FS weekly highlights—18 July 2019

In this issue

 

Brexit news
UK regulator updates
European regulator updates
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
consumer protection and claims management regulation
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
Regulation of derivatives
Financial reporting standards
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Insurance and pensions
Payment services and systems
International—financial services and related sectors
Fintech and virtual currencies
Crowdfunding
Dates for your diary

 

Brexit news

 

Financial Services (Miscellaneous) (Amendment) (EU Exit) (No 3) Regulations 2019

SI 2019/Draft: This draft enactment is laid in exercise of legislative powers under the European Communities Act 1972, the Financial Services and Markets Act 2000, and the European Union (Withdrawal) Act 2018 in preparation for Brexit. This draft enactment proposes to amend UK primary and subordinate legislation and amend and revoke retained direct EU legislation in relation to financial services in order to ensure a coherent and functioning financial services regulatory regime once the UK leaves the EU. It comes into force partly on 11:59pm on the day on which these Regulations are made, partly on the day after the day on which these Regulations are made, partly immediately before exit day, and fully on exit day.

AFME paper looks at regulatory impacts of a no-deal Brexit for financial services firms

The Association for Financial Markets in Europe (AFME) published a report setting out the remaining no-deal risks in the financial services sector and highlighting areas where further work is needed to mitigate risks and minimise disruption to markets and clients. AFME says that while a ‘very substantial’ amount of work was undertaken to mitigate risks by both firms and regulators, a no-deal Brexit is likely to cause a significant impact on the financial services sector, and regulatory and operational challenges remain.

International Trade Committee questions minister on government’s stance on trade in services

The International Trade Committee announced the questioning of George Hollingbery, minister of state for trade policy at the Department for International Trade (DIT), and Tom Josephs, the director of policy at the DIT, at its 17 July Committee meeting. The point was to assist the Committee in its examination of the government’s approach to incorporating arrangements for trading services internationally—such as business and financial services—into future trade agreements.

 

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UK regulator updates

 

FCA seeks views on replacing Gabriel and improving data collection systems

The Financial Conduct Authority (FCA) announced plans to move to a new platform for its data collection systems, replacing existing system Gabriel, and launched a survey requesting views from users of Gabriel on how the FCA should improve the way it collects data from firms. The work is a central part of the FCA’s data strategy, which is designed to help it to deepen its understanding of markets and consumers and to more swiftly identify, appropriately intervene and remediate issues to minimise harm.

Chair and CEO set out FCA’s role and strategy at annual public meeting

The FCA published the speeches made at its annual public meeting by its chair, Charles Randell, and its CEO, Andrew Bailey. Mr Randell discussed the work of the FCA in the previous and coming years, saying fundamental societal shifts and profound technological change required the FCA to be the most agile and responsive regulator it can be. In the next phase of its activities, the FCA will be focusing on transforming its capabilities, its use of technology and its regulatory framework. Mr Bailey discussed a number of specific issues including Brexit, high-cost credit and the FCA’s enforcement action.

FCA publishes minutes of its 30 May 2019 board meeting

The FCA published the minutes of its 30 May 2019 board meeting. Alongside reports from the chief executive and from the Prudential Regulation Authority (PRA), the board discussed issues relating to high cost credit, the FCA’s and the Payment Systems Regulator (PSR)’s annual report and accounts for 2018/19, crowdfunding, and the RBS Global Restructuring Group report.

Nicky Morgan seeks details of FCA’s plans for regulating funeral plan providers

The chair of the Treasury Committee, Nicky Mogan MP, wrote to the chief executive of the FCA, Andrew Bailey, about the government’s intention to give the FCA responsibility for regulating funeral plan providers. Ms Morgan asked Mr Bailey a number of questions about how the FCA intends to regulate the sector and whether the Financial Ombudsman Service (FOS) possesses the resources and experience necessary.

HMT launches Investing in Women Code

HM Treasury (HMT) published a policy paper on the Investing in Women Code, an initiative recommended in an independent review commissioned by HMT and headed up by Alison Rose, deputy CEO of NatWest, whose findings were published on 8 March 2019 (International Women’s Day). 

 

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European regulator updates

 

ESMA publishes newsletter for July 2019

The European Securities and Markets Authority (ESMA) published its newsletter for July 2019, containing in details of current consultations, recent speeches and publications. The issue also includes an infographic on ESMA’s annual report for 2018 and links to June 2019 press releases. 

 

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Authorisation, approval and supervision

 

FCA seeks views on replacing Gabriel and improving data collection systems

The FCA announced plans to move to a new platform for its data collection systems, replacing existing system Gabriel, and launched a survey requesting views from users of Gabriel on how the FCA should improve the way it collects data from firms. The work is a central part of the FCA’s data strategy, which is designed to help it to deepen its understanding of markets and consumers and to more swiftly identify, appropriately intervene and remediate issues to minimise harm.

 

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Prudential requirements

 

PRA publishes CP15/19 on large exposures: reciprocation of French measure under CRR

The PRA published consultation paper 15/19 (CP15/19), in which it sets out its proposal to apply a tighter limit for large exposures to certain French non-financial corporations , to reciprocate the same measure imposed by France. This measure would apply on a consolidated basis to firms identified by the PRA as globally systemically important institutions and other systemically important institutions under the Capital Requirements Directive 2013/36/EU (CRD IV). The consultation closes on 6 September 2019.

EBA publishes draft amendments to ITS on supervisory reporting under CRR

The European Banking Authority (EBA) published amendments to its implementing technical standards (ITS) on the reporting of financial information (FINREP) under the Capital Requirements Regulation 575/2013 (CRR), including changes to the reporting of non-performing exposures (NPEs) and forbearance. The ITS, along with related draft ITS on common reporting and the liquidity coverage ratio (LCR), will apply from 1 June 2020 once endorsed by the European Commission and published in the Official Journal of the EU.

EBA publishes updated ITS ahead of 2020 benchmarking exercise

The EBA published final draft amendments to its ITS on benchmarking of internal models, set out in Commission Implementing Regulation (EU) 2016/2070, with the aim of adjusting the benchmarking portfolios and reporting requirements ahead of the benchmarking exercise it will carry out in 2020. The changes aim to simplify the portfolio’s structure for the credit risk part of the exercise, and to give more insight into the model used for pricing for the market risk part of the exercise.

EBA reports on monitoring of liquidity coverage ratio implementation

The EBA published its first report on the monitoring of LCR implementation in the EU under the CRR. The EBA intends to regularly monitor the implementation of the LCR for EU banks and update this report on an ongoing basis.

BoE releases Q1 2019 statistics on banking sector regulatory capital

The BoE released statistics on banking sector regulatory capital for the first quarter of 2019 Q1. They show levels of capital and risk-weighted assets for the UK banking sector, including breakdowns of the movements in different tiers of capital and risk exposure types, and overall capital ratios.

ECB publishes Q1 2019 supervisory banking statistics

The European Central Bank (ECB) published supervisory banking statistics for the first quarter of 2019. Key findings include capital ratios for significant institutions remaining stable, with the total capital ratio at 17.99% and CET1 at 14.34%. The non-performing loan ratio decreased further to 3.67%, and the LCR increased to 149.71%.

ESMA publishes responses to consultation on indices and recognised exchanges under the CRR

ESMA published responses to its consultation on indices and recognised exchanges under the CRR. The consultation was launched on 24 May and closed on 5 July 2019.

AFME publishes papers on bank prudential and resolution regulation and a broader overview of its key priorities

AFME published a paper addressed to European decision-makers and other stakeholders, setting out its priority objectives for the EU around bank prudential and resolution regulation. These priorities are: completing the banking union; removing the fragmentation in European banking markets, achieving a capital markets union (CMU), ensuring openness to global capital markets, promoting global consistency and avoiding significant increases in capital requirements. AFME also published a broader, accompanying paper in which it recommends that the EU should prioritise a growth strategy that focuses on promoting competitiveness, innovation and deeper integration, while transitioning to a greener economy. 

 

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Financial stability, recovery and resolution

 

FPC publishes July 2019 Financial Stability Report and Record

The Bank of England (BoE)’s Financial Policy Committee (FPC) published its July 2019 Financial Stability Report and Record, which sets out the FPC's view on the stability of the UK financial system and what it is doing to remove or reduce any risks to it.

BoE publishes 2019 H1 systemic risk survey results

The BoE published the systemic risk survey results for 2019 H1. The report presents the results of the 2019 H1 survey, which was conducted by the BoE between 22 April and 16 May 2019. The systemic risk survey is conducted on a biannual basis, to quantify and track market participants’ views of risks to, and their confidence in, the stability of the UK financial system.

ESRB publishes EU Non-Bank Financial Intermediation Risk Monitor for 2019

The European Systemic Risk Board (ESRB) published the EU Non-bank Financial Intermediation Risk Monitor 2019 (previously called the Shadow Banking Monitor), which covers data up to end-2018. The report assesses risks and vulnerabilities using an entity-based monitoring framework which considers both investment funds and other financial institutions, such as financial vehicle corporations, security and derivative dealers and financial corporations engaged in lending.

SRB announces growth in SRF to €33bn after latest round of transfers

The Single Resolution Board (SRB), the central resolution authority within the banking union, announced that the Single Resolution Fund (SRF) received a cash injection of €7.8bn from 3,186 institutions for the year 2019. This brings the total amount in the SRF to just under €33bn. The target size of the SRF is intended to be at least 1% of covered deposits by end 2023, which is expected to be about €60bn.

European Parliament discusses possible new EU plans to finance banks under resolution

The European Parliament published a briefing on the banking union and new arrangements to finance banks under resolution. It describes the existing arrangements in the EU, compares those arrangements with the US and the UK regimes, and considers possible new arrangements along the lines of the US and UK regimes. The briefing states that the resolution of Banco Popular raised questions as to whether the existing EU financing arrangements were sufficiently robust to finance banks under resolution.

AFME publishes papers on bank prudential and resolution regulation and a broader overview of its key priorities

AFME published a paper addressed to European decision-makers and other stakeholders, setting out its priority objectives for the EU around bank prudential and resolution regulation. These priorities are: completing the banking union; removing the fragmentation in European banking markets, achieving a CMU, ensuring openness to global capital markets, promoting global consistency and avoiding significant increases in capital requirements. AFME also published a broader, accompanying paper in which it recommends that the EU should prioritise a growth strategy that focuses on promoting competitiveness, innovation and deeper integration, while transitioning to a greener economy.

ECJ Advocate General issues preliminary ruling on banks’ contributions to resolution funds

Advocate General Campos Sánchez-Bordona of the European Court of Justice (ECJ) delivered a preliminary ruling in the case of Iccrea Banca SpA Istituto Centrale del Credito Cooperativo v Banca d’Italia (Case C‑414/18). The ruling relates to the contributions that credit institutions are required to pay to the SRF and to a national resolution fund (NRF) in order to finance those funds. 

 

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Risk management and controls

 

FSB launches survey on response to and recovery from cyber incidents

The FSB published a survey of industry practices in both the financial and non-financial industry sectors on effective practices in response to, and in order to recover from, cyber incidents. Responses are requested by 28 August 2019.

Risk Coalition seeks comment on risk principles and guidance

The Risk Coalition is consulting on the subject of the principles and guidance for board risk committees and UK financial services sector risk functions. The coalition is composed of not-for-profit professional bodies and membership organisations that endeavour to raise the standards of UK risk governance and management. The consultation closes 20 September 2019.

FCA publishes findings of Retail banking: Business continuity planning

The FCA published the findings of its review of business continuity planning (BCP) amongst several small and medium-sized (SME) retail banks, payments institutions and electronic money institutions. This includes examples of good practice and potential areas for enhancement in the areas of planning and preparation, response and recovery.

PwC and TheCityUK give evidence to Treasury Committee on operational resilience

The House of Commons Treasury Committee published oral evidence given on 9 July 2019 as part of its inquiry into IT failures in the financial services sector. Evidence was given by Simon Chard, a financial services partner at PricewaterhouseCoopers LLP (PwC), Sarah Isted, financial services risk and regulation at PwC, and Marcus Scott, the chief operating officer of TheCityUK. 

 

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Financial crime

 

Directive on law enforcement access to financial information published in OJ

Directive (EU) 2019/1153 of the European Parliament and of the Council of 20 June 2019 laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences, and repealing Council Decision 2000/642/JHA was published in the Official Journal of the EU.

EU Parliament and Commission statements relating to Directive (EU) 2019/1153 on the use of information to prevent, detect, investigate or prosecute money laundering offences published in Official Journal

Statements relating to Directive (EU) 2019/1153 of the European Parliament and of the Council of 20 June 2019 laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences, and repealing Council Decision 2000/642/JHA were published in Official Journal.

UK government publishes economic crime plan 2019 to 2022

HMT and the Home Office published an economic crime plan for 2019 to 2022, providing information on action being taken by the public and private sectors. The plan aims to draw together actions to overhaul the approach to tackling economic crime, with greater partnering between the government, law enforcement and the private sector. It sets out seven priority areas that were agreed in January 2019 by the Economic Crime Strategic Board, the ministerial level public-private board charged with setting the UK’s strategic priorities for combatting economic crime.

FCA reports Richard Baldwin’s conviction for dealing in criminal property

Following the lifting of reporting restrictions, the FCA announced that, on 13 July 2017, Richard Baldwin was convicted of dealing in criminal property between October 2007 and November 2008. The criminal property laundered was £1.5m, representing the proceeds of a conspiracy to insider deal by Martyn Dodgson and Andrew Hind. Mr Baldwin used off-shore companies, bank accounts and false invoices to effect his money laundering.

FCA responds to Treasury Committee letter on bank signature forgery campaign

The Treasury Committee published a letter its chair, Nicky Morgan MP, received from the chief executive of the FCA, Andrew Bailey, regarding the bank signature forgery campaign. The letter, dated 11 July 2019, responds to Ms Morgan’s letter dated 8 July in which she asked the FCA to engage with the bank signature forgery campaign about evidence they possessed relating to the allegations.

FCA announces participants and user cases for 2019 AML TechSprint

The FCA announced the participating firms, data providers and user cases for the 2019 global anti-money laundering (AML) and financial crime TechSprint, which runs from 29 July to 2 August 2019. The FCA will be working with international colleagues from the US, Europe, Africa, Asia and the Pacific, at the FCA offices in London, with a satellite office in Washington. The aim is to develop solutions at the TechSprint that will go on to be tested in the real world through the Sandbox and GFIN network.

N v Royal Bank of Scotland plc

Bank–Contract. The claimant authorised payment institution, which provided foreign exchange and payment services, challenged the defendant bank's decision to terminate its banking relationship with immediate effect on the grounds of suspected money laundering and commingling between suspect accounts and some of the claimant's accounts. The Commercial Court, dismissing the claim, held that the bank's decision was a proper response to the circumstances for which the claimant was required to take responsibility in circumstances where the claimant ought to be better prepared to guard against money laundering.

 

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Consumer protection and claims management regulation

 

Treasury Committee publishes government response to Consumers’ access to financial services report

The Treasury Committee published the government’s response to the Committee’s Consumers’ access to financial services report. In the response, the government notes the Committee’s comprehensive report and says it carefully considered the Committee’s recommendations, which highlight important issues on access to financial services. The government states that it already made substantial progress in tackling financial exclusion and believes that all individuals, regardless of their background or income, should possess access to useful and affordable financial products and services.

Treasury Committee publishes PSR and BoE responses to its report on consumers’ access to financial services

Following the publication by the Treasury Committee of its report on consumers’ access to financial services (HC 1642), on 8 and 12 July 2019 the Committee received the PSR and BoE responses to the report. The PSR’s response focused on the provision of ATMs, the wider workplan on access to cash, and payment terminal providers and manufacturers. The BoE’s response concerns the timeline for the implementation of the Access to Cash Review recommendations.

Public Accounts Committee calls on regulators to work together to prevent exploitation of consumers

The Public Accounts Committee published a report on consumer protection. The report finds that many consumers face problems accessing water, energy, communications and financial services, and regulators take an inconsistent approach in protecting often vulnerable consumers. The Committee therefore calls on regulators to work together to improve choice and services for consumers and prevent consumers from being exploited. 

 

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Enforcement and redress

 

FOS publishes its annual report for 2018-2019

The FOS published its annual report for 2018 to 2019, setting out information about its work, with commentary from the chair, Sir Nicholas Montagu, and chief ombudsman & chief executive, Caroline Wayman.

HSBC extends redress scheme for unreasonable debt collection charge

The FCA announced that HSBC voluntarily agreed to extend its redress scheme for customers who potentially lost out by paying an unreasonable debt collection charge imposed by HFC Bank Ltd (HFC) and John Lewis Financial Services Limited (JLFS). Both HFC and JLFS are now part of HSBC UK Bank Plc.

ESMA publishes first annual report on MiFID II sanctions and measures

ESMA published its first report concerning sanctions and measures imposed under Directive 2014/65/EU (MiFID II) by national competent authorities (NCAs) in 2018. Given that MiFID II only entered into application on 3 January 2018 and transposition was delayed in some Member States, ESMA does not believe that the data allows for any clear trends or tendencies to be observed, and it decided not to produce detailed statistics based on the data.

ESMA amends enforcement decisions on Nordic banks’ CRAR activities

ESMA published amended enforcement decisions regarding Nordea Bank, Svenska Handelsbanken, SEB, and Swedbank following a decision by the board of appeal of the European Supervisory Authorities (ESAs BoA).

Regis-TR S.A. fined by ESMA for data access failures

ESMA fined the TR Regis-TR S.A. €56,000, and issued a public notice, for negligently failing to provide to regulators direct and immediate access to details of derivative contracts. In calculating the fine, ESMA considered both aggravating and mitigating factors provided for in EMIR.

Treasury Committee publishes International Stock Exchange correspondence record with FCA on Woodford fund

The Treasury Committee published a document sent to it by the International Stock Exchange Authority Limited (TISEAL), in which TISEAL sets out its record of the correspondence timeline between itself and the FCA regarding the LF Woodford Equity Income Fund. The document lists telephone calls and emails between TISEAL and the FCA between 15 April and 4 July 2019, along with a brief description of their subject, all of which related to the Fund.

FSCS publishes summary note on the basis for protected claims against London Capital & Finance plc

The Financial Services Compensation Scheme (FSCS) published a summary note on the basis for protected claims against London Capital & Finance plc (LCF). The note sets out the FSCS’s findings about the scope of its protection available to LCF customers, clarifying to whom it can offer redress. The FSCS says it believes that Surge Financial Ltd, acting on behalf of LCF, provided a number of LCF clients with misleading advice, in both telephone calls and emails. Advising that happened after LCF became fully authorised on 7 June 2016 can be protected. 

FSCS says good prospect of replacement cover for Alpha Insurance A/S customers

The FSCS updated its webpage for customers of Alpha Insurance A/S, the insurance company that was declared in default on 8 May 2018. Customers of Alpha Insurance are reminded that their policies expired on 11 August 2018.

ESMA publishes 23rd extract from database of enforcement decisions on financial statements

ESMA published an extract from its confidential database of enforcement decisions on financial statements, including a selection of eight decisions taken by national enforcers between December 2016 and December 2018. ESMA regularly publishes extracts from the database to provide issuers and users of financial statements with relevant information on the appropriate application of the IFRS, and to contribute to a consistent application of the IFRS across the EEA. 

 

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Markets and trading

 

Private sector working group recommends legal action plan for EONIA to €STR transition

The private sector working group on euro risk-free rates, established in 2018 by the ECB, the Financial Services and Markets Authority (FSMA), ESMA and the European Commission, published a set of recommendations on the legal action plan for the transition from the euro overnight index average (EONIA) to the euro short-term rate (€STR). The working group’s recommendations include using the €STR plus a fixed spread of 8.5 basis points as the EONIA fallback rate, as well as no longer entering into new contracts referencing EONIA as from 2 October 2019.

ECB announces publication details for the euro short-term rate (€STR)

The ECB announced that, as of the start date on 2 October 2019, the €STR will be published at 08:00 CET on each TARGET2 business day. It will be listed on the ECB’s website, via the Market Information Dissemination (MID) platform, and through the ECB’s Statistical Data Warehouse. Governance of the rate will transpose the International Organization of Securities Commissions (IOSCO) principles on financial benchmarks where relevant, to ensure that an appropriate and transparent control framework in line with international best practice is in place.

EMMI publishes benchmark statement for the administration of EURIBOR

The European Money Markets Institute (EMMI) published the benchmark statement for the administration of EURIBOR. EMMI was authorised by the Belgian FSMA on 2 July 2019 for the administration of EURIBOR, and was been included in ESMA’s register of benchmark administrators on 4 July 2019.

Andrew Bailey on the end of LIBOR

The FCA published a speech by its chief executive, Andrew Bailey, delivered at the Securities Industry and Financial Markets Association LIBOR Transition Briefing in New York. Mr Bailey said good progress is being made across derivatives and securities markets, with transition in loan markets a key next step.

SEC issues statement on LIBOR transition

The Securities and Exchange Commission (SEC) published a statement that encourages market participants to proactively manage their transition away from LIBOR and outlines several potential areas that may warrant increased attention during that time.

ESMA’s Benchmarks Regulation Q&As clarify commodity benchmark definition and the contribution to the euro short-term rate

ESMA issued an update of its Q&As on the European Benchmarks Regulation. The new Q&As provide clarification on the commodity benchmark definition; and the contribution to the €STR.

Commission discusses possible review of the FX Global Code

The Global Foreign Exchange Commission (GFXC) released details of its 22–23 May 2019 Tokyo meeting, in which the committee discussed its mandate to consider the possibility of a comprehensive review of the FX Global Code at least every three years. The GFXC declared that it would ‘seek feedback through multiple channels’. The GFXC also announced that Neill Penney, managing director and co-head of trading at Refinitiv, was chosen as GFXC’s co-vice chair for a two-year term. 

 

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MiFID II

 

ESMA consults on prices for pre- and post-trade data and the post-trade consolidated tape for equity instruments

ESMA launched a public consultation on the development in prices for pre- and post-trade data and on the post-trade consolidated tape for equity instruments. The consultation closes on 6 September 2019.

ESMA consults on draft guidelines on MiFID II compliance function requirements

ESMA launched a consultation on draft guidelines on certain aspects of the compliance function requirements under the recast MiFID II. The consultation closes on 15 October 2019.

ESMA launches call for evidence on certain investor protection topics in the context of the reports to be submitted by the Commission under Article 90 of MiFID II

ESMA published a call for evidence on certain investor protection topics included in the European Commission’s mandate to ESMA on the reports to be submitted by the Commission under Article 90 of MiFID II.

ESMA issues statement on derivatives trading and clearing under MiFIR and EMIR Refit

ESMA issued a public statement addressing the misalignment between the scope of counterparties subject to the EMIR clearing obligation (CO) and those subject to the derivatives trading obligation (DTO) under Regulation (EU) 600/2014 (MiFIR). ESMA also clarifies the application date of the DTO for those counterparties impacted by the modified application date of the CO under Regulation (EU) 2019/834 (EMIR Refit).

ESMA updates its Q&As on the implementation of investor protection topics under MiFID II and MIFIR

ESMA updated its Q&As on the implementation of investor protection topics under MiFID II/ MiFIR. A new Q&A was added on best execution and the classification of financial instruments for which ESMA did not publish any calibrated market sizes.

ESMA updates MiFID II and MiFIR market structure and transparency Q&As

ESMA updated its Q&As on market structure and transparency issues under MiFID II and MiFIR.

ESMA publishes responses to its call for evidence on position limits in commodity derivatives

ESMA published the responses received to its Call for evidence on position limits in commodity derivatives. The consultation was launched on 24 May 2019 and closed on 5 July 2019.

ESMA issues an opinion on product intervention measures by the Czech Republic regulator

ESMA issued a positive opinion on product intervention measures taken by the Česká Národní Banka of the Czech Republic the NCA of the Czech Republic. The national measures consist of a permanent restriction on the marketing, distribution or sale of CFDs to retail clients in or from the Czech Republic.

ESMA expresses ‘serious concerns’ over non-compliance with rules on CFDs for retail clients

ESMA published a warning to firms marketing, distributing or selling contracts for differences (CFDs) to retail clients, saying it maintains ‘serious concerns’ about non-compliance with the legal requirements applicable. ESMA says firms must ensure that they are compliant with all applicable legislative requirements and with the relevant product intervention decisions, taking into consideration clarifications provided in relevant Q&As and in the new statement. 

 

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Regulation of capital markets and Capital Markets Union

 

Financial Conduct Authority Handbook aligned with Prospectus Regulation

The FCA published an instrument (FCA 2019/82—Prospectus Regulation Rules Instrument 2019) which makes changes to the FCA Handbook to align it with the Prospectus Regulation. The instrument comes into force on 21 July 2019 and the amendments to the Handbook are identical to those set out in the FCA’s policy statement (PS19/12) published in May 2019.

ESMA consults on Prospectus Regulation disclosure guidelines

ESMA launched a public consultation on its draft guidelines on disclosure requirements under the Prospectus Regulation. The consultation period closes on 4 October 2019.

ESMA updates Prospectus Regulation Q&As

ESMA updated its Q&A document on the Prospectus Regulation by adding 25 new or updated Q&As.

ESMA updates Q&As on the Securitisation Regulation

ESMA updated its Q&As document on the Securitisation Regulation.

ESMA publishes updated ESEF reporting manual

ESMA published an updated version of its European Single Electronic Format Reporting Manual, originally published in December 2017.

BoE publishes minutes of Securities Lending Committee meeting for May 2019

The BoE published the minutes of the Securities Lending Committee meeting for May 2019. The meeting included updates on recent International Securities Lending Association developments, the Securities Financing Transactions Regulation, the CSDR, settlement fails, and the Global Master Securities Lending Agreement.

AFME publishes papers on bank prudential and resolution regulation and a broader overview of its key priorities

AFME published a paper addressed to European decision-makers and other stakeholders, setting out its priority objectives for the EU around bank prudential and resolution regulation. These priorities are: completing the banking union; removing the fragmentation in European banking markets, achieving a CMU, ensuring openness to global capital markets, promoting global consistency and avoiding significant increases in capital requirements. AFME also published a broader, accompanying paper in which it recommends that the EU should prioritise a growth strategy that focuses on promoting competitiveness, innovation and deeper integration, while transitioning to a greener economy.

ESMA updates Q&As on the implementation of the Central Securities Depository Regulation

ESMA updated its Q&As on the implementation of the Central Securities Depository Regulation (CSDR).

ESMA amends enforcement decisions on Nordic banks’ CRAR activities

ESMA published amended enforcement decisions regarding Nordea Bank, Svenska Handelsbanken, SEB, and Swedbank following a decision by the ESAs BoA. 

 

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Regulation of derivatives

 

ESMA expresses ‘serious concerns’ over non-compliance with rules on CFDs for retail clients

ESMA published a warning to firms marketing, distributing or selling contracts for differences (CFDs) to retail clients, saying it maintains ‘serious concerns’ about non-compliance with the legal requirements applicable. ESMA says firms must ensure that they are compliant with all applicable legislative requirements and with the relevant product intervention decisions, taking into consideration clarifications provided in relevant Q&As and in the new statement.

ESMA issues statement on derivatives trading and clearing under MiFIR and EMIR Refit

ESMA issued a public statement addressing the misalignment between the scope of counterparties subject to the EMIR CO and those subject to the DTO under MiFIR. ESMA also clarifies the application date of the DTO for those counterparties impacted by the modified application date of the CO under EMIR Refit.

ESMA updates EMIR Q&As

ESMA issued an updated version of its Q&As on EMIR. Most of the updates reflect the amendments made to EMIR by EMIR refit with effect from 17 June 2019.

ESMA publishes responses to its call for evidence on position limits in commodity derivatives

ESMA published the responses received to its Call for evidence on position limits in commodity derivatives. The consultation was launched on 24 May 2019 and closed on 5 July 2019.

ESMA issues an opinion on product intervention measures by the Czech Republic regulator

ESMA issued a positive opinion on product intervention measures taken by the Česká Národní Banka of the Czech Republic the NCA of the Czech Republic. The national measures consist of a permanent restriction on the marketing, distribution or sale of CFDs to retail clients in or from the Czech Republic.

Regis-TR S.A. fined by ESMA for data access failures

ESMA fined the TR Regis-TR S.A. €56,000, and issued a public notice, for negligently failing to provide to regulators direct and immediate access to details of derivative contracts. In calculating the fine, ESMA considered both aggravating and mitigating factors provided for in the EMIR.

CFTC considers proposals to amend oversight of non-US clearing houses

The Futures Industry Association issued a special report on the open meeting of the Commodity Futures Trading Commission (CFTC) held on 11 July 2019, at which the CFTC voted in favour of two proposals which would amend its oversight of non-US clearing houses (central counterparties) and reduce regulatory overlap.

ISDA publishes summary SwapsInfo for H1 2019 and Q2 2019

The International Swaps and Derivatives Association (ISDA) published summary SwapsInfo for first half of 2019 and second quarter of 2019. SwapsInfo Review provides analysis of interest rate derivatives and credit derivatives trading activity. The report provides a breakdown of cleared, non-cleared, swap execution facility (SEF) and off-SEF traded notional and trade count, as well as product taxonomy and currency information. The summary provides a high-level overview of key trends in the first half of 2019 and second quarter of 2019. The full report will be published by the end of July 2019.

Commission discusses possible review of the FX Global Code

The Global Foreign Exchange Commission (GFXC) released details of its 22–23 May 2019 Tokyo meeting, in which the committee discussed its mandate to consider the possibility of a comprehensive review of the FX Global Code at least every three years. The GFXC declared that it would ‘seek feedback through multiple channels’. The GFXC also announced that Neill Penney, managing director and co-head of trading at Refinitiv, was chosen as GFXC’s co-vice chair for a two-year term. 

 

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Financial reporting standards

 

ESMA issues public statement on IAS 12

ESMA issued a public statement on International Accounting Standard (IAS) 12 Income Taxes, setting out its expectations regarding the application of the requirements relating to the recognition, measurement and disclosure of deferred tax assets arising from unused tax losses in International Financial Reporting Standards (IFRS) financial statements.

ESMA responds to EFRAG’s consultation on accounting treatment of equity instruments

ESMA published its response to the European Financial Reporting Advisory Group (EFRAG)’s consultation on possible alternative accounting treatments to fair value measurement for long-term investment portfolios of equity and equity-type instruments, together with a covering letter. 

ESMA publishes 23rd extract from database of enforcement decisions on financial statements

ESMA published an extract from its confidential database of enforcement decisions on financial statements, including a selection of eight decisions taken by national enforcers between December 2016 and December 2018. ESMA regularly publishes extracts from the database to provide issuers and users of financial statements with relevant information on the appropriate application of the IFRS, and to contribute to a consistent application of the IFRS across the EEA. 

 

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Investment funds and asset management

 

Regulation and Directive on cross-border distribution of collective investment undertakings published in OJ

Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulation (EU) 345/2013 (the European Venture Capital Funds Regulation), Regulation (EU) 346/2013 (the European Social Entrepreneurship Funds Regulation) and Regulation (EU) 1286/2014 (the PRIIPs Regulation), and Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019 amending Directive 2009/65/EC (the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive) and Directive 2011/61/EU (the Alternative Investment Fund Managers Directive) with regard to cross-border distribution of collective investment undertakings, was published in the Official Journal of the EU.

ESMA launches consultation on performance fee guidelines for UCITS funds

ESMA launched a consultation setting out draft guidelines on performance fees under the UCITS Directive. The draft guidelines aim to harmonise the way in which performance fees can be charged to UCITS and their investors while ensuring common standards of disclosure across the EU. The consultation closes on 31 October 2019.

ESMA launches call for evidence on certain investor protection topics in the context of the reports to be submitted by the Commission under Article 90 of MiFID II

ESMA published a call for evidence on certain investor protection topics included in the European Commission’s mandate to ESMA on the reports to be submitted by the EC under Article 90 of MiFID II.

AIMA and RSM publish survey on fees and alignment of interest

The Alternative Investment Management Association (AIMA) and RSM published a survey which shows a new average management fee of 1.3% of assets under management (AUM) and 1.4% for new funds launched in the past 12 months.

EFAMA issues statement on regulatory concerns over exchange-traded funds

The European Fund and Asset Management Association (EFAMA) issued a statement on exchange-traded funds (ETFs), commending the work being done by some national regulators and their active role within the ongoing IOSCO-led thematic review of the ETF ecosystem. EFAMA argues that any further regulatory action should be carefully calibrated, and based on evidence, a clearer understanding of the interaction between ETFs and their broader ecosystem, as well as on existing regulation.

Treasury Committee publishes International Stock Exchange correspondence record with FCA on Woodford fund

The Treasury Committee published a document sent to it by TISEAL, in which TISEAL sets out its record of the correspondence timeline between itself and the FCA regarding the LF Woodford Equity Income Fund. The document lists telephone calls and emails between TISEAL and the FCA between 15 April and 4 July 2019, along with a brief description of their subject, all of which related to the Fund. 

 

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Banks and mutuals

 

FCA publishes findings of Retail banking: Business continuity planning

The FCA published the findings of its review of BCP amongst several SME retail banks, payments institutions and electronic money institutions. This includes examples of good practice and potential areas for enhancement in the areas of planning and preparation, response and recovery.

BoE releases Q1 2019 statistics on banking sector regulatory capital

The BoE released statistics on banking sector regulatory capital for the first quarter of 2019 Q1. They show levels of capital and risk-weighted assets for the UK banking sector, including breakdowns of the movements in different tiers of capital and risk exposure types, and overall capital ratios.

European Parliament discusses possible new EU plans to finance banks under resolution

The European Parliament published a briefing on the banking union and new arrangements to finance banks under resolution. It describes the existing arrangements in the EU, compares those arrangements with the US and the UK regimes, and considers possible new arrangements along the lines of the US and UK regimes. The briefing states that the resolution of Banco Popular raised questions as to whether the existing EU financing arrangements were sufficiently robust to finance banks under resolution.

HSBC extends redress scheme for unreasonable debt collection charge

The FCA announced that HSBC voluntarily agreed to extend its redress scheme for customers who potentially lost out by paying an unreasonable debt collection charge imposed by HFC and JLFS. Both HFC and JLFS are now part of HSBC UK Bank Plc.

OBIE launches Fingleton and ODI report examining the purpose, progress and potential of Open Banking

The Open Banking Implementation Entity (OBIE) announced the launch of a report it commissioned from Fingleton and the Open Data Institute (ODI) which examines the purpose, progress and potential of Open Banking. The report, ‘Open Banking: Preparing for lift off’, reviews the progress already made and the potential for Open Banking to become a cornerstone of the digital economy, and makes some detailed recommendations on how Open Banking could be further strengthened.

Lending Standards Board increases threshold level to protect more businesses

The Lending Standards Board (LSB) announced that the Standards of Lending Practice for business customers threshold increased to protect businesses with a turnover over of up to £25m. The standards originally only covered businesses with a turnover of £6.5m but will now aim to bring consistency in the treatment of SME. The existing section of financial difficulty was also developed to include a set of standards that focus on treatment of customers in business support units, as well as including an enhanced level of LSB oversight. The new standards will come into effect on 1 November 2019 when the current set of standards will become obsolete.

AFME publishes papers on bank prudential and resolution regulation and a broader overview of its key priorities

AFME published a paper addressed to European decision-makers and other stakeholders, setting out its priority objectives for the EU around bank prudential and resolution regulation. These priorities are: completing the banking union; removing the fragmentation in European banking markets, achieving a CMU, ensuring openness to global capital markets, promoting global consistency and avoiding significant increases in capital requirements. AFME also published a broader, accompanying paper in which it recommends that the EU should prioritise a growth strategy that focuses on promoting competitiveness, innovation and deeper integration, while transitioning to a greener economy.

Banks and venture capital firms sign Investing in Women Code

HMT announced that plans to increase the number of British female entrepreneurs by half took ‘a leap forward’, with major banks and venture capital firms signalling their support. The Investing in Women Code is a commitment to support female entrepreneurship in the UK by improving women’s access to the advice, resources and finance needed to build a business.

ECJ Advocate General issues preliminary ruling on banks’ contributions to resolution funds

Advocate General Campos Sánchez-Bordona of the ECJ delivered a preliminary ruling in the case of Iccrea Banca SpA Istituto Centrale del Credito Cooperativo v Banca d’Italia (Case C‑414/18). The ruling relates to the contributions that credit institutions are required to pay to the SRF and to a NRF in order to finance those funds.

N v Royal Bank of Scotland plc

Bank–Contract. The claimant authorised payment institution, which provided foreign exchange and payment services, challenged the defendant bank's decision to terminate its banking relationship with immediate effect on the grounds of suspected money laundering and commingling between suspect accounts and some of the claimant's accounts. The Commercial Court, dismissing the claim, held that the bank's decision was a proper response to the circumstances for which the claimant was required to take responsibility in circumstances where the claimant ought to be better prepared to guard against money laundering.

Top EU court to weigh banking cases over unfair loans

The EU’s highest court was referred several questions about how an EU directive on unfair terms in consumer contracts should be applied to two separate banking disputes, one involving a unit of Spanish group Banco Santander and another originating from Romania.

SRB announces growth in SRF to €33bn after latest round of transfers

The Single Resolution Board (SRB), the central resolution authority within the banking union, announced that the Single Resolution Fund (SRF) received a cash injection of €7.8bn from 3,186 institutions for the year 2019. This brings the total amount in the SRF to just under €33bn. The target size of the SRF is intended to be at least 1% of covered deposits by end 2023, which is expected to be about €60bn. 

 

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Consumer credit, mortgage and home finance

 

FCA calls for experts for Credit Information Market Study MS19/1

The FCA issued a call for experts to contribute to its Credit Information Market Study (MS19/1), which it launched on 27 June 2019. The FCA updated its MS19/1 webpage on 15 July to add a request for representatives to join their new group of experts, which will explore how the credit information market might evolve in the future.

ECJ provides interpretation of creditors' pre-contract obligations under Articles 5(6) and 8(1) of CCD (ECJ)

In Michel Schyns v Belfius Banque SA Case (C 58/18) the ECJ was asked to give a preliminary ruling with regard to the relationship between different pre-contractual obligations on the creditor under Article 5(6) of the CCD. In particular, following a referral from a Belgian court, the specific points at issue concerned the extent of the pre-contractual obligation to provide explanations under Article 5(6) of the CCD and the potential importance of the assessment of the creditworthiness of the consumer provided for in Article 8 of the CCD for the conclusion of the agreement. 

 

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Insurance and pensions

 

EIOPA launches consultation on increased proportionality of supervisory reporting and public disclosure

The European Insurance and Occupational Pensions Authority (EIOPA) published a package of consultation documents on supervisory reporting and public disclosure in the context of its work on the 2020 Solvency II Review. EIOPA will be consulting on the review of supervisory reporting and public disclosure in two waves. This consultation package is the first. The deadline for feedback is 18 October 2019. The package includes:

EIOPA consults on its advice on harmonisation of national insurance guarantee schemes

EIOPA launched a consultation on its advice on the harmonisation of national insurance guarantee schemes across EU Member States. This consultation is a draft response to the Call for Advice of the European Commission of 11 February 2019 on the part linked with insurance guarantee schemes. Stakeholders are invited to provide feedback to the draft advice by 18 October 2019. The final advice will be included in the 2020 Solvency II Review Opinion.

EIOPA submits final draft ITS amending Solvency II reporting and disclosure requirements to Commission for endorsement

EIOPA published two (draft amendment to Commission Implementing Regulation (EU) 2015/2450 and draft amendment to Commission Implementing Regulation (EU) 2015/2452) final draft Commission Implementing Regulations which amend the reporting and disclosure requirements (specifically requirements relating to procedures, formats and templates) under the Solvency II Directive, which EIOPA submitted to the European Commission for endorsement.

FCA consults on new rule on travel insurance for consumers with medical conditions

The FCA launched a consultation on proposals designed to help consumers with pre-existing medical conditions (PEMCs) get better access to travel insurance products. CP19/23, Signposting to travel insurance for consumers with medical conditions, seeks views on introducing the new ‘signposting’ rule, to provide consumers with details of a directory of travel insurance firms that possess the appetite and capability to cover consumers with more serious PEMCs. Feedback is sought by 15 September 2019. 

PRA letter clarifies Solvency II remuneration requirements for insurers

The executive director of insurance supervision at the PRA, David Rule, wrote a letter to chairs of remuneration committees of PRA-regulated insurers which clarifies the PRA’s expectations regarding the implementation of the remuneration requirements of Delegated Regulation (EU) 2915/35 supplementing Solvency II.

Working Group on sterling risk-free reference rates asks EIOPA to raise visibility of IBOR/LIBOR transition

The BoE published a letter from the Working Group on sterling risk-free reference rates to EIOPA, in which the Working Group welcomes EIOPA’s decision to add the monitoring of LIBOR transition to its general work on insurance risk-free reference rates but, with known deadlines approaching, encourages EIOPA to go beyond monitoring transition to now actively removing the recognised Solvency II barriers to transition. 

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Payment services and systems

 

PSR consults on proposed approach to the profitability analysis as part of its market review into the supply of card-acquiring services

The PSR published consultation paper MR18/1.6 on its approach to the profitability analysis, and invited comments by 1 August 2019. The consultation forms part of the PSR’s market review into the supply of card-acquiring services in the UK. The PSR published the draft terms of reference for its work in July 2018 and final terms of reference in January 2019, taking account of the feedback it received.

PSR publishes access and governance reports on payment systems 2019

The PSR published access and governance reports for Visa Europe,MastercardLINK Scheme, and Pay.UK. Operators must comply with PSR directions and report annually on how they’re achieving compliance. The reports indicate how the operators responded to these rules over the 12-month period from 1 October 2017 to 30 September 2018.

OBIE launches Fingleton and ODI report examining the purpose, progress and potential of Open Banking

The OBIE announced the launch of a report it commissioned from Fingleton and the ODI which examines the purpose, progress and potential of Open Banking. The report, ‘Open Banking: Preparing for lift off’, reviews the progress already made and the potential for Open Banking to become a cornerstone of the digital economy, and makes some detailed recommendations on how Open Banking could be further strengthened.

Treasury Committee publishes PSR and BoE responses to its report on consumers’ access to financial services

Following the publication by the Treasury Committee of its report on consumers’ access to financial services (HC 1642), on 8 and 12 July 2019 the Committee received the PSR and BoE responses to the report. The PSR’s response focused on the provision of ATMs, the wider workplan on access to cash, and payment terminal providers and manufacturers. The BoE’s response concerns the timeline for the implementation of the Access to Cash Review recommendations. 

 

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Indian and UK leaders discuss financial services ties and explore new business opportunities

The UK and Indian governments announced plans to strengthen UK-Indian trade relations with an emphasis on financial services, trade and technology at the India Day summit held in London.

CFTC considers proposals to amend oversight of non-US clearing houses

The Futures Industry Association issued a special report on the open meeting of the CFTC held on 11 July 2019, at which the CFTC voted in favour of two proposals which would amend its oversight of non-US clearing houses (central counterparties) and reduce regulatory overlap.

SEC issues statement on LIBOR transition

The SEC published a statement that encourages market participants to proactively manage their transition away from LIBOR and outlines several potential areas that may warrant increased attention during that time. 

 

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Fintech and virtual currencies

 

ESMA report examines the status of licencing regimes of fintech firms across the EU

ESMA published a report on the status of licencing regimes for fintech firms across the EU. The report is based on two surveys conducted by ESMA since January 2018, which gathered evidence from NCAs. ESMA concludes that, based on the evidence gathered, at present most innovative business models can operate within the existing EU rules. ESMA says the report reinforces its conclusions made in recent reports on crypto-assets, cyber security and innovation facilitators, but does not make additional recommendations for changes in EU regulation at this stage.

Christopher Woolard outlines the FCA’s approach to AI in financial services

The FCA published a speech by its executive director of strategy and competition, Christopher Woolard, delivered at the Alan Turing Institute's AI ethics in the financial sector conference. Mr Woolard set out the FCA’s approach to the developing field of AI in financial services, saying in the middle of a complex picture, where the FCA’s responsibilities are growing, the regulator needs to think about how it can ensure its interventions cause the biggest impact.

FCA announces participants and user cases for 2019 AML TechSprint

The FCA announced the participating firms, data providers and user cases for the 2019 global AML and financial crime TechSprint, which runs from 29 July to 2 August 2019. The FCA will be working with international colleagues from the US, Europe, Africa, Asia and the Pacific, at the FCA offices in London, with a satellite office in Washington. The aim is to develop solutions at the TechSprint that will go on to be tested in the real world through the Sandbox and GFIN network.

ICMA updates its fintech mapping directory

ICMA updated its fintech mapping directory, which compares the capabilities of different providers and aims to create greater transparency in the market. It focuses on solutions available in repo and cash bond markets, and ancillary categories such as KYC onboarding, as well as workflow and communication. The directory forms part of ICMA’s efforts to promote automation and efficiency in trade processing. 

 

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Crowdfunding

 

John Glen seeks clearance on crowdfunding proposals

HMT published letters from the economic secretary John Glen MP to the chair of the House of Lords European Union Committee, Lord Boswell of Aynho, and to Sir William Cash MP, the chair of the Commons European Scrutiny Committee. The letters update the committees on the European Commission’s proposals for a regulation on European Crowdfunding Service Providers for Business and the related proposal for a Directive amending MiFID II. 

 

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Dates for your diary

 

DateSubjectEvent

 

21 July 2019

 

Regulation of capital markets

 

The Prospectus Regulation will be fully applicable by 21 July 2019.
Two delegated regulations supplementing the Prospectus Regulation (Commission Delegated Regulation (EU) 2019/979 and Commission Delegated Regulation (EU) 2019/980) will apply from 21 July 2019.

22 July 2019

Banks and mutuals

 

 

The deadline for responses to the Competition and Markets Authority’s review of Part 6 of the Retail Banking Market Investigation Order 2017 is 22 July 2019.
23 July 2019

Regulated activities

 

 

The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2019 (SI 2019/1067) will enter into force on 23 July 2019.
26 July 2019

Sustainable finance

 

 

The deadline for responses to EIOPA’s consultation on a draft opinion on sustainability within Solvency II is 26 July 2019.
26 July 2019

Sustainable finance

 

 

The deadline for stakeholders to provide written submissions for the Treasury Committee’s inquiry into the decarbonisation of the UK economy and green finance is 26 July 2019.

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