FS weekly highlights—2 July 2020

FS weekly highlights—2 July 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability
Risk management and controls
Financial crime
Complaints, compensation and claims management
Investigations, enforcement and discipline
Dispute resolution for financial services lawyers
Competition in financial services
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
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
Islamic finance
Dates for your diary

 

Coronavirus (COVID-19)

For further information on the effects of coronavirus (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) amending delegated regulation on prudent valuation under CRR published in OJ

Commission Delegated Regulation (EU) 2020/866 amending Delegated Regulation (EU) 2016/101 supplementing the prudential valuation rules in the Capital Requirements Regulation (EU) No 575/2013 (CRR) has been published in the Official Journal of the EU (OJ). It will enter into force on 26 June 2020.

Source: Commission Delegated Regulation (EU) 2020/866 of 28 May 2020 amending Delegated Regulation (EU) 2016/101 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for prudent valuation under Article 105(14) of Regulation (EU) No 575/2013 (Text with EEA relevance)

Coronavirus (COVID-19)—EBA extends deadline under Guidelines on moratoria to 30 September 2020

The European Banking Authority (EBA) amended its Guidelines on the treatment of public and private moratoria in light of COVID-19 measures so that the deadline by which a moratorium is to be announced and applied is extended from 30 June 2020 to 30 September 2020.

Source: Guidelines amending Guidelines EBA/GL/2020/02 on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis.

Coronavirus (COVID-19) lending: PRA on the application of credit risk approaches for firms

The Prudential Regulation authority (PRA) updated its statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) to include clarifications on the application of credit risk approaches for firms.

Source: COVID-19: PRA updates statement on regulatory treatment of CBILS and CLBILS loan schemes.

Coronavirus (COVID-19)—PRA revises approach to regulatory reporting and Pillar 3 disclosure

The PRA issued a statement outlining its revised approach to regulatory reporting and Pillar 3 disclosure for PRA-regulated banks in response to the COVID-19 outbreak.

Source: Statement by the PRA on COVID-19 regulatory reporting and disclosure amendments.

Coronavirus (COVID-19)—PRA sets out its views on the EU targeted banking package

The PRA issued a statement setting out its views on some of the ‘quick fix’ amendments made by Regulation (EU) 2020/873 (the Amending Regulation) to the Capital Requirements Regulation (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR II) in response to COVID-19. In accordance with the European Union (Withdrawal Agreement) Act, the Amending Regulation applies directly to PRA-regulated firms.

Source: Statement by the PRA on the Capital Requirements Regulation (CRR) ‘Quick Fix’ package.

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

John Glen on the EU targeted banking package

The House of Lords European Union Committee published a letter from John Glen MP, the economic secretary to the Treasury, on the EU targeted banking package.

Source: HM Treasury letter on UK approach to CRR Amending Regulation.

Bailey sets out Bank of England’s position on climate change in relation to coronavirus (COVID-19)

The governor of the Bank of England (BoE), Andrew Bailey, set out the BoE’s position on climate change in relation to the recent COVID-19 crisis. In a short press release, Bailey addresses the climate change implications of the BoE’s policies on lending during the pandemic, including the issue of resetting the benchmark for its purchases of corporate bonds.

Source: Statement on Bank’s commitment to combatting climate change.

Coronavirus (COVID-19)—FCA extends 12-week rule under Approved Persons Regime

The Financial Conduct Authority (FCA) published a statement setting out its expectations to help benchmark administrators and firms using appointed representative (AR) arrangements apply the Approved Persons Regime (APR) during COVID-19. The FCA says it intends to issue a modification by consent to extend the 12-week rule, allowing temporary arrangements for up to 36 weeks during the pandemic.

Source: Approved Persons Regime (APR) and coronavirus: our expectations.

For further information, see: Financial Conduct Authority—APR controlled functions for benchmark administrators and appointed representatives.

SM&CR: FCA extends implementation deadline for solo-regulated firms due to coronavirus COVID-19

The FCA announced that, due to the impact of the coronavirus pandemic, the deadline for solo-regulated (FCA-only) firms to have completed the first assessment of the fitness and propriety of their Certified Persons has been delayed from 9 December 2020 until 31 March 2021. The FCA has also announced that it intends to consult on extending related Senior Manager & Certification Regime (SM&CR) deadlines for solo-regulated firms.

Source: Extension of the Senior Managers & Certification Regime (SM&CR) implementation periods for solo-regulated firms.

For further information, see: Senior Managers and Certification Regime—essentials for solo-regulated firms.

AFME paper on senior manager responsibilities in the ongoing coronavirus (COVID-19) situation

The Association for Financial Markets in Europe (AFME) and Latham & Watkins have published a paper setting out some questions to be considered by individuals who are senior managers under the UK Senior Managers and Certification Regime (SM&CR) as firms consider what their operating model will be in the next phase of tCOVID-19 and over the longer-term.

Source: Questions to consider: Senior Manager responsibilities in the ongoing COVID-19 situation.

Coronavirus (COVID-19)—FCA sets out further detail of its expectations of insurance firms

The FCA updated its webpage providing firms with information on its response to COVID-19 to add a section on insurers’ handling of consumer claims and refund requests. In the updated section, the FCA announces its intention to consult shortly on new guidelines to clarify its expectations of firms and the choices for consumers. It has also updated the travel insurance section of its webpage on insurance and COVID-19 to provide further detail on its expectations of insurance firms.

Sources: FCA webpage update: Coronavirus (COVID-19): Information for firms and   FCA webpage update: Insurance and coronavirus (COVID-19): our expectations of firms.

Coronavirus (COVID-19)—FCA updates guidance on personal loans, credit cards and overdrafts

The FCA published updated temporary guidance setting out its expectations that firms should provide continued support for consumers facing payment difficulties due to circumstances arising out of COVID-19. The guidance relates to personal loans, credit cards (including retail revolving credit) and overdrafts. The FCA has also published an update on banks’ overdraft pricing decisions and plans to support consumers.

Sources: FCA gives update on banks’ overdraft pricing decisions and plans to support consumers,   FCA confirms further support for consumer credit customers,   Credit cards (including retail revolving credit) and coronavirus: updated temporary guidance for firmsOverdrafts and coronavirus: updated temporary guidance for firmsPersonal loans and coronavirus: updated temporary guidance for firmsFS20/9: Further support for consumers impacted by coronavirus: feedback on draft guidance and rules (personal loans, credit cards and overdrafts) and  Coronavirus (Covid-19): Information for firms (updated).

For further information, see: FCA: Treating Customers Fairly—essentials.

Coronavirus (COVID-19)—FCA updates insurance expectations to cover MOT extension

The FCA added a new update to its webpage setting out its expectations of insurance firms during COVID-19. It says that in light of the Department for Transport’s recent decision to extend MOT expiry dates due to coronavirus, the FCA expects motor insurers to continue to provide cover for consumers’ car, motorcycle or van insurance due to their temporary situation.

Source: Insurance and coronavirus (COVID-19): our expectations of firms (MOT section updated following Department for Transport update on MOT extensions).

FCA Insight piece discusses RegTech challenges and opportunities posed by coronavirus (COVID-10) developments

The FCA published an Insight piece discussing RegTech, and asking whether the COVID-19 disruption may be a catalyst for change. The authors argue that current developments caused by the crisis and the resulting regulatory, technological and behavioural shifts are ‘a potential watershed moment for the RegTech ecosystem’.

Source: RegTech—a watershed moment?

FCA updates coronavirus (Covid-19) delayed activities and regulatory change webpage

The FCA updated its webpage giving information on delayed activities and regulatory change resulting from the COVID-19 situation. The update includes an expanded list of delayed rules.

Source: COVID-19: further delays to FCA work.

CCP12 paper praises handling of coronavirus (COVID-19) crisis by CCPs

CCP12, the global association of central counterparties (CCPs), has published a paper emphasising ‘the exceptional handling of crises by CCPs’ despite unprecedented volatility caused by COVID-19, record clearing volumes and long-term implementation of business continuity plans (BCPs). In particular, the paper says that CCPs provided market participants with an efficient and effective forum to manage their risks during the pandemic, while providing transparency and operational reliability, despite the significant challenges and high levels of volatility caused by the operational responses to COVID-19.

Source: CCPs again demonstrate strong resilience in times of crisis.

EIB and ESM hold online seminars on post-coronavirus (COVID-19) recovery

The European Investment Bank (EIB) and the European Stability Mechanism (ESM) have announced that they are holding joint seminars on ‘how to connect capital markets with a post-COVID-19 sustainable recovery’. The seminars are aimed at investors of both EIB and ESM. The seminars will take place over two days in which high-level speakers will talk about the EU’s recovery measures, the role of sustainable finance in the economic recovery and the role of public and private investment in continuing to sustain the transition to a greener and low-carbon economy and Europe’s financial resilience.

Source: and ESM lead discussion on how to connect capital markets with a post-coronavirus sustainable recovery.

Eligibility criteria for Future Fund revised allowing for more firms to benefit

HM Treasury has announced that more start-ups and innovative firms will be able to apply for investment from the government’s £320m Future Fund from 30 June 2020. As a result of changes to the scheme’s eligibility criteria, UK companies who have participated in highly selective accelerator programmes and have parent companies outside of the UK will now be able to apply for investment. Under the scheme, early-stage, high-growth businesses from a diverse range of sectors can apply for a convertible loan of between £125,000 and £5m to help them through COVID-19. Initially, £250m was made available by the government under the Fund, however, due to its popularity, an additional £70m of funding has been made available. Business Secretary, Alok Sharma explained that ‘as we restart our economy, it is crucial that our innovators and risk-takers get all the support they need to flourish’.

Source: More firms can now benefit from the Future Fund.

FSB says benchmark transition remains crucial even amid coronavirus (COVID-19)

The Financial Stability Board (FSB) issued a statement on the impact of COVID-19 on global benchmark reform. The FSB says its Official Sector Steering Group (OSSG) is monitoring developments closely and recognises that some aspects of firms’ transition plans are likely to be temporarily disrupted or delayed, while others can continue. However, the FSB maintains its view that financial and non-financial sector firms across all jurisdictions should continue their efforts in making wider use of risk-free rates in order to reduce reliance on IBORs where appropriate and in particular to remove remaining dependencies on LIBOR by the end of 2021.

Source: FSB statement on the impact of COVID-19 on global benchmark reform.

ISLA launches new webpages on EU developments and coronavirus (COVID-19) impacts

The International Securities Lending Association (ISLA) launched two new webpages, covering EU expected developments, and the impact of COVID-19 on the European Commission’s priorities.

Source: ISLA publishes new EU expected developments roadmap & COVID-19 impacts on key legislative priorities.

Innovate Finance publishes survey results of coronavirus (COVID-19) impact on UK fintech sector

Innovate Finance published the results of a recent survey on the impact of COVID-19 on the fintech industry. The results found that some of the smallest UK fintech companies have a cash runway of six months or less and revealed that over 75% of smaller fintech companies are worried about the next funding round, with over 70% of all respondents having received no private funding since the start of lockdown. Over three-quarters of fintech start-ups with 25 employees or fewer are turning to the government for funding support.

Source: UK FinTech COVID-19 Impact Survey: The results.

Survey published on derivatives market liquidity and coronavirus (COVID-19)

The International Swaps and Derivatives Association (ISDA) and Greenwich Associates have carried out a survey concerning the impact of COVID-19 on derivatives market liquidity. The survey was based on 172 responses from market participants worldwide.

Source: New Survey on Derivatives Market Liquidity and COVID-19.

UK Finance identifies four customer types in post-coronavirus (COVID 19) world

UK Finance wrote a blog post in which it describes four types of customers that are likely to exist after COVID-19 subsides and UK government support is withdrawn. According to the trade association, each of these segments will have its own complex needs, which lenders will need to understand to ensure that they treat their customers fairly.

Source: Four customer types in a post-COVID-19 world.

Coronavirus (COVID-19)—Second o​rder from FCA BI Test Case

The FCA updated its Business interruption insurance webpage to include the details of the order from the second case management conference held on 26 June 2020, in relation to its test case concerning non-damage business interruption losses relating from COVID-19 lockdown.

Source: Business interruption insurance.

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Brexit news

Equivalence Determinations for Financial Services (Amendment etc) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is proposed to amend nine UK secondary legislation in relation to financial services and markets to address failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the UK from the EU. It comes into force on the day after the day on which these Regulations are made.

Source: Regulation: The Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020.

For further information, see Brexit—Financial Services—Statutory Instruments (SI) tracker.

UK and Switzerland announce pathway to mutual recognition for financial services

The chancellor of the exchequer, Rushi Sunak, and the head of Switzerland’s Federal Department of Finance, Ueli Maurer, signed a joint statement outlining a commitment by the UK and Switzerland to negotiate an outcomes-based mutual recognition agreement on financial services. Sunak also announced that HM Treasury has completed its equivalence assessment of Switzerland in relation to Swiss stock markets and found them to be equivalent.

Sources: Speech by the chancellor of the exchequer, Rushi Sunak, on the future relationship between the UK and Switzerland on financial services,   Switzerland and UK to negotiate a bilateral financial services agreement,   Joint statement between Her Majesty’s Treasury and the Federal Department of Finance on deepening co-operation in financial services and UK Finance comments on UK and Swiss bilateral financial services negotiations.

EU’s Barnier rejects UK proposals for equivalence framework

The EU’s chief Brexit negotiator, Michel Barnier, has rejected UK proposals for a legally enforceable regulatory co-operation framework on financial services. In an address given remotely to the Eurofi General Assembly, he said there was no way that Member States or the European Parliament would accept the UK’s attempts to frame the EU’s process for withdrawing equivalence decisions and limit the scope of the prudential carve-out.

Source: Eurofi General Assembly 30 June 2020—Remarks by Michel Barnier.

Italian securities regulator issues warnings to UK banks and investment firms

ISDA published a memorandum on warnings in relation to Brexit from Italian securities regulator CONSOB. CONSOB provided information to address the ability of UK banks and investment firms to provide investment services, including in respect of OTC derivatives entered into with Italian counterparties, in light of Brexit.

Source: Memorandum on CONSOB Warnings in Relation to Brexit.

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UK, EU and international regulators and bodies

FCA publishes Handbook Notice No 78

The FCA published Handbook Notice No 78, which includes changes to the FCA Handbook made by the FCA board on 21 May and 25 June 2020. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Handbook Notice or in separate feedback statements.

Source: Handbook Notice 78.

BIS publishes Annual Report 2019/20 and Economic Report 2020

The Bank for International Settlements (BIS) published its Annual Report for 2019/20 together with its Annual Economic Report 2020.

Sources: Annual Report 2019/20 and Annual Economic Report 2020.

SRB publishes its 2019 annual report

The Single Resolution Board (SRB) published its annual report for 2019, which details the progress made during 2019 in promoting financial stability while protecting the taxpayer through Europe’s banking resolution framework.

Source: SRB launches 2019 annual report.

ECON to hold debate with EBA executive director candidate, François-Louis Michaud

The Committee on Economic and Monetary Affairs (ECON) will hold a debate with the selected candidate for the position of executive director of the European Banking Authority, François-Louis Michaud. Following the debate on 29 June 2020, the vote on the candidate’s appointment will be held on 2 July 2020.

Source: European Banking Authority: committee vote on executive director.

IOSCO identifies good practices for regulatory deference procedures

The International Organization of Securities Commissions (IOSCO) published a series of 11 good practices on processes for deference, to assist regulatory authorities in mitigating the risk of unintended, regulatory-driven market fragmentation and to strengthen international co-operation.

Source: IOSCO publishes good practices on processes for deference.

FCA publishes speech by Nausicaa Delfas on a ‘new era’ for the UK financial regulatory system

The FCA published a speech by its executive director of international, Nausicaa Delfas, entitled ‘Building a financial regulatory system suitable for the UK in the new era’. In the speech, given at the City & Financial Professional Virtual Roundtables on 1 July 2020, Delfas said that developments brought about by Brexit, COVID-19 and technological and societal changes would define the ‘new era’ in which the UK now finds itself.

Source: Building a financial regulatory system suitable for the UK in the new era.

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Authorisation, approval and supervision

Coronavirus (COVID-19)—FCA extends 12-week rule under Approved Persons Regime

The FCA published a statement setting out its expectations to help benchmark administrators and firms using appointed representative (AR) arrangements apply the Approved Persons Regime (APR) during COVID-19. The FCA says it intends to issue a modification by consent to extend the 12-week rule, allowing temporary arrangements for up to 36 weeks during the pandemic.

Source: Approved Persons Regime (APR) and coronavirus: our expectations.

For further information, see: Financial Conduct Authority—APR controlled functions for benchmark administrators and appointed representatives.

SM&CR: FCA extends implementation deadline for solo-regulated firms due to coronavirus COVID-19

The FCA announced that, due to the impact of the coronavirus pandemic, the deadline for solo-regulated (FCA-only) firms to have completed the first assessment of the fitness and propriety of their Certified Persons has been delayed from 9 December 2020 until 31 March 2021. The FCA has also announced that it intends to consult on extending related Senior Manager & Certification Regime (SM&CR) deadlines for solo-regulated firms.

Source: Extension of the Senior Managers & Certification Regime (SM&CR) implementation periods for solo-regulated firms.

For further information, see: Senior Managers and Certification Regime—essentials for solo-regulated firms .

AFME paper on senior manager responsibilities in the ongoing coronavirus (COVID-19) situation

The AFME and Latham & Watkins have published a paper setting out some questions to be considered by individuals who are senior managers under the UK Senior Managers and Certification Regime (SM&CR) as firms consider what their operating model will be in the next phase of COVID-19 and over the longer-term.

Source: Questions to consider: Senior Manager responsibilities in the ongoing COVID-19 situation.

FCA Insight piece discusses RegTech challenges and opportunities posed by coronavirus (COVID-10) developments

The FCA published an Insight piece discussing RegTech, and asking whether the COVID-19 disruption may be a catalyst for change. The authors argue that current developments caused by the crisis and the resulting regulatory, technological and behavioural shifts are ‘a potential watershed moment for the RegTech ecosystem’.

Source: RegTech—a watershed moment?

UK Finance issues guidance on navigating ESMA’s FIRDS

UK Finance published industry user guidance on the European Securities and Markets Authority (ESMA)’s financial instruments reference data system (FIRDS).

Source: UK Finance publishes industry user guidance on ESMA’s FIRDS.

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Prudential requirements

Regulation amending CRR and CRR II in response to the coronavirus (COVID-19) published in Official Journal

Regulation (EU) 2020/873 amending Regulation (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR II) to make certain adjustments in response to COVID-19 has been published in the Official Journal. The Regulation makes targeted amendments to the CRR and CRR II to maximise credit institutions’ capacity to lend and absorb losses related to the pandemic, while still ensuring their continued resilience.

Source: Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic

For further information, see: CRD IV—essentials.

Corrigendum to CRD IV published in Official Journal

Corrigendum to Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending  Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC has been published in the Official Journal.

Source: Corrigendum to Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (Official Journal of the European Union L 176 of 27 June 2013)

For further information, see: Review of the prudential framework for investment firms.

Coronavirus (COVID-19) amending delegated regulation on prudent valuation under CRR published in OJ

Commission Delegated Regulation (EU) 2020/866 amending Delegated Regulation (EU) 2016/101 supplementing the prudential valuation rules in the Capital Requirements Regulation (EU) No 575/2013 (CRR) has been published in the Official Journal of the EU (OJ). It will enter into force on 26 June 2020.

Source: Commission Delegated Regulation (EU) 2020/866 of 28 May 2020 amending Delegated Regulation (EU) 2016/101 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for prudent valuation under Article 105(14) of Regulation (EU) No 575/2013 (Text with EEA relevance)

EBA issues final guidelines on treatment of structural FX positions under CRR

The EBA published its final guidelines on the treatment of structural foreign exchange (FX) positions under the Capital Requirements Regulation (EU) 575/2013 (CRR). The guidelines are intended to establish a harmonised framework for the application of the FX waiver, to allow it to be applied consistently going forward. The EBA has delayed the planned application date of the guidelines by one year to give institutions time to prepare, and they will now apply from 1 January 2022.

Source: EBA publishes final guidelines on the treatment of structural FX positions.

EBA publishes two ITS under CRR II and the Prudential Backstop Regulation on disclosures and reporting

The EBA published new and revised implementing technical standards (ITS) on public disclosures and supervisory reporting under the revised Capital Requirements Regulation (EU) 2019/876 (CRR II) and the Prudential Backstop Regulation (EU) 2019/630. These ITS form part of the EBA Roadmaps on the Risk Reduction Package and have been submitted to the European Commission for adoption.

Source: EBA publishes final draft comprehensive ITS on institutions’ Pillar 3 disclosures and revised final draft ITS on supervisory reporting (Framework 3.0).

EBA launches discussion on further enhancing supervisory powers of competent authorities under BRRD

The EBA published a discussion paper exploring ways to enhance the Bank Recovery and Resolution Directive (BRRD) framework on early intervention measures. The objective is to further enhance crisis management tools available for competent authorities in addition to well-established and widely used supervisory powers laid down in the Capital Requirements Directive (Directive 2013/36/EU) (CRD IV) and in the Single Supervisory Mechanism Regulation (Regulation 1024/2013) (SSMR).

Source: EBA launches discussion on further enhancing supervisory powers of competent authorities.

For further information, see: Bank Recovery and Resolution Directive (BRRD)—essentials.

Coronavirus (COVID-19)—PRA revises approach to regulatory reporting and Pillar 3 disclosure

The has issued a statement outlining its revised approach to regulatory reporting and Pillar 3 disclosure for PRA-regulated banks in response to the COVID-19 outbreak.

Source: Statement by the PRA on COVID-19 regulatory reporting and disclosure amendments.

Coronavirus (COVID-19)—PRA sets out its views on the EU targeted banking package

The PRA issued a statement setting out its views on some of the ‘quick fix’ amendments made by Regulation (EU) 2020/873 (the Amending Regulation) to the Capital Requirements Regulation (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR II) in response to COVID-19. In accordance with the European Union (Withdrawal Agreement) Act, the Amending Regulation applies directly to PRA-regulated firms.

Source: Statement by the PRA on the Capital Requirements Regulation (CRR) ‘Quick Fix’ package.

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

Coronavirus (COVID-19)—New Eurosystem repo facility introduced

In response to COVID-19, the Governing Council of the ECB has decided to set up a new Eurosystem repo facility for central banks (EUREP). This is intended to provide euro liquidity to non-euro area central banks (against adequate collateral) and address euro liquidity needs outside the euro area. EUREP will be available until the end of June 2021.

Source: New Eurosystem repo facility to provide euro liquidity to non-euro area central banks.

BoE article on large exposure regime

The BoE published Quarterly Bulletin 2020 Q2, which contains an article on the current large exposure (LE) regime in the UK and how it has evolved over time to become a key element of financial services regulation. It addresses key concepts such as how the LE framework treats a group of connected counterparties and how banks calculate total exposures to a counterparty.

Source: ‘Don’t put all your eggs in one basket’: protecting banks from the failure of individual counterparties.

John Glen on the EU targeted banking package

The House of Lords European Union Committee has published a letter from John Glen MP, the economic secretary to the Treasury, on the EU targeted banking package.

Source: HM Treasury letter on UK approach to CRR Amending Regulation.

ESRB withdraws Estonian macroprudential policy measure from recommendation on voluntary reciprocity

A recommendation of the European Systemic Risk Board (ESRB) of 2 June 2020 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (ESRB/2020/9) has been published in the Official Journal. Recommendation ESRB/2015/2 has been amended to exclude an Estonian measure that was previously added to the list of macroprudential policy measures recommended for voluntary reciprocity.

Source: Recommendation of the European Systemic Risk Board of 2 June 2020 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (ESRB/2020/9) 2020/C 217/01

FSB report finds TBTF reforms working, and benefits ‘significantly outweigh the costs’

The FSB published for public consultation an evaluation of too-big-to-fail (TBTF) reforms for systemically important banks. The TBTF reforms were endorsed by the G20 in the aftermath of the 2008 global financial crisis and have been implemented in FSB jurisdictions over the past decade. The evaluation examines the extent to which the reforms are reducing the systemic and moral hazard risks associated with systemically important banks, as well as their broader effects on the financial system. Feedback is sought by 30 September 2020.

Source: FSB evaluation finds too-big-to-fail reforms made banks more resilient and resolvable, but gaps need to be addressed.

PRA Dear CEO Letter addresses climate-related financial risk

The deputy governor for prudential regulation and CEO of the PRA, Sam Woods, has sent a letter to CEOs of all PRA-regulated firms, setting out thematic feedback from the PRA’s review of firms’ plans and clarifications of the PRA’s expectations originally set out in its supervisory statement on enhancing firms’ approaches to managing climate-related financial risks (SS3/19). This letter also provides observations on good practice, and sets out next steps for implementation.

Source: Letter from Sam Woods ‘Managing climate-related financial risk—thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarifications of expectations’.

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Financial stability 

FPC chair responds to chancellor of the exchequer’s recommendations

The governor of the BoE, Andrew Bailey, in his role as chair of the Financial Policy Committee (FPC), has responded to the chancellor of the exchequer’s recommendations set out in a letter of 11 March 2020. The FPC welcomes the remit and recommendations set by the chancellor, Rishi Sunak.

Source: Response to the remit and recommendations for the Financial Policy Committee: June 2020.

FPC publishes record of decisions taken since 7 May 2020

The FPC published a record of the decisions it has taken since 7 May 2020. As announced on 3 June, in light of the interim Financial Stability Report (FSR) published in May, the Financial Policy Committee decided on 22 May to delay the publication of the Q2 FSR to 6 August 2020, and revised its meeting schedule and work plan accordingly.

Source: Record of the Financial Policy Committee—June 2020.

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Risk management and controls

FCA reminds firms of need to comply with new ICT guidelines from 30 June 2020

The FCA published a webpage on the EBA final guidelines on ICT and security risk management for credit institutions, investment firms and payment service providers (PSPs). The FCA notes that is has notified the EBA that it intends to comply with these guidelines, and all UK credit institutions, investment firms and PSPs will be expected to make every effort to comply with them from 30 June 2020, when they enter into force.

Source: EBA guidelines on ICT and security risk management.

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Financial crime

FATF consults on proposed amendments to proliferation financing sanction guidance

The Financial Action Task Force (FATF) is considering proposals for amendments to Recommendation 1 and its interpretive note to require countries and the private sector to identify and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions (TFS) related to proliferation financing, as contained in FATF Recommendation 7, and to take action to mitigate these risks. Feedback is sought by 31 August 2020.

Source: Public consultation on FATF’s Recommendation 1 and its interpretive note.

FATF issues updates on Iceland and Mongolia’s ‘Increased Monitoring’ progress

The FATF issued updated statements on the jurisdictions under increased monitoring, following the FATF virtual plenary on 20 June 2020. Due to the COVID-19 crisis, it has only provided updates for Iceland and Mongolia. It says that both jurisdictions have substantially completed their action plans and warrant an on-site assessment to verify that anti-money laundering and countering the financing of terrorism (AML/CFT) reforms have been implemented.

Sources: High-risk jurisdictions subject to a Call for Action—30 June 2020 and   Jurisdictions under increased monitoring—30 June 2020.

Financial Action Task Force President sets out objectives for 2020—2022

The FATF President, Marcus Pleyer, has published his objectives for the first two-year plenary period of July 2020–2022. Areas of priority include the digital transformation of anti-money laundering/counter-terrorist financing, financing of ethnically or racially motivated terrorism, money laundering and migrant smuggling, environmental crime and illicit arms trafficking. FATF will continue its ongoing work of identifying risks, setting standards, evaluating and holding countries to account for effective action.

Source: Objectives for the FATF during the German Presidency (2020-2022).

Brothers from South London sentenced for £11,000 Barclaycard fraud

UK Finance announced that two brothers, Benjamin and Jesse Ackim, from South London have received a combined total of three years as a suspended sentence after pleading guilty to conspiracy to defraud and for being in possession of articles in use for fraud. Following an investigation by the Dedicated Card and Payment Crime Unit, a specialist police unit sponsored by the banking industry, it was found that the brothers had committed £11,428 fraud and attempted another £25,644 of fraud by harvesting bank details from Barclaycard customers and making online purchases. Additionally, officers found equipment at the brothers’ home used to manufacture fake cards.

Source: Croydon-based brothers sentenced for £11k scam.

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Complaints, compensation and claims management

Alternative Dispute Resolution for Consumer Disputes (Extension of Time Limits for Legal Proceedings) (Amendment etc) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is proposed to amend five UK primary and secondary legislation in relation to consumer protection in order to address failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the UK from the EU. It comes into force partly immediately before IP completion day, and fully on IP completion day.

The full draft legislation can be found here . The draft explanatory memorandum can be found here.

Council endorses EU directive on representative actions

The Council of the EU approved a deal concluded between the Croatian presidency of the Council and the European Parliament on a draft directive on representative actions for the protection of the collective interests of consumers. The directive requires Member States to implement a system of representative actions for the protection of consumers’ collective interests against infringements of EU law. It covers actions for both injunctions and redress measures.

See: LNB News 01/07/2020 70.

Source: EU consumers obtain access to collective redress.

Treasury Committee investigates FCA’s complaints handling processes

The chair of the Treasury Committee, Mel Stride MP, has written to the Complaints Commissioner and the FCA for views on how well the FCA has responded to a case where the Commissioner identified ‘numerous concerning observations’ and made remarks generally about the FCA’s complaints handling.

Source: ‘Troubling’ concerns raised about FCA’s handling of complaints.

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Investigations, enforcement and discipline

FCA allows Wirecard UK to resume operational activity

The FCA issued a statement about its work with Wirecard UK and other authorities over the last few days to ensure that the firm was able to meet certain conditions required to lift the restrictions imposed on it. The FCA says it is now in a position to allow Wirecard to resume operational activity. This means customers will now, or very shortly, be able to use their cards as usual.

Source: FCA statement on Wirecard.

FCA announces public censuring of Redcentric PLC

The FCA issued a public censure to Redcentric PLC after it was found to have committed market abuse between 9 November 2015 and 7 November 2016. In that timeframe, Redcentric issued unaudited interim results and audited final year results which materially misstated the company’s net debt position and overstated its asset position. The company has agreed to offer affected investors, who overpaid for shares, compensation.

Source: FCA publicly censures Redcentric PLC for market abuse.

FCA announces that Elevate Credit International Limited has entered administration

The FCA announced that Elevate Credit International Limited, trading as Sunny (and also previously under the ‘1 Monthly Loan’ and ‘Quid’ brands), was put into administration on 29 June 2020. Edward George Boyle and David John Pike from KPMG UK LLP were appointed as joint administrators.

Source: Elevate Credit International Limited enters administration.

FCA imposes restrictions on Wirecard Card Solutions Limited

The FCA announced that restrictions have been imposed on Wirecard Card Solutions Limited (FRN 900051), which is authorised and supervised by the FCA to issue e-money and provide payment services, including issuing e-money onto prepaid cards. On 26 June 2020, the FCA imposed a number of requirements on Wirecard including, that the firm must not dispose of any assets or funds; must not carry on any regulated activities; and must set out a statement on its website and communicate to customers that it is no longer permitted to conduct any regulated activities.

Source: Requirements have been imposed on Wirecard’s authorisation.

Company wound up by courts after falsely claiming entrepreneur support

The Insolvency Service revealed that an online cryptocurrency trading platform has been shut down by courts. According to the Insolvency Service, the company GPay Ltd, which traded as XtraderFX and formerly as Cryptopoint, was wound up in the High Court in the public interest after it falsely claimed support from high-profile entrepreneurs. The Official Receiver has been appointed as liquidator of the company.

Source: Online cryptocurrency trading platform shut down by courts.

Gefion Insurance A/S’s license to operate as an insurance company withdrawn

The European Insurance and Occupational Pensions Authority (EIOPA) and the FCA issued statements noting that the Danish Financial Supervisory Authority (DFSA) has withdrawn Gefion Insurance A/S’s licence to operate as an insurance company. This means that Gefion will be unable to underwrite any new policies and no further adjustments (such as changes of car/address/driver) are now permitted to existing policies. Claims arising under existing policies currently continue to be paid.

Sources: Cross-border co-operation platform on Gefion Insurance A/S—The Danish Financial Supervisory Authority has withdrawn Gefion’s license and   Gefion Insurance A/S—withdrawal of licence to operate.

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Dispute resolution for financial services lawyers

High Court finds against unregulated pension introducers; FCA seeks restitution

The High Court ruled in favour of the FCA in a civil action against two firms and their directors who provided pension services to consumers without FCA authorisation. The FCA is seeking orders from the High Court banning Avacade Future Solutions (AA) and their directors from engaging in unauthorised activities in the UK. The FCA will also be asking the Court to determine the sums that AA and the individuals should be required to pay by way of restitution for their roles in the unlawful activity.

Source: High Court finds against illegal pension introducers, Avacade and others.

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Competition in financial services

CMA issues annual report on banks’ SME lending undertakings

The Competition and Markets Authority (CMA) issued its annual report for 2019 summarising how well eight UK banks have complied with a number of obligations restricting the bundling of certain banking products offered to small- and medium-sized enterprises (SMEs). There were no significant breaches of the undertakings identified during the reporting year.

Source: SME banking 2002 behavioural undertakings: reports on compliance.

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Regulation of benchmarks and IBOR reform

FSB says benchmark transition remains crucial even amid coronavirus (COVID-19)

The FSB issued a statement on the impact of COVID-19 on global benchmark reform. The FSB says its Official Sector Steering Group (OSSG) is monitoring developments closely and recognises that some aspects of firms’ transition plans are likely to be temporarily disrupted or delayed, while others can continue. However, the FSB maintains its view that financial and non-financial sector firms across all jurisdictions should continue their efforts in making wider use of risk-free rates in order to reduce reliance on IBORs where appropriate and in particular to remove remaining dependencies on LIBOR by the end of 2021.

Source: FSB statement on the impact of COVID-19 on global benchmark reform.

ISDA makes recommendations to reform EU Benchmark Regulation

ISDA, in collaboration with the Asia Securities Industry and Financial Markets Association, the Futures Industry Association and the Global Foreign Exchange Division of the Global Financial Markets Association, has published a set of recommendations for the EU to reform Regulation (EU) 2016/1011, the Benchmark Regulation (BMR). The ISDA briefing paper states that the BMR has ‘fundamental flaws in its conception’ that ‘have made the BMR a threat to the financial well-being of benchmark users in the EU and put them at a significant competitive disadvantage.’

Source: The Importance of Reforming the EU Benchmarks Regulation.

Official sector panel discussed transition to risk-free rates at ICMA hosted event

The International Capital Market Association (ICMA) held a panel discussion on the ongoing transition effort for issuance of new financial instruments. Speakers from the UK Financial Conduct Authority, the Federal Reserve Bank of New York, the European Central Bank, the Swiss National Bank and the European Investment Bank took part in the discussions. The question of legacy products referencing LIBOR and other IBORDs as well as international co-operation on the transition to risk-free reference rates were topics covered.

Source: Transition to risk-free rates: an official sector panel discussion from ICMA.

Recommendations to reform the European Union Benchmark Regulation published

ISDA published recommendations, drafted in conjunction with the Asia Securities Industry and Financial Markets Association (ASIFMA), the Futures Industry Association (FIA) and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association (GFMA), on how to reform the European Union Benchmarks Regulation (BMR). A key recommendation is the narrowing of the scope of the BMR to prevent uncertainty and disruption after the end of the transition period on 31 December 2021.

Source: ISDA, ASIFMA, FIA and GFXD Publish EU Benchmarks Regulation Review Recommendation.

UK Finance article sets out tax implications of IBOR transition across Europe

UK Finance published a summary of some of the tax impacts of IBOR transition across selected European jurisdictions. It briefly examines issues such as whether IBOR transition will trigger a taxable event for corporate tax purposes, and the tax treatment of additional payments on loans as a result of transition.

Source: Tax implications of IBOR transition across Europe.

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Regulation of capital markets

EIB and ESM hold online seminars on post-coronavirus (COVID-19) recovery

The European Investment Bank (EIB) and the European Stability Mechanism (ESM) announced that they are holding joint seminars on ‘how to connect capital markets with a post-COVID-19 sustainable recovery’. The seminars are aimed at investors of both EIB and ESM. The seminars will take place over two days in which high-level speakers will talk about the EU’s recovery measures, the role of sustainable finance in the economic recovery and the role of public and private investment in continuing to sustain the transition to a greener and low-carbon economy and Europe’s financial resilience.

Source: and ESM lead discussion on how to connect capital markets with a post-coronavirus sustainable recovery.

ICMA releases positive statement on government's decision not to implement CSDR-SD measures

The ICMA released a statement regarding the government’s decision not to implement the EU CSDR-SD regime from February 2021. The ICMA stated that it had ‘long warned of the negative consequences of the mandatory buy-in element of the CSDR on the functioning of the debt capital markets’ and that ‘consequently the announcement of HMT that they will not be implementing this aspect of the CSDR is a positive step’. The ICMA noted that ‘UK trading entities, along with all third country trading entities, are still likely to be brought into scope of the EU CSDR as it applies at EU settlement level and requires trading parties to put enforceable contractual arrangements in place importing the mandatory buy-in regime'.

Source: ICMA statement on decision of UK government not to implement CSDR-SD measures.

ISDA and FIA highlight concerns of settlement discipline regime under CSDR

ISDA and the Futures Industry Association (FIA) published a position paper explaining concerns surrounding the settlement discipline regime under the Central Securities Depositories Regulation (EU) 909/2014 (CSDR). While the organisations ‘support the aim’ of the CSDR settlement regime, concerns have been raised following consideration of the practical implications of the regime on derivatives transactions. The paper highlights that the regime ‘does not appear to have been devised with derivatives transactions in mind’, which means that applying the cash penalties and mandatory buy-in regimes to settlement fails arising in the context of derivatives transactions can lead to ‘unintended adverse consequences and distort the economic agreement of the parties’. Various requests have been made in the paper, including clarification as to whether the cash penalties and mandatory buy-in requirements will not apply to settlement fails arising in the context of derivatives transactions.

Source: ISDA Publishes Position Paper on CSDR Settlement Discipline Regime.

For further information, see: Central Securities Depositories Regulation—essentials.

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Regulation of derivatives

EMIR 2.2: EACH proposals for a robust process for CCP risk model changes and validations under EMIR Article 49

The European Association of CCP Clearing Houses (EACH) published a paper entitled EMIR 2.2—EACH proposals for a robust and efficient process for CCP risk model changes and validations under EMIR Article 49. The paper provides suggestions, based on the experiences of central counterparties (CCPs), about the indicators that may be used to assess whether a model change is significant in line with EMIR Article 49. It also provides proposals to make the process for submitting, validating and approving a significant change more efficient. EACH considers that implementing these suggestions and proposals would improve the ability of CCPs to manage risk in a more effective manner while being subject to the adequate supervisory scrutiny.

Source: EACH paper—EMIR 2.2: EACH proposals for a robust and efficient process for CCP risk model changes and validations under EMIR Article 49.

For further information, see: EMIR REFIT and EMIR 2.2 roadmap.

CCP12 paper praises handling of coronavirus (COVID-19) crisis by CCPs

CCP12, the global association of central counterparties (CCPs), published a paper emphasising ‘the exceptional handling of crises by CCPs’ despite unprecedented volatility caused by COVID-19, record clearing volumes and long-term implementation of business continuity plans (BCPs). In particular, the paper says that CCPs provided market participants with an efficient and effective forum to manage their risks during the pandemic, while providing transparency and operational reliability, despite the significant challenges and high levels of volatility caused by the operational responses to COVID-19.

Source: CCPs again demonstrate strong resilience in times of crisis.

CPMI/IOSCO publish report on CCP default management auctions

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have published a report on central counterparty (CCP) default management auctions. The report outlines certain issues that CCPs should consider regarding default management auctions processes. It also identifies practices that CCPs could consider in the development and improvement of default management auctions to address those issues.

Source: CPMI-IOSCO publish a report on CCP auctions.

ESRB opinions on ESMA derivatives clearing consultation and report

The European Systemic Risk Board (ESRB) published opinions (dated 12 June 2020) on ESMA’s consultation paper on post trade risk reduction services (PTRRS) with regards to the clearing obligation, and report on central clearing solutions for pension scheme arrangements (PSAs).

Sources: ESRB opinion on ESMA report on post trade risk reduction services with regards to the clearing obligation and  ESRB opinion on ESMA report on Central Clearing Solutions for Pension Scheme Arrangements.

Bond Market Transparency Directory expanded by ICMA

ICMA expanded its Bond Market Transparency Directory to include pre-trade reporting obligations, in addition to post-trade obligations across multiple jurisdictions from Europe, the Americas and Asia-Pacific. ICMA explained that the purpose of the mapping is to provide a consolidated view to compare both regulatory rules and best practice guidance on bond trade reporting transparency regimes, as well as details on reporting fields and exceptions.

Source: ICMA expands scope of Bond Market Transparency Directory .

ISDA issues request for quotations for online platform development

ISDA issued a request for quotations (RFQ) from qualified parties, for the development of an online platform to support their suite of digital documentation. This new online platform will be used to publish ISDA’s 2020 Interest Rate Derivatives Definitions and will also store digital copies of existing documents, such as the 2002 ISDA Master Agreement. Further documentation will be added on a phased basis. Interested parties should indicate their intention to submit a proposal by 5.00 pm on 17 July 2020, and written proposals should be submitted by 5.00 pm on 31 July 2020 (London time) in accordance with the guidance outlined in the RFQ.

Source: ISDA Issues RFQ to Provide Front-end User Platform

ISDA CEO offers comment on important OTC derivatives issues in derivatiViews

ISDA’s CEO, Scott O'Malia, has offered informal comment on the subject of important OTC derivatives issues in derivatiViews.

Source: Tackling Tough Legacy.

ISDA updates derivatives compliance calendar

ISDA updated its global calendar of compliance deadlines and regulatory dates for the over-the-counter derivatives space. The calendar was updated on 30 June 2020.

Source: Updated OTC Derivatives Compliance Calendar 2020-7.

Survey published on derivatives market liquidity and coronavirus (COVID-19)

The International Swaps and Derivatives Association and Greenwich Associates have carried out a survey concerning the impact of COVID-19 on derivatives market liquidity. The survey was based on 172 responses from market participants worldwide.

Source: New Survey on Derivatives Market Liquidity and COVID-19.

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Securities financing transactions

FCA publishes draft SFTR application form for trade repositories

The FCA published a draft form (with notes) for advance applications for the registration of trade repositories providing services under the Securities Financing Transactions Regulation (EU) 2015/2365 (SFTR). The draft form was prepared further to HM Treasury’s announcement that it would bring forward legislation to enable trade repositories to apply in advance to operate in the UK immediately following the end of the Brexit transition period.

Source: Securities Financing Transactions Regulation (SFTR) registration form.

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

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Banks and mutuals

Regulation amending CRR and CRR II in response to the coronavirus (COVID-19) published in Official Journal

Regulation (EU) 2020/873 amending Regulation (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR II) to make certain adjustments in response to COVID-19 has been published in the Official Journal. The Regulation makes targeted amendments to the CRR and CRR II to maximise credit institutions’ capacity to lend and absorb losses related to the pandemic, while still ensuring their continued resilience.

Source: Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic

For further information, see: CRD IV—essentials.

EBA issues final guidelines on treatment of structural FX positions under CRR

The EBA published its final guidelines on the treatment of structural foreign exchange (FX) positions under the Capital Requirements Regulation (EU) 575/2013 (CRR). The guidelines are intended to establish a harmonised framework for the application of the FX waiver, to allow it to be applied consistently going forward. The EBA has delayed the planned application date of the guidelines by one year to give institutions time to prepare, and they will now apply from 1 January 2022.

Source: EBA publishes final guidelines on the treatment of structural FX positions.

EBA publishes two ITS under CRR II and the Prudential Backstop Regulation on disclosures and reporting

The EBA published new and revised implementing technical standards (ITS) on public disclosures and supervisory reporting under the revised Capital Requirements Regulation (EU) 2019/876 (CRR II) and the Prudential Backstop Regulation (EU) 2019/630. These ITS form part of the EBA Roadmaps on the Risk Reduction Package and have been submitted to the European Commission for adoption.

Source: EBA publishes final draft comprehensive ITS on institutions’ Pillar 3 disclosures and revised final draft ITS on supervisory reporting (Framework 3.0).

ECB consults on its approach to bank consolidation plans

The ECB published a guide for consultation that aims to clarify its supervisory approach to consolidation projects involving euro area banks. The ECB says it will make use of its supervisory tools in order to facilitate sustainable consolidation projects. Such projects must be based on a credible business and integration plan, improve the sustainability of the business model, and respect high standards of governance and risk management. Feedback is sought by 1 October 2020.

Source: ECB launches public consultation on its supervisory approach to consolidation.

Coronavirus (COVID-19)—PRA sets out its views on the EU targeted banking package

The PRA issued a statement setting out its views on some of the ‘quick fix’ amendments made by Regulation (EU) 2020/873 (the Amending Regulation) to the Capital Requirements Regulation (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR II) in response to COVID-19. In accordance with the European Union (Withdrawal Agreement) Act, the Amending Regulation applies directly to PRA-regulated firms.

Source: Statement by the PRA on the Capital Requirements Regulation (CRR) ‘Quick Fix’ package.

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

John Glen on the EU targeted banking package

The House of Lords European Union Committee published a letter from John Glen MP, the economic secretary to the Treasury, on the EU targeted banking package.

Source: HM Treasury letter on UK approach to CRR Amending Regulation.

BoE article on large exposure regime

The BoE published Quarterly Bulletin 2020 Q2, which contains an article on the current large exposure (LE) regime in the UK and how it has evolved over time to become a key element of financial services regulation. It addresses key concepts such as how the LE framework treats a group of connected counterparties and how banks calculate total exposures to a counterparty.

Source: ‘Don’t put all your eggs in one basket’: protecting banks from the failure of individual counterparties.

Coronavirus (COVID-19) lending: PRA on the application of credit risk approaches for firms

The PRA updated its statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) to include clarifications on the application of credit risk approaches for firms.

Source: COVID-19: PRA updates statement on regulatory treatment of CBILS and CLBILS loan schemes.

Coronavirus (COVID-19)—PRA revises approach to regulatory reporting and Pillar 3 disclosure

The PRA ha issued a statement outlining its revised approach to regulatory reporting and Pillar 3 disclosure for PRA-regulated banks in response to the COVID-19 outbreak.

Source: Statement by the PRA on COVID-19 regulatory reporting and disclosure amendments.

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA updates guidance on personal loans, credit cards and overdrafts

The FCA published updated temporary guidance setting out its expectations that firms should provide continued support for consumers facing payment difficulties due to circumstances arising out of COVID-19. The guidance relates to personal loans, credit cards (including retail revolving credit) and overdrafts. The FCA has also published an update on banks’ overdraft pricing decisions and plans to support consumers.

Sources: FCA gives update on banks’ overdraft pricing decisions and plans to support consumers,   FCA confirms further support for consumer credit customersCredit cards (including retail revolving credit) and coronavirus: updated temporary guidance for firmsOverdrafts and coronavirus: updated temporary guidance for firmsPersonal loans and coronavirus: updated temporary guidance for firmsFS20/9: Further support for consumers impacted by coronavirus: feedback on draft guidance and rules (personal loans, credit cards and overdrafts) and  Coronavirus (Covid-19): Information for firms (updated).

For further information, see: FCA: Treating Customers Fairly—essentials.

UK Finance identifies four customer types in post-coronavirus (COVID 19) world

UK Finance wrote a blog post in which it describes four types of customers that are likely to exist after COVID-19 subsides and UK government support is withdrawn. According to the trade association, each of these segments will have its own complex needs, which lenders will need to understand to ensure that they treat their customers fairly.

Source: Four customer types in a post-COVID-19 world.

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Regulation of insurance

European Commission launches review of key elements of Solvency II

The European Commission launched a review of the key elements of the Solvency II Directive 2009/138/EC. This public consultation (which takes the form of a questionnaire) is intended to complement the ongoing technical consultations and data collections with insurance and reinsurance companies conducted by EIOPA. Together, they will feed into the Commission review process of the Solvency II framework. The deadline for comments is 21 October 2020.

Source: Insurance & reinsurance firms—review of prudential rules (Solvency II Directive).

For further information, see: Solvency II—essentials.

PRA consults on its proposed approach to publishing Solvency II technical information

The PRA published a consultation paper (CP5/20) setting out its proposed approach to the publication of Solvency II technical information (TI) after the end of the Brexit transition period. UK insurers are currently required to use TI published by EIOPA to calculate their regulatory technical provisions under Solvency II (Directive 2009/138/EC), but from the end of the transition period the PRA will be required to publish TI for each relevant currency. The consultation closes on 30 September 2020.

Source: Solvency II technical information: The PRA’s proposed approach to the publication at the end of the transition period.

Gefion Insurance A/S’s license to operate as an insurance company withdrawn

EIOPA and the FCA issued statements noting that the Danish Financial Supervisory Authority (DFSA) has withdrawn Gefion Insurance A/S’s licence to operate as an insurance company. This means that Gefion will be unable to underwrite any new policies and no further adjustments (such as changes of car/address/driver) are now permitted to existing policies. Claims arising under existing policies currently continue to be paid.

Sources: Cross-border co-operation platform on Gefion Insurance A/S—The Danish Financial Supervisory Authority has withdrawn Gefion’s license and   Gefion Insurance A/S—withdrawal of licence to operate.

IAIS responds to liquidity risk management consultation feedback

The International Association of Insurance Supervisors (IAIS) published responses to the feedback it received on its consultation on a draft application paper on liquidity risk management, which ran between December 2019 and January 2020.

Sources: Resolutions to public consultation comments on application paper on liquidity risk management and  Application paper on liquidity risk management.

Coronavirus (COVID-19)—FCA sets out further detail of its expectations of insurance firms

The FCA updated its webpage providing firms with information on its response to the COVID-19 to add a section on insurers’ handling of consumer claims and refund requests. In the updated section, the FCA announces its intention to consult shortly on new guidelines to clarify its expectations of firms and the choices for consumers. It has also updated the travel insurance section of its webpage on insurance and COVID-19 to provide further detail on its expectations of insurance firms.

Sources: FCA webpage update: Coronavirus (COVID-19): Information for firms and  FCA webpage update: Insurance and coronavirus (COVID-19): our expectations of firms.

Coronavirus (COVID-19)—FCA updates insurance expectations to cover MOT extension

The FCA added a new update to its webpage setting out its expectations of insurance firms during COVID-19. It says that in light of the Department for Transport’s recent decision to extend MOT expiry dates due to coronavirus, the FCA expects motor insurers to continue to provide cover for consumers’ car, motorcycle or van insurance due to their temporary situation.

Source: Insurance and coronavirus (COVID-19): our expectations of firms (MOT section updated following Department for Transport update on MOT extensions).

Coronavirus (COVID-19)—Second o​rder from FCA BI Test Case

The FCA updated its Business interruption insurance webpage to include the details of the order from the second case management conference held on 26 June 2020, in relation to its test case concerning non-damage business interruption losses relating from COVID-19 lockdown.

Source: Business interruption insurance.

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Regulation of personal pension and stakeholder products

High Court finds against unregulated pension introducers; FCA seeks restitution

The High Court has ruled in favour of the FCA in a civil action against two firms and their directors who provided pension services to consumers without FCA authorisation. The FCA is seeking orders from the High Court banning Avacade Future Solutions (AA) and their directors from engaging in unauthorised activities in the UK. The FCA will also be asking the Court to determine the sums that AA and the individuals should be required to pay by way of restitution for their roles in the unlawful activity.

Source: High Court finds against illegal pension introducers, Avacade and others.

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Payment services and systems

Fees for Payment of Taxes, etc by Card Regulations 2020

SI 2020/657: Provisions are made to provide that a fee must be paid in respect of any payment made to the Commissioners for HMRC (‘the Commissioners’) by business credit or debit card. It also revokes the Fees for Payment of Taxes, etc by Credit Card Regulations 2016 and the Fees for Payment of Taxes, etc. by Credit Card (Amendment) Regulations 2017. These Regulations come into force on 1 November 2020.

Source: Fees for Payment of Taxes, etc by Card Regulations 2020

Commission publishes report on the impact of the Interchange Fees Regulation

The European Commission published a report on the impact of the Interchange Fees Regulation (IFR) for card-based payment transactions. In line with the requirements on the IFR itself, it has been sent to the European Parliament and the Council. The report concludes that the main objectives of the Regulation have been achieved, as interchange fees for consumer cards have decreased, leading to reduced merchants' charges for card payments, and ultimately resulting in improved services to consumers and lower consumer prices.

Source: Commission publishes report on the impact of the Interchange Fees Regulation.

PSR says six largest UK banking groups have now implemented Confirmation of Payee (CoP)

The Payment Systems Regulator (PSR) issued a statement noting that the 30 June 2020 extension for implementation of Confirmation of Payee (CoP) has now passed, and the fraud prevention tool has been adopted by the UK’s six largest banking groups. CoP gives customers the additional protection of checking the name of who they want to pay against the account number, which the PSR says is ‘a significant milestone in reducing authorised push payment (APP) scams’.

Source: PSR confirms widespread implementation of name-checking system, Confirmation of Payee.

SCT Inst maximum transaction amount rises to 100,000 euros

The European Payments Council (EPC) announced that, as of 1 July 2020, the maximum amount per Single European Payments Area (SEPA) Instant Credit Transfer (SCT Inst) transaction went up from 15,000 to 100,000 euros. Payment end-users can use the scheme in higher-value business-to-business and business-to-consumer transactions.

Source: SCT Inst transaction limit increased to 100,000 euros

Coronavirus (COVID-19)—EBA extends deadline under Guidelines on moratoria to 30 September 2020

The EBA amended its Guidelines on the treatment of public and private moratoria in light of COVID-19 measures so that the deadline by which a moratorium is to be announced and applied is extended from 30 June 2020 to 30 September 2020.

Source: Guidelines amending Guidelines EBA/GL/2020/02 on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis.

FCA and PSR issue further statement on access to cash

The FCA and the PSR published further information on their joint work to map access to cash and how this will shape their future work in this area. Ensuring access to cash is a priority for both the FCA and the PSR, and developing a better understanding of consumers’ needs and characteristics will be a key part of their longer-term work to maintain access to cash withdrawals and deposits for consumers and businesses.

Source: Identifying and managing access to cash during COVID-19.

New version of Open Banking Standard published

The Open Banking Implementation Entity (OBIE) published Open Banking Standard version 3.1.6, which supports the transition of open banking-enabled services when users switch bank accounts using the Current Account Switching Service (CASS). This is a minor update to version 3.1.5, released in March 2020.

Source: OBIE publishes version 3.1.6. of the Open Banking Standard.

PSR publishes general submissions received on its card-acquiring services market review

The PSR published the general submissions it received in response to its market review into the supply of card-acquiring services during Q1 2020, other than in response to consultations. The general submissions published were received from the Cabinet Office, Mastercard and Worldpay.

Source: Card-acquiring services market review: General submissions received in Q1 2020 (other than in response to consultations).

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Fintech and cryptoassets

FCA study shows 1.1 million spike in cryptoasset buyers

The FCA published results of a research study that the regulator has carried out which shows that an estimated 2.6 million UK consumers have bought cryptoassets at some point. The number marks a 1.1 million increase since the FCA completed a face-to-face survey on the same topic last year. Of the 1.9 million that still hold their cryptoassets—such as Bitcoin, Ripple or Ether—half have more than £260.

Source: FCA research reveals 1.1 million spike in cryptoasset buyers.

BoE selected by BIS to host an Innovation Hub Centre

The BoE announced that it has been selected to host a centre of the Bank for International Settlements (BIS) Innovation Hub. This UK centre will support the global central banking and finance community through the development of digital public goods—addressing issues of critical importance for the global financial system. The decision to establish this centre is a reflection of the UK’s position as a world leader in innovation and technology in finance, with global leadership evident across the private, government and regulatory sectors.

Source: Bank for International Settlements selects Bank of England to host an Innovation Hub Centre.

ESMA and EIOPA respond to the European Commission’s Digital Finance Strategy consultation

ESMA and EIOPA submitted responses to the European Commission’s consultation on a new digital finance strategy for the EU.

Sources: ESMA responds to European Commission consultation on the digital finance strategy and   EIOPA responds to the European Commission’s digital finance strategy consultation.

FMLC responds to European Commission digital finance strategy consultation

The Financial Markets Law Committee (FMLC) published its response to the European Commission’s consultation on a new digital finance strategy for Europe. The FMLC’s response highlights the importance of the use of identifiers such as the Legal Entity Identifier (LEI) in helping the financial sector adopt a common language in a wide range of areas. It also draws attention to the work of organisations more involved in the creation and promulgation of LEIs which will be responding to the consultation.

Source: Response to European Commission consultation: A new digital finance strategy: 26 June 2020.

IOSCO consultation on artificial intelligence and machine learning

IOSCO published a consultation on proposed guidance that member jurisdictions may consider adopting to address the conduct risks associated with the development, testing and deployment of artificial intelligence (AI) and machine learning (ML) by market intermediaries and asset managers. Responses are requested by 26 October 2020.

Source: The use of artificial intelligence and machine learning by market intermediaries and asset managers: Consultation report.

Company wound up by courts after falsely claiming entrepreneur support

The Insolvency Service revealed that an online cryptocurrency trading platform has been shut down by courts. According to the Insolvency Service, the company GPay Ltd, which traded as XtraderFX and formerly as Cryptopoint, was wound up in the High Court in the public interest after it falsely claimed support from high-profile entrepreneurs. The Official Receiver has been appointed as liquidator of the company.

Source: Online cryptocurrency trading platform shut down by courts.

Innovate Finance publishes survey results of coronavirus (COVID-19) impact on UK fintech sector

Innovate Finance published the results of a recent survey on the impact of COVID-19 on the fintech industry. The results found that some of the smallest UK fintech companies have a cash runway of six months or less and revealed that over 75% of smaller fintech companies are worried about the next funding round, with over 70% of all respondents having received no private funding since the start of lockdown. Over three-quarters of fintech start-ups with 25 employees or fewer are turning to the government for funding support.

Source: UK FinTech COVID-19 Impact Survey: The results.

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Sustainable finance

ECB consults on its approach to bank consolidation plans

The ECB published a guide for consultation that aims to clarify its supervisory approach to consolidation projects involving euro area banks. The ECB says it will make use of its supervisory tools in order to facilitate sustainable consolidation projects. Such projects must be based on a credible business and integration plan, improve the sustainability of the business model, and respect high standards of governance and risk management. Feedback is sought by 1 October 2020.

Source: ECB launches public consultation on its supervisory approach to consolidation.

FCA announces publication of CFRF guide to help the financial industry address climate-related financial risks

The FCA announced that the Climate Financial Risk Forum (CFRF) has published a guide written by industry for industry to help firms approach and address climate-related financial risks. The guide, the first of its kind, provides practical recommendations to firms of all sizes on disclosure of climate-related financial risks; effective risk management; scenario analysis, and opportunities for innovation in the interest of consumers.

Source: The Climate Financial Risk Forum publishes its guide to help the financial industry address climate-related financial risks.

European Scrutiny Committee asks for clarification on government plans to align with EU’s Taxonomy Regulation

The House of Commons European Scrutiny Committee published a letter from its chair, Sir William Cash MP, to the economic secretary to the Treasury, John Glen, regarding the UK’s planned approach to implementing the EU’s sustainable investment taxonomy. In the letter, dated 25 June 2020, Cash asks HM Treasury to clarify the extent to which it intends to align UK legislation with the EU’s Taxonomy Regulation after the Brexit implementation period has ended.

Source: Letter William Cash to John Glen: UK implementation of the EU’s Sustainable Investment Taxonomy.

Committee chairs set out opportunities of green economic recovery to chancellor and stress recovery must accelerate move to net zero to avert climate crisis

The chair of the Business, Energy and Industrial Strategy (BEIS) Committee, Darren Jones, and the chair of the Environmental Audit Committee (EAC), Philip Dunne, have written to the chancellor, Rishi Sunak, warning that time is running out to ‘avert an even greater future global crisis caused by climate change’. They stress that the UK’s post-COVID economic recovery package should be used as an opportunity to accelerate investment on climate adaptation and cutting emissions to net zero.

Source: Committee chairs set out opportunities of green economic recovery to chancellor and stress recovery must accelerate move to net zero to avert climate crisis.

Bailey sets out Bank of England’s position on climate change in relation to coronavirus (COVID-19)

The governor of the BoE, Andrew Bailey, has set out the BoE’s position on climate change in relation to the recent COVID-19 crisis. In a short press release, Bailey addresses the climate change implications of the BoE’s policies on lending during the pandemic, including the issue of resetting the benchmark for its purchases of corporate bonds.

Source: Statement on Bank’s commitment to combatting climate change.

BoE publishes Sarah Breeden speech on climate change in the financial sector

The BoE published a speech given by Sarah Breeden, the BoE’s executive sponsor for work on climate change, at a UK Finance webinar held during London Climate Action Week 2020. The speech focused on how the financial sector can draw on the recent work of the BoE, the Climate Financial Risk Forum (CFRF), and the Network for Greening the Financial System (NGFS) to move beyond rhetoric and help make climate action a reality.

Source: Leading the change: climate action in the financial sector—speech by Sarah Breeden.

PRA Dear CEO Letter addresses climate-related financial risk

The deputy governor for prudential regulation and CEO of the PRA, Sam Woods, has sent a letter to CEOs of all PRA-regulated firms, setting out thematic feedback from the PRA’s review of firms’ plans and clarifications of the PRA’s expectations originally set out in its supervisory statement on enhancing firms’ approaches to managing climate-related financial risks (SS3/19). This letter also provides observations on good practice, and sets out next steps for implementation.

Source: Letter from Sam Woods ‘Managing climate-related financial risk—thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarifications of expectations’.

UNEPFI report calls for urgent financial sector action on biodiversity

The United Nations Environmental Programme Finance Initiative (UNEPFI) has published a report outlining the urgent need for financial sector action on biodiversity, and providing a pathway for banks, investors and insurers to get started. It sets out the nine priority sectors with large financial flows and major potential dependencies or impacts on biodiversity.

Source: Beyond ‘business as usual’: Biodiversity targets and finance.

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Islamic finance

IFSB publishes latest round of country-level data on Islamic banking systems

The Islamic Financial Services Board (IFSB) has announced the publication of country-level data on the financial soundness and growth of the Islamic banking systems for Q4 of 2019 from IFSB member jurisdictions. This is the 16th dissemination and completes the availability of quarterly data from Q4 of 2013 to Q4 of 2019.

Source: The IFSB database disseminates data for 2019Q4 for Islamic banking systems in member countries.

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Dates for your diary

 

DateSubjectEvent

3 July 2020

 

Regulation of derivatives

 

Deadline for responses to ESMA ‘ Consultation Paper: Technical standards on reporting, data quality, data access and registration of Trade Repositories under EMIR REFIT (ESMA74-362-47)’.

 

5 July 2020

 

UK, EU and international regulators and bodies

 

Deadline for responses to chapters 2 and 3 of FCA consultation paper ‘ CP20/7: Quarterly Consultation No 28’.

 

6 July 2020

 

Investment funds and asset management



Sustainable finance



Regulation of insurance

 

Deadline for responses to the European Commission consultations:

6 July 2020

 

Financial crime

 

Deadline for responses to EBA consultation on ‘ Draft Guidelines under Articles 17 and 18(4) of Directive (EU) 2015/849 on customer due diligence and ML/TF risk factors (JC 2019 87) (JC 2019 87)’.

 

7 July 2020

 

Coronavirus (COVID-19)

 

P.R.I.M.E Finance will hold a webinar ‘ Regulation: What does the Pandemic mean for Financial Regulation?’ at 15:00 (London).

 

9 July 2020

 

Prudential requirements



Banks and mutuals

 

Deadline for responses to EBA ‘ Consultation Paper: Draft Regulatory Technical Standards on the prudential treatment of software assets under Article 36 of Regulation (EU) No 575/2013 (Capital Requirements Regulation ‐ CRR) amending Delegated Regulation (EU) 241/2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the council with regard to regulatory technical standards for Own Funds requirements for institutions’.

 

 

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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.