FS weekly highlights—12 December 2019

FS weekly highlights—12 December 2019

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Risk management and controls
Financial crime
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
Consumer credit, mortgage and home finance
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

 

FCA updates on its consultation on STS notifications under onshored Securitisation Regulation

The Financial Conduct Authority (FCA) updated the webpage on its consultation CP19/26 concerning draft technical standards on the content and format of simple, transparent and standardised (STS) notifications under the onshored Securitisation Regulation (EU) 2017/2402. The updated page confirms that the consultation, which is part of the FCA’s preparations for a no-deal Brexit, closed and that the FCA will consider the feedback received and publish its final or near-final technical standards in a policy statement on or very near to exit day.

Source: Webpage update: CP19/26: Draft technical standards on the content and format of STS notifications under the onshored Securitisation Regulation.

 

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UK, EU and international regulators and bodies

 

FCA publishes Quarterly Consultation Paper No 26 (CP19/23)

The FCA published Quarterly Consultation Paper No 26 (CP19/23), in which it consults on proposed miscellaneous amendments to the FCA Handbook.

Source: CP19/23: Quarterly Consultation No 26.

FCA updates policy development webpage

The FCA updated its policy development webpage, which provides information on the FCA’s recent and upcoming publications. This version is current as of 6 December 2019.

Source: Updated FCA policy development webpage.

Eurogroup reports on progress made on deepening EMU

The president of the Eurogroup, Mario Centeno, wrote to the president of the Euro Summit, Charles Michel, to report on the progress achieved by the Eurogroup on the deepening of economic and monetary union (EMU), including reform of the European Stability Mechanism (ESM) and introduction of a European Deposit Insurance Scheme (EDIS).

Source: Deepening the EMU: President Centeno's report to the President of the Euro Summit.

 

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Authorisation, approval and supervision

 

FCA extends the SM&CR to 47,000 firms and updates relevant webpages

The FCA issued a press release stating its extension of the Senior Managers and Certification Regime (SM&CR) to around 47,000 firms, including senior managers and certification staff in those firms. The FCA notes that the SM&CR already applies to the banking and insurance sectors and this extension is a key step to creating a culture across financial services ‘where individuals step forward and take accountability for their own actions and competence’.

Source: FCA extends the Senior Managers and Certification Regime to 47,000 firms.

FCA video provides update on Gabriel replacement plans

The FCA published an update on its plans to replace the Gabriel system with a new data collection platform. The FCA conducted a user survey in July 2019 and held a number of roundtable events with users. A short video is available on the FCA website with feedback from the meetings and further information about the FCA’s proposals.

Source: FCA meets firms to discuss feedback on Gabriel and improvements to new data collection platform.

TISA Q&A on SM&CR for solo-regulated firms

The Investing and Saving Alliance (TISA) published a Q&A summary from its SM&CR forum held in November 2019, aimed at solo-regulated firms. Among other issues, the Q&A addresses certification, governance, contractors, SMF 18—the Other Overall Responsibility Function, temporary cover—the 12-week rule, regulatory references, and conduct rules training.

Source: SM&CR Forum: One month to implementation.

 

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Prudential requirements

 

Investment Firms Directive and Regulation published in the Official Journal

Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (the Investment Firms Directive or IFD) and Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (the Investment Firms Regulation or IFR), were published in the OJ. The IFD and IFR establish a new prudential framework for investment firms that is intended to be more proportionate, risk-sensitive and adapted to a firm’s risk profile and business model.

Sources: Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU and  Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014.

Implementing Regulation amending list of closely correlated currencies in CRR ITS published in the Official Journal

Commission Implementing Regulation (EU) 2019/2091 of 28 November 2019 amending Implementing Regulation (EU) 2015/2197 with regard to closely correlated currencies in accordance with Regulation (EU) 575/2013 (Capital Requirements Regulation or CRR), was published in the OJ.

Source: Commission Implementing Regulation (EU) 2019/2091 of 28 November 2019 amending Implementing Regulation (EU) 2015/2197 with regard to closely correlated currencies in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council.

EBA updates its guidelines for the reporting of funding plans

The European Banking Authority (EBA) published updated guidelines on harmonised definitions and templates for the reporting of funding plans. The changes include additional details of forecasted market-based funding, alignment to FINREP reporting and additional proportionality for small and non-complex credit institutions. This update is the result of the experience gained through the EBA's assessment of banks' funding plans in the recent years.

Sources: EBA updates its guidelines for the reporting of funding plansAnnex 1 and Annex II (Reporting on funding plans) with tracked changes.

EBA revises list of ITS validation rules

The EBA issued a revised list of validation rules in its implementing technical standards (ITS) on supervisory reporting, highlighting those which were deactivated either for incorrectness or for triggering IT problems. The EBA informs competent authorities throughout the EU that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.

Sources: EBA issues revised list of ITS validation rules and EBA validation rules update 10/12/2019.

ECON hearing with ECB’s Andrea Enria provides detailed summary of ECB’s supervisory priorities in 2019/2020

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a note of a public hearing with the chair of the supervisory board of the European Central Bank (ECB), Andrea Enria. The briefing addresses the Single Supervisory Mechanism (SSM) priorities for 2020; banks’ profitability issues, stress testing developments; supervisory issues and policies (anti-money laundering, Brexit, and the impact of Basel III and IFRS9), and the completion of the banking union.

Source: Public hearing with Andrea Enria, chair of the ECB supervisory board.

SRB to host planned crisis co-ordination exercise

The Single Resolution Board (SRB) is to host a planned co-ordination exercise with senior officials from EU and national resolution, regulatory and supervisory authorities on 9 & 10 December 2019, as part of ongoing efforts to strengthen crisis preparedness. The simulation builds on prior exercises and is led by the SRB’s dedicated crisis co-ordination team. It aims to increase efficiency, test processes and further improve the co-ordination between the authorities in resolution cases.

Source: EU and national authorities to hold planned co-ordination exercise.

ESMA final report amends the CRR standard on main indices and recognised exchanges

ESMA published the final report on draft amendments to Implementing Regulation (EU 2016/1646), specifying the main indices and recognised exchanges under the CRR relevant to credit institutions and investment firms subject to prudential requirements and trading venues. The amendments ensure the most relevant criteria are applied to specify the main indices, and that the list of recognised exchanges is updated to reflect legislative changes and changes in market structures. The report includes two versions of the amended ITS to account for the UK leaving with a Brexit deal and the possibility of a no-deal exit.

Source: ESMA amends CRR standard on main indices and recognised exchanges.

 

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Risk management and controls

 

BoE, PRA and FCA launch co-ordinated consultations and shared policy on operational resilience

The Bank of England (BoE), the Prudential Regulation Authority (PRA) and the FCA published a shared policy summary and co-ordinated consultation papers (CPs) on new requirements to strengthen operational resilience in the financial services sector. The PRA also published a related CP on outsourcing and third-party risk management. Responses are due by 3 April 2020.

Sources: Building operational resilience: impact tolerances for important business services (BoE) and  Building operational resilience: impact tolerances for important business services (FCA).

UK Finance considers PRA CP30/19—Outsourcing and third-party risk management

UK Finance published a summary of the PRA) consultation paper CP30/19—Outsourcing and third-party risk management, and announced that in advance of the response deadline of 3 April 2020, it will run a free webinar to discuss the implications of CP30/19, on 16 December 2019. The webinar will consider what the CP means for firms and what practical steps they can take.

Sources: The next steps for outsourcing and third party risk management and  Webinar: Bank of England consultation paper—Outsourcing and third-party risk management.

FSB reports look at risks of BigTech and cloud computing in financial services

The Financial Stability Board (FSB) published two reports examining the financial stability implications of BigTech firms offering financial services, and the adoption of cloud computing and data services across a range of functions at financial institutions. The reports set out a number of areas where policymakers may need to take action.

Source: FSB reports consider financial stability implications of BigTech in finance and third party dependencies in cloud services.

The Risk Coalition publishes guidance for financial services boards

Following consultation, the Risk Coalition published guidance entitled: ‘Raising the bar—Principles-based guidance for board risk committees and risk functions in the UK Financial Services sector’. It sets out principles-based good practice guidance for board risk committees and risk functions within the UK financial services sector. It is intended to set out a commonly agreed benchmark for ‘what good looks like’.

Source: Corporate governance: principles-based guidance for board risk committees in the financial services sector.

 

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Financial crime

 

Council of the EU adopts AML/CTF strategic priorities

Following a meeting held on 5 December 2019, the Council of the EU published its conclusions on strategic priorities on anti-money laundering and countering the financing of terrorism (AML/CTF). The Council welcomes the work being done by various EU bodies to tackle the issue, and recognises the need for stronger co-ordination between financial intelligence units. It urges Member States to swiftly complete the transposition of all relevant Union legislation in this area and strengthen its implementation and application.

Source: Council conclusions on strategic priorities on anti-money laundering and countering the financing of terrorism.

Cranston Review Report finds serious shortcomings in LBG’s compensation of HBOS Reading fraud victims

Sir Ross Cranston, who was appointed by the FCA to carry out an independent assurance review of Lloyds Banking Group (LBG)’s customer review following criminal misconduct at the HBOS Impaired Assets Office for London and the South East, published his report. The Cranston Review Report commends many aspects of LBG’s customer review but concludes that there were serious shortcomings. Responding to the report, the FCA said it will ensure LBG addresses these failings as soon as possible.

Sources: FCA response to the Cranston Review and Cranston Review Report.

FATF calls for an end to AML/CTF ‘box ticking’ perception

The Financial Action Task Force (FATF) published a keynote speech by its executive secretary, David Lewis, delivered on 10 December 2019 at the 7th International Anti-Money Laundering and Compliance Conference: Fighting Financial Crime, in Bratislava. Lewis set out FATF’s role in AML/CTF, and called for action after FATF evaluations found nearly 100 countries needed fundamental or major improvements in the preventive measures taken by banks, money service businesses, lawyers, accountants, company formation agents, real estate agents, casinos and others.

Source: Keynote speech at the 7th International Anti-Money Laundering and Compliance Conference, 10 December 2019.

Fraudsters posing as PSR employees

The Payment Systems Regulator (PSR) warned of a scam in which fraudsters send members of the public emails posing as PSR staff asking for money.

Source: Warning about fraudsters posing as PSR employees.

Innovate Finance blog says technological integration can make onboarding clients a valuable process

Innovate Finance published a blog on customer onboarding and the know your customer and AML procedures. Noting the rising costs of such procedures, the article argues that improvements to the onboarding process can have ‘massive impacts’ in terms of reducing costs and creating new income opportunities. The most effective way to drive those improvements is through ‘targeted, judicious investments in technology’.

Source: Onboarding: A better way to tick the boxes.

Prison sentences handed down to members of cyber-crime group

Three individuals were sentenced for using malware to steal tens of thousands of pounds from people across the country. Abhay Singh and Naveed Pasha were both charged with one count conspiracy to conceal, disguise, convert, transfer and/or remove criminal property, and were sentenced to three years and four months in prison and two years in prison, suspended for one year and nine months, respectively. Usman Khan was charged with one count of conspiracy to defraud and two counts of conspiracy to conceal, disguise, convert, transfer and/or remove criminal property and was sentenced to four years and six months in prison.

Source: Three men who were part of cyber fraud group sentenced.

 

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Competition in financial services

 

CMA sets out approach to crematoria land valuation as part of market investigation

The Competition and Markets Authority (CMA) added a document to its webpage for its review into the £2bn funerals market. It sets out the CMA’s approach to the valuation of crematoria land. Views and comments on this paper are sought by 18 December 2019.

Source: Market investigation: Funerals 5 December 2019: Approach to valuation of crematoria land published.

 

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Enforcement and redress

 

Cranston Review Report finds serious shortcomings in LBG’s compensation of HBOS Reading fraud victims

Sir Ross Cranston, who was appointed by the FCA to carry out an independent assurance review of LBG’s customer review following criminal misconduct at the HBOS Impaired Assets Office for London and the South East, published his report. The Cranston Review Report commends many aspects of LBG’s customer review but concludes that there were serious shortcomings. Responding to the report, the FCA said it will ensure LBG addresses these failings as soon as possible.

Sources: FCA response to the Cranston Review and Cranston Review Report.

FCA updates ‘how to complain’ webpage

The FCA published significant amendments to its ‘how to complain’ webpage. Major changes were made to ‘Step 1: Contact the firm directly’ and ‘Step 2: Make the complaint yourself’.

Source: FCA updates ‘how to complain’ webpage.

FCA provides information for customers of Merchant Optimisation Services Limited and One Stop Money Manager Limited

The FCA published information for customers of Merchant Optimisation Services Limited (FRN 789824) and One Stop Money Manager Limited (FRN 900044).

Sources: Information for customers of Merchant Optimisation Services Limited and  Information for customers of One Stop Money Manager Limited.

Payday lender DJS (UK) Limited enters administration

The FCA announced that, on 5 December 2019, DJS (UK) Limited, trading as PiggyBank Zero, PiggyBank Instalment loans, PiggyBank Loans, Aeroplane Loans, PiggyBank Guarantor Loans, was placed into administration. Shane Biddlecombe and Gordon Johnston at HJS Recovery UK Limited were appointed as joint administrators.

Source: DJS (UK) Limited enters administration.

Judgment Alert: Persons identified in Schedule 1 of the Claim Form (the SL Claimants) v Tesco plc; Manning & Napier Fund, Inc. (a company incorporated in the United States of America) and another company v Tesco plc

The judgment in the case of Persons identified in Schedule 1 of the Claim Form (the SL Claimants) v Tesco plc; Manning & Napier Fund, Inc. (a company incorporated in the United States of America) and another company v Tesco plc.

See: [2019] EWHC 3315 (Ch).

 

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Markets and trading

 

FCA reminds UK benchmark administrators of upcoming application deadline under BMR

The FCA updated its benchmarks webpage to highlight the requirement, under the transitional provisions of the Benchmarks Regulation (EU) 2016/1011 (BMR), for UK firms involved in benchmark administration to submit their application for authorisation or registration prior to 1 January 2020. It also flags the need for third-country benchmark administrators to be approved through the recognition or endorsement regimes, where a BMR equivalence decision does not apply to them, prior to 1 January 2022.

Source: Webpage update: Benchmarks.

ESMA publishes final report on draft RTS amending the Delegated Regulation

ESMA published its final report on the draft regulatory technical standards (RTS) amending Regulation (EU) 2019/979 (the Delegated Regulation), containing regulatory technical standards under Regulation (EU) 2017/1129 (the Prospectus Regulation). The report contains the legal basis for the draft RTS, as well as the specific amendments ESMA proposes to the Delegated Regulation. ESMA will submit its final report to the European Commission.

Source: Final Report on the draft RTS amending Delegated Regulation (EU) 2019/979 containing regulatory technical standards under the Prospectus Regulation.

ESMA briefing on benchmark recognition

ESMA issued a briefing on the recognition regime under Article 32 of the BMR. The briefing is designed to assist benchmark administrators located outside the EU in building up their recognition applications.

Source: ESMA issues briefing on benchmark recognition.

ESMA updates Benchmarks Regulation Q&As

ESMA updated its Q&As on the BMR. Following the publication in the Official Journal of the European Union of Regulation (EU) 2019/2089 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks, the modified Q&A provide clarification on the transitional provisions applicable to third country benchmarks.

Sources: ESMA updates its Q&As on the BMR and Q&As on the BMR.

CPMI and IOSCO publish report on authorities’ co-operation to increase FMI safety and efficiency

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report outlining ways in which financial authorities co-operate to promote the safety and efficiency of financial market infrastructures (FMIs), with particular emphasis on the expectations in Responsibility E of the Principles for financial market infrastructures (PFMI). The report, which comes against a backdrop of increasingly globalised markets and growing central clearing of trades, shares the lessons learned from this co-operation.

Sources: CPMI and IOSCO share authorities' experiences in co-operation to increase FMI safety and efficiency and  Responsibility E: A compilation of authorities' experience with co-operation.

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MiFID II

 

ESMA publishes report on prices for market data

The European Securities and Markets Authority (ESMA) published a first review report on the development of prices for market data for equity. ESMA found that MiFID II did not reduce the cost of market data charged by trading venues and approved publication arrangements, and suggests the establishment of an EU-wide real-time consolidated tape for equity instruments.

Source: ESMA recommends real-time consolidated tape for equity.

ESMA updates its Q&As on MiFID II and MiFIR transparency and market structure topics

ESMA updated its Q&As regarding market structures and transparency issues under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

Sources: ESMA updates its Q&As on MiFID II and MiFIR transparency and market structures topicsQuestions and answers on MiFID II and MiFIR market structures topics and  Questions and answers on MiFID II and MiFIR transparency topics.

ESMA updates MiFIR data reporting Q&As

ESMA updated its Q&A document on data reporting under the Markets in Financial Instruments Regulation (EU) 600/2014 (MiFIR). The updated document includes a new question on the reporting of reference rates not included in Commission Delegated Regulation (EU) 2017/590 (RTS 22) and Commission Delegated Regulation (EU) 2017/585 (RTS 23).

Source: ESMA updates Q&A on MiFIR data reporting.

FinDatEx publishes MiFID data-sharing template

The Financial Data Exchange Templates (FinDatEx) platform published the third iteration of the European MiFID Template (EMT V3). The template standardises the information on target market and costs between product manufacturers and distributors, as required under MiFID II. The EMT and all other FinDatEx templates are not compulsory, are provided to the industry free of charge and are free of any intellectual property rights.

Source: FinDatEx published MiFID template—Version 3.0.

 

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Regulation of capital markets and Capital Markets Union

 

ESMA consultation on internal controls for credit rating agencies

ESMA launched a consultation on proposed guidelines on internal controls for CRAs under the Regulation (EC) 1060/2009 on credit ratings agencies (CRA Regulation), as amended, to ‘ensure the accuracy and integrity of the credit rating process’. Responses are requested by 16 March 2020 and a final report is likely to be published by Q3 2020.

Source: ESMA publishes proposals on CRAs’ internal control functions.

FCA updates on its consultation on STS notifications under onshored Securitisation Regulation

The FCA updated the webpage on its consultation CP19/26 concerning draft technical standards on the content and format of STS notifications under the onshored Securitisation Regulation (EU) 2017/2402. The updated page confirms that the consultation, which is part of the FCA’s preparations for a no-deal Brexit, closed and that the FCA will consider the feedback received and publish its final or near-final technical standards in a policy statement on or very near to exit day.

Source: Webpage update: CP19/26: Draft technical standards on the content and format of STS notifications under the onshored Securitisation Regulation.

ISLA manifesto calls for EU action to bolster the securities lending market

The International Securities Lending Association (ISLA) published a manifesto: ‘Securities lending to support more autonomous EU capital markets: Priorities for the next five years’. It sets out views and recommendations in five areas where ISLA believes EU policymakers can help the securities lending market ‘play an integral part in supporting the development of stronger capital markets in Europe’.

Source: ISLA publishes the Association’s manifesto.

ECB opinion examines draft law on a guarantee scheme for securitisations of loans originated by credit institutions

The ECB published an opinion of 6 December 2019 following a request from the Greek Ministry of Finance for an opinion on the draft law on a guarantee scheme for securitisations of loans originated by credit institutions (CON/2019/42). The draft law is designed to encourage the transfer of the risks of non-performing loans (NPLs) off credit institutions’ balance sheets.

Source: ECB Opinion on a guarantee scheme for securitisations of loans originated by credit institutions (CON/2019/42).

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

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

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

Appeal Tracker: Business Mortgage Finance 6 plc v Roundstone Technologies Ltd

Appeal TRacker Alert: Applying for permission to appeal to the Court of Appeal. Appeal from the order of Mr Justice Nugee Chancery Division Financial List dated 22 October 2019 for permission to appeal and a stay of execution. In the previous judgment, notwithstanding purported resolutions and appointments made, a receiver was not validly appointed to act for the claimant, who was the issuer of six classes of notes under a true-sale securitisation structure, and the defendant, who purportedly entered into a sale and purchase agreement with the receiver acting on behalf of the claimant, had not established that that receiver had had ostensible authority so to act. The Chancery Division so held finding that, in the absence of any representation or holding out by the claimant or its trustee, it followed that ostensible authority was not established and the sale and purchase agreement was not binding.

Source: [2019] EWHC 2917 (CH).

 

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Regulation of derivatives

 

ESMA annual statistical report values EU derivatives market at €735tn

ESMA published its second annual statistical report analysing the EU derivatives markets. Based on data submitted under EMIR, the report provides a comprehensive market-level view of the EU’s derivatives markets in 2018, which had a total size of €735tn gross notional amount outstanding, an increase of 11% on 2017.

Source: ESMA values EU derivatives markets at €735tn.

ESAs publish draft RTS on risk mitigation techniques for non-cleared OTC contracts

The European Supervisory Authorities developed joint draft RTS on the risk mitigation techniques for non-cleared over-the-counter (OTC) derivative contracts (bilateral margining) under Article 11(15) of Regulation (EU) 648/2012 on OTC derivatives, CCPs and trade repositories (EMIR), to achieve greater international consistency. The draft RTS set out proposed amendments to the Delegated Regulation (EU) 2016/2251 supplementing EMIR.

Source: EMIR RTS on various amendments to the bilateral margin requirements and joint statement on the introduction of fall-backs in view of the international framework.

ISDA supports US regulators’ proposals on revised margin requirements

The International Swaps and Derivatives Association (ISDA) responded to the notice of proposed rulemaking and request for comments regarding margin and capital requirements for covered swap entities issued by the US prudential regulators. The proposed rulemaking extends the phase-in period for initial margin, preserves the legacy status for swaps amended due to the interbank offered rates (IBOR) transition and certain post-trade events, and removes the obligation for affiliates to exchange initial margin. ISDA ‘strongly supports the proposal and encourages the agencies to finalise it expeditiously’.

Source: ISDA letter to US prudential regulators on revised margin requirements.

European Association welcomes General Approach on CCP Recovery and Resolution

The European Association of CCP Clearing Houses (EACH) welcomed the General Approach on CCP Recovery and Resolution reached by the Council of the EU on 4 December 2019. According to EACH, ‘the resumption of the work on this important file by the former Romanian Presidency of the Council of the EU and its continuation by the current Finnish Presidency overall resulted in additional safeguards for financial stability and limited recourse to taxpayer money’.

Source: EACH welcomes the Council General Approach on CCP Recovery and Resolution.

ESMA publishes second annual report on EMIR penalties and supervisory measures

ESMA published its second annual report regarding supervisory measures carried out and penalties imposed by national competent authorities (NCAs) under the European Market Infrastructure Regulation (Regulation No 648/2012) (EMIR).

Source: ESMA publishes 2nd annual report on EMIR penalties and supervisory measures.

 

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Investment funds and asset management

 

IA report sets out best practice on operational resilience

The Investment Association (IA) published a report on operational resilience, identifying ways in which firms can improve their systems and controls, and identifying key areas where they should ensure they understand the workings of their business services.

Source: Operational resilience: Business services & beyond.

ABI publishes unit-linked guide 2019

The Association of British Insurers (ABI) published the fourth edition of its guide to good practice for unit-linked funds. The ABI consulted with the FCA in developing the guide, but points out that it does not constitute guidance from the FCA, and that in the event of conflict between the guide and the FCA Handbook, the FCA Handbook text prevails.

Source: Updated version of ABI guide to good practice for unit-linked funds: December 2019.

ESMA publishes feedback on the ELTIF RTS consultation

ESMA published the final report on the draft RTS under Article 25 of the Regulation on European Long-Term Investment Funds (ELTIFs) (Regulation (EU) 2015/760). As the draft RTS depend to a large extent on the cost section of the packaged retail and insurance-based investment product (PRIIPs) key information document (KID), which is currently being revised in the context of the review of the delegated acts of PRIIPs, ESMA decided to postpone the finalisation of the draft RTS until the new PRIIPs delegated acts were published.

Source: ESMA publishes report on the responses received to its consultation on the ELTIF Regulation.

 

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Banks and mutuals

 

EBA updates its guidelines for the reporting of funding plans

The EBA published updated guidelines on harmonised definitions and templates for the reporting of funding plans. The changes include additional details of forecasted market-based funding, alignment to FINREP reporting and additional proportionality for small and non-complex credit institutions. This update is the result of the experience gained through the EBA's assessment of banks' funding plans in the recent years.

Sources: EBA updates its guidelines for the reporting of funding plansAnnex 1 and Annex II (Reporting on funding plans) with tracked changes.

Banking union: ECON analysis on factors behind subdued banking profitability

ECON published an in-depth analysis it requested as part of its scrutiny of banking union. The analysis is entitled: ‘The main factors for the subdued profitability of significant banks in the banking union: Is the ECB’s supervisory response conclusive and exhaustive?’. The report surveys studies on the causes of this low profitability and discusses actions that the Single Supervisory Mechanism (SSM) may want to undertake, to support banks in their quest for higher returns.

Source: The main factors for the subdued profitability of significant banks in the banking union.

ECON hearing with ECB’s Andrea Enria provides detailed summary of ECB’s supervisory priorities in 2019/2020

ECON published a note of a public hearing with the chair of the supervisory board of the ECB, Andrea Enria. The briefing addresses the SSM priorities for 2020; banks’ profitability issues, stress testing developments; supervisory issues and policies (anti-money laundering, Brexit, and the impact of Basel III and IFRS9), and the completion of the banking union.

Source: Public hearing with Andrea Enria, chair of the ECB supervisory board.

SRB publishes 2019 conference report on bank resolution and ‘turning policy into action’

The SRB published the full report from its 2019 conference, held on 10 October, entitled ‘bank resolution—turning policy into action’. Topics discussed focused on the implementation of policy rather than its development, and the conference explored rising challenges to practical resolvability. Participants agreed that the task of ‘turning policy into action’ can only be achieved through a strong team effort, and identified an overall need for greater clarity and increased transparency to ensure resolution authorities are clear on what being ‘resolvable’ means for firms.

Source: SRB Conference 2019 report now available.

ECB opinion examines draft law on a guarantee scheme for securitisations of loans originated by credit institutions

The ECB published an opinion of 6 December 2019 following a request from the Greek Ministry of Finance for an opinion on the draft law on a guarantee scheme for securitisations of loans originated by credit institutions (CON/2019/42). The draft law is designed to encourage the transfer of the risks of NPLs off credit institutions’ balance sheets.

Source: ECB Opinion on a guarantee scheme for securitisations of loans originated by credit institutions (CON/2019/42).

ESRB Recommendation on exchange and collection of information for macroprudential purposes on branches of credit institutions having their head office in another Member State or in a third country published in the Official Journal

Recommendation of the European Systemic Risk Board (ERSB) of 26 September 2019 on exchange and collection of information for macroprudential purposes on branches of credit institutions having their head office in another Member State or in a third country (ESRB/2019/18)2019/C 412/01, was published in the Official Journal (OJ).

Source: Recommendation of the European Systemic Risk Board of 26 September 2019 on exchange and collection of information for macroprudential purposes on branches of credit institutions having their head office in another Member State or in a third country.

Better Finance position paper on the banking union calls for focus on citizen protection

Better Finance published a position paper on the banking union, which argues that while the EU initiative reduced the number and magnitude of bank failures and the recourse to taxpayers’ money, it was too focused on prudential objectives, rather than protecting citizens. The paper argues that the banking union ‘too often generated significant detriment to consumers of banking services’.

Source: Better Finance position paper on banking union.

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Consumer credit, mortgage and home finance

 

FCA and BoE publish mortgage lending statistics for 2019 Q3

The FCA and the BoE published mortgage lending statistics for 2019 Q3, based on around 340 regulated mortgage lenders and administrators’ Mortgage Lending and Administration Returns (MLAR). The MLAR is a quarterly return submitted to the FCA and the PRA by firms carrying out mortgage lending and administration.

Sources: Mortgage lending statistics—December 2019 and Mortgage Lenders and Administrators Statistics—2019 Q3.

Finance & Leasing Association calls for update to the Consumer Credit Act 1974

The Finance & Leasing Association (FLA) set out improvements that it says the incoming government should adopt to ‘transform customer protection in the consumer credit market and strengthen the growth of a sustainable and productive economy’. The report, Priorities for 2020 and beyond, says the 45-year-old Consumer Credit Act (CCA), which underpins every consumer credit transaction in the UK, is failing consumers because it requires lenders to send ‘old-fashioned and severely worded’ letters to those in financial difficulty, while delaying how quickly lenders can step in to offer those customers more time to make payments.

Source: The FLA’s priorities for 2020—an agenda for the incoming government.

MMP Financial Limited enters administration

The FCA announced that, on 9 December 2019, MMP Financial Limited, trading as My Money Partner and Swift Sterling, was placed into administration. Chris Laverty, Trevor Patrick O’Sullivan and Helen Dale of Grant Thornton were appointed as joint administrators, and will update customers as soon as possible.

Source: MMP Financial Limited enters administration.

 

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Regulation of insurance

 

Amendment to ITS on Solvency II reporting and disclosure requirements published in the Official Journal

Commission Implementing Regulation (EU) 2019/2103 of 27 November 2019 amending and correcting Implementing Regulation (EU) 2015/2450 laying down implementing technical standards (ITS) with regard to the templates for the submission of information to the supervisory authorities in accordance with Directive 2009/138/EC (Solvency II), was published in the OJ. The amendments align certain reporting and disclosure requirements with recent amendments to the Solvency II Delegated Regulation (EU) 2015/35, which were made by Commission Delegated Regulation (EU) 2018/1221 and Commission Delegated Regulation (EU) 2019/981.

Source: Commission Implementing Regulation (EU) 2019/2103 of 27 November 2019 amending and correcting Implementing Regulation (EU) 2015/2450 laying down implementing technical standards (ITS) with regard to the templates for the submission of information to the supervisory authorities in accordance with Directive 2009/138/EC (Solvency II).

EIOPA extends deadline for its call for research proposals

The European Insurance and Occupational Pensions Authority (EIOPA) extended the deadline for its call for research proposals, which was launched in October 2019 in the context of the ongoing policy and regulatory debates relating to the European financial system that were increasingly focused on topics beyond banking, including the insurance and pension sectors. The deadline for submitting proposals was extended from 15 December 2019 to 15 January 2020.

Source: Deadline extended: EIOPA launches call for research proposals.

EIOPA announces March 2020 Washington DC public forum for the EU-US Insurance Project

EIOPA issued a press release announcing that the steering committee of the EU-US Insurance Project will host a public event on 13 March 2020, in Washington DC. The public event will include discussions of key areas linked to the Project initiatives addressing challenges and opportunities for the insurance sector in the EU and the US related to cyber security risks and the cyber insurance market, and the use of big data.

Source: Public forum: EU-US Insurance Project—13 March 2020 in Washington DC.

 

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Regulation of personal pension and stakeholder products

 

EIOPA extends deadline for its call for research proposals

The European Insurance and Occupational Pensions Authority (EIOPA) extended the deadline for its call for research proposals, which was launched in October 2019 in the context of the ongoing policy and regulatory debates relating to the European financial system that were increasingly focused on topics beyond banking, including the insurance and pension sectors. The deadline for submitting proposals was extended from 15 December 2019 to 15 January 2020.

Source: Deadline extended: EIOPA launches call for research proposals.

 

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Payment services and systems

 

EPC publishes 2019 report on payment threats and fraud trends

The European Payments Council (EPC) published its payment threats and fraud trends report for 2019. The report, published annually, is intended to contribute to the creation of awareness on payment threats and fraud trends and to help payment stakeholders decide on possible actions. It also provides guidance to stakeholders in the payment ecosystem on how to implement mitigating measures to address these payment risks.

Source: 2019 payment threats and fraud trends report.

ECON publishes amendments to proposed Directive on e-commerce VAT fraud concerning payment service providers

ECON published amendments to a report on the proposal for a Council directive amending the EU VAT Directive (Directive 2006/112/EC) as regards introducing certain requirements for payment service providers (COM(2018)0812—C8-0015/2019—2018/0412(CNS)). The proposal seeks to solve the problem of e-commerce VAT fraud by strengthening the co-operation between tax authorities and payment service providers.

Source: Report on the proposal for a Council directive amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers (COM(2018)0812—C8-0015/2019—2018/0412(CNS)).

Fraudsters posing as PSR employees

The PSR warned of a scam in which fraudsters send members of the public emails posing as PSR staff asking for money.

Source: Warning about fraudsters posing as PSR employees.

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Fintech and cryptoassets

 

Council of the EU and Commission call for further regulatory work on stablecoins

The Council of the European Union and the European Commission adopted a joint statement on stablecoins, setting out the potential benefits and risks, and noting that the challenges raised by ‘global stablecoins’ require a co-ordinated global response. The Council and the Commission state that no global stablecoin arrangement should begin operation in the EU until the legal, regulatory and oversight challenges and risks were adequately identified and addressed.

Source: Joint statement by the Council and the Commission on ‘stablecoins’.

FSB reports look at risks of BigTech and cloud computing in financial services

The Financial Stability Board (FSB) published two reports examining the financial stability implications of BigTech firms offering financial services, and the adoption of cloud computing and data services across a range of functions at financial institutions. The reports set out a number of areas where policymakers may need to take action.

Source: FSB reports consider financial stability implications of BigTech in finance and third party dependencies in cloud services.

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

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

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

 

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Sustainable finance

 

Regulation on sustainability-related disclosures in the financial services sector (Regulation (EU) 2019/2088) published in the Official Journal

Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, was published in the OJ. The Regulation forms an integral part of the EU’s efforts, under its Capital Market Union project, to connect finance with needs of the economy and the EU’s sustainable development agenda. This Regulation should assist in facilitating investments in sustainable projects and assets across the EU.

Source: Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.

Sustainable Finance Regulation on low-carbon benchmarks published in the Official Journal

Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks, was published in the OJ.

Source: Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks.

Consultation launched to further nature-related financial disclosure

The Climate Disclosure Standards Board (CDSB) launched a framework consultation into the disclosure regime for nature-related financial information in the mainstream report. The aim of the consultation is to globally drive the uptake of such disclosure, as well as explore the role of the CDSB framework. The consultation welcomes responses until 28 February 2020.

Source: Framework consultation launches to drive uptake of nature-related financial disclosure globally.

EBA action plan on sustainable finance urges firms to act now

The EBA published an action plan on sustainable finance, outlining the regulator’s plans on deliverables and activities related to environmental, social, and governance (ESG) factors and ESG risks. It explains the phased approach and associated time-lines for the reports, advices, guidelines and technical standards mandated to the EBA.

Sources: EBA action plan on sustainable finance and EBA pushes for early action on sustainable finance.

European Commission announces date for European Green Deal publication

The Executive Vice-President of the European Commission, Valdis Dombrovskis, issued a statement at the United Nations Climate Change Conference (COP25) joint high-level sustainable finance event, saying that the European Green Deal will be published on 11 December 2019. A panel discussion at COP25 also included taxonomies, green bonds and the need for coherent frameworks. Dombrovskis stated that the new deal is ambitious and will require ‘massive levels of investment’.

Source: Executive Vice-President Valdis Dombrovskis' statement at the COP 25 joint high-level Sustainable Finance event.

FIA event discusses way ahead for sustainable finance

The Futures Industry Association (FIA) published details of a compliance and regulation forum for members held in London on 27 November 2019. Regulatory and industry experts offered perspectives on sustainable finance and discussed the importance of a carefully managed transition to a low-carbon economy.

Source: FIA forum focuses on transition to sustainable finance.

Switzerland and the EU to link emissions trading systems

The Finnish Presidency of the Council of the European Union, the European Commission and Switzerland met at the United Nations Climate Change Conference, COP25, in Madrid to announce that Switzerland and the EU are joining forces in carbon pricing. On 1 January 2020, Switzerland will become the first country to successfully link its greenhouse gas emissions trading system with the EU emissions trading system (EU ETS). The process took almost ten years.

Source: EU and Switzerland finalise linkage of emissions trading schemes.

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

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

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

Council of the EU adopts conclusions for reform of development policy financing

The Council of the European Union adopted conclusions on the potential reform of the European financial architecture for development policies. The conclusions follow up and build on the report by the Wise Persons' group that was established in April 2019 with the aim of recommending possible options for reforming the existing setup.

Source: Financial architecture for development: Council adopts conclusions on the way forward.

 

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Dates for your diary

 

DateSubjectEvent

 

2 to 13 December 2019

 

Sustainable finance

 

The upcoming UN climate change conference (COP25) will be held in Madrid on 2 to 13 December 2019.

 

13 December 2019Fintech and crypto-assets

The applications for the FCA’s cohort 6 of its regulatory sandbox closes.

 

15 December 2019Prudential requirements

The PRA is to publish systemic risk buffer rates with application by 1 January of the second year following the calendar year when rates are published.

 

15 December 2019Payment services and systems

Most of the provisions of the Cross Border Payments Amending Regulation (which was adopted by the Council of the EU in March 2019) will become applicable as of 15 December 2019.

 

16 December 2019Regulation of insurance

EIOPA must respond to the European Commission’s April 2018 call for information on the liquidity of undertaking’s insurance liabilities and information on the asset management of insurers by 16 December 2019.

 

18 December 2019

Banks and mutuals


Conduct requirements

Part 2 of the annex to the Overdrafts (Information and Tools) Instrument 2019 (FCA 2019/86) comes into force on 18 December 2019.

 

18 December 2019Regulation of insurance

The deadline for feedback to the PRA CP22/19: Solvency II: Prudent person principle is 18 December 2019.

 

18 December 2019Consumer credit, mortgage and home finance

The FCA rules on overdraft repeat use and competition remedies begin to apply from 18 December 2019.

 

18 December 2019Prudential requirements

The deadline for feedback to the European Commission’s roadmap on the implementation of final Basel III reforms is 18 December 2019.

 

18 December 2019

UK, EU and international regulators and bodies


MiFID II

 

Regulation of insurance

The following regulations will be formally signed in Strasbourg on 18 December 2019.
  • Regulation amending ESAs

  • Regulation amending ESRB

  • Directive amending MIiFID/Solvency II

     

18 December 2019Regulation of derivatives

Transparency requirements for CCPs under EMIR Article 38 enter into force. CCPs shall provide clearing members with a simulation tool, allowing them to determine the amount of initial margin that a CCP may require upon the clearing of new transactions. In addition, CCPs have to provide it’s clearing members with information regarding the used initial margin models.

 

18 December 2019Prudential requirements

The deadline for feedback to the PRA CP21/19: Credit risk: Probability of default and loss given default estimation is 18 December 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.