FS weekly highlights—18 April 2019

In this issue

 

Brexit news
Brexit legislation
UK regulator updates
European regulator updates
European System of Financial Supervision
Diversity in financial services
Prudential requirements
Risk management and controls
Financial crime
Enforcement and redress
FCA conduct requirements
Markets and trading
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Insurance and pensions
Payment services and systems
Sustainable finance
Dates for your diary

 

Brexit news

 

Technical update to the Withdrawal Agreement following Article 50 extension

The Department for Exiting the European Union published correspondence with the European Commission confirming agreement to a technical change to the Withdrawal Agreement. The amendment alters the recitals and Article 185 to reflect the agreed extension to the Article 50 withdrawal period. TheCityUK—the industry-led body representing UK-based financial and related professional services—published a response from its CEO, Miles Celic, to the extension. Mr Celic stated ‘The UK should embrace the extension offered but recognise that this cannot be just another hollow postponement'.

FCA provides update on Brexit delay

Following the Council of the EU agreeing to further extend the date the UK is due to leave the EU to 31 October 2019, the Financial Conduct Authority (FCA) announced that it would not implement its preparations for Brexit the weekend of 13-14 April. Firms did not need to take any action or implement any contingency plans for the weekend of 13-14 April. The FCA will provide updates when necessary on its website and through other channels.

FCA postpones notification deadline for temporary permissions regimes

The FCA published directions which postpone to 30 May 2019 the final date for notifications under the temporary permissions regimes for EEA firms operating in the UK, alternative investment fund managersundertakings for collective investment in transferable securitiese-money services and  payment services. The FCA also updated its webpage giving information on the temporary permissions regime for inbound passporting EEA firms and funds, and published a document explaining how to notify under the temporary permission regime for inbound passporting EEA investment funds. The Prudential Regulation Authority (PRA) updated its EU withdrawal webpage to confirm that the deadline for a firm to notify the PRA that it wished to enter the temporary permissions regime ended on 11 April 2019. It is therefore no longer possible to submit a notification to the PRA.

ESMA announcement on no-deal planning following Brexit extension

The European Securities and Markets Authority (ESMA) announced that, following the Council of the EU’s decision on 11 April 2019 to extend the Article 50(3) Brexit deadline, its statements and measures on its no-deal Brexit scenario preparations referring to 12 April 2019 should now be read as referring to 31 October 2019, unless the Council of the EU decides otherwise. ESMA will issue further announcements in relation to the application of this new date in due course.

HMT makes Prospectus Directive and Transparency Directive Equivalence Directions 2019

HM Treasury made the Prospectus Directive and Transparency Directive Equivalence Directions 2019 in exercise of the powers conferred by Regulation 2(1) of and paragraph 9 of Schedule 1 to the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, SI 2019/541. The Regulations give HM Treasury a temporary power to make equivalence directions and exemption directions for EEA Member States in financial services legislation.

HMT makes MAR Exemption Directions

HM Treasury made the Market Abuse Exemption Directions 2019 (the First Directions) in exercise of the powers conferred by Regulations 3(1)(b) and (c) of the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, SI 2019/541 and the Market Abuse Exemption (No. 2) Directions 2019 (the Second Directions) in exercise of the powers conferred by Regulation 3(1)(b)(v) of the Regulations. The Regulations give HM Treasury a temporary power to make equivalence directions and exemption directions for EEA Member States in financial services legislation.

HMT makes Transparency of Securities Financing Transactions and of Reuse Exemption Directions

HM Treasury made the Transparency of Securities Financing Transactions and of Reuse Exemption Directions 2019 (the First Directions) and the Transparency of Securities Financing Transactions and of Reuse Exemption (No. 2) Directions 2019 (the Second Directions) in exercise of the powers conferred by Regulation 3(1)(a) of the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, SI 2019/541. The Regulations give HM Treasury a temporary power to make equivalence directions and exemption directions for EEA Member States in financial services legislation.

HMT makes OTC Derivatives, Central Counterparties and Trade Repositories Exemption Directions 2019

HM Treasury made the OTC Derivatives, Central Counterparties and Trade Repositories Exemption Directions 2019 (the Directions) in exercise of the powers conferred by Regulation 3(1)(f) of the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, SI 2019/541. The Regulations give HM Treasury a temporary power to make equivalence directions and exemption directions for EEA Member States in financial services legislation.

ESMA publishes updated Brexit Q&As on Transparency Directive

ESMA published updated Q&As on Directive 2004/109/EC (the Transparency Directive). The Q&As were updated to include minor updates to question 26. Question 26 was added for the eventuality that the UK withdraws from the EU with no withdrawal agreement in place.

ESMA updates Brexit Q&As on prospectus related matters

ESMA published its 30th updated version of Q&As on prospectus related matters. The Q&As were updated to include minor updates to questions 103 and 104. These questions were added in the eventuality that the UK withdraws from the EU with no withdrawal agreement in place. 

 

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Brexit legislation

 

European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No 2) Regulations 2019

SI 2019/859: This enactment is made in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment amends the definition of ‘exit day’ in section 20(1) of the 2018 Act from 12 April 2019 at 11pm to 31 October 2019 at 11pm, and consequently amends section 20(2) of the 2018 Act. Various provisions of the 2018 Act, including the repeal of the European Communities Act 1972, and a wide range of primary and secondary legislation, take effect or come into force on exit day. It comes into force immediately after 3:15pm on 11 April 2019.

Corrigendum to MAR exemption for BoE published in OJ

Corrigendum to Commission Delegated Regulation (EU) 2019/461 of 30 January 2019 amending Delegated Regulation (EU) 2016/522 as regards the exemption of the Bank of England and the United Kingdom Debt Management Office from the scope of Regulation (EU) No 596/2014 of the European Parliament and of the Council was published in the Official Journal of the EU. Commission Delegated Regulation (EU) 2019/461 as originally published granted exemptions under Regulation (EU) 596/2014(the Market Abuse Regulation (MAR)) to the Bank of England (BoE) and the United Kingdom Debt Management Office. The corrigendum substitutes HM Treasury for the United Kingdom Debt Management Office.

Sanctions (EU Exit) (Miscellaneous Amendments) Regulations 2019

SI 2019/843: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for Brexit. This enactment amends UK secondary legislation in relation to international sanctions to make corrections to the Democratic People’s Republic of Korea (Sanctions) (EU Exit) Regulations 2019, the Iran (Sanctions) (Nuclear) (EU Exit) Regulations 2019, the ISIL (Da’esh) and Al-Qaida (United Nations Sanctions) (EU Exit) Regulations 2019 and the Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019. It comes into force on exit day.

Russia (Sanctions) (EU Exit) Regulations 2019

SI 2019/855: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for Brexit. This enactment revokes UK subordinate legislation and retained direct EU legislation relating to sanctions in Russia in order to ensure that the UK can operate an effective sanctions regime in relation to Russia after the UK leaves the EU. This sanctions regime is aimed at encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty and independence of Ukraine. It comes into force partly on 11 April 2019 and fully on exit day. 

 

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UK regulator updates

 

FCA publishes its 2019/2020 business plan, research agenda and updated fees and levies

The FCA published its business plan, and other matters for the 2019/2020 year ahead. The FCA says its key priority will be continuing to plan for Brexit, although it will also aim to continue to play a leading role in shaping the global regulatory framework by working with other national regulators and financial services international bodies. The FCA also published its research agenda and its updated fees and levies proposal for 2019/2020 via consultation paper CP19/16: FCA regulated fees and levies 2019/20.

PRA publishes business plan and fees proposals for 2019/20

The PRA published its business plan for 2019/20, setting out its strategy, workplan, and budget for the period 1 March 2019 to 29 February 2020. Alongside the plan, the PRA also published consultation paper CP9/19, Regulated fees and levies: Rates for 2019/20. Responses are sought by 14 May 2019.

FCA signs MoU with the Insurance Fraud Bureau

The FCA and the Insurance Fraud Bureau (IFB) signed a memorandum of understanding (MoU) providing a formal basis for co-operation in relation to claims management activities, including for the exchange of information and investigative assistance. The IFB and the FCA say they believe such co-operation will enable them to more effectively perform their respective functions in relation to such activities.

FCA publishes minutes of 28 February 2019 board meeting

The FCA published the minutes of its 28 February 2019 board meeting. Among the issues discussed, the board noted and approved the FCA’s work in preparation of a no-deal Brexit and the possible use of the Temporary Transitional Power.

Caroline Rainbird announced as next FSCS CEO

The Financial Services Compensation Scheme (FSCS) announced that Caroline Rainbird, a former RBS and ABN AMRO executive, will become its next CEO. Outgoing CEO Mark Neale’s last day will be 3 May 2019 and Ms Rainbird’s appointment takes effect from 4 May 2019 for a period of three years. She also joins the FSCS board. The appointment was made by the FCA and the PRA, and approved by HM Treasury.

 

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European regulator updates

 

European Parliament: Dombrovskis opens plenary debates on cross-border distribution, banking reform, SBBS, ESFS and prudential regulation of investment firms

European Commission Vice President Valdis Dombrovskis delivered opening statements at the European Parliament plenary debates on the cross-border distribution of investment fundsbanking reformsovereign bond-backed securities (SBBS), the European System of Financial Supervision (ESFS), and prudential requirements and supervision of investment firms.

ECB consults on amendments to the supervisory fees framework

The European Central Bank (ECB) launched a public consultation on proposed changes to the ECB Regulation on supervisory fees. This consultation incorporates the feedback received during the first public consultation on this issue in 2017 and input from the national competent authorities (NCAs). The current consultation ends on 6 June 2019. 

 

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European System of Financial Supervision

 

European Parliament approves measures reforming European System of Financial Supervision

The European Parliament approved at plenary a package of new rules intended to upgrade and strengthen the ESFS. The reforms aim to benefit European consumers, investors and businesses by making the financial markets safer and more integrated, and to pave the way for completing the banking union and the capital markets union. The package also includes provisions to promote financial products which support environmental, social and good governance initiatives (ESGs):

ECON publishes further amendments to proposals to enhance powers of ESAs and ESRB

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published documents setting out further amendments to two Regulations and a Directive proposed by the European Commission to upgrade the framework of European Supervisory Authorities (ESAs) and the ESRB. The proposed Regulations and Directive are intended to ensure the ESAs can assume an enhanced responsibility for financial market and insurance and pensions supervision, and to strengthen the role of the ESRB. 

 

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Diversity in financial services

 

ECB working paper looks at the gender gap in central banking

The ECB published a working paper on gender differences in career progression and promotions in central banking. The paper notes that central banking is a stereotypically male-dominated occupation, and uses confidential anonymised ECB personnel data during the period 2003-2017. The ECB found that a wage gap emerges between men and women within a few years of hiring, despite broadly similar entry conditions in terms of salary levels and other observables. 

 

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Prudential requirements

 

European Parliament adopts new rules on proportional and risk-based oversight for investment firms

The European Parliament voted at plenary to adopt new rules on proportional and risk-based oversight for investment firms, paired with targeted changes for third-country firms. The measures are intended to ensure a level playing field between bigger systemic investment firms and credit institutions, as well as better protection for investors:

European Parliament approves banking reform package including CRR II, CRD V, BRRD and SRMR

The European Parliament adopted at plenary a package of banking reform measures, which it agreed informally with Member States in December 2018. The package, proposed by the European Commission in November 2016, includes revised rules on capital requirements (the second Capital Requirements Regulation and the fifth Capital Requirements Directive) and resolution (the second Bank Recovery and Resolution Directive and the second Single Resolution Mechanism Regulation), and is seen as an important step towards reducing risks in the banking system and establishing the banking union:

ECON publishes further amendments to proposed directive and regulation on the prudential framework for investment firms

ECON published further amendments to the European Commission’s December 2017 proposals for a new directive on the prudential supervision of investment firms and a new regulation on the prudential requirements of investment firms.

EBA updates list of CRR diversified indices

The European Banking Authority (EBA) updated the list of diversified indices, originally published in December 2013. The list is part of the implementing technical standards (ITS) drafted to calculate the capital requirements for position risk in equities according to the standardised rules. The Commission adopted the ITS in Commission Implementing Regulation (EU) 945/2014 of 4 September 2014. The standards are part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the EU.

 

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Risk management and controls

 

European Parliament approves new EU-wide whistleblowing rules

The European Parliament approved the proposed Directive on the protection of persons reporting on breaches of EU law (the Whistleblowing directive) proposed by the Commission in April 2018. The new rules lay down EU-wide standards to protect whistleblowers revealing breaches of EU law in a wide range of areas including public procurement, financial services, money laundering, product and transport safety, nuclear safety, public health, and consumer and data protection.

ECON publishes further amendments to proposed whistleblowing directive

ECON published two documents (Amendment 155 and Amendment 156) setting out further amendments to the proposed Whistleblowing Directive, which was proposed by the European Commission in April 2018. The European Parliament and the Council of the EU reached a provisional political agreement on the new rules on 12 March 2019. MEPs are due to vote on the proposed directive on 16 April 2019.

Organisations sent reminder concerning the disclosure of personal data

The Information Commissioner’s Office (ICO) deputy commissioner for policy, Steve Wood, wrote a reminder to both public and private organisations explaining that the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 do not stop them from disclosing personal data to assist police forces or other law enforcement authorities. Wood goes on to outline what he believes to be best practice regarding the disclosure of personal data to the relevant authorities. 

 

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Financial crime

 

HMT consults on transposition of MLD5

HM Treasury issued a consultation document on the steps that the UK government proposes to take to meet the UK’s obligation to transpose Directive (EU) 2018/843 (the Fifth Money Laundering Directive (MLD5)) into national law and on the potential costs and benefits of the changes considered. The closing date for comments is 10 June 2019. In implementing MLD5, the government is catering for the scenario where an implementation period is in place after the UK leaves the EU. During this implementation period common rules will remain in place, meaning that EU law will continue to be effective in the UK in the same way as now until the end of an agreed implementation period. This would require the UK to implement MLD5 by January 2020.

Open-ended mandate given to anti-money laundering organisation

The Financial Action Task Force (FATF), an intergovernmental organisation founded in 1989 by the G7, was given an open-ended mandate in leading global action to counter money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction. Its members also agreed to greater ministerial engagement and more regular ministerial-level meetings.

EBA closes investigation of the Danish and Estonian supervisory authorities with respect to Danske Bank

The EBA announced that it closed an investigation into a possible breach of EU law by the Estonian Financial Services Authority (Finantsinspektsioon) and the Danish Financial Services Authority (Finanstilsynet) with respect to Danske Bank and its Estonian branch, regarding suspected money laundering activities. The EBA’s board of supervisors voted on 16 April 2019 to reject a proposal for a breach of EU law recommendation. 

 

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Enforcement and redress

 

PRA consults on amendments to its policy on the settlement of enforcement action

The PRA published consultation paper CP10/19, setting out proposals to amend its policy on the settlement of enforcement action. This is by way of proposed amendments to the statement of policy on the PRA’s approach to enforcement: statutory statements of policy and procedure. Responses are sought by 15 July 2019. The PRA will host a roundtable event for law firms working in this area. The consultation concerns proposals which the PRA says would simplify the PRA’s settlement discount scheme, and further improve the clarity and transparency of the PRA’s settlement procedures.

HBOS Reading fraud: APPG on fair business banking writes to Lloyds Banking Group shareholders and non-execs

The all-party Parliamentary group (APPG) on fair business banking published letters dated 9 April 2019 from Kevin Hollinrake MP to the non-executive directors and the institutional shareholders of Lloyds Banking Group (LBG), in connection with the HBOS Reading fraud. Mr Hollinrake says the conduct of the executive directors of LBG, including its chief executive, António Horta-Osório, raises ‘very serious corporate governance issues’ and drew attention to the four-year gap between the executive directors receiving a report into the fraud and revealing that report to the non-execs.

FSCS confirms Qudos customers to receive replacement insurance policies

The FSCS issued a press release stating that—since the collapse of the Danish-based insurance company Qudos in December 2018—FSCS is working to secure alternative insurance cover for these motor, guaranteed asset protection and pet insurance policyholders. With the assistance of brokers, around 165,000 Qudos motor and pet insurance policies were transferred to new insurers.

FSCS further extends CRL Management replacement insurer deadline

The FSCS further extended the deadline for CRL Management to find an alternative insurer to provide replacement cover for Alpha latent defect and structural damage insurance policyholders, whose policies terminated in August 2018. The FSCS gave CRL Management (an appointed representative of BCR Legal Group) until 30 April 2019 to secure alternative cover, following the granting of a two-week extension on 29 March 2019.

Astra Asset Management (UK) Ltd v Co-Operative Bank plc

Practice–Pre-trial or post-judgment relief. The defendant bank's application for summary judgment against the claimant company was allowed in part, in proceedings concerning certain debts and security interests (the rights). The Commercial Court held that, among other things, there was no tenable argument that a binding contract was made for the sale and purchase of the rights. The dealings between the parties were incapable in law of having given rise to such a contract.

 

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FCA conduct requirements

 

FCA publishes follow-up Dear CEO letter on approval of financial promotions

The FCA published a Dear CEO letter to remind firms involved in the approval of financial promotions for unauthorised persons of their obligations when doing so. This letter follows up on the Dear CEO letter on the same subject published by the FCA on 9 January 2019. The earlier letter reminded firms that, before they approve a financial promotion for communication by an unauthorised person, they must confirm that it complies with the FCA’s rules on financial promotions. This includes ensuring that the financial promotions which they approve are fair, clear and not misleading. An example of this arrangement would be an FCA authorised firm approving the financial promotion of mini-bonds. 

 

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Markets and trading

 

FCA publishes technical note on periodic financial information and inside information

The FCA published a technical note on periodic financial information and inside information (FCA/TN/506.2). The technical note considers the requirement under MAR for an issuer to inform the public as soon as possible of any inside information directly concerning that issuer, in the context of periodic financial information. The technical note was issued following the FCA’s consultation in Primary Market Bulletin No. 19 (PMB No.19) on updating its technical note UKLA/TN/506.1. Alongside its April 2019 technical note, the FCA also published Primary Market Bulletin No. 23, in which it summarises the feedback received to its proposals in PMB No.19.

FCA publishes April 2019 issue of Market Watch

The FCA published Market Watch 59–the April 2019 issue of its monthly newsletter on market conduct and transaction reporting issues. This issue focuses on transaction reporting observations, telephone recording and retention and use of client codes.

BoE publishes minutes of Money Markets Committee meeting March 2019

The BoE published minutes of the Money Markets Committee (MMC) meeting on 5 March 2019. Items discussed included market conditions and the risk-free rate (RFR) transition, as well as an update from the UK Code sub-committee. The MMC discussed other relevant financial market developments since its last meeting, including the impact of Brexit, which continued to create uncertainty in the markets although political events in the run-up to the meeting were perceived to reduce the likelihood of a no-deal outcome. The next MMC meeting is scheduled for 4 June 2019.

ECON publishes further amendments to EU covered bond proposal

ECON published documents setting out further amendments to the proposed new EU regulatory framework for covered bonds. The proposal was introduced by the European Commission in March 2018, and the European Parliament and the Council of the EU reached political agreement on the measures on 26 February 2019. The further amendments relate to the proposed Directive on the issue of covered bond public supervision and amending Directive 2009/65/EC (the Undertakings for Collective Investment in Transferable Securities Directive (the UCITS Directive)) and Directive 2014/59/EU (the Bank Recovery and Resolution Directive (BRRD)) (Amendment 2 and Amendment 3).

FSB reports on progress on the transition to risk-free rates

The Financial Stability Board (FSB) published remarks given by Randal K. Quarles, FSB chair, at the FSB roundtable on reforming major interest rate benchmarks concerning the progress on the transition to RFRs. According to Mr Quarles, the official sector convened national working groups to help develop alternative RFRs and navigate a very complicated transition.

ISDA publishes report on the FRTB and Emerging Markets

The International Swaps and Derivatives Association (ISDA) published a report on the impact of the Fundamental Review of the Trading Book (FRTB) on emerging markets. According to ISDA, for banks in emerging markets, implementation poses some challenges. These include barriers to entry, a shortage of data and concerns about the treatment of sovereign debt. While it is important for the framework to be implemented as consistently as possible, it is also imperative that regulators and market participants monitor and understand the impact on emerging market banks and economies.

Further details on US Dollar ICE Bank Yield Index published

Leading operator of global exchanges and clearing houses Intercontinental Exchange, Inc announced that the ICE Benchmark Administration Limited (IBA) published an update regarding the US Dollar ICE Bank Yield Index. The update provides more detailed information regarding certain aspects of the index, in light of feedback received to date, provides market participants with updated results of testing of the preliminary index methodology during the period from January 2018 to the end of March 2019, which are also available on IBA’s website and extends the feedback period to 31 May 2019. 

 

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Regulation of capital markets

 

European Parliament adopts regulation regarding sovereign bond back securities

Having voted in the plenary on 16 April 2019, the European Parliament adopted the legislative resolution on the proposal for a regulation of the European Parliament and of the Council on SBBS. The regulation was originally proposed by the Commission in May 2018 to grant SBBS the same regulatory treatment as for sovereign bonds, to remove existing obstacles to SBBS, without changing in any way the regulatory treatment of euro area sovereign bonds. SBBS would not involve any mutualisation or transfer of risks between Member States, as they are a purely private sector instrument for private sector use.

ECON publishes further amendments to proposed SME growth markets regulation

ECON published a document setting out further amendments to the proposed Regulation amending MAR and Regulation (EU) 2017/1129 (the Prospectus Regulation) as regards the promotion of the use of SME growth markets.

ICMA quarterly report looks at Brexit, RFRs and the search for a euro safe asset

The International Capital Market Association (ICMA) published its quarterly report for 2Q 2019, assessing market practice and regulatory policy. This issue contains articles on Brexit and the international capital markets, the search for a euro safe asset, and the transition to RFRs.

ICMA launches latest survey of the European repo market

ICMA launched its 37th survey of the European repo market. All European banks dealing in repo are invited to participate. ICMA says its surveys give an accurate picture of how the European repo market responded to turbulent market conditions in the last few years. The survey will provide a snapshot of repo business at close of business on 5 June 2019. All institutions who participate in the survey automatically receive, in confidence, a list of their rankings in the various categories of the survey.

 

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Regulation of derivatives

 

BoE publishes PS and fee rates for non-UK CCP recognition 2018/19, and consults on fees regime for FMI supervision 2019/20

The BoE published a policy statement together with responses to its consultation on the fees regime for non-UK central counterparty (CCP) recognition 2018/19. It also published the fees rate for the 2019/20 fee year. The BoE also opened a consultation on Fees regime for financial market infrastructure (FMI) supervision 2019/20 and other related policy changes. Feedback is sought by 10 June 2019.

ESMA publishes official translations of guidelines on CCP APC margin measures

ESMA issued the official translations of its guidelines on Regulation (EU) No 648/2012 (the European Market Infrastructure Regulation (EMIR)) anti-procyclicality (APC) margin measures for CCPs. NCAs to which these guidelines apply must now notify ESMA within two months whether they comply or intend to comply with the guidelines.

ECON publishes further amendments to proposed regulation on CCP authorisation and recognition

ECON published a document setting out further amendments to the European Commission’s proposal for a new regulation on the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs.

ISDA Letter to the FSB OSSG provides update on Fallbacks for Derivatives

ISDA published a letter addressed to the co-chairs of the FSB Official Sector Steering Group (OSSG) to update them on ISDA’s work to implement fallbacks for derivative contracts referencing key interest rate benchmarks. ISDA undertook this work in 2016 at the request of the FSB OSSG and expects the fallbacks to take effect in early 2020.

Asset Management Derivatives Forum 2019 considers regulatory recalibration and industry collaboration

The Futures Industry Association (FIA) published a recap of the annual Asset Management Derivatives Forum that the FIA hosted with the Securities Industry and Financial Markets Association (SIFMA) Asset Management Group in February 2019. More than 400 attendees examined important trends related to regulatory recalibration and industry collaboration. 

 

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Investment funds and asset management

 

European Parliament adopts directive and regulation on collective investment funds

Having voted in the plenary on 16 April 2019, the European Parliament adopted the proposal for a directive of the European Parliament and of the Council amending the UCITS Directive of the European Parliament and of the Council and Directive 2011/61/EU (the Alternative Investment Fund Managers Directive (AIFMD)) of the European Parliament and of the Council with regard to cross-border distribution of collective investment funds and also on the proposal for a regulation of the European Parliament and of the Council on facilitating cross-border distribution of collective investment funds and amending Regulations (EU) No 345/2013 (the European Venture Capital Funds Regulation (EuVECA)) and (EU) No 346/2013 (the European Social Entrepreneurship Regulation (EuSEF).

AIMA ACC announces sponsors and new website

The Alternative Investment Management Association (AIMA)’s Alternative Credit Council (ACC) announced nine major corporate sponsors, and a new dedicated website for private credit members. The ACC was founded in 2016 and promotes sustainable growth of private credit and direct lending activities, and advocates for lowering barriers to non-bank finance around the world. The new website provides members with access to updates on the ACC’s advocacy work, industry research, and its global events programme.

 

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Banks and mutuals

 

European Parliament approves banking reform package including CRR II, CRD V, BRRD and SRMR

The European Parliament adopted at plenary a package of banking reform measures, which it agreed informally with Member States in December 2018. The package, proposed by the European Commission in November 2016, includes revised rules on capital requirements (the second Capital Requirements Regulation and the fifth Capital Requirements Directive) and resolution (the second Bank Recovery and Resolution Directive and the second Single Resolution Mechanism Regulation), and is seen as an important step towards reducing risks in the banking system and establishing the banking union:

ECON publishes further amendments to risk reduction measures for banks

ECON published a document setting out amendments to the European Commission's proposal for a directive amending Directive 2013/36/EU (the fourth Capital Requirements Directive (CRD IV)) as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers, and capital conservation measures.

ECON publishes additional amendments to risk-reduction amendment to CRR

ECON published a document setting out further proposed amendments to one of the proposed measures aimed at reducing risks in the EU banking sector. The amendments published relate to the proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 575/2013 (the Capital Requirements Regulation (CRR)) as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to CCPs, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements and amending EMIR.

EBA publishes decision on resolution reporting

The EBA published a decision dated 3 April 2019 on reporting by resolution authorities to the EBA. The decision relates to the reporting of information under Commission Implementing Regulation (EU) 2018/1624, a Level 2 measure under the BRRD.

Andrea Enria on recovery and resolution of cross-border banks

The chair of the supervisory board of the ECB, Andrea Enria, delivered a speech at the Institute of International Finance in Washington DC, on mutually assured co-operation and the issue of cross-border banks. Mr Enria discussed how to ensure that a major, global bank could fail without triggering another financial crisis. 

 

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Consumer credit, mortgage and home finance

 

UK Finance publishes speeches on the mortgage market

UK Finance published speeches delivered by its CEO, Stephen Jones, and the chair of its Mortgages Product and Service Board, Richard Rowntree, at its annual mortgage lunch. Mr Jones provided a summary of UK Finance’s work on mortgages in the past year, including its July 1218 industry-wide voluntary agreement to help borrowers on reversion rates, or so-called ‘mortgage prisoners’. Mr Jones said there was a need for the government to consider the regulatory position of the thousands more customers with inactive lenders or unregulated owners that the industry is currently unable to help. 

 

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Insurance and pensions

 

PRA requests feedback on Bermuda Monetary Authority insurance stress test

The PRA requested feedback on an insurance stress test that it will be conducting for the largest regulated life and general insurers from July to September 2019. The announcement was published in a letter dated 11 April 2019, authored by the technical head of insurance at the PRA, Stefan Claus. The letter notes that the PRA will be running a number of scenarios jointly with the Bermuda Monetary Authority (BMA), reflecting its commitment to transparency, supervisory co-operation and information sharing by both authorities, according to the Insurance Core Principles of the International Association of Insurance Supervisors (IAIS).

FCA consults on extension of IGC remit to cover ESG issues

The FCA published consultation paper CP19/15: Independent Governance Committees: extension of remit. Independent Governance Committees (IGCs) currently provide independent oversight of the value for money of workplace personal pensions provided by firms such as life insurers and some self-invested personal pension operators. CP19/15 proposes a new duty for IGCs to report on their firm's policies on ESG issues, consumer concerns and stewardship, for the products that IGCs oversee. The proposals are to help protect consumers from investments that may be unsuitable because of ESG risks including climate change, make sure that consumer concerns are taken into account, and to encourage good stewardship of investments. The deadline for comments is 15 July 2019.

EIOPA calls for consistency in the application of the proportionality principle for SCR supervision

The European Insurance and Occupational Pensions Authority (EIOPA) published a Supervisory Statement on the application of the proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula under Solvency II. EIOPA identified potential divergences in the supervisory practices concerning the supervision of the calculation of immaterial SCR sub-modules. While EIOPA agrees that in the supervisory review process in case of immaterial SCR sub-modules the principle of proportionality applies, it stresses the importance of supervisory convergence as divergent approaches lead to supervisory arbitrage. Consistent implementation of the proportionality principle is key to ensure supervisory convergence for the supervision of the SCR.

EIOPA hosts workshop on cyber insurance risks

EIOPA hosted a workshop on cyber insurance on 1 April 2019. More than 100 representatives from the insurance industry, brokers, consumers, regulators, think tanks and other stakeholders participated. The goal of the workshop was to discuss and identify possible solutions to address the challenges the European cyber insurance market is facing. Specifically, the workshop focused on two main challenges: cyber risks coverage and quantification of cyber risks.

EIOPA holds InsurTech roundtable on use of cloud computing

EIOPA hosted its fourth InsurTech roundtable on ‘the use of cloud computing by (re)insurance undertakings’ on 11 April 2019, and issued a press release regarding the same on 17 April 2019. The roundtable was designed to discuss industry views and approaches to cloud outsourcing in a Solvency II and post-EBA recommendations environment. The roundtable followed on from EIOPA's work in its recent report: ‘Outsourcing to the Cloud: EIOPA's Contribution to the European Commission’s FinTech Action Plan’.

ESRB Secretariat staff response to Insurance Europe’s position paper on the ESRB report on macroprudential measures in insurance

The Secretariat to the ESRB published a letter responding to Insurance Europe’s position paper on the ESRB report on macroprudential measures in insurance. In the letter, the Secretariat notes its disagreement with Imsurance Europe’s position that there is limited potential for systemic risk originating from the insurance industry and that Insurance Europe does not believe that additional macroprudential measures are needed.

Insurers tell Brussels of struggle to meet GDPR demands

Europe’s insurers said they are struggling to update their computer systems to comply with GDPR and fear that the rigorous regime could undermine innovation and hinder cross-border business. Insurance Europe, the voice of the industry,  raised concerns with the European Commission about the data protection rules in a response to a consultation by the European Union’s executive arm.

EIOPA finds areas for improvement in the supervision of Prudent Person Rule compliance by IORPs

EIOPA published the findings of its peer review examining how NCAs ensure that institutions for occupational retirement provision (IORPs) comply with the Prudent Person Rule. The review considered the basis for the interpretation of the Prudent Person Rule, legal and regulatory frameworks, information gathered for assessment, assessment methods and supervisory actions taken. The review was conducted among 27 NCAs from 24 European Economic Area (EEA) countries.

EIOPA to revise pensions registers in light of IORP II

EIOPA published decisions to revise three pension registers, to accommodate changes required by the implementation of the IORP II Directive. The revisions will be made to the register of institutions for occupational retirement provision, the register of institutions for occupational retirement provision (prudential provisions) and the database of pension plans and products in the EEA.

Pensions protection plan to keep savers better informed

Consumers save less for retirement because most believe the government is barely protecting their pension, meaning new disclosure requirements are needed to keep savers better informed about how their nest eggs are being protected, the UK’s statutory compensation scheme said. The FSCS announced proposals to work with pension plans to boost the amount of information consumers get on how much of their retirement savings is protected if their provider goes bust. Two-thirds of consumers wrongly think their protection is capped at £5,000 ($6,540), the FSCS said, and just 4% could put their finger on the right figure at the time of the survey in October—£50,000. That number increased to £85,000 in April. 

 

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Payment services and systems

 

ECB publishes report on card payments in Europe

The ECB published a report on the current landscape and future prospects of card payments in Europe. The report starts out by addressing the fact that although cards are the fastest growing means of payment in Europe, some users (cardholders and merchants) are not benefiting as much as they could, if a Single Euro Payments Area for cards existed.

Consumers can pursue £14 billion Mastercard class action

An appeals court in London revived a £14bn ($18.3bn) proposed class action lawsuit accusing Mastercard of flouting European Union competition law by charging consumers high credit card fees, in a test of the UK’s fledgling class action regime. The Court of Appeal said consumers can pursue billions of pounds in damages over fees imposed on every credit card transaction whenever customers pay using plastic. The credit card charges, known as multilateral interchange fees, were first imposed on retailers, who ultimately passed them on to shoppers. In doing so, the court rejected on Tuesday a ruling in 2017 by the Competition Appeal Tribunal that there was too great a disparity in the swipe fees that merchants passed along for consumers to allow the action to proceed en masse. 

 

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Sustainable finance

 

Launch of Network for Greening Financial Services report: Governor announces BoE’s decision to disclose how it manages financial risks from climate change

Speaking at the Network for Greening Financial Services conference on 17 April 2019, the governor of the BoE, Mark Carney, announced the BoE’s decision to disclose how financial risks from climate change are managed across its entire operations. The BoE’s first disclosure on this matter will be published in 2020 as part of the 2019/2020 annual report. The BoE also published an open letter written by Mr Carney the governor of Banque de France, François Villeroy de Galhau  and the chair of the Network for Greening the Financial Services, Frank Elderson. The open letter looks to the catastrophic effects of climate change and notes that 34 central banks and supervisors–representing five continents, joined forces in 2017 to create a coalition of the willing: the Network for Greening the Financial System (NGFS).

PRA issues SS and PS on financial risks from climate change

The PRA published supervisory statement SS3/19, Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change. The PRA says that, while firms are enhancing their approaches to managing these risks, few firms are taking a strategic approach that considers how actions today affect future financial risks. The PRA also published policy statement PS11/19, providing feedback to responses to the consultation paper CP23/18, Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change, and a speech looking at the wider context.

ECON publishes amendments to proposed Regulation on disclosures relating to sustainable investments and sustainability risks

ECON published a document setting out amendments to the European Commission’s proposal for a new regulation on sustainability-related disclosures in the financial services sector. The proposed regulation forms part of a package of legislative proposals submitted by the Commission on 24 May 2018.

 

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Dates for your diary

 

DateSubjectEvent

 

18 April 2019

 

Markets and trading

 

BaFin (the German Financial Services Regulator) issued a emergency net short position ban in Wirecard AG shares under the Short Selling Regulation. The measure is applicable until midnight Central European Time on 18 April 2019.

 

18 April 2019

Financial crime


Anti-money laundering

 

The deadline for feedback to the Joint Money Laundering Steering Group (JMLSG) proposed revisions to two of the sectors in Part II of its guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry is 18 April 2019.

 

18 April 2019

Markets and trading


Regulation of derivatives

 

A vote on the European Commission’s proposals for changes to rules in relation to authorisation of CCPs and requirements for the recognition of third-country CCPs is scheduled for 18 April 2019 in the European Parliament’s plenary session.

 

18 April 2019

Prudential requirements


Benchmarks

 

The rules set out in Commission Implementing Regulation (EU) 2019/439 of 15 February 2019 which amends Implementing Regulation (EU) 2016/2070 with regard to benchmark portfolios, reporting templates and reporting instructions to be applied in the EU for the reporting referred to in Article 78(2) of CRD IV  enter into force on 18 April 2019.

 

18 April 2019

Markets and trading


Regulation of capital markets

 

A vote on the European Commission’s proposals for changes to rules in relation to covered bonds is scheduled for 18 April 2019 in the European Parliament’s plenary session.

 

18 April 2019

Capital Markets Union


Sustainable finance

 

A vote on the European Commission’s proposals for changes to rules in relation to sustainability related disclosures is scheduled for 18 April 2019 in the European Parliament’s plenary session.

 

18 April 2019

Regulation of capital markets


SME growth markets

 

A vote on the European Commission’s proposals for changes to rules in relation to SME growth markets is scheduled for 18 April 2019 in the European Parliament’s plenary session.

 

19 April 2019

Prudential requirements


Regulatory reporting requirements

 

The deadline for responses to PRA CP6/19: Pillar 2 liquidity: Updates to the framework is 19 April 2019.

 

21 April 2019Prudential requirements

Commission Implementing Decision (EU) 2019/536 of 29 March 2019 amending Implementing Decision 2014/908/EU as regards the lists of third countries and territories whose supervisory and regulatory requirements are considered equivalent for the purposes of the treatment of exposures in accordance with the CRR, enters into force on 21 April 2019.

 

22 April 2019

Markets and trading


MiFID II

 

The maintenance window of the Financial Instrument Transparency System (FITRS) system will take place from Friday 12 April 2019 21:30 CEST until Monday 22 April 2019 12:00 CEST.

 

23 April 2019Insolvency

The Financial Services and Markets (Insolvency) (Amendment of Miscellaneous Enactments) Regulations 2019 will enter into force on 23 April 2019.

 

23 April 2019Risk management and controls

The deadline for responses to FCA ‘CP19/4: Optimising the Senior Managers & Certification Regime and feedback to DP16/4 – Overall responsibility and the legal function’ is 23 April 2019.

 

24 AprilMortgages and home finance

As part of its live and local series the FCA will host its ‘Ask the regulator’ Q&A roundtable discussion with FCA and industry panel on 24 April 2019 in Southampton.

 

25 AprilUK regulator updates

The FCA is due to hold its April board meeting on this date.

 

 

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