London interbank offered rate (LIBOR) is a UK regulated and administered comprehensive set of benchmarks across a number of standard maturities and major currencies. Given how pervasive LIBOR is in the global financial system, any discontinuation of LIBOR will have far reaching implications. 2018 has seen regulators increasing pressure on firms to prepare for the transition away from LIBOR to new risk-free/nearly risk-free rates (RFRs). While new interest rate derivatives and cash markets continue referencing LIBOR, public authorities and private sector working groups have jointly selected overnight RFRs options that are being adopted by market participants. The adoption of RFRs though remains at a low level to date.
With the publication of the eagerly awaited draft ordinance on 24 October, FIDLEG became more tangible and its provisions were sharpened. Based on the information available today, FIDLEG has similar objectives as the equivalent European legislation MiFID II and PRIIPs but applies a principle-based approach and is less detailed and prescriptive. Both legislations cover very similar requirements with a little twist in the details.
In light of the published draft ordinance, Deloitte hosted the webinar “FIDLEG: Seeing beneath the surface ”. The objective of the webinar was to address the provisions refined by the ordinance and outline their operational impact on financial organisations, while highlighting key commonalities and differences to European legislation. Alongside the webinar, the participants provided valuable insights regarding the FIDLEG implementation within their organisations. The fifth blog post in our FIDLEG series considers the outcome of these poll questions and addresses the implications for a successful regulatory journey.
What is on top of treasurers’ agendas, after the wave of implementation of liquidity regulations? With the awaited implementation of the net stable funding ratio (NSFR) and recent release of the interest rate risk in the banking book (IRRBB) regulation in Switzerland, the increasing challenge for banks’ treasury and asset liability management (ALM) functions is the management of their balance sheet resources and profitability. The new angle of the treasurer’s role is set: Optimization.
In financial services, discussions about artificial intelligence (AI) tend to be about the technology. And that’s an important subject. But today Bob Contri, Financial Services Leader for Deloitte Global wants to focus on what it takes for financial institutions to stay successful in an AI-enabled world. From targeted tweaks to big, bold bets, here are five ways firms can ride the AI wave.
"We do not provide tax advice. You should consult your own tax advisor before engaging in any transaction." We expect that all readers are familiar with the above disclaimer banks make when making financial recommendations. In this article, we seek to understand why banks are reluctant to provide tax advice and, more importantly, why they should not be.
What Swiss FIs must know about the abolition of the “white list” approach in the Swiss CRS legislation
On 22 October 2018, the Swiss Federal Tax Administration (SFTA) published an FAQ announcing that Switzerland intends to amend the participating jurisdiction definition in the CRS Ordinance by abolishing the “white list” approach. Once approved by the Federal Council, the changes will become effective on 1 January 2019 and impose additional due diligence obligations on Swiss financial institutions (FIs).
This blog discusses the legislative change announced in the FAQ, sets out the scope of affected jurisdictions and highlights the key tasks and considerations for Swiss FIs in complying with the amendment.
In 2017, total financial wealth world-wide amounted to US $ 175.1 tn (54 per cent of total gross wealth). Of this total financial wealth, only 5 per cent or US $ 8.6 tn were booked in one of the leading centres of international wealth management, i.e., Bahrain, Hong Kong, Luxembourg, Panama & the Caribbean, Singapore, Switzerland, United Arab Emirates, United Kingdom, the United States or one of the other smaller centres as offshore assets. In 2010, the same figures were US $ 134.8 tn and US $ 9.3 tn, respectively. Accordingly, the share of “offshore” wealth of all financial wealth has declined by almost 30 per cent.
A number of drivers have led to this decline. While the assets booked offshore have been positively affected by booming financial markets, a growing global wealth base and an increase in global wealth inequality, a trend to repatriation of assets (particularly in the Western World), a re-focus of wealth managers to reduce regulatory complexity and a move to non-bankable assets have negatively impacted offshore assets. In addition, local specificities have further influenced the growth or decline of assets in the wealth management centres.
IRS representatives participated in several panels at the 33th Annual Forum Tax Withholding & Information Reporting Conference (11-12 October 2018) and the SIFMA Global Tax Reporting Symposium (16-17 October 2018), where they shared insights and responded to questions relevant for US and non-US financial institutions.
This blog summarizes the key messages communicated by IRS representatives during these significant industry conferences, that have historically preceded the issuance of new guidance and outlines the potential impact to non-US financial institutions.
Interbank offered rates (IBORs) have served for decades as the reference rate at which banks borrow in the interbank market. During the last financial crisis however, significant fraud and conspiracy connected to the rate submissions led to the London Interbank Offered Rate (LIBOR) scandal. This triggered concerns on the sustainability of certain IBORs in the unsecured bank funding market. In 2013, the Financial Stability Board (FSB) started reviewing major interest rate benchmarks due to concerns on their reliability and robustness. In 2014, the FSB opined that risk-free reference rates (RFRs) could be more suitable than reference rates containing a term credit risk component.
The EU Benchmarks Regulation (“BMR”) went live on 1 January 2018, forming part of the EU’s response to concerns over the reliability and integrity of financial benchmarks. BMR provides a harmonised framework to ensure clients investing in these regulated products are protected from the risk of benchmark manipulation. The majority of focus to date has been on the administrators of benchmarks largely because of the steps required to evidence compliance. The UK is leading the way in registration and authorisation as shown by ESMAs published register.
With FIDLEG expected to come into force on 1 January 2020, financial services providers in Switzerland will need to comply with a new set of investor protection requirements.
Late provision of clarity by regulators about many MiFID II requirements led to cumbersome manual workarounds in many cases. Financial institutions focused on ensuring compliance by the regulatory deadline at the expense of process efficiencies and better customer experience. The challenges created by those workarounds had to be addressed throughout 2018 in numerous Day 2 projects. Taking this experience into account, and looking ahead to the timeline for FIDLEG, preparation for a compliant and timely FIDLEG implementation needs to start now, addressing key design decisions, based on the recent MiFID II implementation and the strategic objectives of the organisation. This will determine the scope of the project, set the timeline to achieve compliance by January 2020, and considerably limit the necessity for post go-live enhancements.
This fourth blog post in our FIDLEG series considers an illustrative roadmap for effective FIDLEG implementation. It outlines why financial institutions should start addressing FIDLEG now to ensure a smooth journey to compliance.