FS News Brief—4 March 2019

Welcome to the first bulletin of the LexisPSL Financial Services 'News Brief'. This weekly update gives you a quick insight into some of the biggest stories from the past week, and highlights some of the stories that may have gone under your radar. 

 

See our full Weekly Highlights here.

 

News brief
Best of the rest
You may have missed
The week ahead

 

News brief

 

BoE, FCA and CFTC issue joint statement on continuity of derivatives trading and clearing post-Brexit

The Bank of England (BoE), Financial Conduct Authority (FCA) and Commodity Futures Trading Commission (CFTC) issued a joint statement on continuity of derivatives trading and clearing post-Brexit. BoE, FCA and CFTC say that they are taking measures to ensure that the UK's withdrawal from the EU, in whatever form it takes, will not create regulatory uncertainty regarding derivatives market activity between the UK and US, and will coordinate their activities in the areas of supervisory cooperation, extension of existing CFTC relief and comparability for the UK, and UK equivalence for the US.

FCA confirms proposals in the event of a no-deal Brexit

The FCA published policy statement PS 19/5: Brexit Policy Statement and Transitional Directions. The policy statement contains feedback received in response to its Brexit consultations: CP 18/28: Brexit: proposed changes to the Handbook and Binding Technical Standards; CP18/36: Brexit: proposed changes to the Handbook and Binding Technical Standards – second consultation; CP 18/29: Temporary permission regime for inbound firms and funds; CP 19/2: Brexit and contractual continuity and CP 18/34: Regulatory fees and levies, policy proposals for 2019/20. The policy statement also includes near-final Handbook rules and Binding Technical Standards as well as more detail on how the FCA intends to use the Temporary Transitional Power. The FCA also release updated guidance on Brexit.

BoE publishes approach to financial services legislation under the EUWA

The Bank of England (BoE) published a package of materials updating firms on the BoE's regulatory and supervisory approach in relation to its work on EU withdrawal. The package builds on its previous engagement with firms on their preparations around EU withdrawal and acts as a contingency for a scenario in which the implementation period, which is agreed in principle as part of the UK's Withdrawal Agreement with the EU, does not take effect on 29 March 2019. It reflects close coordination between the Bank and the FCA whose package of communications has also been released.

Council of EU and European Parliament reach political agreement on low carbon benchmarks

The Council of the EU and the European Parliament reached a political agreement on a proposal creating a new category of low-carbon financial benchmarks, aimed at giving increased information on an investment portfolio’s carbon footprint. The rules, originally proposed by the European Commission in May 2018, will still need to be formally approved by the Council and the European Parliament before they can enter into force. The measures agreed by the EU institutions will create a new category of low-carbon benchmarks, comprising two types (1) EU climate transition benchmarks, which aim to lower the carbon footprint of a standard investment portfolio, and (2) EU Paris-aligned benchmarks, which push for a more ambitious goal to select only components that contribute to attaining the reduction set out in the Paris climate agreement.

Capital Markets Union—Presidency and Parliament agree on a new regulatory and supervision framework for investment firms

On 26 February 2019, the Romanian Presidency of the Council and the European Parliament reached  a provisional agreement on a package of measures, setting out new prudential requirements and supervisory arrangements for investment firms. The text agreed by the Presidency and the Parliament aims to adapt the requirements to the firms' risk profiles and business models while preserving financial stability. There are approximately 6,000 investment firms in the EEA. Most of them are considered small, but a limited number of investment firms hold a significant proportion of all assets and provide a very broad range of services. Until now, all investment firms were subject to the same capital, liquidity and risk management rules as banks. The CRR/CRDIV are based on international standards intended for banks. Therefore, they do not fully take into account the specificities of investment firms.

Capital Markets Union: Council of the European Union agrees to position on easier access to financial markets for SMEs

On 27 February 2019, EU ambassadors endorsed the Council's position on a proposal to give easier access to SMEs trying to list and issue securities on financial markets, while safeguarding investor protection and market integrity. The initiative endorsed today concerns ‘SME growth markets’, which is a recently introduced category of trading venue dedicated to small issuers. On the basis of this text, the Presidency will start negotiations with the European Parliament on 6 March 2019. There are approximately 20 million SMEs in Europe, only 3,000 of which are currently listed on stock-exchanges. This is partially due to high compliance costs on the one hand and insufficient liquidity on the other. Therefore, the proposed rules aim to reduce the administrative burden and cut red-tape faced by smaller companies.

Capital Markets Union: political agreement reached on EU framework for covered bonds

The Council of the EU issued a press release on 26 February 2019, stating that the Romanian presidency and the European Parliament reached a provisional agreement on a harmonised framework for covered bonds. Covered bonds are financial instruments backed by a separate pool of assets to which investors enjoy a preferential claim in case of failure of the issuer. They are considered to be an efficient source of financing of the economy while ensuring a high level of certainty for investors. The framework reached by the agreement will specify a common definition to receive an EU covered bond label and benefit from preferential capital treatment. The deal will now be submitted for endorsement by EU ambassadors.

ECON endorses political agreement on risk-reduction measures for EU banks

ECON unanimously endorsed the agreement reached between the Romanian Presidency and the European Parliament on a set of revised rules aimed at reducing risks in the EU banking sector. The package agreed by the Council and the Parliament comprises two regulations and two directives, relating to bank capital requirements and the recovery and resolution of banks in difficulty. The European Parliament and Council reached political agreement on 4 December 2018. The Council of the EU approved the political agreement on 15 February 2019. ECON now approves the text that was agreed. In particular agreement was reached on (1) Legislative File 2016/0361(COD) (as regards amending the Single Resolution Mechanism) (2) Legislative File 2016/0362(COD) as regards amending the Bank Recovery and Resolution Directive (BRRD) (3) Legislative File 2016/0364(COD) as regards amending CRD IV, and (4) Legislative File 2016/0360A(COD) as regards amending the CRR.

BCBS meeting examines implementation of post-crisis reforms

The Basel Committee on Banking Supervision (BCBS) published details of its 27-28 February 2019 meeting, where a range of policy and supervisory issues were discussed. The Committee also discussed its work programme for evaluating the impact of its post-crisis reforms. The programme included planned evaluations related to cross-cutting policy issues, the countercyclical capital buffer framework and the global systemically important banks framework. Committee members also discussed issues related to sovereign risk. The next meeting of the Basel Committee is provisionally scheduled for 19-20 June 2019.

EBA consults on Guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGD

The European Banking Authority (EBA) launched a consultation on its Guidelines on credit risk mitigation in the context of the advanced internal rating-based (A-IRB) approach, which aim to eliminate the remaining significant differences in approaches in the area of credit risk mitigation (CRM), which are either due to different supervisory practices or bank-specific choices. The draft Guidelines complement the EBA Report on CRM, published in March 2018, which focused on the standardised approach (SA) and the foundation-IRB approach (F-IRB). The consultation runs until 25 May 2019.

FCA calls on firms to act following review of costs and charges disclosure in the investment sector and consults on such disclosures to workplace pension scheme members

The FCA published the key findings of supervisory work to assess the effectiveness of disclosure by asset managers and intermediaries, (eg wealth managers) to their retail customers. This work was prompted by new disclosure requirements on costs and charges introduced by the recast MiFID II and the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, which came into effect in January 2018. The FCA also published the findings of its call for input which sought views on the initial experiences of the requirements introduced by PRIIPs, including transaction cost reporting and the scope of PRIIPs. In addition, the FCA has published consultation paper 19/10 (CP19/10): publishing and disclosing costs and charges to workplace pension scheme members and amendments to COBS.

 

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Best of the rest

 

OFSI provides information on enforcement of financial sanctions

EBA publishes revised outsourcing Guidelines             

ESMA will recognise UK central securities depository in the event of a no-deal Brexit

Council of EU publishes progress report on proposed Whistleblowing Directive

EU could turn Solvency II against Britain, insurers warn

Brexit SI Bulletin—Minister for the Cabinet Office outlines plan to defer commencement of Brexit SIs in the event of a deal

Tax crimes: special committee calls for a European financial police force           

FMLC publishes paper on credit institutions winding-up and reorganisation as part of its ‘onshoring’ Statutory Instruments comment series

Regulators probe Metro Bank over £900M accounting blunder

BoE announces temporary change to liquidity insurance facilities around planned Brexit date

FCA’s Andrew Bailey speaks on MiFID II at European Independent Research Providers Association

 

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You may have missed

 

Re UBS Ltd [2019] EWHC 261 (Ch)

Lewis Alexander Ltd v Financial Conduct Authority [2019] UKUT 0049 (TCC)

Draft Electronic Commerce and Solvency 2 (Amendment etc) (EU Exit) Regulations 2019 (Laid)

Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (Laid)

Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019 (Laid for sifting)

Money Market Funds (Amendment) (EU Exit) Regulations 2019 (Made)

Solvency 2 and Insurance (Amendment, etc) (EU Exit) Regulations 2019 (Made)

Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019 (Made)

Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 (Made)

Sanctions (Amendment) (EU Exit) (No 2) Regulations 2019 (Made)

 

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The week ahead

 

 

DateSubjectEvent

 

28 February 2019

 

FSCS

 

The deadline for responses to FCA ‘CP19/9: Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20’ and PRA ‘CP2/19:Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20’ is 28 February 2019.

 

28 February 2019Money laundering

Following FCA ‘CP18/32: Recovering the costs of the Office for Professional Body Anti-Money-laundering Supervision (OPBAS): proposed fee rates for 2018/19’ the deadline for professional body supervisors to submit their figures to OPBAS is 28 February 2019.

 

28 February 2019Investment funds

The deadline for feedback to FCA ‘CP18/40: Consultation on proposed amendment of COBS 21.3 permitted links rules, the purpose of which is to further enable retail investors to invest in patient capital through unit-linked funds’ is 28 February 2019.

 

28 February 2019Global Financial Innovation Network

Firms wishing to take part in the FCA’s cross-border testing pilot (for firms wishing to test innovative products, services or business models across international markets—the pilot is an  initiative by the Global Financial Innovation Network (GFIN), a group of 29 international organisations committed to supporting financial innovation in the interest of consumers and which is currently chaired by the FCA) in the UK should review the list of participating regulators and apply before the deadline of 28 February 2019.

 

28 February 2019Brexit

The deadline for responses to the UK Parliament’s call for views on the Financial Services (Implementation of Legislation) [Lords] Bill, which is currently passing through Parliament is 5pm on 28 February 2019.

 

28 February 2019Benchmarks

The European Commission is consulting with the European Securities Committee until 28 February 2019 regarding a draft implementing amending Commission Implementing Regulation (EU) 2016/1368, establishing a list of critical benchmarks used in financial markets pursuant to Regulation (EU) 2016/1011 (the Benchmarks Regulation).

 

March 2019Prudential requirements

The provisional political agreement resulting from interinstitutional negotiations on the European Commission’s proposal for a regulation amending the CRR with regard to minimum loss coverage for non-performing exposures (NPEs) will be considered at a plenary session in March 2019.

 

March 2019Brexit

The FCA is expected to give feedback on its consultation on recovering the costs of regulating securitisation repositories after the UK leaves the European Union, in March 2019.

 

March 2019Mortgage and home finance

The PRA proposes that firms should meet the revised expectations by the end of March 2019 following 'PS13/17—Residential mortgage risk weights'.

 

1 March 2019Payment services

The deadline for comments on the Payment Systems Regulator’s (PSR) consultation (on the PSRs proposed approach to analysing how the level of fees that merchants pay for card-acquiring services responded to changes in interchange fees and scheme fees, as part of its market review into the supply of card-acquiring services) is 1 March 2019.

 

1 March 2019Sustainable finance

The deadline for feedback to the IA’s first industry-wide consultation on sustainability and responsible investment is 1 March 2019.

 

1 March 2019FinTech

The deadline for applications to be part of the second cohort of the IAs specialist FinTech accelerator and innovation hub for the asset management industry is 12.00pm on 1 March 2019. Applications can be made through the IA accelerator program  website.

 

1 March 2019PRA

The proposed implementation date for the PRA Fees Amendment Instrument 2019 and the updated SS3/16 ‘Fees: PRA approach and application’ is 1 March 2019.

 

1 March 2019European Payments Council

The Principality of Andorra and the Vatican City State/the Holy See will be part of the geographical scope of the SEPA schemes from 1 March 2019.

 

5 March 2019Insurance

As part of its live and local series the FCA will host its ‘Ask the regulator’ Q&A roundtable discussion in Edinburgh on 5 March 2019.

 

6 March 2019Retail investments

As part of its live and local series the FCA will host its interactive workshop on defined benefit pension transfers on 6 March in Edinburgh.

 

7 March 2019Payment services and systems

The Board of the European Payments Council (EPC) will make a formal final determination in relation to UK Finance’s application on behalf of the UK financial services and payments industry to maintain participation in the Single Euro Payments Area (SEPA), on 7 March 2019.

 

7 March 2019Markets and tradingThe deadline for feedback on the discussion of other complex derivative products as set out in CP18/38: Restricting CFDs products sold to retail clients and a discussion of other retail derivative products is 7 March 2019.

 

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