Financial Services weekly highlights—19 December 2019

Financial Services weekly highlights—19 December 2019

In this issue

 

 

UK, EU and international regulators and bodies
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Conduct requirements
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Islamic finance
Dates for your diary

 

UK, EU and international regulators and bodies

 

FCA publishes Handbook Notice No. 72

The Financial Conduct Authority (FCA) published Handbook Notice No. 72, which includes changes to the FCA Handbook made by the FCA board on 21 November 2019 and 12 December 2019. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Handbook Notice or in separate policy statements (PSs).

Source: Handbook Notice No 72.

FOS consults on 2020/21 plans and budget and future strategy

The Financial Ombudsman Service (FOS) launched a public consultation on its proposed plans and budget for 2020 and its future strategy, looking ahead to 2025 and beyond. The consultation sets out the FOS’s plans for the coming financial year, including the volumes of complaints it expects to receive and resolve, and its proposed budget and funding arrangements. The consultation closes on 31 January 2020.

Source: Consultation opens on our strategic plans and budget for 2020/2021.

Carney responds to Javid on PRC and FPC remits

The governor of the Bank of England (BoE), Mark Carney, responded to letters from the chancellor of the excheqeur, Sajid Javid, on the remits of the Prudential Regulation Committee (PRC) and the Financial Policy Committee (FPC).

Sources: Response to the remit for the Financial Policy Committee—December 2019 and  Response to the remit for the Prudential Regulation Committee—December 2019.

 

Back to top of page

 

Prudential requirements

 

Commission publishes proposed new reporting requirements under CRR

The European Commission published its proposed Commission Delegated Regulation amending the Capital Requirements Regulation (EU) 575/2013 (CRR) with regard to the alternative standardised approach for market risk. The delegated regulation sets out amendments to the revised market risk framework—which was included in the ‘banking package’ of prudential reforms published earlier in 2019—to address a number of technical issues in the framework.

Source: Commission Delegated Regulation (EU) …/... amending Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to the alternative standardised approach for market risk.

PRA publishes PS26/19 on Pillar 2 liquidity reporting threshold

The Prudential Regulation Authority (PRA) published a policy statement, PS26/19, on Pillar 2 liquidity: PRA110 reporting frequency threshold, which provides feedback to responses to its consultation paper, CP14/19, and sets out the PRA’s final policy. The policy statement amends PRA rules to introduce a further threshold of total assets of £5bn or above for the PRA110 reporting frequency and updates a related supervisory statement to reflect the new threshold. The implementation date for PS26/19 is 1 May 2020.

Source: Pillar 2 liquidity: PRA110 reporting frequency threshold.

EBA consults on changes to ITS on benchmarking of internal models

The European Banking Authority (EBA) launched a consultation to amend Commission Implementing Regulation (EU) 2016/2070 setting out implementing technical standards (ITS) on the benchmarking of internal models. The proposed amendments adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise the EBA will carry out in 2021. The consultation runs until 13 February 2020.

Sources: EBA consults to amend standards on benchmarking of internal models and  Consultation paper: Draft implementing technical standards amending Commission Implementing Regulation (EU) 2016/2070 with regard to benchmarking of internal models.

BCBS launches consolidated Basel Framework

The Basel Committee on Banking Supervision (BCBS) announced the launch of its consolidated Basel Framework. The framework brings together all of the Basel Committee's global standards for the regulation and supervision of banks.

Source: Launch of the consolidated Basel Framework.

Basel Committee invites comments on prudential treatment for crypto-assets

The BCBS published a discussion paper on the design of a prudential treatment for crypto-assets.

Source: Basel Committee invites comments on the design of a prudential treatment for crypto-assets.

SRB extends eligible liabilities prior permissions procedure

The Single Resolution Board (SRB) announced that its procedure to assess applications to reduce eligible liabilities instruments under Article 78a of the Capital Requirements Regulation (EU) 575/2013 (CRR) will remain in place until the relevant European Banking Authority’s regulatory technical standards (RTS) come into force. To continue performing market-making and other secondary market activities as of 1 January 2020, banks must obtain a prior permission.

Source: Single Resolution Board extends prior permissions procedure.

Decision on policies relating to the prudential supervision of credit institutions published in the Official Journal

Decision (EU) 2019/2158 of the ECB of 5 December 2019 on the methodology and procedures for the determination and collection of data regarding fee factors used to calculate annual supervisory fees (ECB/2019/38) has been published in the Official Journal of the EU.

Source: Decision (EU) 2019/2158 of the European Central Bank of 5 December 2019 on the methodology and procedures for the determination and collection of data regarding fee factors used to calculate annual supervisory fees (ECB/2019/38).

Regulation on supervisory fees published in the Official Journal

Regulation (EU) 2019/2155 of the ECB of 5 December 2019 amending Regulation (EU) No 1163/2014 on supervisory fees (ECB/2019/37) has been published in the Official Journal of the EU.

Source: Regulation (EU) 2019/2155 of the European Central Bank of 5 December 2019 amending Regulation (EU) No 1163/2014 on supervisory fees (ECB/2019/37).

AFME publishes prudential data report

The Association for Financial Markets in Europe (AFME) published a report collating information on EU global systemically important banks (EU GSIBs)’ prudential capital, leverage, loss-absorption capacity and liquidity ratios, with updated information as at 30 September 2019.

Source: Prudential data report.

Carney responds to Javid on PRC and FPC remits

The governor of the Bank of England (BoE), Mark Carney, responded to letters from the chancellor of the excheqeur, Sajid Javid, on the remits of the Prudential Regulation Committee (PRC) and the Financial Policy Committee (FPC).

Sources: Response to the remit for the Financial Policy Committee—December 2019 and  Response to the remit for the Prudential Regulation Committee—December 2019.

Luis de Guindos sets out case for rebalancing capital requirements towards releasable buffers

The vice-president of the European Central Bank (ECB), Luis de Guindos, opened the fourth annual ECB macroprudential policy and research conference in Frankfurt am Main on 16 December 2019. In his welcoming remarks, de Guindos discussed EU economic and financial conditions, and the need to rebalance capital requirements towards releasable buffers to allow macroprudential authorities to act more effectively in a countercyclical manner, especially in adverse economic conditions.

Source: Luis de Guindos: Welcome remarks—ECB macroprudential policy and research conference.

 

Back to top of page

 

Financial stability, recovery and resolution 

 

BoE consults on proposals for stress testing the financial stability implications of climate change

The BoE published a discussion paper which sets out its proposed framework for the 2021 biennial exploratory scenario (BES) exercise on the financial risks from climate change. The objective of the BES is to test the resilience of the current business models of the largest banks and insurers to the physical and transition risks associated with different possible climate scenarios, and the financial system’s exposure more broadly to climate-related risk. It will therefore determine the scale of adjustment that will need to be undertaken in the coming decades for the system to remain resilient. Comments are requested by 18 March 2020.

Sources: Bank of England consults on its proposals for stress testing the financial stability implications of climate change and  BoE DP: The 2021 biennial exploratory scenario on the financial risks from climate change.

BoE publishes Financial Stability Report and results of annual stress test and H2 2019 systemic risk survey

The BoE’s Financial Policy Committee (FPC) published its Financial Stability Report, which includes the results of the 2019 annual cyclical scenario (ACS) stress test. The FPC says the UK banking system would be resilient to deep simultaneous recessions in the UK and global economies that are more severe overall than the global financial crisis, combined with large falls in asset prices and a separate stress of misconduct costs. It would ‘therefore be able to continue to meet credit demand from UK households and businesses even in the unlikely event of these highly adverse conditions’. Findings of the systemic risk survey for H2 2019 have also been announced.

Sources: Financial Stability Report, Financial Policy Committee Record and stress testing results—December 2019Stress testing the UK banking system: 2019 results and Systemic risk survey results—2019 H2.

ESRB publishes report on macroprudential policy implications of foreign branches relevant for financial stability

The European Systemic Risk Board (ESRB) published a report on the macroprudential policy implications of foreign branches that are relevant for financial stability. According to the ESRB, the report provides an underlying analysis of an ERSB recommendation on the exchange and collection of information for macroprudential purposes on branches of banks with a head office in another Member State or a third country that was recently published in the Official Journal.

Source: ESRB report on macroprudential policy implications of foreign branches relevant for financial stability.

SRB extends eligible liabilities prior permissions procedure

The Single Resolution Board (SRB) announced that its procedure to assess applications to reduce eligible liabilities instruments under Article 78a of the Capital Requirements Regulation (EU) 575/2013 (CRR) will remain in place until the relevant European Banking Authority’s regulatory technical standards (RTS) come into force. To continue performing market-making and other secondary market activities as of 1 January 2020, banks must obtain a prior permission.

Source: Single Resolution Board extends prior permissions procedure.

SRB provides update from 9th industry dialogue

The SRB provided details of its 9th industry dialogue on 16 December 2019 in Brussels. The dialogue brought together representatives from EU-level and national banking federations and their associates from banking union participating Member States, and representatives from National Resolution Authorities, the European Commission, European Parliament and the European Central Bank.

Source: 9th industry dialogue.

FSB’s 2020 work programme: assess new risks and finalise post-crisis reform

The FSB published its work programme for 2020, which sets out a programme of forward-looking monitoring of developments to identify, assess and address new and emerging vulnerabilities, while at the same time looking to finalise and operationalise the remaining elements of the post-crisis reforms. The FSB says it will monitor and assess the implementation of reforms, and evaluate their effects in order to ensure that they work as intended.

Source: FSB sets out 2020 work programme

 

Back to top of page

 

Risk management and controls

 

Commission press release notes application of new cross-border payments rules and new rules for whistleblower protection

The European Commission issued a press release noting that the requirements set out in Regulation (EU) 2019/518 amending the Cross-Border Payments Regulation (Regulation (EC) 924/2009) (CBPR2), as well as the Whistleblowing Directive (Directive (EU) 2019/1937), become applicable.

Source: Commission press release notes entry into force of new cross-border payments rules and new rules for whistleblower protection.

AFME report sets out conduct and compliance guidance on LIBOR to RFR transition

The Association for Financial Markets in Europe (AFME), together with law firm Simmons & Simmons, published the first in a series of papers, LIBOR transition: Managing the conduct and compliance risks, which provides practical guidance to senior managers and legal and compliance teams on managing conduct risks posed to firms engaged in the transition away from the London interbank offered rate (LIBOR) to risk free reference rates (RFRs).

Source: AFME and Simmons & Simmons publish white paper on managing conduct risk during LIBOR transition.


Back to top of page

 

Financial crime

 

ESAs publish guidelines to ensure uniform AML/CFT supervision of cross-border groups

The ESAs published a Final report on Joint guidelines on co-operation and information exchange for the purpose of the fourth Money Laundering Directive (Directive (EU) 2015/849) (MLD4) between competent authorities supervising credit and financial institutions—the anti-money laundering and counter terrorist financing (AML/CFT) colleges guidelines. They clarify the practical modalities of supervisory co-operation and information exchange, and create a common framework that supervisors should use to support effective oversight of cross-border groups from an AML/CFT perspective and also from a more general prudential perspective.

Sources: Joint guidelines on co-operation and information exchange on AML and ESAs transform the way competent authorities cooperate with each other on AML/CFT matters.

ESMA peer review finds areas for improvement in STORs handling under MAR

The European Securities and Markets Authority (ESMA) published a peer review report on how national competent authorities (NCAs) handle suspicious transactions and order reports (STORs) under the Market Abuse Regulation (MAR). The report found a significant increase in STORs and finds that national supervisors can do more to ensure all financial participants play their part in combatting market abuse. ESMA has also published details on NCAs’ issuance of sanctions and administrative measures under MAR.

Sources: ESMA calls for strengthened supervision on suspicious transaction reportingESMA reports on NCAs’ issuance of sanctions and administrative measures under MAR and Annual report on administrative and criminal sanctions and other administrative measures under MAR.

FCA sets out crypto asset AML/CTF supervision fees

The FCA, which will be the AML and CTF supervisor of UK crypto asset businesses from 10 January 2020, has updated its webpage to set out the fees applicable to firms. Following consultation on registration fees, the FCA board has agreed that the charges will be £2,000 for businesses with UK crypto asset income up to £250,000, and £10,000 for businesses with UK crypto asset income greater than £250,000.

Source: FCA updates Cryptoassets: AML/CTF regime webpage.

Trial involving illegal money lender results in confiscation order and compensation to victims

The trial of Dharam Prakash Gopee concluded on 11 December 2019 at Southwark Crown Court with the jury returning a guilty verdict to the charges brought by the FCA for offences under the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000. The Court made a confiscation order against Dharam Prakash Gopee in the sum of £5,118,018.72, the effect of which was to confiscate all his criminal proceeds as an illegal money lender. Mr Gopee was also ordered to pay almost £230,000 in compensation to consumers.

Source: FCA secures confiscation order totalling £5m against illegal money lender.

 

Back to top of page

 

Conduct requirements

 

IOSCO consults on conflicts of interest and conduct risks in debt capital raising

The International Organization of Securities Commissions (IOSCO) is consulting on proposed guidance to help its members address potential conflicts of interest and associated conduct risks arising from the role of market intermediaries in the debt capital raising process. Feedback is sought by 16 February 2020.

Source: IOSCO consults on measures to reduce conflict of interests in debt capital raising.

 

Back to top of page

 

Enforcement and redress

 

FCA fines claims management company for misleading PPI materials

The FCA fined Professional Personal Claims Limited (PPC) £70,000 for misleading consumers through its websites and printed materials. This decision follows the transfer of regulatory responsibility for claims management companies (CMCs) to the FCA on 1 April 2019. The FCA held that PPC’s websites and printed materials prominently used the logos of five major banks which was liable to mislead consumers into believing they were submitting redress claims for mis-sold payment protection insurance (PPI) directly to their banks, rather than engaging PPC as a CMC to pursue claims on their behalf in return for payment of a success fee.

Source: FCA fines PPC for misleading consumers and banks in first CMC case closed by the regulator.

Complaints Commissioner invites FCA to disclose PII providers of firms

In a final report dated 21 November 2019, the Complaints Commissioner rejected a complaint against the FCA, but in doing so invited the FCA to consider whether there is a case for allowing the publication or disclosure of information about regulated firms’ professional indemnity insurance (PII) in the future (Complaint number FCA00664).

Source: Final report by the Complaints Commissioner.

Independent reviewer seeks submissions on FSA/FCA’s handling of interest rate hedging products

John Swift QC, the independent reviewer of the Financial Services Authority (FSA)/FCA's supervisory intervention on interest rate hedging products (IRHPs), is inviting submissions from interested parties. Swift said anyone affected by or involved with the FSA/FCA's IRHP redress scheme should send representations, or views in relation to the issues raised in the terms of reference, by 31 January 2020.

Source: Announcement from John Swift QC inviting submissions from interested parties

FOS consults on 2020/21 plans and budget and future strategy

The Financial Ombudsman Service (FOS) launched a public consultation on its proposed plans and budget for 2020 and its future strategy, looking ahead to 2025 and beyond. The consultation sets out the FOS’s plans for the coming financial year, including the volumes of complaints it expects to receive and resolve, and its proposed budget and funding arrangements. The consultation closes on 31 January 2020.

Source: Consultation opens on our strategic plans and budget for 2020/2021.

FSCS announces Elite Insurance Company Ltd in administration

The Financial Services Compensation Scheme (FSCS) announced that Gibraltar-based Elite Insurance Company Ltd was placed in administration on 11 December 2019 and is no longer paying claims. The FSCS will protect the majority of policies that Elite sold in the UK to individuals and small businesses, and is working with Elite’s administrator, PwC LLP, and the Gibraltar Financial Services Commission on the matter.

Sources: Elite Insurance Company Ltd fails and FCA advice.

FSCS to protect customers of North Airdrie Credit Union Ltd

The FSCS is to protect the members of North Airdrie Credit Union Ltd, which has stopped trading and is now in default. The FSCS says it will compensate the vast majority of the 1,494 members of the North Lanarkshire credit union within seven days, sending payments to them automatically.

Source: North Airdrie Credit Union Ltd fails.

FSCS publishes Outlook newsletter for December 2019

The FSCS published the latest issue of its industry newsletter, Outlook, containing details of claims worked on, news and a levy update. In her inaugural introduction to the issue, CEO Caroline Rainbird provides an update of FSCS vision for the 2020s— ‘Protecting the Future’—including work with regulatory colleagues to tackle phoenixing, one of the areas of focus of its ‘Prevent’ pillar.

Source: FSCS Outlook.

UK Finance blog expresses concern at ICO’s proposed extension of enforcement powers

UK Finance published a blog on the Information Commissioner’s proposals to extend its enforcement powers, including allowing it to recover profits from the criminal misuse of data under the Proceeds of Crime Act (2002) (POCA). The authors note that such an extension is likely to be of interest to organisations that hold large volumes of data, such as banks, and is a further example of wider trends of regulators extending their enforcement powers, using dual-track criminal and regulatory investigations, and seeking parallel redress from individuals and corporates.

Source: ICO consults on extension of its enforcement powers.

Trial involving illegal money lender results in confiscation order and compensation to victims

The trial of Dharam Prakash Gopee concluded on 11 December 2019 at Southwark Crown Court with the jury returning a guilty verdict to the charges brought by the FCA for offences under the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000. The Court made a confiscation order against Dharam Prakash Gopee in the sum of £5,118,018.72, the effect of which was to confiscate all his criminal proceeds as an illegal money lender. Mr Gopee was also ordered to pay almost £230,000 in compensation to consumers.

Source: FCA secures confiscation order totalling £5m against illegal money lender.

 

Back to top of page

 

Markets and trading

 

ESMA provides information on pending applications for benchmark administrator authorisation and registration

ESMA issued a public statement on pending authorisation/registration applications by EU-based administrators under the Regulation (EU) 2016/1011 (the Benchmarks Regulation).

Sources: ESMA provides information on pending applications for benchmark administrators and  Public statement.

AFME report sets out conduct and compliance guidance on LIBOR to RFR transition

AFME, together with law firm Simmons & Simmons, have published the first in a series of papers, LIBOR transition: Managing the conduct and compliance risks, which provides practical guidance to senior managers and legal and compliance teams on managing conduct risks posed to firms engaged in the transition away from the London interbank offered rate (LIBOR) to risk free reference rates (RFRs).

Source: AFME and Simmons & Simmons publish white paper on managing conduct risk during LIBOR transition.

 

Back to top of page

 

MiFID II

 

Regulation amending MiFID II, MAR and the Prospectus Regulation on the promotion of the use of SME growth markets published in OJ

Regulation (EU) 2019/2115 of 27 November 2019 amending MiFID II (which created a new type of trading venue, the small and medium-sized enterprise (SME) growth market, a subcategory of multilateral trading facilities (MTFs)), the Market Abuse Regulation (EU) 596/2014, and Regulation (EU) 2017/1129 (Prospectus Regulation) as regards the promotion of the use of SME growth markets has been published in the Official Journal of the EU. The amendments form part of the Capital Markets Union initiative which seeks to reduce dependence on bank lending, diversify market-based sources of financing for all SMEs and promote the issuance of bonds and shares by SMEs on public markets.

Source: Regulation (EU) 2019/2115 of 27 November 2019 amending Directive 2014/65/EU, Regulation (EU) 596/2014 and Regulation (EU) 2017/1129 as regards the promotion of the use of SME growth markets.

 

Back to top of page

 

Regulation of capital markets and Capital Markets Union

 

Regulation amending MiFID II, MAR and the Prospectus Regulation on the promotion of the use of SME growth markets published in OJ

Regulation (EU) 2019/2115 of 27 November 2019 amending MiFID II (which created a new type of trading venue, the small and medium-sized enterprise (SME) growth market, a subcategory of multilateral trading facilities (MTFs)), the Market Abuse Regulation (EU) 596/2014, and Regulation (EU) 2017/1129 (Prospectus Regulation) as regards the promotion of the use of SME growth markets has been published in the Official Journal of the EU. The amendments form part of the Capital Markets Union initiative which seeks to reduce dependence on bank lending, diversify market-based sources of financing for all SMEs and promote the issuance of bonds and shares by SMEs on public markets.

Source: Regulation (EU) 2019/2115 of 27 November 2019 amending Directive 2014/65/EU, Regulation (EU) 596/2014 and Regulation (EU) 2017/1129 as regards the promotion of the use of SME growth markets

Overview of accepted market practices under market abuse regulation

ESMA published its annual report providing an overview of the establishment and application of accepted market practices (AMPs) after Regulation (EU) 596/2014 (the Market Abuse Regulation) became applicable. This includes the AMPs established under the Market Abuse Directive (Directive 2003/6/EC) that remained applicable afterwards.

Source: ESMA Issues 2019 Report on Accepted Market Practices Under MAR.

ESMA publishes responses to MAR review consultation

ESMA published the responses received to its 3 October 2019 consultation on the review of the Market Abuse Regulation (MAR).

Source: ESMA publishes responses received to its consultation on the MAR review.

ESMA peer review finds areas for improvement in STORs handling under MAR

ESMA published a peer review report on how national competent authorities (NCAs) handle suspicious transactions and order reports (STORs) under the Market Abuse Regulation. The report found a significant increase in STORs and finds that national supervisors can do more to ensure all financial participants play their part in combatting market abuse. ESMA has also published details on NCAs’ issuance of sanctions and administrative measures under MAR.

Sources: ESMA calls for strengthened supervision on suspicious transaction reportingESMA reports on NCAs’ issuance of sanctions and administrative measures under MAR and Annual report on administrative and criminal sanctions and other administrative measures under MAR.

ESMA consults on procedural rules for imposing penalties on third-country CCPs, TRs and CRAs

ESMA launched a consultation on future procedural rules regarding penalties for third-country central counterparties (TC-CCPs), trade repositories (TRs) and credit rating agencies (CRAs). The consultation deals with specific aspects of the procedural rules for imposing fines and penalties on TC-CCPs, TRs and CRAs, with the aim of aligning the three sets of rules. The consultation closes on 18 January 2020.

Source: ESMA consults on procedural rules to impose penalties on supervised entities.

FCA Primary Market Bulletin sets out updates driven by Prospectus Regulation

The FCA published the 26th edition of the Primary Markets Bulletin, the FCA newsletter for primary market participants. The edition focuses on the first stages of updates to technical and procedural notes in the FCA’s Knowledge Base to reflect changes driven by the Prospectus Regulation (EU) 2017/1129).

Source: Primary Market Bulletin issue 26.

IOSCO consults on conflicts of interest and conduct risks in debt capital raising

The International Organization of Securities Commissions (IOSCO) is consulting on proposed guidance to help its members address potential conflicts of interest and associated conduct risks arising from the role of market intermediaries in the debt capital raising process. Feedback is sought by 16 February 2020.

Source: IOSCO consults on measures to reduce conflict of interests in debt capital raising.

Amendment to Delegated Regulation on the ESEF to update the core taxonomy to be used for ESEF reporting published in OJ

Commission Delegated Regulation (EU) 2019/2100 of 30 September 2019 amending Delegated Regulation (EU) 2019/815 with regard to updates of the taxonomy to be used for the European Single Electronic Format (ESEF) has been published in the Official Journal of the EU.

Source: COMMISSION DELEGATED REGULATION (EU) 2019/2100 of 30 September 2019 amending Delegated Regulation (EU) 2019/815 with regard to updates of the taxonomy to be used for the single electronic reporting format.

ISDA/GFMA response to LEI ROC consultation—LEI eligibility for general government entities

ISDA, together with the Global Financial Markets Association (GFMA), have issued a response to the Legal Entity Identifier (LEI) Regulatory Oversight Committee’s (ROC) consultative document: LEI eligibility for general government entities. Broadly speaking, ISDA/GFMA members support the LEI ROC’s initiatives towards improving the quality of information for general government entities within the global LEI system (GLEIS).

Source: Joint ISDA/GFMA response to the LEI ROC consultation—LEI eligibility for general government entities.

Dombrovskis highlights ECOFIN actions on green finance, crypto assets and CMU

The European Commission published opening remarks by executive vice-president Valdis Dombrovskis at a press conference following the last Economic and Financial Affairs Council (ECOFIN) meeting under the Finnish presidency. He said the meeting had involved many discussions related to tackling climate change and to finding the best solutions to finance the transition to the climate-neutral economy, including green budgeting, carbon pricing and green taxation.

Source: Opening remarks by executive vice-president Valdis Dombrovskis at the ECOFIN press conference.

 

Back to top of page

 

Regulation of derivatives

 

Commission publishes EMIR Delegated Regulation on the specification of criteria for establishing the arrangements to adequately mitigate counterparty credit risk associated with covered bonds and securitisations

The European Commission published a Commission Delegated Regulation (C (2019) 8886 final) supplementing the European Markets Infrastructure Regulation (Regulation (EU) 648/2012) (EMIR) with regard to regulatory technical standards 9RTS) on the specification of criteria for establishing the arrangements to adequately mitigate counterparty credit risk associated with covered bonds and securitisations, and amending Delegated Regulations (EU) 2015/2205 and (EU) 2016/1178.

Source: Commission Delegated Regulation (EU) …/... of 16.12.2019 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the specification of criteria for establishing the arrangements to adequately mitigate counterparty credit risk associated with covered bonds and securitisations, and amending Delegated Regulations (EU) 2015/2205 and (EU) 2016/1178.

EMIR 2.2 published in OJ

Regulation (EU) 2019/2099 of 23 October 2019 (EMIR 2.2) amending EMIR as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs has been published in the Official Journal of the EU.

Source: Regulation (EU) 2019/2099 of 23 October 2019 (EMIR 2.2) amending Regulation (EU) 648/2012 (EMIR) as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs.

ESMA consults on procedural rules for imposing penalties on third-country CCPs, TRs and CRAs

ESMA launched a consultation on future procedural rules regarding penalties for third-country central counterparties (TC-CCPs), trade repositories (TRs) and credit rating agencies (CRAs). The consultation deals with specific aspects of the procedural rules for imposing fines and penalties on TC-CCPs, TRs and CRAs, with the aim of aligning the three sets of rules. The consultation closes on 18 January 2020.

Source: ESMA consults on procedural rules to impose penalties on supervised entities.

ESMA publishes responses to the EMIR FRANDT consultation

ESMA published the responses it received to its consultation on its draft technical advice on commercial terms for providing clearing services under the European Market Infrastructure Regulation (EMIR), also known as the FRANDT consultation—fair, reasonable, non-discriminatory and transparent.

Source: ESMA publishes responses received to its FRANDT consultation.

 

Back to top of page

 

Investment funds and asset management

 

ESMA issues annual report on national sanctions under the UCITS directive

ESMA issued its second annual report on sanctions (penalties and measures) imposed by national competent authorities (NCAs) under the Directive (2009/65/EU) on Undertakings for Collective Investments in Transferable Securities (UCITS) Directive (covering the year 2018).

Source: ESMA issues second pan-EU overview on the use of supervisory sanctions for UCITS.

FCA publishes policy statement on platform switching

The FCA published policy statement PS19/29, Making transfers simpler—feedback to CP19/12 and final rules. PS19/29 summarises the feedback received by the FCA on CP19/12—the consultation on investment platforms market study remedies, published in March 2019, and sets out the FCA’s final policy position and final rules.

Source: PS19/29 Making transfers simpler.

FPC makes recommendations for FCA and BoE’s review of open-ended investment funds liquidity mismatches

In its Financial Stability Report published on 16 December 2019, the Financial Policy Committee (FPC) set out the initial findings of a joint review by the Financial Conduct Authority (FCA) and the Bank of England (BoE) on open-ended investment funds and the risks posed by their liquidity mismatch. The FPC has reviewed the progress of the work and made a number of suggestions for achieving greater consistency between the liquidity of a fund’s assets and its redemption terms. The review will now consider how these principles could be implemented in a proportionate and effective manner.

Sources: FCA and Bank of England statement on joint review of open-ended funds and  Financial Conduct Authority and Bank of England statement on joint review of open-ended funds.

IOSCO announces two-step process for monitoring leverage in funds that may pose stability risks

IOSCO announced a framework designed to facilitate monitoring of leverage in investment funds that could potentially pose risks to financial stability. It aims to achieve a balance between precise leverage measures and simple, robust metrics that regulators can apply consistently to the wide range of funds offered in different jurisdictions.

Source: IOSCO launches framework for monitoring leverage in funds that may pose stability risks.

 

Back to top of page

 

Banks and mutuals

 

Decision on policies relating to the prudential supervision of credit institutions published in the Official Journal

Decision (EU) 2019/2158 of the European Central Bank of 5 December 2019 on the methodology and procedures for the determination and collection of data regarding fee factors used to calculate annual supervisory fees (ECB/2019/38) has been published in the Official Journal.

Source: Decision (EU) 2019/2158 of the European Central Bank of 5 December 2019 on the methodology and procedures for the determination and collection of data regarding fee factors used to calculate annual supervisory fees (ECB/2019/38).

Regulation on supervisory fees published in the Official Journal

Regulation (EU) 2019/2155 of the ECB of 5 December 2019 amending Regulation (EU) No 1163/2014 on supervisory fees (ECB/2019/37) has been published in the Official Journal of the EU.

Source: Regulation (EU) 2019/2155 of the European Central Bank of 5 December 2019 amending Regulation (EU) No 1163/2014 on supervisory fees (ECB/2019/37).

FCA launches call for input on how open finance could transform financial services

The FCA launched a call for input (CfI) on the opportunities presented by so-called ‘open finance’, which builds on the principles of open banking: the sharing of data which provides new ways for customers and businesses to make the most of their money. Feedback to the CfI is sought by 17 March 2020.

Source: FCA asks for proposals on how open finance could transform financial services.

BCBS launches consolidated Basel Framework

The Basel Committee on Banking Supervision (BCBS) announced the launch of its consolidated Basel Framework. The framework brings together all of the Basel Committee's global standards for the regulation and supervision of banks.

Source: Launch of the consolidated Basel Framework.

ECB publishes opinions on draft Lithuanian laws on financial market participants’ asset tax and credit institutions’ income tax

The ECB published an opinion of 16 December 2019 on draft legislative proposals from the Lithuanian Parliament relating to taxes on assets of certain financial market participants and additional corporate income taxes on certain credit institutions. The ECB decided to deliver an own initiative opinion on the draft laws as it had not been formally consulted by the Lithuanian authorities.

Source: Opinion of the European Central Bank of 16 December 2019 on taxes on assets of certain financial market participants and additional corporate income taxes on certain credit institutions (CON/2019/44).

ESRB publishes report on macroprudential policy implications of foreign branches relevant for financial stability

The European Systemic Risk Board (ESRB) published a report on the macroprudential policy implications of foreign branches that are relevant for financial stability. According to the ESRB, the report provides an underlying analysis of an ERSB recommendation on the exchange and collection of information for macroprudential purposes on branches of banks with a head office in another Member State or a third country that was recently published in the Official Journal.

Source: ESRB report on macroprudential policy implications of foreign branches relevant for financial stability.

ESG focus linked to financial outperformance by commercial banks

A report on the linkages between commercial banks’ financial performance and material sustainability issues has found evidence that strategic focus on environmental, social and governance (ESG) issues can lead to financial outperformance. The report, ‘Do sustainable banks outperform? Driving value creation through ESG practices’, was initiated by the Global Alliance for Banking on Values following exchanges with the European Investment Bank (EIB) about the links between financial performance and sustainability focus.

Sources: Environmental, society and governance issues drive financial performance and  Do sustainable banks outperform? Driving value creation through ESG practices.

SRB provides update from 9th industry dialogue

The SRB provided details of its 9th industry dialogue on 16 December 2019 in Brussels. The dialogue brought together representatives from EU-level and national banking federations and their associates from banking union participating Member States, and representatives from National Resolution Authorities, the European Commission, European Parliament and the European Central Bank.

Source: 9th industry dialogue.

 

Back to top of page

 

Regulation of insurance

 

Views sought on information and communication security and governance guidelines

The European Insurance and Occupational Pensions Authority (EIOPA) launched a consultation on guidelines on information and communication technology (ICT) security and governance. The consultation is focussed in operational risks set in Solvency II,  Directive 2009/138/EC, in the Commission's Delegated Regulation (EU) 2015/35 and EIOPA Guidance set out in EIOPA's Guidelines on System of Governance. The consultation welcomes responses until 13 March 2020.

Source: EIOPA consults on guidelines on Information and Communication Technology security and governance.

EIOPA publishes a report on insurers’ asset and liability management

EIOPA published a report on insurers' asset and liability management in relation to the illiquidity of their liabilities. The report supplements information provided in EIOPA's annual reports on long-term guarantee measures and is published in response to a request from the European Commission in the context of the 2020 Review of Solvency II.

Source: EIOPA publishes a report on insurers’ asset and liability management in relation to the illiquidity of their liabilities.

EIOPA publishes annual report on the use of capital add-ons by NCAs under Solvency II

EIOPA published its annual report on the use of capital add-ons by national competent authorities (NCAs) under Directive 2009/138/EC (Solvency II).

Source: EIOPA publishes annual report on the use of capital add-ons under Solvency II.

EIOPA publishes analysis on use and impact of LTG measures and measures on equity risk under Solvency II

EIOPA published its fourth annual analysis on the use and impact of long-term guarantees measures (LTG) and measures on equity risk. The analysis carried out by EIOPA in the report will serve as a basis for its opinion on the 2020 review of Solvency II (Directive 2009/138/EC).

Source: EIOPA publishes its fourth annual analysis on the use and impact of long-term guarantees measures and measures on equity risk.

EIOPA updates representative portfolios for Solvency II volatility adjustments

EIOPA published updated representative portfolios that will be used for the calculation of the volatility adjustments (VA) to the relevant risk-free interest rate term structures for Solvency II (Directive 2009/138/EC). EIOPA will start using these updated representative portfolios for the calculation of the VA at the end of March 2020, which will be published at the beginning of April 2020.

Source: EIOPA updates representative portfolios to calculate volatility adjustments to the Solvency II risk-free interest rate term structures.

IAIS secretary general on the challenges of technology in insurance supervision

The International Association of Insurance Supervisors (IAIS) published a speech by its secretary general, Jonathan Dixon, on fintech developments, delivered at the Asia Insurance Forum 2019 in Hong Kong on 10 December 2019. Dixon said policymakers, supervisors and firms are all confronted with the same question: how to strike an appropriate balance between risk and benefit—disruption and dividend—considering the scale and pace of technological innovation.

Source: Secretary General Jonathan Dixon—Asia Insurance Forum, Hong Kong (10 December 2019).

 

Back to top of page


Payment services and systems

 

BoE publishes final ‘like-for-like’ ISO 20022 message scheme for use in CHAPS

The BoE published further information on the adoption of ISO 20022 messaging in CHAPS for CHAPS Direct Participants (DPs). The BoE has published the final ‘like-for-like’ message set for the Introductory Phase of the ISO 20022 CHAPS migration. This includes information on the BoE’s migration approach, including updates on the use of enhanced data messages, testing and work to ensure participant readiness. The BoE has also published a separate update to explain the impact of these changes on other real-time gross settlement (RTGS) account holders, in addition to a joint publication by the BoE and Pay.UK on their priorities on ISO 20022 payment messages for 2020.

Sources: A new messaging standard for UK payments: ISO 20022ISO 20022 CHAPS migration: information for Direct ParticipantsInformation for RTGS account holders on transitioning to ISO 20022 messaging and Collaboration between Pay.UK and the Bank of England on ISO 20022 payment messages.

Commission press release notes application of new cross-border payments rules and new rules for whistleblower protection

The European Commission issued a press release noting that the requirements set out in Regulation (EU) 2019/518 amending the Cross-Border Payments Regulation (Regulation (EC) 924/2009) (CBPR2), as well as the Whistleblowing Directive (Directive (EU) 2019/1937), become applicable.

Source: Commission press release notes entry into force of new cross-border payments rules and new rules for whistleblower protection.

FCA launches call for input on how open finance could transform financial services

The FCA launched a call for input (CfI) on the opportunities presented by so-called ‘open finance’, which builds on the principles of open banking: the sharing of data which provides new ways for customers and businesses to make the most of their money. Feedback to the CfI is sought by 17 March 2020.

Source: FCA asks for proposals on how open finance could transform financial services.

EPC consults on technical interoperability for MSCTs based on payee-presented data

After the publication of the ‘Mobile initiated (instant) credit transfer interoperability guidance’ (MSCT IG), the European Payment Council (EPC)’s ad-hoc multi-stakeholder group on MSCTs has published a new document, ‘Technical interoperability for MSCTs based on payee-presented data’, for public consultation. It focuses on the functions to be supported by MSCT service provider back-ends for interconnectivity as well as on the minimum data set to be exchanged between payee and payer to enable the initiation of an MSCT. Feedback is sought by 14 February 2020.

Source: Public consultation on ‘Technical interoperability for MSCTs based on payee-presented data’.

European Payments Council publishes article on PSD2 implementation challenges for ASPSPs

The European Payments Council (EPC) published the first in a series of articles on the views of stakeholders on the implementation of the revised Payment Services Directive (PSD2), including remaining challenges. This article covers the views of an Account Servicing Payment Service Provider (ASPSP) representative.

Source: PSD2 implementation: challenges for ASPSPs.

 

Back to top of page

 

Fintech and cryptoassets

 

FCA sets out crypto asset AML/CTF supervision fees

The FCA, which will be the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisor of UK crypto asset businesses from 10 January 2020, has updated its webpage to set out the fees applicable to firms. Following consultation on registration fees, the FCA board has agreed that the charges will be £2,000 for businesses with UK crypto asset income up to £250,000, and £10,000 for businesses with UK crypto asset income greater than £250,000.

Source: FCA updates Cryptoassets: AML/CTF regime webpage.

Basel Committee invites comments on prudential treatment for crypto-assets

The BCBS published a discussion paper on the design of a prudential treatment for crypto-assets.

Source: Basel Committee invites comments on the design of a prudential treatment for crypto-assets.

CPMI publishes report on wholesale digital tokens

A new report by the Committee on Payments and Market Infrastructures (CPMI) sets out a list of criteria for developers and market participants to consider when designing digital tokens for use in wholesale transactions. The ‘Wholesale digital tokens’ report describes the potential innovations and design questions associated with digital tokens that could be used to settle wholesale, or large-value, payments, made possible by new technologies such as blockchain, or distributed ledger technology.

Source: CPMI report sets out considerations for developers of wholesale digital tokens.

First Bitcoin options trade completed on US regulated market

Intercontinental Exchange, Inc. announced the first block trade of Bakkt Bitcoin (USD) Monthly Options submitted to ICE Futures US, a US federally-regulated market. Bakkt Bitcoin Options settle into the underlying Bakkt Bitcoin (USD) Monthly Futures contract two days prior to expiry. Price discovery for the contract occurs completely within a federally-regulated market and has no exposure to unregulated bitcoin spot markets.

Source: Trades completed in the first US regulated bitcoin options on ICE Futures US.

IAIS secretary general on the challenges of technology in insurance supervision

IAIS published a speech by its secretary general, Jonathan Dixon, on fintech developments, delivered at the Asia Insurance Forum 2019 in Hong Kong on 10 December 2019. Dixon said policymakers, supervisors and firms are all confronted with the same question: how to strike an appropriate balance between risk and benefit—disruption and dividend—considering the scale and pace of technological innovation.

Source: Secretary General Jonathan Dixon—Asia Insurance Forum, Hong Kong (10 December 2019).

Innovate Finance urges government to support fintech with immigration and patient capital reforms

Innovate Finance said it looks forward to continuing dialogue with the new UK government on fintech, to ensure the sector ‘continues to drive growth and innovation in financial services’. It called for answers to ‘pressing immigration questions’, saying the government should consider a scale-up visa, that allows scale-up and high-growth companies to fast-track essential hires from overseas during times of rapid expansion, as well as supporting tech companies with retaining talent.

Source: Innovate Finance statement on UK election results.

Dombrovskis highlights ECOFIN actions on green finance, crypto assets and CMU

The European Commission published opening remarks by executive vice-president Valdis Dombrovskis at a press conference following the last Economic and Financial Affairs Council (ECOFIN) meeting under the Finnish presidency. He said the meeting had involved many discussions related to tackling climate change and to finding the best solutions to finance the transition to the climate-neutral economy, including green budgeting, carbon pricing and green taxation.

Source: Opening remarks by executive vice-president Valdis Dombrovskis at the ECOFIN press conference.

Luis de Guindos on stablecoin regulation and the rise of digital payments

The vice president of the ECB, Luis de Guindos, has delivered a speech on financial innovation for inclusive growth: a European approach, in which he discussed the potential for stablecoin to increase financial inclusion and lower the global average cost of cross-border remittances. De Guindos said for retail stablecoins to work, they must successfully address outstanding issues such as high costs, a cash-in/cash-out infrastructure, identification and know-your-customer requirements. They must also be designed and implemented so that they do not compromise other public objectives such as anti-money laundering and consumer protection.

Source: Financial innovation for inclusive growth: a European approach.

Expert Group on Regulatory Obstacles to Financial Innovation makes 30 recommendations on regulation, innovation and finance

The Expert Group on Regulatory Obstacles to Financial Innovation, set up by the European Commission in June 2018, has published a report setting out 30 recommendations on how to create an accommodative framework for fintech.

Source: Final report of the Expert Group on Regulatory Obstacles to Financial Innovation: 30 recommendations on regulation, innovation and finance.

 

Back to top of page

 

Sustainable finance

 

EU negotiators reach agreement on proposed Taxonomy Regulation

The European Parliament reached an agreement with the Council of the EU on the proposed Taxonomy Regulation, which is intended to provide clarity for investors on which activities are considered environmentally and socially sustainable. The agreement will now need to be approved by the two committees involved and by a plenary vote.

Source: Climate change: new rules agreed to determine which investments are green.

The European Commission publishes initial roadmap for the European Green Deal

The European Commission published ‘The European Green Deal’, described as ‘a roadmap for making the EU's economy sustainable by turning climate and environmental challenges into opportunities across all policy areas and making the transition just and inclusive for all’. Initiatives include labels for green retail investment products and an EU green bond standard.

Sources: The European Green Deal sets out how to make Europe the first climate-neutral continent by 2050, boosting the economy, improving people's health and quality of life, caring for nature, and leaving no one behind and  Green deal for Europe: First reactions from MEPs.

BoE consults on proposals for stress testing the financial stability implications of climate change

The BoE published a discussion paper which sets out its proposed framework for the 2021 biennial exploratory scenario (BES) exercise on the financial risks from climate change. The objective of the BES is to test the resilience of the current business models of the largest banks and insurers to the physical and transition risks associated with different possible climate scenarios, and the financial system’s exposure more broadly to climate-related risk. It will therefore determine the scale of adjustment that will need to be undertaken in the coming decades for the system to remain resilient. Comments are requested by 18 March 2020.

Sources: Bank of England consults on its proposals for stress testing the financial stability implications of climate change and  BoE DP: The 2021 biennial exploratory scenario on the financial risks from climate change.

Dombrovskis highlights ECOFIN actions on green finance, crypto assets and CMU

The European Commission published opening remarks by executive vice-president Valdis Dombrovskis at a press conference following the last Economic and Financial Affairs Council (ECOFIN) meeting under the Finnish presidency. He said the meeting had involved many discussions related to tackling climate change and to finding the best solutions to finance the transition to the climate-neutral economy, including green budgeting, carbon pricing and green taxation.

Source: Opening remarks by executive vice-president Valdis Dombrovskis at the ECOFIN press conference.

ESG focus linked to financial outperformance by commercial banks

A report on the linkages between commercial banks’ financial performance and material sustainability issues has found evidence that strategic focus on environmental, social and governance (ESG) issues can lead to financial outperformance. The report, ‘Do sustainable banks outperform? Driving value creation through ESG practices’, was initiated by the Global Alliance for Banking on Values following exchanges with the European Investment Bank (EIB) about the links between financial performance and sustainability focus.

Sources: Environmental, society and governance issues drive financial performance and Do sustainable banks outperform? Driving value creation through ESG practices.

Back to top of page

 

Islamic finance

 

IFSB adopts new standards on financial inclusion and lender-of-last resort facilities

The Council of the Islamic Financial Services Board (IFSB) approved the adoption of two new standards at its 35th meeting of the IFSB Council in Dhaka, Bangladesh. The two new standards are a technical note on financial inclusion and Islamic finance (TN-3), and a guidance note on Sharī`ah-compliant lender-of-last-resort facilities (GN-7).

Source: The IFSB Council adopts two new standards for the Islamic financial services industry.

 

Back to top of page

 

Dates for your diary

 

DateSubjectEvent

 

27 December 2019

 

Regulation of insurance

 

The deadline for feedback to the PRA consultation paper (CP23/19): Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets is 27 December 2019.

 

31 December 2019Enforcement and redress

Payment services and systems

A small group of payment services providers (PSPs) that are signatories to the Authorised Push Payment (APP) Scams Steering Group’s voluntary code of good practice, will fund the reimbursement victims of ‘no blame’ APP scams until 31 December 2019 (a long term funding mechanism is expected to be implemented in January 2020).

 

31 December 2019PRIIPs

Date by which the European Commission is expected to review Regulation (EU) 1286/2014 (the PRIIPs Regulation). It decided to defer the review deadline of 31 December 2018 as the application date of the PRIIPs Regulation was deferred by one year.

 

31 December 2019Regulation of insurance

The implementation date for the PRA’s changes to SS3/17 will not be before 31 December 2019. For further information, see: Policy Statement 31/18 (PS31/18) on Solvency II—equity release mortgages.

 

31 December 2019Regulation of insurance

EIOPA aims to issue final guidelines in relation to outsourcing to cloud service providers in the insurance market by the end of 2019.

 

31 December 2019Pensions

EIOPA expects to publish the results and conclusions of its biennial stress test of the European occupational pension sector, by the end of 2019.

 

31 December 2019Regulation of derivatives

The International Swaps and Derivatives Association (ISDA) intends to implement interest rate benchmark fallbacks for derivatives contracts that reference certain interbank offered rates by end 2019.

 

31 December 2019Regulation of capital markets

ESMA must respond to a formal request it received for technical advice on the report to be submitted by the European Commission under Article 38 of Regulation (EU) 596/2014 (the Market Abuse Regulation), by 31 December 2019.

 

31 December 2019Regulation of insurance

The implementation date for the PRA’s changes to SS3/17 will not be before 31 December 2019. For further information, see: Policy Statement 31/18 (PS31/18) on Solvency II—equity release mortgages.

 

31 December 2019Payment services and systems

From 31 December 2019, Directed PSPs (members of the six largest banking groups in the UK, who are involved in around 90% of bank transfers) must respond to confirmation of payee requests.

 

31 December 2019Payment services and systems

The EPC invites stakeholders to submit change requests relating to the SCT and SDD rulebooks by 31 December 2019.

 

31 December 2019Prudential requirements

The EBA’s final guidelines on disclosure of non- performing and forborne exposures which intend to give market participants and stakeholders a better picture of the quality of banks' assets, the main features of their non-performing and forborne exposures, and, in the case of more troubled banks, the distribution of the problematic assets and the value of the collateral backing those assets apply from 31 December 2019.

 

31 December 2019Prudential requirements

The EBA is due to issue its final guidelines for determining weighted average maturity of contractual payments due under the tranche of a securitisation transaction under CRR by 31 December 2019.

 

Back to top of page

Related Articles:
Latest Articles:
About the author:
Pietra has completed the Bar Professional Training Course at the University of Law and was called to the Bar in 2019. Prior to the BPTC, Pietra undertook a law degree at the University of Bristol.