Regulatory Compliance

Regulatory Compliance

A legal and ethical commitment

The attainment of business targets has been compatible at all times not only with Regulatory Compliance but also with the development of best practices and standards required for its business activity. This issue therefore represents not only a legal obligation for Bankinter, but also an ethical commitment.

This commitment also serves as an opportunity to reflect, for Bankinter to become a leading institution adapted to the new reality of the finance industry, which is subject to the need to change relationships with customers and adjust the Bank's business model in line with new financial consumption habits and multiple reporting requirements.

The growing importance of Regulatory Compliance has been underscored with the entry into force, as a result of the economic and financial crisis, of several highly complex regulations and the launch of the new supervisory architecture, obliging the Bank to strengthen its available resources.

The purpose of the compliance function is to assess and provide guidelines for the lines of business that help define its strategy, ensuring compliance with applicable legislation at all times. With this in mind, all areas of the compliance function spare no efforts in enhancing the training activities of its commercial staff.

Institutional framework

The Regulatory Compliance at Bankinter is subject to an internal institutional framework. The head of Regulatory Compliance, Regulation and Corporate Governance hierarchically reports to the Audit and Regulatory Committee under Bankinter's Board of Directors and functionally reports to the General Secretary of the Bank, through which it forms part of the Organisation as a whole, ensuring close cooperating with the other areas of Senior Management, particularly Risks and Legal Counsel in all areas for which they are responsible.

In particular it sits on the following Bodies at the institution:

  • The Regulatory Compliance Committee. The Senior Management body responsible for monitoring the bank's policies within this scope. The Committee executes the policies in relation to the regulatory and Regulatory Compliance matters that are established by the audit and regulatory compliance committee of the board of directors.
  • The Products Committee. which approves the launch, modification or cancellation of products and services offered to customers. During 2018, the product and service governance procedures were consolidated, adapting the institution's practice to their design and the roll-out of standards required by regulators, in particular those in relation to establishing the target customer.
  • The internal control body. Establishes policies regarding the prevention of money laundering and the financing of terrorism, in accordance with Law 10/2010, and ensures compliance with them.

This organisational structure enables the Bank to adequately manage the risk of Regulatory non-Compliance which involves significant reputational risk, with a potential negative impact on the relationship with customers, markets, employees and the authorities. In particular, Regulatory nonCompliance may lead to sanctions, damages or cancellation of contracts, with the resulting damage to the Bank's image.

Regulatory changes

In 2018, the Regulatory Compliance area focussed its efforts on the entry into force of the MiFID II Directive and its implementing regulations, the MIFIR Regulation (relating to markets in financial instruments) and PRIIPs Regulation (relating to documents with key information relating to packaged retail and insurance-based investment products), given its cross-sector impact on the provision of investment services by the Group.

The new regulation represents a challenge not only from a regulatory point of view but also strategically, given that it requires the professionalisation of investment services and introduces significant changes to the structure of revenue arising from the provision of them. In 2018, the adaptation to MiFID II, MIFIR and PRIIPs has become a priority and the Regulatory Compliance area advised the Group on the adaptation work and on the analysis and decisions that need to be adopted as a result of European regulatory changes and their transposition into Spanish law.

Another important regulatory change was the entry into force of the General Data Protection Regulation. The Regulatory Compliance area actively participated in the adaptation of Bankinter's policies and processes to these new regulations.

Furthermore, the Bankinter Group assigned the management of regulatory change competencies to the Regulatory Compliance Division through the Regulation area. Thus, the function was made stronger, providing it with greater consistency and unity, facilitating the early detection of the possible impact of regulatory changes and reducing the corresponding risks. This assignment of competencies is related to the EBA guidelines (EBA/GL/2017/11), which strengthen the internal governance systems, procedures and mechanisms that credit institutions and investment service firms must implement to guarantee effective and prudent management.

Basic areas

Under this regulatory and institutional framework, the Bank developed the basic areas of the compliance function in 2018: control and advisory services regarding Regulatory Compliance in relation to investment and banking products, and the prevention of money laundering and the financing of terrorism.

In relation to the compliance control function, Bankinter implemented a methodology based on the risk approach that enables the risk of default in each area of activity to be assessed in relation to the provision of investment and banking services.

In terms of the prevention of money laundering and the financing of terrorism, 2018 was marked by the international strengthening of the control framework, both in the customer scope of knowledge and the controls applicable to international financial sanctions and correspondent banking.

In Spain, Royal Decree Law 11/2018 of 31 August was published, containing the amendments resulting from the transposition of Directive (EU) 2015/849 of the European Parliament and the Council, of 20 May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.

At Group Bankinter, the prevention of these activities represents a strategic objective and an ethical commitment to society as a whole and to compliance with control standards in this area. With this objective in mind, in 2018 Bankinter bolstered the IT tools dedicated to this function.

Outlook for 2019

In 2019, work at the institution to adapt to the regulation of investment services will conclude, following the completion of the transposition of MiFID II rules. Furthermore, it will be necessary to promote the institution's adaptation to the regulatory framework of reporting transparency in the provision of banking services, in particular in relation to mortgage lending, to the framework deriving from the transposition of Directive 2014/828 in terms of the promotion of the long-term involvement of shareholders, and Directive 2015/849 on the prevention of money laundering and terrorist financing.

Furthermore, the area will oversee compliance with the new regulatory requirements set out in the Payment Services Directive (PSD2) and the Insurance Distribution Directive (IDD). Finally, the institution will closely monitor the regulatory aspects related to the Action Plan of the European Union on sustainable finances, which shall be reflected in amendments of the MiFID and IDD regulations.

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