FS weekly highlights—14 May 2020

FS weekly highlights—14 May 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
UK, EU and international regulators and bodies
Regulated activities
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

 

Coronavirus (COVID-19)

Coronavirus (COVID-19)—ECB guideline on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral published in Official Journal

Guideline (EU) 2020/634 of the European Central Bank (ECB) of 7 May 2020 amending Guideline ECB/2014/31 on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral (ECB/2020/29) as a result of the coronavirus (COVID-19) pandemic was published in the Official Journal of the EU.

Source: Regulation (EU) 2020/605 of the European Central Bank of 9 April 2020 amending Regulation (EU) 2015/534 on reporting of supervisory financial information (ECB/2020/22).

Coronavirus (COVID-19)—ESMA letter to IASB welcomes Exposure Draft COVID-19-related rent concessions

The European Securities and Markets Authority (ESMA) wrote to the International Accounting Standards Board (IASB) thanking the IASB for the opportunity to respond to the IASB’s due process with regards to Exposure Draft ED/2020/2 COVID-19 related rent concessions. ESMA welcomes the initiative of the IASB to introduce a practical expedient that may provide relief for lessees in accounting for rent concessions granted by lessors in the very specific circumstances of the coronavirus (COVID-19) pandemic.

Sources: Ref: IASB’s Exposure Draft COVID-19 related rent concessions—proposed amendments to IFRS 16 and  Ref: EFRAG’s Draft Comment Letter on the IASB’s Exposure Draft COVID-19 related rent concessions—proposed amendments to IFRS 16.

Coronavirus (COVID-19)—ESMA updates on supervision of CRAs

ESMA updated its coronavirus (COVID-19) webpage providing information on the supervision of credit rating agencies (CRAs). As the ‘single EU direct supervisor’ of CRAs, ESMA has explained that it continues to engage with CRAs to evaluate the impact of coronavirus on their businesses and operations.

Source: COVID-19.

For further information, see: EU regulatory regime for credit rating agencies.

Coronavirus (COVID-19)—Enria says ECB relief measures will remain for as long as necessary

The ECB published an interview with the chair of its supervisory board, Andrea Enria, in which he states that ECB relief measures put in place to tackle the coronavirus (COVID-19) crisis will remain as long as is necessary and will only be lifted gradually as pre-crisis capital and liquidity measures return. In response to concerns, he makes clear that under current conditions banks have sufficient capital buffers to avoid automatically triggering restrictions on payments of Additional Tier 1 (AT1) capital instruments.

Source: ‘The current crisis is a wake-up call’.

Coronavirus (COVID-19)—Pentti Hakkarainen on bank digitalisation and the lessons being learned

The ECB published a blog post by Pentti Hakkarainen, a member of its supervisory board, looking at banks’ digital response to the coronavirus (COVID-19) pandemic. With the vast majority of people forced to work from home, banks have had to rely on digital and remote solutions to handle their daily business and continue to deliver their services to clients.

Source: Coronavirus (COVID-19)—ECB blog says state-of-the-art technology is vital.

Coronavirus (COVID-19)—Lagarde calls for common EU fiscal response

The Bank for International Settlements (BIS) published the opening remarks made by ECB president Christine Lagarde at an online conference on the State of the Union. Lagarde discussed the history of EU integration, the ECB’s role and the impact of the coronavirus (COVID-19) pandemic.

Source: Christine Lagarde: Opening remarks at the EUI's State of the Union event.

Coronavirus (COVID-19)—FCA board meeting discusses help for financially vulnerable customers

The Financial Conduct Authority (FCA) published the minutes of its 1 April 2020 board meeting, which focused on the FCA’s guidance to firms dealing with financially vulnerable customers during the coronavirus (COVID-19) pandemic.

Source: FCA board minutes: 1 April 2020.

Coronavirus (COVID-19)—FCA issues update following the Prime Minister’s 10 May 2020 statement

The FCA issued a statement noting the Prime Minister’s statement made on Sunday 10 May 2020. The FCA notes that the financial services industry has continued to operate during the coronavirus (COVID-19) crisis with homeworking and some workers operating in locations such as branches and call centres.

Source: FCA update following the prime minister’s statement on Sunday 10 May.

Coronavirus (COVID-19)—FCA sets out expectations on firms' handling of post and paper documents

The FCA issued a statement on how firms should handle post and paper documents during the coronavirus (COVID-19) outbreak, saying it recognises that there will be some important functions, such as processing post, that will be more difficult for firms to do in a timely way. The FCA says it is concerned, in particular, that vulnerable customers, who are often more likely not to use online services, are still protected.

Source: FCA statement on how firms should handle post and paper documents.

For further information, see: FCA: Treating Customers Fairly—essentials.

Coronavirus (COVID-19)—FCA updates draft guidance for insurance and premium finance firms for customers in temporary financial difficulty

The FCA updated its webpage on its guidance consultation for insurance and premium finance firms on coronavirus (COVID-19) and customers in temporary financial difficulty to confirm the date on which the guidance will come into force.

Source: Coronavirus and customers in temporary financial difficulty: draft guidance for insurance and premium finance firms.

FPC Financial Stability Report urges banks to keep lending

The Bank of England’s (BoE) Financial Policy Committee (FPC) published an interim Financial Stability Report setting out the FPC’s view of the performance of the financial system through the coronavirus (COVID-19) related disruption and the outlook for UK financial stability, including its assessment of the resilience of the UK financial system.

Source: Bank of England Interim Financial Stability Report.

Coronavirus (COVID-19)—UK Finance blog says bank lending is the best plan for all

UK Finance published a blog on the Interim Financial Stability Report—May 2020 published by the FPC. The interim report described the results of a ‘desk-top stress test’ which looked at bank lending and coronavirus (COVID-19) economic disruption.

Source: Interim Financial Stability Report—May 2020.

Coronavirus (COVID-19)—PRA CRD IV statement on Pillar 2A

In response to firms’ challenges caused by the coronavirus (COVID-19) pandemic, the Prudential Regulation Authority (PRA) announced that all Pillar 2A requirements will be set as a nominal amount, instead of a percentage of total risk weighted assets (RWAs), in the 2020 and 2021 Supervisory Review and Evaluation Processes (SREPs). This is relevant to PRA-supervised firms to which the Capital Requirements Directive (2013/36/EU) (CRD IV) applies. Firms with a SREP in 2020 do not need to apply for a variation to their Pillar 2A requirements.

Source: Statement by the PRA on conversion of Pillar 2A capital requirements from RWA percentage to nominal amount.

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—PRA and BoE publish statement on resolution measures

The BoE and the PRA published a joint statement on resolution measures aimed at alleviating operational burdens on PRA-regulated firms in response to the coronavirus. The BoE also provided an update on the Minimum Requirement for Own Funds and Eligible Liabilities (MREL). The deadlines for major UK banks and building societies to submit their first reports on their preparations for resolution (and publicly disclose a summary of these reports) have been extended by a year. The first reports are now due by October 2021 and public disclosures are required by June 2022.

Source: Statement by the Bank of England and Prudential Regulation Authority on resolution measures and COVID-19.

For further information, see: Minimum Requirements for Own Funds and Eligible Liabilities (MREL).

Coronavirus (COVID-19)—PRA issues update on priority areas of work

In light of the coronavirus (COVID-19) pandemic, the PRA issued an update on its plans to support firms and enable them, and the PRA, to focus their resources on the highest priority work. The PRA’s work, alongside that of the wider BoE, is ‘focused on ensuring that banks and insurers can play their part in supporting the UK economy to respond to the significant impact of COVID-19’.

Source: Statement by the Prudential Regulation Authority on prioritisation in light of COVID-19.

Coronavirus (COVID-19)—FOS confirms it will take into account FCA temporary measures in event of complaints

An exchange of correspondence between the interim executive director of strategy & competition at the FCA, Sheldon Mills, and the CEO of the Financial Ombudsman Service (FOS), Caroline Wayman, has been published. Mills seeks reassurance from Wayman that in considering complaints arising from firms’ acts or omissions during the pandemic period, the FOS will take account of the operational challenges faced by firms during this period, and the FCA’s revised expectations of what constitutes compliance with FCA rules, guidance and standards, as well as what counted as good industry practice at the time. In her response, Wayman clarifies how the FOS will approach complaints which might arise during this period.

Sources: Letter to Financial Ombudsman Service regarding complaints handling during coronavirus pandemic and  Letter: Financial Ombudsman Service reply to the FCA regarding complaints handling during coronavirus pandemic.

For further information, see: Financial Ombudsman Service—essentials and The complaint-handling process of the Financial Ombudsman Service.

Coronavirus (COVID-19)—secondary legislation bringing funeral plan firms within FCA remit delayed

HM Treasury updated the webpage on its June 2019 consultation on the regulation of pre-paid funeral plans to indicate that, as a result of the coronavirus (COVID-19) pandemic, the government now intends that the secondary legislation bringing funeral plan firms within the remit of the FCA will be laid before Parliament in Q4 2020. The government will keep this under review as the crisis progresses.

Source: Consultation outcome Regulation of pre-paid funeral plans: consultation on a policy proposal.

Coronavirus (COVID-19)—Treasury Committee questions Barclays about BBLS access issues

The chair of the Treasury Committee, Mel Stride MP, wrote to Barclays Bank CEO Matt Hammerstein following reports that customers are experiencing problems applying for loans from the bank under the Bounce Back Loans Scheme (BBLS). At a public meeting on 4 May 2020 the Committee questioned Hammerstein about the problems that some people were having in accessing the Barclays online system and was assured that the system was able to cope well. But Stride said Barclays customers still seem to be facing issues and new ones may have arisen, and he had written to the bank to find out what it is doing to fix any problems.

Source: Chair asks Barclays to explain customers' struggle in accessing emergency business loans.

Coronavirus (COVID-19)—IAIS global co-ordination on financial stability and policyholder protection

The International Association of Insurance Supervisors (IAIS) announced that it has been co-ordinating with other standard-setting bodies and the Financial Stability Board (FSB) to assess the impact of the coronavirus (COVID-19) pandemic on the global insurance sector. It has also facilitated (and continues to facilitate) the sharing of information and discussion among its members on supervisory responses to the impact of coronavirus. These discussions have highlighted the importance of effective policyholder protection and fair customer treatment. The IAIS thinks there are limits on the coverage offered by the insurance sector alone where it is difficult to achieve pooling and diversification of risks necessary to support viable insurance cover. Therefore, the IAIS encourages efforts seeking potential solutions to protect businesses and individuals against these types of risk and stands ready to help facilitate these discussions at the international level.

Source: IAIS facilitates global co-ordination on financial stability and policyholder protection during COVID-19 crisis.

Coronavirus (COVID-19)—BIS Bulletin examines links between CCPs and banks

The BIS published a bulletin on the central counterparty (CCP)-bank nexus during the coronavirus (COVID-19) pandemic. It notes that, with the financial turbulence during the crisis, CCPs have issued large margin calls, weighing on the liquidity of clearing member banks. And in spite of the turbulence, CCPs remained resilient, as intended by the post-crisis reforms of financial market infrastructures.

Source: The CCP-bank nexus in the time of COVID-19.

Coronavirus (COVID-19)—TheCityUK sets out work to recapitalise the post-COVID-19 economy

TheCityUK wrote to BoE governor Andrew Bailey, to share analysis on the potential level of unsustainable debt held by UK businesses in light of the coronavirus (COVID-19) pandemic and set out its approach to finding industry-led solutions to recapitalise these businesses and support the economic recovery.

Sources: TheCityUK sets out work to recapitalise the post-COVID-19 economy and  Letter.

Coronavirus (COVID-19)—700,000 customers receive payment holidays on their credit cards

UK Finance revealed that the banking and finance industry has provided financial relief to hundreds of thousands of consumer credit customers whose finances have been affected by the coronavirus (COVID-19) pandemic. Lenders have been working with the FCA to aid individuals facing temporary financial pressures by providing payment freezes on credit cards and personal loans for up to three months, and offering interest-free borrowing on the initial £500 of their overdrafts.

Source: Lenders offer hundreds of thousands of customers payment holidays on credit cards and personal loans.

Coronavirus (COVID-19)—UK Finance announces lenders have provided £5.5bn to SMEs through CBILS

UK Finance issued a press release revealing that the banking and finance sector has lent over £5.5bn to SMEs so far through the Coronavirus Business Interruption Loan Scheme (CBILS) as part of a broad package of support to help businesses.

Source: Lenders provide £5.5bn to SMEs through CBIL scheme.

Coronavirus (COVID-19)—UK Finance suggests EU legislative modifications to enable banks to aim support at businesses and households affected by the pandemic

UK Finance published a blog suggesting some targeted modifications to the banking package unveiled by the European Commission on 28 April 2020. The aim of the package is to facilitate lending to households and businesses in the EU, with the aim of ensuring banks can continue to lend money to support the economy and help mitigate the significant economic impact of the coronavirus (COVID-19) pandemic.

Source: Targeted legislative modifications to enable banks to aim support at businesses and households affected by COVID-19.

Coronavirus (COVID-19)—APPG on Fair Business Banking and the British Business Bank discuss CBILS

The All-Party Parliamentary Group (APPG) on Fair Business Banking published a statement and an exchange of letters with the British Business Bank on the CBILS. The APPG had criticised the scheme for having too high a refusal rate, and for too slow a turnaround time. The letters discuss the figures underlying the refusal rate claim and certain aspects of the scheme.

Source: Letter exchange between with APPG and BB.

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Brexit news

FMLC highlights areas of uncertainty in proposed overseas fund regime

The Financial Markets Law Committee (FMLC) published its response to HM Treasury’s March 2020 consultation on a proposed ‘overseas funds regime’ (OFR) aimed at allowing investment funds domiciled overseas to access the UK market once the post-Brexit implementation period has ended. In its response, the FMLC highlights a number of uncertainties around the criteria, timing and process of the equivalence assessments under the proposed OFR regime, and calls for clarification.

Source: Response to consultation: Overseas funds regime: 11 May 2020.

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UK, EU and international regulators and bodies

Coronavirus (COVID-19)—PRA issues update on priority areas of work

In light of the coronavirus (COVID-19) pandemic, the PRA issued an update on its plans to support firms and enable them, and the PRA, to focus their resources on the highest priority work. The PRA’s work, alongside that of the wider BoE, is ‘focused on ensuring that banks and insurers can play their part in supporting the UK economy to respond to the significant impact of COVID-19’.

Source: Statement by the Prudential Regulation Authority on prioritisation in light of COVID-19.

Coronavirus (COVID-19)—Lagarde calls for common EU fiscal response

The BIS published the opening remarks made by ECB president Christine Lagarde at an online conference on the State of the Union. Lagarde discussed the history of EU integration, the ECB’s role and the impact of the coronavirus (COVID-19) pandemic.

Source: Christine Lagarde: Opening remarks at the EUI's State of the Union event.

Financial Services Regulatory Initiatives Forum’s Grid sets out major forthcoming work

The Financial Services Regulatory Initiatives Forum published a Grid setting out the planned timetable for major regulatory work, including the transition from LIBOR and the introduction of financial services legislation to prepare for the end of the EU withdrawal transition period. The Grid also highlights initiatives that have been cancelled or delayed to ease the burden on financial services firms during the coronavirus (COVID-19) crisis, including the BoE’s 2020 annual stress test and a number of consultations.

Sources: FCA: The Financial Services Regulatory Initiatives Forum launches Grid to help financial firms’ planningBoE press release and  PSR press release.

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Regulated activities

Coronavirus (COVID-19)—secondary legislation bringing funeral plan firms within FCA remit delayed

HM Treasury updated the webpage on its June 2019 consultation on the regulation of pre-paid funeral plans to indicate that, as a result of the coronavirus (COVID-19) pandemic, the government now intends that the secondary legislation bringing funeral plan firms within the remit of the FCA will be laid before Parliament in Q4 2020. The government will keep this under review as the crisis progresses.

Source: Consultation outcome Regulation of pre-paid funeral plans: consultation on a policy proposal.

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Prudential requirements

Coronavirus (COVID-19)—Enria says ECB relief measures will remain for as long as necessary

The ECB published an interview with the chair of its supervisory board, Andrea Enria, in which he states that ECB relief measures put in place to tackle the coronavirus (COVID-19) crisis will remain as long as is necessary and will only be lifted gradually as pre-crisis capital and liquidity measures return. In response to concerns, he makes clear that under current conditions banks have sufficient capital buffers to avoid automatically triggering restrictions on payments of Additional Tier 1 (AT1) capital instruments.

Source: ‘The current crisis is a wake-up call’.

Coronavirus (COVID-19)—PRA CRD IV statement on Pillar 2A

In response to firms’ challenges caused by the coronavirus (COVID-19) pandemic, the PRA announced that all Pillar 2A requirements will be set as a nominal amount, instead of a percentage of total risk weighted assets (RWAs), in the 2020 and 2021 SREPs. This is relevant to PRA-supervised firms to which the CRD IV applies. Firms with a SREP in 2020 do not need to apply for a variation to their Pillar 2A requirements.

Source: Statement by the PRA on conversion of Pillar 2A capital requirements from RWA percentage to nominal amount.

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—PRA and BoE publish statement on resolution measures

The BoE and the PRA published a joint statement on resolution measures aimed at alleviating operational burdens on PRA-regulated firms in response to the coronavirus. The BoE also provided an update on the MREL. The deadlines for major UK banks and building societies to submit their first reports on their preparations for resolution (and publicly disclose a summary of these reports) have been extended by a year. The first reports are now due by October 2021 and public disclosures are required by June 2022.

Source: Statement by the Bank of England and Prudential Regulation Authority on resolution measures and COVID-19.

For further information, see: Minimum Requirements for Own Funds and Eligible Liabilities (MREL).

Coronavirus (COVID-19)—UK Finance suggests EU legislative modifications to enable banks to aim support at businesses and households affected by the pandemic

UK Finance published a blog suggesting some targeted modifications to the banking package unveiled by the European Commission on 28 April 2020. The aim of the package is to facilitate lending to households and businesses in the EU, with the aim of ensuring banks can continue to lend money to support the economy and help mitigate the significant economic impact of the coronavirus (COVID-19) pandemic.

Source: Targeted legislative modifications to enable banks to aim support at businesses and households affected by COVID-19.

ECJ dismisses appeal regarding Single Resolution Fund contributions

The European Court of Justice (ECJ) dismissed an appeal by Credito Fondiario SpA seeking the annulment of an order of the European General Court (EGC), dated 19 November 2018, which dismissed an action brought by the appellant to annul two decisions by the Single Resolution Board (SRB) on ex ante contributions to the Single Resolution Fund (SRF). Credito Fondiario had also sought a finding of unlawfulness of Commission Delegated Regulation (EU) 2015/63 supplementing Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD) regarding ex ante contributions to resolution financing arrangements.

Source: Judgment of the Court (Eighth Chamber) of 5 March 2020—Credito Fondiario SpA v Single Resolution Board, Italian Republic, European Commission.

ECB amending regulation on reporting of supervisory information published in the Official Journal

Regulation (EU) 2020/605 of the ECB of 9 April 2020 amending Regulation (EU) 2015/534 on reporting of supervisory financial information (ECB/2020/22) was published in the Official Journal of the EU.

Source: Regulation (EU) 2020/605 of the European Central Bank of 9 April 2020 amending Regulation (EU) 2015/534 on reporting of supervisory financial information (ECB/2020/22).

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Financial stability 

FPC Financial Stability Report urges banks to keep lending

The BoE’s Financial Policy Committee (FPC) published an interim Financial Stability Report setting out the FPC’s view of the performance of the financial system through the coronavirus (COVID-19) related disruption and the outlook for UK financial stability, including its assessment of the resilience of the UK financial system.

Source: Bank of England Interim Financial Stability Report.

Coronavirus (COVID-19)—UK Finance blog says bank lending is the best plan for all

UK Finance published a blog on the Interim Financial Stability Report—May 2020 published by the Financial Policy Committee (FPC). The interim report described the results of a ‘desk-top stress test’ which looked at bank lending and coronavirus (COVID-19) economic disruption.

Source: Interim Financial Stability Report—May 2020.

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Risk management and controls

Government sustains regulating cross-border corporate information sharing

HM Treasury and the Home Office published a statement to advise regulated entities on when it is acceptable to share information across borders. The government affirms the value of well-governed private sector information sharing, viewing it as an important tool in anti-money laundering and counter-terrorist financing measures. The guidance provides best practice measures to aid regulated entities to responsibly share data. The statement has been developed through public-private partnership, with representatives from the financial, legal and accountancy sectors, the Information Commissioner’s Office and the FCA.

Source: Cross-border information-sharing within corporate groups.

FSB publishes key takeaways from 2019 compensation workshop

The FSB published a note which provides key takeaways from a November 2019 workshop that the FSB held with banks, insurance and asset management firms, trade associations and academia on the implementation of compensation reforms. As part of its work to monitor implementation of its Principles for Sound Compensation Practices and their Implementation Standards, the FSB engages regularly with firms across financial sectors to assess the extent to which the standards have been effectively implemented.

Source: FSB compensation workshop 2019: Key takeaways.

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Financial crime

European Commission announces ‘comprehensive’ AML/CTF action plan

The European Commission announced an ‘ambitious and multifaceted’ action plan, which sets out concrete measures the Commission will take over the next 12 months to better enforce, supervise and co-ordinate the EU's rules on anti-money laundering/countering terrorist financing (AML/CTF). The aim of this new, ‘comprehensive’ approach is to shut down any remaining loopholes and remove any weak links in the EU's rules.

Sources: Commission steps up fight against money laundering and terrorist financingAFME welcomes European Commission Action Plan on Preventing Money Laundering and Terrorist Financing and  Enhancements of the EU’s legal framework to strengthen the fight against money laundering and terrorism financing.

For further information, see: The anti-money laundering regime.

EBA announces action plan to enhance regulatory framework for dividend arbitrage schemes

The EBA announced a ten-point action plan aimed at enhancing the future regulatory framework for dividend arbitrage schemes, with a focus on prudential and AML requirements. A report published alongside the action plan sets out the results of the EBA’s inquiry into the actions of prudential, AML and countering the financing of terrorism (CFT) supervisors in dealing with these schemes.

Source: EBA publishes its inquiry into dividend arbitrage trading schemes (‘cum-ex/cum-cum’), and announces a 10-point action plan to enhance the future regulatory framework.

Government sustains regulating cross-border corporate information sharing

HM Treasury and the Home Office published a statement to advise regulated entities on when it is acceptable to share information across borders. The government affirms the value of well-governed private sector information sharing, viewing it as an important tool in anti-money laundering and counter-terrorist financing measures. The guidance provides best practice measures to aid regulated entities to responsibly share data. The statement has been developed through public-private partnership, with representatives from the financial, legal and accountancy sectors, the Information Commissioner’s Office and the FCA.

Source: Cross-border information-sharing within corporate groups.

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Consumer protection

Coronavirus (COVID-19)—FCA board meeting discusses help for financially vulnerable customers

The FCA published the minutes of its 1 April 2020 board meeting, which focused on the FCA’s guidance to firms dealing with financially vulnerable customers during the coronavirus (COVID-19) pandemic.

Source: FCA board minutes: 1 April 2020.

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Conduct requirements

Coronavirus (COVID-19)—FCA sets out expectations on firms' handling of post and paper documents

The FCA issued a statement on how firms should handle post and paper documents during the coronavirus (COVID-19) outbreak, saying it recognises that there will be some important functions, such as processing post, that will be more difficult for firms to do in a timely way. The FCA says it is concerned, in particular, that vulnerable customers, who are often more likely not to use online services, are still protected.

Source: FCA statement on how firms should handle post and paper documents.

For further information, see: FCA: Treating Customers Fairly—essentials.

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Complaints, compensation and claims management

EBA publishes latest data on EU Deposit Guarantee Schemes

The EBA published 2019 data relating to two key concepts in the Deposit Guarantee Schemes Directive 2014/49/EU (DGSD)—available financial means and covered deposits. The data is published annually by the EBA and is intended to enhance the transparency and public accountability of EU deposit guarantee schemes (DGSs) for the benefit of depositors, markets, policymakers, DGSs and EU Member States.

Source: EBA updates data on Deposit Guarantee Schemes across the EU.

Coronavirus (COVID-19)—FOS confirms it will take into account FCA temporary measures in event of complaints

An exchange of correspondence between the interim executive director of strategy & competition at the FCA, Sheldon Mills, and the CEO of the FOS, Caroline Wayman, has been published. Mills seeks reassurance from Wayman that in considering complaints arising from firms’ acts or omissions during the pandemic period, the FOS will take account of the operational challenges faced by firms during this period, and the FCA’s revised expectations of what constitutes compliance with FCA rules, guidance and standards, as well as what counted as good industry practice at the time. In her response, Wayman clarifies how the FOS will approach complaints which might arise during this period.

Sources: Letter to Financial Ombudsman Service regarding complaints handling during coronavirus pandemic and  Letter: Financial Ombudsman Service reply to the FCA regarding complaints handling during coronavirus pandemic.

For further information, see: Financial Ombudsman Service—essentials and  The complaint-handling process of the Financial Ombudsman Service.

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Investigations, enforcement and discipline

FCA provides update on its civil proceedings against alleged unauthorised deposit takers

The FCA updated its webpage on its civil proceedings against Bright Managment [sic] Solution Limited, Soccer League International, Soccer League UK Limited, and senior individuals at those firms. In its update, the FCA confirms that all of the defendants consented, on 5 May 2020, to the interim injunction remaining in place until further order of the court or the end of the action.

Source: FCA webpage update: The FCA commences civil proceedings in relation to alleged unauthorised deposit takers.

FCA announces collaboration agreement with HMRC

The FCA announced that it has made a collaboration agreement with Her Majesty’s Revenue & Customs (HMRC) to provide Single Point of Contact (SPoC) services, under Section 79(3) of the Investigatory Powers Act 2016 and Section 8.58 of the Statutory Code of Practice.

Source: FCA and HMRC make collaboration agreement.

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Markets and trading

FMSB report sets out key components of data governance

The Fixed Income, Currencies and Commodities (FICC) Markets Standards Board (FMSB) published its second ‘Spotlight Review’ examining the role of data management in the stability and resilience of wholesale FICC markets and financial systems. The paper highlights the significant benefits to market participants from moving to a more centralised data strategy, although it acknowledges that the magnitude of centralisation will vary from firm to firm depending on size, complexity and business models.

Source: FMSB publishes Spotlight Review on data management in the financial system.

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Regulation of capital markets

Commission publishes draft Delegated Regulation amending Delegated Regulation (EU) 2018/1229 supplementing the CSDR regarding RTS on settlement discipline

The European Commission published a draft Delegated Regulation amending Delegated Regulation (EU) 2018/1229 supplementing the Central Securities Depositories Regulation (Regulation (EU) 909/2014) (CSDR) regarding regulatory technical standards (RTS) on settlement discipline. This draft Regulation amends Delegated Regulation (EU) 2018/1229 by postponing its application to 1 February 2021.

Source: Commission Delegated Regulation (EU) …/... amending Delegated Regulation (EU) 2018/1229 supplementing the Central Securities Depositories Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on settlement discipline of 8.5.2020 (not yet in force).

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

ESMA thematic report of CLO credit ratings raises supervisory concerns

ESMA published a thematic report on collateralised loan obligations (CLOs) credit ratings in the EU, including the UK. It provides an overview of CLO rating practices and identifies the main supervisory concerns, and medium-term risks, which include the internal organisation of credit rating agencies (CRAs), their interactions with CLO issuers, operational risks, commercial influence on the rating process, and the need for proper analysis of CLOs. The report also discusses the impact that the coronavirus (COVID-19) pandemic may have on CLO methodologies.

Source: ESMA highlights challenges for rating collateralised loan obligations.

Coronavirus (COVID-19)—ESMA updates on supervision of CRAs

ESMA updated its coronavirus (COVID-19) webpage providing information on the supervision of CRAs. As the ‘single EU direct supervisor’ of CRAs, ESMA has explained that it continues to engage with CRAs to evaluate the impact of coronavirus on their businesses and operations.

Source: COVID-19.

For further information, see: EU regulatory regime for credit rating agencies.

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Regulation of derivatives

Coronavirus (COVID-19)—BIS Bulletin examines links between CCPs and banks

The BIS published a bulletin on the central counterparty (CCP)-bank nexus during the coronavirus (COVID-19) pandemic. It notes that, with the financial turbulence during the crisis, CCPs have issued large margin calls, weighing on the liquidity of clearing member banks. And in spite of the turbulence, CCPs remained resilient, as intended by the post-crisis reforms of financial market infrastructures.

Source: The CCP-bank nexus in the time of COVID-19.

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Investment funds and asset management

FMLC highlights areas of uncertainty in proposed overseas fund regime

The Financial Markets Law Committee (FMLC) published its response to HM Treasury’s March 2020 consultation on a proposed ‘overseas funds regime’ (OFR) aimed at allowing investment funds domiciled overseas to access the UK market once the post-Brexit implementation period has ended. In its response, the FMLC highlights a number of uncertainties around the criteria, timing and process of the equivalence assessments under the proposed OFR regime, and calls for clarification.

Source: Response to consultation: Overseas funds regime: 11 May 2020.

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Banks and mutuals

Coronavirus (COVID-19)—PRA CRD IV statement on Pillar 2A

In response to firms’ challenges caused by the coronavirus (COVID-19) pandemic, the PRA announced that all Pillar 2A requirements will be set as a nominal amount, instead of a percentage of total risk weighted assets (RWAs), in the 2020 and 2021 Supervisory Review and Evaluation Processes (SREPs). This is relevant to PRA-supervised firms to which the CRD IV applies. Firms with a SREP in 2020 do not need to apply for a variation to their Pillar 2A requirements.

Source: Statement by the PRA on conversion of Pillar 2A capital requirements from RWA percentage to nominal amount.

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—PRA and BoE publish statement on resolution measures

The BoE and the PRA published a joint statement on resolution measures aimed at alleviating operational burdens on PRA-regulated firms in response to the coronavirus. The BoE also provided an update on the MREL. The deadlines for major UK banks and building societies to submit their first reports on their preparations for resolution (and publicly disclose a summary of these reports) have been extended by a year. The first reports are now due by October 2021 and public disclosures are required by June 2022.

Source: Statement by the Bank of England and Prudential Regulation Authority on resolution measures and COVID-19.

For further information, see: Minimum Requirements for Own Funds and Eligible Liabilities (MREL).

Coronavirus (COVID-19)—Pentti Hakkarainen on bank digitalisation and the lessons being learned

The ECB published a blog post by Pentti Hakkarainen, a member of its supervisory board, looking at banks’ digital response to the coronavirus (COVID-19) pandemic. With the vast majority of people forced to work from home, banks have had to rely on digital and remote solutions to handle their daily business and continue to deliver their services to clients.

Source: Coronavirus (COVID-19)—ECB blog says state-of-the-art technology is vital.

Coronavirus (COVID-19)—APPG on Fair Business Banking and the British Business Bank discuss CBILS

The APPG on Fair Business Banking published a statement and an exchange of letters with the British Business Bank on the CBILS. The APPG had criticised the scheme for having too high a refusal rate, and for too slow a turnaround time. The letters discuss the figures underlying the refusal rate claim and certain aspects of the scheme.

Source: Letter exchange between with APPG and BB.

Coronavirus (COVID-19)—Treasury Committee questions Barclays about BBLS access issues

The chair of the Treasury Committee, Mel Stride MP, wrote to Barclays Bank CEO Matt Hammerstein following reports that customers are experiencing problems applying for loans from the bank under the BBLS. At a public meeting on 4 May 2020 the Committee questioned Hammerstein about the problems that some people were having in accessing the Barclays online system and was assured that the system was able to cope well. But Stride said Barclays customers still seem to be facing issues and new ones may have arisen, and he had written to the bank to find out what it is doing to fix any problems.

Source: Chair asks Barclays to explain customers' struggle in accessing emergency business loans.

FPC Financial Stability Report urges banks to keep lending

The BoE’s FPC published an interim Financial Stability Report setting out the FPC’s view of the performance of the financial system through the coronavirus (COVID-19) related disruption and the outlook for UK financial stability, including its assessment of the resilience of the UK financial system.

Source: Bank of England Interim Financial Stability Report.

Coronavirus (COVID-19)—UK Finance blog says bank lending is the best plan for all

UK Finance published a blog on the Interim Financial Stability Report—May 2020 published by the FPC. The interim report described the results of a ‘desk-top stress test’ which looked at bank lending and coronavirus (COVID-19) economic disruption.

Source: Interim Financial Stability Report—May 2020.

Coronavirus (COVID-19)—UK Finance announces lenders have provided £5.5bn to SMEs through CBILS

UK Finance issued a press release revealing that the banking and finance sector has lent over £5.5bn to SMEs so far through the CBILS as part of a broad package of support to help businesses.

Source: Lenders provide £5.5bn to SMEs through CBIL scheme.

Coronavirus (COVID-19)—UK Finance suggests EU legislative modifications to enable banks to aim support at businesses and households affected by the pandemic

UK Finance published a blog suggesting some targeted modifications to the banking package unveiled by the European Commission on 28 April 2020. The aim of the package is to facilitate lending to households and businesses in the EU, with the aim of ensuring banks can continue to lend money to support the economy and help mitigate the significant economic impact of the coronavirus (COVID-19) pandemic.

Source: Targeted legislative modifications to enable banks to aim support at businesses and households affected by COVID-19.

EU banking organisations issue declaration on provision of sustainable financial services

The European Banking Federation (EBF), along with the European Savings and Retail Banking Group (ESBG) and the European Association of Co-operative Banks (EACB), issued a joint declaration that aims to enhance the development of responsible and sustainable provision of financial services—at the European, national, multinational and company level—that are in line with professional values and a healthy working environment, and ensure employee participation in the process.

Source: EBF-BCESA: Joint declaration on employment aspects of providing financial services including guidance.

ECB amending regulation on reporting of supervisory information published in the Official Journal

Regulation (EU) 2020/605 of the ECB of 9 April 2020 amending Regulation (EU) 2015/534 on reporting of supervisory financial information (ECB/2020/22) was published in the Official Journal of the EU.

Source: Regulation (EU) 2020/605 of the European Central Bank of 9 April 2020 amending Regulation (EU) 2015/534 on reporting of supervisory financial information (ECB/2020/22).

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—700,000 customers receive payment holidays on their credit cards

UK Finance revealed that the banking and finance industry has provided financial relief to hundreds of thousands of consumer credit customers whose finances have been affected by the coronavirus (COVID-19) pandemic. Lenders have been working with the FCA to aid individuals facing temporary financial pressures by providing payment freezes on credit cards and personal loans for up to three months, and offering interest-free borrowing on the initial £500 of their overdrafts.

Source: Lenders offer hundreds of thousands of customers payment holidays on credit cards and personal loans.

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Regulation of insurance

Solvency II Implementing Regulation on own funds and reporting for Q2 2020 published in Official Journal

Commission Implementing Regulation (EU) 2020/641 of 12 May 2020 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 31 March 2020 until 29 June 2020 in accordance with the Solvency II Directive (2009/138/EC), has been published in the Official Journal.

Source: Commission Implementing Regulation (EU) 2020/641 of 12 May 2020 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 31 March 2020 until 29 June 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.

For further information, see: Solvency II—essentials.

Coronavirus (COVID-19)—FCA updates draft guidance for insurance and premium finance firms for customers in temporary financial difficulty

The FCA updated its webpage on its guidance consultation for insurance and premium finance firms on coronavirus (COVID-19) and customers in temporary financial difficulty to confirm the date on which the guidance will come into force.

Source: Coronavirus and customers in temporary financial difficulty: draft guidance for insurance and premium finance firms.

Coronavirus (COVID-19)—IAIS global co-ordination on financial stability and policyholder protection

The International Association of Insurance Supervisors (IAIS) announced that it has been co-ordinating with other standard-setting bodies and the FSB to assess the impact of the coronavirus (COVID-19) pandemic on the global insurance sector. It has also facilitated (and continues to facilitate) the sharing of information and discussion among its members on supervisory responses to the impact of coronavirus. These discussions have highlighted the importance of effective policyholder protection and fair customer treatment. The IAIS thinks there are limits on the coverage offered by the insurance sector alone where it is difficult to achieve pooling and diversification of risks necessary to support viable insurance cover. Therefore, the IAIS encourages efforts seeking potential solutions to protect businesses and individuals against these types of risk and stands ready to help facilitate these discussions at the international level.

Source: IAIS facilitates global co-ordination on financial stability and policyholder protection during COVID-19 crisis.

EIOPA publishes list of EU-headquartered IAIGs

The European Insurance and Occupational Pensions Authority (EIOPA) published the list of Internationally Active Insurance Groups (IAIGs) headquartered in the EU. IAIGs are the focus of the IAIS common framework for the supervision of internationally active insurance groups (ComFrame).

Source: Publication of the list of Internationally Active Insurance Groups (IAIG) in the EU.

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Regulation of personal pension and stakeholder products

PLSA launches industry group on ESG duties

The Pensions and Lifetime Savings Association (PLSA) set up an industry group to help produce guidance which will support schemes in getting to grips with their new 2020 Environment, Social and Governance (ESG) and stewardship reporting deadlines and duties.

Source: PLSA launches industry group on ESG duties next steps.

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Payment services and systems

ECB decision identifying Mastercard as systemically important payment system

The ECB published a decision on the identification of Mastercard Clearing Management System as a systemically important payment system pursuant to Regulation (EU) No 795/2014 on oversight requirements for systemically important payment systems (ECB/2020/26).

Source: Decision on Mastercard Clearing Management System (ECB/2020/26).

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Fintech and cryptoassets

ECB publishes Yves Mersch speech on the potential for an ECB digital currency

The ECB published a speech given by Yves Mersch, a member of the executive board of the ECB and vice-chair of its supervisory board, at the Consensus 2020 virtual conference on 11 May 2020. In the speech Mersch noted that a recent survey among 66 central banks by the BIS showed that more than 80% are working on central bank digital currencies (CBDCs) and that the ECB is one of them.

Source: An ECB digital currency—a flight of fancy?

Fintech report calls for removal of regulatory hurdles

TheCity UK published a report on fintech regulation, which says regulatory hurdles are a barrier and difficult to understand. It says the sector is calling for fintech regulation to be consolidated and made more user friendly, ‘particularly if the UK is to maintain its global leadership in the fintech market’. The report, ‘Enhancing the UK’s approach to innovation in financial services’, argues that regulatory change is needed to help launch more firms successfully into the global market.

Source: UK regulatory approach to fintech needs to grow along with the sector.

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Sustainable finance

ICMA publishes proposed high-level sustainable finance definitions

The International Capital Market Association (ICMA) published high-level definitions for sustainable finance, saying there is a need for convergence on terminology among market participants and wider stakeholders. ICMA’s proposed definitions build on current market usage and existing official sector terminology for the most commonly used terms in the sustainable finance field, including climate finance, impact finance, green finance and social finance. The objective is to ensure that all participants and stakeholders are using a common and transparent vocabulary. It is also designed as a contribution to other ongoing efforts in the financial industry to develop a consensus around key terms and definitions in sustainable finance.

Source: ICMA issues high-level definitions for sustainable finance.

ISDA and AFME respond to Commission’s consultations on climate transition

The International Swaps and Derivatives Association (ISDA) and the Association for Financial Markets in Europe (AFME) published a joint draft response to the European Commission’s consultations on draft Delegated Acts, specifying requirements of EU Climate Transition and EU Paris-aligned benchmarks.

Source: ISDA/AFME draft response to the European Commission’s consultations on draft Delegated Acts, specifying requirements of EU climate transition and EU Paris-aligned benchmarks.

PLSA launches industry group on ESG duties

The Pensions and Lifetime Savings Association (PLSA) set up an industry group to help produce guidance which will support schemes in getting to grips with their new 2020 Environment, Social and Governance (ESG) and stewardship reporting deadlines and duties.

Source: PLSA launches industry group on ESG duties next steps.

Environmental Audit Committee to hear evidence from CEO of the Principles for Responsible Investment

The House of Commons Environmental Audit Committee is to continue its scrutiny of the preparations for COP26 with evidence to be heard on 14 May from the CEO of the UN-supported Principles for Responsible Investment, Fiona Reynolds, and Nigel Topping, a UK climate action champion.

Source: MPs to examine impact of coronavirus on progress towards environment goals.

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Dates for your diary

 

 

DateSubjectEvent

15 May 2020

 

Authorisation, approval and supervision

 

Deadline for responses to PRA consultation paper ‘ CP4/20: Regulated fees and levies: Rates proposals 2020/21’.

 

18 May 2020

 

Financial crime

Fintech and crypto-assets

 

Deadline for responses to JMLSG consultation on Part II of its guidance which considers the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, which brings cryptoasset exchange providers and custodian wallet providers into scope of the Money Laundering Regulations.

 

19 May 2020

 

Authorisation, approval and supervision

 

Deadline for responses to FCA consultation paper ‘ CP20/6: FCA regulated fees and levies: Rates proposals 2020/21’.

 

20 May 2020

 

Regulation of personal pension and stakeholder products

 

Deadline for responses to EIOPA’s consultation on implementing technical standards (ITS) for supervisory reporting and co-operation under the Pan-European Personal Pension Product (PEPP) Regulation is 20 May 2020.

 

 

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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.