those institutions that already report this item.

The form, validation form and definitions have been updated to reflect this change, and are available to download as above.

Statistical Notices issued by the Bank of England are available from:

www.bankofengland.co.uk/statistics/reporters/snotice/index.htm