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The European Securities and Markets Authority (ESMA) announced that
in the event of a no-deal Brexit, three central counterparties (CCPs) established in the UK—London Clearing House (LCH) Limited, ICE Clear Europe Limited and LME Clear Limited, will be recognised to provide their services in the EU. ESMA adopted
these recognition decisions in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU. The recognition decisions would take effect on the date following the exit date, under
a no-deal Brexit scenario. ESMA previously communicated, in its statements of 23 November and 19 December 2018 and 4 February 2019, that its Board of Supervisors supports continued access to UK CCPs.
The European Insurance and Occupational Pensions Authority (EIOPA) issued recommendations
for the insurance sector, to provide guidance on the treatment of UK insurance undertakings and distributors relating to cross-border services in the EU in the event of a no-deal Brexit. The recommendations, which are addressed to national competent
authorities (NCAs), are intended to minimise the detriment to policyholders with cross-border insurance contracts by fostering supervisory convergence and ensuring consistent supervisory practices.
The European Parliament confirmed that it does not object to three delegated regulations adopted by the European Commission, which would amend existing delegated regulations supplementing Regulation (EU) 648/2012 (EMIR) to facilitate the transfer
of derivative contracts to EU counterparties in the event of a no deal Brexit and to extend the dates of deferred application of the clearing obligation for certain over the counter (OTC) derivative contracts:
The Financial Conduct Authority (FCA) is hosting two briefings for regulated firms in preparation for
the UK leaving the EU. These will take place in London and Edinburgh with live webcasts. The briefings are intended to give firms a clearer understanding of the FCA's approach to managing the impact of Brexit. The events will take place on 11 March
(Central London) and 14 March (Edinburgh). At both events, Nausicaa Delfas, Executive Director of International, will explain how the FCA is preparing for Brexit and its expectations of firms.
HM Treasury updated its webpage, giving guidance on banking, insurance and other financial services if there's no Brexit deal. The webpage gives information about financial services, such as banking and insurance for UK residents,
businesses based in the UK, European Economic Area (EEA) residents, and financial services institutions. HM Treasury moved a technical notice to a separate page and archived it as it replaced it with new information. The webpage was first published
on 23 August 2018 and previously updated on 8 January 2019.
The House of Lords EU Financial Affairs Sub-Committee published an uncorrected transcript of the oral evidence given on 13 February 2019 by Daniel Maguire, Chief Executive Officer, LCH and Michael Voisin, Director, Futures Industry Association (FIA). Mr Voisin told
the committee about the potentially “significant” costs for consumers of CCP market fragmentation after Brexit. Mr Maguire though spoke of his “cautious optimism” that ESMA recognition of UK CCPs will come soon and therefore
there would be no cliffedge.
Professor Joachim Wuermeling, Member of the Executive Board of the Deutsche Bundesbank, spoke at the German embassy in London
about the implications of Brexit for UK branches of German banks. He warned that the Single Supervisory Mechanism (SSM) will not accept empty shells, and any outsourcing will need to meet the SSM's expectations, which may mean moving staff to the
EU27. With a hard Brexit looking increasingly likely, UK branches of German banks and SSM banks in general will need to become third country branches. Although the Prudential Regulation Authority’s (PRA's) temporary permissions regime 'buys
time,' Professor Wuermeling said 'there is no alternative to conversion into third country branches'.
Aviva PLC can transfer its €9bn ($10.15bn) European business from the UK to Ireland to address concerns that a hard Brexit will disrupt operations in the bloc, a judge in London ruled, as the insurer becomes the latest to ink a backup plan ahead of March 29. High Court Judge Richard Snowden approved the plan by Aviva Life and Pensions UK Ltd to move approximately 440,000 life insurance policies
held in the UK by European policyholders to an Irish subsidiary. The policies include business written from Ireland that was being held in London, as well as insurance taken out in France, Belgium, Germany, Iceland and Sweden. Some £6.75bn ($8.72bn)
in liabilities are part of the transfer scheme.
Political uncertainty surrounding the UK’s fast-approaching exit from the EU threatens Royal Bank of Scotland's (RBS’s) ability to clear 300,000 daily cross-border payments valued at more than €50bn ($56bn), the lender warned. The bank,
which is backed by the taxpayer, warned that failure to secure a Brexit deal by 29 March would create a ‘significant impact’ on how it clears euro payments. RBS said it is taking precautions and hopes to be granted licenses in Germany
and the Netherlands to allow it to continue clearing—but said there are risks this may not happen. ‘Given the quantum of affected payments and lack of short-term contingency arrangements, in the event that such euro-clearing capabilities
were not in place in time for a hard Brexit, or as required in the future, it could have a material impact on the group and its customers,’ the bank said in its annual results.
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HM Treasury published a revised Policy Note on the Financial Services (Implementation of Legislation) Bill. The Bill would provide the power, in a no-deal scenario, for the UK to implement and make changes
to a specified list of 'in-flight files'. The Policy Note outlines the Bill's purpose and provides detail on the 'in-flight files' specified in the Bill itself. Following its passage through the House of Lords, the Policy Note was revised with additional
safeguards which include more stringent reporting requirements to enhance Parliamentary scrutiny, and limitations to the Bill's power of adjustment. It also sets out changes to the Bill adopted in the House of Lords.
SI 2019/325: This enactment is made in exercise of legislative powers under the European Communities Act 1972 (ECA
1972) and the European Union (Withdrawal) Act 2018 (EU(WA) 2018) in preparation for Brexit. This enactment amends UK legislation and retained direct EU legislation in relation to collective investment schemes in order to address deficiencies
in retained EU law, which arise from the withdrawal of the UK from the EU. These Regulations are made to amend Part 17 of the Financial Services and Markets Act 2000, and the Undertakings for Collective Investment in Transferable Securities
Regulations 2011, SI 2011/1613. It comes into force in part on 20 February 2019 and in full on exit day (updated from draft 19 February 2019).
SI 2019/310: This enactment is made in exercise of legislative powers under the ECA 1972 and EU(WA)
2018 in preparation for Brexit. This enactment is made in order to address deficiencies in retained EU law in relation to market abuse arising from the withdrawal of the UK from the EU. This instrument amends retained EU law relating to market abuse,
including the EU Market Abuse Regulation 596/2014 (MAR), the tertiary legislation made under MAR, and the UK legislation which complemented MAR, to ensure that the relevant legislation continues to operate effectively at the point at which
the UK leaves the EU. It comes into force partly on the day after which these Regulations are made and fully on exit day (updated from draft on 18 February 2019).
SI 2019/284: This enactment is made in exercise of legislative powers under the EU(WA) 2018 in preparation for Brexit.
This enactment amends UK legislation and retained EU legislation in relation to interchange fee regulation in order to ensure that Regulation (EU) 2015/751 on interchange fees for card-based payment transactions can continue to operate effectively
as direct retained EU law after the UK’s withdrawal from the EU. It comes into force on exit day (updated from draft on 13 February 2019).
SI 2019/264: This enactment is made in exercise of legislative powers under the EU(WA) 2018 in preparation for Brexit.
This enactment amends UK subordinate legislation and retained direct EU legislation related to financial conglomerates in order to address deficiencies arising as a result of the UK leaving the EU. This instrument acts to ensure that the UK’s
regulation of financial conglomerates and other financial groups continues to operate as intended in the UK once the UK leaves the EU. It comes into force on exit day (updated from draft on 14 February 2019).
SI 2019/253: This enactment is made in exercise of legislative powers under the EU(WA) 2018 in preparation for Brexit.
This enactment amends UK subordinate legislation and EU legislation and revokes EU legislation in order to address deficiencies in retained EU law in relation to anti-money laundering (AML) arising from the withdrawal of the UK from the EU. This is
to ensure the legislation continues to operate effectively at the point at which the UK leaves the EU. It comes into force on exit day (updated from draft on 14 February 2019).
SI 2019/266: This enactment is made in exercise of legislative powers under the EU(WA) 2018 in preparation for Brexit.
This enactment amends UK legislation and retained direct EU legislation and revokes other retained direct EU legislation in relation to credit rating agencies (CRAs) to ensure that it continues to operate effectively in the UK once the UK leaves the
EU. It comes into force partly on 15 February 2019 and fully on exit day (updated from draft on 14 February 2019).
The Commons European Statutory Instruments Committee (ESIC) and the Lords Secondary Legislation Scrutiny Committee (SLSC) are responsible for the sifting process under the EU(WA) 2018. These committees scrutinise proposed negative Brexit statutory instruments
and make recommendations on the appropriate parliamentary procedure before the instruments are laid in Parliament. This bulletin outlines the latest updates and recommendations, collated on 15 February 2019. The following Brexit SIs were noted by
The Lord Mayor of the City of London, Peter Estlin, paid an official visit to
Hong Kong to reinforce the UK’s links with the city. During the visit, the Lord Mayor delivered a keynote speech to British and Hong Kong businesses entitled ‘Innovation, Skills and Citizenship: Financial and Professional Services in the
Digital Era’, which gave an overview of the City of London’s priorities as well as his own digital skills agenda, at a British Chamber of Commerce breakfast in Hong Kong.
TheCityUK (the industry-led body representing UK-based financial and related professional services) issued a press release noting that it renewed its Memorandum of Understanding (MoU) with Toronto Finance International (a public-private partnership between Canada’s largest financial services institutions
and the Canadian government), facilitating increased access and co-operation between the UK and Canada. Miles Celic, Chief Executive Officer, TheCityUK, said: ‘Toronto Finance International is a global leader in promoting sustainability and
competitiveness within financial services, and a natural partner for TheCityUK. Renewing this MoU will help us to encourage greater innovation and ensure ongoing cooperation between the UK and Canada’.
The World Federation of Exchanges (WFE), the global industry group for exchanges and CCPs, agreed its 2019 business priorities. It will focus on the following areas: regulatory coherence or market fragmentation; technology-related policy work on topics including initial coin offerings, crypto assets and cyber resilience; environmental, social
and governance issues in market structure; clarifying the nature of market data, and CCP-related capital matters.
The Bank of England (BoE) published its
2018 Annual Report on the Supervision of financial market infrastructures (FMI Annual Report 2018). The FMI Annual Report 2018 sets out how the BoE exercised its responsibilities in respect of supervising financial market infrastructure over the past
year. It also outlines the domestic and international policy work where the BoE is at the forefront of initiatives to strengthen both regulatory standards and supervisory frameworks for the supervision of FMIs going forward. The FCA also issued a
statement on the operation of the MoU with the BoE for market infrastructure.
The FCA and the Information Commissioner signed an MoU establishing a framework for cooperation, coordination
and information sharing. It sets out the broad principles of collaboration and the legal framework governing the sharing of relevant information and intelligence, aiming to enable closer working between the FCA and the Commissioner so as to assist
them in discharging their regulatory functions. The MoU will be reviewed biennially.
The FCA announced the appointment, confirmed
by HM Treasury, of Wanda Goldwag as the new chair of the independent Financial Services Consumer Panel. Ms Goldwag’s appointment is effective from 1 March 2019 for an initial three-year term. The Financial Services Consumer Panel is an independent
statutory body established to represent consumers’ interests in the FCA’s development of policy. Ms Goldwag will be the public face of the panel, representing its views to the FCA board and to senior staff within the FCA as well as representing
the panel outside the FCA.
On 14 February 2019, the Competition and Markets Authority (CMA) published its
annual plan for 2019/20, setting out its programme for the year ahead. The CMA’s plans include improving trust, by prioritising work in markets that matter to consumers and cases where consumers may lose out because they are vulnerable to exploitation,
taking tough action on harmful business practices and promoting better competition in online markets. In relation to the UK's exit from the EU, the CMA is ready to accept additional responsibilities, including a new UK State aid function, whether
at the end of March or later, and although a ‘no deal’ exit would present initial challenges, the CMA believes the period ahead also provides opportunities.
Council Recommendation of 12 February 2019 on the appointment of a member of the Executive Board of the European Central Bank (ECB) was published in the Official Journal. The Council of the EU recommended to the European Council that Philip R. Lane be appointed as a member of the Executive Board of the ECB for a term of office
of eight years with effect from 1 June 2019.
The Board of Supervisors of the European Banking Authority (EBA) nominated José
Manuel Campa as the new chairperson of the EBA. Subject to any objection by the European Parliament within one month, Mr Campa will succeed the current chairperson Andrea Enria and will serve for a renewable five-year term. Mr Campa, who currently
serves as global head of regulatory affairs at Santander, was selected from a shortlist of candidates compiled by the EBA Selection Committee.
ESMA published its 2019 Supervision Work Programme, detailing the main areas of focus for the coming year for ESMA’s supervision of trade repositories
, CRAs, and the monitoring of third-country market infrastructures such as third-country CCPs and third-country central securities depositaries. ESMA’s supervisory priorities for 2019 focus on data, Brexit and cybersecurity.
The FCA published a webpage entitled ‘Psychological safety’, exploring the topic
of how to create a speak up, listen up culture in financial services. The webpage summarises the first FCA CultureSprint held in December 2018 and links to a video on the event. The outcome of the CultureSprint was that firms’ traditional focus
on encouraging staff to speak up should evolve to a focus on listening up. The webpage also gathers together relevant FCA Insight articles and the FCA’s webinar from November 2018 on psychological safety.
The Council of the European Union published a proposal for a decision on the position to
be adopted, on behalf of the EU, within the EEA Joint Committee, concerning the amendment of Annex IX (Financial Services) to the EEA Agreement relating to the incorporation of the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR)
and the Capital Requirements Directive (Directive 2013/36/EU) (CRD IV). According to the Decision, the CRR and CRD IV are to be incorporated into the Agreement on the EEA. Annex IX to the EEA Agreement should therefore be amended accordingly
in accordance with the provisions of the Decision.
The judgment of the Court of Justice of the European Union (CJEU) in Silvio Berlusconi, Finanziaria d'investimento Fininvest SpA (Fininvest) v Banca d'Italia, Istituto per la Vigilanza Sulle Assicurazioni (IVASS) (Case C-219/17) was published in the Official Journal of the EU. The court held that Article 263 of the Treaty on the Functioning
of the European Union must be interpreted as precluding national courts from reviewing the legality of decisions to initiate procedures, preparatory acts or non-binding proposals adopted by competent national authorities in the procedure provided
for in Articles 22 and 23 of CRD IV.
The EBA published its presentation
to its public hearing on the EBA's consultation paper on draft guidelines on information and communication technology (ICT) and security risk management. The guidelines establish requirements for credit institutions, investment firms and payment service
providers (PSPs) on the mitigation and management of their ICT risks and aim to ensure a consistent and robust approach across the single market. The consultation runs until 13 March 2019—a final publication date is expected in September 2019.
The European Data Protection Board (EDPB) issued an opinion on
the draft administrative arrangement developed by the ESMA and the International Organisation of Securities Commissions (IOSCO) for the transfer of personal data between EEA financial supervisory authorities and non-EEA financial supervisory authorities.
ESMA and IOSCO welcomed the EDPB opinion, which is the first of its kind and will enable the continued
exchange of enforcement and supervisory information between securities regulators, including under the IOSCO multilateral MoU.
Six European financial services organisations launched Financial
Data Exchange Templates (FinDatEx), a platform to support the development and use of standardised templates for exchanging data between European financial sector institutions. All templates produced by FinDatEx will be provided to the industry free
of charge and free of any intellectual property rights. The aim of the FinDatEx platform is to allow EU financial services representatives to (1) interact to develop technical templates (2) coordinate and organise any standardisation work carried
out by experts from different financial services, and (3) help disseminate technical templates to other EU financial services stakeholders.
The ECB published an
opinion on banning the use of euro 500 denomination banknotes and on certain amendments to AML legislation. The publication followed a request from Finanstilsynet (the Danish Financial Supervisory Authority) for an opinion from the ECB on a draft
law the Finanstilsynet is proposing amending Danish AML law. The draft law proposes to ban the use €500 banknotes in Denmark. According to the explanatory notes to the draft law, simple possession of €500 banknotes is permitted, which includes
bringing €500 banknotes into and out of Denmark.
Europe’s top banking watchdog announced Tuesday 19 February 2019 it is investigating whether Danish and Estonian banking regulators failed in their obligations to properly supervise Danske Bank, which is currently embroiled in one of the
world’s largest money laundering scandals. The EBA said it is launching a ‘formal investigation’ into a possible breach of EU law by the Estonian Financial Services Authority and the Finanstilsynet. It is acting after Denmark’s
largest bank revealed that €200bn ($226bn) in murky transactions flowed through the accounts of its tiny Estonian branch between 2007 and 2015 without either regulator sounding an alarm.
Estonia’s financial regulator ordered Danske
Bank A/S to shut down its operations in the country within eight months after revelations that the Baltic state was at the centre of the lender’s €200bn ($226bn) money laundering scandal. The Estonian Financial Services Authority said that
Danske must close its local branch—and if it fails to do so before the deadline it will be hit with a fine of 10% of the parent group’s turnover. The Estonian watchdog said the Danish lender committed serious money laundering violations
‘for years’ that damaged the country’s financial reputation.
Kevin Hollinrake MP, Co-Chair of the All-Party Parliamentary Group on Fair Business Banking, wrote to Antonio Horta-Osorio, Group Chief Executive, Lloyds Banking Group, on the treatment of customers who informed Lloyds of alleged forged signatures on Lloyds court documents. The letter
refers to evidence provided by one such customer and says that Mr Horta-Osorio should answer some extremely serious questions, including whether it is Lloyds' corporate policy to attempt to silence customers who inform it of alleged fraud by the bank,
for example through using litigation and non-disclosure agreements.
UK Finance issued a press release saying that the Dedicated Card and Payment Crime Unit (DCPCU) prevented an estimated £94.5m
of fraud in 2018, the highest annual total to date. This brings the DCPCU's total estimated savings from reduced fraud activity to £600m since it was established in April 2002. DCPCU tackles organised criminal groups responsible for financial
fraud and in 2018 secured 48 convictions and disrupted 11 organised crime groups. Collectively, over 58 years in prison were handed down to defendants in cases investigated by DCPCU in the same period.
The Court of Appeal updated its case tracker for civil appeals to indicate that permission to
appeal the High Court's decision in the case of the Queen on the application of Berkeley Burke SIPP Administration Ltd v Financial Ombudsman Service Limited and Ors  EWHC 2878 (Admin) was granted. In a decision dated 30
October 2018, Mr Justice Jacobs dismissed the application by the claimant, Berkeley Burke SIPP Administration Ltd, a self-invested personal pension (SIPP) provider and administrator, for judicial review of a decision by the Financial Ombudsman Service
Limited (FOS) relating to the claimant's investment in a scam investment scheme. The Administrative Court found that FOS acted in accordance with its statutory jurisdiction under section 228(2) of the Financial Services and Markets Act 2000.
The appeal should be heard by 3 March 2020.
The FCA published a webpage to report on monthly payment protection insurance (PPI) refunds and
compensation. The webpage includes a graph and table which set out monthly figures on refunds and compensation paid to customers who have complained about PPI since 2011. A total of £258.9m was paid in December 2018 to customers who complained
about the way they were sold. This takes the amount paid since January 2011 to £33.8bn. As of September 2015, these figures come from 23 firms making up 95% of complaints made about the sale of PPI.
The CJEU published an order dated 28 November 2018 in response to a request
for a preliminary ruling regarding the case of Powszechna Kasa Oszczędności (PKO) Bank Polski S.A. w Warszawie v Jacek Michalski. The CJEU ruled that under EU legislation, it was impossible for a court, in the absence of an action brought by a consumer,
to examine the unfairness of contractual terms in respect of an order for payment procedure based on bank ledger excerpts. The request for a preliminary ruling was made by the Sąd Rejonowy w Siemianowicach Śląskich (District Court, Siemianowice Śląskie,
Poland) in proceedings between PKO, a bank established in Warsaw, and Mr Michalski concerning an order for payment based on a banking ledger excerpt from PKO and issue on account of Mr Michalski's default on payment of money borrowed on a credit card
issued by PKO.
ESMA agreed to renew its temporary restriction
on the marketing, distribution or sale of binary options to retail clients. The restriction, in effect since 2 July 2018, will be renewed for a further three-month period beginning on 2 April 2019. Since the temporary prohibition was first issued
on a three-month basis last year, ESMA renewed it twice. This third renewal, on the same terms as the previous renewal decision that started to apply on 2 January 2019, was agreed by ESMA’s Board of Supervisors on 14 February 2019.
ESMA issued an official opinion agreeing to an emergency
net short position ban, for a period of two months, by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) on net short positions in Wirecard AG shares under the Short Selling Regulation. The measure entered into force at 06:00 CET on
18 February 2019 (before trading) and is applicable until midnight Central European Time on 18 April 2019. The FCA issued a statement drawing the industry's attention to the ban imposed by BaFin.
The European Commission is consulting with
the European Securities Committee until 28 February 2019 regarding a draft implementing amending Commission Implementing Regulation (EU) 2016/1368, establishing a list of critical benchmarks used in financial markets pursuant to Regulation
(EU) 2016/1011(the Benchmarks Regulation). The draft implementing decision was submitted to the Committee on 14 February 2019. It will be subject to the examination procedure set out in Articles 5-7 of Regulation (EU) 182/2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers.
The International Swaps and Derivatives Association (ISDA) published the
second in its series of legal guidelines for smart derivatives contracts, which aim to explore the core principles of ISDA documentation and to raise awareness of important legal terms that should be maintained when a technology solution is used in
derivatives trading. This second paper sets out a summary of the main elements of the ISDA Master Agreement along with possible considerations for technology developers.
ISDA and the Global Financial Markets Association (GFMA) updated the Legal
Entity Identifier (LEI) factsheet, which they first published in July 2017. The factsheet highlights the pressing need for market participants to obtain LEIs for existing and forthcoming regulatory mandates.
The Global Foreign Exchange Committee (GFXC) published reports on the role of disclosure and transparency and 'cover
and deal' arrangements in the global FX market. One report, 'The Role of Disclosure and Transparency in the Global FX Market'
, describes eight characteristics to help market participants develop and review FX disclosures. The other report, 'The Role of 'Cover and Deal' Arrangements in the Global FX Market'
describes various aspects of 'cover and deal' arrangements and highlights specific, relevant principles within the Global Code that relate to such trading practices.
The European Central Securities Depositaries Association (ECSDA) presented the updated draft version of the ECSDA Central Securities
Depositories Regulation (EU) No 909/2014 (CSDR) Penalties Framework to stakeholders in an industry workshop held on 18 February 2019. ECSDA published its slides on the draft framework, in addition to slides by Paul Janssens, Programme Director
at the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Mr Janssens’ slides, entitled ‘CSDR and Standards/ECSDA’ set out detail on the penalty mechanism and reporting.
Europe’s largest investment companies made the biggest cuts to their investment research
after new EU securities trading rules were introduced, research published shows, raising concerns that this could reduce competition because research costs might be cutting into profits at smaller investment companies. The CFA Institute, the global
association for investment professionals, said that EU investment companies managing more than €250bn ($283bn) slashed their research budgets by an average of 11% since the introduction in January 2018 of the revised Markets in Financial Instruments
Directive (MiFID II). But asset managers with less than €1bn on their portfolios made only ‘negligible’ cuts to their research costs, figures suggest.
The European Parliament adopted a legislative resolution on the proposal for
a regulation on the law applicable to the third-party effects of assignments of claims (COM(2018)0096–C8-0109/2018–2018/0044 (COD). The proposal was first put forward by the European Commission on 12 March 2018 and aims to create stronger,
deeper and more integrated capital markets through the creation of efficient and safe post-trade infrastructures. The proposal aims to create legal certainty as to which national law applies when determining who owns a claim after it has been assigned in a cross-border context. The full list of the European Parliament’s
amendments can be seen here.
The International Capital Market Association (ICMA) responded to the UK Financial Reporting Council’s call for feedback on a post implementation review of the 2016 Ethical and Auditing Standards changes to implement the Auditing Regulation and Directive.
ICMA provided comments on one aspect of the call for feedback—whether there should be further restrictions or an outright prohibition on non-audit services. The feedback is given by the ICMA primary market constituency, made up of banks that
lead and manage syndicated debt securities issues throughout Europe.
The Bank for International Settlements (BIS) published a paper on how securities lending affects OTC market liquidity. The
paper combines micro-data on corporate bond market trades with securities lending transactions and individual corporate bond holdings by US insurance companies, to identify and quantify the importance of securities lending of corporate bonds to market
liquidity in the OTC corporate bond market. The paper shows that the shutdown of AIG’s securities lending program in 2008 caused a statistically and economically significant reduction in the market liquidity of corporate bonds predominantly
held by AIG.
The Regulatory Policy Committee (RPC) published on 13 February 2019 an
opinion on HM Treasury’s impact assessment (IA) on the Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018, SI 2018/786 (the Regulations). The RPC rates the IA as fit
for purpose. The Regulations, among other things, gave effect to certain provisions of the Prospectus Regulation (EU) 2017/1129 (Prospectus Regulation) which came into force in July 2018, including permitting Member States to exempt offers
of securities to the public, below €8m, from the obligation to publish a prospectus. The government implemented the discretionary increase (as allowed by the Prospectus Regulation) at €8m in the UK.
The Council of the EU published Commission Delegated Regulation supplementing Regulation
(EU) 345/2013 of the European Parliament and of the Council with regard to conflicts of interest in the area of European venture capital funds (C(2019) 664 final) which was adopted by the European Commission on 4 February 2019. Regulation
(EU) 345/2013 sets out the conditions on which investment funds may use the European Venture Capital Fund (EuVECA) label. The EuVECA Regulation introduces measures to allow venture capitalists to market their funds across the EU using a single
set of rules. Every fund using the label must prove that a high percentage of investments (70% of the capital received from investors) is spent on supporting small companies.
The European Commission issued a press release welcoming the European Parliament's support for investment
screening framework. The proposal to create the first EU-wide framework for screening of foreign direct investments was unveiled by President Juncker during the 2017 State of the Union speech. The text approved by the Parliament was the result of
three-way talks between the European Parliament, the Council and the Commission that concluded on 20 November 2018. The Regulation will enter into force once the Council also gives its approval. After that, Member States and the Commission will have
18 months to put in place the necessary arrangements for the new mechanism to operate. The Council of the EU also published an information note on the proposal.
HM Treasury announced a revamp of its Asset Management Taskforce, as five new
senior executives from the UK’s world-leading investment industry join the team. John Glen, Economic Secretary to the Treasury, also challenged the refreshed Taskforce to investigate what new international opportunities the UK’s asset
management industry could seize after Brexit and to explore ways to promote responsible investment, in addition to its existing priorities.
ESMA issued a call for candidates in order to renew the composition
of its Consultative Working Group which advises ESMA's Investment Management Standing Committee. ESMA invites interested experts to send their application by 15 March 2019. ESMA's work relating to collective investment management covers principally
the Directives on Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Fund Managers (AIFMD), as well as the Regulations on Money Market Funds, EuVECA, European Social Entrepreneurship Funds (EuSEF)
and European Long-term Investment Funds (ELTIFs).
The Investment Association (IA) issued new
guidance to help fund managers communicate more clearly with UK savers. The IA’s Fund Communication Guidance, entitled ‘Clarity of language in fund documentation: fund objectives and investment policy’, was developed to respond to
FCA PS19/4: Asset Management Market Study–further remedies. The IA’s guidance includes a list of over 35 frequently-used terms, explained in simple language. As part of the FCA’s Fund Objectives Working Group, it was agreed and set
out in FCA PS19/4 that the IA would work with its members and consumer representatives, informed by consumer research, to promote the use of consistent terminology in communications from fund managers about their funds. The guidance is the output
of this work.
The Alternative Investment Management Association (AIMA), together with its affiliate, the Alternative Credit Council (ACC), published a white paper on the future of non-bank lending in Europe. The paper was jointly produced by the ACC and Allen & Overy LLP to provide insights from industry and an overview of the European regulatory
landscape to support policymakers in re-evaluating their approach to the non-bank lending market and considering whether the current regulatory framework remains appropriate.
Insurance Europe and the European Fund and Asset Management Association (EFAMA) say that current rules allowing the use of information documents prepared under the UCITS Directive for multi-option products under the Packaged Retail Investment and Insurance Products (PRIIPs) Regulation must
be urgently extended in order to ensure consumers can continue to receive pre-contractual information about these products. The two industry bodies wrote a joint letter to
the European Commission and EIOPA requesting that the necessary legislation to extend these rules is adopted prior to European elections in May.
Better Finance, the European Federation of Investors and Financial Services Users, issued a press release welcoming the final report of the European Supervisory Authorities’ (ESAs) Joint Committee to the European Commission on targeted amendments to the PRIIPs Level 2 legislation. These proposals
fall in line with some of Better Finance’s positions, but unfortunately, do not solve the most important issues. In November 2018, the ESAs launched a public consultation on possible amendments to the provisions laying down the content and presentation
of the Key Information Document (KID) for PRIIPs.
The Council of the EU endorsed the
political agreement reached between the Romanian presidency and the European Parliament on a set of revised rules aimed at reducing risks in the EU banking sector. The package agreed by the Council and the Parliament comprises two regulations and two directives, relating to bank capital requirements and the recovery and resolution of banks in difficulty. The
following compromise texts were agreed between the presidency and the Parliament and were approved by the Council (1) a proposal for a regulation amending the CRR (2)
a proposal for a directive amending CRD IV (3) a proposal for a directive amending the Bank Recovery and Resolution Directive 2014/59/EU (BRRD), and (4) proposal for a regulation amending the Single Resolution Mechanism Regulation (EU) 806/2014 (SRMR).
The Single Resolution Board (SRB) published its Framework for Valuation, which provides independent valuers and the general
public with an indication of the SRB’s expectations regarding the principles and methodologies for valuation reports under the BRRD and the SRMR. The BRRD and SRMR form the legal framework governing resolution authorities’ powers to intervene
and resolve failing or likely to fail banks. The intention is to reduce uncertainty for independent valuers and for the SRB, to provide the necessary indications to achieve the goals of the valuation and to enhance comparability and consistency of
valuations across future resolution cases.
The RPC published an opinion on HM Treasury’s final stage IA for
the Bank Creditor Hierarchy Directive (Directive EU/2017/2399). Among other things, the Opinion considers the impacts of the proposal (including familiarisation costs, benefits and the wider impact of the proposal). The RPC rates the IA as fit for
purpose. The IA relates to the domestic implementation of the Bank Creditor Hierarchy Directive (which was adopted by the European Parliament on 12 December 2017), the aim of which is to create a new class of senior unsecured debt called ‘non-preferred
senior’ debt. This is a new type of debt that banks can issue. It provides an additional method for firms to issue their requirements under the minimum requirement for own fund and eligible liabilities.
The EBA published its Consumer Trends Report for 2018 and 2019. The Report covers the trends and issues related to retail banking products and services that fall within the EBA's consumer protection mandate, such as mortgages, consumer
credit, deposits, payment accounts, payment services and electronic money. The Report also provides an overview of the topical issues identified in 2018/19 that impact or may impact consumers. The 2018/19 Report is more extensive than previous editions
as it provides a comprehensive quantitative assessment of the trends and a qualitative description of each retail banking product or service within the EBA's consumer protection scope.
The FCA published the complete set of comparable data from the main
current account providers in the UK about the services they offer to consumers and to small businesses, and how far their customers recommend them, including both updated information and new data. The CMA also published a second set of banking customer satisfaction results, following an independent survey of thousands of personal and small business customers. The CMA introduced its survey after it conducted
a market investigation into the banking sector in 2016.
The Open Banking Implementation Entity (OBIE) published the
latest Service Quality Indicators. These indicators are one of the measures required by the CMA following its investigation into the UK retail banking market. This data is published every six months and enables people to compare service levels provided
Barclays PLC became the latest UK high-street lender to suffer online banking glitches as IT outages in the sector come under increased scrutiny by MPs. Customers complained of issues with their mobile, telephone and online banking ahead of a planned
upgrade to Barclays IT systems over the weekend. ‘We are having a few issues but the team is on the job to get this fixed,’ the bank told customers who took to Twitter to complain. Barclays said the unplanned outage was affecting ‘a number of customers’ without giving details. The bank said it was investigating the causes. The
banking giant also suffered a major outage in September with online, telephone and branch services down for several hours.
Lloyds Banking Group PLC is facing pressure to abandon its new overdraft charges, with 20 British lawmakers warning that the ‘opportunistic and irresponsible’ fees could expose some customers to annual interest rates of 61%. The new charges,
which Lloyds announced in November and introduced in January, could force savers who overdraw by less than £1,250 to pay a 61% interest rate, Labour lawmakers told Antonio Horta-Osorio, the banking group’s chief executive, in a
letter. The MPs even suggested that Lloyds was trying to boost profits before the FCA begins cracking down on excessive overdraft fees in 2020.
UK Finance published an article by Andrew Kinnes, partner, and
Neil Campbell, associate, of Shepherd and Wedderburn LLP on equity release mortgages (ERMs). The authors give an overview of developments in ERMs and trading in ERM portfolios, drawing on their experience in the Scottish market. The authors note that
figures published recently by the Equity Release Council suggest
that the number of borrowers entering into ERMs, and the cumulative value of these new mortgage plans, was higher in 2018 than in the past ten years.
EIOPA published the Commission's formal request to EIOPA to provide technical advice on the review of the Solvency II Directive.
EIOPA is asked to provide its advice by 30 June 2020. Solvency II provides that certain areas must be reviewed by the Commission in 2020; (1) long term guarantees measures and measures on equity risk (2) methods, assumptions and standard parameters
used when calculating the Solvency Capital Requirement standard formula (3) Member States' rules and supervisory authorities' practices regarding the calculation of the Minimum Capital Requirement (4) group supervision and capital management within
a group of insurance or reinsurance undertakings.
The European Commission is consulting with
the Insurance and Occupational Pensions Committee until 25 February 2019, regarding Implementing Regulation (EU) 2019/228 of 7 February 2019 laying down technical information for the calculation of technical provisions and basic own funds for reporting
with reference dates from 31 December 2018 until 30 March 2019 in accordance with the Solvency II Directive. The implementing regulation was submitted to the Committee on 12 February 2019. It will be subject to the advisory procedure set out in Articles
4 and 8 of Regulation (EU) 182/2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers.
EIOPA published a framework for assessing conduct risk through
the product lifecycle. The purpose of the framework is to clarify drivers of conduct risk and their implications in the emergence of consumer detriment. The framework provides an aid for understanding issues faced by consumers and input on the types
of conduct risks EIOPA and the NCAs should focus on. It sets a common starting point for more practical supervision of products, services or market segments, for instance, through ‘deep dive’ thematic work or for future policy development.
The PRA published Policy
Statement (PS)4/19 which
provides feedback on responses to its Consultation Paper (CP) 27/18 - Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down. PS4/19 contains the PRA’s final policy on updating Supervisory
Statement (SS) 3/15 - Solvency II: The quality of capital instruments (Appendix 1).
The PRA also issued a reporting clarification on how such adjustments should be reflected in the Solvency II reporting templates (Appendix 2). The new policy will come into effect for all instruments issued on or after 21 February 2019.
The FCA published its final report of its wholesale
insurance brokers market study (MS17/2.2), which was launched in November 2017 to assess how competition was working in the sector. Overall, the FCA did not find evidence of significant levels of harm that merit the introduction of intrusive remedies.
Therefore, the report is a final rather than interim report. The FCA found areas for improvement and intends to work with industry to ensure these are addressed. The FCA highlights that these areas can be addressed using FCA supervisory processes
and/or competition law enforcement processes. The FCA added that due to the ‘dynamic nature of the market’, it will continue to monitor developments in broker business models.
The House of Commons European Scrutiny Committee published its 55th report of
the 2017-2019 Parliamentary session. Documents considered include the proposal for a Regulation on a pan-European Personal Pension Product (PEPP). The Committee considered a letter from Economic Secretary to the Treasury John Glen dated 11 February
2019, in which he provided a final update on the proposed PEPP Regulation. The Committee noted that it was particularly pleased that national regulators would be able to curtail the passporting rights of providers to market PEPPs on a cross-border
basis from other EU countries where necessary to protect savers.
EIOPA published a statement welcoming the agreement
reached by the European Parliament and the Members States on the proposal for the PEPP. EIOPA provided advice to the European Commission in building up the proposal for a draft regulation on PEPP. Gabriel Bernardino, Chairman of EIOPA, said: ‘Today's
agreement is a key milestone in providing sustainable pensions and addressing the ever-growing pensions gap in Europe. The PEPP should be available to every citizen in the European Union. Within a transparent and cost-effective framework, it will
offer greater choice to save for retirement making a real difference in citizens' lives.
Better Finance, the European Federation of Investors and Financial Services Users, issued a press release welcoming the final compromise reached on 13 February 2019 by the EU Commission, Council of the EU and the European Parliament for the creation of PEPP that would go a long
way towards alleviating this worrying situation, provided the PEPP ensures pension adequacy through decent long-term returns and a ‘basic PEPP’ (default investment option) that is really safe and really simple. Better Finance states that
if properly implemented, the ‘basic PEPP’ should protect the long-term real value of your nest egg, shielding your savings from fees and inflation, and ensure you don’t have a bad surprise when you reach retirement age. To this end
a PEPP will offer so-called ‘capital guarantee’.
Europe’s proposals to introduce a blocwide pension product are ‘not the answer’ to the EU’s pensions crisis and may hurt consumers if providers are not regulated and charge high fees that cut into savings, consumer groups have
said. Consumer rights organisations Finance Watch and
Better Finance lambasted EU lawmakers for leaving unanswered questions on how the PEPP will safeguard the bloc’s retirement savers. The Council of the European Union announced a political agreement on the proposals, which it said would help
narrow the member states’ €2trn ($2.3trn) annual savings gap. ‘Finance Watch has been clear from the start of discussions around the PEPP—it is not the solution to the pension crisis in Europe,’ said Benoit Lallemand,
secretary general at Finance Watch.
The European Parliament published a provisional version of
its legislative resolution of 14 February 2019 on the European Commission's proposal for a regulation amending Regulation (EC) 924/2009 as regards certain charges on cross-border payments in the EU and currency conversion charges. The European
Commission also published frequently asked questions and a factsheet on the amendments. The amendments to the regulation on cross-border payments were proposed by the Commission in March 2018 and are intended to reduce the cost of intra-EU payments within
the entire EU and unify the single retail payments market.
European lawmakers gave their final backing to
reforms that will help 150m Europeans who live outside the Eurozone avoid excessive bank charges when they make cross-border payments using the euro. Some 532 parliamentarians backed the change, with 22 opposing and 55 abstentions, paving the way
for the banking reforms to enter into force before the end of the year. The European Commission and the Council already backed the revised Cross-border Payments Regulation. Under current arrangements a citizen of Bulgaria, which is outside the Eurozone,
could pay as much as €24 to transfer €50 to Finland, which is inside the zone, according to Valdis Dombrovskis, the Commission’s vice-president and finance chief. The regulation is designed to change this by forcing banks to charge equally for cross-border payments
in euros and make conversion costs more transparent.
The Council of the EU published an information note on the proposal for a Regulation amending Regulation
(EC) 924/2009 as regards certain charges on cross-border payments in the EU and currency conversion charges. The note confirms that the European Parliament’s position on the proposal, which it adopted at first reading on 14 February 2019,
reflects the position previously agreed informally between the Council of the EU, the European Parliament and the European Commission, meaning that the Council of the EU should be able to approve the Parliament’s position.
The European Payments Council (EPC) issued a
call for change requests to the Single Euro Payments Area (SEPA) Proxy Lookup (SPL) Scheme Rulebook. The call for requests runs until 31 March 2019. The template to submit a change request to the SPL scheme rulebook can be downloaded from the EPC webpage. Any person or organisation with a legitimate interest can submit a change request in accordance
with the rules described in section 3.2.3 ‘Submission of Change Requests to the Secretariat’ of the current rulebook version (v1.0).
The EPC published version
1.3 of its dedicated paper on the SEPA Credit Transfer (SCT) and SEPA Instant Credit Transfer (SCT Inst) rulebooks. The paper, which will be updated over time, addresses operational aspects related to the SCT and SCT Inst rulebooks, seeks to ensure
consistent implementation of the two EPC credit transfer rulebooks by payment service providers participating in the schemes, and provides guidance and recommendations on how to handle situations not covered in the rulebooks.
The EPC published a pack
of template documents to be completed and signed for adherence to the Extended Remittance Information (ERI) option of the SCT scheme. The ERI option was added into the SCT scheme rulebook in November 2019 through the addition of a new Annex V. The
ERI option allows originators to transmit per single SCT a specified combination of remittance information to the beneficiary.
The EPC published a list of the
members of its Scheme Technical Forum (ESTF) for the period from September 2017 to September 2019. The ESTF is a dialogue channel between the EPC and representatives of technical players who facilitate the processing of transactions under the SEPA
schemes. The current composition of the ESTF is set out in the two-page membership list, available on the EPC website.
The FCA updated its webpage on the Revised Payment Services Directive (PSD2) by adding a
video in which Maha El Dimachki, Head of the FCA's Payments Department, and members of her team, give a brief overview of the Payment Department's work. The Payment Department's primary focusses are (1) culture and governance (2) operational resilience,
cyber security and sound systems (3) payment fraud and financial fraud in general, and (4) innovation. The FCA added two further videos to its webpage on 20 February 2019. The new videos set out what PSPs should expect when interacting with the FCA. The most recent videos are entitled ‘The authorisation process for payment
firms’ and ‘What area is the FCA most interested in?’.
The RPC issued its opinion on the FCA’s assessment of
the equivalent annual net direct cost to business (EANDCB) for PSD2. The FCA expects approximately 1,821 businesses to be affected by the proposals contained within PSD2. It is expected that 1,552 payment service providers (these include banks, building
societies PIs and EMIs), 200 businesses that operate under limited network exclusion, 10 businesses that operate under electronic communications network exclusions and 59 credit unions and deposit takers will be affected. Overall the RPC summarises
the FCA’s assessment as reasonable and proportionate. Nevertheless, it notes several instances where the FCA’s assessment could have been improved.
The Financial Stability Board (FSB) published a
report on FinTech and market structure in financial services. According to the FSB, FinTech presents opportunities for the provision of financial services and could lead to a more efficient and resilient financial system. However, it warns that increased
competition could also pressure banks to take on more risks, and a bigger role for non-banks could have implications for financial stability. The report says that technological innovation holds great promise for the provision of financial services, with the potential to increase market access, the range of product offerings, and convenience while also
lowering costs to clients.
The United Nations Environment Programme (UNEP) Finance Initiative (FI) announced that twelve more banks are now endorsing its Principles for Responsible Banking, bringing the total number of banks supporting the new framework to forty-nine. The Principles, which
provide guidance for banks to create value for customers, shareholders and society, are the first global framework to enable banks to integrate sustainability across all business areas, from strategic to portfolio to transaction level. The Principles
are currently open for global public consultation until 31 May 2019 and will become available for signature in New York in September 2019 during the UN General Assembly.
21 February 2019
The deadline for responses to EIOPA’s call for input on
Solvency II reporting and disclosure requirements as part of the 2020 Solvency II review is 21 February 2019.
Prior to the FCA’s proposed introduction of a price cap on rent-to-own (RTO) firms to protect vulnerable consumers from high costs (which will come into force on 1 April 2019 subject to consultation) a two-day cooling off period for the sale of extended warranties is also being introduced, which will effectively ban firms from selling these warranties at the point
of purchase. This will partly be implemented by the High Cost Credit (Rent to Own Warranties) Instrument 2018 (FCA 2018/51) which
enters into force on 22 February 2019.
The deadline for feedback to the European Commission’s Technical Expert Group on Sustainable Finance taxonomy approach is 22 February 2019.
The European Commission is consulting with
the Insurance and Occupational Pensions Committee until 25 February 2019, regarding Implementing Regulation (EU) 2019/228 of 7 February 2019 laying down technical information for the calculation of technical provisions and basic own
funds for reporting with reference dates from 31 December 2018 until 30 March 2019 in accordance with Solvency II.
As part of its live and local series the FCA will host its interactive workshopon defined
benefit pension transfers on 27 February 2019 in Belfast.
The deadline for responses to FCA ‘CP19/9: Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20’
and PRA ‘CP2/19: Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20’
is 28 February 2019.
Following FCA ‘CP18/32: Recovering the costs of the Office for Professional Body Anti-Money-laundering Supervision (OPBAS): proposed fee rates for 2018/19’
the deadline for professional body supervisors to submit their figures to OPBAS is 28 February 2019.
The deadline for feedback to FCA ‘CP18/40: Consultation on proposed amendment of COBS 21.3 permitted links rules, the purpose of which is to further enable retail investors to invest in patient capital through unit-linked funds’
is 28 February 2019.
Firms wishing to take part in the FCA’s cross-border testing pilot (for
firms wishing to test innovative products, services or business models across international markets—the pilot is an initiative by the Global Financial Innovation Network (GFIN), a group of 29 international organisations committed to supporting financial innovation in the interest of consumers and which is currently
chaired by the FCA) in the UK should review the list of participating regulators and apply before the deadline of 28 February 2019.
The deadline for
responses to the UK Parliament’s call for views on the Financial Services (Implementation of Legislation) [Lords] Bill, which is currently passing through Parliament is 5pm on 28 February 2019.
The European Commission is consulting with
the European Securities Committee until 28 February 2019 regarding a draft implementing amending Commission Implementing Regulation (EU) 2016/1368, establishing a list of critical benchmarks used in financial markets pursuant to Regulation (EU) 2016/1011 (the Benchmarks Regulation).
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