FS weekly highlights—16 October 2020

FS weekly highlights—16 October 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Financial crime
Complaints, compensation and claims management
Investigations, enforcement and discipline
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Investment funds and asset management
Securities financing transactions
Crowdfunding
Consumer credit, mortgage and home finance
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

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

BIS general manager says coronavirus (COVID-19) highlights need for NBFI regulatory calibration

The general manager of the Bank for International Settlements (BIS), Agustín Carstens, delivered a speech on ‘Rebuilding better: Banks, central banks and governments in a COVID economy’. Carstens argued that while banks and central banks had reacted well to the coronavirus (COVID-19) pandemic, the turmoil exposed new vulnerabilities among non-bank financial intermediaries (NBFIs).

Source: Rebuilding better: Banks, central banks and governments in a COVID economy.

BIS publishes FSI brief on stress-testing banks during the coronavirus (COVID-19) pandemic

The BIS published an FSI brief on stress-testing banks during the coronavirus pandemic. FSI briefs are written by staff members of the BIS Financial Stability Institute (FSI), sometimes in co-operation with other experts.

Source: Stress-testing banks during the COVID-19 pandemic.

Coronavirus (COVID-19)–ECON publishes draft report on Prospectus Regulation changes

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on a proposed regulation amending the Prospectus Regulation (EU) 2017/1129 to create an EU recovery prospectus and make targeted adjustments for financial intermediaries to help the recovery from the coronavirus pandemic. The amending regulation is part of the capital markets recovery package proposed by the European Commission in July 2020 in response to the pandemic.

Source: Draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2017/1129 as regards the EU Recovery prospectus and targeted adjustments for financial intermediaries to help the recovery from the COVID-19 pandemic (COM(2020)0281—C9-0206/2020—2020/0155(COD)).

FCA speech delivered at mortgage forbearance webinars

The Financial Conduct Authority (FCA) published a speech delivered online by its executive director of supervision—retail and authorisations, Jonathan Davidson, as the introduction to mortgage forbearance webinars.

Source: Mortgages and coronavirus—enabling positive consumer outcomes.

FCA speech discusses consumer credit regulation during the coronavirus (COVID-19) pandemic and beyond

The FCA published a speech given by its director of consumer and retail policy, Nisha Arora, at the Finance and Leasing Association conference 2020. In her speech, entitled ‘FCA regulation of consumer credit—during the pandemic and beyond’, Arora discussed topics including the importance of credit markets, affordability, good forbearance and collection, coronavirus guidance for consumers, and the FCA’s ‘business priority’.

Source: FCA regulation of consumer credit—during the pandemic and beyond.

Coronavirus (COVID-19)—FCA Occasional paper 57 considers mortgage market disruptions

The FCA published Occasional paper 57, which considers mortgage market disruptions by analysing all regulated mortgage contracts offered and originated in the UK, documents the major trends associated with the coronavirus pandemic of 2020, and compares them to the 2008 financial crisis.

Source: Occasional paper 57: Mortgage market disruptions.

FCA’s 28 August 2020 board minutes discuss re-prioritisation in light of coronavirus (COVID-19) pandemic

The FCA published its 28 August 2020 board minutes. The minutes note that the FCA board was briefed on the progress in forming a flexible group of staff that could be deployed to meet the most urgent needs of the organisation arising as a result of the coronavirus pandemic.

Source: FCA board minutes: 28 August 2020.

FCA’s director of market oversight discusses coronavirus (COVID-19) market abuse risks

The FCA published a speech by its director of market oversight, Julia Hoggett, on market abuse and the coronavirus pandemic, in which she highlighted three themes of the FCA’s market risk assessment: the scale of primary market activity that has taken place over the course of the pandemic, with the UK seeing a greater volume of follow-on equity issuance than the next seven major European bourses combined; the challenges of surveillance during volatile markets; and the challenges of surveillance driven by the new ways of working.

Source: Market abuse in a time of coronavirus.

ESMA’s Verena Ross discusses the coronavirus (COVID-19) pandemic, MiFID, MiFIR and MAR

ESMA published a speech by its executive director, Verena Ross, given at the Association for Financial Markets in Europe (AFME) annual European Compliance and Legal Conference. Ross discussed a number of topics, including the impact of the coronavirus pandemic on financial markets; the review of MiFID and MiFIR; the Market Abuse Regulation (MAR); and ESMA’s priorities laid down in its 2021 work programme.

Source: Verena Ross delivers keynote speech at AFME conference.

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Brexit news

Ofgem issues REMIT contingency arrangements letter to market participants

Ofgem wrote a letter to market participants providing them with an update on the REMIT arrangements that will apply in Great Britain from 1 January 2021 following the end of the transition period. The letter outlines to market participants that the REMIT arrangements are expected to be consistent with the arrangements set out in Ofgem’s No-deal EU exit REMIT contingency arrangements—September update letter. The letter discusses monitoring and enforcement, registration, data reporting and the next steps.

Source: EU exit REMIT contingency arrangements – October 2020 update.

Treasury Committee welcomes FCA response on expats’ accounts post Brexit

The FCA responded to a Treasury Committee letter of 29 September 2020 asking the FCA to set out how much notice firms should provide if they decide to close the accounts of UK bank customers living in the EU. The FCA’s response said that not all firms are informing customers their current accounts will be closed but, if firms do decide to do so, they must provide sufficient notice and ensure their actions are consistent with the customers’ contractual rights.

Source: FCA takes “welcome step” in asking banks to warn expats of account closures .

EIOPA urges insurance sector to prepare for end of UK transition period

The European Insurance and Occupational Pensions Authority (EIOPA) issued a statement urging the insurance sector to finalise preparations and implement ‘suitable and realistic’ contingency plans in advance of the end of the Brexit transition period. EIOPA says the sector needs to be prepared for the consequences of UK and Gibraltar insurance undertakings becoming third-country undertakings and no longer benefiting from the Solvency II authorisation to provide services in the EU, as well as other legal repercussions concerning insurance contracts, insurance disclosure and group supervision.

Source: EIOPA calls on insurance sector to complete preparations for the end of the UK transition period.

John Glen on UK-EU equivalence decisions and regulatory co-operation and the future regulatory framework for UK financial services

The House of Lords EU Services Sub-Committee published a letter to its chair from the economic secretary to HM Treasury, John Glen MP. In the letter, which is dated 21 September 2020, Glen provides information on UK-EU equivalence decisions, future UK-EU regulatory co-operation and the future regulatory framework for UK financial services.

See: LNB News 09/10/2020 46.

Source: Letter from John Glen MP, economic secretary to HM Treasury, to Baroness Donaghy, 21 September 2020.

FCA and PRA set out final preparations for firms before end of Brexit transition period

The FCA and the Prudential Regulation Authority (PRA) wrote a joint letter to CEOs of UK and international banks preparing for the end of the Brexit transition period, stressing the importance of firms continuing to build on their preparatory work to ensure that they, and to the extent possible their clients, are ready for a range of scenarios.

Sources: Letter from the PRA and FCA ‘Final preparations for the end of the transition period’ and FCA writes joint letter with the Bank to CEOs of UK and international banks.

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MiFID II

ESMA calls for evidence in relation to the review of transparency requirements for equity and non-equity instruments

ESMA published a call for evidence in the context of the review of transparency requirements for equity and non-equity instruments under MiFID II/MiFIR. Responses are due by 31 October 2020.

Source: Call for evidence on the review of transparency requirements for equity and non-equity instruments.

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UK, EU and international regulators and bodies

ECB opens debate and consultation on possibility of a digital euro

The BIS published remarks made by Fabio Panetta, a member of the executive board of the European Central Bank (ECB), to ECON, on the potential risks and benefits of a digital euro. The ECB has opened a consultation on the topic, with views sought by 12 January 2021.

Sources: ECB speech: Fabio Panetta: A digital euro for the digital era and Consultation.

ESAs’ Board of Appeal dismisses case against ESMA on alleged non-application of EU law

The Joint Board of Appeal of the European Supervisory Authorities (ESAs—the European Banking Authority (EBA), EIOPA and European Securities and Markets Authority (ESMA)) published its decision in the appeal case brought by Mr Howerton against ESMA. The Board of Appeal’s decision considered as inadmissable the appellant’s claim that six national financial supervisory authorities and ESMA should have taken supervisory steps in relation to an alleged non-application of EU law.

Source: ESAs’ board of appeal dismisses case against ESMA on alleged non-application of Union law.

Mairead McGuinness appointed European Commissioner for financial services

The Council of the EU appointed Mairead McGuinness as new member of the European Commission. McGuinness has been assigned the portfolio of financial services, financial stability and the Capital Markets Union. The appointment follows Phil Hogan’s resignation and will last until the end of the term of office of the Commission on 31 October 2024.

Source: Council appoints Mairead McGuinness as new member of the European Commission .

PRA seeks information on firms’ readiness for a possible zero or negative Bank Rate

The CEO of the PRA and Bank of England deputy governor (prudential regulation), Sam Woods, wrote to the CEOs of firms seeking information on their operational readiness to implement a zero or negative Bank Rate. The BoE and the PRA have commenced structured engagement on the operational considerations of a zero or negative policy rate, although they stress this is not indicative that the Monetary Policy Committee (MPC) will employ such a rate, and they are not asking firms to begin taking steps to ensure they are operationally ready to implement a negative Bank Rate.

Source: Letter from Sam Woods ‘Information request: Operational readiness for a zero or negative Bank Rate’.

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Authorisation, approval and supervision

FCA publishes solo-regulated firms directory persons update

The FCA updated the webpage for its directory of certified and assessed persons on the Financial Services Register, which it publishes as part of the Senior Managers and Certification Regime (SM&CR). The update concerns the submission of solo-regulated firms’ directory persons data..

Source: Directory of certified and assessed persons.

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Prudential requirements

Corrigendum to Regulation on minimum loss coverage for NPEs published in Official Journal

A corrigendum to Regulation (EU) 2019/630 amending the CRR (Regulation (EU) 575/2013) as regards minimum loss coverage for non-performing exposures (NPEs) was published in the Official Journal of the EU. Regulation (EU) 2019/630, which came into force on 26 April 2019, requires a deduction to be made from own funds when NPEs are not sufficiently covered by provisions or other adjustments.

EBA publishes final draft rules on the prudential treatment of software assets

The EBA published final draft regulatory technical standards (RTS) specifying the methodology to be adopted by institutions for the purpose of the prudential treatment of software assets, following amendments made to the Capital Requirements Regulation (EU) 575/2013 (CRR) by Regulation (EU) 2019/876 (CRR 2), which were introduced as part of the risk reduction measures package endorsed by European legislators in 2019.

Source: EBA published final draft regulatory technical standards specifying the prudential treatment of software assets.

PRA consults on the approach to overseas IRB models in CP16/20

The PRA published consultation paper CP16/20: Credit risk: The approach to overseas Internal Ratings Based (IRB) models. CP16/20 sets out the PRA’s proposed approach in respect of firms’ use of overseas IRB credit risk models built to non-UK regulatory requirements, in the calculation of UK group consolidated capital requirements. The consultation closes on 12 January 2021.

Source: Consultation paper 16/20: Credit risk: The approach to overseas Internal Ratings Based (IRB) models.

PRA hosts virtual meeting on IRB mortgages

The PRA published presentation slides from a virtual roundtable meeting on internal ratings based (IRB) mortgages for PRA-regulated firms with an IRB permission for mortgage exposures, which took place on 5 October 2020. The PRA presented on the most relevant cross-firm modelling issues, and further discussed their expectations for developing hybrid probability of default (PD) and loss given default (LGD) models.

Source: The PRA hosts IRB mortgage roundtable.

PRA publishes policy statement PS22/20 on counterparty credit risk and model limitations

The Prudential Regulation Authority (PRA) published policy statement PS22/20, Counterparty credit risk: Treatment of model limitations in banks’ internal models. The policy statement provides feedback to responses to consultation paper CP17/19 and contains final policy via the updated supervisory statement SS12/13 ‘Counterparty credit risk’. The changes to SS12/13 clarify expectations regarding the treatment of model limitations and assumptions under Part Three, Title II, Chapter 6 (counterparty credit risk) of the Capital Requirements Regulation (EU) 575/2013 (CRR) and are effective immediately.

Source: Counterparty credit risk: Treatment of model limitations in banks’ internal models.

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Financial stability 

FPC assesses the outlook for UK financial stability—October 2020

The Bank of England (BoE)’s Financial Policy Committee (FPC) published its financial policy summary and record for October 2020, assessing the outlook for financial stability by identifying the risks faced by the financial system. The report says the UK banking system ‘remains resilient to a very wide range of possible economic outcomes’, with banks maintaining large capital buffers they can use to keep lending, even while weathering losses.

Source: Financial Policy Summary and Record—October 2020.

FSB updates G20 meeting on market fragmentation and coronavirus (COVID-19) response

The Chair of the Financial Stability Board (FSB), Randal K. Quarles, wrote to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on 14 October 2020, in which he highlights work undertaken by the FSB in response to the coronavirus crisis, as well as an update on efforts to address market fragmentation, among other things.

Sources: FSB Chair updates G20 on action to harness benefits from financial technology and innovation and FSB updates on work to address market fragmentation.

SRB invites interested parties to watch 2020 conference video

The Single Resolution Board (SRB) invited interested parties to watch the fifth annual SRB conference, ‘Banking resolution: firm foundations for stability’, which took place on 8 October 2020.

Source: Watch SRB 2020 conference video.

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Financial crime

OFSI’s annual review shows increase in reporting of breaches

The Office of Financial Sanctions Implementation (OFSI) published its annual review for 2019–2020. The report outlines the OFSI’s work on UN and EU financial sanctions regimes, UK counter-terrorism asset freezes, frozen funds review, compliance and enforcement, licensing, outreach and communications. The review shows that from 2019–2020 the OFSI received 140 reports of potential financial sanctions breaches, an increase from 99 reports in 2018.

Source: OFSI Annual Review.

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Complaints, compensation and claims management

FCA, FSCS and FOS joint statement on German Property Group

The FCA, the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS) published a joint statement on an unregulated, overseas property investment scheme: German Property Group (also known as Dolphin Capital/Dolphin Trust/Red Rock) (together referred to as GPG).

Source: FCA, FSCS and FOS publish joint statement on German Property Group (also known as Dolphin Capital/Dolphin Trust/Red Rock), together referred to as GPG.

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Investigations, enforcement and discipline

FCA announces ban of IFA directors who provided false and misleading SIPP declarations

The FCA issued a press release in which it announced that it had banned Peter Howson and John Butterfield from performing any regulated activity because of their roles in the submission of false and misleading information about customers’ high net worth status.

Source: FCA bans IFA directors who provided false and misleading SIPP declarations.

FCA issues first fine under the EU Short Selling Regulation

The FCA fined Asia Research and Capital Management Ltd (ARCM) £873,118 over transparency failures, after the firm failed to notify the FCA and disclose to the public its net short position in Premier Oil Plc built between February 2017 and July 2019. This is the first time the FCA has taken enforcement action for a breach of the EU Short Selling Regulation.

Sources: FCA fines ARCM £873,118 for breaches of short selling disclosure rules and Final Notice: Asia Research and Capital Management Ltd.

FCA urges investors in Synergy Land Group’s unauthorised land banking scheme to get in contact

The FCA is urging members of the public who invested in an unauthorised land banking scheme, and who may be eligible to receive some of their money back, to get in contact. While the FCA does not regulate the sale of land, it does regulate collective investment schemes (CIS) and a firm must be authorised by the FCA to promote or operate a CIS in the UK.

Source: FCA urges unauthorised land banking scheme victims to get in touch to return funds.

Valdis Dombrovskis opens debate on the lessons for the ESAs of the Wirecard collapse

The European Commission published the opening statement by executive vice-president Valdis Dombrovskis at the European Parliament’s plenary debate on the role of the European Supervisory Authorities (ESAs) in the Wirecard scandal. Dombrovskis said it was essential to investigate fully whether EU investors were fully protected in the Wirecard case, as provided for by European legislation, and said while it was too early to draw definitive conclusions about the causes of the firm’s collapse, ‘it seems that the principal cause’ was financial reporting fraud.

Source: European Parliament: EVP Dombrovskis statement at the plenary debate on the Wirecard scandal.

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Regulation of benchmarks and IBOR reform

ECON report on amendments to the Benchmarks Regulation

ECON of the European Parliament published a draft report on the proposal for a regulation amending Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (the Benchmarks Regulation). The amendments relate, amongst other things, to the exemption of certain third-country foreign exchange benchmarks and the designation of replacement benchmarks for LIBOR.

Source: Draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1011 as regards the exemption of certain third country foreign exchange benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation (COM(2020)0337—C9-0209/2020—2020/0154(COD)).

ISDA statement on IBOR fallbacks

The International Swaps and Derivatives Association (ISDA) published a statement from its board of directors on the forthcoming launch of the IBOR Fallbacks Supplement and IBOR Fallbacks Protocol. ISDA has completed a formal competition law procedure with the US Department of Justice (DoJ) and has kept competition authorities in Australia, Canada, the EU and certain other jurisdictions fully informed of the issues addressed with the DoJ. ISDA does not anticipate adverse action by these authorities and proposes to launch the IBOR Fallbacks Supplement to the 2006 ISDA Definitions and the ISDA 2020 IBOR Fallbacks Protocol on 23 October 2020..

Source: ISDA board statement on the IBOR Fallbacks Supplement and Protocol.

BIS working paper considers transition away from LIBOR—from overnight to term rates

The BIS published a working paper which looks at different ways of constructing term rates from overnight rates. When LIBOR goes out of use, as planned for the end of 2021, financial contracts will need to use LIBOR’s alternative rates. For the US market, this is the Secured Overnight Financing Rate (SOFR), a measure of the cost of borrowing cash overnight collateralised by Treasury securities. However, unlike LIBOR, which is a term rate, SOFR and the other alternative rates are all overnight rates.

Source: At the crossroads in the transition away from LIBOR—from overnight to term rates.

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Regulation of capital markets

AFME publishes EURIBOR transition model wording for securitisation transactions

The Association for Financial Markets in Europe (AFME) published EURIBOR transition model wording for securitisation transactions. The wording has been developed by AFME’s Securitisation Division, which includes issuers, underwriters, investors, law firms, credit rating agencies and service providers.

Source: EURIBOR transition model wording for securitisation transactions.

European Parliament adopts report on the future of the capital markets union

The European Parliament adopted a report on further development of the capital markets union (CMU), improving access to capital market finance, in particular by SMEs, and further enabling retail investor participation.

Source: P9_TA-PROV(2020)0266 Further development of the Capital Markets Union (CMU): improving access to capital market finance, in particular by SMEs, and further enabling retail investor participation European Parliament resolution of 8 October 2020 on further development of the Capital Markets Union (CMU): improving access to capital market finance, in particular by SMEs, and further enabling retail investor participation (2020/2036(INI)).

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Investment funds and asset management

PSD2 RTS on central contact points published in Official Journal

Commission Delegated Regulation (EU) 2020/1423 supplementing Directive (EU) 2015/2366 (PSD2) with regard to regulatory technical standards (RTS) on the criteria for appointing central contact points within the field of payment services and on the functions of those central contact points was published in the Official Journal of the EU.

AMIC publishes response to ESMA's letter on AIFMD review

The Asset Management and Investors Council (AMIC) of the International Capital Market Association (ICMA) published its position paper following the ESMA letter on Alternative Investment Fund Managers Directive (AIFMD) review. In its response, the AMIC focuses on the current framework and states that re-writing the AIFMD and the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive on key points (for example 'delegation, leverage/liquidity, reporting'), as proposed by ESMA, would be a significant distraction for 'policy makers, supervisors and asset managers, when collective energy should be dedicated to the post coronavirus recovery, the Sustainable Finance Action Plan and the Capital Markets Union'. The AMIC believes that some of the points highlighted in ESMA's letter can be managed by the European authority and National Competent Authorities (NCAs), by utilising their current powers (ie Guidelines, Q&As, Common Supervisory Action) or through focused level two measures. In addition, it calls for the European Commission, 'to focus on vehicles which, with changes', could encourage development in European capital markets (eg the European Long-Term Investment Funds Regulation) as opposed to those which have been successful in ensuring EU’s competitiveness and appeal.

Source: ICMA AMIC publishes position paper on ESMA's letter on AIFMD review.

Investment Association launches mentoring programme for senior black professionals

The Investment Association (IA) launched a cross-industry mentoring programme for senior black professionals in investment management as part of Investment20/20, IA’s talent initiative, and #talkaboutblack, part of the Diversity Project, coinciding with Black History Month.

Source: INVESTMENT20/20 AND #TALKABOUTBLACK launch cross-industry black leaders mentoring programme.

 

Securities financing transactions

SFTR reporting obligations now apply to buy-side

The International Capital Market Association (ICMA) announced that the third phase of reporting under the Regulation on reporting and transparency of securities financing transactions (SFTR) (Regulation (EU) 2015/2365) is now live. SFTR reporting obligations now apply to investment funds, pensions funds and (re)insurance undertakings, as well as sell-side firms, central clearing counterparties and central securities depositories, which have been reporting for three months. ICMA has also published recommendations for reporting under SFTR to assist stakeholders.

Source: Buy-side starts reporting under SFTR .

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Crowdfunding

Lords EU Committee asks UK government for views on EU crowdfunding proposals

Lord Kinnoull, Chair of the House of Lords European Union Committee, wrote to John Glen MP, Economic Secretary to the Treasury, in response to earlier correspondence from Glen regarding the EU’s legislative proposals on crowdfunding. In the letter, the Committee Chair seeks to understand whether the government might make similar changes in the UK, and how they may diverge from the EU regime.

Source: Letter from Lord Kinnoull, Chair of the European Union Committee, to John Glen MP .

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Consumer credit, mortgage and home finance

EBA supports Commission proposals to harmonise EU creditworthiness assessment processes for consumer lending

The EBA responded to the European Commission’s consultation on the proposed new consumer agenda, expressing its support for the Commission’s plans to harmonise the creditworthiness assessment process for consumer lending across the EU, which would include the introduction of standards for the data and creditworthiness assessment process.

Source: EBA supports harmonisation of creditworthiness assessment for consumer credit across the EU.

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Regulation of insurance

EIOPA discontinues extraordinary RFR/EDA processes

EIOPA announced that, as of September 2020, it has discontinued producing and publishing extraordinary processes for risk-free interest rate term structures (RFR) and symmetric adjustment to equity risk (EDA). EIOPA will continue to monitor the financial situation closely to support insurance and reinsurance undertakings in their own monitoring of their solvency and financial position. Production of monthly RFR/EDA will continue.

Source: Discontinuance of extraordinary RFR/EDA processes.

EIOPA publishes final guidelines on ICT security and governance

EIOPA finalised its guidelines on information and communication technology (ICT) security and governance. They aim to guide national supervisory authorities and market participants on how regulation regarding operational risks set out in the Solvency II Directive (Directive 2009/138/EC) and in the Commission's Delegated Regulation 2015/35 is applied in the case of ICT security and governance, considering as well EIOPA's guidelines on system of governance. National supervisory authorities are expected to apply the guidelines from 1 July 2021.

Source: EIOPA finalises guidelines on information and communication technology security and governance.

EIOPA publishes introductory statement of Gabriel Bernardino at hearing of the ECON Committee

EIOPA published the introductory statement of EIOPA’s chair, Gabriel Bernardino, at a hearing of the Economic and Monetary Affairs Committee of the European Parliament (ECON Committee). Bernardino discussed the steps taken to mitigate the impact of coronavirus, the broader implications for EIOPA's supervisory work and the role for insurance and pensions in the recovery.

Source: Introductory statement of Gabriel Bernardino at hearing of the ECON Committee.

EIOPA publishes supervisory document on approach to IDD product oversight and governance

EIOPA published a document which sets out its supervisory approach to the Insurance Distribution Directive 2016/97/EU (IDD) product oversight and governance (POG) requirements.

Source: Effective supervision of product oversight and governance crucial for driving good outcomes for consumers.

IAIS invites views on climate-related risk supervision application paper

The International Association of Insurance Supervisors (IAIS) is seeking feedback on a draft application paper that it has developed jointly with the Sustainable Insurance Forum (SIF) on the supervision of climate-related risks in the insurance sector. The application paper aims to support supervisors in integrating climate risk into the supervision of the insurance sector. The IAIS invites stakeholders to submit feedback by 12 January 2021, in order to enable the IAIS to further develop and finalise the paper.

Source: IAIS issues Draft Application Paper on the Supervision of Climate-related Risks in the Insurance Sector for public consultation. 

Insurance Europe publishes position paper in response to European Commission consumer agenda

Insurance Europe (IE) published a position paper in response to a consultation by the European Commission on its new consumer agenda.

Source: New EC consumer agenda opportunity to ensure EU rules meet needs and expectations of greener consumers in a digital world.

MAS publishes travel insurance website for those with serious pre-existing medical conditions

The FCA published an update to its webpage on signposting to travel insurance for consumers with medical conditions. It notes that the Money and Pensions Service has launched a travel insurance directory on its Money Advice Service (MAS) website for people with serious pre-existing medical conditions.

Source: PS20/3: Signposting to travel insurance for consumers with medical conditions.

HM Treasury launches call for evidence on Pool Re

Following the Office for National Statistics' classification of Pool Reinsurance Limited (Pool Re) as a central government subsector, HM Treasury (HMT) launched a call for evidence, seeking input to inform the management of its relationship with Pool Re and its ongoing intervention in the UK terrorism (re)insurance market.​ Feedback is requested by 22 November 2020.

PRA policy statement extends FSCS protection for building guarantee policies

The PRA published policy statement PS21/20, Extending policyholder protection for building guarantee policies (BGPs). The PS makes a rule change to increase Financial Services Compensation Scheme (FSCS) protection for eligible policyholders of BGPs from 90% to 100%. The rule change came into effect on 8 October 2020.

Source: Extending policyholder protection for building guarantee policies.

East West Insurance Company Limited enters administration

The FCA announced that, following application to the High Court of Justice, insurance firm East West Insurance Company Limited (East West) was placed into administration on 12 October 2020. Richard Barker and Simon Edel, both of Ernst & Young LLP, have been appointed as joint administrators.

Source: East West Insurance Company Limited enters administration.

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Payment services and systems

BoE confirms its updated approach to ISO 20022 migration

The Bank of England (BoE) updated its webpage, ‘A new messaging standard for UK payments: ISO 20022’, to provide updated information on its timelines and approach for ISO 20022 migration. The BoE says that, following industry wide consultation and an impact assessment, the RTGS Renewal Programme is now able to confirm a revised approach to the migration. Further guidance for CHAPS direct participants will be provided alongside technical information during the week commencing 26 October 2020.

Source: Bank of England webpage update: A new messaging standard for UK payments: ISO 20022.

EBA consults on revisions to PSD2 major incident reporting guidelines

The EBA launched a public consultation with proposed revisions to its guidelines on major incident reporting under the Payment Service Directive (EU) 2015/2366 (PSD2). The changes are intended to optimise and simplify the reporting process, capture additional relevant security incidents, reduce the number of operational incidents that will be reported, and improve the meaningfulness of the incident reports received. The revisions also aim to decrease the reporting burden on payment service providers (PSPs). The consultation runs until 14 December 2020.

Source: EBA consults on the revision of the Guidelines on major incident reporting under PSD2.

FSB publishes roadmap to enhance cross-border payments

The Financial Stability Board (FSB) has published its stage 3 report setting out a roadmap to enhance cross-border payments. The report, which has been delivered to the G20 ahead of its meeting on 14 October 2020, presents a high-level plan to address the key challenges often faced by cross-border payments and the frictions in existing processes that contribute to these challenges.

Source: FSB delivers a roadmap to enhance cross-border payments.

 

Fintech and cryptoassets

BoE’s Dave Ramsden discusses growth and regulatory challenges of AI

The Bank of England (BoE)’s deputy governor, markets and banking, Dave Ramsden, delivered the opening remarks at the launch of the joint BoE and FCA Artificial Intelligence Public Private Forum. Ramsden explained the purpose of the new Forum and discussed the impact of the coronavirus pandemic on the UK fintech sector; firms’ developing uses of AI platforms; and the regulatory challenges presented by the rapid growth COVID-19 has triggered.

Source: Opening remarks at the launch of the Artificial Intelligence Public Private Forum—speech by Dave Ramsden.

Central banks set out ‘foundational principles’ for a possible CBDC

Seven central banks, together with the BIS, published a report identifying the ‘foundational principles’ and core features necessary for a publicly available central bank digital currency (CBDC). The report does not give an opinion on whether CBDCs should be issued, as central banks are continuing to investigate their feasibility.

Source: Central banks and BIS publish first central bank digital currency (CBDC) report laying out key requirements.

European Parliament makes recommendations to the European Commission on digital finance

The European Parliament adopted a report with recommendations to the European Commission on emerging risks in crypto-assets and regulatory and supervisory challenges in the area of financial services, institutions and markets.

Source: Provisional edition P9_TA-PROV(2020)0265 Digital Finance: emerging risks in crypto-assets—regulatory and supervisory challenges in the area of financial services, institutions and markets European Parliament resolution of 8 October 2020 with recommendations to the Commission on Digital Finance: emerging risks in crypto-assets—regulatory and supervisory challenges in the area of financial services, institutions and markets (2020/2034(INL)).

FSB report examines financial stability benefits of SupTech and RegTech

The Financial Stability Board (FSB) published a report on the use of supervisory and regulatory technology by authorities and regulated institutions, covering market developments and financial stability implications. The report notes that technology and innovation are transforming the global financial landscape, presenting opportunities, risks and challenges for regulated institutions and authorities alike, and that SupTech and RegTech tools could have important benefits for financial stability. The report is being delivered to G20 finance ministers and central bank governors for their virtual meeting on 14 October 2020.

Sources: The use of supervisory and regulatory technology by authorities and regulated institutions: Market developments and financial stability implications and FSB report highlights increased use of RegTech and SupTech.

FSB report examines role of BigTech in finance in emerging market and developing economies

The FSB published a report on market developments and the financial stability implications of BigTech in finance in emerging market and developing economies (EMDEs). The report is being delivered to G20 finance ministers and central bank governors for their virtual meeting on 14 October 2020. It argues that the experience of some EMDEs ‘demonstrates the positive role that strong regulation, supervision and other official-sector policy can play in supporting innovation in financial services and mitigating risks’.

Source: FSB report considers financial stability implications of BigTech in finance in emerging market and developing economies.

FSB publishes final high-level recommendations for regulation, supervision and oversight of global stablecoins

The FSB published the final version of its high-level recommendations for the regulation, supervision and oversight of ‘global stablecoin’ (GSC) arrangements, following an earlier public consultation. According to the report, GSC arrangements are expected to adhere to all applicable regulatory standards and to address risks to financial stability before commencing operation, as well as adapting to new regulatory requirements as necessary.

Source: FSB publishes high-level recommendations for regulation, supervision and oversight of ‘global stablecoin’ arrangements.

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Sustainable finance

FCA article on ‘future market dynamics’ discusses potential impact of climate change on regulation

In the first of a series of articles on ‘future market dynamics’ that may shape future financial regulation, the FCA published a piece discussing how climate change may affect its work.

Source: Future Market Dynamics—Part 1 Climate change and a changing society.

ICMA announces members of 2020/2021 Green and Social Bonds Advisory Council

The International Capital Market Authority (ICMA) Green Bond Principles and Social Bond Principles Executive Committee has announced the composition of the Advisory Council for 2020/2021. The role of the Advisory Council is to advise the Executive Committee, to increase its market awareness and outreach, and to enable further engagement with specific membership categories and observers.

Source: Green Bond Principles and Social Bond Principles executive committee announces 2020/2021 Advisory Council composition.

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Dates for your diary

 

DateSubjectEvent
16 October 2020Regulation of derivatives

House of Commons European Scrutiny Committee member Sir William Cash MP wrote a letter to the economic secretary to HM Treasury, John Glen, on EU supervision of UK central counterparties (CCPs) under EMIR 2.2. In particular, Cash asks for clarification from HM Treasury on whether the UK government, as part of its equivalence discussions with the European Commission, has agreed to regulatory alignment under EMIR 2.2 after the end of the Brexit transition period. A response is requested by 16 October 2020.

 

16 October 2020Sustainable finance

Deadline for responses to the ESA’s survey seeking public feedback on presentational aspects of product templates, pursuant to Articles 8(3), 9(5) and 11(4) of the Regulation on sustainability‐related disclosures in the financial services (SFDR).

 

17–18 October 2020Authorisation, approval and supervision

The FCA announced that the first firms will be moved from Gabriel to RegData over this weekend.

 

20 October 2020Payment services and systems

Deadline for responses to HM Treasury’s call for evidence as part of the Payments Landscape Review.

 

22 October 2020

Prudential requirements


Banks and mutuals

Deadline for responses to the EBA’s consultation on draft regulatory technical standards (RTS) on default probabilities (PDs) and losses given default (LGDs) for default risk model for institutions using the new internal model approach (IMA) under the Fundamental Review of the Trading Book (FRTB).

 

22 October 2020Prudential requirements

Deadline for responses to the EBA’s consultation on proposed guidelines specifying the conditions that institutions will need to comply with when they use the alternative treatment under the Capital Requirements Regulation (EU) 575/2013 (CRR), as amended by Regulation (EU) 2019/876 (CRR II), with regard to tri-party repurchase agreements facilitated by a tri-party agent for large exposures purposes.

 

 

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About the author:
Pietra has completed the Bar Professional Training Course at the University of Law and was called to the Bar in 2019. Prior to the BPTC, Pietra undertook a law degree at the University of Bristol.