FS weekly highlights—16 January 2020

FS weekly highlights—16 January 2020

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Prudential requirements
Financial stability, recovery and resolution
Financial crime
Conduct requirements
Complaints, compensation and claims management
Investigations, enforcement and discipline
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
Regulation of derivatives
PRIIPs
Investment funds and asset management
Banks and mutuals
Regulation of insurance
Payment services and systems
International - financial services and related sectors
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

 

European Commission publishes slides on data protection and financial services under future UK-EU relationship

The European Commission published slides summarising internal EU27 preparatory discussions on the future relationship between the UK and the EU in relation to personal data protection (adequacy decisions), and co-operation and equivalence in financial services.

Source: Slides—Internal EU27 preparatory discussions on the future relationship: ‘Personal data protection (adequacy decisions); Cooperation and equivalence in financial services’.

House of Lords publishes revised report ahead of Withdrawal Agreement scrutiny

The House of Lords EU Select Committee published a report analysing the revised EU Withdrawal Agreement and the Political Declaration outlining future relations between the UK and EU. The report was published ahead of the House of Lords’ consideration of the Withdrawal Agreement Bill, which was set to begin on 13 January 2020. The revised UK-EU Withdrawal Agreement and political declaration were presented to parliament in October 2019. This report in turn updates an earlier report by the committee on previous iterations of the Withdrawal Agreement and Political Declaration, which was published in December 2018.

Source: Brexit—revised Withdrawal Agreement and Political Declaration report published by Committee.

AFME paper sets out principles and recommendations to improve EU equivalence regime

The Association for Financial Markets in Europe (AFME) published a paper setting out recommendations for further improvements to the EU equivalence framework, and proposing key objectives for the EU’s relationship with third countries and core principles which should underpin equivalence.

Source: AFME recommends further improvements to the EU equivalence framework.

FCA updates credit rating agencies webpage to reflect Brexit developments

The Financial Conduct Authority (FCA) updated its webpage for credit rating agencies (CRAs), for which the FCA will become the UK regulator post-Brexit. In its update, the FCA says it is making changes to its systems implementation activities to reflect the government’s indicated commitment to the UK leaving the EU with a Withdrawal Agreement in place, and explains the implications of those changes for CRAs.

Source: FCA webpage update.

 

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UK, EU and international regulators and bodies

 

EBA and EIOPA stakeholder groups publish joint position paper on ESA Review

The European Banking Authority (EBA) published a joint position paper, produced by four stakeholder groups, on the review of the regulations establishing the ESAs (the ESA Review). In the position paper the Banking Stakeholder Group (BSG) of the EBA and three European Insurance and Occupational Pensions Authority (EIOPA) stakeholder groups—the Insurance and Reinsurance Stakeholder Group (ISRG), the Occupational Pensions Stakeholder Group (OPSG) and the Securities and Markets Stakeholder Group (SMSG)—share their opinion on the upcoming change in the composition of the stakeholder groups that will result from the ESA Review.

Source: Joint position paper on the ESA review.

ESMA publishes list of questions under development

ESMA started publishing a list of questions received through its Q&A process, divided into questions for which a Q&A will be submitted for approval at the next ESMA Board of Supervisors meeting, rejected questions (i.e. questions that were tabled for discussions in an ESMA Standing Committee and to which ESMA does not intend to provide an answer), and questions forwarded to the European Commission.

Source: ESMA starts publishing questions received through its Q&A process.

BIS expands membership with central banks from emerging market economies

The Bank for International Settlements (BIS) announced that it is to expand its central bank membership base and increase collaboration in its work as a forum for international co-operation and as a hub for central banks and other financial authorities. The central banks of Kuwait, Morocco and Vietnam will be invited to join, taking the number of BIS members to 63.

Source: BIS expands membership and collaboration.

UKRN publishes performance scorecards to determine whether companies are satisfying their customers

The UK Regulators Network (UKRN) with help from Ofgem, Ofcom, Ofwat, the Consumer Council for Water and the FCA have published performance scorecards which provide insight into whether companies in water, energy, telecoms and financial services are delivering effectively for their customers. UKRN used consumer metrics covering service quality, price differentials and satisfaction levels, to generate a performance scorecard. UKRN want the relevant companies to use the performance scorecards to determine where to focus action, improve performance and prepare for challenges that may arise.

Source: Moving forward together—Performance scorecards.

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

The Council of the European Union 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, the European system of financial supervision review, non-performing loans (NPLs), sovereign bond-backed securities and sustainable finance.

Source: Progress on financial services legislative files.

FCA January 2020 policy development update

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

Source: FCA policy development update.

ESMA announces strategic priorities for 2020-22

ESMA published its Strategic Orientation for 2020-22. The Strategic Orientation sets out ESMA’s future focus and objectives, and reflects its expanded responsibilities and powers following the ESAs’ Review and EMIR 2.2, which increase its focus on supervisory convergence, strengthen its role in building the capital markets union (CMU) and give it more direct supervision responsibilities.

Source: ESMA announces key priorities for 2020-22.

ESMA publishes budget for 2020

ESMA published its budget for 2020. It sets out sources and size of revenue including fees, and budgeted expenditures for the year.

Source: ESMA 2020 Budget.

 

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Prudential requirements

 

EBA consults on draft RTS on treatment of non-trading book positions subject to FX or commodity risk under FRTB framework

The EBA launched a consultation on draft RTS on the treatment of non-trading book positions subject to foreign exchange risk or commodity risk under the fundamental review of the trading book (FRTB) framework, in accordance with Regulation (EU) 575/2013 (CRR) as amended by Regulation (EU) 2019/876 (CRR II). The consultation closes on 10 April 2020.

Source: EBA launches a consultation on draft RTS on the treatment of non-trading book positions subject to foreign-exchange risk or commodity risk under the FRTB framework.

FCA to consult on changes to its lists of multilateral development banks

The FCA announced that, in the forthcoming Quarterly Consultation Paper (QCP) it intends to consult on changes to the Glossary terms for ‘multilateral development bank’ and ‘designated multilateral development bank’. The proposed changes involve updating the existing lists in line with Article 117 of the Capital Requirements Regulation 2013 (as amended).

Source: FCA notes intention to consult on updates to the FCA lists of multilateral development banks.

EBA updates compliance table for the SREP common procedure and methodologies guidelines

The EBA updated its compliance table for the guidelines on the revised common procedures and methodologies for the supervisory review and evaluation process (SREP) and supervisory stress testing. It sets out which competent authorities comply or intend to comply with the guidelines. Updates relate to Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).

Source: Guidelines compliance table EBA/GL/2018/03 19 July 2018; Date of application—1 January 2019 (14 January 2020).

 

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Financial stability, recovery and resolution 

 

ECB publishes opinion on draft German law on recovery and resolution of CCPs

The ECB published an opinion, dated 14 January 2020, on a draft German law introducing dedicated rules for the recovery and resolution of central counterparties (CCPs) into an existing law on recovery and resolution which implements Directive 2014/59/EU (BRRD). The German Federal Ministry of Finance requested the opinion from the ECB in October 2019.

Source: Opinion of the European Central Bank of 14 January 2020 on the recovery and resolution of central counterparties (CON/2020/3).

ECB opines on measures limiting macroprudential risks in residential property loans

The ECB published an opinion dated 8 January 2020 on a draft regulation on the implementation of measures to limit macroprudential risks in the residential property construction and acquisition loan sector. The draft regulation relates to the Deutsche Bundesbank and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets.

Source: Opinion of the European Central Bank of 8 January 2020 on measures limiting macroprudential risks in residential property loans (CON/2020/1).

 

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Financial crime

 

FCA becomes AML/CTF supervisor of UK cryptoasset exchange and custodian wallet providers

From 10 January 2020 the FCA is the anti-money laundering and counter-terrorist financing (AML/CTF) supervisor of UK cryptoasset businesses under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 SI 2017/692, as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, SI 2019/1511 (the MLRs). The in-scope cryptoasset businesses are cryptoasset exchange providers (including cryptoasset automated teller machines, peer-to-peer providers, and issuers of new cryptoassets, eg initial coin offerings and initial exchange offerings) and custodian wallet providers.

Sources: FCA becomes AML and CTF supervisor of UK cryptoasset activities and Connect page updated to include new money laundering regulation registrations.

FCA publishes Fees (Cryptoasset Business) Instrument 2020

The FCA published it Fees (Cryptoasset Business) Instrument 2020. The FCA made this instrument in the exercise of the power under Regulation 102 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.

Source: Fees (Cryptoasset Business) Instrument 2020.

FATF provides details of Supervisors Forum on supervising virtual assets

The Financial Action Task Force (FATF) issued a press release setting out details of the second meeting of the FATF Supervisors Forum on supervising virtual assets, held in Paris on 9 January 2020. The forum, consisting of 135 representatives from over 50 delegations involved in virtual asset supervision, met to discuss how to supervise and regulate virtual assets and virtual asset service providers (VASPs). This meeting was the first opportunity for supervisors to discuss how to implement these new measures since the FATF finalised them in June 2019.

Source: FATF Supervisors’ Forum on supervising virtual assets—Paris, France, 9 January 2020

 

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Conduct requirements

 

FCA publishes update on its evaluation of RDR and FAMR

The FCA published a progress update on its evaluation of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR). The RDR and FAMR aimed to improve consumer outcomes from financial advice and guidance, and the FCA is in the process of reviewing their impact on the market to date and assessing how the market may develop. The FCA plans to publish its financial RDR/FAMR Review report later in 2020.

Source: Evaluation of the Retail Distribution Review and the Financial Advice Market Review.

 

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Complaints, compensation and claims management

 

PRA and FCA consult on FSCS MELL 2020/2021

The PRA and the FCA published consultation paper PRA CP1/20 / FCA CP20/2, Financial Services Compensation Scheme (FSCS)—Management Expenses Levy Limit (MELL) 2020/21. The proposed MELL is £83.2m for 2020/21, consisting of a management expenses budget of £78.2m and an unlevied contingency reserve of £5m. Feedback is sought by 17 February 2020.

Source: Financial Services Compensation Scheme—Management Expenses Levy Limit 2020/21.

Negotiation of draft directive to allow consumers collective redress imminent

The European Parliament Committee on Legal Affairs confirmed the European Parliament’s negotiating position on the EU draft directive introducing EU rules on the collective interests of consumers with 20 votes in favour and two abstentions. Consequently, members of the European Parliament will negotiate the final content of the draft directive soon. The draft directive is a response to consumer harm scandals that have had implications across the EU.

Source: Negotiations on new EU collective redress rules to begin.

FCA to return £2.5m to victims of land banking UCIS

The FCA obtained High Court approval for a scheme to return £2.5m to compensate victims of a series of unauthorised collective investment schemes (UCIS). In a statement on its website, the FCA confirmed that it will distribute the money it recovered from the liquidation of a Panamanian company related to the unlawful schemes, Paradigm Consultancy SA, to the 573 qualifying investors identified.

Source: FCA returns funds to land banking victims.

FSCS announces protection decisions for LCF investors

The Financial Services Compensation Scheme (FSCS) announced key decisions for claims in relation to the London Capital and Finance (LCF) failure, setting out which types of investors will receive FSCS protection. The FSCS aims to provide a further update by the end of February 2020 outlining the next steps. In the meantime LCF customers do not need to take any action.

Source: FSCS announces decision on LCF claims.

FCA update on Citizens Advice super-complaint to the CMA

The FCA published an update on its work regarding cash savings, home insurance and mortgage markets. The Competition and Markets Authority (CMA) published a response to the Citizens Advice super-complaint on the loyalty penalty in December 2018, in which it made a number of cross-cutting and market-specific recommendations in these areas.

Source: Citizens Advice super-complaint to the CMA—update.

 

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Investigations, enforcement and discipline

 

FCA launches civil proceedings against alleged unauthorised deposit takers

The FCA announced that it has commenced civil proceedings in the High Court against Bright Managment [sic] Solution Limited (Bright), Soccer League International Limited (Soccer League International), Soccer League UK Limited (Soccer League UK), and senior individuals at these firms. The FCA alleges the defendants have been carrying on unauthorised deposit taking by accepting money from the public for different projects, including forex trading and crypto-assets.

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

Poor health cannot halt £80m FCA trial over pension advice

Law360, London: On 8 January 2019 the High Court refused to delay the start of a trial against two men accused of misleading customers into putting £80m (US$105m) of retirement savings into investments that failed, saying it is not clear that medical treatment would solve ‘serious’ health issues.

See: Poor health cannot halt £80m FCA trial over pension advice.

P.F. (International) Ltd v Financial Conduct Authority

The FCA’s application to strike out a reference made by the applicant company (PFI) to the Upper Tribunal (Tax and Chancery) Chamber succeeded. The reference had been made in relation to a supervisory notice issued by the FCA to PFI varying the permission granted to PFI pursuant to Part 4A of the Financial Services and Markets Act 2000 FSMA by removing certain regulated activities. Prior to the hearing of that reference, in relation to an unrelated matter, the FCA had given PFI a Final Notice cancelling its permission to conduct any regulated activity. In granting the FCA's application, the tribunal held that the reference had become academic as a result of the issue of that Final Notice.

The judgment is available at: [2020] UKUT 2 (TCC)

 

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Markets and trading

 

ISDA publishes IBOR Fallback Rate Adjustments FAQs

ISDA published a set of IBOR Fallback Rate Adjustments FAQs, which address issues arising from key adjustments that will need to be made if fallbacks to risk-free rates (RFRs) are to take effect in contracts that were originally negotiated to reference the inter-bank offer rates (IBORs).

Source: ISDA publishes IBOR Fallback Rate Adjustments FAQs.

Working Group on Sterling Risk-Free Reference Rates announces buy-side sector roundtable event

The Working Group on Sterling Risk-Free Reference Rates, in conjunction with the Bank of England (BoE) and the FCA, announced that it would like to invite buy-side market practitioners (eg traders, hedge fund managers, portfolio managers) to attend one of two roundtable events, on 24 and 31 January. The Working Group welcomes interested practitioners with relevant expertise to join discussions on the buy-side barriers to LIBOR transition, dependencies on LIBOR and steps taken by firms to develop SONIA products.

Source: Buy-side sector roundtable event.

 

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MiFID II

 

ESMA publishes responses to its consultation on MiFID II review report on position limits

ESMA published the responses received to its consultation on the MiFID II review report on position limits and position management.

Source: ESMA publishes responses to its consultation on MIFID II review report on position limits.

FIA and ISDA respond to ESMA consultation on position limits

The Futures Industry Association (FIA) and the International Swaps and Derivatives Association (ISDA) submitted a joint response to ESMA consultation paper on position limits and position management under MiFID II. The trade associations say their members are of the view that while the regime has not caused significant negative consequences with the exception for new and illiquid contracts, there are several areas that could be improved.

Source: FIA files response with ESMA on the review of MiFID II position limits.

ICMA Quarterly Report assesses progress on RFRs, CMU and the impact of MiFID II

The International Capital Market Association (ICMA) published its Q1 2020 report assessing market practice and regulatory policy. There are feature articles on the global transition to risk free rates (RFRs), capital markets union (CMU) challenges, MiFID II/MiFIR and the bond markets, the Central Securities Depositories Regulation (CSDR)’s impact study on mandatory buy-ins, and an overview of the European Bank for Reconstruction and Development’s green bond programme.

Source: ICMA Quarterly Report first quarter 2020.

 

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Regulation of capital markets and Capital Markets Union

 

FCA updates credit rating agencies webpage to reflect Brexit developments

The FCA updated its webpage for CRAs, for which the FCA will become the UK regulator post-Brexit. In its update, the FCA says it is making changes to its systems implementation activities to reflect the government’s indicated commitment to the UK leaving the EU with a Withdrawal Agreement in place, and explains the implications of those changes for CRAs.

Source: FCA webpage update.

ICMA Quarterly Report assesses progress on RFRs, CMU and the impact of MiFID II

The ICMA published its Q1 2020 report assessing market practice and regulatory policy. There are feature articles on the RFRs, CMU challenges, MiFID II/MiFIR and the bond markets, the CSDR’s impact study on mandatory buy-ins, and an overview of the European Bank for Reconstruction and Development’s green bond programme.

Source: ICMA Quarterly Report first quarter 2020.

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

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

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

 

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Regulation of derivatives

 

ISDA publishes paper on private international law aspects of smart derivatives contracts using DLT

ISDA published a paper on private international law aspects of smart derivatives contracts utilising distributed ledger technology (DLT) and governed by the laws of Singapore and England & Wales. The paper identifies specific private international law issues with respect to contract law that may arise when trading derivatives in a DLT environment and, where appropriate, proposes recommendations on how these issues might be clarified or resolved.

Sources: Private international law aspects of smart derivatives contracts utilizing DLT and ISDA, Clifford Chance, R3 and the Singapore Academy of Law publish smart contracts paper.

ESRB report looks at procyclicality of margins and haircuts

The European Systemic Risk Board (ESRB) published a report on mitigating the procyclicality of margins and haircuts in derivatives markets and securities financing transactions. It expands on the work of a previous ESRB report published in 2017 by providing new analysis and setting out possible policy options to address systemic risks arising from the procyclicality associated with margin and haircut practices.

Sources: ESRB publishes report on mitigating the procyclicality of margins and haircuts in derivatives markets and securities financing transactions and 2017 report: The macroprudential use of margins and haircuts.

ISDA—China continues to make progress on enforceable close-out netting

ISDA published the opening remarks of its CEO, Scott O’Malia, that were made at the China close-out netting event. O’Malia highlighted areas where China has taken steps to expand participation and facilitate global access to liquidity in cash and derivate markets. These areas included Chinese market reforms, progress made on enforceable close-out netting and the development of a resolution regime for systematically important financial institutions in China. O’Malia stated that a transparent and predictable legal framework is crucial for China to be able to implement its reforms.

Source: ISDA CEO Scott O’Malia Opening Remarks at China Close-out Netting Event.

 

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PRIIPs

 

IE’s response to ESA’s PRIIPs proposals raises ‘serious concerns’

Insurance Europe (IE) said it has ‘serious concerns’ about the (European Supervisory Authorities) ESAs’ proposals in the review of the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulatory technical standards (RTS). IE says the proposals would make things worse for both consumers and insurers.

Source: ESAs proposals on PRIIPs: going from bad to worse (consultation response by to ESAs so may be important).

ICMA remains concerned about vanilla bond markets in amendments to PRIIPs KID

The ICMA published responses to the ESAs’ joint consultation paper on amendments to Commission Delegated Regulation (EU) 2017/653 (PRIIPS) key information documents. The ICMA’s Asset Management and Investors Council stated that ‘contrary to explicit costs, implicit transaction costs are not a charge to investors but reflect the cost of investing in markets which are deducted from reported fund performance and fully reflected in performance statements’. The ICMA’s primary market constituency also responded, saying that ‘PRIIPs’ product scope has remained a major concern in the vanilla bond markets’.

Source: ICMA responds to ESAs’ Joint Consultation Paper concerning amendments to the PRIIPs KID.

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Investment funds and asset management

 

ESMA study values EU AIFs at €5.8tn

ESMA published its second statistical report on EU alternative investment funds (AIFs). The study found that, in 2018, the sector as measured by net asset value amounted to €5.8tn, or nearly 40% of the total EU fund industry. The report is based on data from 30,357 AIFs, which is almost 100% of the market.

Source: ESMA report values EU alternative investment funds at €5.8 trillion.

FCA reports on findings from its study on risk modelling and other portfolio management tools

The FCA published a report setting out its review findings of how firms in the asset management sector selected and used risk modelling and other portfolio management tools. While the FCA says it saw some good practice at most firms, it also identified problems in firms’ processes and controls, particularly in risk model oversight and contingency planning. The FCA says firms should consider the findings and how they apply to their own processes.

Source: Asset management portfolio tools.

FCA to return £2.5m to victims of land banking UCIS

The FCA obtained High Court approval for a scheme to return £2.5m to compensate victims of a series of UCIS. In a statement on its website, the FCA confirmed that it will distribute the money it recovered from the liquidation of a Panamanian company related to the unlawful schemes, Paradigm Consultancy SA, to the 573 qualifying investors identified.

Source: FCA returns funds to land banking victims.

 

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Banks and mutuals

 

FCA proposes reforms to the easy access cash savings market

The FCA published consultation paper CP20/1: Introducing a Single Easy Access Rate for cash savings, which proposes to reform the easy access cash savings market in order to protect longstanding customers. Under new rules all firms would have to set a single easy access rate (SEAR) across all easy access accounts. Firms will have flexibility to offer multiple introductory rates for up to 12 months, then they will need to choose one SEAR for their easy access cash savings accounts, and one for their easy access cash savings ISAs. Feedback is sought by 9 April 2020.

Sources: FCA acts to help customers get better rates for cash savingsCP20/1: Introducing a Single Easy Access Rate for cash savingsBSA comments on FCA savings market consultation and UK Finance responds to the FCA's consultation paper on easy access cash savings market.

EBA report examines big data and advanced analytics in the banking sector

The EBA published a report on the use of big data and advanced analytics (BD&AA) in the banking sector, aiming to share knowledge among stakeholders on the current use of BD&AA by providing background information, key observations, pillars, and elements of trust that could accompany their use.

Sources: EBA report on big data and advanced analytics and EBA report identifies key challenges in the roll out of big data and advanced analytics.

EBA BSG says data, taxonomy and methodologies crucial for sustainable finance progress

The EBA’s Banking Stakeholder Group (EBA BSG) published a policy paper on sustainable finance, saying banks, as intermediaries between savings and investment and major finance providers in the EU, have a key role to play in the mobilisation of the necessary resources to tackle climate change and mitigate its effects. The paper argues that in order to better identify financial risks and opportunities linked to climate change for the banking system, progress must be achieved in the collection of data, usable taxonomy and methodologies, including scenarios. Any regulatory or supervisory development should acknowledge this and contribute to this progress.

Source: Policy paper on sustainable finance.

ECB publishes Q3 2019 supervisory banking statistics

The European Central Bank (ECB) published supervisory banking statistics for the third quarter of 2019. The figures show capital ratios for significant institutions up slightly in the third quarter, with total capital ratio rising to 18.05% from 18.00% in the second quarter. The non-performing loan ratio was down further to 3.41%, the lowest level since the series was first published in 2015. The liquidity coverage ratio fell to 145.16% from 146.85% in the second quarter.

Source: ECB publishes supervisory banking statistics for the third quarter of 2019.

EU banks: profitability contracts but capital position remains strong, EBA says

The EBA published its Risk Dashboard based on Q3 2019 statistics, alongside the results of the Risk Assessment Questionnaire (RAQ). The EBA says the capital position of EU banks remained strong and asset quality improved further, but profitability contracted in Q3 2019, with a negative outlook from both banks and analysts.

Source: EU banks’ face a further contraction of profitability.

 

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Regulation of insurance

 

PRA publishes policy statement on notification of longevity risk transfers under Solvency II

The PRA published policy statement PS1/20 in which it provides feedback on the responses to consultation paper CP3/19 ‘Solvency II: Longevity risk transfers—simplification of pre-notification expectations’. It also contains the PRA’s final policy in an updated version of supervisory statement SS18/16 ‘Solvency II: longevity risk transfers’.

Source: Solvency II: Longevity risk transfers—simplification of pre-notification expectations.

EIOPA publishes the technical specifications for the annual MCRCS

EIOPA published the instructions and technical specifications for the annual Market and Credit Risk Comparative Study for 2019 (MCRCS YE2019). The MCRCS is an annual Europe-wide comparative study on the modelling of market and credit risk. Its main objective is to compare risk charges for a selection of asset portfolios to be used as a tool for the supervisory review of internal models.

Source: EIOPA publishes the technical specifications for the Market and Credit Risk Comparative Study YE2019.

PRA calls for feedback on insurance data release

The PRA is preparing to publish regular, aggregated data relating to the UK insurance market on a quarterly basis. A call for feedback requests comments and views from potential users of such data on the proposed content and presentation. Comments are requested by 16 March 2020.

Source: Insurance data release: information and format: A call for feedback.

FMLC responds to EIOPA consultation on Solvency II review opinion

The Financial Markets Law Committee (FMLC) published its response to the EIOPA consultation on an opinion providing technical advice for the 2020 review of Directive 2009/138/EC (Solvency II). In its response, the FMLC draws attention to uncertainties in EIOPA’s proposals to amend Solvency II, particularly in relation to the freedom of establishment and freedom to provide services, calculations for ‘expected profits in future premiums’, and Solvency II’s long-term guarantee (LTG) measures.

Source: Solvency II 2020 review: Response to EIOPA consultation.

European Parliament resolution on IFRS 17 Insurance Contracts published in the Official Journal

European Parliament resolution of 3 October 2018 on International Financial Reporting Standards: IFRS 17 Insurance Contracts (2018/2689(RSP)), was published in the Official Journal of the EU.

Source: European Parliament resolution of 3 October 2018 on International Financial Reporting Standards: IFRS 17 Insurance Contracts

IE’s response to ESA’s PRIIPs proposals raises ‘serious concerns’

IE said it has ‘serious concerns’ about the ESAs’ proposals in the review of the PRIIPs RTS. IE says the proposals would make things worse for both consumers and insurers.

Source: ESAs proposals on PRIIPs: going from bad to worse (consultation response by to ESAs so may be important).

 

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Payment services and systems

 

EPA publishes first edition of new Guide to Payment Account Providers

The Emerging Payments Association (EPA) published a ‘first of its kind’ guide which aims to address the need for increased access to bank accounts. The new Guide to Payment Account Providers—to which ten UK account providers, including e-money institutions, digital banks and other account servicing payment service providers (PSPs), have contributed in their own words—examines the types of accounts those providers offer, their risk appetite and the schemes they support, as well as providing clear and practical guidance for those opening accounts with them.

Source: EPA publishes payment providers guidance in a call for transparency.

EPC publishes extension of mandate of ad-hoc Multi-stakeholder Group on Mobile Initiated SEPA Credit Transfers (including SCT Inst)

The European Payments Council (EPC) published a document setting out an extension of mandate of the ad-hoc Multi-Stakeholder Group on Mobile Initiated SEPA Credit Transfers (MSG MSCT). The ad-hoc MSG MSCT was established in Q2 2018 and developed, according to their mandate (MSG MSCT 001-18), the document ‘Mobile Initiated SEPA (Instant) Credit Transfers Interoperability Guidance’ (MSCT IG—EPC 269-19).

Source: Extension Mandate ad-hoc multi-stakeholder group for Mobile Initiated SEPA Credit Transfers (MSG MSCT 061-19v1.1).

EBA updates compliance table for PSD2 security measures guidelines

The EBA updated its compliance table for the guidelines on the security measures for operational and security risks of payment services under PSD2. It sets out which competent authorities comply or intend to comply with the guidelines. There are a large number of updates including in relation to Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF).

Source: Guidelines compliance table EBA/GL/2017/17 12 December 2017; Date of application—9 February 2018 (Update—14 January 2020).

EBA updates compliance table for the PSD2 fraud reporting guidelines

The EBA updated its compliance table for the guidelines on fraud reporting under PSD2. It sets out which competent authorities comply or intend to comply with the guidelines. Updates relate to the Central Bank of Cyprus.

Source: Guidelines compliance table EBA/GL/2018/05 18 July 2018; Date of application—1 January 2019 (updated 14 January 2020) Fraud reporting PSD2.

Genevieve Marjoribanks named as new head of policy at the PSR

The Payment Systems Regulator (PSR) announced that it has appointed Genevieve Marjoribanks as its new head of policy. Marjoribanks will be responsible for leading the development of regulatory policy at the PSR. She joins from the FCA, where she was a head of policy in strategy & competition.

Source: PSR appoints Genevieve Marjoribanks as new head of policy.

 

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ISDA—China continues to make progress on enforceable close-out netting

ISDA published the opening remarks of its CEO, Scott O’Malia, that were made at the China close-out netting event. O’Malia highlighted areas where China has taken steps to expand participation and facilitate global access to liquidity in cash and derivate markets. These areas included Chinese market reforms, progress made on enforceable close-out netting and the development of a resolution regime for systematically important financial institutions in China. O’Malia stated that a transparent and predictable legal framework is crucial for China to be able to implement its reforms.

Source: ISDA CEO Scott O’Malia Opening Remarks at China Close-out Netting Event.

 

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Fintech and cryptoassets

 

FCA becomes AML/CTF supervisor of UK cryptoasset exchange and custodian wallet providers

From 10 January 2020 the FCA is the AML/CTF supervisor of UK cryptoasset businesses under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 SI 2017/692, as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, SI 2019/1511 (the MLRs). The in-scope cryptoasset businesses are cryptoasset exchange providers (including cryptoasset automated teller machines, peer-to-peer providers, and issuers of new cryptoassets, eg initial coin offerings and initial exchange offerings) and custodian wallet providers.

Sources: FCA becomes AML and CTF supervisor of UK cryptoasset activities and Connect page updated to include new money laundering regulation registrations.

FCA publishes Fees (Cryptoasset Business) Instrument 2020

The FCA published it Fees (Cryptoasset Business) Instrument 2020. The FCA has made this instrument in the exercise of the power under Regulation 102 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.

Source: Fees (Cryptoasset Business) Instrument 2020.

ISDA publishes paper on private international law aspects of smart derivatives contracts using DLT

ISDA published a paper on private international law aspects of smart derivatives contracts utilising DLT and governed by the laws of Singapore and England & Wales. The paper identifies specific private international law issues with respect to contract law that may arise when trading derivatives in a DLT environment and, where appropriate, proposes recommendations on how these issues might be clarified or resolved.

Sources: Private international law aspects of smart derivatives contracts utilizing DLT and ISDA, Clifford Chance, R3 and the Singapore Academy of Law publish smart contracts paper.

Innovate Finance launches 36H Group for lending platforms that accept retail investments

Innovate Finance, the industry body representing UK fintech, has launched the 36H Group, aiming to provide a unified voice for lending platforms that accept retail investments, now that standards are set by the FCA. The group will focus on policy and regulatory matters, as well as promoting the benefits the sector is delivering, including bringing choice, competition and transparency to the lending and investment markets.

Source: Innovate Finance launches 36H Group.

FATF provides details of Supervisors Forum on supervising virtual assets

The FATF issued a press release setting out details of the second meeting of the FATF Supervisors Forum on supervising virtual assets, held in Paris on 9 January 2020. The forum, consisting of 135 representatives from over 50 delegations involved in virtual asset supervision, met to discuss how to supervise and regulate virtual assets and virtual asset service providers (VASPs). This meeting was the first opportunity for supervisors to discuss how to implement these new measures since the FATF finalised them in June 2019.

Source: FATF Supervisors’ Forum on supervising virtual assets—Paris, France, 9 January 2020.

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

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

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

 

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Sustainable finance

 

EBA BSG says data, taxonomy and methodologies crucial for sustainable finance progress

The EBA BSG published a policy paper on sustainable finance, saying banks, as intermediaries between savings and investment and major finance providers in the EU, have a key role to play in the mobilisation of the necessary resources to tackle climate change and mitigate its effects. The paper argues that in order to better identify financial risks and opportunities linked to climate change for the banking system, progress must be achieved in the collection of data, usable taxonomy and methodologies, including scenarios. Any regulatory or supervisory development should acknowledge this and contribute to this progress.

Source: Policy paper on sustainable finance.

National Grid launches green bond in charge towards its net zero target

National Grid announced the introduction of its first green bond. The bond is expected to raise £430m to finance UK electricity transmission projects that have environmental benefits. The projects will be selected by National Grid’s Green Financing Committee.

Source: National Grid launches green bond to fund sustainability projects.

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

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

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

UK Finance blog discusses the impact of climate change on banks

UK Finance published a blog on the impact of climate change on banks, and the PRA and Financial Policy Committee (FPC)’s 2021 Biennial Exploratory Scenario (BES) stress test.

Source: Stressing climate change—how could the scenarios play out?

 

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Dates for your diary

 

DateSubjectEvent

 

17 January 2020

 

Prudential requirements

 

Deadline for responses to EBA consultation on draft guidelines on the application of the structural FX provision. The guidelines aim to create a regulatory framework on Structural FX to address the observed diversity in its application across the EU.

 

17 January 2020

Consumer protection

Regulation (EU) 2017/2394 on cooperation between national authorities responsible for the enforcement of consumer protection laws and repealing Regulation (EC) No 2006/2004 (the Consumer Protection Cooperation Regulation) applies from this date.

 

17 January 2020Prudential requirements

Deadline for responses to PRA consultation paper ‘CP24/19 Asset encumbrance’.

 

18 January 2020

Regulation of capital markets

Regulation of derivatives

Deadline for responses to ESMA’s consultation on procedural rules for imposing penalties on third-country CCPs, TRs and CRAs.

 

20 January 2020Regulation of insurance

Deadline for responses to the International Association of Insurance Supervisors (IAIS) consultation on its draft application paper on liquidity risk management.

 

21 January 2020Markets and trading

Deadline for responses to ISDA’s supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing euro LIBOR and EURIBOR in the event these benchmarks are permanently discontinued.

 

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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.