FS weekly highlights—19 March 2020

FS weekly highlights—19 March 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Financial crime
Risk management and controls
Complaints, compensation and claims management
Competition in financial services
Markets and trading
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Securities financing transactions
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

European Commission sets out immediate response to mitigate the economic impact of coronavirus (COVID-19)

The UK Cabinet Office published a communication from the European Commission to the European Parliament, the European Council, the Council, the European Central Bank (ECB), the European Investment Bank and the Eurogroup setting out an EU co-ordinated economic response to the coronavirus (COVID-19) outbreak. It calls on Member States to be vigilant and ‘use all tools available’ at EU and national level to avoid that the current crisis leading to a loss of critical assets and technology. This includes tools like national security screening and other security related instruments.

Source: Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Investment Bank and the Eurogroup co-ordinated economic response to the COVID-19 outbreak.

ESMA requires net short position holders to report positions of 0.1% and above in light of coronavirus (COVID-19) pandemic

The European Securities and Markets Authority (ESMA) issued a decision temporarily requiring the holders of net short positions in shares traded on an EU regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital after the entry into force of the decision.

Source: ESMA requires net short position holders to report positions of 0.1% and above.

European Banking Authority delays EU-wide stress test until 2021

In response to the global spread of the coronavirus (COVID-19), the European Banking Authority (EBA) announced that it has delayed the EU-wide stress test until 2021. This measure is intended to allow banks to address critical operational challenges and focus on supporting household and corporate sector customers. The EBA also recommended that national competent authorities (NCAs) take full advantage of the flexibility embedded in the banking sector regulatory framework.

Source: EBA statement on actions to mitigate the impact of COVID-19 on the EU banking sector.

ECB relaxes capital requirement rules in face of coronavirus (COVID-19) outbreak

The ECB announced a number of measures to ensure that its directly supervised banks can ‘continue to fulfil their role in funding the real economy as the economic effects of the coronavirus become apparent’. The ECB will allow banks to operate temporarily below the level of capital defined by the Pillar 2 Guidance (P2G), the capital conservation buffer (CCB) and the liquidity coverage ratio (LCR). The ECB considers that these temporary measures will be enhanced by the appropriate relaxation of the countercyclical capital buffer (CCyB) by the national macroprudential authorities.

Source: ECB Banking Supervision provides temporary capital and operational relief in reaction to coronavirus.

ESMA opinion says Spanish emergency short selling measure ‘necessary’ in light of coronavirus (COVID-19)

ESMA published an opinion on a proposed emergency measure by the Spanish Comision Nacional del Mercado de Valores (CNMV) under Section 1 of Chapter V of Regulation (EU) 236/2012 (the Short Selling Regulation (SSR)). The measure has been proposed in response to the outbreak of the coronavirus (COVID-19) pandemic.

Source: Opinion of the European Securities and Markets Authority of 17 March 2020 on a proposed emergency measure by Comision Nacional del Mercado de Valores under Section 1 of Chapter V of Regulation (EU) No 236/2012.

ESMA agrees to three-month short selling ban on Italian MTA market due to coronavirus (COVID-19)

ESMA issued an official opinion agreeing to an emergency short selling prohibition, for a period of three months, by the Commissione Nazionale per le Società e la Borsa (CONSOB) on all transactions which might constitute or increase net short positions on all shares traded on the Italian Mercato Telematico Azionario (MTA) regulated market, for which CONSOB is the relevant competent authority, as well as to all related instruments relevant for the calculation of the net short position. Shorter bans, also approved by ESMA, were introduced by Spanish regulator CNMV and by the French AMF. All three bans have been introduced in response to the coronavirus (COVID-19) pandemic.

Sources: ESMA issues positive opinion on short selling ban by Italian CONSOB and  ESMA issues positive opinion on short selling ban by French AMF.

BoE outlines the Covid Commercial Financing Facility

The BoE published a Market Notice dated 18 March 2020, outlining a joint HM Treasury and BoE Covid Commercial Financing Facility (CCFF). The CCFF will provide funding to businesses by purchasing commercial paper of up to one-year maturity, issued by firms making a material contribution to the UK economy. It will help businesses across a range of sectors to pay wages and suppliers, even while experiencing severe disruption to cashflows.

Sources: Bank of England Market Notice and Exchange of letters between the chancellor of the exchequer and the governor of the Bank of England, 17 March 2020.

FCA prohibits short selling in a list of instruments

The Financial Conduct Authority (FCA) notified that it is temporarily prohibiting short selling in a number of specified instruments under Articles 23(1) and 26(4) of Regulation (EU) No 236/2012 (the Short Selling Regulation). This follows a decision made by another EU competent authority.

Source: Temporary prohibition of short selling—17 March.

Financial services regulators and industry bodies provide updates on coronavirus (COVID-19): 18 March 2020

The FCA published the 27th edition of its Primary Market Bulletin (PMB), which provides key commentary for issuers and market participants in light of the coronavirus (COVID-19) pandemic. The ECB updated its COVID-19 statement, saying it is ready to adjust all of its measures, as appropriate, should this be needed to safeguard liquidity conditions in the banking system. The Personal Finance Society (PFS) has also published an update on its own response, together with contingency planning & client communications advice for its members, while the Building Societies Association (BSA) has issued Q&As on mortgage-related issues.

Sources: FCA Primary Market Bulletin Issue No. 27—Coronavirus updateECB statementImportant coronavirus updateCoronavirus—financial protection options and  BSA position on coronavirus

Financial services regulators and industry bodies provide updates on coronavirus (COVID-19): 17 March 2020

The FCA announced that it is ready to take any steps necessary to ensure customers are protected and markets continue to function well in response to the coronavirus (COVID-19) outbreak. It announced extensions in consultation/call for evidence response times and the delay of all publications due before end-June 2020. The Financial Services Compensation Scheme (FSCS) and the Futures Industry Association (FIA) also provided updates.

Sources: FCA information for firms on coronavirus COVID-19 responseUK Finance responds to FCA information for firms on coronavirus COVID-19 responseFSCS open and fully operational and Update on FIA’s response to coronavirus COVID-19.

FCA Primary Market Bulletin No. 27—coronavirus (COVID-19) issues

The FCA published the 27th edition of the Primary Markets Bulletin, the FCA newsletter for primary markets participants. This special edition provides commentary for issuers and market participants in light of the coronavirus (COVID-19) pandemic.

Source: Primary Market Bulletin Issue No. 27 – Coronavirus update.

Central banks announce measures to improve liquidity

The Bank of Canada, the BoE, the Bank of Japan, the ECB, the Federal Reserve, and the Swiss National Bank announced a co-ordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements.

Sources: Co-ordinated central bank action to enhance the provision of global US dollar liquidity and  Statement from the governor of the Bank of England, Mark Carney, and incoming governor, Andrew Bailey.

Brexit Bulletin—EU reviews draft treaty text as coronavirus (COVID-19) halts talks on UK-EU future relationship

The UK and EU confirmed that round two of the negotiations on the future UK-EU relationship will not go ahead in London next week as planned, due to the latest coronavirus (COVID-19) developments. The negotiating teams are looking at alternatives for continuing the talks remotely. Meanwhile, the European Commission prepared a draft of its proposed future partnership agreement and shared it with the European Parliament and Council for discussion.

Source: Joint statement by EU and UK negotiators on next week's round of negotiations.

Coronavirus (COVID-19): Carney and Sunak meet banking industry representatives to discuss SME support

The chancellor of the exchequer, Rishi Sunak, and the governor of the Bank of England (BoE), Mark Carney, held a banking industry summit on support for small and medium sized businesses (SMEs) affected by the coronavirus. Together with BoE governor-designate Andrew Bailey and economic secretary to the Treasury John Glen MP, they met representatives from the banking industry to discuss co-ordinated action to support SMEs whose finances are affected by the outbreak.

Source: Chancellor and Bank of England Governor hold Coronavirus banking industry summit.

ISDA issues market closure announcement for Philippines equity, FX and interest rate markets

The International Swaps and Derivatives Association (ISDA) said it has been made aware of the closure of certain markets and systems in the Philippines, which are pertinent to the derivatives market. ISDA is collating further details on the closures, with a view to issuing guidance similar to that which has been produced for previous market closures.

Source: Market closure announcement: Closure of Philippines Equity, FX and Interest Rate Markets.

ISDA extends deadline for its pre-cessation fallbacks consultation

ISDA extended the deadline for its consultation on pre-cessation fallbacks. The deadline for responses will now be 1 April 2020. ISDA says it feels that, given the coronavirus (COVID-19) outbreak, this extra time is ‘appropriate to ensure derivatives market participants are able to give this important consultation the necessary time and consideration’.

Source: Pre-cessation consultation: Responding to COVID-19—extension.

UK Finance urges COVID-19-affected businesses to contact finance providers as early as possible

UK Finance responded to the chancellor of the exchequer and the BoE banking industry summit for support for small and medium sized business (SMEs) affected by the coronavirus (COVID-19). UK Finance urged all businesses to think about how their customers and suppliers could be affected by the global outbreak and to contact their finance providers as early as possible if they think they might have any additional financing requirements.

Source: UK Finance responds to chancellor and Bank of England banking industry summit for support for small and medium sized business affected by coronavirus.

Better Finance states Europe needs a global fiscal and health response against coronavirus (COVID-19)

Better Finance published a blog post noting that the oil price war between Russia and Saudi Arabia delivered a second shock to the economic disruption already brought upon by coronavirus (COVID-19). A third coup will follow, as the sharp falls in financial markets destroy wealth and magnify the damage to the economy of countries around the globe.

Source: Europe needs a global fiscal and health response against coronavirus.

LMA, ISDA and the IAIS publish responses to coronavirus (COVID-19)

The Lloyds Market Association (LMA), ISDA and the International Association of Insurance Supervisors (IAIS) published their responses to the coronavirus (COVID-19) pandemic.

Sources: LMA response to COVID-19COVID-19: ISDA update and Statement from IAIS Jonathan Dixon about COVID-19.

Lending Standards Board issues statement on coronavirus (COVID-19)

The Lending Standards Board (LSB) issued a statement on the coronavirus (COVID-19) outbreak, saying it is working with the financial services sector to ensure it is responding effectively. The LSB says it expects all registered firms to have contingency plans in place to deal with major events and continue to support and serve customers.

Source: LSB COVID-19 statement.

Lloyd’s announces business continuity plan in response to coronavirus (COVID-19)

Lloyd’s of London (Lloyd's) announced its business continuity plan in relation to coronavirus (COVID-19). On 13 March 2020, Lloyd’s will test the resilience of the market by closing the Underwriting Room for 24 hours and invoke its Emergency Trading Protocol (ETP). This exercise will provide information on the effectiveness of the ETP. Relevant regulators have been informed of these plans.

Source: COVID-19: Lloyd’s announces plans to stress test the market and Corporation resilience.

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Brexit news

Valdis Dombrovskis outlines equivalence assessment processes for EU and UK

The executive vice-president of the European Commission, Valdis Dombrovskis, wrote to the UK’s chancellor of the exchequer, Rishi Sunak, on the topic of equivalence assessments. Dombrovskis says both the EU and the UK should start these assessments as soon as possible, endeavouring to conclude them before the end of June 2020, but he also emphasises that, as agreed in the Political Declaration, this means proceeding with the assessments as opposed to taking equivalence decisions by that date.

Source: Letter from Commission EVP Valdis Dombrovskis to Mr Rishi Sunak, UK chancellor of the exchequer.

For further information on impact of Brexit on financial services and equivalence, see:  Financial Services passporting, equivalence and the UK post-Brexit.

Brexit Bulletin—EU reviews draft treaty text as coronavirus (COVID-19) halts talks on UK-EU future relationship

The UK and EU confirmed that round two of the negotiations on the future UK-EU relationship will not go ahead in London next week as planned, due to the latest coronavirus (COVID-19) developments. The negotiating teams are looking at alternatives for continuing the talks remotely. Meanwhile, the European Commission has prepared a draft of its proposed future partnership agreement and shared it with the European Parliament and Council for discussion.

Source: Joint statement by EU and UK negotiators on next week's round of negotiations.

FOS makes Exiting the European Union: Deferral of Commencement Instrument 2020

The Financial Ombudsman Service Limited (FOS) made the Exiting the European Union: Deferral of Commencement Instrument 2020. It has made the instrument in the exercise of paragraph 8 (Information, advice and guidance) and related provisions of Schedule 17 to the Financial Services and Markets Act 2000 (FSMA 2000).

Source: Exiting the European Union: Deferral of Commencement Instrument 2020.

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UK, EU and international regulators and bodies

Ombudsman News issue 150 published

FOS published issue 150 of Ombudsman News, which includes articles on the coronavirus, the links between underinsurance, misrepresentation and non-disclosure, the FSO being named as top employer in Stonewall’s Top 100 for 2020, and the FSO’s diversity, inclusion and wellbeing report 2019/20.

Source: Ombudsman News issue 150.

ESMA publishes conclusions reached at January 2020 management board meeting

ESMA published a summary of conclusions reached by its management board at its 28 January 2020 meeting. Among the topics discussed were the Common Supervisory Action on liquidity of funds, implementation of EMIR 2.2, and various issues relating to the MiFID II review.

Source: Summary of conclusions: Management board.

FCA publishes minutes of its 29 and 30 January 2020 board meeting

The FCA published the minutes of its 29 and 30 January 2020 board meeting. In addition to the appointment of two new non-executive directors (Jeannette Lichner and Bernadette Conroy), the board noted items approved since the last meeting (Enterprise Act Report 21 June 2019—12 December 2019 and FEES (Cryptoasset Business) Instrument 2020). Hot topics covered included the FCA’s engagement with Google on misleading advertising for high risk products, minibonds, revised overdraft pricing, Brexit and COVID-19.

Source: FCA board minutes: 29 and 30 January 2020.

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Authorisation, approval and supervision

FCA Insight article warns against measuring corporate culture

The FCA published an Insight article entitled ‘Measuring corporate culture: a warning’. The authors warn against a strong focus on measurement and conclude that truly understanding corporate cultures ‘requires going much more deeply into corporations in order to analyse the values and practices as they have become embedded in everyday work’. This requires up-close methods of investigation; data and measurement can be used to support or to challenge such methods and outcomes, but cannot measure cultural health.

Source: Measuring corporate culture: a warning.

For further information on the FCA’s approach to firm culture, see:  The FCA’s expectations around culture in financial services firms.

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Prudential requirements

PRA completes review of the capital regime for credit unions

The PRA published policy statement PS6/20, Credit unions: Review of the capital regime. PS6/20 provides feedback to responses to CP28/19 Credit unions: Review of the capital regime, and the PRA’s final policy.

Source: Credit unions: Review of the capital regime.

For further information on regulation for credit unions, see:  Credit unions—essentials.

ECB relaxes capital requirement rules in face of coronavirus (COVID-19) outbreak

The ECB announced a number of measures to ensure that its directly supervised banks can ‘continue to fulfil their role in funding the real economy as the economic effects of the coronavirus (COVID-19) become apparent’. The ECB will allow banks to operate temporarily below the level of capital defined by the Pillar 2 Guidance (P2G), the capital conservation buffer (CCB) and the liquidity coverage ratio (LCR). The ECB considers that these temporary measures will be enhanced by the appropriate relaxation of the countercyclical capital buffer (CCyB) by the national macroprudential authorities.

Source: ECB Banking Supervision provides temporary capital and operational relief in reaction to coronavirus.

European Banking Authority delays EU-wide stress test until 2021

In response to the global spread of the coronavirus (COVID-19), the EBA announced that it has delayed the EU-wide stress test until 2021. This measure is intended to allow banks to address critical operational challenges and focus on supporting household and corporate sector customers. The EBA also recommended that national competent authorities take full advantage of the flexibility embedded in the banking sector regulatory framework.

Source: EBA statement on actions to mitigate the impact of COVID-19 on the EU banking sector.

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Financial stability, recovery and resolution 

Amended ECB credit risk guideline published in the Official Journal

Guideline (EU) 2020/381 of the ECB amending Guideline (EU) 2017/2335 on the procedures for the collection of granular credit and credit risk data (ECB/2020/11), was published in the Official Journal of the EU. The guideline is addressed to Eurosystem central banks.

Source: Guideline (EU) 2020/381 of the European Central Bank (ECB) amending Guideline (EU) 2017/2335 on the procedures for the collection of granular credit and credit risk data (ECB/2020/11).

SRB issues final decision on resolution of Banco Popular Español: no compensation due to shareholders

The Single Resolution Board (SRB) decided that no compensation is due to shareholders and creditors affected by the resolution of Banco Popular Español, S.A. (BPE). It concluded that they would not have been better off under normal insolvency proceedings. The decision is based on the post-resolution valuation by an independent valuer, as well as on the analysis of comments received in the context of the ‘right to be heard’ process.

Source: SRB decides no compensation due to Banco Popular shareholders and creditors, finding that insolvency would have been more costly.

Better Finance states Europe needs a global fiscal and health response against coronavirus (COVID-19)

Better Finance published a blog post noting that the oil price war between Russia and Saudi Arabia delivered a second shock to the economic disruption already brought upon by coronavirus (COVID-19). A third coup will follow, as the sharp falls in financial markets destroy wealth and magnify the damage to the economy of countries around the globe.

Source: Europe needs a global fiscal and health response against coronavirus.

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Financial crime

Commission report assesses implementation of the Market Abuse Directive

The UK Cabinet Office published a report from the European Commission to the European Parliament and the Council on the implementation of Directive 2014/57/EU on criminal sanctions for market abuse (the Market Abuse Directive).

Source: Report from the Commission to the European Parliament and the Council on the implementation of Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (Market Abuse Directive).

For further information on the Market Abuse Directive, see:  Directive 2014/57/EU on criminal sanctions for market abuse.

UK Finance calls for legislation to tackle APP online platform fraud

UK Finance published statistics on 2019 authorised push payment (APP) fraud, and called for cross-sector co-operation to tackle a rise in cases together with legislation to combat the abuse of online platforms by criminals. Authorised push payment (APP) fraud losses rose to £456m in 2019, driven in part by criminals abusing online platforms to scam their victims.

Source: UK Finance: Cross-sector co-operation needed to tackle rise in authorised push payment fraud

For further information on APP, see:  The regulation of payment services providers—essentials.

‘Take Five Week’ raises public awareness of fraud and scams

UK Finance published a blog on ‘Take Five Week’, the fraud and scams awareness campaign that ran from 9-15 March 2020. The week saw the launch of the ‘Take Five Voluntary Charter’, a set of minimum standards signed up to by 27 banks and building societies which sets out the expectations required of signatories. These include prominently displaying the Take Five logo and key messages across a variety of platforms including remote banking, ATM screens and staff communications.

Source: Take Five week—9-15 March.

Treasury Committee publishes government and regulators’ response to IT failures and economic crime enquiries

The Treasury Committee published the government and the regulators’ responses to reports on IT failures and on economic crime by its predecessor committee in the last Parliament.

Source: Committee comments on government and regulator responses to reports.

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Risk management and controls

Treasury Committee publishes government and regulators’ response to IT failures and economic crime enquiries

The Treasury Committee published the government and the regulators’ responses to reports on IT failures and on economic crime by its predecessor committee in the last Parliament.

Source: Committee comments on government and regulator responses to reports.

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Complaints, compensation and claims management

Complaints Commissioner ‘surprised’ by FCA decision not to investigate financial adviser complaint

The Office of the Complaints Commissioner (OCC) published its final report (FCA00683), dated 27 February 2020, concerning a complaint made against the FCA with regards to its decision not to investigate concerns about a firm of financial advisers.

Source: Upheld complaint: Complaints Commissioner final report FCA00683.

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Competition in financial services

UK mergers: CMA confirms clearance of Bottomline Technologies/Experian merger

The Competition and Markets Authority (CMA) confirmed clearance of the acquisition by Bottomline Technologies (de), Inc of Experian Limited’s Experian Payments Gateway business and related assets. This follows the CMA’s provisional finding issued on 18 February 2020 that the deal does not raise competition concerns.

Source: Payment software deal cleared by CMA.

For all live merger investigations before the CMA, see: UK mergers—ongoing cases tracker

CMA varies Santander Open Banking directions

The CMA varied the directions issued to Santander UK plc (Santander) under the Retail Banking Market Investigation Order 2017 (the Order). The variation concerns Santander’s failure to deliver open banking for the c40,000 business current accounts of its subsidiary, Cater Allen.

Source: Retail banking market investigation (update) 18 March 2020: Varied directions for Santander published.

For further information on open banking, see:  Open banking.

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Markets and trading

Commission report assesses implementation of the Market Abuse Directive

The UK Cabinet Office published a report from the European Commission to the European Parliament and the Council on the implementation of Directive 2014/57/EU on criminal sanctions for market abuse (the Market Abuse Directive).

See: LNB News 16/03/2020 70.

Source: Report from the Commission to the European Parliament and the Council on the implementation of Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (Market Abuse Directive).

For further information on the Market Abuse Directive, see:  Directive 2014/57/EU on criminal sanctions for market abuse.

Consultation on swaptions impacted by CCP discounting transition from EONIA to the €STR

The Working Group on Sterling Risk-Free Reference Rates (RFRs) launched a public consultation on whether to issue recommendations to address specific issues for swaption products as a result of the proposed transition from EONIA to the euro short-term rate (€STR).

Source: Working group on euro risk-free rates seeks feedback on swaptions impacted by transition from EONIA to the €STR.

For further information on the transition from EONIA to the €STR, see:  LIBOR transition.

ECB working group on euro RFRs sets out key messages on EONIA to €STR transition and EURIBOR fallbacks

The ECB’s working group on euro RFRs published two factsheets dated March 2020, one setting out key messages for the transition from EONIA to €STR and the other providing information to assist in understanding EURIBOR fallbacks. The factsheets are part of the working group’s communication toolkit, which aims to enable a smooth transition by providing communication material for interested parties to use in their own communication and education efforts.

Sources: Factsheet on EONIA to €STR transition and  Factsheet on EURIBOR Fallbacks.

RFRs Working Group publishes statement on SONIA in bond markets and roadmap on discontinuation of new GBP LIBOR lending

The Working Group on Sterling RFRs published a statement on bond market conventions: ‘Use of the SONIA Index and weighting approaches for observation periods’, and a roadmap: ‘Path to discontinuation of new GBP LIBOR lending by end-Q3 2020’.

Sources: Statement on bond market conventions: Use of the SONIA Index and weighting approaches for observation periods and  Path for discontinuation of new sterling LIBOR-linked lending by end-Q3 2020.

FCA Primary Market Bulletin No. 27—coronavirus (COVID-19) issues

The FCA published the 27th edition of the Primary Markets Bulletin, the FCA newsletter for primary markets participants. This special edition provides commentary for issuers and market participants in light of the coronavirus (COVID-19) pandemic.

Source: Primary Market Bulletin Issue No. 27 – Coronavirus update.

FCA statement on LIBOR contractual triggers

The FCA published a webpage on how it would announce the LIBOR contractual triggers.

Source: LIBOR contractual triggers.

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Regulation of capital markets

ESMA requires net short position holders to report positions of 0.1% and above in light of coronavirus (COVID-19) pandemic

ESMA issued a decision temporarily requiring the holders of net short positions in shares traded on an EU regulated market to notify the relevant national competent authority if the position reaches or exceeds 0.1% of the issued share capital after the entry into force of the decision.

Source: ESMA requires net short position holders to report positions of 0.1% and above.

ESMA opinion says Spanish emergency short selling measure ‘necessary’ in light of coronavirus (COVID-19)

ESMA published an opinion on a proposed emergency measure by the Spanish Comision Nacional del Mercado de Valores (CNMV) under Section 1 of Chapter V of Regulation (EU) 236/2012 (the Short Selling Regulation (SSR)). The measure has been proposed in response to the outbreak of the coronavirus (COVID-19) pandemic.

Source: Opinion of the European Securities and Markets Authority of 17 March 2020 on a proposed emergency measure by Comision Nacional del Mercado de Valores under Section 1 of Chapter V of Regulation (EU) No 236/2012.

ESMA agrees to three-month short selling ban on Italian MTA market due to COVID-19

ESMA issued an official opinion agreeing to an emergency short selling prohibition, for a period of three months, by the Commissione Nazionale per le Società e la Borsa (CONSOB) on all transactions which might constitute or increase net short positions on all shares traded on the Italian Mercato Telematico Azionario (MTA) regulated market, for which CONSOB is the relevant competent authority, as well as to all related instruments relevant for the calculation of the net short position. Shorter bans, also approved by ESMA, were introduced by Spanish regulator CNMV and by the French AMF. All three bans have been introduced in response to the coronavirus (COVID-19) pandemic.

Sources: ESMA issues positive opinion on short selling ban by Italian CONSOB and  ESMA issues positive opinion on short selling ban by French AMF.

FCA prohibits short selling in a list of instruments

The FCA notified that it is temporarily prohibiting short selling in a number of specified instruments under Articles 23(1) and 26(4) of Regulation (EU) No 236/2012 (the Short Selling Regulation). This follows a decision made by another EU competent authority.

Source: Temporary prohibition of short selling—17 March.

FCA notifies temporary short selling prohibition

The FCA temporarily prohibited short selling in a number of instruments under Articles 23(1) and 26(4) of the Short Selling Regulation (EU) 236/2012. The prohibition follows decisions made by Comisión Nacional del Mercado de Valores (CNMV) and CONSOB, and is effective immediately on 13 March 2020 until the end of the trading day on 13 March 2020.

Source: Temporary prohibition of short selling.

Update on proposal for a Regulation on assignments of claims

The Council of the EU published an update on the progress of the European Commission’s proposal for a Regulation on assignments of claims, part of the capital markets union project.

Source: Proposal for a Regulation of the European Parliament and of the Council on the law applicable to the third-party effects of assignments of claims—Information from the Presidency.

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Regulation of derivatives

ISDA issues market closure announcement for Philippines equity, FX and interest rate markets

ISDA said it has been made aware of the closure of certain markets and systems in the Philippines, which are pertinent to the derivatives market. ISDA is collating further details on the closures, with a view to issuing guidance similar to that which has been produced for previous market closures.

Source: Market closure announcement: Closure of Philippines Equity, FX and Interest Rate Markets.

ISDA extends deadline for its pre-cessation fallbacks consultation

ISDA extended the deadline for its consultation on pre-cessation fallbacks. The deadline for responses will now be 1 April 2020. ISDA says it feels that, given the coronavirus (COVID-19) outbreak, this extra time is ‘appropriate to ensure derivatives market participants are able to give this important consultation the necessary time and consideration’.

Source: Pre-cessation consultation: Responding to COVID-19—extension.

ISDA report on operational considerations for FCs under EMIR REFIT

ISDA published a report on the operational challenges and points for consideration arising from the additional reporting requirements for financial counterparties (FCs) introduced by EMIR REFIT (Regulation (EU) 2019/834).

Source: EMIR REFIT: FCs reporting on behalf of both itself and NFC clients—operational considerations.

For further information on the EMIR REFIT, see:  EMIR REFIT and EMIR 2.2 roadmap and  EMIR—essentials.

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Investment funds and asset management

FCA says some property fund suspensions ‘likely to be in the best interests of fund investors’

The FCA released a statement saying it understands that certain Standing Independent Valuers have determined that there is currently material uncertainty over the value of commercial real estate (CRE). In such situations, the FCA says a fair and reasonable valuation of CRE funds cannot be established. As a result, some managers of open-ended CRE funds have temporarily suspended dealing in units of these funds and others are likely to follow for the same reason.

Source: Statement on property fund suspensions.

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Securities financing transactions

Phase 1 firms reporting obligations under the Securities Financing Transactions Regulation

The FCA produced an overview of the Securities Financing Transactions Regulation (SFTR). The SFTR applies directly to the UK for the duration of the transition period and trade repositories will remain regulated by the European Securities and Markets Association. At the end of the transition period, the regulations will be onshored by the European Union (Withdrawal) Act 2018. As of 11 April 2020, reporting obligations will be applicable to phase 1 firms.

Source: Securities Financing Transactions Regulation (SFTR).

For further information on the SFTR, see:  Securities Financing Transactions Regulation (SFTR)—essentials.

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Banks and mutuals

EBA calls for ‘policy-oriented’ research papers on new technologies in the banking sector

The EBA published a call for papers ahead of its 2020 policy research workshop, scheduled to take place in Paris on 12-13 November, on the topic of ‘New technologies in the banking sector—impacts, risks and opportunities’. The organisers are inviting submissions of policy-oriented, preferably empirical, research papers on the topic by 10 July 2020.

Source: 2020 EBA policy research workshop: ‘New technologies in the banking sector—impacts, risks and opportunities’.

PRA completes review of the capital regime for credit unions

The PRA published policy statement PS6/20, Credit unions: Review of the capital regime. PS6/20 provides feedback to responses to CP28/19 Credit unions: Review of the capital regime, and the PRA’s final policy.

Source: Credit unions: Review of the capital regime.

For further information on regulation for credit unions, see:  Credit unions—essentials.

The CMA varied the directions issued to Santander UK plc (Santander) under the Retail Banking Market Investigation Order 2017 (the Order). The variation concerns Santander’s failure to deliver open banking for the c40,000 business current accounts of its subsidiary, Cater Allen.

Source: Retail banking market investigation (update) 18 March 2020: Varied directions for Santander published.

For further information on open banking, see:  Open banking.

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Consumer credit, mortgage and home finance

KH v Sparkasse Südholstein considers the concept of ‘distance contract’ in DMD

Advocate General Sharpston delivered an opinion in case C‑639/18, KH v Sparkasse Südholstein, a request for a preliminary ruling from the Landgericht Kiel (Regional Court, Kiel, Germany). This reference for a preliminary ruling from the Landgericht Kiel required the Court of Justice of the EU to interpret for the first time Article 2(a) of Directive 2002/65/EC on distance marketing of consumer financial services (DMD) and the concept of ‘distance contract’. Within that context, is a subsequent interest rate agreement amending a loan contract only with regard to the interest rate a ‘contract’ to which the provisions of DMD apply? And what are the criteria for determining whether a contract concluded without the simultaneous physical presence of the supplier and the consumer is a ‘distance contract’ within the meaning of Article 2(a) of DMD?

Source: Sparkasse Sudholstein (Consumer protection—Financial services—Opinion) [2020] EUECJ C-639/18 (12 March 2020).

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Regulation of insurance

PRA publishes PS7/20 on Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion under Solvency II

The PRA published policy statement PS7/20: Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion. PS7/20 provides feedback to responses to consultation paper CP26/19: ‘Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion’. It also contains the PRA’s final policy in an updated supervisory statement SS3/15: Solvency II: The quality of capital instruments (see appendix).

Sources: Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion and  Solvency II: the quality of capital instruments.

For further information on the UK transposition of Solvency II, see:  Solvency II—UK transposition and implementation of Solvency II.

FOS report examines customer underinsurance issues and suggests ways forward for firms

FOS published an insights report on underinsurance, misrepresentation and non-disclosure, setting out the possible issues that can occur if someone doesn’t answer questions correctly when taking out insurance. The report also contains some key points for insurers.

Source: Insight in depth: Underinsurance, misrepresentation and non-disclosure.

IAIS publishes Level 2 Document for ICS Version 2.0 for the monitoring period

IAIS published the Level 2 Document for ICS Version 2.0 for the monitoring period. The Level 2 Document follows the Level 1 Document, published in November 2019, which set out the overarching principles and concepts (ie ICS architecture) for the annual confidential reporting of the reference ICS and, at the option of group-wide supervisors (GWS), additional reporting during the five-year monitoring period.

Source: Level 2 Document for ICS Version 2.0 for the monitoring period.

Insurance Europe criticises EIOPA’s ICT security and governance proposals

Insurance Europe (IE) published its response to a consultation by the European Insurance and Occupational Pensions Authority (EIOPA) on its draft guidelines on information and communication technology (ICT) security and governance. IE called on EIOPA to take a more principle-based approach, as its proposals are ‘overly prescriptive in some areas’.

Source: EIOPA ICT security and governance guidelines should be principle-based, aligned with wider EU financial services initiatives.

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Regulation of personal pension and stakeholder products

PLSA publishes Diversity and Inclusion Made Simple guide

The Pensions and Lifetime Savings Association (PLSA) published its new Diversity and Inclusion Made Simple guide, in partnership with Travers Smith. According to the guide, there is robust and extensive evidence showing that teams which are more diverse and inclusive make better decisions and achieve better financial outcomes.

Source: PLSA publishes Diversity and Inclusion Made Simple guide.

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Payment services and systems

PSR provides update on publication of the card-acquiring market review interim report

The Payment Systems Regulator (PSR) provided an update on the interim report of its market review into the supply of card-acquiring services following concerns that the supply of these services may not be working well for merchants, and ultimately consumers. According to the PSR, it is planning to publish the interim report for consultation in June 2020.

Source: Update on publication of the card-acquiring market review interim report.

UK Finance calls for legislation to tackle APP online platform fraud

UK Finance published statistics on 2019 authorised push payment (APP) fraud, and called for cross-sector co-operation to tackle a rise in cases together with legislation to combat the abuse of online platforms by criminals. Authorised push payment (APP) fraud losses rose to £456m in 2019, driven in part by criminals abusing online platforms to scam their victims.

Source: UK Finance: Cross-sector co-operation needed to tackle rise in authorised push payment fraud

For further information on APP, see:  The regulation of payment services providers—essentials.

Central bank digital currency: BoE seeks views on opportunities, risks and design

The BoE published a discussion paper on the opportunities, challenges and possible design of a central bank digital currency (CBDC), which would be an electronic form of central bank money that could be used by households and businesses to make payments. The BoE has not yet made a decision on whether to introduce a CBDC, and intends to engage widely with stakeholders on the benefits, risks and practicalities of doing so. The discussion paper is intended to be the basis for further research and dialogue between the BoE and the payments industry, technology providers, payments users, financial institutions, academics, other central banks, and public authorities.

Source: Central bank digital currency: opportunities, challenges and design.

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Fintech and cryptoassets

Barclays fintech survey finds firms anticipating global payments innovation

Barclays Bank published a report on the future of fintech and potential consumer trends, exploring the ‘disruptive forces reshaping the financial services ecosystem’, from new technologies and consumer expectations to regulation and security. The report finds that a significant percentage of firms see regulation as ‘a new opportunity to do business, particularly in the US and Europe’.

Sources: An ecosystem in transition—FinTechs and traditional financial institutions collaborate for a connected future and  The future of FinTech: An ecosystem in transition.

BoE paper sets out latest thinking on how open data can help SMEs shop around for credit

The BoE published a paper on open finance for small and medium enterprises (SMEs), providing an update on what the BoE has learnt from its research and industry engagement to date. It will guide the BoE’s ongoing engagement with public authorities, including as an input to the government’s Smart Data Review and Digital Markets Taskforce, as well as the FCA’s Open Finance initiative. The paper will form part of the BoE’s input to the government summit announced in the March 2020 Budget, looking at what further data needs to be made accessible to make it faster and easier for SMEs to shop around for credit.

Source: Open data for SME finance: what we proposed and what we have learnt.

EBA calls for ‘policy-oriented’ research papers on new technologies in the banking sector

The EBA published a call for papers ahead of its 2020 policy research workshop, scheduled to take place in Paris on 12-13 November, on the topic of ‘New technologies in the banking sector—impacts, risks and opportunities’. The organisers are inviting submissions of policy-oriented, preferably empirical, research papers on the topic by 10 July 2020.

Source: 2020 EBA policy research workshop: ‘New technologies in the banking sector—impacts, risks and opportunities’.

FMLC responds to Commission consultation on EU cryptoasset framework

The Financial Markets Law Committee (FMLC) published its response to the European Commission’s consultation on an EU framework for markets in cryptoassets. The FMLC’s response is set out in two complementary reports. Part I comprises comments on the classification of cryptoassets. Part II comprises comments—gathered with the advice of members of the Fintech Scoping Forum—in response to the section of the consultation dealing with cryptoassets which fall within the EU regulatory perimeter.

Source: Response to European Commission consultation: Framework for markets in cryptoassets: 17 March 2020.

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Sustainable finance

HoL Financial Affairs Sub-Committee to hear COP26 evidence from Mark Carney

The EU Financial Affairs Sub-Committee is to hear evidence from Mark Carney, the newly appointed finance adviser to the Prime Minister for COP26 and UN Special Envoy for Climate Action and Finance, on 18 March 2020 at 10.15am. This is part of the House of Lords cross-committee work on climate change ahead of COP26, the UN climate change conference hosted by the UK in November 2020.

Source: Mark Carney questioned on green finance and COP26.

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Dates for your diary

 

DateSubjectEvent
24 March 2020Payment services and systems

 

Deadline for responses to the PSRs call for input on competition issues that could arise in the UK’s New Payments Architecture (NPA)—the UK payments industry’s proposed new way of organising the clearing and settlement of payments between banks, known as interbank payments, which are ‘a key part of everyday life for businesses and consumers alike’.

 

25 March 2020Regulation of derivatives

Deadline for responses to ISDA consultation on how to implement pre-cessation fallbacks for derivatives.

 

 

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About the author:
Prior to joining LexisNexis in 2016 as a paralegal, Lauren was an adjudicator at the Financial Ombudsman Service. There she resolved consumers’ complaints, and gained knowledge about a wide variety of financial products. Before this she studied Law at Nottingham Trent University.