FS weekly highlights—17 October 2019

FS weekly highlights—17 October 2019

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Crowdfunding
Consumer protection and claims management regulation
Competition in financial services
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
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
International - financial services and related sectors
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

 

The Financial Services (Implementation of Legislation) Bill falls

Parliament confirmed that the Financial Services (Implementation of Legislation) Bill 2017–19 failed to complete its passage through Parliament before the end of the Parliamentary session and will make no further progress. The Bill was intended to provide the government with the power to implement and make changes to ‘in flight’ files of financial services legislation for two years after the UK's withdrawal from the EU in the absence of a withdrawal agreement being reached (ie in a no-deal scenario). 

Queen's Speech 2019: Financial Services Bill

The Queen’s speech included the Financial Services (FS) Bill, intended to ensure that the UK maintains its ‘world-leading regulatory standards’ and remains open to international markets after Brexit. This Bill replaces the FS Bill which was dropped as a result of the early prorogation in September 2019. Ian Mason, head of UK FS regulation and joint head of UK FS sector at Gowling WLG, and Richard Flenley, senior associate at Charles Russell Speechlys LLP, discuss the impact the FS Bill would have on the FS, property and trading markets. 

Queen's Speech 2019: European Union (Withdrawal Agreement) Bill

The Queen’s speech included a reaffirmation that the government’s priority is to ‘secure the United Kingdom’s departure from the European Union on 31 October 2019’, and information on the European Union (Withdrawal Agreement) Bill. The purpose of the Bill is to implement any Withdrawal Agreement which may be agreed between the UK and the EU in domestic law and recognise the government’s promise to achieve ‘a new partnership with the European Union, based on free trade and friendly cooperation’. Professor Adam Cygan, Professor of law at University of Leicester, says the speech was ‘essentially the government outlining what it would put in its next election manifesto for the upcoming election’, and both he and Kieran Laird, partner at Gowling WLG, re-emphasise that the Bill’s promises are all dependent on the government securing a trade deal with the EU. 

FCA updates guidance on no-deal Brexit implications

The Financial Conduct Authority (FCA) issued an update on the steps firms need to take in the event the UK leaves the EU on 31 October 2019 without a deal. The FCA is aware that leaving the EU during the working week could pose operational challenges for firms. During this time firms should take reasonable steps to be prepared to comply with post-exit MiFID transaction reporting and EMIR trade reporting requirements. The FCA says it will take a proportionate and pragmatic approach to supervising reporting around exit day. 

FCA updates no-deal statement on the reporting of derivatives

The FCA updated its statement on the reporting of derivatives under the UK EMIR regime in a no-deal scenario. The statement is addressed to trade repositories (TRs) and UK counterparties that use them, and is intended to ensure they are compliant with their EMIR reporting obligations after exit day. Given challenges posed by a mid-week exit, the FCA will take a proportionate and pragmatic approach to supervising reporting on Friday 1 November 2019, particularly where firms are taking reasonable steps to ensure that their systems are robust, and the data they report to the FCA are accurate. 

FCA instructions for its Financial Instruments Transparency System

The FCA published instructions on the use of the FCA Financial Instruments Transparency System for the purpose of complying with the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 and the associated binding technical standards. This system will replace ESMA's equivalent system in the event of the UK's exit from the EU.

Treasury Committee oral evidence addresses issues related to no-deal Brexit

The House of Commons Treasury Committee published oral evidence dated 15 October 2019. Witnesses include the governor of the Bank of England, Mark Carney, and the chief executive Officer of the Prudential Regulation Authority (PRA), Sam Woods. Evidence addressed the BoE’s preparations for a no-deal Brexit, the protections of the Financial Services Compensation Scheme (FSCS) in the event of a no-deal Brexit, the role of the Senior Managers Regime in the FX market, and stress testing for climate change. 

UK lenders sign charter to help SMEs through Brexit

UK banks and alternative lenders signed a new small-to-medium enterprise (SME) finance charter reaffirming their commitment to fund British business through Brexit and beyond. The charter was adopted at the first meeting of the new Business Finance Council, attended by representatives from Britain’s lenders and from the British Chambers of Commerce and the Federation of Small Businesses. 

Budget 2019 will be on 6 November 2019 if Brexit deal is agreed

The Chancellor announced plans to deliver his Budget on 6 November 2019, provided the UK leaves the EU with a deal on 31 October 2019. If there is no deal, the government confirmed it would ‘take early action to support the economy, businesses and households’, and a Budget would occur in the weeks following. 

 

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UK, EU and international regulators and bodies

 

FSB and IMF publish fourth progress report on the G20 Data Gaps Initiative

The Financial Stability Board (FSB) and International Monetary Fund (IMF) published the Fourth progress report—Countdown to 2021 on the implementation of the second phase of the G20 Data Gaps Initiative. The report will be submitted to the G20 finance ministers and central bank governors ahead of their meetings in Washington DC in mid-October 2019.

Budget 2019 will be on 6 November 2019 if Brexit deal is agreed

The Chancellor announced plans to deliver his Budget on 6 November 2019, provided the UK leaves the EU with a deal on 31 October 2019. If there is no deal, the government confirmed it would ‘take early action to support the economy, businesses and households’, and a Budget would occur in the weeks following.

 

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Authorisation, approval and supervision

 

New FCA webpage on SM&CR conversion notification form: Form K

The FCA published a webpage explaining SM&CR Form K, which is the conversion notification form. Form K enables firms to notify the FCA which approved individuals they wish to convert from the Approved Persons Regime to corresponding Senior Management Functions under the Senior Managers & Certification Regime (SM&CR).

FCA webpage sets out guidance on change of control notifications

The FCA published a webpage setting out guidance on which forms firms will need to complete to submit a notification for a change in control. Forms are required from all proposed controllers of firms authorised under the Financial Services and Markets Act (FSMA), or firms authorised or registered under the Electronic Money Regulations 2011, or the Payment Services Regulations (PSRs) 2017. Firms authorised or registered under the PSRs 2009 should continue to notify changes in qualifying holdings themselves.

FCA updates webpage on key people directory submissions

The FCA updated its ‘directory persons’ webpage, which sets out information for submitting data for the directory, a public register that enables consumers, firms and other stakeholders to find information on key individuals working in financial services. In the update, the FCA confirms that it will publish the directory persons data for banks, building societies, credit unions and insurance companies in March 2020, and directory permissions data for all other firms in December 2020. 

Users want faster Gabriel replacement

The FCA published a webpage giving an overview of responses to its online survey asking users about their experience of the Gabriel system and their ideas to improve it. Respondents highlighted the need for improvements to the speed of the system, the reporting schedule, guidance when making a data submission and the system’s data validation processes.

 

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Prudential requirements

 

EBA consults on comprehensive Pillar 3 disclosures

The European Banking Authority (EBA) issued a public consultation on the new comprehensive implementing technical standard (ITS) for financial institutions' public disclosure, designed to promote market discipline. The proposal seeks to optimise the EBA Pillar 3 policy framework by moving from a silo-based approach, with different disclosure policy products, to an all-inclusive ITS. It also implements regulatory changes introduced by CRR 2 and aligns the disclosure framework with international standards. Responses are due by 16 January 2020.

EBA consults on CRR supervisory reporting proposals

The EBA is consulting on revised implementing technical standards (ITS) on supervisory reporting related to CRR 2 and Backstop Regulation, which aim to keep the reporting requirements in line with changes in the regulatory framework and with the evolving needs for supervisory authorities' risk assessments. Feedback is sought by 16 January 2020.

EBA consults on a regulatory framework for Structural FX

The EBA is consulting 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. In particular, they identify criteria to assist competent authorities in their assessment of the structural nature of a foreign-exchange position and whether such a position was deliberately taken for hedging the capital ratio. Feedback is sought by 17 January 2020.

European Commission consults on Basel III implementation

The European Commission launched a public consultation on the implementation of the final set of Basel III reforms in the EU. The Commission aims to gather stakeholders’ views on specific topics in the areas of credit risk, operational risk, market risk, credit valuation adjustment risk, securities financing transactions and the output floor. The Commission would also welcome stakeholders’ views on certain other subjects with a view to ensuring convergent and consistent supervisory practices across the EU and alleviating the administrative burden.

Hybrid and Other Mismatches (Financial Instruments: Excluded Instruments) Regulations 2019

SI 2019/1345: Provisions are made to replace existing legislation exempting regulatory capital issued by financial institutions from counteraction under the hybrid and other mismatch rules in the UK. UK tax policy allows deductions for the costs of regulatory capital securities which financial institutions are required to hold to provide stability for the financial sector and for the wider UK economy. The Hybrid and Other Mismatches (Financial Instrument: Exclusions) Regulations 2019 are revoked. The Regulations will come into force on 1 January 2020.

DG FISMA announces ‘Implementing Basel III: Challenges and impact’ conference

The EU Commission’s Directorate General for financial stability, financial services and capital markets union (DG FISMA) announced that it organised a conference to discuss the impact and challenges of implementing the finalised Basel III standards in the EU. The conference, which takes place on Tuesday 12 November 2019 in the Charlemagne Building in Brussels, aims to gather ideas on whether new risks or developments that banks face or are going to face would require regulatory action. 

BCBS publishes progress report on Basel III adoption status

The Basel Committee on Banking Supervision (BCBS) issued the 17th progress report on the adoption of the Basel regulatory framework. It sets out the adoption status of Basel III standards for each Committee member jurisdiction as of end-September 2019. The report includes the Basel III post-crisis reforms published by the Committee in December 2017 and the finalised minimum capital requirements for market risk in January 2019. These reforms will take effect from 1 January 2022.

ECB clarifies the process for recognition of contractual netting agreements as risk-reducing

The chair of the supervisory board of the European Central Bank (ECB), Andrea Enria, wrote to significant credit institutions to clarify its process for the recognition of contractual netting agreements as risk-reducing under the Capital Requirements Regulation (CRR). Enria also sets out in which circumstances the significant credit institution must notify its Joint Supervisory Team. 

PRA publishes PS24/19 on large exposures: reciprocation of French measure under CRR

The Prudential Regulation Authority (PRA) published policy statement PS24/19 setting out final rules, following its consultation paper CP15/19, which proposed applying a tighter limit for large exposures under the CRR to certain French non-financial corporations. The policy set out in PS24/19 will take effect on 1 January 2020.

 

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Financial stability, recovery and resolution 

 

Commissioner Vestager and others speak at SRB annual conference

European Commissioner Margrethe Vestager spoke on progress and priorities at the Single Resolution Board (SRB)’s fourth conference in Brussels. Vesthager said the banking system is more resilient but she stressed, among other things, the need for banks to have adequate levels of own funds. Vestager included examples of how Member States can help banks clean up their balance sheets without granting State aid or distorting competition. In addition, Bank of England (BoE) executive director Sasha Mills mentioned the recently published Resolvability Assessment Framework, which will help banks to become accountable for their own resolvability. Moreover, the chair of the SRB, Elke König, referred to a public consultation on its ‘Expectations for Banks’ document, which will be launched later in October 2019.

FSB publishes 2019 annual report on implementation and effects of G20 financial regulatory reforms

The FSB published its fifth annual report on the implementation and effects of the financial regulatory reforms called for by the G20 after the global financial crisis. The FSB considers that the support of the G20 is critical in order to fully achieve the goal of greater resilience as vulnerabilities are evolving. The FSB calls on the G20 to implement the agreed reforms and reinforce global regulatory co-operation.

FSB provides update on market fragmentation work

The FSB published an update report on its work on market fragmentation. The update was delivered to G20 finance ministers and central bank governors for their forthcoming meeting in Washington DC. The report provides progress updates for the ongoing work on market fragmentation by the FSB and standard-setting bodies.

FSB chair reports to G20 finance ministers and central bank governors on post-crisis reforms

The FSB published a letter from its chair, Randal K Quarles, to G20 finance ministers and central bank governors ahead of their forthcoming meetings in Washington DC. The letter notes that the development of post-crisis reform policies is nearly complete and implementation is well underway. It also emphasises that the FSB’s mission is far from complete, with new risks, stablecoin and sustainable global growth top of the agenda. Implementation progress on agreed G20 reforms remains uneven across key reform areas, and the FSB is in the process of evaluating whether reforms are working as intended. 

Single Resolution Board and Japan’s Financial Services Agency agree enhanced co-operation on resolution planning

The SRB and Japan’s Financial Services Agency exchanged letters agreeing to co-operate on resolution planning. The letters were signed on 11 October 2019 in Tokyo at the EU-Japan Joint Financial Regulatory Forum.

 

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Risk management and controls

 

FSMB publishes final conflicts of interest statement of good practice

The Fixed Income, Currencies and Commodities (FICC) Markets Standards Board (FSMB) published the final version of a statement of good practice on the issue of conflicts of interest. It aims to provide practical guidance for market participants on identifying, preventing, managing or mitigating conflicts of interest that arise in connection with their FICC markets business and more generally across their firm. 

ESMA chair on corporate governance: Investor trust is key to funding SMEs and start-ups

The chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, delivered a speech on the quality of corporate governance, its role in attracting retail investors to the financial markets, the capital markets union (CMU) and the role of ESMA. 

 

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Financial crime

 

European Commission outlines refined methodology for identifying third countries with high money laundering risks

The Council of the EU published an informal document prepared by the Commission on key elements of a refined methodology for identifying high-risk third countries under the Fourth Money Laundering Directive.

HM Treasury approves LMA guidance on risk of money laundering in syndicated lending transactions

Following discussions between the Loan Markets Association, the Joint Money Laundering Steering Group (JMLSG) and HM Treasury, chapter 17 of the JMLSG's guidance on the prevention of money laundering and terrorism financing in the UK financial services industry, which relates specifically to syndicated lending and which was re-written by the LMA in May 2018, was formally approved by HMT.

OFSI annual report discusses UK sanctions implementation and enforcement

The Office of Financial Sanctions Implementation (OFSI) published its annual review for April 2018 to March 2019 outlining it work on sanctions implementation and enforcement. The report says 2,183 people and entities were subject to an asset freeze across 28 regimes as of 28 March 2019. Around a quarter of those involved North Korea and a fifth Ukraine.

FATF publishes details about FATF Week

The Financial Action Task Force (FATF) published details about FATF Week, taking place between 13 and 18 October 2019 in Paris. During the six days of meetings, representatives from 205 countries and jurisdictions around the world, the IMF, UN, World Bank and other organisations will focus on disrupting financial flows linked to crime and terrorism and discuss ways to contribute to global safety and security. FATF Week will conclude with the first Plenary under the Chinese Presidency of Xiangmin Liu, from 16 October. 

 

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Crowdfunding

 

Council of EU publishes comparative table setting out positions of EU institutions on regulation on crowdfunding and directive amending MiFID II

The Council of the EU published two interinstitutional files comparing the positions of the Commission, the Council and the European Parliament on the Commission’s Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business, and the Commission’s Proposal for a Directive of the European Parliament and of the Council amending MiFID II. 

 

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Consumer protection and claims management regulation

 

Government responds to Treasury Committee report on the FCA and the regulatory perimeter

The government responded to the Treasury Committee’s report ‘The work of the Financial Conduct Authority: the perimeter of regulation’, published on 2 August 2019. The report noted that the complexity of the perimeter caused an impact on consumer outcomes and drew attention to topics considered by the Committee which have an element of perimeter complexity to them, including RBS’s Global Restructuring Group and the wider issue of SME lending, mortgage prisoners, and the failure of London Capital and Finance.

FCA Dear CEO letter to CMCs on PPI; FCA announces firms may be unable to respond to all PPI claims until summer 2020

The FCA published a Dear CEO letter on what it expects from claims management companies on payment protection insurance (PPI). The FCA also made a public announcement that, following the August 2019 deadline for customers to launch PPI complaints, some firms are struggling to cope with the volume of complaints received, and may not be able to give a final response to some customers until summer 2020.

Government responds to Committee of Public Accounts’ cross-sectoral report on consumer protection regulation

HM Treasury published the government’s response to the Committee of Public Accounts’ 107th report of session 2017–19—a cross-sectoral examination of consumer protection regulation issues. The government supports the approach taken by the regulators (the FCA, Ofcom, Ofgem, and Ofwat) in response to each of the Committee’s recommendations.

 

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Competition in financial services

 

CMA revokes directions to Danske Bank on mobile app redirection functionality

The Competition and Markets Authority (CMA) revoked directions it gave to Danske Bank on 1 April 2019 regarding its delay in complying with certain aspects of the Open Banking programme. The directions were revoked on confirmation by the implementation trustee that Danske was compliant with Article 14.1 of the Retail Banking Market Investigation Order 2017 with respect to app-to-app redirection functionality.

 

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Enforcement and redress

 

Independent review into supervision of Connaught fund launches consultation process

The FCA published a new webpage providing an update on the independent investigation into the Financial Services Authority (FSA) and FCA’s regulatory approach to, implementation and oversight of the Connaught Income Fund Series 1. As part of the ongoing investigation, independent reviewer Raj Parker invited affected individuals to get in touch by email, by 8 November 2019.

FCA Dear CEO letter to CMCs on PPI; FCA announces firms may be unable to respond to all PPI claims until summer 2020

The FCA published a Dear CEO letter on what it expects from claims managements companies on PPI. The FCA also made a public announcement that, following the August 2019 deadline for customers to launch PPI complaints, some firms are struggling to cope with the volume of complaints received, and may not be able to give a final response to some customers until summer 2020. 

FCA publishes information on proposed winding-up of LF Woodford Equity Income Fund

The FCA published information for investors in the LF WEIF, following the announcement by the fund’s authorised corporate director (ACD), Link Fund Solutions Ltd (LFS), that it will seek to wind-up the fund as soon as possible rather than continuing work to re-open it. LFS expects the winding-up to begin in mid-January, subject to regulatory approvals. It will now request the FCA’s formal approval to wind-up the fund. 

FCA reminds regulated firms that they should not deal with David Cunningham King

The FCA issued a press release reminding firms that they should not deal with David Cunningham King, the chair of Rangers International Football Club PLC in light of a ruling made by the Takeover Panel Hearings Committee that Mr King is a person who, in the Committee’s opinion, is not likely to comply with the Code and should be ‘cold-shouldered’.

FCA fines Tullett Prebon £15.4m for undermining ‘proper function of wholesale markets’

The FCA fined Tullett Prebon (Europe) Limited (Tullett Prebon) £15.4 million for failing to conduct its business with due skill, care and diligence, failing to have adequate risk management systems and for failing to be open and co-operative with the FCA. The firm qualified for a 30% discount under the FCA’s settlement discount scheme, without which the fine would be £22m.

Complaints Commissioner rules on FCA and defined benefit transfer complaint

The OCC published its report on the FCA’s treatment of a complaint concerning the transfer of a defined benefit (DB) pension to a personal pension in 2017. Complaint number FCA00637 concerns issues of delay, confidentiality and accuracy of the Financial Services Register (the Register).

FSCS working to return client money to eligible customers of Reyker Securities plc

The Financial Services Compensation Scheme (FSCS) is making plans to help eligible customers of Reyker Securities plc, which went into special administration on 8 October 2019. Special administrators will carry out an assessment of the client money and assets held by the firm, and then work to return as much client money and assets to customers as possible, as quickly as possible. 

 

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Markets and trading

 

EBA consults on a regulatory framework for Structural FX

The EBA is consulting 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. In particular, they identify criteria to assist competent authorities in their assessment of the structural nature of a foreign-exchange position and whether such a position was deliberately taken for hedging the capital ratio. Feedback is sought by 17 January 2020.

European Commission consults on Benchmarks Regulation

The European Commission launched a public consultation on the functioning of the EU benchmarks regime, two years after its entry into application. The consultation covers topics the Benchmark Regulation itself puts forward for review, such as the regime for critical benchmarks and the effectiveness of the mechanism for authorisation and registration of EU benchmark administrators, and broader topics such as the categorisation of benchmarks and the rules for third-country benchmarks. 

Commission adopts RTS on Securitisation Regulation information requirements

The European Commission adopted a Commission Delegated Regulation of 16 October 2019 supplementing the Securitisation Regulation with regard to regulatory technical standards (RTS) specifying the information and the details of a securitisation to be made available by the originator, sponsor and securitisation special purpose entity.

HMT seeks clearance of low carbon benchmarks regulation

HM Treasury published a letter from the economic secretary to the Treasury, John Glen MP, to the chair of the House of Lords European Union Select Committee, seeking clearance for the UK to be able to vote in favour of the proposed Regulation amending the Benchmarks Regulation on low carbon benchmarks and positive carbon impact benchmarks.

 

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MiFID II

 

FCA updates guidance on no-deal Brexit implications

The FCA issued an update on the steps firms need to take in the event the UK leaves the EU on 31 October 2019 without a deal. The FCA is aware that leaving the EU during the working week could pose operational challenges for firms. During this time firms should take reasonable steps to be prepared to comply with post-exit MiFID transaction reporting and EMIR trade reporting requirements. The FCA says it will take a proportionate and pragmatic approach to supervising reporting around exit day.

FCA instructions for its Financial Instruments Transparency System

The FCA published instructions on the use of the FCA Financial Instruments Transparency System for the purpose of complying with the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 and the associated binding technical standards. This system will replace ESMA's equivalent system in the event of the UK's exit from the EU.

Council of EU publishes comparative table setting out positions of EU institutions on regulation on crowdfunding and directive amending MiFID II

The Council of the EU published two interinstitutional files comparing the positions of the Commission, the Council and the European Parliament on the Commission’s Proposal for a Regulation of the European Parliament and of the Council on ECSP for Business, and the Commission’s Proposal for a Directive of the European Parliament and of the Council amending MiFID II.


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Regulation of capital markets and Capital Markets Union

 

CMU report shows increased issuance of green bonds but fintech growth slows

The Association for Financial Markets in Europe (AFME) published the second edition of its annual report that tracks the progress of the European Commission’s CMU project, in which it found that CMU requires more action to tackle obstacles. Assessing through eight key performance indicators, AFME found that issuance of green, social and dual-purpose bonds increased 16% in the EU during 2018 to €69bn, an increase of €9bn compared to 2017. However, EU27 fintech companies have only benefited from $7.2bn in investments since 2009, compared with $120bn in the US, $20.3bn in the UK and $23.8bn in China. 

IASB aims to publish proposed update 1 to the IFRS Taxonomy 2019 on 14 October 2019

The International Accounting Standards Board announced that it expects to issue proposed update 1 to the IFRS Taxonomy 2019 on 14 October 2019. This update includes IFRS Taxonomy elements to reflect the new disclosure requirements introduced by ‘Interest Rate Benchmark Reform’ issued by the IASB in September 2019, which amended IFRS 9, IAS 39 and IFRS 7.

 

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Regulation of derivatives

 

Council of EU adopts EMIR 2.2

The Council of the EU adopted at first reading a regulation which amends the European Market Infrastructure Regulation (EU) 648/2012 (EMIR) to set out a new framework for how EU and third-country clearing houses and central counterparties (CCPs) should be supervised in the future. The regulation, known as EMIR 2.2, is intended to strengthen the supervision of CCPs to take account of the growing size, complexity and cross-border dimension of clearing in Europe.

FCA updates guidance on no-deal Brexit implications

The FCA issued an update on the steps firms need to take in the event the UK leaves the EU on 31 October 2019 without a deal. The FCA is aware that leaving the EU during the working week could pose operational challenges for firms. During this time firms should take reasonable steps to be prepared to comply with post-exit MiFID transaction reporting and EMIR trade reporting requirements. The FCA says it will take a proportionate and pragmatic approach to supervising reporting around exit day.

FCA updates no-deal statement on the reporting of derivatives

The FCA updated its statement on the reporting of derivatives under the UK EMIR regime in a no-deal scenario. The statement is addressed to TRs and UK counterparties that use them, and is intended to ensure they are compliant with their EMIR reporting obligations after exit day. Given challenges posed by a mid-week exit, the FCA will take a proportionate and pragmatic approach to supervising reporting on Friday 1 November 2019, particularly where firms are taking reasonable steps to ensure that their systems are robust, and the data they report to the FCA are accurate.

FSB report finds ‘limited additional implementation’ in OTC reforms

The FSB published its annual progress report on the implementation of the agreed G20 reforms to over-the-counter (OTC) derivatives markets. The report finds that, overall, there was limited additional implementation of the reforms between end-November 2018 and end-September 2019.

Further ISDA response to FASB exposure drafts

In a letter dated 11 October 2019, the International Swaps and Derivatives Association (ISDA) responded to the Financial Accounting Standards Board (FASB)’s proposals on debt-debt with conversion and other options (subtopic 470–20) and derivatives and hedging—contracts in entity’s own equity (subtopic 815-40).

 

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Investment funds and asset management

 

ESAs consult on amendments to the PRIIPs KID rules

The European Supervisory Authorities (ESAs) are consulting on proposed amendments to the existing rules underpinning the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs). Feedback is sought by 13 January 2020. 

IA opens third round of applications for its fintech accelerator, Velocity

The IA announced that applications are open for its third cohort of fintech innovators for Velocity, its specialist fintech accelerator and innovation hub for the investment management industry. Fintech firms with market-viable technology are being invited to apply to participate through the Velocity website by midnight on 2 December 2019.

FCA publishes information on proposed winding-up of LF Woodford Equity Income Fund

The FCA published information for investors in the LF Woodford Equity Income Fund (WEIF), following the announcement by the fund’s ACD, LFS, that it will seek to wind-up the fund as soon as possible rather than continuing work to re-open it. LFS expects the winding-up to begin in mid-January, subject to regulatory approvals. It will now request the FCA’s formal approval to wind-up the fund. 

‘Sustainable long-term value’: FCA chair outlines vision for UK investment industry

The FCA published a speech by its chair, Charles Randell, on how the UK investment industry can secure its ‘world-leading position’ by focusing on customer outcomes and sustainable long-term value, and by harnessing innovation and ‘fierce competition’ to benefit all kinds of investors and the wider society. The speech was delivered at the Investment Association annual dinner in Mansion House.

 

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Banks and mutuals

 

European Commission consults on Basel III implementation

The European Commission launched a public consultation on the implementation of the final set of Basel III reforms in the EU. The Commission aims to gather stakeholders’ views on specific topics in the areas of credit risk, operational risk, market risk, credit valuation adjustment risk, securities financing transactions and the output floor. The Commission would also welcome stakeholders’ views on certain other subjects with a view to ensuring convergent and consistent supervisory practices across the EU and alleviating the administrative burden.

Federal Reserve Board tailors rules for domestic and foreign banks to match risk profiles

The Federal Reserve Board (FRB) announced finalised rules that tailor its regulations for domestic and foreign banks to more closely match their risk profiles. The FRB says the rules reduce compliance requirements for firms with less risk while maintaining ‘stringent’ requirements for the largest and most complex banks.

Joint BoE and FCA survey finds increasing use of machine learning in financial services

The BoE and the FCA published a joint report summarising and analysing the results of their survey, carried out earlier this year, on the current use of machine learning in UK financial services. The survey found that machine learning (ML), defined as the development of models for prediction and pattern recognition with limited human intervention, is increasingly being used in the UK financial services industry.

Commissioner Vestager and others speak at SRB annual conference

European Commissioner Margrethe Vestager spoke on progress and priorities at the Single Resolution Board (SRB)’s fourth conference in Brussels. Vesthager said the banking system is more resilient but she stressed, among other things, the need for banks to have adequate levels of own funds. Vestager included examples of how Member States can help banks clean up their balance sheets without granting State aid or distorting competition. In addition, Bank of England (BoE) executive director Sasha Mills mentioned the recently published Resolvability Assessment Framework, which will help banks to become accountable for their own resolvability. Moreover, the chair of the SRB, Elke König, referred to a public consultation on its ‘Expectations for Banks’ document, which will be launched later in October 2019.

CMA revokes directions to Danske Bank on mobile app redirection functionality

The Competition and Markets Authority (CMA) revoked directions it gave to Danske Bank on 1 April 2019 regarding its delay in complying with certain aspects of the Open Banking programme. The directions were revoked on confirmation by the implementation trustee that Danske was compliant with Article 14.1 of the Retail Banking Market Investigation Order 2017 with respect to app-to-app redirection functionality. 

DG FISMA announces ‘Implementing Basel III: Challenges and impact’ conference

The EU Commission’s Directorate General for financial stability, financial services and capital markets union (DG FISMA) announced that it organised a conference to discuss the impact and challenges of implementing the finalised Basel III standards in the EU. The conference, which takes place on Tuesday 12 November 2019 in the Charlemagne Building in Brussels, aims to gather ideas on whether new risks or developments that banks face or are going to face would require regulatory action.

 

Consumer credit, mortgage and home finance

 

FCA consults on new protections for motor finance customers

The FCA announced plans to ban commission models that give motor finance brokers and dealers an incentive to raise customers’ interest rates. The proposed new rules are set out in consultation paper CP19/28, which also proposes minor changes to some of the FCA’s rules and guidance to ensure that many types of credit brokers give consumers more relevant information about commission. The consultation closes on 15 January 2020.

Government responds to Treasury Committee report on the FCA and the regulatory perimeter

The government responded to the Treasury Committee’s report ‘The work of the Financial Conduct Authority: the perimeter of regulation’, published on 2 August 2019. The report noted that the complexity of the perimeter caused an impact on consumer outcomes and drew attention to topics considered by the Committee which have an element of perimeter complexity to them, including RBS’s Global Restructuring Group and the wider issue of SME lending, mortgage prisoners, and the failure of London Capital and Finance.

Private members bills on pension charges and creditworthiness assessment do not complete passage through Parliament

The Pension Charges Bill 2017–19 and the Creditworthiness Assessment Bill [HL] 2017-19 failed to complete their passage through Parliament before the end of the session. This means the bills will make no further progress.

 

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Regulation of insurance

 

ESAs consult on amendments to the PRIIPs KID rules

The ESAs are consulting on proposed amendments to the existing rules underpinning the key information document (KID) for PRIIPs. Feedback is sought by 13 January 2020.

PRA consults on change to treatment of restricted Tier 1 own funds under Solvency II

The PRA published consultation paper CP26/19 Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion. This proposes amendments to supervisory statement 3/15 Solvency II: the quality of capital instruments. 

EIOPA consults on Solvency II review opinion

The European Insurance and Occupational Pension Authority (EIOPA) is consulting on an opinion setting out technical advice for the 2020 review of Solvency II. The opinion responds to the call for advice of the European Commission of 11 February 2019 on the 2020 review. Feedback is sought by 15 January 2020. EIOPA will issue the opinion in June 2020.

EIOPA publishes Single Programming Document for 2020–2022, and annual workplan

EIOPA published its Single Programming Document for 2020-2022 together with its annual work programme for 2020. EIOPA says a major priority in 2020 will be to advance its work on digitalisation and sustainable finance, and to contribute to consistent and high-quality supervision as well as the protection of consumers. It will also seek to further develop its core financial stability products, including integration of pension data and ongoing monitoring of emerging risks. 

Joint BoE and FCA survey finds increasing use of machine learning in financial services

The BoE and the FCA published a joint report summarising and analysing the results of their survey, carried out earlier this year, on the current use of machine learning in UK financial services. The survey found that machine learning (ML), defined as the development of models for prediction and pattern recognition with limited human intervention, is increasingly being used in the UK financial services industry. 

 

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Regulation of personal pension and stakeholder products

Private members bills on pension charges and creditworthiness assessment do not complete passage through Parliament

The Pension Charges Bill 2017–19 and the Creditworthiness Assessment Bill [HL] 2017-19 failed to complete their passage through Parliament before the end of the session. This means the bills will make no further progress.

Treasury Committee letter to FCA on pension scheme trustees’ ESG stewardship policy request

The Treasury Committee published a letter it wrote to the FCA following an oral evidence session held by the Committee in October 2019 entitled ‘green finance: unlocking private capital for net-zero’. The letter refers to a complaint, submitted by the Association of Member Nominated Trustees (AMNT) to the FCA in May 2019 and discussed at the session, requesting an FCA investigation into the alleged failure of the fund management industry to allow pension scheme trustees to operate a stewardship policy governing the environmental, social and governance (ESG) role of the companies in which they invest via fund managers, particularly in pooled funds.

Complaints Commissioner rules on FCA and defined benefit transfer complaint

The OCC published its report on the FCA’s treatment of a complaint concerning the transfer of a defined benefit (DB) pension to a personal pension in 2017. Complaint number FCA00637 concerns issues of delay, confidentiality and accuracy of the Financial Services Register (the Register). 

 

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Payment services and systems

 

PSR seeks feedback on LINK and Specific Direction 8

The Payment Systems Regulator (PSR) is conducting a review of its Specific Direction 8, given to LINK in October 2018, which aimed to ensure the ATM operator does all it can to fulfil its commitment to maintain the broad geographic spread of free-to-use cash machines. Feedback is sought by 28 October 2019.

EBA sets 31 December 2020 deadline for e-commerce transactions to migrate to SCA

The EBA published an opinion on the deadline for the migration to strong customer authentication (SCA) under the revised Payment Services Directive (PSD2) for e-commerce card-based payment transactions. The opinion sets the deadline to 31 December 2020 and prescribes the expected actions to be taken during the migration period. It also recommends national competent authorities (NCAs) take a consistent approach toward the SCA migration period across the EU and require their respective payment service providers (PSPs) to carry out the actions set out in the opinion. 

EPC provides details of first register of participants of the SCT ERI Option

The European Payments Council (EPC) issued a press release noting that, as from 17 November 2019, the Extended Remittance Information (ERI) option can be used under the 2019 SEPA Credit Transfer (SCT) Rulebook. From 11 October 2019 onwards, the EPC maintains a separate register of SCT scheme participants that support the ERI option. Already ten SCT participants will be able to provide their customers with this new option as of 17 November 2019.

Barclays announces end to customer withdrawals from Post Office as from January 2020

Barclays Bank announced that its customers will no longer be able to withdraw cash from post offices from January 2020. Commenting on the announcement, the interim chair of the Treasury Committee, Catherine McKinnell MP, said ‘The Treasury Committee has said repeatedly that free access to cash must be maintained for those who need it. Barclays decision to prevent their customers from withdrawing their own cash from post offices is, therefore, hugely disappointing.’ 

 

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Joint EU-Japan financial regulatory forum statement

The European Commission published a joint statement with the Financial Services Agency of Japan (JFSA) on the inaugural meeting of the joint EU-Japan financial regulatory forum, held on 11 October 2019. The forum provided an opportunity for both sides to exchange views on the recent regulatory and supervisory developments in the financial sector at international level and in their respective jurisdictions. 

 

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Fintech and cryptoassets

 

FCA consults on proposals for recovering costs of supervising cryptoasset firms under MLRs

The FCA published consultation paper CP19/29 on its fee proposals to recover the costs of supervising cryptoasset businesses under the UK’s revised anti-money laundering regulations (MLRs). The consultation period closes on 11 November 2019 for comments on the proposed registration fee, and on 10 December 2019 for comments on periodic fees. 

IA opens third round of applications for its fintech accelerator, Velocity

The IA announced that applications are open for its third cohort of fintech innovators for Velocity, its specialist fintech accelerator and innovation hub for the investment management industry. Fintech firms with market-viable technology are being invited to apply to participate through the Velocity website by midnight on 2 December 2019.

CMU report shows increased issuance of green bonds but fintech growth slows

AFME published the second edition of its annual report that tracks the progress of the European Commission’s CMU project, in which it found that CMU requires more action to tackle obstacles. Assessing through eight key performance indicators, AFME found that issuance of green, social and dual-purpose bonds increased 16% in the EU during 2018 to €69bn, an increase of €9bn compared to 2017. However, EU27 fintech companies have only benefited from $7.2bn in investments since 2009, compared with $120bn in the US, $20.3bn in the UK and $23.8bn in China.


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Sustainable finance

 

HMT seeks clearance of low carbon benchmarks regulation

HM Treasury published a letter from the economic secretary to the Treasury, John Glen MP, to the chair of the House of Lords European Union Select Committee, seeking clearance for the UK to be able to vote in favour of the proposed Regulation amending the Benchmarks Regulation on low carbon benchmarks and positive carbon impact benchmarks.

Council of EU publishes comparative table setting out positions of EU institutions on proposed Taxonomy Regulation

The Council of the EU published an interinstitutional file comparing the positions of the Commission, the Council and the European Parliament on the Commission’s Proposal for a Regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment (also referred to as the Taxonomy Regulation).

FCA FS19/6 sets out future work on climate change and green finance

The FCA published a feedback statement (FS19/6) setting out its proposals to improve climate change disclosures by issuers, regulated firms’ integration of climate change risk and opportunities into their decision-making, and consumers’ access to green financial products and services. The feedback statement summarises the responses the FCA received from stakeholders to its discussion paper DP18/8 and sets out the FCA’s actions and next steps.

Council of the EU informs COREPER on proposed corrigendum to Regulation on disclosures relating to sustainable investments and sustainability

The General Secretariat of the Council issued an information note to the Permanent Representatives Committee of the Council (COREPER) on the outcome of the European Parliament's first reading and corrigendum procedure concerning a proposal for a Regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341.

CMU report shows increased issuance of green bonds but fintech growth slows

AFME published the second edition of its annual report that tracks the progress of the European Commission’s CMU project, in which it found that CMU requires more action to tackle obstacles. Assessing through eight key performance indicators, AFME found that issuance of green, social and dual-purpose bonds increased 16% in the EU during 2018 to €69bn, an increase of €9bn compared to 2017. However, EU27 fintech companies have only benefited from $7.2bn in investments since 2009, compared with $120bn in the US, $20.3bn in the UK and $23.8bn in China. 

Treasury Committee letter to FCA on pension scheme trustees’ ESG stewardship policy request

The Treasury Committee published a letter it wrote to the FCA following an oral evidence session held by the Committee in October 2019 entitled ‘green finance: unlocking private capital for net-zero’. The letter refers to a complaint, submitted by AMNT to the FCA in May 2019 and discussed at the session, requesting an FCA investigation into the alleged failure of the fund management industry to allow pension scheme trustees to operate a stewardship policy governing the ESG role of the companies in which they invest via fund managers, particularly in pooled funds. 

EIB president outlines plans to grow sustainable finance ‘from billions to trillions’

The president of the European Investment Bank (EIB), Werner Hoyer delivered a speech to MEPs at the European Parliament in Brussels on measures to make EU investments more environmentally friendly. Hoyer said the EIB’s investment in climate action and environmental sustainability made it one of the world’s largest multilateral providers of finance for climate and environment-related projects, and said the EIB was committed to grow sustainable finance ‘from billions to trillions’.


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Dates for your diary

 

DateSubjectEvent

 

18 October 2019

 

Regulation of capital markets

 

The deadline to respond to ICMA’s ‘more granular study’ on bond market impact is 18 October 2019.

 

18 October 2019UK, EU and international regulators and bodies

The deadline for feedback to the HM Treasury’s Call for Evidence, which is the first phase of its Future Regulatory Framework Review.

 

18 October 2019Regulation of insurance

The deadline for responses to EIOPA’s consultation on supervisory reporting and public disclosure in the context of its work on the 2020 Solvency II Review is 18 October 2019.

 

18 October 2019Regulation of insurance

The deadline for responses to EIOPA’s consultation on its advice on the harmonisation of national insurance guarantee schemes across EU member states is 18 October 2019.

 

18 October 2019

Regulation of insurance


Prudential regulation

The deadline for feedback to EIOPA’s discussion paper on methodological principles of insurance stress testing is 18 October 2019.

 

18 October 2019MiFID II

The targeted entry date for the Commission Delegated Regulation implementing the European Commission’s equivalence decision providing for an exemption from pre- and post-trade transparency requirements under EU law to the People's Bank of China in its performance of monetary, foreign exchange and financial stability policies is 18 October 2019.

 

21 October 2019

Regulation of insurance


Prudential regulation

The deadline for responses to the PRA’s consultation on group availability of subordinated liabilities and preference shares under Solvency II is 21 October 2019.

 

 

 

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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.