FS weekly highlights—10 December 2020

FS weekly highlights—10 December 2020

In this issue

 

 

Brexit news
Coronavirus (COVID-19)
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Conduct requirements
Complaints, compensation and claims management
Investigations, enforcement and discipline
Competition in financial services
Markets and trading
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
International - financial services and related sectors
Dates for your diary

 

Brexit news

EBA statement provides information for EU consumers on the end of the Brexit transition period

The European Banking Authority (EBA) published a statement on the end of the Brexit transition period for the benefit of consumers across the EU. It sets out information on UK firms ceasing or continuing to provide services in the EU; changes in cross-border payments; EU customers’ access to their UK bank accounts; and the information customers should expect to receive from affected firms.

Source: EBA informs customers of UK financial institutions about the end of the Brexit transition period.

ESAs highlight upcoming changes to STS securitisation transactions at the end of the UK transition period

The Joint Committee of the European Supervisory Authorities (ESAs) issued a press release highlighting the impact of the change of status of ‘simple, transparent and standardised’ (STS) securitisation transactions after the end of the Brexit transition period on 31 December 2020. The ESAs advise investors to assess the impact of this change of status on their balance sheet and investments ahead of 31 December 2020.

Sources: ESAs highlight the change in the status of simple, transparent and standardised (STS) securitisation transactions at the end of the UK transition period and  ESMA press release.

FCA explains process for adding a new sub-fund to an umbrella scheme that will be in the TMPR

The Financial Conduct Authority (FCA) published a webpage explaining its proposed process for adding a new sub-fund to an umbrella scheme that will be in the temporary marketing permissions regime (TMPR) established by the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019, SI 2019/325 (CIS Regulations).

Source: Adding a new sub-fund to an umbrella scheme in the TMPR.

For further information, see: Brexit and financial services—the temporary permissions regime (TPR).

FCA’s latest Primary Market Bulletin provides onshored legislation update

The FCA published the 32nd edition of its Primary Market Bulletin, which contains a reminder for issuers, investors and other market participants of the changes that will take effect when post-Brexit onshored legislation enters into force. The issue also contains an update on the FCA’s work to implement some aspects of the onshored legislation.

Source: Primary Market Bulletin 32.

ISDA conference examines implications of the end of the Brexit transition period

The International Swaps and Derivatives Association (ISDA) published an issue of its ‘IQ In brief’, following a 2 December 2020 European public policy virtual conference exploring the implications of the forthcoming end of the Brexit transition period, central counterparty equivalence and the review of the EU Benchmarks Regulation (EU) 2016/1011.

Source: IQ in Brief: European Regulation.

ECB regulation amending the MMSR Regulation in light of Brexit published in the OJ

Regulation (EU) 2020/2004 of the European Central Bank (ECB) of 26 November 2020, which amends Regulation (EU) 1333/2014 concerning statistics on the money markets (the Money Market Statistical Reporting (MMSR) Regulation), has been published in the Official Journal of the EU (OJ). The amending regulation seeks to ensure that the European System of Central Banks will continue to receive daily statistical information relating to money market instruments for UK-located branches of reporting agents after the Brexit implementation period ends on 31 December 2020.

Source: Regulation (EU) 2020/2004 of the European Central Bank of 26 November 2020 amending Regulation (EU) No 1333/2014 concerning statistics on the money markets (ECB/2020/58)

Counter-Terrorism (Sanctions) (EU Exit) (Commencement) Regulations 2020

SI 2020/1416: Certain provisions of the Counter-Terrorism (Sanctions) (EU Exit) Regulations 2019, which have been made under section 1 of the Sanctions and Anti-Money Laundering Act 2018, come into force on 7 December 2020.

Read the official version of this legislation.

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Coronavirus (COVID-19)

For further information on the effects of COVID-19 on financial services, see: Coronavirus (COVID-19)—key developments for financial services lawyers and  Coronavirus (COVID-19)—key financial services issues.

FCA consults on proposed guidance for firms offering BBLS ‘Pay as You Grow’ options

The FCA is consulting on proposed guidance for firms that will be providing Pay as You Grow (PAYG) options under the government’s Bounce Back Loan Scheme (BBLS). The FCA says it wants firms that provide such options to understand its expectations in advance of starting to collect debts from their customers, and to understand how they can use and offer PAYG options in a manner compliant with Chapter 7 of the Consumer Credit Sourcebook (CONC). Responses are sought by 18 December 2020.

Sources: Bounce Back Loan Scheme: guidance for firms on use of Pay as You Grow options and  Bounce Back Loan Scheme—Pay as You Grow options and CONC 7 compliance.

For further information, see: Coronavirus (COVID-19)—UK and EU government support for businesses.

FSB to hold workshop on its ‘holistic review’ of the coronavirus (COVID-19) market turmoil

The Financial Stability Board (FSB) is to hold a virtual workshop on its recent holistic review of the March 2020 market turmoil, at 15.00 (CET) on 16 December 2020.

Source: Virtual workshop on the FSB holistic review of the March market turmoil.

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MiFID II

Coronavirus (COVID-19)—ECON and Council of EU agree changes to MiFID II

The European Parliament’s Economic and Monetary Affairs Committee (ECON) announced that its negotiators have reached an agreement with the Council of the EU on targeted adjustments to the Markets in Financial Instruments Directive (MIFID II) that were proposed by the European Commission as part of its Capital Markets Recovery Package in response to the coronavirus (COVID-19) pandemic.

Source: COVID-19 recovery deal: balance investor protection and firms’ compliance costs.

For further information, see: Coronavirus (COVID-19)—EU capital markets recovery package.

FCA publishes webpages on MiFID reporting and migration to FCA FIRDS and FITRS after the Brexit transition period

The FCA published new webpages giving information on MiFID reporting after the Brexit transition period and the cutover plan for firms migrating to FCA FIRDS and FITRS.

Sources: MiFID reporting after the Brexit transition period and  Cutover plan for firms migrating to FCA FIRDS and FITRS after the Brexit transition period.

For further information, see: The impact of Brexit on the MiFID II regime.

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UK, EU and international regulators and bodies

ESMA publishes 2020 ESEF taxonomy files and Conformance Suite

The European Securities and Markets Authority (ESMA) published its 2020 European Single Electronic Format (ESEF) XBRL taxonomy files, along with an update to the ESEF Conformance Suite, to facilitate implementation of Commission Delegated  Regulation (EU) 2019/815 (the ESEF Regulation).

Source: ESMA publishes 2020 ESEF XBRL taxonomy files and ESEF conformance suite.

FCA publishes Quarterly Consultation Paper No. 30

The FCA published CP20/23: Quarterly Consultation Paper No. 30. CP20/23 includes a joint FCA/PRA consultation on their expectations for temporary, long-term absences.

Sources: CP20/23: Quarterly Consultation Paper No. 30 and  Joint PRA and FCA Chapter ‘Clarifying our expectations for temporary, long-term absences’ within the FCA Quarterly Consultation Paper.

FCA publishes policy development update for December 2020

The FCA published its latest policy development update, which provides information on its recent and upcoming publications.

Source: Policy development update.

Nikhil Rathi provides Treasury Committee with FCA update following evidence session

The chief executive of the FCA, Nikhil Rathi, has written to the Treasury Committee providing further information on a number of topics following a session with the Committee on 4 November 2020. Rathi discussed a number of issues including increasing the Financial Services Compensation Scheme levies, improvements that could be made to the scheme, the coronavirus (COVID-19) Bounce Back Loan Scheme, and a number of issues surrounding pensions advice.

Source: Letter from chief executive of the FCA following the recent hearing on the work of the FCA, dated 26 November 2020.

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Authorisation, approval and supervision

BoE’s annual report 2020 on supervision of financial market infrastructures

The Bank of England (BoE) published its financial market infrastructure firms (FMIs) annual report for 2020, which sets out how the BoE has exercised its responsibilities in respect of supervising FMIs since the last report. The report also sets out the BoE’s domestic and international policy work to strengthen the regulatory and supervisory frameworks for FMIs.

Source: The Bank of England's supervision of financial market infrastructures—annual report 2020.

FCA guidance consultation on insolvency practitioners and regulated firms

The FCA launched guidance consultation GC20/5, ‘Guidance for insolvency practitioners on how to approach regulated firms’, which includes draft guidance in annex 1. Responses are due by 18 January 2021.

Source: Guidance for insolvency practitioners on how to approach regulated firms GC20/5.

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Prudential requirements

PRA consults on designation of firms within certain consolidation groups

The Prudential Regulation Authority (PRA) published consultation paper CP22/20, Designation of firms within certain consolidation groups, which sets out its proposed approach to designating entities within certain banking UK consolidation groups as responsible for ensuring that consolidated prudential requirements are met during a transitional period. Responses are sought by 5pm on 16 December 2020.

Source: Designation of firms within certain consolidation groups.

PRA publishes near-final rules and policy for CRD V implementation

The PRA published a policy statement (PS26/20) providing feedback to responses on its consultation papers, CP12/20 and CP17/20, on the implementation of the Capital Requirements Directive V (Directive (EU) 2019/878) (CRD V). PS26/20 also sets out near-final rule instruments, statements of policy (SoP), supervisory statements (SS) and templates. The PRA says it does not plan to change the policy set out in the statement or to make significant alterations to the text of the instruments before the final policy material is published.

Source: Capital Requirements Directive V (CRD V): Further implementation.

For further information, see: CRD IV—essentials.

EBA publishes standards on the treatment of non-trading book positions subject to foreign-exchange risk or commodity risk under FRTB

The EBA published final draft regulatory technical standards (RTS) under the CRR on how institutions are to calculate the own funds requirements for foreign-exchange and commodity risk stemming from banking book positions under the fundamental review of the trading book (FRTB) standardised and internal model approaches.

Source: EBA publishes final draft technical standards on the treatment of non-trading book positions subject to foreign-exchange risk or commodity risk under the FRTB framework.

PRA systemic risk buffer rates remain at December 2019 rate for a further year

The PRA issued a statement announcing its decision to maintain firms’ systemic risk buffer (SRB) rates at the rate set in December 2019 for a further year until December 2022, with no rate changes taking effect until January 2024.

Source: PRA decision on systemic risk buffer rates.

SRB publishes Q2 2020 MREL dashboard

The Single Resolution Board (SRB) published a dashboard designed to give a comprehensive overview of the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) across the banks under the SRB’s remit. Based on bank data reported to the SRB, it illustrates the results concerning MREL targets, eligible liabilities and shortfalls in 2018 and 2019 under the Bank Recovery and Resolution Directive (BRRD I) framework, and estimates of the MREL requirements under the new BRRD II framework with reference to end-2019 data. It also sets out the quarterly monitoring dashboard and highlights recent developments on the cost of funding.

Source: Single Resolution Board publishes MREL dashboard.

ESRB supports proposed introduction of Norwegian systemic risk buffer

The European Systemic Risk Board (ESRB) published a recommendation (ESRB/2020/14), dated 4 December 2020, in which it supports the proposed introduction by Finansdepartementet (the Norwegian Ministry of Finance) of a systemic risk buffer (SyRB) rate in accordance with Article 133 of Directive 2013/36/EU (CRD IV).

Source: Recommendation of the European Systemic Risk Board regarding Norwegian notification of its intention to set a systemic risk buffer rate in accordance with Article 133 of Directive (EU) 2013/36/EU (ESRB/2020/14).

ISDA announces licensing of Standardised Approach Benchmarking unit tests by eight technology vendors

ISDA announced that eight technology vendors have licensed the ISDA Standardised Approach (SA) Benchmarking unit tests to promote consistent implementation of the standardised approach for calculating capital requirements. The eight vendors are ActiveViam, Avera AI (Area 120 at Google), AxiomSL, Calypso, Finastra, FIS, MSCI and Murex.

Source: Eight technology vendors license ISDA SA Benchmarking unit test.

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Financial stability 

FSB Americas RCG discusses coronavirus (COVID-19) policy responses and cross-border payments roadmap

The FSB Regional Consultative Group (RCG) for the Americas has met to discuss global and regional macroeconomic and financial market developments, with members exchanging views on spillovers from the policy responses to the March 2020 market turmoil and coronavirus (COVID-19) pandemic. Participants reiterated the importance of international co-operation to evaluate and co-ordinate policy responses, including considerations for their future unwinding, once appropriate.

Source: FSB Americas group discusses financial market developments and enhancing cross-border payments.

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Risk management and controls

PRA stresses need for supervisory co-ordination on operational resilience

The PRA published a statement on operational resilience, noting that the ability of a bank to recover from operational disruption has become even more important with the growing trend toward technology-led business transformation. The PRA says it recognises the global and interconnected nature of banks and the importance of supervisory co-ordination, and is committed to working closely with the European Central Bank and the Federal Reserve to ensure that supervisory approaches on operational resilience are well co-ordinated.

Source: Statement regarding supervisory co-operation on operational resilience.

IMF paper lists strategies to ‘strengthen cybersecurity and improve financial stability worldwide’

The International Monetary Fund (IMF) published a research paper, ‘Cyber risk and financial stability: It’s a small world after all’, which sets out ‘six major strategies that would considerably strengthen cybersecurity and improve financial stability worldwide’. The IMF says addressing all the gaps identified would require a collaborative effort from standard-setting bodies, national regulators, supervisors, industry associations, the private sector, law enforcement, international organisations, and other capacity-development providers and donors.

Source: IMF blog: Cyber risk is the new threat to financial stability.

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Financial crime

Commission removes Mongolia from list of high-risk third countries under MLD4

The European Commission adopted a delegated regulation that would remove Mongolia from the list of high-risk third countries in point I of the Annex to Delegated Regulation (EU) 2016/1675, which supplements the Fourth Money Laundering Directive (EU) 2015/849 (MLD4) by identifying high-risk third countries with strategic deficiencies.

Source: Commission Delegated Regulation (EU) …/... on amending Delegated Regulation (EU) 2016/1675 supplementing Directive (EU) 2015/849 of the European Parliament and of the Council, as regards deleting Mongolia from the table in point I of the Annex.

Sanctions (EU Exit) (Consequential Provisions) (Amendment) Regulations 2020

SI 2020/1289: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA 2018) in preparation for IP completion day. This enactment amends three pieces of UK secondary legislation in relation to international sanctions. It comes into force in accordance with regulations made by the Secretary of State under SAMLA 2018.

Read the official version of this legislation.

 

Conduct requirements

FCA evaluates impact of the Retail Distribution Review and the Financial Advice Market Review

The FCA published an evaluation of the impact of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR). On the whole, the FCA found that the financial advice market is improving, ‘albeit slowly’. However, it also found that many consumers are holding their money in cash rather than investing it, so are ‘missing out on the potential opportunity to make their money work better for them in the longer term’.

Source: Evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review.

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Complaints, compensation and claims management

FCA delays publication of policy statement on CP20/11: Complaints against the regulators

The FCA updated its webpage on consultation paper CP20/11: Complaints against the regulators. In light of concerns raised by some respondents regarding the timing of the proposed amendments to the Complaints Scheme, a policy statement on the consultation will now not be published until towards the end of Q2 2021.

Source: CP20/11: Complaints against the Regulators (The Financial Conduct Authority, the Prudential Regulation Authority and the Bank of England) (updated 8 December 2020).

FCA chair answers Treasury Committee questions on the complaints scheme consultation

The chair of the FCA, Charles Randell, has written to the Treasury Committee responding to additional questions that the Committee did not have time to raise during its 4 November 2020 evidence session. The questions concern the FCA’s complaints scheme consultation, including the extent to which it reached the general public, and compensation issues.

Source: Letter from chair of FCA relating to complaints scheme consultation, dated 27 November 2020.

Directive on representative actions for the protection of the collective interests of consumers published in Official Journal

Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC has been published in the Official Journal.

Source: Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC

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Competition in financial services

CMA publishes advice for government on new digital markets competition regime

The Competition and Markets Authority (CMA) Digital Markets Taskforce delivered advice to the government on the design and implementation of the new pro-competition regime for digital markets. The advice published covers the potential design and implementation of pro-competitive measures for unlocking competition in digital markets. The proposed new regime will govern the ‘most powerful’ tech firms and will establish a Digital Markets Unit (DMU) to ensure the ‘rules of the game’ are clear and complied with. The CMA has also published responses to the call for information issued in July 2020.

Sources: CMA advises government on new regulatory regime for tech giants Digital Markets Taskforce and  Competition and Markets Authority advises government on new regulatory regime for tech giants .

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Markets and trading

IOSCO consults on access to market data in secondary equity markets

The International Organization of Securities Commissions (IOSCO) launched a consultation on access to market data in secondary equity markets. Comments are requested by 26 February 2021.

Source: IOSCO consults on issues and concerns regarding market data.

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Regulation of benchmarks and IBOR reform

European Commission seeks feedback on draft implementing regulation determining benchmarks for free allocation of emission allowances

The European Commission published a draft implementing regulation determining revised benchmark values for free allocation of emission allowances for the period from 2021 to 2025, under the EU Emissions Trading Scheme (ETS) Directive 2003/87/EC. The draft implementing regulation is open for feedback until 4 January 2021.

Source: Commission Decision determining the benchmarks values for free allocation in the period 2021-2025.

Council of the EU endorses amendments to the Benchmarks Regulation

EU ambassadors confirmed on behalf of the Council of the EU an agreement reached between the German presidency and the European Parliament’s negotiators on the proposed regulation amending the Benchmarks Regulation (EU) 2016/1011 as regards the exemption of certain third-country foreign exchange benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation. The amendments are intended to avoid any systemic risks that might result from the phasing out of LIBOR by the end of 2021.

Source: Council endorses new rules addressing cessation of financial benchmarks.

For further information, see: Benchmarks Regulation—essentials.

BoE director Hauser tells firms to prepare now for the end of LIBOR

The executive director for markets at the BoE, Andrew Hauser, gave a speech on the transition away from LIBOR, in which he highlighted three key actions for market participants in the months ahead: moving all new business off LIBOR, adopting the ISDA fallbacks for existing derivatives, and reducing the legacy of post-2021 LIBOR-linked contracts.

Source: Speech by Andrew Hauser—Bowing out gracefully: LIBOR’s retirement draws near.

For further information, see: LIBOR transition.

IBA launches consultation on intention to cease LIBOR publications

ICE Benchmark Administration Limited (IBA), the FCA-authorised and regulated administrator of LIBOR, launched a consultation on its intention to cease publication of EUR LIBOR, CHF LIBOR, JPY LIBOR, GBP LIBOR and USD LIBOR after 31 December 2021 (or, in the case of USD LIBOR overnight and 1, 3, 6 and 12 months tenors, 30 June 2023). Feedback is sought by 5pm London time on 25 January 2021.

Source: ICE LIBOR consultation on potential cessation.

ISDA publishes webinar on the path forward for LIBOR

ISDA published a webinar in which ISDA CEO Scott O’Malia, David Bowman of the Federal Reserve Board, Edwin Schooling Latter of the Financial Conduct Authority, Deepak Sitlani of Linklaters and Tom Wipf of Morgan Stanley discuss the path forward for LIBOR.

Source: ISDA webinar: The path forward for LIBOR.

Intercontinental Exchange launches SONIA options

Intercontinental Exchange Inc launched options and mid-curve options based on three-month SONIA index futures. ICE’s global head of financial derivatives, Steve Hamilton, said SONIA options provide ‘another tool to help the market transition from LIBOR and manage nonlinear risk’.

Source: Intercontinental Exchange becomes first venue to launch SONIA options.

SONIA Stakeholder Advisory Group minutes for November 2020 published

The BoE published the minutes of the SONIA Stakeholder Advisory Group for 2 November 2020, which was the inaugural meeting for new chair Scott McMunn. The meeting included a review of market conditions including Brexit uncertainties, the ongoing impact of the coronavirus (COVID-19), and the potential for negative rates.

Source: Minutes: SONIA Stakeholder Advisory Group 2 November 2020.

 

Regulation of capital markets

Commission consults on review of CSDs and securities settlement in the EU

The European Commission launched a targeted consultation on the review of the regulation of central securities depositories (CSDs), and on improving securities settlement in the EU. The consultation seeks feedback on a range of specific areas where targeted action may be necessary to ensure the fulfilment of the objectives of Regulation (EU) 909/2014 (the CSDR) in a more proportionate, efficient and effective manner. Responses are sought by 2 February 2021.

Source: Targeted consultation on the review of regulation on improving securities settlement in the European Union and on central securities depositories.

For further information, see: Central Securities Depositories Regulation—essentials.

Council of the EU sets out CMU priorities

The Council of the EU approved a set of conclusions on the European Commission's new action plan on the capital markets union (CMU), which was published on 24 September 2020. The conclusions set out the Council's priorities among the outlined measures, to provide the Commission with political steering and guidance when preparing future legislation and non-legislative initiatives. The Council says the highest priority should be given to those actions that are important for improving the funding of the economy—particularly of SMEs—and that have the potential to support a swift economic recovery in the context of the coronavirus (COVID-19) pandemic.

Sources: Capital markets union: Council approves conclusions on the Commission's new action plan and  Council conclusions on the Commission’s CMU Action Plan.

For further information, see: The Capital Markets Union.

FCA publishes guidelines for preparation of ESEF annual financial reports

The FCA published guidelines for the preparation of European Single Electronic Format (ESEF) annual financial reports (AFRs) for submission to the FCA.

Source: Guidelines for the preparation of ESEF annual financial reports for submission to the FCA.

FCA updates securitisation repositories webpage

The FCA updated its securitisation repositories webpage to add the application form for registering as a UK securitisation repository.

Source: FCA updates securitisation repositories webpage.

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Regulation of derivatives

CFTC adopts electronic trading, bankruptcy and other rules

The Commodity Futures Trading Commission (CFTC) adopted Electronic Trading Risk Principles and significant bankruptcy reforms for commodity brokers in an open meeting on 8 December 2020. In advance of the meeting the CFTC also approved five final rules and withdrew the unadopted portions of the 2018 Swap Execution Facilities and Trade Execution Requirement Proposed Rule.

Sources: CFTC unanimously approves final rules related to margin requirements for uncleared swaps for swap dealers and major swap participantsCFTC unanimously approves technical amendments to reflect organizational changesCFTC unanimously approves final rules related to SEFs and withdraws unadopted proposalsCFTC approves two final rules at December 8 open meeting and  FIA praises CFTC for adopting electronic trading and bankruptcy rules.

European Commission seeks feedback on draft EMIR delegated regulations on procedures and penalties for TRs and CCPs

The European Commission published two draft delegated regulations, relating to the procedures for penalties imposed on trade repositories (TRs) and on third-country central counterparties (CCPs) by ESMA under the European Market Infrastructure  Regulation (EU) 648/2012 (EMIR). Feedback on both draft delegated acts is invited by 4 January 2021.

Sources: European Securities & Markets Authority (ESMA)—procedures for penalties imposed on trade repositories (updated rules) and  Rules of procedures for penalties imposed on third-country CCPs by ESMA.

For further information, see: EMIR—essentials.

ECON recommends proposed CCP recovery and resolution regulation for second reading

The Committee on Economic and Monetary Affairs (ECON) of the European Parliament has recommended the proposed CCP recovery and resolution regulation for second reading.

Source: Recommendation for Second Reading: On the Council position at first reading with a view to the adoption of a regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, (EU) No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 2002/47/EC, 2004/25/EC, 2007/36/EC, 2014/59/EU and (EU) 2017/1132 (09644/1/2020—C9 0376/2020—2016/0365(COD)).

FCA updates position limits for three commodity derivative contracts

The FCA published updated position limits for certain commodity derivative contracts traded on ICE Futures Europe. The limits have been established under the Markets in Financial Instruments Regulations 2017, and are being revised in accordance with regulatory technical standard 21, which states that position limits should be reviewed when there is a significant change in Open Interest, deliverable supply, or any other significant change in the market.

Source: Update of position limits for certain commodity derivative contracts.

FSB publishes 2020 progress report on OTC derivatives market reforms

The FSB published its 2020 note on implementation progress of OTC derivatives market reforms. The FSB finds that overall progress in implementation of the agreed G20 reforms to over-the-counter (OTC) derivatives markets is well advanced, but there has been limited additional implementation of the reforms since October 2019.

Source: OTC derivatives market reforms: 2020 note on implementation progress.

The Derivatives Service Bureau announces 2021 consultation on fee model for new unique product identifiers

The Derivatives Service Bureau (DSB) has announced its forthcoming industry consultation on the principles underlying the fee model for the new unique product identifier (UPI). The first consultation will begin on 11 January and end on 5 March 2021. All market participants that report to trade repositories—and that will be required to incorporate the UPI into their workflows—are encouraged to respond to the consultation, in order to ensure that a broad range of views will be reflected in the service that will be introduced in 2022.

Source: The Derivatives Service Bureau announces UPI 2021 industry consultation.

The Working Group on Sterling Risk-Free Reference Rates publishes report on transition in sterling non-linear derivatives

The market-led Working Group on Sterling Risk-Free Reference Rates has published a report, Transition in sterling non-linear derivatives, intended for all non-linear derivatives market participants and end-users.

Source: Transition in sterling non-linear derivatives: The Working Group on Sterling Risk-Free Reference Rates.

 

Investment funds and asset management

ESMA updates MMF Regulation reporting

ESMA has updated its validation rules for reporting under the Money Market Funds Regulation (EU) 2017/1131 (MMF Regulation). The proposed changes are not related to the published XML schemas, but provide clarifications on existing validation rules in order to fix inconsistencies or ease the understanding of the rules. They also extend the Classification of Financial Instruments (CFI) codes for eligible assets.

Source: ESMA updates reporting under the Money Market Funds Regulation.

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Banks and mutuals

PRA publishes policy statement and updated supervisory statement on recovery plans

The PRA published policy statement PS25/20, which sets out feedback to consultation paper CP10/20, ‘Simplified obligations for recovery planning’. It also contains the PRA’s updated supervisory statement SS9/17, ‘Recovery planning’ (appendix 1), which will simplify and reduce certain firms’ obligations under the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) (Simplified obligations).

Sources: Recovery planning and Simplified obligations for recovery planning.

BCBS publishes supplemental note to its external audits of banks guidance

The Basel Committee on Banking Supervision (BCBS) published a supplemental note to its 2014 guidelines on external audits of banks. The supplemental note is issued following the implementation of the expected credit loss (ECL) accounting frameworks.

Source: Supplemental note to external audits of banks—audit of expected credit loss.

ECB’s Elizabeth McCaul discusses control functions and bank resilience

The ECB published a speech by a member of its supervisory board, Elizabeth McCaul, on bank boards and supervisory expectations, in which she discussed internal control frameworks and overall resilience. McCaul said the ECB had noted that, in some banks, control functions have been insufficiently proactive in adapting to the coronavirus (COVID-19) environment, in revising their risk appetite frameworks to align them with strategic goals, and in making their decision-making processes more agile.

Source: Bank boards and supervisory expectations.

SRB publishes paper on banks’ M&A engagements

The SRB published a paper setting out its expectations for how banks engaging in mergers and acquisitions (M&As) can ensure resolvability. The report provides more detail to banks on the information the SRB may need. It also gives insights into the potential effects on resolvability in selected areas, including loss-absorption and recapitalisation capacity, information systems, operational continuity, and access to financial market infrastructure (FMI) services and legal structure.

Source: SRB publishes guidance on bank mergers and acquisitions.

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Consumer credit, mortgage and home finance

Association of Mortgage Intermediaries report finds poor customer understanding of income insurance

The Association of Mortgage Intermediaries (AMI) published a report on the mortgage protection market, which draws on research asking 5,000 consumers and 500 mortgage brokers about the protection market in September 2020. The report highlights a lack of trust around claims statistics; poor customer understanding around Income Protection; and the fact that the vast majority of consumers think life insurance is important but only the minority have it.

Source: The Association of Mortgage Intermediaries (AMI) launches new report based on extensive consumer and adviser research.

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Regulation of insurance

EIOPA launches natural catastrophe insurance gap dashboard

The European Insurance and Occupational Pensions Authority (EIOPA) launched a pilot dashboard showing the insurance protection gap for natural catastrophes. It aims to represent the drivers of a climate-related insurance protection gap in order to identify measures that will help in decreasing society’s losses in the event of natural catastrophes.

Source: EIOPA’s pilot dashboard addresses the natural catastrophe protection gap.

EIOPA publishes fifth annual report on the use and impact of long-term guarantees measures and measures on equity

EIOPA submitted to the European Parliament, the Council of the European Union and the European Commission, its fifth and final annual report on long-term guarantees (LTG) measures and measures on equity risk.

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

EIOPA publishes recommendations following peer review of cross-border supervision

EIOPA published the results of its peer review of co-operation between EU supervisory authorities on the supervision of cross-border activities of insurance undertakings. The peer review focuses on how national supervisory authorities (NSAs) approach insurance cross-border activities, how they exchange supervisory information and collaborate, how data is stored, and practices regarding portfolio transfers.

Source: EIOPA recommends actions and best practices to national supervisory authorities to improve supervisory practices regarding cross-border activities.

BoE speech on insurance stress tests for 2021 and 2022

The BoE published a speech by its executive director for insurance supervision, Charlotte Gerken, given at the Insurance Risk and Capital EMEA 2020 Virtual conference. Gerken outlines the current stress test for UK insurance firms under the Solvency II regime and sets out the PRA’s plans for stress tests for the insurance industry in 2021 and 2022, including a climate stress test.

Source: The fox and the hedgehog: preparing in a world of high risk and high uncertainty—speech by Charlotte Gerken.

IAIS summarises outcomes from its annual conference and AGM

The International Association of Insurance Supervisors (IAIS) issued a press release summarising its 27th annual conference, which was preceded by its annual general meeting (AGM) and several weeks of committee meetings. During the conference and meetings, which were held virtually, the IAIS says it finalised numerous projects, discussed the impact of the coronavirus (COVID-19) on the global insurance sector as well as the associated supervisory responses, and set the direction for future activities in 2021.

Source: IAIS AGM and 27th annual conference reflect on response to COVID-19 and set direction for future activities.

Insurance Europe says IAIS should adjust criteria for infrastructure and strategic equity investments

Insurance Europe (IE) published its response to a questionnaire conducted by the IAIS on infrastructure and strategic equity investments. While IE welcomes the IAIS proposal for a differentiated and more appropriate capital treatment of infrastructure and strategic equity investments, it says further improvements should be made to the criteria to better reflect the actual risks the assets pose to insurers and the different approaches insurers take in making long-term investments.

Source: ICS treatment of infrastructure and strategic equity investments should better reflect risk posed to insurers.

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Payment services and systems

Consultation opens on proposed insolvency changes

HM Treasury launched a consultation on potential amendments to insolvency rules for payment and electronic money institutions (the institutions). Proposed changes include helping protect customers where the institutions have gone into insolvency thereby improving the outlook for the payment and e-money industries. The consultation closes at 11.59 pm on 14 January 2021.

Source: Insolvency changes for payment and electronic money institutions: consultation.

EPC publishes document on the technical interoperability of MSCTs based on payer-presented data

The European Payments Council (EPC) announced that, following the publication of the ‘Mobile Initiated Single European Payment Area (SEPA) (Instant) Credit Transfer Interoperability Guidance’ (MSCT IG) document in November 2019, the ad-hoc multi-stakeholder group on MSCTs (MSG MSCT) has conducted a more detailed analysis on the technical interoperability of MSCTs based on payer-presented data.

Source: Technical interoperability of MSCTs based on payer-presented data.

For further information, see: SEPA Regulation and cross-border payments—essentials.

EPC report highlights payment threats and frauds

The EPC published its annual Payment Threat and Fraud Trends report, providing an overview of the most important threats and other ‘fraud enablers’ in the payments landscape, including social engineering and phishing, malware, advanced persistent threats, (distributed) denial of service, botnets and monetisation channels. For each threat, an analysis is made of the impact and context, and suggested controls and mitigations.

Source: 2020 Payment Threats and Fraud Trends report.

Interim funding to compensate APP scam victims extended until 30 June 2021

The signatories to the voluntary Authorised Push Payment (APP) Contingent Reimbursement Code have agreed to extend until 30 June 2021 the interim funding to compensate eligible victims provided the customer, sending and recipient banks have met the standards expected of them under the Code. The extension of interim funding is intended to provide further time for legislation to be agreed and implemented, placing the voluntary Code on a statutory footing.

Source: Interim funding for APP scam victim compensation to continue to 30 June 2021.

PSR publishes terms of reference and further minutes of its Access to Cash working groups

The Payment Systems Regulator (PSR) published terms of reference and minutes for its various Access to Cash working groups, which are run jointly with the FCA. The terms of reference documents set out objectives, work programmes and membership of the groups.

Sources: FCA/PSR Access to Cash—Working Group 1: Consumer and SME Needs (Terms of Reference)FCA/PSR Access to Cash—Working Group 2: Access to Branch Services (Terms of Reference)FCA/PSR Access to Cash—Working Group 3: Access to Cash Withdrawals (Terms of Reference)FCA/PSR Access to Cash—Working Group 4: Digital Transition (Terms of Reference)FCA/PSR Access to Cash—Steering Group (meeting minutes—9 November 2020)FCA/PSR Access to Cash—Working Group 1: Consumer and SME Needs (meeting minutes—5 November 2020)FCA/PSR Access to Cash—Working Group 1: Consumer and SME Needs (meeting minutes—12 November 2020)FCA/PSR Access to Cash—Working Group 2: Access to Branch Services (meeting minutes—5 November 2020)FCA/PSR Access to Cash—Working Group 2: Access to Branch Services (meeting minutes—12 November 2020)FCA/PSR Access to Cash—Working Group 3: Access to Cash Withdrawals (meeting minutes—2 November 2020)FCA/PSR Access to Cash—Working Group 4: Digital Transition (meeting minutes—2 November 2020) and  FCA/PSR Access to Cash—Working Group 4: Digital Transition (meeting minutes—9 November 2020).

Vestagar speech on the Interchange Fee Regulation

The European Commission’s executive vice president and commissioner in charge of competition policy, Margrethe Vestager, has given a speech entitled ‘The Interchange Fee Regulation in a rapidly evolving payment landscape: Impact and way forward’.

Source: Speech by EVP Margrethe Vestager on ‘The Interchange Fee Regulation in a rapidly evolving payment landscape: Impact and way forward’.

For further information, see: Interchange Fee Regulation—essentials.

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Fintech and cryptoassets

BIS publishes Benoît Cœuré speech at World FinTech Festival

The head of the Bank for International Settlements (BIS) Innovation Hub, Benoît Cœuré, gave a speech at the World FinTech Festival on, amongst other things, central bank digital currency (CBDC), the Innovation Hub’s strategic themes and plans for new centres in Toronto, London, Stockholm Paris and Frankfurt, and a strategic partnership with the Federal Reserve Bank of New York by December 2021.

Source: Moving fast and not breaking things—central banks and innovation.

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Sustainable finance

BoE summarises key points discussed at fifth Climate Financial Risk Forum

The BoE published a statement regarding the fifth meeting of the Climate Financial Risk Forum (CFRF), which was hosted jointly by the PRA and the FCA in November 2020. Among other topics, the CFRF noted the importance of progress in developing and understanding climate data and metrics, and decided that this should be a thematic topic that is addressed by all CFRF working groups in the next phase of work.

Source: Fifth meeting of the PRA and FCA’s joint Climate Financial Risk Forum.

ESMA chair discusses the future of sustainability reporting

The chair of ESMA, Steven Maijoor, delivered a speech on ‘The three (apparent) paradoxes of sustainability reporting and how to address them’. Maijoor discussed proportionality and standardisation of disclosure requirements, and the dangers of greenwashing.

Source: ESMA: Steven Maijoor delivers keynote about paradoxes of sustainability reporting.

ICMA publishes new guidelines for climate transition finance in debt capital markets

The International Capital Market Association (ICMA) published new guidelines on the disclosures that should be made by issuers on their climate change strategy when raising funds in debt capital markets. The guidelines are intended to support the growth of climate transition finance.

Source: Green & Social Bond Principles launch new guidelines on climate transition finance.

ISDA responds to ESMA consultation on reporting of non-financial information

ISDA responded to ESMA consultation on reporting of non-financial information by entities in scope of the Non-Financial Reporting Directive (NFRD).

Source: ISDA responds to ESMA consultation on reporting by NFRD entities.

FSB workshop will discuss implications of climate change for financial stability

The FSB is to hold a virtual workshop on its recent publication on the implications of climate change for financial stability, at 13.00 (CET) on 15 December 2020.

Source: FSB: Virtual workshop on the implications of climate change for financial stability.

UNEP FI consults on Principles for Responsible Banking

The United Nations Environment Programme Finance Initiative (UNEP FI) has published draft guidance on reporting under the Principles for Responsible Banking (PRB) for comment. Banking members can provide feedback on the draft by 29 January 2021.

Source: Guidance document on reporting.

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IRSG report examines financial services impact of restrictions on cross-border data transfers

The International Regulatory Strategy Group (IRSG) published a report, in collaboration with DAC Beachcroft LLP, on the impact of the trend towards data localisation on the financial services sector. It looks at restrictions on the extra-territorial transfer of data and suggests ways to address the concerns of national governments and regulators.

Source: IRSG report: How the trend towards data localisation is impacting the financial services sector.

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Dates for your diary

 

DateSubjectEvent

11 December 2020

 

Coronavirus (COVID-19)



Banks and mutuals

 

The EBA will publish the results of its 2020 EU-wide transparency exercise, assessing the preliminary impact of coronavirus on the banking sector, on 11 December 2020.

 

14 December 2020

 

SM&CR

 

The FCA will begin to publish solo-regulated firms’ Directory Persons data on the FS Register from 14 December 2020

 

14 December 2020

 

Brexit

 

The Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2020 come into force on 14 December 2020.

 

14 December 2020

 

Brexit

 

Fund managers should expect to be able to submit their updated notification regarding the temporary permissions regime from 14 December 2020. Fund managers should only submit their updated notification when they are certain that all the correct funds are included. Updated notifications must be received before the end of 30 December 2020. Practice Note: Brexit and financial services—the temporary permissions regime (TPR).

 

14 December 2020

 

Payment services and systems

 

Deadline for comments on the EBA’s consultation on revisions to its guidelines on major incident reporting under PSD2.

 

15 December 2020

 

Investment funds and asset management

 

Deadline for responses to the FCA’s call for input to help shape its work on improving the consumer investment market.

 

16 December 2020

 

Prudential requirements

 

The PRA published policy statement PS15/20: Pillar 2A: Reconciling capital requirements and macroprudential buffers. PS15/20 provides feedback to responses to Consultation Paper CP2/20 ‘Pillar 2A: Reconciling capital requirements and macroprudential buffers’. It also contains the PRA’s final policy in Supervisory Statement 31/15 (SS31/15) ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP). The PRA will apply the Pillar 2A reduction, where applicable, on or before 16 December 2020 and for efficiency align the assessment to related processes.

 



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About the author:
Prior to joining LexisNexis in 2016 as a paralegal, Lauren was an adjudicator at the Financial Ombudsman Service. There she resolved consumers’ complaints, and gained knowledge about a wide variety of financial products. Before this she studied Law at Nottingham Trent University.