FS weekly highlights—13 February 2020

FS weekly highlights—13 February 2020

In this issue

 

 

Brexit news
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Consumer protection
Conduct requirements
Complaints, compensation and claims management
Investigations, enforcement and discipline
Markets and trading
Regulation of capital markets
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

UK financial regulators to be questioned on Brexit impact on financial services

The House of Lords EU Financial Affairs Sub-Committee announced that it would hear evidence from the Bank of England (BoE) and the Financial Conduct Authority (FCA) about financial services after Brexit on 12 February 2020. It is expected that the committee would question the preparedness of the UK’s financial services industry for the end of the transition period, the possible future UK-EU relationship in financial services and new UK financial regulations after Brexit.

Source: Bank of England and Financial Conduct Authority questioned on financial services after Brexit.

HoL EU Financial Affairs Sub-Committee hears evidence on future of UK financial services

The House of Lords EU Financial Affairs Sub-Committee heard evidence from academics on the likely future of UK financial services after Brexit. The committee discussed issues including equivalence and potential divergence, the EU’s appetite to onshore UK financial services, and the potential shape of EU-UK institutional arrangements

Source: Uncorrected oral evidence: Financial Services after Brexit—Financial services after Brexit.

Carney to give evidence to HoL Economic Affairs Committee on 11 February 2020

The House of Lords Economic Affairs Committee heard evidence from the governor of the BoE, Mark Carney, on 11 February 2020, in his last annual session with the Committee. Carney was expected to discuss Brexit, sustainable finance and financial stability issues.

Source: Mark Carney on financial stability, Brexit and green finance.

BoE deputy governor considers the future UK/EU framework on the governance of the financial sector

The deputy governor for financial stability at the BoE, Jon Cunliffe, delivered a speech at the German Economic Council annual finance conference. He discusses, from the particular perspective of financial stability, how to build new arrangements for the governance of the financial sector between the EU and the UK. Cunliffe emphasises the EU’s need to access London’s global financial markets and sets out considerations for each side in agreeing a future framework.

Source: BoE speech Jon Cunliffe: Governance of financial globalisation.

AFME publishes wording for post-Brexit selling restrictions for equity (EEA and UK)

The Association for Financial Markets in Europe (AFME) published wording setting out the selling restrictions for equity transactions for use following the UK’s withdrawal from the EU until the end of the transitional period. The wording reflects the application of Regulation EU 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC (the Prospectus Regulation).

Source: AFME selling restrictions for equity (EEA and UK)—February 2020 version.

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MiFID II

ESMA recommends aligning MiFIR derivatives trading obligation with EMIR REFIT

The European Securities and Markets Authority (ESMA) published a final report on alignment of the Markets in Financial Instruments Regulation (EU) 600/2014 (MiFIR) with the changes introduced by Regulation (EU) 2019/834 (EMIR REFIT), to the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). Since the amendment of EMIR by EMIR REFIT there has been a misalignment between the counterparties subject to the clearing obligation under EMIR and the counterparties subject to the derivatives clearing obligation under MiFIR. ESMA recommends aligning MiFIR with EMIR as amended by EMIR REFIT.

Source: ESMA publishes the final report on MiFIR alignments following the introduction of EMIR REFIT.

ESMA statement on compliance with MIFIR pre-trade transparency for commodity derivatives

ESMA published a statement on implementation of its supervisory briefing relating to MiFIR pre-trade transparency requirements in commodity derivatives. ESMA said the FCA had not taken appropriate supervisory action with regards to LME and ICE Futures Europe and encourages the FCA to employ supervisory measures against these trading venues, which may include fines and sanctions.

Source: ESMA updates on progress on compliance with the MiFIR pre-trade transparency requirements in commodity derivatives.

ESMA publishes opinions on MiFID II/MIFIR position limits for commodity derivatives

ESMA published seven opinions on position limits regarding commodity derivatives under MiFID II/MIFIR.

Source: ESMA issues opinions on position limits under MiFID II.

EFAMA and AFME call for action over rising costs of market data

The European Fund and Asset Management Association (EFAMA) and AFME issued a joint statement on the negative effects of increased market data costs, saying the problems are widely recognised, including by supervisory authorities, but despite some attempts to solve the problems, such costs have continued to increase.

Sources: Joint statement: Reasonable market data costs benefits the real economy and  EFAMA statement.

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UK, EU and international regulators and bodies

Council of the EU publishes progress update on financial services legislative files

The Council of the EU published an update on the state of play of legislative proposals in the field of financial services. It sets out the aim and stage of 11 pieces of legislation, including measures relating to crowdfunding, the European Deposit Insurance Scheme, central counterparties recovery and resolution, non-performing loans, motor vehicle insurance, sovereign bond-backed securities and the sustainable finance framework (SFF—Taxonomy).

Source: Progress on financial services legislative files.

MEPs outline priorities for future ECB policies

Members of the European Parliament (MEPs) approved a resolution setting out the Parliament’s priorities in relation to the European Central Bank (ECB)’s future policies. The resolution asks the ECB to improve its green credentials, address growing financial technology challenges, continue to expand the overall money supply, and continue with its preparations to ensure financial stability in the EU after Brexit.

Source: ECB policy is working, but new challenges need new responses.

FCA February 2020 policy development update

The FCA published its policy development update for February 2020, providing information on the its recent and upcoming publications.

Source: Policy development update.

Two new non-executive directors join the FCA board

HM Treasury announced the appointment of two new non-executive directors to the FCA board. Jeannette Lichner and Bernadette Conroy will each serve three-year terms beginning on 1 April 2020 and 1 August 2020 respectively. They will join the board as Amelia Fletcher OBE and Catherine Bradley CBE step down following the end of their terms as non-executive directors, having served since April 2013 and August 2014 respectively.

Source: New appointments to the FCA board announced.

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Authorisation, approval and supervision

SM&CR: FCA updates Directory Persons webpage

The FCA updated its Directory Persons webpage, setting out information for submitting data for the Directory, a public register that enables consumers, firms and other stakeholders to find information on key individuals working in financial services. In the update, the FCA notes that banks, building societies, credit unions and insurance companies must submit their data by 9 March 2020. All other solo-regulated firms must submit their data by 9 December 2020.

Source: FCA webpage update.

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Prudential requirements

EBA issues opinion on CRR measures to address macroprudential risk following Central Bank of the Netherlands notification

The European Banking Authority (EBA) published an opinion following the notification by the Central Bank of the Netherlands (De Nederlandsche Bank—DNB) of its intention to modify capital requirements in order to address an increase in macroprudential risk. Based on the evidence submitted by the DNB, the EBA does not object to the adoption of the proposed measure, which is based on Article 458(2) of the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR). This measure aims at enhancing the resilience of the Dutch banking sector to a potential severe downturn in the residential real estate market against the background of sustained price increases in real estate over the past few years.

Source: EBA issues opinion on measures to address macroprudential risk following notification by De Nederlandsche Bank (DNB).

BaFin president discusses European banking supervision in ECB interview

The ECB published an interview with ECB supervisory board member and president of the German Federal Financial Supervisory Authority (BaFin), Felix Hufeld, in which he discusses the high-level review of the supervisory review and evaluation process (SREP), the importance of the international capital adequacy assessment process (ICAAP), digital developments and other financial services issues.

Source: ‘Taking a closer look at individual risk drivers’.

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Financial stability, recovery and resolution 

EIOPA publishes report on its 2019 crisis walkthrough exercise

The European Insurance and Occupational Pensions Authority (EIOPA) published a report on its first crisis walkthrough exercise, held in June 2019. The main objective of the walkthrough exercise was to test the crisis processes and procedures and assess the way in which participants interacted in terms of exchanging information, cooperating and adopting decisions.

Source: Crisis walkthrough exercise: approach and lessons learned.

Carney to give evidence to HoL Economic Affairs Committee on 11 February 2020

The House of Lords Economic Affairs Committee heard evidence from the governor of the Bank of England (BoE), Mark Carney, on 11 February 2020, in his last annual session with the Committee. Carney was expected to discuss Brexit, sustainable finance and financial stability issues.

Source: Mark Carney on financial stability, Brexit and green finance.

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Risk management and controls

FCA, ICO and FSCS issue joint warning on personal data misuse

The FCA, the Information Commissioner’s Office (ICO) and the Financial Services Compensation Scheme (FSCS), issued a joint warning to insolvency practitioners and FCA-authorised firms to be responsible when dealing with personal data. It follows reports that some insolvency practitioners and FCA-authorised firms have attempted to sell clients’ personal data to claims management companies (CMCs) unlawfully.

Sources: Joint statement warning FCA-authorised firms and insolvency practitioners to be responsible when dealing with personal data and  FCA, ICO and FSCS publish joint statement to insolvency practitioners and authorised firms.

WFE publishes paper on organisational structures for enterprise and operational risk

The World Federation of Exchanges (WFE) published a benchmarking paper, which examines the organisational structures for enterprise and operational risk within market infrastructures (MIs). As a first step to agreeing and harmonising practices, the WFE’s Enterprise Risk Working Group (ERWG) studied the way exchange and central counterparty (CCP) operators structure their approach to risk management through enterprise risk management (ERM) functions and their relationship with other parts of their organisations.

Source: WFE enterprise risk management benchmarking paper.

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Financial crime

Feedback period opens for European Commission’s Action Plan on Money Laundering

The European Commission opened the feedback period for its Action Plan on Money Laundering, which runs from 12 February 2020 to 11 March 2020 (midnight Brussels time). The Commission published a ‘roadmap’ on the initiative, which aims to develop a new, comprehensive approach to preventing and combating money laundering and terrorism financing.

Source: Action Plan on anti-money laundering.

Commission sends letters of formal notice to eight Member States for MLD5 failures

The European Commission sent letters of formal notice to Cyprus, Hungary, the Netherlands, Portugal, Romania, Slovakia, Slovenia and Spain for not having notified any implementation measures for the 5th Anti-Money Laundering Directive (Directive (EU) 2018/843) (MLD5).

Source: Commission urges 8 Member States to transpose the 5th Anti-Money Laundering Directive.

Financial Action Task Force issues global standards on use of virtual assets

The Financial Action Task Force (FATF) issued global, binding standards with the support of the G20 to prevent misuse of virtual assets for money laundering and terrorist financing. The FATF measures ensure that virtual currencies have the same safeguards applied to them as the traditional financial sector, which will ultimately increase trust in blockchain technology. Regulation should take place within traditional banks and virtual assets service providers, with focus on Know Your Customer procedures and reporting suspicious transactions while keeping the customers identity private.

Source: Virtual Assets.

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Consumer protection

FCA Occasional Paper considers behaviourally informed consumer policy

The FCA published Occasional Paper 51, in which the authors discuss the merits of online experiments for behaviourally informed policy making. The online experiments the authors have in mind combine elements of laboratory and natural field experiments, with a focus on external validity. These experiments are increasingly used to investigate consumer behaviour in different settings, including the testing of prospective consumer policies.

Source: Occasional Paper No. 51: Using online experiments for behaviourally informed consumer policy.

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Conduct requirements

FCA recognises LSB’s Standards of Lending Practice for business customers for unregulated activities

The FCA published feedback summary FS20/1: Recognition of codes: feedback on quarterly consultation paper no 25 CP19/27. The FCA has recognised the Lending Standard Board (LSB)’s Standards of Lending Practice for business customers for unregulated activities. As the LSB’s Standards of Lending Practice for business customers covers both regulated and unregulated activities, FCA recognition only extends to unregulated activities. Compliance with the Standards may be one way for supervised firms or individuals to evidence they are complying with the FCA’s overall governance requirements.

Source: FS20/1: Recognition of codes: feedback on QCP 25 CP19/27.

FCA confirms commercial radio industry body’s guidance on financial promotions for motors brands

The FCA confirmed guidance issued by Radiocentre, the industry body for commercial radio, on ensuring financial promotions for motor brands on radio are clear, fair and not misleading. The FCA’s confirmation takes the form of a statement that it has reviewed the guidance and can confirm that it will take it into account when exercising the FCA’s regulatory functions. The guidance is not mandatory and is not FCA guidance. The FCA’s view does not affect the rights of third parties.

Sources: FCA list of industry guidanceRadiocentre press release and Radiocentre guidance.

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Complaints, compensation and claims management

EBA’s third and final opinion on the implementation of the DGSD considers DGSs funding

The EBA published its third and final opinion addressed to the European Commission on the implementation of the recast Deposit Guarantee Schemes Directive 2014/49/EU (DGSD) in the EU. The opinion focuses on deposit guarantee schemes (DGSs) funding and uses of DGS funds. It proposes several changes to the EU legal framework, aimed at strengthening depositor protection, enhancing financial stability and reinforcing financial resilience of DGSs. The EBA also published a factsheet on improving deposit protection for EU citizens.

Sources: EBA puts forward concrete proposals to improve the current DGSD legal frameworkEBA opinion implementation DGSD—DGS funding and uses of DGS funds (EBA-Op-2020-02) and  Factsheet—Improving depositor protection for citizens in the EU.

ICO FOIA decision on FCA’s implementation of the ADR Regulations

The ICO published a decision notice under the Freedom of Information Act 2000 (FIA 2000) relating to information held by the FCA and the Financial Ombudsman Service (FOS) in connection with how they have interpreted and implemented the Alternative Dispute Resolution (ADR) Regulations 2015.

Source: Freedom of Information Act 2000 Decision notice.

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Investigations, enforcement and discipline

PRA takes first enforcement action against individuals involved in a credit union

The PRA has banned non-approved person Mr Michael Graeme Grimsdale and former director Mr Richard Charles Nichols from the financial services industry on the grounds of lack of integrity (and dishonesty on the part of Mr Grimsdale). It also issued public censures to Mr Nichols and former directors Ms Gillian Birkett and Mr Phil Neale. All were involved in the failure of Enterprise the Business Credit Union Ltd (EBCU) in 2015, which had 1,900 members and £7m in savings.

Source: PRA issues two bans and three public censures following failure of Enterprise the Business Credit Union Ltd.

CMA tells Nationwide to repay £900,000 over unarranged overdraft failings

The Competition and Markets Authority (CMA) announced that Nationwide is to repay customers £900,000 after it failed to correctly warn them that they would be charged for entering an unarranged overdraft. The building society was found to have broken Part 6 of the CMA’s Retail Banking Market Investigation Order, which states that customers with personal current accounts must receive a text alert warning of fees before banks charge them for an unarranged overdraft. This gives people time to take action and avoid unexpected fees.

Source: CMA secures £900,000 in refunds for Nationwide customers.

Mark Steward discusses the FCA’s market integrity work

The FCA published a speech by its executive director of enforcement and market oversight, Mark Steward, outlining the regulator’s approach to market integrity and its detective and enforcement techniques. Steward warned would-be abusers that the FCA’s increased powers materially ‘ratchet up the risk of being found out’. The speech discusses the ‘market cleanliness metric’, which records abnormal price movements two days prior to a takeover announcement, and is currently at its lowest level since it was introduced in 2008.

Source: Market integrity and strategic approach.

ICO FOIA decision on FCA’s implementation of the ADR Regulations

The ICO published a decision notice under the FIA 2000 relating to information held by the FCA and the FOS in connection with how they have interpreted and implemented the ADR Regulations 2015.

Source: Freedom of Information Act 2000 Decision notice.

Notice of appeal by HSBC companies published in the Official Journal

Notice of an appeal brought on 3 December 2019 by HSBC Holdings plc, HSBC Bank plc, HSBC France against the judgment of the General Court (Second Chamber, Extended Composition) delivered on 24 September 2019 in Case T-105/17, HSBC Holdings plc and Others v Commission, was published in the Official Journal of the EU.

Source: Appeal brought on 3 December 2019 by HSBC Holdings plc, HSBC Bank plc, HSBC France against the judgment of the General Court (Second Chamber, Extended Composition) delivered on 24 September 2019 in Case T-105/17, HSBC Holdings plc and Others v Commission.

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Markets and trading

EIOPA publishes discussion paper on the IBOR transitions

EIOPA published a discussion paper on IBOR transitions. Following the EU Benchmark Regulation (EU BMR), this paper addresses for the first time the subject of the ongoing changes to the new benchmark rates (or IBOR transitions). The paper addresses issues identified within the EIOPA risk free rate environment. Feedback is sought by 30 April 2020.

Source: Discussion open on the ongoing changes to the new benchmark rates, the IBOR transitions.

EFAMA and AFME call for action over rising costs of market data

EFAMA and AFME issued a joint statement on the negative effects of increased market data costs, saying the problems are widely recognised, including by supervisory authorities, but despite some attempts to solve the problems, such costs have continued to increase.

Sources: Joint statement: Reasonable market data costs benefits the real economy and  EFAMA statement.

ISLA publishes latest edition of the Securities Lending Market Report

The International Securities Lending Association (ISLA) published the 12th edition of the Securities Lending Market Report, examining the forces that are shaping markets today, and the implications for market participants and other interested stakeholders alike. The report includes a roadmap of the EU’s expected developments in 2020-22, and the potential implications for securities lending markets.

Source: ISLA publishes 12th edition of the Securities Lending Market Report.

ISDA report and forum say 2020 must be the year of engagement with benchmark transition

The International Swaps and Derivatives Association (ISDA) published a research note on major developments in the adoption of risk-free rates (RFRs) expected in 2020. It discusses upcoming issues related to the adoption of RFRs, including the publication of new benchmark fallbacks for derivatives contracts and central counterparty (CCP) changes in discounting, and price alignment interest (PAI) for certain currencies. Alongside the report ISDA held a forum in New York to discuss the issues and the need for an industry-wide engagement in the year ahead, particularly as regards fallbacks. A similar event will be held in London on 20 February 2020.

Sources: Adoption of risk-free rates: Major developments in 2020 and  ISDA CEO Scott O’Malia opening remarks at ISDA/SIFMA AMG Benchmark Strategies Forum.

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Regulation of capital markets

FCA paper looks at ways to measure liquidity and dealer inventories in global bond markets

The FCA published an occasional paper on bond liquidity and dealer inventories. The authors argue that, while trades in the global bond market are key to financial systems working effectively (the market far exceeds that of equities in size), little is known on a global level as to the performance of these markets outside a country’s respective territory. Using both US and UK regulatory data, the authors ask whether conclusions can be drawn, or whether unique trading patterns are cancelled out at global level.

Source: Occasional Paper No. 52: Bond liquidity and dealer inventories.

WFE publishes paper on organisational structures for enterprise and operational risk

The World Federation of Exchanges (WFE) published a benchmarking paper, which examines the organisational structures for enterprise and operational risk within market infrastructures (MIs). As a first step to agreeing and harmonising practices, the WFE’s Enterprise Risk Working Group (ERWG) studied the way exchange and central counterparty (CCP) operators structure their approach to risk management through enterprise risk management (ERM) functions and their relationship with other parts of their organisations.

Source: WFE enterprise risk management benchmarking paper.

Recast ECB decisions on asset purchase programmes published in the OJ

Two ECB decisions on the implementation of aspects of its expanded asset purchase programme (APP), have been published in the Official Journal of the EU (OJ). Decision (EU) 2020/187 relates to the implementation of the third covered bond purchase programme (CBPP3), and Decision (EU) 2020/188 relates to the secondary markets public sector purchase programme (PSPP).

Sources: Decision (EU) 2020/187 of the European Central Bank of 3 February 2020 on the implementation of the third covered bond purchase programme (ECB/2020/8) (recast) and  Decision (EU) 2020/188 of the European Central Bank of 3 February 2020 on a secondary markets public sector asset purchase programme (ECB/2020/9).

AFME publishes wording for post-Brexit selling restrictions for equity (EEA and UK)

AFME published wording setting out the selling restrictions for equity transactions for use following the UK’s withdrawal from the EU until the end of the transitional period. The wording reflects the application of Regulation EU 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC (the Prospectus Regulation).

Source: AFME selling restrictions for equity (EEA and UK)—February 2020 version.

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Regulation of derivatives

ESMA recommends aligning MiFIR derivatives trading obligation with EMIR REFIT

ESMA published a final report on alignment of MiFIR with the changes introduced by the EMIR REFIT, to EMIR. Since the amendment of EMIR by EMIR REFIT there has been a misalignment between the counterparties subject to the clearing obligation under EMIR and the counterparties subject to the derivatives clearing obligation under MiFIR. ESMA recommends aligning MiFIR with EMIR as amended by EMIR REFIT.

Source: ESMA publishes the final report on MiFIR alignments following the introduction of EMIR REFIT.

ECB publishes results of December 2019 SESFOD survey on credit terms and conditions

The ECB published the results of the December 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets (SESFOD). Credit terms offered to counterparties were broadly unchanged between September and November 2019 in both the securities financing market and the OTC derivatives market. Price terms eased, whereas non-price terms tightened. The ECB says an improvement in liquidity conditions, competitive pressure and greater availability of balance sheet capacity were the main drivers underlying the easing of price terms.

Source: Results of the December 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).

ISDA paper sets out legal guidelines for smart contracts in the equity derivatives market

ISDA published a paper on smart derivatives contracts, intended to support technology developers, lawyers and other key stakeholders in the development of smart derivatives contracts in the equity derivatives market.

Sources: Legal guidelines for smart derivatives contracts: Equities and  Private international law aspects of smart derivatives contracts utilizing DLT.

ISDA publishes fifth set of legal guidelines for smart derivatives contracts: interest rate derivatives

ISDA published the fifth in a series of legal guidelines for smart derivatives contracts, intended to explain the core principles of ISDA documentation and to raise awareness of important legal terms that should be maintained when a technology solution is applied to derivatives trading. The fifth publication is intended to support technology developers, lawyers and other key stakeholders in the development of smart derivatives contracts and other technology solutions in the interest rate derivatives (IRD) market.

Source: Fifth legal guidelines for smart derivatives contracts: Interest rate derivatives.

ISDA report and forum say 2020 must be the year of engagement with benchmark transition

ISDA published a research note on major developments in the adoption of risk-free rates (RFRs) expected in 2020. It discusses upcoming issues related to the adoption of RFRs, including the publication of new benchmark fallbacks for derivatives contracts and central counterparty (CCP) changes in discounting, and price alignment interest (PAI) for certain currencies. Alongside the report ISDA held a forum in New York to discuss the issues and the need for an industry-wide engagement in the year ahead, particularly as regards fallbacks. A similar event will be held in London on 20 February 2020.

Sources: Adoption of risk-free rates: Major developments in 2020 and  ISDA CEO Scott O’Malia opening remarks at ISDA/SIFMA AMG Benchmark Strategies Forum.

CCP12 report provides data-driven analysis of the OTC derivatives market

CCP12—the Global Association of Central Counterparties—published a report on progress and initiatives in over-the-counter (OTC) derivatives, the second instalment in a series of reports exploring the current and future ecosystem of OTCs. It explores the key drivers of change currently taking place, the evolution in the bilateral and cleared markets and how uncleared margin rules (UMR) are affecting the industry.

Source: CCP12 publishes progress and initiatives in OTC derivatives—A CCP12 report.

FCA’s webpage on EMIR notifications has been updated

The FCA updated its webpage on how to make EMIR notifications and applications. It sets out that all counterparties (including non-financial counterparties) must register on the FCA Connect system to submit EMIR notifications. From 10 February 2020 all firms that are required to submit an EMIR notification or application are required to be enrolled (and create a firm profile) on Connect.

Source: FCA updates webpage on submitting EMIR notifications and applications.

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Investment funds and asset management

FCA Dear CEO letter on platforms portfolio strategy

The FCA published a Dear CEO letter addressed to firms providing a ‘platform service’. It is also of interest to firms that allow customers or advisers access to retail investment products through an online platform. The letter lists the FCA’s concerns and expectations as well as its current focus and supervisory strategy.

Source: Platforms Portfolio Strategy letter.

ESRB letter on AIFMD shortcomings

The European Systemic Risk Board (ESRB) secretariat provided information on its experiences with the scope and application of Alternative Investment Funds Directive 2011/61/EU (AIFMD) to the European Commission. Areas highlighted by the ESRB include: the AIFMD reporting framework and data access; leverage limits; and the development of a European ‘macroprudential policy framework’ for investment funds and other non-banks.

Source: ESRB considerations regarding the AIFMD.

Research report on sustainable investing

KPMG International, CREATE-Research, the AIMA and the Chartered Alternative Investment Analyst Association (CAIA) published a joint report entitled: ‘Sustainable investing: fast-forwarding its evolution’. The report examines sustainable investing and its impact on the alternative investment industry and is based on research involving 135 institutional investors and hedge fund managers, long only managers and pension consultants in 13 countries in all the key regions.

Source: Sustainable investing: fast-forwarding its evolution.

ISLA sets out clarification on the SFTR scope of non-EU AIFs

ISLA reported that on 14 January 2020, the Alternative Investment Management Association (AIMA) submitted a letter to the European Commission and ESMA regarding the Securities Financing Transactions Regulation (Regulation 2015/2365) (SFTR) scope of non-EU alternative investment funds (AIFs), and its conflict in relation to the drafting of the Level 1 text.

Source: Clarification on the SFTR scope of non-EU AIF.

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Banks and mutuals

EBA’s third and final opinion on the implementation of the DGSD considers DGSs funding

The EBA published its third and final opinion addressed to the European Commission on the implementation of the recast DGSD in the EU. The opinion focuses on DGSs funding and uses of DGS funds. It proposes several changes to the EU legal framework, aimed at strengthening depositor protection, enhancing financial stability and reinforcing financial resilience of DGSs. The EBA has also published a factsheet on improving deposit protection for EU citizens.

Sources: EBA puts forward concrete proposals to improve the current DGSD legal frameworkEBA opinion implementation DGSD—DGS funding and uses of DGS funds (EBA-Op-2020-02) and  Factsheet—Improving depositor protection for citizens in the EU.

FCA recognises LSB’s Standards of Lending Practice for business customers for unregulated activities

The FCA published feedback summary FS20/1: Recognition of codes: feedback on quarterly consultation paper no 25 CP19/27. The FCA recognised the Lending Standard Board (LSB)’s Standards of Lending Practice for business customers for unregulated activities. As the LSB’s Standards of Lending Practice for business customers covers both regulated and unregulated activities, FCA recognition only extends to unregulated activities. Compliance with the Standards may be one way for supervised firms or individuals to evidence they are complying with the FCA’s overall governance requirements.

Source: FS20/1: Recognition of codes: feedback on QCP 25 CP19/27.

Basic Bank Accounts: FCA highlights good practice and areas for improvement

The FCA published findings and recommendations following its review of how retail banks provide information about Basic Bank Accounts (BBAs), which are designed to help people who may otherwise be unable to open a standard bank account. The FCA found examples of good practice, such as where staff provided customers with clear information and took account of their individual circumstances, as well as some areas for improvement, including making information about BBAs more prominent. The review also suggests that firms can improve customers’ first engagement with bank staff, how they deal with non-standard proof of identity and their approach to identifying vulnerable customers.

Source: Retail banking: Our review of Basic Bank Accounts.

BaFin president discusses European banking supervision in ECB interview

The ECB published an interview with ECB supervisory board member and president of the German Federal Financial Supervisory Authority (BaFin), Felix Hufeld, in which he discusses the high-level review of the supervisory review and evaluation process (SREP), the importance of the international capital adequacy assessment process (ICAAP), digital developments and other financial services issues.

Source: ‘Taking a closer look at individual risk drivers’.

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Consumer credit, mortgage and home finance

Treasury announces 60-day breathing space period for problem debt

HM Treasury announced that the government’s new ‘breathing space’ period will freeze interest, fees and enforcement for people in problem debt, with further protections for those in mental health crisis treatment. A 60-day breathing space period will see enforcement action from creditors halted and interest frozen for people with problem debt. During this period, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.

Source: Breathing space to help millions in debt.

Basic Bank Accounts: FCA highlights good practice and areas for improvement

The FCA published findings and recommendations following its review of how retail banks provide information about BBAs, which are designed to help people who may otherwise be unable to open a standard bank account. The FCA found examples of good practice, such as where staff provided customers with clear information and took account of their individual circumstances, as well as some areas for improvement, including making information about BBAs more prominent. The review also suggests that firms can improve customers’ first engagement with bank staff, how they deal with non-standard proof of identity and their approach to identifying vulnerable customers.

Source: Retail banking: Our review of Basic Bank Accounts.

FCA confirms commercial radio industry body’s guidance on financial promotions for motors brands

The FCA confirmed guidance issued by Radiocentre, the industry body for commercial radio, on ensuring financial promotions for motor brands on radio are clear, fair and not misleading. The FCA’s confirmation takes the form of a statement that it has reviewed the guidance and can confirm that it will take it into account when exercising the FCA’s regulatory functions. The guidance is not mandatory and is not FCA guidance. The FCA’s view does not affect the rights of third parties.

Sources: FCA list of industry guidanceRadiocentre press release and Radiocentre guidance.

CMA tells Nationwide to repay £900,000 over unarranged overdraft failings

The CMA announced that Nationwide is to repay customers £900,000 after it failed to correctly warn them that they would be charged for entering an unarranged overdraft. The building society was found to have broken Part 6 of the CMA’s Retail Banking Market Investigation Order, which states that customers with personal current accounts must receive a text alert warning of fees before banks charge them for an unarranged overdraft. This gives people time to take action and avoid unexpected fees.

Source: CMA secures £900,000 in refunds for Nationwide customers.

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Regulation of insurance

EIOPA consults on the Solvency II 2020 review

EIOPA is consulting on proposals for the Solvency II 2020 review, which will examine the technical implementation means for the package on Solvency 2 supervisory reporting and public disclosure. Feedback is sought by 20 April 2020.

Source: EIOPA consults on review of technical implementation means for the package on Solvency 2 supervisory reporting and public disclosure.

EIOPA publishes report on its 2019 crisis walkthrough exercise

EIOPA published a report on its first crisis walkthrough exercise, held in June 2019. The main objective of the walkthrough exercise was to test the crisis processes and procedures and assess the way in which participants interacted in terms of exchanging information, cooperating and adopting decisions.

Source: Crisis walkthrough exercise: approach and lessons learned.

EIOPA publishes guidance on outsourcing to cloud service providers

Following discussions and exchanges with stakeholders, EIOPA published guidance on outsourcing to cloud service providers. The aim of the guidelines is to provide clarification and transparency to market participants, and avoid potential regulatory arbitrages, and to foster supervisory convergence regarding the expectations and processes applicable to cloud outsourcing.

Source: Guidelines on outsourcing to cloud service providers.

EIOPA publishes its strategies for cyber underwriting and SupTech

EIOPA published its strategies for cyber underwriting and supervisory technology (SupTech). The strategies reflect EIOPA’s strategic priorities and respond to the evolving insurance landscape, in particular as it relates to digital technology.

Source: EIOPA sets out strategies on cyber underwriting and SupTech.

EIOPA highlights SupTech, pensions and cyber underwriting as new supervisory convergence priorities

EIOPA published its supervisory convergence plan for 2020, in which it identifies supervisory technology (SupTech), pension issues and cyber underwriting as three new priorities for the year. The plan sets out priorities and activities for the coming year, building on previous years’ work while incorporating new priorities to reflect new trends and emerging risks.

Source: EIOPA identifies supervisory technology, pensions and cyber underwriting as new supervisory convergence priorities.

Lloyd’s Market Association sets out 2020 priorities

The Lloyd’s Market Association (LMA) published its objectives for 2020, with the successful delivery of the Future at Lloyd’s the main priority. This work will include the roll-out of underwriting standards for modernised syndication; establishing pilot exercises to transform the claims service model and initiate Electronic Claims Files (ECF) replacement; supporting the PPL replatform; and working with Lloyd’s to drive a common set of data standards. The LMA says it will aid the development of technical skills required, resulting from the Lloyd’s blueprint.

Source: Future at Lloyd’s and Brexit top LMA 2020 objectives.

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Regulation of personal pension and stakeholder products

PASA launches DB Transfers Code of Good Practice consultation

The Pensions Administration Standards Association (PASA) launched a consultation on its Defined Benefit Transfers Code of Good Practice. Responses to the consultation are required by 30 April 2020, and the code is expected to be released on 1 September 2020.

Source: PASA launch DB Transfers Code of Good Practice Consultation.

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Fintech and cryptoassets

Opinion of the Economic and Social Committee on Blockchain and the EU single market published in the Official Journal

The European Economic and Social Committee (EESC)’s opinion on blockchain was published in the Official Journal of the EU. The opinion calls on the European Commission to launch a comprehensive blockchain initiative setting out a common EU approach, complemented by an action plan for Europe to become the reference point for blockchain worldwide. It further calls on the Commission to establish an EU blockchain stakeholder platform.

Source: Opinion of the European Economic and Social Committee on Blockchain and the EU single market: what next?(own-initiative opinion)

Financial Action Task Force issues global standards on use of virtual assets

The FATF issued global, binding standards with the support of the G20 to prevent misuse of virtual assets for money laundering and terrorist financing. The FATF measures ensure that virtual currencies have the same safeguards applied to them as the traditional financial sector, which will ultimately increase trust in blockchain technology. Regulation should take place within traditional banks and virtual assets service providers, with focus on Know Your Customer procedures and reporting suspicious transactions while keeping the customers identity private.

Source: Virtual Assets.

IOSCO sets out key considerations for regulating crypto-asset trading platforms

The International Organization of Securities Commissions (IOSCO) published a report which describes the issues and risks associated with crypto-asset trading platforms (CTPs) and sets out key considerations to assist regulatory authorities in addressing those issues. The report draws on responses IOSCO received to its 2019 consultation on the same subject.

Source: IOSCO publishes key considerations for regulating crypto-asset trading platforms.

EIOPA publishes its strategies for cyber underwriting and SupTech

EIOPA published its strategies for cyber underwriting and SupTech. The strategies reflect EIOPA’s strategic priorities and respond to the evolving insurance landscape, in particular as it relates to digital technology.

Source: EIOPA sets out strategies on cyber underwriting and SupTech.

Applications sought to join the financial services AI public private forum

The deadline for applications to join the FCA/BoE financial services AI public private forum (AIPPF) is 21 February 2020. The FCA and the BoE are establishing the forum to further constructive dialogue with the public and private sectors to better understand the use and impact of artificial intelligence and machine learning (AI/ML), including the potential benefits and constraints to deployment, as well as the risks.

Source: Financial services AI public private forum.

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Sustainable finance

COREPER approves Taxonomy Regulation

The Council of the EU published file items on the proposed regulation on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation), stating that on 5 February 2020 the Permanent Representatives Committee (COREPER) confirmed the agreement reached with the European Parliament and suggested the Council should adopt a political agreement on the text of the Regulation.

Sources: Proposal for a Regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment—Political agreementConsolidated version of the text and Revised note.

ESMA publishes sustainable finance strategy

ESMA published its strategy on sustainable finance, which sets out how it will place sustainability at the core of its activities by embedding environmental, social, and governance (ESG) factors in its work. ESMA’s priorities include: transparency obligations, risk analysis on green bonds, ESG investing, convergence of national supervisory practices on ESG factors, taxonomy and supervision.

Source: ESMA sets out its strategy on sustainable finance.

Research report on sustainable investing

KPMG International, CREATE-Research, the AIMA and the CAIA published a joint report entitled: ‘Sustainable investing: fast-forwarding its evolution’. The report examines sustainable investing and its impact on the alternative investment industry and is based on research involving 135 institutional investors and hedge fund managers, long only managers and pension consultants in 13 countries in all the key regions.

Source: Sustainable investing: fast-forwarding its evolution.

Carney to give evidence to HoL Economic Affairs Committee on 11 February 2020

The House of Lords Economic Affairs Committee heard evidence from the governor of the BoE, Mark Carney, on 11 February 2020, in his last annual session with the Committee. Carney was expected to discuss Brexit, sustainable finance and financial stability issues.

Source: Mark Carney on financial stability, Brexit and green finance.

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Dates for your diary

 

DateSubjectEvent

 

14 February 2020

 

Prudential requirements

 

Deadline for responses to Basel Committee on Banking Supervision (BCBS) consultations on Pillar 3 disclosure documents.

14 February 2020Payment services and systems

Deadline for responses the European Payment Councils (EPC) consultation on technical interoperability for MSCTs based on payee-presented data.

 

17 February 2020Prudential requirements

Banks and mutuals

Deadline for responses to ECB’s request for feedback on draft ECB Guideline on materiality threshold for credit obligations past due for less significant institutions.

 

17 February 2020Complaints, compensation and claims management

Deadline for responses to PRA/FCA consultation paper ‘PRA CP1/20 / FCA CP20/2, Financial Services Compensation Scheme—Management Expenses Levy Limit (MELL) 2020/21’.

 

19 February 2020Prudential requirements

Banks and mutuals

Deadline for responses to EBA consultation on its draft regulatory technical standards (RTS) on the criteria to identify all categories of staff whose professional activities have a material impact on the institutions’ risk profile (‘risk takers’).

 

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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.