FS weekly highlights—10 October 2019

FS weekly highlights—10 October 2019

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Consumer protection and claims management regulation
Competition in financial services
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
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

 

ESMA updates database and calculations planning for possible no-deal Brexit

The European Securities and Markets Authority (ESMA) updated its measures and guidance on the possibility of a no-deal Brexit scenario on 31 October 2019.

FCA updates supervisory statement on the MiFID transparency regime post-Brexit

The Financial Conduct Authority (FCA) updated its supervisory statement on the operation of the MiFID transparency regime post-Brexit. It is intended to help market participants understand the FCA’s approach to the operation of the MiFID transparency regime if the UK leaves the EU without a withdrawal agreement. The statement sets out how the FCA expects various aspects of the regime to operate, and provides estimated dates of when the FCA expects to publish further guidance.

FCA’s Market Watch for October 2019 focuses on preparations for a no-deal Brexit

The FCA published the October 2019 edition of its Market Watch newsletter, with a focus on how firms can prepare for a possible no-deal Brexit on 31 October 2019. The issue contains links to a number of FCA resources designed to help firms with their contingency planning. 

OBIE reminds EEA participants in Open Banking of need to enter TPR if there is a no deal Brexit

The Open Banking Implementation Entity (OBIE) issued a press release reminding firms that are EEA participants in UK Open Banking that they must enter the FCA’s temporary permissions regime (TPR) to be able to continue to passport into the UK if the UK leaves the EU without an implementation period. If firms do not notify the FCA before the deadline that they wish to enter the TPR, they will automatically fall into the supervised run off regime (SRO) or the contractual run off regime (CRO). 

EBA urges continued progress in financial institutions’ Brexit preparations

The European Banking Authority (EBA) published a communication on the remaining issues relating to the preparation by financial institutions for the UK’s departure from the EU. The EBA emphasises that effective contingency planning efforts must continue to ensure that assets, appropriate staff and data are in place to support relevant authorisations and to ensure that adequate customer communications are made.

ISDA CEO highlights dangers of separate EU and UK derivatives trading obligations post-Brexit

The International Swaps and Derivatives Association (ISDA) published an article by its chief executive officer, Scott O'Malia, on the risks of a disruption in trading activity and split in liquidity if the UK leaves the EU without a deal and no equivalence determinations are made in relation to the derivatives trading obligation (DTO) under MiFIR and UK onshored legislation. O’Malia says that close regulatory co-ordination and a pragmatic, timely and predictable approach to cross-border trading has the potential to address or at least partially mitigate these risks.

BoE publishes financial policy summary and record of FPC October 2019 meeting

The BoE published the record of a meeting of its FPC which took place on 2 October 2019 and includes a financial policy summary produced by the FPC. The meeting addressed issues including Brexit, open-ended funds and payment systems. The FPC calls for market participants to accelerate their transition efforts to alternative benchmark rates away from Libor.

Steven Maijoor on enhancing ESMA’s roles, the supervision of CCPs, and Brexit

The chair of ESMA, Steven Maijoor, delivered the keynote speech at Association for Financial Markets in Europe’s Legal and Compliance conference in Paris. The speech focused on enhancing the role and responsibilities of ESMA, strengthening the supervision of EU and non-EU central counterparties (CCPs), and Brexit. 

PSR publishes board meeting minutes for July 2019

The Payment Systems Regulator (PSR) published the minutes of its July 2019 board meeting. Topics discussed included Brexit, cryptocurrencies and long-term access to cash. 

Brexit Bulletin—no-deal Brexit readiness report

The Cabinet Office and Department for Exiting the European Union published a ‘No-deal readiness report’, summarising UK preparations for exiting the EU on 31 October 2019. 

 

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UK, EU and international regulators and bodies

 

ECB regulation amending the MMSR Regulation published in the OJ

Regulation (EU) 2019/1677 of the European Central Bank (ECB) of 27 September 2019 amending Regulation (EU) No 1333/2014 concerning statistics on the money markets (the Money Market Statistical Reporting (MMSR) Regulation) was published in the Official Journal of the EU (OJ). The aim of the amending regulation is to further ensure the availability of high quality statistics on the euro money market.

Council Implementing Decision to appoint Yves Mersch as vice-chair of the Supervisory Board of the ECB published in the Official Journal

Council Implementing Decision (EU) 2019/1671 of 4 October 2019 on the appointment of the vice-chair of the Supervisory Board of the ECB was published in the OJ.

TheCityUK signs co-operation MoU with Uzbekistan’s Capital Markets Development Agency

TheCityUK and the Capital Markets Development Agency of the Republic of Uzbekistan signed a memorandum of understanding (MoU) to support increased access and co-operation between the UK and Uzbekistan. The MoU aims to bring mutual benefit to both countries’ financial and related professional services industries by enhancing cross-border collaboration and encouraging joint initiatives. 

European Council approves appointment of ECB President

The European Council published a decision to appoint Christine Lagarde as president of the ECB.

Chancellor of the exchequer says timetable for new BoE governor is ‘on track’

The chancellor of the exchequer, Sajid Javid MP, said that the timetable to appoint the new governor of the BoE, who will take office on 1 February 2020, is on track. Javid wrote to the Treasury Committee to confirm the timescales following reports in September 2019 that the appointment might be delayed, and that Mark Carney may be asked to extend his service beyond 31 January 2020. 

European Commission report finds EBA’s activities unaffected by Paris move

The European Commission published a report on the compliance of the EBA with the requirements regarding the location of its seat. The report concludes that, based on the available information, the EBA’s execution of its tasks and powers, its governance structure, its main organisation, and the financing of its activities have not been affected by the relocation to Paris.

FCA publishes October 2019 policy development update

The FCA published its latest policy development update, current as of 4 October 2019. The policy development update provides some information on the FCA’s recent and upcoming publications, but should not be regarded as comprehensive.

 

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Authorisation, approval and supervision

 

PRA deputy CEO letter on SM&CR in the context of IT failures in financial services sector

The Treasury Committee published a letter it received from the Prudential Regulation Authority (PRA)’s deputy chief executive officer, Lyndon Nelson, following oral evidence he provided to the Committee in relation to the ‘IT failures in the financial services sector’ inquiry. In the letter, Nelson sets out the background to the senior managers and certification regime (SM&CR) and the relevant senior manager function (SMF) which covers IT failures, as well as the PRA’s enforcement process.

FCA updates ‘More information on SM&CR categorisation for solo-regulated firms’ webpage

The FCA updated its webpage titled ‘More information on SM&CR categorisation for solo-regulated firms’. The updated page now includes an SM&CR overview video. 

PRA consults on minor amendments to PRA Rulebook Parts

The PRA published occasional consultation paper CP25/19 proposing minor amendments to PRA Rulebook Parts, supervisory statements, statements of policy (SoPs) and the relevant templates.

 

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Prudential requirements

 

ESAs joint board of appeal dismisses Creditreform appeal against EBA decision

The joint board of appeal of the European Supervisory Authorities (ESAs) published its decision in the appeal by the German credit rating agency Creditreform AG against an EBA decision. The joint board of appeal dismissed the appeal, which challenged the adoption of certain draft implementing technical standards (ITS), as inadmissible.

PRA consults on minor amendments to PRA Rulebook Parts

The PRA published occasional consultation paper CP25/19 proposing minor amendments to PRA Rulebook Parts, supervisory statements, statements of policy (SoPs) and the relevant templates. 

ECB says 2019 stress test found ‘vast majority’ of banks have comfortable liquidity

The ECB announced that the 2019 supervisory stress test showed that Euro area banks have overall comfortable liquidity positions, although some vulnerabilities require further attention. The 2019 exercise assessed banks’ ability to handle hypothetical liquidity shocks lasting six months. While banks showed adequate liquidity reserves to withstand stress, vulnerabilities were found in relation to foreign currencies, data quality and collateral management.

EU looks at potential reforms to the bank stress test model

The European Parliament published a briefing note on a potential re-design of EU bank stress tests. The note follows the 26 September 2019 speech by ECB chair Andrea Enria on ‘the future of stress testing—realism, relevance and resources’, in which he set out a proposal to update the tests, with fewer resources required. Stress tests are currently carried out using a ‘constrained bottom-up approach’ whereby supervisory authorities ensure a quality check of models run by banks. It is suggested to split stress tests into a supervisory view (top-down approach along the lines of stress tests under Dodd-Frank in the US) and a ‘banks’ view’ (bottom-up approach). 

EBA Risk Dashboard says low bank profitability continues to affect sector

The EBA published its quarterly Risk Dashboard, covering Q2 2019 data, which summarises the main risks and vulnerabilities in the EU banking sector. The EBA says capital ratios remained broadly stable and banks’ asset quality further improved. However, low profitability remains a key challenge for the sector.

 

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Financial stability, recovery and resolution 

 

Randal K. Quarles on the challenges ahead for the FSB

The Financial Stability Board (FSB) published a speech by its chair, Randal K. Quarles, to mark its tenth anniversary. Speaking at the European Banking Federation’s European Banking Summit in Brussels, Quarles discussed how the FSB had contributed to the construction of the post-crisis global financial architecture, and looked ahead at challenges including innovations in financial technology, shifts in financial globalisation and integration, and increasing non-bank financial intermediation.

FCA reports on Reyker Securities plc

The FCA issued a press release stating that Reyker Securities plc (Reyker) stopped conducting any regulated activities following financial difficulties. Reyker was until last week undertaking an accelerated sales process, but it is not possible to conclude that sale. Although it remains open to potential acquirers of the business, in light of its financial circumstances the directors of Reyker are taking immediate steps to place the company into special administration under the Investment Bank Special Administration Regulations 2011.

BIS committees publish two major reports on unconventional policy tools

The Bank for International Settlements (BIS) published major reports by two of its committees—the Committee on the Global Financial System (CGFS) and the Markets Committee—on the implementation and implications of unconventional monetary policy tools introduced by central banks in response to the financial crisis and its aftermath.

 

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Risk management and controls

 

UK government will not transpose proposed directive strengthening whistle-blower protection

The EU formally adopted new rules strengthening protection for whistle-blowers across sectors including public procurement, financial services, public health, and data protection. Under the directive, both private and public organisations must provide safe channels for whistle-blowers to report, where they will be protected against retaliation. Another change will be the obligation for national authorities to adequately inform citizens and train public officials on how to deal with whistle-blowing. The Department for Business, Energy & Industrial Strategy (BEIS) expressed continued concern over the ‘overall proportionality’ of the directive’s proposals in two letters sent to EU committees within the House of Commons and House of Lords. 

IE calls for narrow scope of EIOPA guidelines on outsourcing to cloud service providers

Insurance Europe (IE) said the industry will likely need additional time to implement proposed guidelines on outsourcing to cloud service providers, which the European Insurance and Occupational Pensions Authority (EIOPA) is currently developing. IE said the guidelines should be limited to instances of material outsourcing, ie outsourcing that encompasses critical and important operational functions or activities only, to ensure legal certainty and consistency with Solvency II. Non-material outsourcing to the cloud should fall outside of their scope, IE argues.

 

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Financial crime

 

ESAs’ AML/CTF opinion raises concerns on transaction monitoring and reporting

The ESAs—comprising the EBA, EIOPA and ESMA published their second joint opinion on the risks of money laundering and terrorist financing affecting the EU financial sector. Drawing on data and information provided by national anti-money laundering (AML) and countering terrorist financing (CTF) competent authorities, the ESAs found that the monitoring of transactions, and suspicious transaction reporting, still raise concerns—particularly in sectors where a financial institution’s business model is based on frequent transactions.

UK-US agreement will speed up cross-border electronic data transfers in criminal cases

The UK and US governments signed the first US-UK Bilateral Data Access Agreement, which enables US and UK law enforcement agencies, given the necessary authorisation, to directly request electronic data from tech companies based in the other country for serious cross-border criminal investigations. The agreement allows law enforcement agencies to circumvent the previous lengthy mutual legal assistance process of law enforcement agencies requesting communications data from central governments, while also preserving privacy and supporting civil liberties. It aims to quicken investigations of crime, such as terrorism, child sexual abuse and cybercrime, as well as complex investigations into suspected terrorists and paedophiles, by lowering the wait time for requests from up to two years to weeks, even days. Andrew Smith, partner at Corker Binning, states the agreement may ‘become the template for similar agreements with other countries around the world’.

 

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Consumer protection and claims management regulation

 

European Commission guidance notice on Unfair Contract Terms Directive published in the OJ

A European Commission guidance notice on the interpretation and application of Council Directive 93/13/EEC on unfair terms in consumer contracts (Unfair Contract Terms Directive) was published in the OJ on 27 September 2019. The notice is intended to present, in a structured way, the interpretation provided by the Court of Justice of the EU on the key concepts and provisions of the UCTD, in light of specific cases dealt with by the courts of the Member States.

 

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Competition in financial services

 

CMA says Bottomline Technologies’ purchase of Experian Payments Gateway may reduce competition

The Competition and Markets Authority (CMA) found that payment software firm Bottomline Technologies’ purchase of Experian Payments Gateway (EPG) may reduce competition. After completing its initial Phase 1 investigation, the CMA is concerned that the new, merged company may increase prices, reduce product availability, or reduce its investment in innovation. This is mainly because if Bottomline did not acquire EPG, there would be a realistic chance that EPG would be bought by a different firm, which could result in a more competitive market with greater product development and more choice for customers.

 

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Enforcement and redress

 

PRA updates statement of policy on its approach to enforcement

The PRA published an updated version of its statement of policy on the PRA’s approach to enforcement: statutory SoPs and procedure. The update follows the publication of Enforcement: Changes to the PRA’s settlement policy PS23/19 and was consulted on in CP10/19 Enforcement: Changes to the PRA’s settlement policy. The PRA received no responses to CP10/19 and decided to make the changes to the statement of policy as consulted.

FCA urges remaining Churchgate Trading Syndicate victims to get in touch

The FCA issued a press release urging members of the public who lost money in an unauthorised scheme called the Churchgate Trading Syndicate, and who may be eligible to receive some of their money back, to get in contact with the FCA.

FCA appeals for possible victims of illegal investment scheme

The FCA is urging investors who may be victims of an illegal scheme to contact it urgently if they have not yet done so. The appeal follows Southwark Crown Court making confiscation orders against Samrat Bhandari, Muhammad Mirza and Paul Moore, after their earlier convictions and prison sentences for running an illegal investment scheme that lost investors over £1.4m. 

FSCS to compensate members of Solent Credit Union Ltd

The Financial Services Compensation Scheme (FSCS) announced that it will protect the members of Solent Credit Union Ltd, trading as Solent Community Bank, which stopped trading and is now in default. The FSCS says it will compensate the ‘vast majority’ of the 2,146 members of the Southampton-based credit union within seven days.

Supreme Court publishes permission to appeal results for June-August 2019

The Supreme Court published a document setting out the results of permission to appeal applications for June, July and August 2019. The document confirms, among other results, that the case of Mastercard Incorporated and others v Walter Hugh Merricks CBE (UKSC 2019/0118) was granted permission to appeal, whereas permission to appeal was refused in the case of Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd (UKSC 2019/0044).

 

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Markets and trading

 

ESMA consults on possible changes to the Market Abuse Regulation

ESMA is consulting on the provisions of the Market Abuse Regulation (EU) 596/2014 (MAR), as requested by the European Commission. The changes proposed in the consultation paper affect the investor community as a whole, but are particularly relevant for issuers of financial instruments admitted to trading or traded on a trading venue, and their management, investment firms and asset management companies. Responses are also sought from any other market participant, including trade associations and industry bodies, institutional and retail investors, consultants and academics. Feedback is sought by 29 November 2019. 

FMSB publishes statement of good practice on information and confidentiality in the FICC markets

The Fixed Income Currencies and Commodities (FICC) Markets Standards Board (FMSB) published a statement of good practice on information and confidentiality, which seeks to provide clarity on sharing information in FICC markets and dealing with confidential information within a firm. It sets out nine good practice statements together with commentary explaining their rationale.

ESMA adopts RTS on supervisory co-operation under MAR

ESMA published its final report on a set of regulatory technical standards (RTS) on the application of MAR. The RTS cover co-operation arrangements between national competent authorities and their counterparts in third countries for the purpose of efficiently exchanging information and enforcing obligations related to market abuse.

AFME publishes report on future of surveillance in wholesale banking

The Association for Financial Markets in Europe (AFME) published a report on ‘The future of surveillance in wholesale banking’, in collaboration with KPMG. The report outlines some of the key points to consider when planning a future surveillance strategy and emphasises the challenges that firms may face, in the context of the industry’s growing focus on surveillance to detect market abuse, market misconduct and financial crime.

 

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MiFID II

 

ESMA consults on aligning the MiFIR derivatives trading obligation with EMIR REFIT

ESMA launched a consultation on possible amendments to the trading obligation under MiFIR to reflect the amendments made to EMIR by EMIR REFIT. The closing date for responses is 22 November 2019.

FCA updates supervisory statement on the MiFID transparency regime post-Brexit

The Financial Conduct Authority (FCA) updated its supervisory statement on the operation of the MiFID transparency regime post-Brexit. It is intended to help market participants understand the FCA’s approach to the operation of the MiFID transparency regime if the UK leaves the EU without a withdrawal agreement. The statement sets out how the FCA expects various aspects of the regime to operate, and provides estimated dates of when the FCA expects to publish further guidance.

ESMA updates MiFID II investor protection Q&As

ESMA updated its Q&As on the implementation of investor protection and intermediaries topics under the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and Regulation (EU) 600/2014 (MiFIR).

ESMA publishes updated Q&A on MIFIR data reporting

ESMA updated its Q&As on data reporting under the Market in Financial Instruments Regulation (EU 600(2014)) (MiFIR). The amendments to the existing Q&A on MiFIR data reporting become effective from 7 October 2019.

ESMA publishes opinion on frequent batch auctions and the double volume cap mechanism

ESMA published an opinion on frequent batch auctions (FBAs) and the double volume cap mechanism (DVCM). The opinion reflects the conclusions of ESMA’s Final Report on Periodic Auctions, published on 11 June 2019, and aims to provide sufficient clarification regarding the application of the pre-trade transparency requirements by FBA systems and the price determination process of FBA systems, ensuring consistent application throughout the EU. 

ESMA annual report on the application of waivers and deferrals under MiFIR

ESMA, published its 2019 annual report on the application of waivers and deferrals under MiFIR. The report includes an analysis based on waiver applications received in the course of the 2017 and 2018 and for which ESMA issued an opinion to the competent authority before 31 December 2018. It also includes an overview of the deferral regimes applied across the different Member States, distinguishing between on-venue and over-the-counter (OTC) application.

 

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Regulation of capital markets and Capital Markets Union

 

ESMA publishes final CSDR guidelines on standardised procedures and messaging protocols

ESMA published its final report on the guidelines on standardised procedures and messaging protocols. The guidelines aim to clarify the scope of the requirement set out in Article 6(2) of the Central Securities Depositories Regulation (EU) 909/2014 (the CSDR) and provide guidance on the standardised procedures and messaging standards used for compliance. 

ESMA publishes opinion on frequent batch auctions and the double volume cap mechanism

ESMA published an opinion on frequent batch auctions (FBAs) and the double volume cap mechanism (DVCM). The opinion reflects the conclusions of ESMA’s Final Report on Periodic Auctions, published on 11 June 2019, and aims to provide sufficient clarification regarding the application of the pre-trade transparency requirements by FBA systems and the price determination process of FBA systems, ensuring consistent application throughout the EU. 

 

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Regulation of derivatives

 

ESMA consults on aligning the MiFIR derivatives trading obligation with EMIR REFIT

ESMA launched a consultation on possible amendments to the trading obligation under MiFIR to reflect the amendments made to EMIR by EMIR REFIT. The closing date for responses is 22 November 2019.

ESMA consults on commercial terms for providing client clearing services under EMIR

ESMA launched a consultation on draft technical advice to the European Commission on the conditions under which commercial terms are to be considered fair, reasonable, non-discriminatory and transparent, where clearing service providers offer clearing services to clients under the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). The consultation closes on 2 December 2019.

CPMI/IOSCO report on governance arrangements for key OTC derivatives data elements

The BIS published a joint report by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). The report, entitled ‘Governance arrangements for critical OTC derivatives data elements (other than UTI and UPI)’, forms the final part of CPMI and IOSCO's mandate to develop global guidance on the harmonisation of data elements reported to trade repositories. CPMI/IOSCO call for the recommended governance arrangements to be implemented across jurisdictions within the next three years.

FSB report on governance arrangements for the UPI

The FSB published a report which sets out its conclusions on governance arrangements for the Unique Product Identifier (UPI), together with a recommended implementation plan for those arrangements and next steps to establish the International Governance Body (IGB) for the UPI. The report also conditionally identifies the IGB for the UPI and for the Unique Transaction Identifier. 

ISDA writes to EU policy makers on eligibility of MMFs as initial margin

ISDA published a letter it sent to EU policy makers, dated 30 September 2019, regarding the eligibility of non-EU money market funds (MMFs) as initial margin for non-cleared derivatives. In the letter, ISDA requests a modification of European Commission Delegated Regulation (EU) 2016/2251 (the EMIR Margin RTS) to expand the scope of eligible instruments for initial margin purposes.

ISDA supports FASB’s exposure draft on reference rate reform, but seeks clarifications

ISDA published a response to the Financial Accounting Standards Board (FASB)’s exposure draft file reference number 2019-770 on reference rate reform (Topic 848). ISDA says its members support the FASB’s proposals in the exposure draft to provide optional expedients and exceptions to applying US GAAP to derivatives and hedging relationships and other transactions and contracts that will be affected by reference rate reform.

 

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Investment funds and asset management

 

FCA consults on changes to guidance for closed-ended investment funds

The FCA issued a guidance consultation (GC19/4) on changes that it proposes to make to the Knowledge Base, its repository of non-handbook commentary that has the status of formal FCA guidance. The FCA proposes to amend its existing technical note on master-feeder structures (FCA/TN/409.1) and add a new technical note on class testing changes to an investment management agreement (IMA) where there are unquantifiable benefits (FCA/TN/411.1). The proposals are summarised in Primary Market Bulletin No. 24. The consultation closes on 14 November 2019.

 

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Banks and mutuals

 

EU looks at potential reforms to the bank stress test model

The European Parliament published a briefing note on a potential re-design of EU bank stress tests. The note follows the 26 September 2019 speech by ECB chair Andrea Enria on ‘the future of stress testing—realism, relevance and resources’, in which he set out a proposal to update the tests, with fewer resources required. Stress tests are currently carried out using a ‘constrained bottom-up approach’ whereby supervisory authorities ensure a quality check of models run by banks. It is suggested to split stress tests into a supervisory view (top-down approach along the lines of stress tests under Dodd-Frank in the US) and a ‘banks’ view’ (bottom-up approach).

AFME publishes report on future of surveillance in wholesale banking

The Association for Financial Markets in Europe (AFME) published a report on ‘The future of surveillance in wholesale banking’, in collaboration with KPMG. The report outlines some of the key points to consider when planning a future surveillance strategy and emphasises the challenges that firms may face, in the context of the industry’s growing focus on surveillance to detect market abuse, market misconduct and financial crime.

EBA Risk Dashboard says low bank profitability continues to affect sector

The EBA published its quarterly Risk Dashboard, covering Q2 2019 data, which summarises the main risks and vulnerabilities in the EU banking sector. The EBA says capital ratios remained broadly stable and banks’ asset quality further improved. However, low profitability remains a key challenge for the sector.

ECB publishes Q2 2019 supervisory banking statistics

The ECB published supervisory banking statistics for the second quarter of 2019. The key finding is that capital ratios for significant institutions remain stable; the Common Equity Tier 1 (CET1) ratio stood at 14.34%, the Tier 1 ratio at 15.55% and the total capital ratio at 18.01%. The non-performing loan ratio has decreased further to 3.56%, and the liquidity coverage ratio decreased to 146.83%. 

ECB sets out SSM supervisory priorities for 2020

The ECB published the Single Supervisory Mechanism (SSM) supervisory priorities for 2020. They build on an assessment of the key challenges facing supervised banks in the current economic, regulatory and supervisory environment. ECB Banking Supervision conducts an annual risk identification and assessment exercise in close co-operation with the national competent authorities (NCAs). The analysis draws on a wide range of contributions, including from the Joint Supervisory Teams and the ECB’s horizontal microprudential and macroprudential functions. It is also informed by discussions with banks and other relevant authorities. 

 

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Regulation of insurance

 

EIOPA launches field test of proposed new Solvency II reporting and disclosure templates

As part of the 2020 Solvency II reporting and disclosure review, EIOPA launched a field test of the revised and newly proposed templates. The revision covers both content and structure. The aim of the field test is to allow undertakings to implement the new and revised reporting requirements, to identify main issues and to report on them. Stakeholders are invited to test one, more or all of the templates, and to provide feedback by 31 January 2020.

EIOPA publishes first parallel RFR calculation under Solvency II and updates source code

EIOPA published its first parallel calculation for Solvency II relevant risk-free interest rate term structures (RFR) as of the end of September 2019, based on ‘Refinitiv’ data, alongside an updated version of the source code used for the monthly RFR calculation. 

EIOPA’s thematic review of travel insurance results in warning to industry

EIOPA published its thematic review on consumer protection issues in travel insurance. EIOPA has also issued a warning to the travel insurance industry as a supervisory response to the issues identified by the thematic review. Among other issues, EIOPA found heightened conduct risks due to problematic business models with remuneration structures based on extremely high commission levels, ultimately resulting in consumer detriment. Such business models were found to be inconsistent with the Insurance Distribution Directive (IDD). 

IE calls for narrow scope of EIOPA guidelines on outsourcing to cloud service providers

Insurance Europe (IE) said the industry will likely need additional time to implement proposed guidelines on outsourcing to cloud service providers, which the European Insurance and Occupational Pensions Authority (EIOPA) is currently developing. IE said the guidelines should be limited to instances of material outsourcing, ie outsourcing that encompasses critical and important operational functions or activities only, to ensure legal certainty and consistency with Solvency II. Non-material outsourcing to the cloud should fall outside of their scope, IE argues.

FCA study shows insurance customers who renew their policies tend to pay more

The FCA published an interim report from its market study into motor and home insurance pricing, in which it raises concerns regarding competition in these markets. The FCA says that the pricing model used in the markets means consumers who stay with their provider and do not negotiate, often pay high prices for their insurance. The FCA estimates around six million policyholders pay such high fees.

CII reacts to FCA market study paper MS18/1.2 on GI pricing

The Chartered Insurance Institute (CII) published a response to the FCA’s interim report of general insurance (GI) pricing practices market study (Market Study Report MS18/1.2). In response to the FCA’s criticism of GI pricing, the CII’s managing director for engagement, Keith Richards, stated insurers need to take action. 

 

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Regulation of personal pension and stakeholder products

 

FCA reminds SIPP operators of their obligations in light of Berkeley Burke administration

Following the decision of the administrators of Berkeley Burke SIPP Administration Limited (BBSAL) to discontinue BBSAL’s appeal of the High Court’s judgment about the firm’s judicial review of a Financial Ombudsman Service final decision (R (Berkeley Burke SIPP Administration Limited) vs Financial Ombudsman Service Limited), the FCA reminded self-invested pension plan (SIPP) operators of the FCA’s Dear CEO letter published in October 2018.

FCA speech on delivering the FCA/TPR joint pensions strategy

The FCA published a speech by its director of supervision, life insurance and financial advice, Deb Jones, in which she gives an FCA perspective on regulating the pensions and retirement income sector. In the speech, delivered at the FCA and The Pensions Regulator’s (TPR) ‘joint regulatory strategy—one year on’ event, Jones explains how the FCA, together with the TPR, is delivering the joint regulatory strategy they published last October.

ASA rulings for 9 October 2019

The Advertising Standards Authority (ASA) challenged an ad on the website www.comparing-pensions.co.uk seen on 8 March 2019 on the grounds that ‘the ad falsely implied that the marketer was acting for purposes outside its business’. In addition, another complaint was received that challenged ‘whether the website misleadingly implied that the advertiser provided financial advice’. Also, an ad for gambling app Casumo Services appearing as a Google-sponsored search result has prompted 24 complaints to the ASA. The complainants claimed that the ad was irresponsibly targeted. The ASA upheld all complaints, along with four others. 

 

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Payment services and systems

 

OBIE reminds EEA participants in Open Banking of need to enter TPR if there is a no deal Brexit

The Open Banking Implementation Entity (OBIE) issued a press release reminding firms that are EEA participants in UK Open Banking that they must enter the FCA’s temporary permissions regime (TPR) to be able to continue to passport into the UK if the UK leaves the EU without an implementation period. If firms do not notify the FCA before the deadline that they wish to enter the TPR, they will automatically fall into the supervised run off regime (SRO) or the contractual run off regime (CRO).

Pay.UK analysing feedback on APP scam redress proposals

Pay.UK provided an update on its call for information, launched in August 2019, which sought views on the proposed Faster Payments System rule change on customer redress for authorised push payment (APP) scams. Pay.UK says it received 39 responses to the call for information and is now analysing the evidence provided in those submissions. 

BEIS committee chair criticises Barclays’ move to restrict customers’ access to cash

The chair of the Business, Energy and Industrial Strategy (BEIS) Committee, Rachel Reeves, commented on the decision by Barclays Bank to stop its customers withdrawing cash from post office branches. Reeves said Barclays’ ‘unjustifiable decision’ to stop customers accessing their own money from post offices was a ‘deeply retrograde step’ which let down its customers, potentially leaving people in many places unable to access their own cash, and which ‘undermines the post office network’. 

CMA says Bottomline Technologies’ purchase of Experian Payments Gateway may reduce competition

The Competition and Markets Authority (CMA) found that payment software firm Bottomline Technologies’ purchase of Experian Payments Gateway (EPG) may reduce competition. After completing its initial Phase 1 investigation, the CMA is concerned that the new, merged company may increase prices, reduce product availability, or reduce its investment in innovation. This is mainly because if Bottomline did not acquire EPG, there would be a realistic chance that EPG would be bought by a different firm, which could result in a more competitive market with greater product development and more choice for customers. 

BoE publishes financial policy summary and record of FPC October 2019 meeting

The BoE published the record of a meeting of its FPC which took place on 2 October 2019 and includes a financial policy summary produced by the FPC. The meeting addressed issues including Brexit, open-ended funds and payment systems. The FPC calls for market participants to accelerate their transition efforts to alternative benchmark rates away from Libor. 

PSR publishes board meeting minutes for July 2019

The Payment Systems Regulator (PSR) published the minutes of its July 2019 board meeting. Topics discussed included Brexit, cryptocurrencies and long-term access to cash.

 

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Fintech and cryptoassets

 

Innovate Finance publishes special report on the UK’s fintech sector

Innovate Finance published a special report on the future of fintech, with articles on UK startups and the funding environment, AI-powered regtech, and how challengers can break into the small-to-medium lending market.

Intercontinental Exchange executes first block trade of Bakkt Bitcoin Futures

Intercontinental Exchange, an operator of global exchanges and clearing houses and provider of data and listings services, announced the execution of the first block trade of Bakkt Bitcoin Futures submitted to ICE Futures US. The block trade was executed between Galaxy Digital and XBTO, and was cleared by ED&F Man.

WFE asks the FCA not to ban the sale of crypto derivatives to retail investors

The World Federation of Exchanges (WFE), the global industry group for exchanges and CCPs, asked the FCA not to ban the sale of crypto derivatives to retail consumers while supporting the regulator’s desire to better protect vulnerable consumers. 

Report on AI-powered finance says UK ‘ready to reap the benefits’

The International Regulatory Strategy Group published a report on AI-powered finance in the UK’s financial and related professional services. Published in association with Accenture, the report explores the opportunity afforded by AI for the industry, and discusses how the UK government and regulatory bodies can encourage AI-powered innovation while mitigating any potential risks arising from industry-wide adoption. 

Andrew Jenkins appointed Northern Ireland fintech envoy

HM Treasury announced that Andrew Jenkins was appointed as the new fintech envoy for Northern Ireland. Jenkins’ role is to promote Northern Ireland as a place for firms to develop and grow their business. The appointment was made by the economic secretary to the Treasury, John Glen. 

 

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Sustainable finance

 

EIB report urges EU to invest in competitiveness, sustainability and inclusion

The European Investment Bank (EIB) published a report which examines ‘three core areas where EU-wide political ambition and investment are truly necessary’: competitiveness, sustainability and inclusion. Instead of merely adapting to change, the report calls for the EU to be ‘proactive through timely reform and investment that sets us on a pathway towards a society that is productive, sustainable and inclusive, by design’. It calls for a holistic approach, with a focus on the complex interlinkages between the three concepts. 

Mark Carney outlines key priorities for the TCFD

The BIS published Mark Carney’s address at the inaugural Taskforce on Climate-related Financial Disclosures (TCFD) summit in Tokyo. Carney said just two years after the final TCFD recommendations were published, ‘support has sky-rocketed and conversations about climate-related financial risks have moved from the fringes to the forefront’. Current supporters control balance sheets totalling $120trn and include the world’s top banks, asset managers, pension funds, insurers, credit rating agencies, accounting firms and shareholder advisory services. 

 

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Dates for your diary

 

DateSubjectEvent

 

11 October 2019

 

MiFID II

 

Commission Delegated Regulation (EU) 2019/1011 amending Commission Delegated Regulation (EU) 2017/565 as regards certain registration conditions to promote the use of small and medium enterprise growth markets for the purposes of MiFID II will apply from 11 October 2019.

 

14 October 2019Markets and trading

The Financial Services and Markets Act 2000 (Benchmarks) (Amendment) Regulations 2019 will come into force on 14 October 2019.

 

14 October 2019Banks and mutuals

The CMA is due to announce its decision on whether to refer the anticipated acquisition by MUFG Bank Ltd relating to the aviation business of DVB Bank SE for a phase 2 investigation by 14 October.

 

15 October 2019MiFID II

The deadline for responses to ESMA’s consultation on draft guidelines on certain aspects of the compliance function requirements under MiFID II is 15 October 2019.

 

15 October 2019Authorisation, approval and supervision

Under new rules set out in PRA PS11/19: Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change the PRA expects firms to submit an updated Senior Management Function SMF form by 15 October 2019.

 

15 October 2019

Banks and mutuals



Consumer credit, mortgage and home finance

The CMA provisionally decided to vary the Retail Banking Market Investigation Order 2017 and remove Part 6, in light of the FCA’s forthcoming rules on overdraft alerts. The CMA is seeking comments on this provisional decision, and on the variation order, and the draft explanatory note. The CMA will consider the comments and evidence provided before reaching its final decision. Feedback is sought by 15 October 2019.

 

15 October 2019

Banks and mutuals



Regulation of insurance

The deadline for firms to adopt an initial plan to meet PRA expectations for a strategy managing financial risks raised by climate change is 15 October 2019.

 

16 October 2019Investment funds and asset management

Fund managers that wish to update their temporary permissions notification before the notification window closes on 30 October 2019 must do so by the end of 16 October 2019 at the very latest.

 

16 October 2019Payment services and systems

The deadline for feedback to the BoE’s updated migration approach to ISO 20022 is 16 October 2019.

 

16 October 2019Regulation of insurance

The deadline for feedback on IAIS consultation on its draft issues paper on the use of big data analytics in insurance is 16 October 2019.

 

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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.