FS weekly highlights—20 June 2019

In this issue

 

Brexit news
Regulatory architecture
UK regulator updates
European regulator updates
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Information and cyber security for financial services firms
Financial crime
Competition in financial services
Enforcement and redress
Competition in financial services
Markets and trading
MiFID II
Regulation of capital markets
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
Sustainable finance
Islamic finance
Dates for your diary

 

Brexit news

 

BoE amends and updates PS5/19 relating to amendments to financial services legislation under the European Union (Withdrawal) Act 2018

The Bank of England (BoE) published amendments and updates to PS5/19 relating to amendments to financial services legislation under the European Union (Withdrawal) Act 2018. PS5/19 was corrected to reflect that annex BF to The Prudential Regulation Authority (PRA) Rulebook: (EU Exit) Instrument 2019 does not come into force on 1 July 2019 but instead comes into force on ‘exit day’. It was also updated to add appendix B.2A which makes a small amendment to the PRA Rulebook: (EU Exit) Instrument 2019 in appendix B.2.

FCA executive director looks at UK-US regulatory co-operation post-Brexit

The Financial Conduct Authority (FCA) published a speech by its executive director for international, Nausicaa Delfas, on regulatory co-operation and coherence between the UK and the US. She argued that while the two regimes may not be identical, strong regulatory co-operation, coupled with rules seeking to achieve common outcomes, were ‘essential ingredients for supporting open markets’.

Foreign direct investment to the UK declined by 36 percent in 2018

The United Nations Conference on Trade and Development (UNCTAD) published the World Investment Report 2019 that shows global foreign direct investment (FDI) fell by 13% in 2018—the third consecutive annual decline. FDI inflows to the UK declined by 36%—from $101bn in 2017 to $64bn in 2018. FDI outflows from the UK also declined to $50bn from $118bn. UNCTAD stated that the link between Brexit and the decrease in inflow and the impact on FDI in general is not yet clear. 

 

Back to top of page

 

Regulatory architecture

 

London-Shanghai Stock Connect goes live, as UK-China MoU announced

HM Treasury announced that from 17 June 2019, UK listed companies are able to sell shares in China, with the launch of the London-Shanghai Stock Connect, which will enable companies to dual-list on both the Shanghai and London Stock Exchanges using depositary receipts. This is the first time that any foreign company will be able to list in mainland China. Investors will be able to trade across London and Chinese time zones, allowing issuers from both markets to raise capital in the other market and providing investors with greater choice. The FCA and the China Securities Regulatory Commission (CSRC) made a joint announcement of their approval of the scheme.

Eurogroup agreement on euro-area budgetary instrument and revised ESM treaty

The Council of the European Union announced that the Eurogroup agreed on the main features of the budgetary instrument for convergence and competitiveness for the euro area, and for European Exchange Rate Mechanism (ERM II) Member States on a voluntary basis. The Council of the EU says the instrument will strengthen the economic and monetary union by supporting a higher degree of convergence and competitiveness within the euro area and participating Member States, and help to strengthen potential growth, resilience and adjustment capacities of EU economies, as well as the mechanisms of economic governance.

ECB notes increase in international use of the euro

The ECB published the latest annual report on the international role of the euro, which noted that the euro’s international role strengthened in 2018 and early 2019, reversing a declining trend in recent years. 

 

Back to top of page

 

UK regulator updates

 

UK bodies and Monetary Authority of Singapore sign agreements on green finance, cybersecurity and skills

UK bodies including the City of London Corporation, BoE and FCA signed agreements with the Monetary Authority of Singapore (MAS) to ‘deepen exchanges and collaboration’ in financial services between the two international financial centres. The agreements will aim to boost co-operation in a number of areas, including financial data sharing, cybersecurity, skills and training, and green finance.

FCA publishes its first annual perimeter report

The FCA published its first annual perimeter report. It sets out an overview of the perimeter and explains how the FCA manages issues on the edge of the perimeter, highlighting the particular difficulties facing consumers in the retail investment sector. FCA CEO Andrew Bailey notes that the question of the FCA perimeter is particularly important in 2019: firms operating on the edges of the perimeter recently caused serious harm to consumers; innovative assets and products, such as cryptoassets, may become more common in future, and the perimeter is likely to be tested more often.

FCA April 2019 board meeting discusses LC&F investigation

The FCA published the minutes of its 24 and 25 April 2019 board meeting, which discussed, among other issues, the HM Treasury directed investigation into the failure of London Capital & Finance plc (LC&F), which will be conducted by an independent reviewer appointed by the FCA, but approved by HM Treasury. It was noted that, because the scope of the review was expected to consider the board’s prior oversight of relevant issues, it would be appropriate to form a committee of the board to oversee the FCA’s co-operation with the review. The members of the committee would be board members elected after the events in question to avoid any perceptions of a conflict of interests.

FCA annual meeting to be held on 17 July 2019

The FCA will hold its annual public meeting in London on 17 July 2019 (09:30-12:00), where it will discuss its 2018/19 annual report and accounts. The meeting is open to firms, consumers, trade associations and any other interested parties. There will be an opportunity for questions to the FCA chair, chief executive and directors.

New TheCityUK chair sets out priorities

TheCityUK published a speech by the new chair of its board, Mark E Tucker, delivered at its annual conference 2019. Mr Tucker set out the priorities for the organisation over the next three years, including increasing public understanding of the economic and societal benefits of financial services, restoring the sector’s reputation following the financial crisis, and focusing on the UK’s trading and investment relationships with Europe and major markets in the rest of the world. 

 

Back to top of page

 

European regulator updates

 

ESMA publishes annual report for 2018

The European Securities and Markets Authority (ESMA) published its annual report for 2018, setting out its achievements against its objectives for the year. ESMA says 2018 was dominated by the implementation of Directive 2014/65/EU (MiFID II) and preparations for Brexit. The year ahead will see work on the impact of the double volume cap and the increasing use of periodic auctions.

EIOPA publishes annual report for 2018

The European Insurance and Occupational Pensions Authority (EIOPA) published its annual report for 2018, setting out its work to foster a common approach to supervision and address risks to the internal market. In the field of oversight and supervisory convergence, EIOPA's work included peer reviews, participation in colleges of supervisors to improve supervision of cross-border groups, and training activities for national supervisors. In the regulatory field, EIOPA continues its work on the review of Directive 2009/138/EC (Solvency II), providing advice to the European Commission on the solvency capital requirement.

Council of the EU publishes update on financial services legislative files

The Council of the EU published information dated 14 June 2019 on the state of play of EU legislative proposals in the field of financial services.

European Council adopts Directive to simplify the set up of companies in the EU

The European Council adopted a Directive which looks to contribute to the modernisation of EU company law by encouraging the use of online tools in contracts between companies and public authorities, lasting throughout the contracts’ lifespan. 

 

Back to top of page

 

Authorisation, approval and supervision

 

PRA publishes policy statement 12/19 (PS12/19) on fees: approach and application

The PRA published PS12/19, which provides feedback to responses to CP9/19, Regulated fees and levies: Rates proposals 2019/20. Appended to the policy statement is the PRA Periodic Fees (2019/20) and Other Fees Instrument 2019, and updated an version of SS3/16.

Mark Carney on the case for gender diversity in the workplace

The governor of the BoE, Mark Carney, delivered a speech, Finance by all, for all, at the Women in Banking and Finance annual awards. He set out statistics showing the benefit to companies of gender diversity in the workplace and outlined the BoE’s efforts to change the culture in its own practices.

BoE director on diversity and inclusivity in financial services

The BoE published a speech by its director for insurance supervision, Anna Sweeney, on ‘Making impactful change’, which looked at ways to build and sustain a diverse workforce and inclusive working environment across the sector. Ms Sweeney also focuses on the PRA’s rules to promote diversity of skills and experience on boards of directors in order to avoid group-think.

Remuneration—Lloyds Bank questioned on executive pension levels

The Work and Pensions Committee questioned Lloyds Banking Group chief executive António Horta-Osório, and the head of the Group’s remuneration committee, Stuart Sinclair, on 19 June 2019, on the level of executive pensions at the Group compared to that of the wider workforce. 

 

Back to top of page

 

Prudential requirements

 

FCA consultation paper 19/20 (CP19/20) considered the purpose of assessing adequate financial resources

The FCA published CP19/20, Our framework: Assessing adequate financial resources, which explains the purpose of, and the FCA’s approach to the assessment of, adequate financial resources, and provides further guidance on the meaning of ‘adequate financial resources’ in threshold conditions and principles for business.

PRA publishes PS13/19 Pillar 2 liquidity: Updates to the framework

The PRA published PS13/19, Pillar 2 liquidity: Updates to the framework. It provides feedback on responses to CP6/19, Pillar 2 liquidity: Updates to the framework and the PRA’s final updated policy. 

 

Back to top of page

 

Financial stability, recovery and resolution

 

FSB publishes progress report on sound compensation practices

The Financial Stability Board (FSB) published Implementing the FSB principles for sound compensation practices and their implementation standards: Sixth progress report. The report confirms that all FSB jurisdictions implemented the Principles and Standards for all banks considered significant. While most banks put in place practices and procedures which reduce the potential for inappropriate risk-taking, their effectiveness is still being tested. At most banks, further work is required to validate that practices and procedures operate effectively and cover all compensation-related risks.

SRB holds 8th industry dialogue

The Single Resolution Board (SRB) organised its 8th industry dialogue on 18 June 2019 in Brussels. The event brought together representatives from EU-level and national banking federations and their associates from Member States in the banking union, representatives from national resolution authorities, the European Commission, the European Parliament and the European Central Bank (ECB). 

 

Back to top of page

 

Risk management and controls

 

ECB calls for substantial and timely improvements to institutions’ risk data aggregation and risk reporting

The ECB wrote to significant EU banking institutions raising concerns about institutions’ risk data aggregation and risk reporting capabilities, and calling for substantial and timely improvements in these areas. 

 

Back to top of page

 

Information and cyber security for financial services firms

 

IOSCO report urges authorities to use existing standards to address cyber risk

The International Organization of Securities Commissions (IOSCO) issued a final report providing an overview of three internationally recognised cyber standards and frameworks used by IOSCO members. The report, prepared by the IOSCO Cyber Task Force, also identifies potential gaps in the application of the standards and seeks to promote sound cyber practices across the IOSCO membership. 

 

Back to top of page

 

Financial crime

 

Council of EU adopts Directive on law enforcement access to financial information

On 14 June 2019 the Council of the European Union (Economic and Financial Affairs) formally adopted at first reading the Directive of the European Parliament and of the Council laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences, and repealing Council Decision 2000/642/JHA of 17 October 2000 concerning arrangements for co-operation between financial intelligence units (FIUs) of the Member States in respect of exchanging information. The measures agreed are designed to strengthen security union and complement the EU fourth Money Laundering Directive 2015/849/EU (MLD4) by allowing timely access to financial information, improving co-operation between national authorities and safeguarding data protection.

Law Commission calls for new advisory board on anti-money laundering

The Law Commission published a report on anti-money laundering (AML) and the suspicious activity reports (SARs) scheme. It finds the submission of low-quality SARs are undermining the regime, frustrating law enforcement’s efforts to investigate and prosecute crime. To resolve this, the Law Commission calls for the creation of an advisory board along with a SARs online form and statutory guidance. Lawyers at Clifford Chance, Herbert Smith Freehills, Arnold and Porter, BCL Solicitors and Kingsley Napley comment on the report, adding the proposals are ‘limited’ but ‘sensible and welcome’.

FMLC issues report on EU blocking of US Iran sanctions

The Financial Markets Law Committee (FMLC) published a report on US sanctions and the EU Blocking Regulation: Issues of legal uncertainty. The report looks at the US’s withdrawal from the Joint Comprehensive Plan of Action (the JCPOA) and re-imposition of the sanctions on Iran that were lifted or waived under the JCPOA, and the EU’s expansion of Regulation (EC) 2271/96 (the Blocking Regulation) to cover the re-imposed US measures on Iran.

CLLS responds to consultation on transposition of MLD5

The Regulatory Law Committee of the City of London Law Society (CLLS) published its response to HM Treasury’s consultation on the transposition of the Fifth Money Laundering Directive (EU) 2018/843(MLD5). CLLS’ response focuses on crypto-assets and registration of express trusts.

Cryptocurrency experts discuss co-operation opportunities at conference

Over 300 cryptocurrency experts from both the private sector and law enforcement attended the sixth Cryptocurrency Conference hosted at Europol’s headquarters to discuss opportunities for closer co-operation and new partnerships to prevent and detect cryptocurrency-facilitated crime and to assist asset recovery. The conference was the largest law enforcement cryptocurrency event in Europe and was organised by Europol’s European Cybercrime Centre. It took place between 12 and 14 June 2019.

Swedbank suspends execs at Estonia unit amid AML probe

Troubled lender Swedbank suspended the chief executive and finance director of its Estonian operations as an internal investigation into compliance with AML rules at the bank sees more senior staff depart. Swedbank AB said it suspended Robert Kitt, who was chief executive in Estonia since 2015, and Vaiko Tammevali, chief financial officer in the country since 2014, with immediate effect. Priit Perens, a member of Swedbank Estonia's council, also left his role, the bank added in a statement.

 

Back to top of page

 

Competition in financial services

 

‘Sufficiently robust’—is expanding competition watchdogs’ powers necessary?

The government confirmed its intent to widen the scope of competition watchdogs’ powers, enabling regulators to fine businesses who break consumer law, removing the current requirement to go via the courts. Partner at Pinsent Masons, Angelique Bret, discusses the possible legal ramifications of the government’s plans, which will, if introduced, come with ‘a level of risk which will be difficult to mitigate against’.

FCA update on its work to tackle the loyalty penalty

The FCA published an update on its work to ensure fair outcomes for longstanding and vulnerable consumers. The update comes as the Competition and Markets Authority (CMA) published a progress report on recommendations for the mortgages, cash savings and home insurance markets in light of the Citizens Advice supercomplaint on loyalty penalties.

CMA notice revokes Northern Ireland Personal Current Account Order 2008

The CMA published a notice revoking the Northern Ireland Personal Current Account Order 2008. The CMA’s predecessor, the Competition Commission (CC), made the 2008 Northern Ireland PCA banking market investigation Order (as amended in 2011) (the Order) for the purpose of remedying, mitigating and preventing the adverse effect on competition specified in a 2008 report of the CC entitled Personal current account banking services in Northern Ireland market investigation.

General Court: Order published removing from register JPMorgan’s appeal in EURIBOR cartel decisions

On 17 June 2019, the General Court published its order made on 6 June 2019 that Case T–420/18 JPMorgan Chase and Others v Commission be removed from the register, following a document from the applicants lodged on 10 April 2019 informing the Court of its wish to discontinue proceedings. On 7 January 2019, the appellants lodged an appeal against the General Court order made on 25 October 2018 in Case T-420/18 JPMorgan Chase and Others v Commission, when the General Court dismissed the appellant's application for interim measures seeking the suspension of the publication of the European Commission Euro Interbank Offered Rate (EURIBOR) cartel decisions of December 2016. 

 

Back to top of page

 

Enforcement and redress

 

FCA publishes final report in relation to RBS GRG

The FCA published the final report on its investigation into RBS’s treatment of small and medium-sized enterprise (SME) customers transferred to its Global Restructuring Group (GRG). This follows the update provided in July 2018 on the investigation. The report notes that because most of GRG’s activities were outside of the FCA’s jurisdiction, the regulator was not able to impose a financial penalty on RBS or any senior management. The FCA also considered if any senior management lack fitness and propriety, such that they should be prohibited from the financial services industry. The FCA did not find evidence that senior management acted dishonestly or with a lack of integrity. Nicky Morgan, Chair of the Treasury Committee also responded to the FCA’s report.

APPG on Fair Business Banking responds to FCA final report on RBS GRG

The co-chair of the All-party Parliamentary Group (APPG) on Fair Business Banking, Kevin Hollinrake MP, responded to the FCA’s final report on its investigation into RBS’s treatment of customers transferred to its GRG. Mr Hollinrake said the report was ‘another complete whitewash and another demonstrable failure of the regulator to perform its role’.

FCA launches investigation into suspended Woodford fund

Britain's financial watchdog confirmed that it opened an investigation into the events surrounding the suspension of Neil Woodford’s flagship fund, which prevented investors from accessing their accounts for more than two weeks. The City watchdog confirmed it is investigating the £3.7 billion ($4.6 billion) Woodford fund, which was suspended after growing numbers of investors tried to withdraw their cash. The FCA’s chief executive Andrew Bailey announced the investigation in  correspondence to British lawmaker Nicky Morgan but declined to give any further details.

PPI complaints deadline nears, as compensation passes £35bn

As the FCA’s payment protection insurance (PPI) claim awareness campaign enters its final leg, with just over two months to go until the 29 August 2019 complaints deadline, the regulator is urging all UK consumers to make a decision about whether to complain. A final media campaign comes as the FCA released figures showing it saw more than 3.9m users access the PPI website and 44,000 calls to its dedicated contact centre.

FSCS press release notes eight firms were declared in default in May 2019

The Financial Services Compensation Scheme (FSCS), the UK's statutory compensation scheme that protects customers of authorised financial services firms, issued a press release setting out details of eight firms spread across the UK that it declared in default in May 2019. A declaration of default means FSCS is satisfied a firm is unable to pay claims for compensation made against it. This paves the way for customers of that firm to make a claim for compensation with FSCS.

Kevin Hollinrake: ‘personal attack’ may be attempt to undermine his work on SME dispute resolution service

The APPG on Fair Business Banking published a letter from its co-chair, Kevin Hollinrake, to the chair of the Independent Dispute Resolution Service Implementation Steering Group, in which Mr Hollinrake says that he was told that at least two financial institutions are attempting to undermine his personal credibility (and that of the APPG) by means of a personal attack, and that this may be a desperate attempt to silence him and prevent him from fighting for justice for SMEs and for individuals within the banking sector to be held to account. 

 

Back to top of page

 

Markets and trading

 

ESMA publishes annual report for 2018

ESMA published its annual report for 2018, setting out its achievements against its objectives for the year. ESMA says 2018 was dominated by the implementation of MiFID II and preparations for Brexit. The year ahead will see work on the impact of the double volume cap and the increasing use of periodic auctions.

ESMA: translations for guidelines on non-significant benchmarks published

ESMA published the official translations of its guidelines on non-significant benchmarks under Regulation (EU) 2016/1011 (the Benchmarks Regulation). National competent authorities (NCAs) to which the guidelines apply must notify ESMA within two months whether they comply or intend to comply with the guidelines.

Steven Maijoor speech on ESMA’s data strategy and improving supervisory and financial reporting

The chair of ESMA, Steven Maijoor, gave a speech on ESMA’s work to improve the quality and availability of data in the context of both supervisory reporting and financial reporting, to ensure more transparent and stable financial markets. Mr Maijoor set out ESMA’s objectives as a data regulator and as a data user. He concluded that building up analytical capabilities both at national and EU level should be a priority in the years ahead.

FCA recognises ICE Data Indices, LLC as a third country benchmark administrator

The FCA recognised ICE Data Indices, LLC as a third country benchmark administrator under Article 32 of the Benchmarks Regulation. ICE Data Indices, LLC is operated by Intercontinental Exchange, Inc (ICE). Its approved benchmarks are included in the ESMA register.

FinDatEx publishes update on membership

FinDatEx (Financial Data Exchange Templates—a joint structure established by representatives of the European financial services sector) issued a press release providing an update on its membership structure. Earlier in 2019, FinDatEx issued its first call for interested experts to join the MiFID II, packaged retail investment and insurance products (PRIIPs) and Solvency II technical working groups. This call was open until 15 March 2019. FinDatEx received over 650 applications and, for the time being, is not looking for new ‘active’ members. 

 

Back to top of page

 

MiFID II

 

ESMA issues eight positive opinions on national product intervention measures under MiFIR

ESMA issued eight positive opinions relating to product intervention measures taken by the NCAs of Ireland, Italy, Luxembourg and Portugal. In its opinions, ESMA finds that the proposed measures are justified and proportionate and that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures.

MiFIR: ESMA updates register of derivatives to be traded on-venue

ESMA updated the public register of derivative contracts that are subject to the trading obligation under the Markets in Financial Instruments Regulation (EU) No 600/2014 (MiFIR). The update consists of adding to the list several UK venues where some of the classes of derivatives subject to the trading obligation are available for trading. 

 

Back to top of page

 

Regulation of capital markets

 

ESMA updates its CSDR Q&As

ESMA updated its Q&As on the Central Securities Depositary Regulation (EU) 909/2014 (CSDR). The new Q&As clarify aspects of the process applicable to the provision of notary or central maintenance services in other Member States and passporting procedures.

Andrea Enria urges banks to tackle NPLs while the economy remains resilient

The ECB published a speech by the chair of its supervisory board, Andrea Enria, in which he urged EU banks to solve the issue of non-performing loans (NPLs) while the economy is still resilient.

IASB seeks members for its Capital Markets Advisory Committee

The International Accounting Standards Board (IASB) issued a call for members for its Capital Markets Advisory Committee, which provides the IASB with regular feedback from the international community of users of financial statements. Members provide views about proposals IASB is developing, offer advice on the practical implications of proposals in development for users of financial statements, and assist IASB in planning outreach. 

 

Back to top of page

 

Regulation of derivatives

 

Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019

SI 2019/1031: Amendments are made to the Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013, which implemented the European Market Infrastructure Regulation (EU) 648/2012 (EMIR), in order to ensure that Regulation (EU) 2019/834 (EMIR REFIT) is fully effective and enforceable in the UK. These Regulations will come into force on 9 July 2019.

ESMA updates trade reporting Q&As to reflect EMIR REFIT

ESMA updated its Q&As on EMIR to reflect amendments made to EMIR by EMIR REFIT.

ESMA asks Commission to clarify EMIR REFIT treatment of hedging exemption for FCs in non-financial groups

ESMA published a letter dated 7 June 2019 to the European Commission in which ESMA queries the application of the hedging exemption to the calculation of the month-end average positions of financial counterparties in non-financial groups. This calculation is used to determine whether these financial counterparties are subject to the clearing obligation.

ISDA highlights differences in the implementation of margin requirements for non-cleared derivatives across jurisdictions

The International Swaps and Derivatives Association (ISDA) published a paper on the implementation of margin requirements and market fragmentation, which looks at the main areas of difference in the implementation of margin requirements for non-cleared derivatives across jurisdictions and makes recommendations on how to resolve them. 

 

Back to top of page

 

Investment funds and asset management

 

Council of the EU adopts cross-border distribution of funds measures

The Council of the EU announced that it adopted the Regulation and Directive on the cross-border distribution of investment funds. It is expected that these measures, which form part of the EU’s capital markets union (CMU) project, will be signed on 20 June 2019 and published in the Official Journal of the EU shortly thereafter, taking effect 20 days after publication.

FCA launches investigation into suspended Woodford fund

Britain's financial watchdog confirmed that it opened an investigation into the events surrounding the suspension of Neil Woodford’s flagship fund, which prevented investors from accessing their accounts for more than two weeks. The City watchdog confirmed it is investigating the £3.7bn ($4.6bn) Woodford fund, which was suspended after growing numbers of investors tried to withdraw their cash. The FCA’s chief executive Andrew Bailey announced the investigation in correspondence to British lawmaker Nicky Morgan but declined to give any further details.

FCA responds to Treasury Committee questions on Woodford Fund suspension

The FCA published a letter from its chief executive, Andrew Bailey, to the chair of the Treasury Committee, Nicky Morgan MP, regarding the LF Woodford Equity Income Fund (the Woodford Fund). In the letter, Mr Bailey responds to Ms Morgan’s letter of 10 June 2019 in which she requested information from the FCA on issues relating to the suspension of the fund.

Nicky Morgan notes FCA investigation into Woodford suspension ahead of FCA’s appearance before Treasury Committee

The chair of the Treasury Committee, Nicky Morgan MP, noted the FCA’s response to her 10 June 2019 letter on the suspension of the Woodford Fund. CEO Andrew Bailey stated that the FCA opened a formal investigation into the events that led to the suspension of the fund. Ms Morgan also published a timeline of communications between the International Stock Exchange Authority Limited and the FCA related to the Woodford Fund. The Treasury Committee will examine Mr Bailey’s response and wider issues brought into focus by the suspension of the Woodford Fund when it takes evidence from Mr Bailey and Charles Randell (chair of the FCA) on 25 June 2019.

Hargreaves Lansdown responds to Nicky Morgan MP on its links to the Woodford Fund

The chief executive of Hargreaves Lansdown (HL), Chris Hill, responded to the letter of Nicky Morgan MP, chair of the Treasury Committee, regarding the firms’ links with the Woodford Fund following suspension of trading in the units of the LF Woodford Equity Income Fund. The letter responds to the Committee’s questions in addition to setting out further background. Mr Hill noted that HL commenced a review of its actions in relation to the Fund. The Treasury Committee will examine the correspondence and wider issues brought into focus by the suspension of the Woodford Fund during its evidence session with the FCA on 25 June 2019.

PIMFA says Woodford fund suspension has caused ‘erosion of trust’

The Personal Investment Management and Financial Advice Association (PIMFA)—the trade association for investment managers and financial advisers—commented on the news that dealing in the units of the LF Woodford Equity Income Fund was suspended. PIMFA’s CEO, Liz Field, said the key implication of the news for the personal investment management and financial advice sector is ‘an erosion of trust’.

Investment Association publishes report on black representation in investment management

The Investment Association (IA) published a report on the experiences of black professionals working in the investment management industry and black students considering their careers. ‘Black voices: Building black representation in investment management’ sets out ten key steps firms can take to create more diverse and inclusive workplaces.

FCA Insight piece examines alternative pricing structures in mutual funds

The FCA published an Insight piece on alternative pricing structures in mutual funds, and how they make a difference to investor returns and to the stability of the market. The study suggests that alternative pricing rules could play ‘a powerful role’ mitigating the negative consequences of fire sales when market conditions deteriorate. 

 

Back to top of page

 

Banks and mutuals

 

EBA launches consultation on draft guidelines on loan origination and monitoring

The European Banking Authority (EBA) published a consultation paper on its draft guidelines on loan origination and monitoring. The draft guidelines aim to tackle the high level of non-performing exposures (NPEs) across the EU in recent years by ensuring that institutions can demonstrate robust and prudent standards for credit risk taking, management and monitoring, and that newly originated loans are of high credit quality. They also seek to ensure that the institutions’ practices are aligned with consumer protection rules and AML requirements. The consultation closes on 30 September 2019.

Updated EBA data on EU deposit guarantee schemes

The EBA published 2018 data on two key concepts in the Deposit Guarantee Schemes Directive (DGSD): available financial means, and covered deposits. The EBA publishes this data on a yearly basis to enhance the transparency and public accountability of deposit guarantee schemes (DGSs) across the EU for depositors, markets, policymakers, DGSs and Members States.

HLWG chair reports to Eurogroup on banking union and European deposit insurance scheme

The chair of the high-level working group (HLWG) on the European deposit insurance scheme (EDIS) made a report to the Eurogroup on the further strengthening of the banking union, including by establishing EDIS.

EFDI paper on deposit guarantee scheme SCV requirements

The European Forum of Deposit Insurers (EFDI) published a paper, dated 11 June 2019, entitled ‘State of play and non-binding guidance paper: single customer view in the EEA’. The paper outlines a set of recommendations on building and defining the content of the single customer views (SCVs) which a DGS needs to implement within the existing EU regulatory framework.

Scottish Affairs Committee to question Post Office on banking service in Scotland

On 12 June 2019 the Scottish Affairs Committee questioned the Post Office’s banking director and the network development director on the stability of branches in Scotland, and the Post Office’s plans for the future of their banking services. In the following panel, the Committee questioned the economic secretary to the treasury John Glen MP on the evidence gathered throughout the inquiry on the diminishing availability of access to financial services across Scotland. The Committee also questioned the minister on preserving access to cash and regulation of bank branches and ATM networks. 

 

Back to top of page

 

Consumer credit, mortgage and home finance

 

Government to introduce 60 day breathing space scheme for people with debt problems

HM Treasury announced a new breathing space scheme which will give individuals struggling with problem debt an extra 60 days to get their finances under control. During that time, people with problem debts will be protected from enforcement action from creditors and their interest will remain frozen, but they will be required to consult with professional debt advisers to get back on track with payments. Individuals receiving NHS treatment for mental health will be exempted from the requirement to seek debt advice. The scheme will cover various forms of debts, including arrears owed to the government such as council tax, personal tax and benefit overpayments. Cathryn Williams, partner at Crowell & Moring, comments on the scheme, highlighting that it will allow those with debt problems to 'prevent such issues spiralling out of control'.

Treasury Committee publishes correspondence on mortgage prisoners

The Treasury Committee published correspondence—(1) Gerald McHugh to Treasury Committee (2) Sue Abrahams to Treasury Committee (3) Treasury Committee to Gerald McHugh, and (4)  Treasury Committee to Sue Abrahams—on mortgage prisoners with Tulip Mortgages Ltd. The Committee sought details of the lender’s approach to mortgage prisoners, including customer safeguards and communications of a change of interest rate charges. 

 

Back to top of page

 

Insurance and pensions

 

Amendments to Solvency II Delegated Regulation published in Official Journal

Commission Delegated Regulation (EU) 2019/981 of 8 March 2019 amending Delegated Regulation (EU) 2015/35 (the Solvency II Delegated Regulation) supplementing Solvency II was published in the Official Journal of the EU. The Delegated Regulation makes a number of amendments to the Solvency II Delegated Regulation and follows a review of the methods, assumptions and standard parameters used when calculating the Solvency Capital Requirement standard formula.

EIOPA publishes annual report for 2018

EIOPA published its annual report for 2018, setting out its work to foster a common approach to supervision and address risks to the internal market. In the field of oversight and supervisory convergence, EIOPA's work included peer reviews, participation in colleges of supervisors to improve supervision of cross-border groups, and training activities for national supervisors. In the regulatory field, EIOPA continues its work on the review of Solvency II, providing advice to the European Commission on the solvency capital requirement.

Regulators and authorities agree common minimum standards for (re)insurance reporting

EIOPA and the ECB published common minimum standards for data revisions, agreed between the ECB, EIOPA, national central banks (NCBs) and NCAs. Data reported under the EU Solvency II framework for insurance and reinsurance undertakings are used by NCAs in the supervisory review process and by most NCBs as input in the compilation of insurance corporation statistics. NCAs also submit the supervisory information to EIOPA, and NCBs submit the derived statistical information to the ECB.

Insurance stress test 2019: PRA letter to large insurers

The BoE published a letter sent by the PRA to the largest regulated life and general insurers regarding the launch of its biennial insurance stress test. In the letter, which follows a request for technical input in a letter to firms on 11 April 2019, the PRA asks those large insurers to provide information about the impact of a range of stress tests on their business.

IAIS sets out strategic plan for 2020-2024

The International Association of Insurance Supervisors (IAIS) published its strategic plan for the period 2020 to 2024. The organisation says that while it maintains its core functions of developing global standards, supporting implementation and contributing to global financial stability, the period ahead will ‘see a change in emphasis toward applying these functions in ways that help our members proactively respond to a rapidly changing global environment driven by technological innovation, shifts in consumer behaviour and societal challenges’.

IAIS publishes mid-2019 consultation on its supervisory material, together with feedback on 2018 drafts

The IAIS launched its mid-2019 public consultation package on its supervisory material. The package presents the outcome of the 2018 public consultation on ComFrame and new revisions released for public consultation. The IAIS is seeking feedback on its draft revised glossary; its draft ComFrame assessment methodology; changes in the introduction to the Insurance Core Principles (ICPs) and ICP 7 (corporate governance) for consistency with ComFrame development; and a draft revised ICP 22 (AML and combatting the financing of terrorism). Feedback is sought by 15 August 2019. The IAIS released the following documents:

Council of the EU adopts PEPP measures

The Council of the EU announced that it adopted the Regulation on the Pan-European Pension Product (PEPP). It is expected that these measures, which form part of the EU’s CMU project, will be signed on 20 June 2019 and published in the Official Journal of the EU shortly thereafter, taking effect 20 days after publication.

FCA reviews defined benefit transfer data and sets out supervisory approach

The FCA published the results of data received from firms carrying out defined benefit (DB) transfers and set out the next steps in its supervisory work related to transfers. The FCA is concerned that firms are recommending large numbers of consumers transfer out of their DB pension schemes despite the FCA’s stance that transfers are likely to be unsuitable for most clients. The FCA will be informing firms where it identified the potential for harm in the firm’s data. This will set out the FCA's expectations and the actions firms should take.

Remuneration—Lloyds Bank questioned on executive pension levels

The Work and Pensions Committee questioned Lloyds Banking Group chief executive António Horta-Osório, and the head of the Group’s remuneration committee, Stuart Sinclair, on 19 June 2019, on the level of executive pensions at the Group compared to that of the wider workforce.

New ESG and stewardship guidance for pension fund trustees launched by PLSA

The Pensions and Lifetime Savings Association (PLSA) published a new guide to help pension funds comply with new environmental, social and governance (ESG) requirements coming into force from 1 October 2019 and support them in achieving good practice into the future. 

 

Back to top of page

 

Payment services and systems

 

Agustín Carstens on central banks’ interest in digital currencies

The Bank for International Settlements (BIS) published an article by its general manager, Agustín Carstens, on innovation in the field of money and payments. Mr Carstens discussed central banks’ efforts to develop and implement new payment technologies that meet the need for speed and globalisation, while maintaining reliability. 

 

Back to top of page

 

Fintech and virtual currencies

 

Agustín Carstens on central banks’ interest in digital currencies

The BIS published an article by its general manager, Agustín Carstens, on innovation in the field of money and payments. Mr Carstens discussed central banks’ efforts to develop and implement new payment technologies that meet the need for speed and globalisation, while maintaining reliability.

Cryptocurrency experts discuss co-operation opportunities at conference

Over 300 cryptocurrency experts from both the private sector and law enforcement attended the sixth Cryptocurrency Conference hosted at Europol’s headquarters to discuss opportunities for closer co-operation and new partnerships to prevent and detect cryptocurrency-facilitated crime and to assist asset recovery. The conference was the largest law enforcement cryptocurrency event in Europe and was organised by Europol’s European Cybercrime Centre. It took place between 12 and 14 June 2019.

Facebook’s cryptocurrency immediately in legislators’ sights

Facebook announced its intention to launch its cryptocurrency Libra, which aims to target the 1.7bn global unbanked population by creating a global digital currency, facing immediate pushback from US legislators and European officials. The independent Geneva-based Libra Association will govern the Libra Blockchain, on which the Libra cryptocurrency is being built, and the Libra Reserve, which will hold a host of ‘low-volatility assets’ in various currencies to give Libra intrinsic value, according to a white paper released by the social media giant. Hours after the release of the white paper and supporting documents, ranking member of the US Senate’s Banking, Housing and Urban Affairs Committee and Finance Committee member Sherrod Brown, D-Ohio, pledged congressional oversight of Libra. 

 

Back to top of page

 

Sustainable finance

 

European Commission guidelines on corporate climate-related information reporting

The European Commission published new guidelines on corporate climate-related information reporting, as part of its Sustainable Finance Action Plan. The guidelines aim to provide companies with practical recommendations on how to better report the impact that their activities are having on the climate as well as the impact of climate change on their business. The Commission also welcomed the publication of three new reports by the Technical Expert Group on sustainable finance, including key recommendations on the types of economic activities that can contribute to climate change mitigation or adaptation (taxonomy).

European Commission’s joint research centre publishes minutes of EU Ecolabel for Financial Products experts meeting

The European Commission’s joint research centre published minutes of the 3 June 2019 meeting of the expert sub-group on criteria 1.1 for the EU Ecolabel for Financial Products. Criteria 1.1 will set out the definition of the thresholds for the greenness of an investment portfolio based on verification of the underlying assets.

G20 summit sees declaration on improving the visibility and energy performance of asset investments

The UN Environment’s Finance Initiative (UNEP FI) and the International Partnership for Energy Efficiency Co-operation (IPEEC) co-ordinated a G20 global summit on financing energy efficiency, innovation and clean technology. Over 150 delegates and participants concluded a declaration on improving the visibility and energy performance of asset investments.

BIS speech on the Network on Greening the Financial System, sustainability and climate change

The BIS published a speech by Sabine Mauderer, a member of the executive board of the Deutsche Bundesbank, at the 2019 Green Bond Principles and Social Bond Principles annual general meeting and conference in Frankfurt. Ms Mauderer discussed the work of the Network on Greening the Financial System (NGFS) and the role of central banks in promoting green finance.

ICMA announces guidance, and election results for its Green, Social and Sustainability Principles committees

The International Capital Market Association (ICMA) published guidance to complement the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines. It also announced a new advisory council and the results of the elections to the Principles’ executive committee.

EFAMA urges next European Commission to develop sustainable finance and the CMU

European Fund and Asset Management Association (EFAMA) published policy recommendations for the next European Commission (2019-2024). The recommendations include unleashing the potential of sustainable finance and continuing to build a CMU in order to channel savings into productive activities.

New ESG and stewardship guidance for pension fund trustees launched by PLSA

The PLSA published a new guide to help pension funds comply with new ESG requirements coming into force from 1 October 2019 and support them in achieving good practice into the future. 

 

Back to top of page

 

Islamic finance

 

IFSB holds public hearings on Islamic finance exposure drafts

The Islamic Financial Services Board (IFSB) held its public hearings for the two new exposure drafts on Core Principles for Effective Islamic Deposit Insurance Systems (ED CPIDIS) and Guidance Note on Shariah-Compliant Lender-of-Last-Resort Facilities (ED GN-7) on 18 June 2019. The exposure drafts were issued on 5 May (ED GN-7) and 22 May (ED CPIDIS) respectively, and the public consultation period for both drafts ends on 5 July 2019. 

 

Back to top of page

 

Dates for your diary

 

Date

SubjectEvent

 

21 June 2019

 

EMIR

 

Compliance date for central clearing of over-the-counter (OTC) derivatives applicable to financial counterparties with a limited volume of derivatives activity. See, ESMA Final Report: On the clearing obligation for financial counterparties with a limited volume of activity ESMA/2016/1585.

 

21 June 2019Virtual currencies

The deadline for feedback to the Law Society’s and UK Jurisdiction Taskforce’s consultation on clarifying the status of cryptoassets, distributed ledger technology and smart contracts under English private law is 21 June 2019.

 

24 June 2019Payment systems and services

The European Payments Council’s (EPC) ad-hoc multi-stakeholder group (MSG) on mobile initiated single euro payments area credit transfers, including instant transfers (MSG MSCT), will host its first meeting on 24 June 2019.

 

24 June 2019Sustainable finance

The European Commission technical expert group on sustainable finance will hold a stakeholder dialogue on sustainable finance on 24 June 2019, at which it will publicly launch new guidelines for companies on how to report climate-related information.

 

26 June 2019Mortgages and home finance

The deadline for feedback to the FCA’s CP19/14: Mortgage customers: proposed changes to responsible lending rules and guidance is 26 June 2019.

 

27 June 2019UK regulator updates

The FCA is due to hold its June board meeting on this date.

 

 

Back to top of page

Relevant Articles