FS weekly highlights—19 November 2020

FS weekly highlights—19 November 2020

In this issue

 

 

Brexit news
Coronavirus (COVID-19)
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Complaints, compensation and claims management
Dispute resolution for financial services lawyers
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
Fintech and cryptoassets
International - financial services and related sectors
Sustainable finance
Dates for your diary

 

Brexit news

HM Treasury, the PRA and the FCA publish joint statement on the implementation of prudential reforms contained in the Financial Services Bill

HM Treasury, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) published a joint statement on the implementation of prudential reforms contained in the Financial Services Bill. As the Financial Services Bill continues its progress through Parliament, HM Treasury, the FCA and the PRA consider it appropriate to update industry on planned timelines for introducing the UK’s Investment Firms Prudential Regime (IFPR) and implementation of those Basel III reforms which make up the UK equivalent to the outstanding elements of the EU’s second Capital Requirements Regulation.

Source: Joint statement on the implementation of prudential reforms in the Financial Services Bill.

For further information, see: Impact of Brexit: CRR and prudential regulation—quick guide.

Letter from HM Treasury on the objectives and measures of the Financial Services Bill

The economic secretary to HM Treasury, John Glen, wrote a letter to the chair of the Treasury Select Committee, Mel Stride MP, on the objectives and measures of the Financial Services Bill. Glen says he believes these measures will support the UK’s position as a global leader in financial services.

Source: Letter from the economic secretary relating to the Financial Services Bill, dated 21 October 2020.

For further information, see: Brexit—impact on financial services.

PRA statement on the application of TTP to CRD V and BRRD II derived legislation

The PRA has published a statement confirming that no additional exceptions from the application of the temporary transitional power (TTP) are expected to be required in relation to onshoring changes to new rules and legislation implementing  Directive (EU) 2019/878 (CRD V) and Directive (EU) 2019/879 (BRRD II).

Source: Statement on the application of the temporary transitional power to CRD V and BRRD II derived legislation.

For further information, see: Brexit and financial services—Temporary transitional powers (TTP).

FCA updates webpage for firms preparing for end of Brexit transition period

The FCA updated its webpage for firms preparing for the end of the Brexit transition period, with considerations for UK firms and for EEA firms conducting business in the UK.

Sources: Preparing your firm for Brexit: end of the transition period and Towards end of the transition period: getting ready for a new environment.

PRA CEO discusses proposed simplification of UK small bank regulation

The PRA published a speech by its CEO, Sam Woods, in which he discussed the direction of UK financial regulation post-Brexit and the Treasury’s proposal to delegate responsibility for the implementation of firm requirements to the regulators. This would mean that ‘the vast majority of the updated banking regime will be implemented in PRA rules’, and Woods discussed in his speech the potential to use the new powers to simplify the regulation of smaller UK banks.

Source: Strong and simple: Speech given by Sam Woods, deputy governor for prudential regulation and chief executive officer, Prudential Regulation Authority.

Directions relating to the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 published

Directions relating to the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 have been published. They relate to the Benchmarks Regulation, CSDR, CRA, short selling, EMIR, CRR and Solvency II.

Source: Directions relating to the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019.

For further information, see: Financial Services passporting, equivalence and the UK post-Brexit.

TheCityUK examines UK financial services exports

TheCityUK has published a report saying financial services are the biggest exporting service sector in ‘every British region and nation apart from the South East and the East of England’. The report finds that all regions and nations in Britain saw growth in financial and related professional services exports in 2019, with the industry’s exports rising overall by 8.2% year-on-year.

Source: Financial services is the largest services export for nearly all parts of the UK.

Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2020

SI 2020/1274: This enactment is made in exercise of legislative powers under the Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019 in preparation for IP completion day. This enactment amends one piece of UK secondary legislation in relation to financial services. It comes into force on 14 December 2020.

Read the official version of this legislation.

Financial Services and Economic and Monetary Policy (Consequential Amendments) (EU Exit) Regulations 2020

SI 2020/1301: This enactment is made in exercise of legislative powers under the European Union (Withdrawal Agreement) Act 2020 in preparation for IP completion day. This enactment amends 49 pieces of UK secondary legislation in relation to financial services and economic, and monetary policy. It comes into force on 30 December 2020.

Read the official version of this legislation.

Back to top of page

 

Coronavirus (COVID-19)

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

Coronavirus (COVID-19): FCA update on regulatory timelines

The FCA issued an update on work that it intends to either stop or postpone in light of the ongoing impact of the coronavirus (COVID-19) pandemic and economic conditions. These changes will allow the FCA to focus its resources on the most urgent work where it can make the most immediate difference to consumers and markets.

Source: Statement on certain FCA work in light of coronavirus and changing market conditions.

Coronavirus (COVID-19)—Andrew Bailey discusses UK’s future investment needs and the role of regulation

The Bank of England (BoE) published a speech by its governor, Andrew Bailey, on the long-term effects of the coronavirus (COVID-19) and the investment required to support the recovery. Bailey argued that the financial system can help companies manage the current shock, saying regulators and financial services firms must work together so businesses are able to get the finance they need to invest for the future.

Source: The future for business investment in the age of COVID and the role of financial services—speech by Andrew Bailey.

FSB report says financial regulatory reforms helped weather the coronavirus (COVID-19) macroeconomic shock

The Financial Stability Board (FSB) published its 2020 report on the implementation and effects of the G20 financial regulatory reforms. The report, which will be delivered to G20 leaders ahead of their November 2020 summit, finds that the G20 reforms after the 2008 financial crisis have served the financial system well during the COVID-19 pandemic.

Source: FSB publishes annual report on implementation and effects of financial regulatory reforms.

Back to top of page

 

MiFID II

Coronavirus (COVID-19)—ECON publishes report on MiFID II changes

The European Parliament’s Economic and Monetary Affairs Committee (ECON) published its report on the proposed amendments to MiFID II included in the capital markets recovery package that was adopted by the European Commission in response to the coronavirus (COVID-19) crisis. The report was adopted by ECON on 28 October 2020 and tabled for consideration by the European Parliament in plenary.

Source: ECON report on the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU as regards information requirements, product governance and position limits to help the recovery from the COVID-19 pandemic.

Back to top of page

 

UK, EU and international regulators and bodies

FCA CEO discusses challenges facing UK financial regulators

The FCA published a speech by its chief executive, Nikhil Rathi, on the challenges facing the regulator, including the coronavirus (COVID-19) pandemic, Brexit, climate change and LIBOR reform. Rathi said transforming the FCA and the way that it works would involve maximising the use of data and technology, making the FCA more diverse, and ‘using the lessons of this extraordinary year to build on the best elements of our organisational culture’.

Source: Facing the future—challenges and priorities for the FCA.

Back to top of page

 

Authorisation, approval and supervision

FCA ‘Dear CEO’ letter sets out supervision strategy for price comparison websites

The FCA published a Dear CEO letter relating to its supervision strategy for price comparison websites (PCWs). The letter sets out the FCA’s view of the key risks of harm to customers or markets which are posed by PCW firms and asks CEOs to consider to what extent their firms present such risks, and their strategies, processes, systems and controls reduce those risks.

Source: Portfolio letter: FCA supervision strategy for price comparison websites (PCWs).

Back to top of page

 

Prudential requirements

Commission publishes CRR technical standards on deduction of software assets

The European Commission published draft regulatory technical standards (RTS) on the deduction of software assets from Common Equity Tier 1 items under Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms (CRR). A draft explanatory memorandum has also been published. The draft RTS reflect changes made to the CRR by Regulation (EU) 2019/876 (CRR II) as part of the risk reduction measures endorsed by European legislators in 2019.

Source: Commission Delegated Regulation (EU) …/...of 12.11.2020 amending Delegated Regulation (EU) No 241/2014 as regards the deduction of software assets from Common Equity Tier 1 items.

For further information, see: CRD IV—essentials.

EBA publishes materials for the 2021 EU-wide stress test

The European Banking Authority (EBA) published the final methodology, draft templates and template guidance for the 2021 EU-wide stress test, along with the key milestones of the exercise. The methodology and templates include some targeted changes compared to the postponed 2020 exercise, such as the recognition of FX effects for certain P&L items, and the treatment of moratoria and public guarantees in relation to the coronavirus (COVID-19) crisis. The stress test exercise will be launched in January 2021 with the publication of the macroeconomic scenarios and the results published by 31 July 2021.

Source: EBA publishes the methodology for the 2021 EU-wide stress test.

ECB vice-president says coronavirus (COVID-19) highlights need to further the banking union

The European Central Bank (ECB) published a speech by its vice-president, Luis de Guindos, on the euro area financial sector in the pandemic crisis, in which he discussed how the coronavirus (COVID-19) pandemic has amplified existing vulnerabilities in the financial system, the role that financial regulation and prudential policy have played in response, and argued that further policy measures are needed to develop the banking union

Source: The euro area financial sector in the pandemic crisis.

For further information, see: Banking Union: The EU banking package.

PRA sends Dear CFO letter on remediation of prudential treatment of legacy instruments

The PRA’s executive director for UK deposit takers supervision, Sarah Breeden, has written to chief financial officers (CFOs) with an action request relating to remediation of prudential treatment of legacy instruments before the Capital Requirements Regulation I (CRR I) transition period ends.

Source: Letter from Sarah Breeden ‘Remediation of prudential treatment of legacy instruments’.

Back to top of page

 

Financial stability 

BoE speech on the impact of leveraged investors on market liquidity and financial stability

The BoE published a speech by its deputy governor, financial stability, Sir Jon Cunliffe, on the impact of leveraged investors on market liquidity and financial stability during the coronavirus (COVID-19) pandemic.

Source: The impact of leveraged investors on market liquidity and financial stability.

Coronavirus (COVID-19)—FSB acts to address issues highlighted by ‘market turmoil’

The FSB published a letter from its chair, Randal K. Quarles, along with two reports delivered to G20 leaders ahead of their November 2020 summit. The documents set out the FSB’s work programme to address risks from non-bank financial intermediation (NBFI) highlighted by the ‘market turmoil’ in March 2020, caused by the coronavirus (COVID-19) pandemic.

Sources: FSB acts to address issues highlighted by March market turmoil and  COVID-19 pandemic: Financial stability impact and policy responses.

ESRB working paper considers retrenchment of euro area banks and international banking models

The European Systemic Risk Board (ESRB) published a working paper entitled ‘Retrenchment of euro area banks and international banking models’. The authors analyse the importance of international banking models, along with operational and funding dimensions, for the decline in international positions of European banks since the banking crisis in 2008.

Source: Retrenchment of euro area banks and international banking models.

FPC’s Kashyap speaks on liquidity multipliers and lessons from March 2020

Anil Kashyap, an external member of the Bank of England’s Financial Policy Committee (FPC), has given a speech in which he looked at how the chains of entities that exist in the market-based finance (MBF) system can contribute to problems during periods of stress, as was the case in March 2020 due to the coronavirus (COVID-19) crisis. In the speech, he focused on the funding flows and linkages between different parts of the system—securities and derivatives dealers, asset managers, pension funds, insurers, and a wide range of investment funds and money market funds.

Source: The dash for cash and the liquidity multiplier: Lessons from March 2020—speech by Anil Kashyap.

Back to top of page

 

Risk management and controls

FCA warning to firms over client data handling

The FCA published a new webpage entitled ‘FCA warns firms to be responsible when handling client data’. The FCA observes that the current economic climate is changing the way many firms operate and may cause some to leave the market or merge with other firms. When this happens, the FCA warns firms that they must make sure they lawfully process and transfer client data. Firms that intend to transfer or receive personal client data must be able to demonstrate how they have considered the fair treatment of consumers and how their actions comply with data protection and privacy laws. The webpage reminds firms what to consider in order to protect client data.

Source: FCA warns firms to be responsible when handling client data.

ISDA submits response to EBA consultation on data inputs in risk-measurement

The International Swaps and Derivatives Association (ISDA) submitted its response to a consultation by the EBA on criteria for the use of data inputs in the risk-measurement model. The ISDA states that it appreciates the efforts of the EBA in trying to develop guidelines to align industry standards on data inputs used in firms’ risk measurement models. However, it also mentions that it has concerns regarding the prescriptive nature of the regulatory technical standards, especially in relation to the allowance of appropriate extrapolation techniques and how this could bring about a level-playing-field issue if European banks have a different set of modelling options compared to banks in other jurisdictions.

Source: Consultation Response on Data Inputs in the Risk Measurement Model.

Back to top of page

 

Financial crime

FATF Executive Secretary delivers speech at V20 summit

The Financial Action Task Force (FATF) published the opening remarks of FATF Executive Secretary, David Lewis, at the V20 summit. Since the last V20 meeting in 2019, Lewis commented that ‘the sector has continued to grow, evolve and edge closer to mainstream adoption’ with understanding of the importance of anti-money laundering and counter terrorist financing controls increasing. Lewis highlighted that 25 out of 39 FATF members have introduced new laws and regulations to implement FATF global Standards and industries have developed technological solutions to enable compliance.

Source: Opening Remarks by FATF Executive Secretary at V20 Summit.

FCA updates CBILS/BBLS webpage with information on managing financial crime

The FCA updated it webpage on the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the new Bounce Back Loan Scheme (BBLS). Following a 10 November 2020 update to the BBLS scheme, the FCA has added information on managing financial crime.

Source: Statement on the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the new Bounce Back Loan Scheme (BBLS).

Back to top of page

 

Complaints, compensation and claims management

CC publishes final reports on complaints against FCA and PRA

The Complaints Commissioner (CC) published two final reports, of which one relates to a complaint against the FCA and the PRA regarding their supervision of the Cooperative Bank, and the other relates to a complaint made against the FCA by a professional spread better regarding a 2018 change in the client classification rules.

Sources: FCA00641 and  FCA00817.

Back to top of page

 

Dispute resolution for financial services lawyers

DenizBank AG v Verein für Konsumenteninformation

European Union – Consumer protection. Article 52(6)(a) of Directive (EU) 2015/2366, read in conjunction with art 54(1) thereof, should be interpreted to the effect that it governed the information and conditions to be provided by a payment service provider wishing to agree, with a user of its services, on tacit consent with regard to changes, in accordance with the detailed rules laid down in those provisions, of the framework contract that they had concluded, but did not lay down restrictions regarding the status of the user or the type of contractual terms that could be the subject of such tacit consent, without prejudice, however, where the user was a consumer, to a possible review of the unfairness of those terms in the light of the provisions of Council Directive (EEC) 93/13. The Court of Justice of the European Union (First Chamber) so held in a preliminary ruling in proceedings concerning the validity of contractual terms relating to the use of personalised multifunctional bank cards that were equipped, in particular, with near-field communication functionality, commonly known as the 'contactless payment' function.

See: C‑287/19.

Back to top of page

 

Regulation of benchmarks and IBOR reform

FCA consults on new benchmark powers as ICE Benchmark Administration proposes to cease publication of GBP, EUR, CHF and JPY LIBOR

The FCA published a statement setting out its potential approach to the use of proposed new powers under the Financial Services Bill to ensure an orderly wind down of LIBOR, and has launched two consultations on its proposed policy in relation to some of the new powers it would be granted under the Benchmarks Regulation (BMR) as amended by the Bill. Comments on both consultations are sought by 18 January 2021. The FCA’s exercise of the powers would be subject to a decision by ICE Benchmark Administration (IBA) to cease publication of LIBOR as the conclusion of its own upcoming consultation.

Sources: FCA consults on new benchmarks powersICE Benchmark Administration to consult on its intention to cease the publication of GBP, EUR, CHF and JPY LIBOR and ISDA statement on IBA and UK FCA announcements on LIBOR consultations.

For further information, see: LIBOR transition and  Benchmarks Regulation—essentials.

Back to top of page

 

Regulation of capital markets

ESMA decision of 16 September 2020 on temporary short selling notification requirements published in Official Journal of the EU

European Securities and Markets Authority (ESMA) Decision (EU) 2020/1689 of 16 September 2020 renewing the temporary requirement to natural or legal persons who have net short positions to lower the notification thresholds of net short positions in relation to the issued share capital of companies whose shares are admitted to trading on a regulated market to notify the competent authorities above a certain threshold in accordance with of Article 28(1)(a) of Regulation (EU) 236/2012 (Short Selling Regulation) has been published in the Official Journal of the EU.

Source: European Securities and Markets Authority Decision (EU) 2020/1689 of 16 September 2020 renewing the temporary requirement to natural or legal persons who have net short positions to lower the notification thresholds of net short positions in relation to the issued share capital of companies whose shares are admitted to trading on a regulated market to notify the competent authorities above a certain threshold in accordance with point (a) of Article 28(1) of Regulation (EU) No 236/2012 of the European Parliament and of the Council

ESMA publishes its first annual statistical report on EU securities markets

ESMA published its first annual statistical report on EU securities markets. The report uses new regulatory data sources to give a comprehensive overview of European equity and bond markets in 2019, including the number, characteristics, volumes traded and transparency data on the equity and bond instruments subject to MiFID II. It focuses on market monitoring, reference and transparency data, and securities markets statistics.

Sources: ESMA publishes first overview of the size and structure of EU securities markets and  Webinar on ESMA's ASRs on derivatives and securities markets.

Back to top of page

 

Regulation of derivatives

Council of EU adopts position on CCP recovery and resolution regulation

The Council of the EU adopted its first-reading position on the European Commission’s draft regulation on a framework for the recovery and resolution of central counterparties (CCPs), reflecting the compromise reached in negotiations between the Council and the European Parliament in June 2020 with the support of the Commission. The Council’s position was adopted at first reading together with a statement of the Council's reasons.

Source: Draft Regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, (EU) No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 2002/47/EC, 2004/25/EC, 2007/36/EC, 2014/59/EU and (EU) 2017/1132 (2016/0365 COD)—Adoption of the Council's position at first reading and of the statement of the Council's reasons—Outcome of the written procedure initiated by CM 4594/20.

FSB publishes guidance on the treatment of CCP equity in resolution

The FSB published final guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution. The guidance aims to support resolution authorities and crisis management groups in assessing the adequacy of financial resources for CCP resolution and provides guidance on approaches to the treatment of CCP equity in resolution.

Source: FSB releases guidance on CCP financial resources for resolution and announces further work.

FSB report highlights need for more work on resolvability of financial institutions

The FSB published its 2020 Resolution Report, which updates on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions, and highlights the need for resolution preparedness. The report also discusses lessons learnt from the coronavirus (COVID-19) pandemic, which confirmed the importance of ongoing work on resolvability, including for central counterparties (CCPs).

Source: FSB highlights need for resolution preparedness.

ESMA report states EU derivative clearing showed strong growth in 2019

ESMA published its third annual statistical report analysing the EU’s derivatives markets. It provides a comprehensive market-level view of the EU’s derivatives markets in 2019, which had a total size of €681tn gross notional amount outstanding, a decrease of 5% on 2018. The report is based on data submitted under the European Markets and Infrastructure Regulation (EMIR).

Source: EU derivative clearing showed strong growth in 2019.

FIA and ISDA respond to ESMA consultation on CCP supervisory reviews and evaluation process guidelines

The Futures Industry Association (FIA) and the ISDA responded to ESMA consultation on its draft guidelines on common procedures and methodologies on supervisory review and evaluation process of CCPs under Article 21 of EMIR. The associations support standardisation of scope and depth of these reviews.

Source: FIA and ISDA respond to ESMA’s draft guidelines of supervisory review of CCPs.

ISDA chief urges EU to take action on equivalence for trading venues

The ISDA published the latest edition of derivatiViews, in which CEO Scott O’Malia provides informal comments on how cross-border derivatives business between UK and EU participants will work after the Brexit implementation period ends on 31 December 2020. O’Malia highlights the issue of equivalence for trading venues, which has not been addressed by either the UK or the EU.

Source: The Brexit end game.

ISDA responds to FASB consultation on reference rate reform guidance

On 13 November 2020 the ISDA responded to the Financial Accounting Standards Board (FASB) consultation on reference rate reform (topic 848). ISDA says its members support the FASB’s proposals to address the accounting implications of the discounting transition for derivatives contracts that do not reference a rate that is expected to be discontinued. The response also includes additional feedback and proposed refinements for the FASB’s consideration.

Source: ISDA response on FASB reference rate reform guidance.

Back to top of page

 

Investment funds and asset management

ESMA finds corporate debt and real estate funds responded well to coronavirus (COVID-19) market stress but should prepare for future shocks

ESMA published a report on the preparedness of investment funds with significant exposures to corporate debt and real estate assets, for potential future adverse liquidity and valuation shocks. The report finds that most funds exposed to corporate debt and real estate managed to adequately maintain their activities when facing redemption pressures and/or episodes of valuation uncertainty during the market stress linked to the coronavirus (COVID-19) pandemic, with only a limited number suspending subscriptions and redemptions. ESMA says, however, that these findings should be interpreted with caution and identifies five priority areas for action which would enhance the preparedness of these fund categories.

Sources: ESMA tells fund managers to improve readiness for future adverse shocks and  Report: Recommendation of the European Systemic Risk Board (ESRB) on liquidity risk in investment funds.

ESMA publishes reports on use of sanctions for UCITS and under the AIFMD

ESMA published its first report on the use of sanctions under the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD), and its third annual report on the use of sanctions for Undertakings for Collective Investment in Transferable Securities (UCITS) under the UCITS Directive 2009/65/EC.

Sources: ESMA publishes first report on use of sanctions under the AIFMD and  ESMA publishes third annual report on use of sanctions for UCITS.

ACC publishes roadmap to reform ELTIF

The Alternative Credit Council (ACC) published a roadmap to reform the European Long-Term Investment Fund (ELTIF) and boost non-bank lending in Europe. The European market for non-bank lending has grown 20% year on year during the last decade and now stands at $242bn. However, the ACC argues that reforms are needed to maintain this growth rate as Europe still has among the highest barriers to non-bank lending in the world. If successful, these reforms could see lenders invest $1.5tn in more than 25,000 European companies by 2030.

Source: Financing European business non-bank lending and the economic recovery.

For further information, see: European Long-Term Investment Funds Regulation (the ELTIF Regulation).

ESMA says costs and performance for retail investment products, and market data quality are EU strategic supervisory priorities

ESMA, using its new convergence powers, identified costs and performance for retail investment products and market data quality as the EU strategic supervisory priorities for national competent authorities (NCAs). Under these priorities, the specific topics on which NCAs will undertake supervisory action in 2021, co-ordinated by ESMA, are costs and fees charged by fund managers; and improving the quality of transparency data reported under MiFIR.

Source: ESMA identifies costs and performance and data quality as new Union strategic supervisory priorities.

Investment Association publishes 2021 Principles of Remuneration

The Investment Association (IA) published its 2021 Principles of Remuneration and updated the guidance it issued in April 2020 on executive remuneration in light of the coronavirus (COVID-19) pandemic.

Sources: Investors clampdown on executive pension perksLetter sent to FTSE 350 companies and 2021 Principles of Remuneration: Updated COVID-19 guidance.

Back to top of page

 

Banks and mutuals

BoE Quarterly Bulletin discusses the Resolvability Assessment Framework

The BoE published a Quarterly Bulletin article, ‘The Resolvability Assessment Framework: increasing transparency and accountability in bank resolution’, which concerns the last major piece of the UK’s bank resolution regime published in July 2019: The Resolvability Assessment Framework (RAF). The RAF introduces a fundamental change in the way banks approach their preparations for the range of unpredictable and challenging issues a resolution involves.

Source: The Resolvability Assessment Framework: increasing transparency and accountability in bank resolution.

EBA publishes report on benchmarking of national loan enforcement frameworks

The EBA published its report on the benchmarking of national loan enforcement frameworks across EU Member States. The report was prepared in response to the European Commission’s call for advice in January 2019 on the benchmarking of national loan enforcement frameworks (including insolvency frameworks) from a bank creditor perspective. The report concludes that, at present, there is significant variability across Member States in the effectiveness of national insolvency practices as measured by loan recovery rates, times of recovery and costs of recovery.

Source: EBA publishes report on benchmarking of national insolvency frameworks across the EU.

ECB chair makes case for cross-border banks

The chair of the supervisory board of the ECB, Andrea Enria, has said in a speech that banking union is transforming the European banking sector from a shock amplifier into a shock absorber. He argued that a European deposit insurance scheme is needed for the banking union to be a truly domestic market, but more can be done in the meantime to limit the ring-fencing of Member States’ banking sectors.

Source: Andrea Enria: The yin and yang of banking market integration—the case of cross-border banks.

ECB Banking Supervision publishes November 2020 newsletter

ECB Banking Supervision published the November 2020 edition of its Supervision Newsletter, which features articles on climate-related and environmental risk supervision, bolstering fit and proper supervision, and what banks need to do to prepare for the end of the Brexit transition period and beyond. It also includes articles on the impact of coronavirus (COVID-19) on Europe’s smaller banks and good governance practices during the crisis.

Source: ECB Supervision Newsletter, November 2020.

Kerstin af Jochnick discusses the ECB’s coronavirus (COVID-19) response and the way ahead for banks

The ECB has published an interview with Kerstin af Jochnick, a member of its supervisory board, in which she discussed aspects of the ECB’s coronavirus (COVID-19) recovery and regulatory response, including relief measures, the use of capital and liquidity buffers, and the ban on dividend distributions and share buy-backs. Af Jochnick also discussed the banking union, operational risk and resilience, and climate-related financial risks.

Source: COVID-19: recovery and regulatory response.

FSB report highlights need for more work on resolvability of financial institutions

The FSB published its 2020 Resolution Report, which updates on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions, and highlights the need for resolution preparedness. The report also discusses lessons learnt from the coronavirus (COVID-19) pandemic, which confirmed the importance of ongoing work on resolvability, including for central counterparties (CCPs).

Source: FSB highlights need for resolution preparedness.

Back to top of page

 

Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA confirms guidance on mortgage support measures

The FCA confirmed its updated guidance to firms setting out enhanced support that should be available to mortgage borrowers experiencing payment difficulties as a result of the coronavirus (COVID-19) pandemic. The guidance will be fully in force from 20 November 2020 but the FCA encourages firms that are able to start providing this enhanced support sooner to do so.

Sources: FCA confirms support for mortgage borrowers impacted by coronavirus and  Finalised guidance: Mortgages and coronavirus: updated guidance for firms.

For further information, see: Coronavirus (COVID-19)—implications for consumer credit, overdrafts and mortgages.

Consumer Credit (Enforcement, Default and Termination Notices) (Coronavirus) (Amendment) Regulations 2020

SI 2020/1248: Provisions are made to amend the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 that govern the prescribed language in and form of enforcement, default and termination notices. This instrument updates the content of these notices and aims to make them less intimidating and easier to understand. These Regulations come into force on 2 December 2020.

Read the official version of this legislation and the explanatory memorandum.

Back to top of page

 

Regulation of insurance

EIOPA survey seeks views on application of the Insurance Distribution Directive

The European Insurance and Occupational Pensions Authority (EIOPA) launched a survey on the application of the Insurance Distribution Directive (EU) 2016/97 (IDD), aiming to gather feedback from stakeholders on the improvement of quality of advice and selling methods, the impact of the IDD on small and medium-sized enterprises, and possible further improvements.

Source: Survey on the application of the Insurance Distribution Directive.

For further information, see: Insurance Distribution Directive (IDD)—essentials.

PRA publishes letter to general insurance firms

The PRA published a letter to the chief risk officers of general insurance firms it regulates. The letter shares insights from the PRA’s recent supervision review work across the general insurance sector, focusing on reserving and exposure management, including some observations on contract uncertainty in light of the coronavirus (COVID-19) crisis. The PRA expects the boards and reserving committees of general insurers to reflect on the points covered in the letter appropriately and explicitly, to the extent relevant for their businesses, as part of setting the year-end Solvency II and booked reserves.

Source: Letter to general insurance firms: ‘Insights from PRA review work on reserving and exposure management’.

Insurance Europe publishes response to review on EU trade policy

Insurance Europe (IE) published its response to the European Commission's consultation on the review of EU trade policy. IE notes that (re)insurers need the right rules at EU and international levels to maintain competition in the global market and the right conditions in order to access international markets. IE notes that the (re)insurance industry is Europe's largest investor, investing over €10bn into the economy and that it can provide a unique opportunity to invest in sustainable European economic growth. The life insurance market also provides and encourages stable and sustainable savings and pensions.

Source: EU rules and trade policy must help, not hinder, European firms’ global competitiveness.

Coronavirus (COVID-19)—FCA business interruption test case—rewatching the appeal

The FCA published to its dedicated business interruption insurance website details on how to rewatch the Supreme Court appeal, relating to the FCA's test case concerning non-damage business interruption insurance claims arising out of the coronavirus (COVID-19) lockdown.

Source: Business interruption insurance.

For further information, see: Coronavirus (COVID-19)—business interruption insurance.

FCA business interruption test case—Supreme Court timetable

The FCA published the timetable of the Supreme Court hearing to its dedicated business interruption insurance website. The appeal commenced on 16 November 2020 and concerns the appeal of its test case concerning non-damage business interruption insurance claims arising out of the coronavirus (COVID-19) lockdown.​

Source: Business interruption insurance.

Back to top of page

 

Regulation of personal pension and stakeholder products

EIOPA statement aims to encourage supervisory convergence on registering or authorising IORPs

EIOPA published a supervisory statement on sound supervisory practices for registering or authorising institutions for occupational retirement provision (IORPs), including the assessment of suitability for cross-border activities. EIOPA’s main aim is to ensure that IORPs operating cross-border do so under prudent conditions, regardless of the different authorisation or registration regimes.

Source: EIOPA calls for sound supervisory practices in registering or authorising IORPs to foster a level-playing field across the EU.

Investors clampdown on executive pensions

Investors will be clamping down further on executive pension perks in a move to promote fairness and good employee relations, the IA updated annual pay guidelines for companies has revealed.

Source: Investors clampdown on executive pension perks.

ABI calls for financial advice and guidance overhaul

The Association of British Insurers (ABI) called for a fundamental rethink of how financial advice and guidance operate. It comes as 72% of people say they will not pay for financial advice.

Source: ABI calls for financial advice and guidance overhaul as polling reveals 72% of people will not pay for advice.

Back to top of page

 

Payment services and systems

ECB to launch independent review of TARGET2 outage

The ECB is to launch an independent review of an incident that affected its real-time gross settlement system TARGET2 on 23 October 2020, causing an outage for almost 10 hours. An initial investigation determined that a software defect in a network device was the specific technical cause of the incident. The main findings of the review will be shared with market participants and made public by the second quarter of 2021.

Source: ECB announces independent review of payments system outage.

Payment Services and Electronic Money (Amendment) Regulations 2020

SI 2020/1275: Amendments are made to the Electronic Money Regulations 2011 and the Payment Services Regulations 2017 to apply sections 93(4) and 233-236 of the Banking Act 2009, with modifications, to authorised electronic money institutions, small electronic money institutions, authorised payment institutions and small payment institutions. These Regulations come into force on 8 December 2020.

Read the official version of this legislation.

Back to top of page

 

Fintech and cryptoassets

Council of the EU promotes use of regulatory sandboxes and experimentation clauses

The Council of the EU adopted a set of conclusions on the role of regulatory sandboxes and experimentation clauses in ‘an innovation-friendly, future-proof, sustainable and resilient EU regulatory framework’. The Council is encouraging the European Commission to continue considering the use of experimentation clauses on a case-by-case basis when drafting and reviewing legislation, as well as to evaluate the use of experimentation clauses in ex-post evaluations and fitness checks on the basis of an exchange of information with Member States.

Source: Regulatory sandboxes and experimentation clauses as tools for better regulation: Council adopts conclusions.

FSB publishes online workshops on BigTech in emerging markets, and on RegTech/SupTech developments

The FSB published videos of online workshops it held on BigTech’s role in emerging markets, and on RegTech/SupTech developments and financial stability implications.

Sources: FSB virtual workshop on BigTech firms in emerging market and developing economies and  FSB virtual workshop on the use of supervisory and regulatory technology by authorities and regulated institutions.

Joint AFME and PwC report points to future trends/challenges for European banks

The Association for Financial Markets in Europe (AFME) and PwC jointly published a report, titled the ‘Technology and Innovation in Europe’s Capital Markets’ report, which looked at the largest investment banks in Europe with the aim of assessing their technological progress over the last two years. The report found, while the banks have ‘accelerated adoption of emerging technologies’, insufficient IT investment and complex legacy systems remain barriers to progress further.

Source: AFME and PwC identify trends and challenges for European ‘investment banks of the future’.

BoE’s Haldane says digital finance could transform payments and lending

Andy Haldane, chief economist and member of the Monetary Policy Committee at the BoE, said in a speech that developments in digital finance could transform how consumers and businesses make payments and raise finance, which could help revitalise the UK economy in the wake of the coronavirus (COVID-19) pandemic.

Source: Seizing the opportunities from digital finance—speech by Andy Haldane.

Back to top of page

 

EU-South America Forum on Financial Regulation holds first meeting

The EU-South America Forum on Financial Regulation published a joint statement following its first meeting on 17 November 2020. Established in 2020, the Forum aims to enhance mutual understanding and cross-border co-operation among financial authorities from the EU and jurisdictions in the South America region as well as Mexico. Among other issues, participating authorities discussed sustainable finance and financial stability risks, including the evolving stability issues resulting from the coronavirus (COVID-19) pandemic and sovereign debt sustainability.

Source: EU-South America Forum on financial regulation—Joint statement—18 November 2020.

Back to top of page

 

Sustainable finance

BoE announces restarting of the CBES

The BoE issued a press release announcing that, in line with comments made by governor Andrew Bailey on 9 November 2020, it is restarting the Climate Biennial Exploratory Scenario (CBES). The CBES will be launched in June 2021.

Source: The Bank of England is restarting the Climate Biennial Exploratory Scenario (CBES).

Finance plays ‘pivotal’ rile in tackling climate change, says Sharma

COP26 President, Alok Sharma, commented on the ‘pivotal role’ of finance in tackling climate change at Finance in Common, the first global summit of all Public Development Banks. Sharma commented on public finance playing a crucial role in stimulating private and global energy investments, of which $3.5m a year until 2050 is needed to limit temperature rises to 1.5 degrees. Sharma stressed that donors must ‘meet and surpass the goal of mobilising $100 billion a year’, adding that ‘our COP26 Presidency will focus on working with others to mobilise funds and improve access for adaptation and resilience’. All public development banks must come forward with clear plans including target dates by which their operations will be fully aligned with the Paris Agreement before COP26, explained Sharma.

Source: The pivotal role of finance in tackling climate change.

PRA publishes response to the general insurance industry relating to framework for assessing financial impacts of physical climate change

The PRA published its response to industry feedback received on the framework for assessing financial impacts of physical climate change report. According to the PRA, the feedback provided a consensus that both the guidance and methodology included in the framework are valuable, and useful in the assessment of physical climate change risk for the general insurance industry. The case studies provided were seen as being very helpful in guiding firms through the different steps identified by the framework, and facilitating progress that is already visible since the publication of the report.

Source: Response to the general insurance industry—A framework for assessing financial impacts of physical climate change.

John Glen writes to Treasury Committee on climate-related financial disclosures

The House of Commons Treasury Committee published a letter dated 9 November 2020 from John Glen MP, economic secretary to the Treasury, to the chair of the committee, Mel Stride MP, regarding the government’s announcement and report on the UK’s implementation of climate-related financial disclosures.

Source: Letter from the economic secretary relating to climate-related financial disclosures, dated 9 November 2020.

UK Finance proposes principles for measurement and reporting of multi-year ESG commitments

UK Finance published a paper on sustainable finance proposing a principles-based framework for the measurement and reporting of multi-year commitments. The paper focuses specifically on the way in which credit institutions measure and report multi-year commitments to sustainable finance, and presents high-level principles as market guidance. UK Finance has also published a related blog on the Green Horizon Summit, held on 9-11 November 2020, hosted jointly by the City of London Corporation, the Green Finance Institute and the World Economic Forum.

Sources: Sustainable finance—Establishing a principles-based framework for the measurement and reporting of multi-year commitments and  The Green Horizon.

ICMA and JSDA hold conference on green, social, and sustainability bond markets

The International Capital Market Association (ICMA) and the Japan Securities Dealers Association (JSDA) hosted a joint conference on the ‘Developments in bond markets contributing to sustainability under COVID-19—globally and in Japan’.

Source: ESG, finance, and building back better: a silver lining for COVID-19?.

Investment Association position paper on climate change sets out industry commitments

The IA published a climate change position paper, setting outcommitments from the industry and suggestions for how the UK government can further the interests of green investment. IA’s paper discusses the work of the Taskforce on Climate Related Financial Disclosure (TCFD), green gilts and net-zero targets.

Source: IA publishes industry stance on tackling climate change.

Back to top of page

 

Dates for your diary

 

DateSubjectEvent

 

20 November 2020

 

 

Brexit

 

 

Deadline for submissions of written evidence to the House of Lords EU Services Sub-Committee’s  inquiry into financial services after Brexit.

 

22 November 2020

 

Regulation of insurance

 

Deadline for responses to HM Treasury’s  call for evidence on Pool Re.

 

23 November 2020

 

SM&CR

 

The FCA will begin to publish dual-regulated firms’ Directory Persons data on the FS Register from 23 November 2020.

 

23 November 2020

 

Financial crime

 

Deadline for responses to the FCA’s consultation paper CP20/17, setting out its proposals to extend the scope of its annual financial crime reporting obligation (REP-CRIM) to include firms, including cryptoasset exchange providers, that carry on regulated activities that potentially pose a higher money laundering (ML) risk, irrespective of a firm’s revenue threshold.

 

23 November 2020

 

Complaints, compensation and claims management



Investigations, enforcement and discipline

 

Dame Elizabeth Gloster is expected to deliver her report into the regulation of London Capital and Finance (LC&F), to the FCA.

 

24 November 2020

 

Regulation of insurance

 

Deadline for responses to EIOPA’s  consultation on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.

 

25 November 2020

 

International—financial services and related sectors

 

Deadline for responses to the UK governments  call for evidence on how to improve the UK’s international regulatory co-operation practices in response to a review by the Organisation for Economic Co-operation and Development (OECD).

 

25 November 2020

 

Payment services and systems

 

Deadline for responses to HM Treasury’s  call for evidence on access to cash.

 

25 November 2020

 

MiFID II

 

Deadline for responses to ESMA’s  consultation on the functioning of Organised Trading Facilities.

 

 

Back to top of page

Related Articles:
Latest Articles:
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.