CUBE RegNews:
25^th April

Following the publication of the Hong Kong Monetary Authority (HKMA) Letter to CEOs regarding the second round of the climate risk stress test (CRST), the regulator has now published the terms of reference for the CRST which is focused on two major types of climate risks, namely physical risk and transition risk . Those authorized institutions (AIs) taking part in the CRST exercise will be expected to follow the assessment approach outlined in the paper. The paper notes that “the HKMA intends to integrate the CRST into its supervisor-driven stress testing (SDST) framework. To harmonize with the SDST cycle and reduce the reporting burden on the participating AIs, this round of the CRST will be undertaken over an extended period spanning from June 2023 to June 2024.”

The European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) have published a joint discussion paper on how to better insure households and businesses in the European Union against climate-related natural catastrophes such as floods or wildfires. The policy options set out in the paper are aimed at boosting the uptake and efficiency of climate catastrophe insurance while creating incentives to adapt to and reduce climate risks. Currently, only about one-quarter of all climate-related catastrophe losses in the European Union are insured. In some countries, the figure is below 5%. This is partly because many people underestimate the costs of climate-related damage. Some also shy away from insurance, preferring to rely on government support. As natural disasters become both more frequent and more severe, insurance costs are expected to rise. Some insurers may reduce risk coverage or stop providing certain types of catastrophe insurance altogether, which would widen the insurance gap further. 

The European Central Bank (ECB) has published an additional report on a potential digital euro and the possible possible features of a digital wallet. 

The progress report outlines the ECB’s proposed design and distribution options for a digital euro, which has been endorsed by the Governing Council. The digital euro would initially be accessible to residents, merchants, and governments within the euro area, with non-residents having access if they hold an account with a euro area-based payment services provider. In further releases, consumers from selected third countries could also have access, depending on accessibility rules. The digital euro could also offer cross-currency functionalities with other central bank digital currencies outside the euro area. 

The ECB proposes that the digital euro could be distributed via payment services providers defined in the Payment Services Directive. It could be made available through existing banking apps or an app provided by the Eurosystem, which would offer a harmonized entry point for basic payment functionalities. Intermediaries distributing the digital euro would be required to provide a set of mandatory core services to end-users and could offer additional services, such as conditional payments or the ability to split person-to-person payments among multiple parties. 

EBA consults on diversity and gender pay gap

The European Banking Authority (EBA) has published a consultation on Guidelines on the benchmarking of diversity practices including diversity policies and gender pay gap under the Capital Requirements Directive (CRD) and the Investment Firms Directive (IFD).

The benchmarking of diversity practices, says the CP, will allow competent authorities to monitor diversity trends over time, including the identification of common practices for diversity policies and information on the gender pay gap at the level of the management body. The aspects of diversity that will be analyzed concern the gender, age, educational and professional background as well as the geographical provenance of members of the management bodies.

The consultation runs until 24 July 2023

MAS issues financial promotion consultations

The Monetary Authority of Singapore (MAS) has published two consultation papers with proposals to enhance safeguards for prospecting and marketing of financial products. The CPs reflect both the resumption of roadshows aimed at drumming up new business, and also the increased use of digitally-led marketing and financial promotions. 

• The Consultation Paper on Enhancing Safeguards for Proper Conduct of Prospecting Activities at Public Places and Telemarketing seeks feedback on MAS proposals to enhance safeguards for proper conduct of prospecting activities at public places and telemarketing, and address conduct risks and issues associated with these activities. 
• The Consultation Paper on Enhancing Safeguards for Proper Conduct of Digital Prospecting and Marketing Activities seeks feedback on MAS proposals to enhance safeguards for proper conduct of digital prospecting and marketing activities, and address conduct risks and issues associated with these activities. 

Both consultations have a deadline for comment of 30^th June.