FS weekly highlights—2 May 2019

FS weekly highlights—2 May 2019

In this issue

 

Brexit news
UK regulator updates
European regulator updates
International regulator updates
Authorisation, approval and supervision
Prudential requirements
Financial crime
Consumer protection
Enforcement and redress
Markets and trading
MiFID II
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Insurance and pensions
Payment services and systems
FinTech and virtual currencies
Dates for your diary

 

Brexit news

 

ESMA clarifies schedule for transparency calculations in May and June 2019

The European Securities and Markets Authority (ESMA) published a statement clarifying that transparency calculations due in May and June 2019 as well as in the following months will now be published. ESMA considers that it is necessary to provide clarity to stakeholders following the UK’s Article 50(3) extension. ESMA intends to perform and publish the calculations for the quarterly systematic internaliser (SI) determination for equity instruments and bonds and the quarterly liquidity determination for bonds on 30 April 2019, and the double volume cap on 8 May 2019.

EIB Board of Governors decision on capital subscribed by the remaining Member States as a result of Brexit published in Official Journal

Decision of the Board of Governors of the European Investment Bank (EIB) of 16 April 2019 on the replacement of the capital of the United Kingdom in the EIB by capital subscribed by the remaining Member States (2019/655) was published in the Official Journal. As a result of the UK's decision to leave the EU, this will bring an end to the UK's membership of the EIB and therefore to its subscribed capital in the Bank. With effect from the UK's withdrawal from the EU, the capital subscribed by the remaining Member States will be increased by EUR 39 195 022 000, in proportion to each Member State's share in the total subscribed capital of EUR 204 089 132 500. Council Decision (EU) 2019/654 of 15 April 2019 amending Protocol No 5 on the Statute of the EIB (also due to the UK’s withdrawal from the EU) was also published in the Official Journal.

International Trade Committee to examine investor protection and the impact of Brexit on overseas investment

The International Trade Committee held a session on 1 May 2019 examining investor protection and the impact of Brexit on overseas investment, as part of its ongoing inquiry into UK investment policy. During the session, MPs heard evidence on investor protection mechanisms commonly found in trade agreements, how the UK might do more to help both inward and outward investors, and the impact of Brexit on investment into the UK.

Loan Market Association users guide receives no-deal update

A minor change was made to the Loan Market Association’s (LMA) users guide to reflect the Financial Conduct Authority's (FCA’s) indication as to the use of its transitional powers in the case of a no-deal Brexit. The LMA ‘bail-in clause and users guide’ document is available on the organisation’s website to LMA members only. 

 

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UK regulator updates

 

FCA publishes Handbook Notice No. 65

The FCA published Handbook Notice No. 65, which includes changes to the FCA Handbook made by the FCA board on 28 March 2019 and by the FCA’s Executive Regulation and Policy Committee on 16 April 2019, as well as changes to binding technical standards (BTS) made by the FCA board on 9 April 2019. Feedback on the relevant consultation papers was published in separate documents. The Handbook Notice includes the following instruments:

  • Conduct of Business (Binary Options) Instrument 2019 (FCA 2019/15)
  • Binding Technical Standards Instruments (FCA 2019/57-59 and 64-66), and
  • Supervision Manual (Supervisory Principles Amendment) Instrument 2019
PRA publishes Regulatory Digest for April 2019

The Prudential Regulation Authority (PRA) published its Regulatory Digest for April 2019. Highlighted features in this issue are: (1) the PRA business plan for 2019/20, setting out its strategy, workplan, and budget for the coming year (2) climate change publications, including policy statement PS11/19 and supervisory statement SS3/19 on ‘Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change’, and a speech by the PRA’s executive director for international banks supervision, Sarah Breeden, on ‘Avoiding the storm: Climate change and the financial system’, and (3) consultation paper CP7/19 ‘Solvency II: Equity release mortgages–Part 2’. A number of other topics and issues are also discussed.

FSCS announces firm levy for 2019/20

The Financial Services Compensation Scheme (FSCS) announced that it will levy firms £532m for 2019/20, £16m more than it forecast in its plan and budget 2019/20 in January. The FSCS says the main reasons for the increase between the forecast levy and the final levy are an uplift in the number of claims expected against self-invested personal pension (SIPP) operators and an upwards revision to the expected continuing costs in some historic insurance failures. A full explanation of the 2019/20 annual levy is contained in the latest edition of the FSCS’s publication, Outlook, which was also published on 30 April 2019.

Philip Hammond updates Treasury Committee on BoE governor appointment process

The Chancellor of the Exchequer, Philip Hammond MP, wrote to the Treasury Committee providing details on the appointment process of the next Governor of the Bank of England (BoE), when Mark Carney’s term ends on 31 January 2020. Mr Hammond said that although the appointment was not regulated by the Office of the Commissioner for Public Appointments, the government would follow its guidance wherever possible. The application window for the role will run through to 5 June 2019.

 

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European regulator updates

 

ECB supervisory fees for 2019 a significant rise on 2018

The European Central Bank (ECB) set its estimated 2019 supervisory fees at €576m, comprising €559m in expected supervision costs plus €15.3m for the 2018 deficit, plus €1.7m due to adjustments to individual fees resulting from changes in banking structures. Banks that are directly supervised by the ECB will pay 91% of the fees and the remaining 9% will be paid by banks that are indirectly supervised by the ECB. Banks will receive their individual fee notices in October 2019. A public consultation on the fees framework is currently underway, including a move to invoicing ex-post instead of ex-ante.

Andrea Enria discusses bail-in, restructuring and ECB transparency

The ECB published an interview with the Chair of its Supervisory Board, Andrea Enria, in which he discussed the application of the bail-in principle, the restructuring and winding-up of banks that are in trouble, non-performing loans (NPLs), and how his role and remit might differ from that of his predecessor, Danièle Nouy.

European Commission: April 2019 Finance newsletter focuses on supervisory reform

The European Commission published its latest Finance newsletter, which summarises developments in April 2019. Among other items, it focuses on provisional agreed reform of the European supervision of EU financial markets. Also discussed are issues including the capital markets union (CMU), the adoption of revised rules on capital requirements and FinTech. 

 

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International regulator updates

 

FSB plenary and publication of thematic review on bank resolution planning

The Financial Stability Board (FSB) plenary met in New York on 26 April 2019 to discuss vulnerabilities in the global financial system and progress under its 2019 work programme, including deliverables for the June 2019 G20 meetings in Japan. The FSB plenary found that the core of the financial system is ‘considerably more resilient than it was a decade ago’, however potential vulnerabilities persist, including the extent of financial institutions’ exposures to riskier credit instruments, such as leveraged loans. 

 

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Authorisation, approval and supervision

 

FCA updates Handbook to reflect new approach to supervision

The FCA published the Supervision Manual (Supervisory Principles Amendment) Instrument 2019 (FCA 2019/67), which amends Chapter 1A of the Supervision Manual (SUP) in the FCA Handbook to reflect the FCA’s recent ‘Approach to supervision’ document, which was published on 24 April 2019. The changes came into effect on that day. 

 

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Prudential requirements

 

Amendment to CRR concerning minimum loss coverage for non-performing exposures published in Official Journal

​Regulation (EU) 2019/630 of the European Parliament and of the Council of 17 April 2019 amending the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR) as regards minimum loss coverage for non-performing exposures was published in the Official Journal. Regulation (EU) 2019/630 sets capital requirements applying to banks with non-performing exposures (NPEs) on their balance sheets, to ensure those banks set aside sufficient own resources to cover NPLs and to create appropriate incentives to avoid the accumulation of NPEs.

PRA: SRB rates for ring-fenced banks and large building societies

The PRA published the systemic risk buffer (SRB) rates applicable from 1 August 2019. The PRA set SRB rates for ring-fenced banks (RFBs), including Lloyds Banking Group and Royal Bank of Scotland, which apply to all exposures, on a sub-consolidated basis. The PRA has also set an SRB rate for Nationwide Building Society. The PRA is required by the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 as amended by Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015 (Part 5A) to set SRB rates for RFBs and large building societies from 1 January 2019 by applying the Financial Policy Committee (FPC)'s framework for the SRB.

 

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Financial crime

 

Eight members of £3m ‘boiler room’ investment scam operation jailed

Eight members of a ‘boiler room’ investment scam operation that conned over 50 elderly and vulnerable victims out of almost £3m were jailed. The group cold-called potential victims, offering a chance to invest in corporate bonds and promising large annual returns. The leader of the scam was jailed for seven years after being convicted of money laundering offences at Southwark Crown Court and previously being found guilty of conspiracy to defraud for the scam at an earlier trial.

EBA faces calls for revamp after dropping Danske AML case

The European Union’s financial regulation chief criticised the bloc's top banking watchdog for closing an investigation into a suspected €200bn ($223bn) money laundering scandal at Danske Bank, as he called for an overhaul at the regulator. The European Banking Authority (EBA) ended a probe into whether Denmark and Estonia’s financial regulators failed in their obligations to properly supervise Danske Bank in relation to a money laundering scandal after finding they did not breach European Union law. But the decision by the EBA to end the investigation drew criticism from Valdis Dombrovskis, the European Commission Vice-President responsible for financial services policy. He tweeted Monday that he was disappointed that the authority ‘did not act on one of the biggest money laundering scandals in Europe’. 

 

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Consumer protection

 

FCA call for input on financial advice market

The FCA launched a call for input asking for feedback on its proposed approach to reviewing the Retail Distribution Review and the Financial Advice Market Review. The review will consider whether these initiatives are successful, whether the market delivers what consumers want and how new market trends and developments might affect the future development of advice and guidance services. Feedback is requested by 3 June 2019. The FCA will conduct research and stakeholder engagement in Autumn 2019, and the final report is expected in 2020. 

 

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Enforcement and redress

 

FCA issues Final Notice to Linear Investments following UT decision

The FCA issued its Final Notice to Linear Investments Ltd, imposing a financial penalty of £409,300 in relation to market abuse failings. Publication of the Final Notice follows the Upper Tribunal (UT)’s decision that the FCA's penalty was appropriate. The UT's decision was its first under the process introduced for partly contested cases.

FMLC responds to proposal for a regulation on the law applicable to the third-party effects of assignments of claims

The Financial Markets Law Committee (FMLC) published a letter addressed to the Chair of the Committee on Legal Affairs at the European Parliament, Pavel Svoboda, concerning a proposal for a regulation on the law applicable to the third-party effects of assignments of claims. The Committee previously engaged with this topic and recommended that the third-party consequences of assignments of claims should be governed by the law of the assigned claim rather than the law of the assignor’s habitual residence. This letter to the European Parliament reiterates that recommendation and draws attention to new uncertainties introduced by the legislative resolution.

 

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Markets and trading

 

ESMA decision to renew temporary restriction on marketing, distribution or sale of CFDs to retail clients published in Official Journal

ESMA Decision (EU) 2019/679 of 17 April 2019 renewing the temporary restriction on the marketing, distribution or sale of contracts for differences (CFDs) to retail clients was published in the Official Journal of the EU. The Decision renews and amends ESMA Decision 2019/155, and applies from 1 May 2019 for a period of three months. The Decision sets out the detail of the temporary restriction on CFDs in respect of retail clients, as well as a prohibition on participating in circumvention activities. ESMA states in the Decision its continued concern that, if the temporary restriction is not renewed, it is likely that CFDs will again be offered to retail clients without adequate measures to sufficiently protect them against the risks related to those products that gave rise to the consumer detriment identified in this and previous Decisions.

FCA delays final rules on CFD intervention measures

The FCA announced that is to delay until summer 2019 a policy statement and any final Handbook rules on permanent product intervention measures to restrict the sale, marketing and distribution of CFDs and CFD-like options sold to retail clients. The policy statement and any rules were due in April 2019. In the meantime, the temporary restrictions imposed by ESMA will continue to apply to FCA-authorised firms.

ESMA publishes official translations of CSDR guidelines on internalised settlement reporting

ESMA issued the official translations of its guidelines on internalised settlement reporting under Article 9 of Regulation (EU) 909/2014 on improving securities settlement in the EU and on central securities depositories and amending Directive 98/26/EC and Directive 2014/65/EU and Regulation (EU) 236/2012 (CSDR). National competent authorities (NCA's) to which these guidelines apply must now notify ESMA within two months of whether they comply or intend to comply with the guidelines, providing reasons for non-compliance.

LMA publishes results of Developing Markets Survey for 2019

The LMA published the results of its members’ survey on the opportunities and challenges facing increasingly active developing market jurisdictions, focusing primarily on Africa, Central and Eastern Europe and the Middle East. The aim of the survey was to determine where the key investment opportunities and challenges lie, which sectors are most likely to drive future growth and which factors will be most important in developing the loan market within these jurisdictions.

SONIA swaps majority of transactions in association’s quarterly review

In the International Swaps and Derivatives Association’s (ISDA’s) Interest Rate Benchmarks review for the first quarter of 2019, it was reported that Sterling Overnight Index Average (SONIA) swaps ‘represented the majority of transactions referencing RFRs [risk free rates], reflecting the fact that SONIA is currently used as the reference rate for sterling overnight index swaps’, among some of the findings.

 

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MiFID II

 

ESMA delays publication of the SI regime data for equity, equity-like instruments and bonds

On 1 May 2019 ESMA announced that it will delay the publication of the SI regime data for equity, equity-like instruments and bonds due to a technical issue. ESMA says it will publish the information by 10 May 2019. The publication of the data for the SI calculations for derivatives and other instruments was delayed until 2020 at the latest, as set out in the updated plan announced by ESMA on 30 January 2019. The SI assessment for those asset classes does therefore not need to be performed until this publication takes place.

ESMA clarifies schedule for transparency calculations in May and June 2019

ESMA published a statement clarifying that transparency calculations due in May and June 2019 as well as in the following months will now be published. ESMA considers that it is necessary to provide clarity to stakeholders following the UK’s Article 50(3) extension. ESMA intends to perform and publish the calculations for the quarterly SI determination for equity instruments and bonds and the quarterly liquidity determination for bonds on 30 April 2019, and the double volume cap on 8 May 2019.

ESMA publishes five opinions on MiFID II/MIFIR commodity derivative position limits

ESMA published five opinions on position limits regarding commodity derivatives under the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and the Markets in Financial Instruments Regulation (EU) 600/2014 (MIFIR). ESMA found that the proposed position limits are consistent with the objectives established in MiFID II and with the methodology developed for setting those limits. ESMA will continue to assess the notifications received and issue opinions in order to ensure that the position limits are set in accordance with the MiFID II framework.

 

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Regulation of derivatives

 

Commission Delegated Regulation extending the dates of deferred application of the clearing obligation for certain OTC derivative contracts under EMIR published in OJ

Commission Delegated Regulation (EU) 2019/667 of 19 December 2018 amending Delegated Regulations (EU) 2015/2205, (EU) 2016/592 and (EU) 2016/1178 to extend the dates of deferred application of the clearing obligation for certain over-the-counter (OTC) derivative contracts was published in the Official Journal of the EU. The new delegated act extends the deferred date of application of the clearing obligation for certain OTC interest rate derivative and credit derivative contracts arising from intragroup transactions with a third-country group entity to 21 December 2020.

EU hands Japan equivalence nod on OTC derivatives trades

The European Commission struck a deal with Japan's financial services regulator to recognise rules on OTC derivatives as ‘equivalent’ in a move it hopes will strengthen ties between the two jurisdictions’ financial sectors. The European Union’s executive arm announced Thursday it recognised that the Japan Financial Services Agency's rules covering the legal, supervisory and enforcement arrangements for OTC derivative contracts that are not cleared by a central counterparty meet EU standards under Regulation (EU) 648/2012 (the European Market Infrastructure Regulation (EMIR)).

ECB publishes results of March 2019 survey on SESFOD credit terms and conditions

The ECB published the results of the March 2019 survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets (SESFOD). The results show that credit terms tightened for almost all counterparties between December 2018 and February 2019, and financing collateralised with euro-denominated securities declined, especially where domestic government bonds were used as collateral.

ISDA updates OTC compliance calendar and publishes ‘In Review’ for April 2019

ISDA published its ‘In Review’ for April 2019, and updated its OTC derivatives compliance  calendar, which sets out deadlines and regulatory dates for the sector until September 2023. This issue of ‘In Review’ focuses on ISDA’s 34th annual general meeting, held in Hong Kong, as well as a round-up of its articles, letters, guidance, responses and updates from April 2019.

 

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Investment funds and asset management

 

FCA publishes thematic review report 19/3 and a Dear CEO letter on the fair treatment of with-profits customers

The FCA published thematic review report TR19/3 setting out its findings into its review of the fair treatment of with-profits customers. According to the FCA, most firms that it assessed are taking reasonable care to manage the risk of customer harm in their with-profits business. The FCA’s findings for investment strategy and management, and overall governance, underline this. The FCA did not find evidence of widespread customer harm arising from firms’ practices across the areas it assessed. Alongside TR19/3, the FCA  published a ‘Dear CEO letter’ which sets out key findings for affected firms to consider.

AIMA publishes Responsible Investment Primer

The Alternative Investment Management Association (AIMA), in partnership with Simmons & Simmons, published the Responsible Investment Primer, to provide an overview as to how hedge fund managers may approach responsible investment, and to encourage dialogue between investors and hedge fund managers. Among other topics, the Primer contains a set of principles to inform the debate on effective responsible investment regulation.

Investment Association updates guide to setting up charity-authorised investment funds

The Investment Association updated its guide for fund managers wishing to set up a charity-authorised investment fund (CAIF). The guide was originally produced together with the Charity Investors Group and the Charity Law Association. A CAIF is a fund authorised by the FCA, complying with the requirements applicable to FCA authorised funds, and also a UK charity registered with the Charity Commission for England & Wales. 

 

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Banks and mutuals

 

FSB plenary and publication of thematic review on bank resolution planning

The FSB published its ‘Thematic review on bank resolution planning’, setting out the core elements of effective resolution regimes that allow authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss, while maintaining continuity of their vital economic functions. The report forms part of a series of peer reviews to support ‘timely and consistent’ implementation of the FSB’s key attributes of effective resolution regimes for financial institutions. It focuses on resolution planning for all domestically incorporated banks that could be systemically significant or critical if they fail.

Commission adopts report on BRRD and SRMR implementation

The European Commission adopted its report assessing the implementation of the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) and the Single Resolution Mechanism Regulation (EU) 806/2014 (SRMR), which it describes as ‘core building blocks of the banking union’ adopted in the wake of the financial crisis. The report concludes that, given the two legislative instruments are so far only applied in a very limited number of cases–some of which concern ‘legacy issues’, from before and during the financial crisis–more time is needed for their assessment before any amendments are proposed.

EBA publishes 2018 report on supervisory colleges

The EBA published its 2018 report on supervisory colleges, which summarises its findings on the monitoring of supervisory colleges for the main cross-border European banking groups. The report considers the progress in the functioning of colleges over the years, focusing mainly on the quality of the colleges’ deliverables, and gives examples of good practice. The EBA found overall significant improvement in the work of supervisory colleges in 2018 but found that further efforts were still needed to enhance the risk assessment reports and joint decisions.

PRA: SRB rates for ring-fenced banks and large building societies

The PRA published the SRB rates applicable from 1 August 2019. The PRA set SRB rates for RFBs, including Lloyds Banking Group and Royal Bank of Scotland, which apply to all exposures, on a sub-consolidated basis. The PRA also set an SRB rate for Nationwide Building Society. The PRA is required by the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 as amended by Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015 (Part 5A) to set SRB rates for RFBs and large building societies from 1 January 2019 by applying the FPC's framework for the SRB.

BoE should factor huge fines into stress tests, MPs told

The BoE should broaden the way it carries out stress tests on lenders to gauge the risks they face from multimillion-pound penalties for misconduct, a senior regulatory expert told the parliamentary Treasury Committee. Mark Zelmer, a former Canadian central banker, said British regulators are world leaders in the way they test the adequacy of lenders’ capital reserves. But he told lawmakers that Britain’s central bank should sharpen its understanding of the threat that regulatory sanctions pose to lenders’ balance sheets. ‘The road has been pretty well trod in terms of looking at traditional balance sheet risks like credit risk or exposure to interest rates,’ Zelmer told the cross-party MPs. ‘Trying to model, in a statistical sense, the risks associated with conduct issues, or more generally the risks associated with the basic operations of banking, is something that is at a much earlier stage of development'.

OBIE publishes version 3.1.2 of the Open Banking Standard

The Open Banking Implementation Entity (OBIE) published the latest Open Banking Standard, version 3.1.2, which includes updates to the Customer Experience Guidelines and the Operational Guidelines. Both Guidelines include a number of minor changes and clarifications which were made in consultation with participants in the ecosystem, and also include updated versions of the checklists.

 

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Consumer credit, mortgage and home finance

 

Government considering FCA findings on CCA and reform of consumer credit regulatory regime

A question and answer statement from the House of Commons dated 30 April 2019 notes that the government is considering the FCA's final report on the review of the retained provisions of the Consumer Credit Act 1974 and whether further reform of the consumer credit regulatory regime is needed. The FCA published its final report on the retained provisions of the Consumer Credit Act 1974 in March 2019 and concluded that the current framework of information requirements continues to provide important consumer protection, but there are a number of issues that need further consideration.

FCA video on treating customers fairly in the sales and advice process

The FCA published a webpage and video on consumer credit sales and advice, covering the information firms need to give customers when selling products, and setting out the FCA’s expectations of firms when assessing a customer’s creditworthiness, including affordability. The video discusses how to treat customers fairly in the sales process and notes that firms must ensure their staff enjoy the skills, knowledge and experience needed to comply with FCA rules. They must also ensure that they adequately manage the risks arising from any incentive scheme they operate.

FCA highlights consumer credit firms’ ongoing commitment to clients

The FCA published a new webpage, including the final video in its consumer credit series, in which it outlines why a firm’s commitment to customers should not end after they enter into an agreement. According to the FCA, a firm’s commitment should continue for as long as the product or service lasts and, in the case of complaints covered by the FOS, often far longer. In practical terms, treating customers fairly means ensuring that the product or service works as intended over its lifetime, the FCA says.

Mortgage Credit Directive added to EBA’s online interactive Single Rulebook

The EBA updated its online interactive Single Rulebook and Q&A tool with the inclusion of Directive 2014/17/EU (the Mortgage Credit Directive (MCD)). Users will now be able to review on the EBA website all the EBA's final technical standards and guidelines associated with the MCD by navigating through the MCD on an article-by-article basis. The EBA says the inclusion of the MCD into the Q&A tool will also allow users to submit any questions on the application of the MCD and the EBA's work related to it.

 

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Insurance and pensions

 

EIOPA reports on 2018 supervisory activities and sets out priorities for 2019

The European Insurance and Occupational Pensions Authority (EIOPA) published its first annual report on supervisory activities, which outlines EIOPA’s supervisory activities conducted in 2018 and sets out its priorities for 2019. According to the report, EIOPA’s priorities will remain the same but with new activities identified for each priority area. In 2018 EIOPA addressed supervisory convergence from different perspectives and using different tools depending on the issue and risks at stake. In 2019 EIOPA will continue to focus on the practical implementation of the key characteristics of the common supervisory culture and further development of supervisory tools, the risks to the internal market and to the level playing field, which may lead to supervisory arbitrage, and the supervision of emerging risks.

EIOPA issues recommendations for NCAs following 2018 insurance stress test

EIOPA issued recommendations to NCAs to address vulnerabilities identified by the 2018 insurance stress test. EIOPA analysed the test results at individual group level, and then categorised the recommendations into three groups, before expanding on each one in more detail: (1) Supervisory convergence and financial stability—recommendations 1-3 (2) Efficiency and enhancing the stress test exercise process—recommendation 4, and (3) Cross-sectoral co-ordination—recommendation 5. The results and findings of the 2018 exercise are set out in detail in the 2018 insurance stress test report published by EIOPA on 14 December 2018.

FCA updates Treasury Committee on its call for input on access to insurance

The FCA published evidence given to the Treasury Committee following an appearance by Chris Woolard and Nisha Arora before the Committee in February 2019. During the hearing, Charlie Elphicke MP questioned them about access to travel insurance for people with pre-existing medical conditions. Ms Arora highlighted the FCA’s ongoing work on a signposting service for these customers and the Chair asked when this would be happening. The FCA said it would provide an update. The FCA alerted the Committee that it published an update on feedback statement FS18/1 setting out its response to the call for input on access to insurance on 4 April 2019.

Insurers must adapt to automation risks, Lloyd’s says

According to new reports released on 24 April 2019 by Lloyd's of London (Lloyd’s), the rapid acceleration of automation means that societies could become reliant on robots and artificial intelligence for everything from surgery to picking fruit, and insurers need to change their business models accordingly. Published in collaboration with the University of Surrey, the reports by risk experts from Lloyd's said insurers could reap the benefits of wholesale automation and AI in the manufacturing, agriculture, health care and retail industries by selling data-dependent companies assurances against the risk their algorithms produce unwanted effects.

 

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Payment services and systems

 

EU investigation: Commission adopts commitments by Mastercard and Visa to cut inter-regional interchange fees

On 29 April 2019, the European Commission announced it adopted commitments offered by Mastercard and Visa to significantly reduce (on average by approximately 40%) their multilateral interchange fees (MIFs) for payments in the EEA with consumer cards issued elsewhere. The commitments are now legally binding under EU antitrust laws and are expected to lead to lower prices to the benefit of all European consumers. These decisions are the first time that any competition authority in the world is taking action in relation to inter-regional MIFs; all of the Commission’s previous decisions were in relation to intra-EEA MIFs.

EBA publishes clarifications on third set of issues raised by API working group

The EBA published clarifications to a third set of issues that were raised and discussed by participants of its working group on application programming interfaces (APIs) under Directive (EU) 2015/2366 (the recast Payment Services Directive (PSD2)). Some of the issues required the EBA to interpret legal instruments it previously published and are therefore now clarified via the relevant Q&As, which are cross-referenced in the latest publication.

FCA reminds PSPs of obligations under PSD2 technical standards

The FCA published a reminder to all payment service providers (PSPs) that technical standards under PSD2 will come into effect on 14 September 2019, and PSPs should be making changes now to meet some of the requirements which must be met ahead of that date. The FCA published details of its approach to these rules in its policy statement PS18/24 in December 2018.

PSR grants Bacs’ competitive procurement extension request

The Payment Systems Regulator (PSR) granted a request by Bacs to extend the date for compliance with PSR Specific Direction 2 on competitive procurement of central infrastructure by three years.

European Payments Council explains Single Euro Payments Area Proxy Lookup scheme

The European Payments Council (EPC) published an article explaining the Single Euro Payments Area Proxy Lookup scheme, which covers the exchange of the data necessary to initiate payments between proxy-based payment solutions on a pan-European level. The service was ready for market use since February of this year.

Merricks v Mastercard Inc and other companies

Competition – Competition Appeal Tribunal. The Competition Appeal Tribunal did not apply the test that, at the certification stage of an application for a collective proceedings order, the proposed representative only needs to demonstrate that he posseses a real prospect of success. The Court of Appeal, Civil Division, in allowing the appellant's appeal against the refusal of the order, further held that it was premature and wrong to refuse certification by reference to the proposed method of distribution: an error compounded by the view that distribution was capable of being carried out by some means which corresponded to individual loss. 

 

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FinTech and virtual currencies

 

FinTech groups announce UK network to promote skills, investment and diversity, and FCA provides updates on FinTech initiatives

Innovate Finance–the independent membership association that represents the UK’s global Fintech community–is collaborating with FinTech Scotland and FinTech North to create a national network that will encourage UK innovators to form multiple fintech hubs and centres of excellence. The network will focus on skills and talent, capital and investment, and diversity. Innovate Finance CEO Charlotte Crosswell said momentum is growing in the UK’s national fintech scene outside of London, and Innovate Finance ‘is committed to ensuring that fintech is supported and represented across the entire breadth of the UK’. The announcement came as the first UK-wide fintech week commenced, running from 29 April to 3 May 2019. The FCA’s executive director of strategy and competition, Christopher Woolard, used the event to launch the FCA’s evaluation report on its fintech unit, Innovate. In his speech, ‘Deeds not words: the next stage of the FCA’s innovation journey’, Mr Woolard also announced the launch of the first cross-border tests of the Global Financial Innovation Network–a group of regulators working together to test new propositions across 12 jurisdictions.

Innovate Finance–UK FinTech state of the nation report

Innovate Finance published 'The FinTech state of the nation' report, a comprehensive summary of the UK's fintech industry to help inform stakeholders for trade and investment and demonstrate the UK's attractiveness as a fintech destination. The report describes the actions that the government, regulators and industry are taking to stimulate and sustain the growth of the UK's fintech sector, and includes a chapter contributed by the FCA. The report broadly covers the UK's past successes, current state, and future objectives in key areas that include: demand, capital, regulation & policy, and talent. The report was managed by the Department for International Trade (DIT) with support from Innovate Finance to ensure that the objectives and content align with the UK government's fintech strategy.

DIT and HMT announce FinTech Bridge programs with Hong Kong and Australia

The DIT and HM Treasury announced two fintech Bridge pilot programs, building upon UK fintech Bridge agreements with Hong Kong and Australia. The agreements set out areas of collaboration between the UK and the two governments, and allow for co-operation between regulatory bodies and connectivity between the markets and ecosystems involved. They encourage the sharing of information and discussion of best practice between counterparts, including emerging trends and regulatory issues.

Philip Hammond speaks at international Fintech conference in London

The Chancellor of the Exchequer, Philip Hammond, gave a speech at the International FinTech Conference in London, in which he said that the UK was a ‘fintech powerhouse’ with distinct advantages in the ‘global fintech competition’, and discussed the government’s plans to make London a global hub for fintech. Mr Hammond began by reflecting on the City of London’s history of innovation and change, saying that ‘Britain has long been at the forefront of the linked worlds of technology and finance’, that this remains the case today, and that the government is ‘committed to ensuring it remains so in future’.

Mark Carney on Fintech and the ‘fourth industrial revolution’

The Governor of the BoE, Mark Carney, gave a speech on fintech in which he said the fourth industrial revolution is just beginning, with a new economy emerging that is driven by ‘immense changes in technology, the reordering of global economic power, and the growing pressures of climate change’. Mr Carney said a new economy requires a new finance to serve the digital economy, to support the major transitions underway across the globe, and to increase the sector’s resilience. The UK’s fintech companies are, Mr Carney argued, creating this new finance.

Innovate Finance CEO on Fintech’s capacity to reach the financially vulnerable

Innovate Finance published the opening address delivered by its CEO, Charlotte Crosswell, at the Innovate Finance Global Summit 2019, part of the UK FinTech week. Ms Crosswell said fintech and digital transformation carry the power to go beyond enhancing business and consumer markets, and reach out to those who otherwise may be excluded from the financial system.

 

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Dates for your diary

 

DateSubjectEvent

 

3 May 2019

 

Insurance

 

The deadline for feedback to HM Treasury’s consultation on the implementation of insurer’s duty to pass on personal injury savings back to customers is 3 May 2019.

 

4 May 2019UK regulator updates

Caroline Rainbird will begin her three year term as CEO of the FSCS on 4 May 2019.

 

6 May 2019

Insurance


Solvency II

 

The deadline for responses to PRA CP3/19 on longevity risk transfers and the simplification of pre-notification expectations under Solvency II is 6 May 2019.

 

7 May 2019

Investment funds


UK regulator updates

 

Certain changes set out in the FCA’s Collective Investment Schemes Sourcebook (Miscellaneous Amendments) Instrument 2019 (FCA 2019/6) are effective from 7 August 2019.

 

7 May 2019

International regulators


Compensation

 

The deadline for responses to the FSB’s call for feedback following its workshop on international standards of compensation is 7 May 2019.

 

8 May 2019

Markets and trading


MiFID II

 

ESMA intends to perform and publish the calculations for the double volume cap on 8 May 2019.

 

9 May 2019Insurance

As part of its live and local series the FCA will host its ‘Ask the regulator’ Q&A roundtable discussion in Cambridge on 9 May 2019.

 

9 May 2019Markets and Trading

The clearing obligation RTS for credit default swaps will take effect for Category 4 counterparties from this date.

 

9 May 2019Competition in financial services

The deadline for submissions to the Competition and Market Authority’s (CMA’s) issues statement outlining initial theories on what might be affecting competition and potential remedies (as part of its market investigation into the supply of services by funeral directors at the point of need and the supply of crematoria services) is 9 May 2019.

 

 

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About the author:
Prior to joining LexisNexis in 2018, Raphael carried out work placements at Willkie, Farr & Gallagher (sat in Debt Finance) and Macfarlanes (sat in Banking and Finance), through which he was able to gain knowledge about a wide variety of financial products and services. Raphael recently graduated in Law from King’s College London where he took a particular interest in modules such as Finance, Credit & Security and Transnational Company Law. Raphael has also worked as a Paralegal at Axiom Stone Solicitors in Mayfair, where he was involved in a wide range of contentious matters.