FS weekly highlights—12 November 2020

FS weekly highlights—12 November 2020

In this issue

 

 

Brexit news
Coronavirus (COVID-19)
MiFID II
UK, EU and international regulators and bodies
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Consumer protection
Investigations, enforcement and discipline
Dispute resolution for financial services lawyers
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Securities financing transactions
Crowdfunding
Banks and mutuals
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

Chancellor’s statement on post-Brexit future of UK financial services addresses equivalence, green finance and fintech

The chancellor of the exchequer, Rishi Sunak, outlined the government’s planned approach to financial services post-Brexit, saying that the UK will remain an open, attractive international financial centre and will extend its global leadership in green finance and financial technology. He also announced the publication of a new guidance document setting out the UK’s approach to equivalence with overseas jurisdictions, as well as a package of equivalence decisions relating to the EU and EEA member states.

Source: Chancellor sets out ambition for future of UK financial services.

For further information, see: Brexit—impact on financial services.

EBA issues guidance to financial services firms on preparations for end of Brexit transition period

The European Banking Authority (EBA) issued a reminder to financial institutions to finalise the full execution of their contingency plans in accordance with the conditions agreed with relevant competent authorities before the end of the Brexit transition period on 31 December 2020, from which point the provision of financial services from UK authorised institutions to EU customers on a cross-border basis (passporting) will no longer be possible. The EBA sets out specific reminders to payment service providers, and also reminds institutions to ensure adequate communication regarding their preparations and possible changes to any affected EU customers.

Source: The EBA reminds financial institutions of the need for readiness in view of the Brexit transition period ending on 31 December 2020.

For further information, see: Financial Services passporting, equivalence and the UK post-Brexit.

ESMA updates Brexit statements on EMIR and SFTR reporting, MiFID II calculations, and its Data Operational Plan

The European Securities and Markets Authority (ESMA) updated three statements which address the impact on reporting under the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR), and on the operation of ESMA databases and IT systems after 31 December 2020—the end of the UK’s transition from the EU.

Source: ESMA updates Brexit statements for the end of UK transition period.

For further information, see: The impact of Brexit on the MiFID II regime, Impact of Brexit: EMIR—quick guide, and Impact of Brexit: SFTR—quick guide.

ESMA updates its Brexit Q&As on the Prospectus Regulation and the Transparency Directive

ESMA updated the Brexit Q&As contained in its Q&A documents on the Prospectus Regulation and on the Transparency Directive. The Brexit Q&As previously referred to the date the UK withdraws from the EU and the Prospectus Directive. These have been updated to refer to the position at the end of the implementation period (IP completion day) and the Prospectus Regulation.

Source: ESMA updates Q&As for prospectus and transparency rules linked to Brexit.

FCA publishes webpage with links to information about Brexit from EEA regulators

The Financial Conduct Authority (FCA) published a webpage with information about Brexit from European Economic Area (EEA) regulators. It provides links to dedicated Brexit websites hosted by financial regulators in EEA member states.

Source: New webpage: Information about Brexit from EEA regulators.

Financial Services Bill passes second reading in House of Commons

The Financial Services Bill passed its second reading in the House of Commons on 9 November 2020. The Bill is now being considered by a Public Bill Committee, which will scrutinise the Bill line by line.  The first sitting of the Committee will be on 17 November 2020, and the Committee is expected to report to the House by 3 December 2020.

Sources: Financial Services Bill Second Reading and  Financial Services Bill 2019-21.

Financial Services—new Brexit transition webpage

The government published a fresh webpage for UK businesses and organisations in the financial services sector collating existing stakeholder and sectoral guidance on preparation for the end of the transition period. Subjects covered include foreign travel insurance, financial services legislation under the European Union (Withdrawal) Act 2018, the temporary permissions regime and Temporary Transitional Power (Bank/PRA). The majority of the guidance within the new webpage is not new but has been collated by sector for ease of reference and bookmarking​. Some of the guidance may change as the transition period progresses, so stakeholders are advised to monitor these pages for updates.

Source: Financial Services Sector: End of Transition Period Guidance.

HMT publishes summary of responses to Gibraltar Authorisation Regime consultation, and next steps

HM Treasury (HMT) published a summary of the responses it received to its March 2020 consultation on the main features of the Gibraltar Authorisation Regime (GAR), together with the government’s decisions on the final policy design. GAR is a new permanent legislative framework enabling UK market access for Gibraltar-based financial services firms on the basis of alignment of regulatory and supervisory frameworks and co-operation between the jurisdictions.

Source: Consultation outcome: Market access arrangements for financial services between the UK and Gibraltar: a consultation.

Cyber sanctions—further Brexit transition guidance from Foreign, Commonwealth & Development Office

The Foreign, Commonwealth & Development Office  published new guidance to assist individuals in implementing and complying with the Cyber (Sanctions) (EU Exit) Regulations 2020, SI 2020/597, in line with the Sanctions and Anti-Money Laundering Act 2018, to help stakeholders prepare for the end of the transition period and beyond. Further new and updated guidance may be issued as the transition period progresses, so stakeholders are advised to monitor these pages for updates.

Source: Cyber sanctions: guidance.

Central Counterparties (Equivalence) Regulations 2020

SI 2020/1244: Provisions are made to specify that the legal and supervisory arrangements for Central Counterparties (CCPs) in the European Economic Area (EEA) meet at least equivalent outcomes to the UK’s corresponding regime. These Regulations come into force at 10.59 pm on 31 December 2020.

Source: The Central Counterparties (Equivalence) Regulations 2020

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Coronavirus (COVID-19)

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

ECB Opinion on proposals for regulations amending the EU securitisation framework in response to the coronavirus (COVID-19) pandemic published in Official Journal

An Opinion of the European Central Bank (ECB) of 23 September 2020 on proposals for regulations amending the EU securitisation framework in response to the coronavirus (COVID-19) pandemic has been published in the Official Journal (CON/2020/22).

Source: Opinion of the European Central Bank of 23 September 2020 on proposals for regulations amending the Union securitisation framework in response to the COVID-19 pandemic (CON/2020/22) 2020/C 377/01.

Coronavirus (COVID-19)— ECON adopts reports on proposed changes to securitisation rules

The European Parliaments’ Committee on Economic and Monetary Affairs (ECON) adopted two reports on proposed amendments to the rules on securitisation set out in the Securitisation Regulation (EU) 2017/2402 and the Capital Requirements Regulation (EU) 575/2013 (CRR). The proposals were adopted by the European Commission in July 2020 as part of its capital markets recovery package, in response to the coronavirus (COVID-19) pandemic.

Sources: ECON report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation to help the recovery from the COVID-19 pandemic and  ECON report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards adjustments to the securitisation framework to support the economic recovery in response to the COVID-19 pandemic.

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

PRA publishes statement on coronavirus (COVID-19) guidance for firms

The Prudential Regulation Authority (PRA) issued a statement which replaces previous guidance relating to coronavirus (COVID-19) measures for PRA-regulated firms, in light of updates from the UK government.

Source: Statement by the PRA on COVID guidance for firms.

FCA letter to the Treasury Committee on support for borrowers affected by coronavirus

The FCA published a letter from its chief executive, Nikhil Rathi, to the chair of the Treasury Committee, Mel Stride MP, on further support for borrowers affected by the coronavirus (COVID-19) pandemic.

Source: Letter from the FCA regarding support for borrowers affected by coronavirus, dated 4 November 2020.

For further information, see: Coronavirus (COVID-19)—implications for consumer credit, overdrafts and mortgages.

ESMA executive director discusses CRAs and the impact of coronavirus (COVID-19)

ESMA published a speech by its executive director, Verena Ross, on the Credit Ratings Agency Regulation and related issues, at the European Capital Markets Institute (ECMI) 2020 annual conference. Ross discussed how credit ratings agencies (CRAs) assess the impact of the coronavirus (COVID-19) on their assessments, and the renewed debate on the role of, and reliance on, credit ratings in the financial system.

Source: Verena Ross speaks about CRA regulation at ECMI annual conference.

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MiFID II

ESMA consults on its proposals on MiFID II/MiFIR obligations on market data

ESMA launched a consultation paper seeking input from market participants in relation to its draft guidelines on the MiFID II/MiFIR obligations on market data. Feedback is sought by 11 January 2021. ESMA expects to publish the final report and guidelines by Q2 2021.

Source: ESMA consults on MIFID II/MIFIR obligations on market data.

ESMA issues new decision and guidance on MiFIR transparency assessments of third-country trading venues

The Board of Supervisors of ESMA issued a new decision on the delegation to the ESMA chair of the assessment regarding third country trading venues for the purposes of Articles 20 and 21 of Regulation (EU) 600/2014 (MiFIR). ESMA has also issued updated guidance on the annex to its opinion determining third-country trading venues for the purpose of transparency under MiFIR. The annex provides a list of venues which meet the relevant criteria defined in the opinion.

Sources: Decision of the Board of Supervisors on delegation to the ESMA chair of the assessment regarding third country trading venues for the purposes of Articles 20 and 21 of MiFIR and  Guidance on the annex to ESMA opinion determining third-country trading venues for the purpose of transparency under MiFIR.

For further information, see: MiFID II & MiFIR—third-country regime.

ESMA updates Q&As on MiFID II and MiFIR investor protection and intermediaries topics

ESMA updated its Q&A document on MiFID II and MiFIR investor protection and intermediaries topics.

Source: ESMA publishes new Q&A on product governance.

For further information, see: MiFID II conduct of business and investor protection requirements.

Better Finance urges EU not to amend MiFID II ‘in haste’ or to make coronavirus (COVID-19) changes permanent

Better Finance written a public letter to the European Parliament’s ECON Committee warning about the long-term detrimental effects it says several provisions and amendments will have on retail investor protection if done in haste as part of the MiFID II ‘quick fixes’.

Source: Public letter to the European Parliament’s ECON Committee: Harm done to EU citizens as ‘retail’ investors through MiFID II ‘Quick Fixes’.

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UK, EU and international regulators and bodies

FOS publishes annual report and accounts for 2019-20

The Financial Ombudsman Service (FOS) published its annual report and accounts for the 2019-20 financial year, and laid them before Parliament. The report and accounts set out details of the FOS’s progress against its strategic aims and objectives each year, together with information about its financial performance and audited accounts.

Source: We’ve published our annual report and accounts 2019-20.

FCA publishes policy development update for November 2020

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

Source: Policy development update.

FCA’s Rathi discusses the pandemic response and transforming the FCA

The FCA released its latest ‘Inside FCA’ podcast interview in which its chief executive, Nikhil Rathi, discusses his new role, the FCA’s response to the coronavirus (COVID-19) pandemic and its approach to the various challenges ahead. He emphasises the ‘central role’ the regulator is playing in the recovery of the UK economy, and its priorities: consumer investments, credit, payments, fair value and the transformation of the FCA.

Source: Nikhil Rathi discusses the FCA’s pandemic response and his vision for the future.

Better Finance says ECB policy leads to ‘financial repression’

Better Finance published a response to the ECB survey on the impact of monetary policy, listing a number of ways it says the ECB subsidises EU banks and governments at the expense of individual savers.

Source: Better Finance: Position on the impact of monetary policy on global challenges and the European Central Bank.

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Financial stability 

FSB publishes 2020 list of global systemically important banks (G-SIBs)

The Financial Stability Board (FSB) published the 2020 list of global systemically important banks (G-SIBs) using end-2019 data and an assessment methodology designed by the Basel Committee on Banking Supervision (BCBS). The 30 banks on the list remain the same as the 2019 list. The list is accompanied by further information published by the BCBS on its 2020 assessment of G-SIBs, including details to enhance the understanding of G-SIB scores.

Sources: FSB publishes 2020 G-SIB list2020 list of global systemically important banks (G-SIBs) and Basel Committee publishes new details on global systemically important banks.

ESMA risk dashboard sees continued risk of significant market corrections

ESMA published its second risk dashboard for 2020, which sees a continued risk of decoupling between asset valuations and economic fundamentals. ESMA says the potential for a sudden reversal in investors’ risk assessment is the key risk currently seen for EU financial markets.

Sources: ESMA sees potential for sudden reversal in investors’ risk assessment and  ESMA risk dashboard 11 November 2020.

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Risk management and controls

FSB consults on regulatory and supervisory issues relating to outsourcing and third-party relationships

The FSB published a discussion paper for public consultation, on regulatory and supervisory issues relating to outsourcing and third-party relationships. The discussion paper draws on findings from a survey conducted among FSB members, and aims to facilitate a discussion on current regulatory and supervisory approaches to the management of outsourcing and third-party risks.

Source: FSB consults on regulatory and supervisory issues relating to outsourcing and third-party relationships.

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Financial crime

Council of the EU sets out expectations for role of an EU-level AML/CFT supervisor

The Council of the EU published its conclusions on anti-money laundering and countering the financing of terrorism (AML/CFT), as approved by the Council in a written procedure ended on 5 November 2020. The Council sets out in detail its position on the establishment of an EU-level AML/CFT supervisor.

Sources: Council conclusions on anti-money laundering and countering the financing of terrorism and  Approval—End of written procedure.

HMRC updates on MLD5 and Trust Registration Service progress

HMRC announced that, following the conclusion of the technical consultation on the Fifth Money Laundering Directive (MLD5) and Trust Registration Service (TRS) on 21 February 2020, the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020, SI 2020/991, has come into force partly on 6 October 2020. The proposed regulations were considered by the House of Commons European Statutory Instruments Committee and the House of Lords Secondary Legislation Scrutiny Committee before being laid before Parliament on 15 September 2020.

Source: Technical consultation: Fifth Money Laundering Directive and Trust Registration Service.

UK Finance publishes individual regime reviews of UK sanctions statutory instruments

UK Finance published a number of individual reviews of UK sanctions statutory instruments enacted as a result of the UK’s decision to leave the EU. The reviews aim to provide a helpful resource for financial institutions and other firms with a responsibility to comply with UK sanctions legislation either in the UK or overseas.

Source: UK Sanctions Statutory Instruments Review—Individual regime.

UK Finance publishes review of new UK sanctions rules

UK Finance published a review of new UK sanctions regulations, as EU sanctions legislation and regulations will cease to have UK effect at the end of the Brexit transition period. The UK legislation is designed to replace the current EU derived legislation, but it also allows the UK to finesse the regimes with language that was not possible via the EU legislation. The review sets out areas where the requirements, language or general policy can cause interpretation to expand or contract.

Source: UK Finance and legal partners review of new UK sanctions regulations.

Cyber sanctions—further Brexit transition guidance from Foreign, Commonwealth & Development Office

The Foreign, Commonwealth & Development Office  published new guidance to assist individuals in implementing and complying with the Cyber (Sanctions) (EU Exit) Regulations 2020, SI 2020/597, in line with the Sanctions and Anti-Money Laundering Act 2018, to help stakeholders prepare for the end of the transition period and beyond. Further new and updated guidance may be issued as the transition period progresses, so stakeholders are advised to monitor these pages for updates.

Source: Cyber sanctions: guidance.

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Consumer protection

FSCS participates in Money and Pensions Service’s Talk Money Week

The Financial Services Compensation Scheme (FSCS) announced that it is participating in the Money and Pensions Service's Talk Money Week, which runs from 9-13 November 2020. The campaign encourages talking openly about financial choices, saying doing so has many benefits, ‘not least for our mental health and wellbeing’. It argues that sounding out family and friends can reduce the risk of falling for scams.

Source: How often do you talk about money?.

CISI launches online course on FCA vulnerable customer requirements

The not-for-profit Chartered Institute for Securities & Investment (CISI) professional body developed an online e-learning course for financial services professionals, on the FCA’s vulnerable customer requirements and the Financial Planning Standards Board guidance.

Source: CISI offers new e-learning course on vulnerable customers.

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Investigations, enforcement and discipline

FCA launches High Court proceedings over unauthorised collective investment schemes

The FCA commenced High Court proceedings against Robin Forster, Fortem Global Limited and Richard Tasker over alleged links to investments in care homes in which investors appear to have lost at least £30m. The FCA—which alleges that the defendants carried out unauthorised activity in relation to the operation and/or promotion of collective investment schemes—is seeking injunctions, a declaration that the defendants’ actions amounted to unauthorised activity, and a restitution order to return funds to consumers who were affected by these alleged breaches.

Source: FCA commences High Court proceedings over unauthorised collective investment schemes.

FCA bans three individuals for non-financial misconduct

The FCA prohibited Russell David Jameson, Mark Horsey, and Frank Cochran from working in the financial services industry following findings that they are not fit and proper. Each of them had been convicted of serious non-financial indictable offences while working in the financial services industry.

Source: FCA bans three individuals from working in the financial services industry for non-financial misconduct.

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Dispute resolution for financial services lawyers

Operative part of the judgment in BNP Paribas v ECB published in Official Journal

The Operative part of the Judgment of the General Court of the EU of 9 September 2020—BNP Paribas v ECB (Cases T-150/18 and T-345/18) has been published in the Official Journal.

Source: Cases T-150/18 and T-345/18: Judgment of the General Court of 9 September 2020—BNP Paribas v ECB (Economic and monetary policy—Prudential supervision of credit institutions—Contribution to the deposit guarantee scheme or to the single resolution fund by way of irrevocable payment commitments—Tasks conferred on the ECB—ECB’s specific supervision powers—Article 4(1)(f), Article 16(1)(c) and Article 16(2)(d) of Regulation (EU) No 1024/2013—Measure imposing the deduction of the cumulative sum of outstanding irrevocable payment commitments from Common Equity Tier 1—Absence of individual examination)

Operative part of the judgment in Société Générale v ECB published in Official Journal

The Operative part of the Judgment of the General Court of the EU of 9 September 2020—Société Générale v ECB (Case T-143/18) has been published in the Official Journal.

Source: Case T-143/18: Judgment of the General Court of 9 September 2020—Société générale v ECB (Economic and monetary policy—Prudential supervision of credit institutions—Contribution to the deposit guarantee system or to the single resolution fund by means of irrevocable payment commitments—Tasks entrusted to the ECB—Specific supervision powers of the ECB—Article 4(1)(f) and Article 16(1)(c) and (2)(d) of Regulation (EU) No 1024/2013—Measure requiring the deduction of the cumulative amount of irrevocable payment commitments outstanding from Tier 1 capital—Absence of individual examination)

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Regulation of benchmarks and IBOR reform

New ESMA Q&A clarifies transitional provisions of the Benchmarks Regulation

ESMA updated its Q&As on the European Benchmarks Regulation (EU) 2016/1011 (Benchmarks Regulation), clarifying the transitional provisions of the (Benchmarks Regulation regarding critical benchmarks. The new question 9.4 concerns the length of time for which a critical benchmark can be used by supervised entities in the EU if the index provider has not been granted authorisation.

Source: ESMA updates Q&A on Benchmarks Regulation.

For further information, see: Benchmarks Regulation—essentials.

EESC supports proposed Benchmarks Regulation amendment

The Council of the EU published the opinion of the European Economic and Social Committee (EESC) on the European Commission’s proposal for a Regulation amending Regulation (EU) 2016/1011 (the Benchmarks Regulation) as regards the exemption of certain third-country foreign exchange benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation.

Source: Opinion of the European Economic and Social Committee (EESC) on the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1011 as regards the exemption of certain third country foreign exchange benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation.

ISDA publishes response to ESMA consultation on fees for benchmark administrators under BMR

The International Swaps and Derivatives Association (ISDA) published its response to ESMA consultation on fees for benchmark administrators under the Benchmarks Regulation. Following the implementation of a review by the European Supervisory Authorities, ESMA will have direct supervisory responsibilities on these benchmarks and their administrators.

Source: ISDA response to ESMA consultation on fees for benchmark administrators under BMR.

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Regulation of capital markets

ESMA publishes official translations of guidelines on securitisation repository data completeness and consistency thresholds

ESMA issued the official translations of its guidelines on securitisation repository data completeness and consistency thresholds. National competent authorities (NCAs) to which the guidelines apply must notify ESMA within two months of the date of publication as to whether they comply or intend to comply with the guidelines.

Source: ESMA publishes translations for Guidelines on securitisation repository data completeness and consistency thresholds .

ESMA publishes reports on the implementation of the CSDR

ESMA published its first two reports on the implementation of the Central Securities Depositories Regulation (EU) 909/2014 (CSDR), covering central securities depositories (CSDs) cross-border services and handling of applications, as well as internalised settlement.

Source: ESMA publishes its first reports on CSDR implementation.

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

European Commission adopts amendment to ESEF RTS

The European Commission adopted the Commission Delegated Regulation of 6.11.2020 amending Commission Delegated Regulation (EU) 2019/815 as regards the 2020 update of the taxonomy laid down in the regulatory technical standards (RTS) for the European Single Electronic Format (ESEF).

Sources: Commission Delegated Regulation (EU) …/... amending Delegated Regulation (EU) 2019/815 as regards the 2020 update of the taxonomy laid down in the regulatory technical standards for the single electronic reporting format and  Annex.

Financial Conduct Authority announces delay of European Single Electronic Format

The FCA issued a policy statement outlining its decision on its proposals to delay mandatory requirements related to the ESEF by one year. Initially, the ESEF requirements for filing and publishing machine-readable financial statements and mandatory tagging of basic financial information were scheduled to start on or after 1 January 2020, however, they will now apply to financial years starting on or after 1 January 2021. The policy statement impacts ‘issuers with transferable securities admitted to trading on UK regulated markets, or who are considering admission to trading on a UK regulated market’.

Source: PS20/14: Delay to the implementation of the European Single Electronic Format (ESEF).

European Commission seeks feedback on convergence of national insolvency laws

The European Commission opened a consultation on the subject of insolvency laws and the increasing convergence of national laws to encourage cross-border investment. The initiative will address the primary discrepancies between national corporate insolvency laws that have acted as obstacles to the functioning of a Capital Markets Union, and will consider the interests of creditor groups, including investors, employees and consumers. The consultation, which is open until 9 December 2020, seeks feedback for the further development and fine tuning of the initiative. Received feedback will be summarised in a synopsis report, which will also set out how the input will either be taken on board, or provide reasons as to why it cannot be.

Source: Insolvency laws: increasing convergence of national laws to encourage cross-border investment.

EESC welcomes EU capital markets recovery package but proposes further changes to regulatory capital treatment of NPLs

The Council of the EU published the opinion of the European Economic and Social Committee (EESC) on the EU capital markets recovery package.

Source: Opinion of the European Economic and Social Committee (EESC) on Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2017/1129 as regards the EU Recovery prospectus and targeted adjustments for financial intermediaries to help the recovery from the COVID-19 pandemic [COM(2020) 281 final—2020/0155 (COD)]—Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation to help the recovery from the COVID-19 pandemic [COM(2020) 282 final—2020/0151 (COD)]—Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards adjustments to the securitisation framework to support the economic recovery in response to the COVID-19 pandemic [COM(2020) 283 final—2020/0156 (COD)].

European Court of Auditors says results on CMU are ‘still to come’

The European Court of Auditors (ECA) published a report on the progress of the capital markets union (CMU). The ECA says that although some progress had been made on the European Commission’s ‘ambitious goal’, expectations had been raised too high, and could not realistically have been achieved with the measures introduced.

Sources: The capital markets union: slow progress and Special report No 25/2020: Capital markets union—Slow start towards an ambitious goal.

For further information, see: The Capital Markets Union.

FCA issues Primary Market Bulletin No. 31

The FCA published Primary Market Bulletin No. 31 which contains a round up of recent developments relating to Primary Markets regulation as well as two reviews undertaken by the FCA on corporate governance disclosures by listed companies and delayed disclosure of inside information notifications under the Market Abuse Regulation.

Source: Primary Market Bulletin 31.

Law Commission publishes scoping paper on intermediated securities

The Law Commission published a scoping paper on intermediated securities, identifying issues concerning investors and businesses for potential future review and setting out possible solutions. In the paper, which was produced in response to a request by the Department for Business, Energy & Industrial Strategy, the Commission suggests that the system of intermediation should be retained but improved through reforms targeted at alleviating some of the problems caused by intermediation.

Sources: Law Commission says improvements are required to the way shares are held and  AIC responds to Law Commission paper on share ownership.

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Regulation of derivatives

ESMA issues final report on post-trade risk reduction services under EMIR

ESMA published a final report on post trade risk reduction services (PTRR) under the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). The report analyses whether any trades that directly result from PTRR services should be exempted from the clearing obligation, and highlights that a limited and qualified exemption from the clearing obligation would further reduce not only risk in the market, but also its overall complexity.

Source: ESMA releases report on post trade risk reduction services.

For further information, see: EMIR—essentials.

ISDA discusses timing of 2021 Interest Rate Derivatives Definitions implementation

ISDA published a recording of the 27 October 2020 call of its Interest Rate Definitions Working Group. On the call, the working group discussed the updated implementation plan and timeline working towards 17 May 2021 for publication of the 2021 Interest Rate Derivatives Definitions, and 21 June 2021 for the adoption of the new definitions.

Source: 2020 ISDA Interest Rate Derivatives Definitions.

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Investment funds and asset management

ESMA consults on draft guidance for funds’ marketing communications

ESMA launched a consultation on its proposed guidelines on marketing communications for the purposes of Regulation (EU) 2019/1156 on facilitating the cross-border distribution of collective investment undertakings. The draft guidelines are intended to specify the requirements for marketing communications sent to investors in order to promote undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIFs). The consultation closes on 8 February 2021.

Source: ESMA consults on guidance for funds’ marketing communications.

ESMA publishes translations of its guidelines on UCITS and AIF performance fees

ESMA issued the official translations of its guidelines on performance fees in Undertakings for the Collective Investment in Transferable Securities (UCITS) and certain types of Alternative Investment Funds (AIFs).

Source: ESMA publishes translations for guidelines on performance fees in UCITS and certain types of AIFS.

HMT publishes summary of responses to consultation on the overseas funds regime

HM Treasury (HMT) published a summary of the responses it received to its May 2020 consultation on proposals to simplify the process for allowing investment funds set up overseas to be marketed in the UK. The document sets out the government’s approach to legislating for the overseas funds regime after considering those views. The final policy is reflected in the Financial Services Bill, which was introduced in Parliament on 21 October 2020.

Source: Consultation outcome: Overseas funds regime: a consultation.

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Securities financing transactions

ESMA publishes Q&As on reporting under the Securities Financing Transactions Regulation

ESMA published its first Q&As on reporting under the Securities Financing Transactions Regulation (EU) 2015/2365 (SFTR).

Source: ESMA publishes first Q&As on SFTR reporting.

For further information, see: Securities Financing Transactions Regulation (SFTR)—essentials.

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Crowdfunding

HM Treasury outlines UK’s approach to EU crowdfunding regime

The economic secretary to HM Treasury and City minister, John Glen, wrote a letter to Lord Kinnoull on the UK’s approach to the recently adopted EU crowdfunding regime (Regulation (EU) 2020/1503 on European crowdfunding service providers for business (7049/18) and Directive (EU) 2020/1504 excluding crowdfunding service providers from the scope of MiFID II (7048/18)). In the letter Glen states that, following active review, the government has concluded that implementation of the EU crowdfunding regime in the UK would not result in material benefit to the UK crowdfunding sector.

Sources: HM Treasury statement 7049/18 on: Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and  Letter: John Glen to the European Union Committee.

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Banks and mutuals

European Commission seeks views on upcoming review of EU bank crisis management and deposit insurance framework

The European Commission published a combined evaluation roadmap and inception impact assessment about an upcoming review of the EU’s bank crisis management and deposit insurance framework. The review will focus on the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), and the Deposit Guarantee Schemes Directive (DGSD). The deadline for feedback is 8 December 2020.

Source: Banking union: Review of the bank crisis management and deposit insurance framework (BRRD review).

Business Banking Resolution Service to hold roundtable for SMEs on design of scheme rules

The Business Banking Resolution Service (BBRS) is inviting small-to-medium business (SME) representatives and experts to contribute to the debate over the pre-launch preparations regarding the BBRS scheme rules, and to participate in an SME roundtable event on 18 November 2020.

Source: BBRS hosts roundtable for SME representatives.

EBA’s 2020 EU-wide transparency exercise results to be published 11 December 2020

The EBA announced that its 2020 risk assessment report and transparency exercise results with bank-by-bank data will be released on 11 December 2020 at 18:00 CET. The EU-wide transparency exercise was launched on 25 September 2020.

Source: EBA announces timing for publication of 2020 EU-wide transparency exercise and risk assessment report.

Sunak authorises BoE Asset Purchase Facility to purchase £150bn of government bonds

The governor of the Bank of England (BoE), Andrew Bailey, and the chancellor of the exchequer, Rishi Sunak, exchanged letters on the BoE’s asset purchase programme. Following a 4 November 2020 meeting of the BoE’s Monetary Policy Committee (MPC), which agreed to additional monetary policy stimulus measures in order to meet its statutory objectives, Bailey wrote to Sunak requesting that he authorise the Asset Purchase Facility (APF) to purchase up to a further £150bn of UK government bonds financed by the creation of central bank reserves.

Source: Exchange of letters between the governor and the chancellor on the Asset Purchase Facility—November 2020.

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Regulation of insurance

Coronavirus (COVID-19)—insurers less exposed to risks but risks remain

EIOPA published its updated Risk Dashboard, which shows that the risk exposures of the EU insurance sector slightly reduced, compared July 2020. However, the risk assessment does not account for the second wave of the coronavirus (COVID-19) pandemic.

Source: Risk Dashboard: European insurers slightly less exposed to risks compared to the beginning of COVID-19 outbreak but concerns remain.

EEA Joint Committee decision on Solvency II level 2 measure published in Official Journal

Decision of the EEA Joint Committee No 111/2018 of 31 May 2018 amending Annex IX (Financial Services) to the EEA Agreement has been published in the Official Journal of the EU. This decision incorporates Commission Implementing Regulation (EU) 2018/165 (a level 2 measure under the Solvency II Directive 2009/138/EC) into the EEA Agreement.

Source: Decision of the EEA Joint Committee No 111/2018 of 31 May 2018 amending Annex IX (Financial Services) to the EEA Agreement

Implementing Regulation laying down Solvency II technical information published in the OJ

Commission Implementing Regulation (EU) 2020/1647 of 9 November 2020 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September 2020 until 30 December 2020 in accordance with Directive 2009/138/EC (Solvency II) has been published in the Official Journal of the EU (OJ).

Source: Commission Implementing Regulation (EU) 2020/1647 of 9 November 2020 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September 2020 until 30 December 2020 in accordance with Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance

IAIS launches consultations on comparable outcomes, liquidity metrics and resolution

The International Association of Insurance Supervisors (IAIS) published three public consultations relating to comparable outcomes, liquidity metrics and resolution.

Source: IAIS releases three public consultations related to comparable outcomes, liquidity metrics and resolution.

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Payment services and systems

OBIE launches consultation on variable recurring payments and sweeping

The Open Banking Implementation Entity (OBIE) launched consultations on variable recurring payments (VRPs) and sweeping. The consultations represent the next stage in the development of open banking in the UK. Responses are sought by 4 December 2020.

Source: OBIE launches variable recurring payments and sweeping consultation.

Pay.UK publishes paper on the payments consumer protection landscape

Pay.UK published a Consumer Protections in Payments summary paper, which provides an overview of the work it has undertaken to explore the payments consumer protection landscape in the UK, informed by secondary research.

Source: Consumer protections in payments summary paper.

Minutes of FCA/PSR Access to Cash Steering Group October 2020 meeting published

The Payment Services Regulator (PSR) published the minutes of the meeting of the FCA/PSR Access to Cash Steering Group, which took place via video/audio link on 16 October 2020.

Source: Minutes FCA/PSR Access to Cash—Steering Group 16th October 2020.

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Fintech and cryptoassets

BIS working paper looks at relation between regulatory sandboxes and fintechs’ access to finance

The Bank for International Settlements (BIS) published a working paper on the effectiveness of the regulatory sandboxes in improving fintechs’ access to finance. The paper finds that firms entering the sandbox see a significant increase of 15% in capital raised post-entry, relative to firms that did not enter; and their probability of raising capital increases by 50%.

Source: Inside the regulatory sandbox: Effects on fintech funding.

Commission to host webinar on its digital operational resilience proposal

The European Commission is to hold a webinar on its proposal on digital operational resilience on 11 November 2020 at 9:00am (GMT), as part of its Digital Financial Outreach 2020 series of events.

Source: Commission webinar: Digital finance outreach: Digital operational resilience.

UK Finance publishes blog on the role of AI in customer service experience

UK Finance published a blog on customer service and the future of banking, arguing that AI advancing ‘artificial empathy’ in the medium term, banks’ capacity to hyper-personalise their products and services is set to grow. The authors cite research that shows customers primarily rate brands based on personal feelings and experiences, rather than information.

Source: The Future of Banking: CX = AI + HP.

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Sustainable finance

ESMA consults on draft advice on disclosure obligations required under the Taxonomy Regulation

ESMA is consulting on its draft advice to the European Commission on Article 8 of the Taxonomy Regulation (Regulation (EU) 2020/852), which specifies the content, methodology and presentation of the key performance indicators (KPIs) that non-financial undertakings and asset managers are required to disclose. Responses are sought by 4 December 2020 and ESMA will deliver its final advice to the European Commission by 28 February 2021.

Sources: ESMA specifies obligations on environmentally sustainable activities and  Consultation paper on draft advice to EC under Article 8 of the Taxonomy Regulation.

Better Finance responds to ESAs’ survey on templates for ESG financial product disclosures

Better Finance published its response to the European Supervisory Authorities’ survey on templates for environmental and social financial products disclosures under the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services (SFDR).

Source: Better Finance response to the European Supervisory Authorities’ survey on templates for environmental and/or social financial products under SFDR.

Government and financial regulators support IFRS consultation on global sustainability reporting

The government and the UK financial regulators have published their initial response to the International Financial Reporting Standards Foundation's (IFRS) consultation on the global approach to sustainability reporting. The consultation follows an increased focus on environmental, social and governance matters, developments in sustainability reporting and increased calls for standardisation of such reporting. The consultation aims to determine the demand for global sustainability standards and assess whether and to what extent the IFRS might contribute to the development of such standards. In their initial response, the government and regulators supported the approach set out in the consultation paper. The consultation closes on 31 December 2020.

Sources: IFRS Foundation Trustees consult on global approach to sustainability reporting and on possible Foundation role and  Initial response to IFRS Foundation Trustees consultation.

UK regulators deliver speeches on climate change at Green Horizon Summit

The Governor of the Bank of England, Andrew Bailey, and FCA CEO, Nikhil Rathi, have delivered a speech at the Corporation of London Green Horizon Summit on the role of the financial system in tackling climate change. Bailey thanked the former Governor of the Bank of England, Mark Carney, for his ‘deep commitment’ to fighting climate change. The Governor maintained that the Bank of England has not abandoned its commitment to tackle climate change amid the challenges posed by the coronavirus (COVID-19) pandemic and stated the necessity to not only plan for the future but act on these plans.

Sources: The time to push ahead on tackling climate change - speech by Andrew Bailey and  Green Horizon Summit: Rising to the Climate Challenge .

Roadmap published detailing UK’s method of implementing TCFD’s recommendations

The government and UK regulators published their joint interim report and roadmap detailing the UK’s approach to implementing the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). The government is aiming to introduce fully mandatory climate-related financial disclosure requirements across the economy by 2025, with significant mandatory requirements in place by 2023. The report covers the reasons for mandatory TCFD aligned disclosures, the path towards mandatory TCFD-aligned disclosures, key considerations in developing the roadmap and next steps.

Source: UK joint regulator and government TCFD Taskforce: Interim Report and Roadmap.

PRA publishes response letter on climate risk action

PRA executive director Sarah Breeden has written a letter to the chair of the Treasury Select Committee, Mel Stride MP, following an evidence session on ‘Decarbonisation and Green Finance’. In the letter, Breeden sets out responses to questions on the progress in embedding climate risk into PRA regulated firms’ operations and the role of the Senior Manager Regime in this process. Breeden also sets out responses to questions raised following the session on impact from exiting the EU and sustainable linked loans.

Source: Letter from Sarah Breeden, Executive Director, Prudential Regulation Authority, following the evidence session on 30 September 2020, dated 19 October 2020.

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Dates for your diary

 

DateSubjectEvent

 

13 November 2020

 

 

SM&CR

 

 

Dual-regulated firms have until 13 November 2020 to update their Directory Person data on the FS Register in order for it to appear in the 23 November publication; any updates submitted after 13 November will appear after the initial data is published

 

16 November 2020

 

Regulation of insurance

 

The Supreme Court has granted the FCA, Arch, Argenta, Hiscox, MS Amlin, QBE, RSA and the Hiscox Action Group as intervenors, permission to appeal the decision of the FCA business interruption test case, concerning non-damage business interruption insurance claims, arising out of the coronavirus (COVID-19) lockdown. The hearing will commence on 16 November 2020 and it is estimated to last four days.

 

16 November 2020

 

Regulation of derivatives

 

Deadline for responses to ESMA ‘Consultation Paper Draft Guidelines on common procedures and methodologies on supervisory review and evaluation process of CCPs under Article 21 of EMIR’.

 

16 November 2020

 

Regulation of derivatives

 

Deadline for responses to ESMA ‘Consultation paper: Regulatory technical standards on conditions under which additional services or activities to which a CCP wishes to extend its business are not covered by the initial authorisation and conditions under which changes to the models and parameters are significant under EMIR’.

 

17 November 2020

 

Brexit



Prudential requirement

 

Deadline for responses to the PRA’s consultation paper CP17/20, which sets out proposed changes to the PRA’s rules, supervisory statements and statements of policy to implement elements of CRD V. It also proposes to update aspects of the UK framework as a result of amendments made to the Capital Requirements Regulation (EU) 575/2013 (CRR) by Regulation (EU) 2019/876 (CRR II), which apply during the Brexit transition period.

 

17 November 2020

 

Brexit

 

Deadline for responses to BoE and PRA joint consultation paper (CP13/20) on the UK withdrawal from the EU: Changes before the end of the transition period.

 

 

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