FS weekly highlights—21 May 2020

FS weekly highlights—21 May 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
UK, EU and international regulators and bodies
Prudential requirements
Financial stability, recovery and resolution
Financial crime
Investigations, enforcement and discipline
Competition in financial services
Markets and trading
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

Coronavirus (COVID-19)—European Parliament to consider adjustments to CRR in June plenary session

The European Parliament’s procedural file on adjustments in response to the coronavirus (COVID-19) pandemic has been updated to indicate that it will examine the Regulation amending the Capital Requirements Regulation (75/2013) (CRR) at its plenary session on 18 June 2020.

Source: 2020/0066(COD) Capital Requirements Regulation: adjustments in response to the COVID-19 pandemic.

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—European Parliament to debate further bank lending

The European Parliament’s Committee on Economic and Monetary Affairs will look into the proposed targeted amendments to the CRR on 18 May 2020. The objective of these amendments to the EU prudential framework for banks is to further facilitate bank lending in order to mitigate the economic effects of the coronavirus (COVID-19) pandemic. The proposals cover various issues including the adaptation of timelines and a more favourable treatment of public guarantees granted during the crisis.

Source: EU banking prudential rules: committee debate COVID-19 adjustments.

Coronavirus (COVID-19)–EIOPA’s latest Risk Dashboard shows increased risk exposures for insurance sector

The European Insurance and Occupational Pensions Authority (EIOPA) published its updated Risk Dashboard, which sets out the authority’s quarterly risk assessment of the EU insurance industry based on Q4 2019 Solvency II data. The results show that the EU insurance sector’s risk exposures increased as the coronavirus (COVID-19) outbreak strongly affected the lives of all European citizens with disruptions in all financial sectors and economic activities.

Source: European insurers face increased risk exposures due to COVID-19, but market perceptions and imbalances remained at medium level.

For further information, see: Solvency II—essentials.

Coronavirus (COVID-19)—EIOPA moves to two-weekly production of RFR/EDA information

Due to the coronavirus (COVID-19) outbreak, the EIOPA changed the frequency of current extraordinary processes for risk-free interest rate term structures (RFR) and symmetric adjustment to equity risk (EDA) productions from a weekly basis to every two weeks. The new two-weekly frequency will apply from the week starting on 25 May. A calendar for the next extraordinary RFR/EDA processes will be also published on the dedicated area of the EIOPA website.

Source: Change of extraordinary RFR/EDA productions from weekly to bi-weekly frequency.

Coronavirus (COVID-19)–ESMA notes non-renewal and early termination of national short selling bans

The European Securities and Markets Authority (ESMA) published a statement noting that national competent authorities (NCAs) in Austria, Belgium, France, Greece and Spain will not be renewing their emergency restrictions on short selling and similar transactions, and that Italy’s Commission Nazionale per la Società e la Borsa (CONSOB) is terminating its emergency restrictions, which were due to expire on 18 June 2020, early. ESMA co-ordinated the recent emergency restriction renewals and contributed to this aligned action by the NCAs.

Source: ESMA–non-renewal and termination of short selling bans by Austrian FMA, Belgian FSMA, French AMF, Greek HCMC, Italian CONSOB and Spanish CNMV.

For further information, see: An introduction to short selling.

Coronavirus (COVID-19)—ESMA Dashboard shows ‘very high’ risks across all areas of its remit

ESMA published the first complete risk dashboard for 2020, highlighting very high risks in all areas of ESMA’s remit. The assessment remains at the same level as the separate risk update published on 2 April 2020.

Source: ESMA sees potential decoupling of financial market performance and underlying economic activity.

Coronavirus (COVID-19)—ESMA statement in support of ESRB recommendation

ESMA published a statement in support of the European Systemic Risk Board (ESRB)’s recommendation to ESMA, which forms part of a set of actions to address the coronavirus (COVID-19) emergency from a macroprudential perspective. In its statement, ESMA says that it supports the ESRB actions to address COVID-related systemic vulnerabilities. The ESRB recommends in particular that ESMA should co-ordinate a supervisory exercise involving investment funds which have exposures to corporate debt or real estate.

Source: ESMA supports ESRB actions to address COVID-related systemic vulnerabilities.

Coronavirus (COVID-19)—ESMA statement on half-yearly financial reports of listed issuers

ESMA issued a public statement addressing the implications of the coronavirus (COVID-19) pandemic on the half-yearly financial reports of listed issuers. ESMA emphasises the role of audit committees in promoting high-quality half-yearly financial reports ‘at this difficult junction in time’.

Source: ESMA calls for transparency on COVID-19 effects in half-yearly financial reports.

Coronavirus (COVID-19)—ESRB sets out actions to support the EU financial system

At its extraordinary meeting on 6 May 2020, the General Board of the ESRB discussed a first set of actions in five priority areas identified to address the impact of the coronavirus (COVID-19) emergency on the financial system from a macroprudential perspective. The ESRB continues work in the five priority areas and the next extraordinary meeting of the General Board will take place on 27 May 2020.

Source: The General Board of the European Systemic Risk Board takes first set of actions to address the coronavirus emergency at its extraordinary meeting on 6 May 2020.

Coronavirus (COVID-19)—FCA Innovation Hub seeks firms who may have tools to help support consumers and small businesses

The Financial Conduct Authority (FCA) updated its webpage on how to request Innovation Hub support, encouraging proposals from firms—both start-ups and established companies—that may have creative and innovative solutions to the challenges posed by the coronavirus (COVID-19) pandemic.

Source: Request Innovation Hub support.

Coronavirus (COVID-19)—FCA introduces measures for insurance and premium finance customers in temporary financial difficulty

Following a short consultation, the FCA published guidance setting out its expectations for insurance and premium finance firms dealing with customers in temporary financial difficulty due to coronavirus (COVID-19). The FCA also published a feedback statement (FS20/5) on its consultation on the guidance, in addition to the COVID-19 Premium Finance Instrument 2020 (FCA 2020/20) which implements consequential changes to the FCA Handbook. The guidance come into force on 18 May 2020. It will be reviewed in the next three months and revised if appropriate.

Sources: FCA confirms measures to help insurance customers who may be suffering financial difficulties as a result of coronavirusFeedback statement FS20/5Coronavirus and customers in temporary financial difficulty: guidance for insurance and premium finance firms and  COVID-19 Premium Finance Instrument 2020.

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

Coronavirus (COVID-19)—FCA sets out FS exemptions in forthcoming Corporate Insolvency and Governance Bill

The FCA published a list of the financial services exemptions in the forthcoming Corporate Insolvency and Governance Bill, which aim to help businesses affected by the coronavirus (COVID-19) pandemic. The FCA says it is necessary to have specific provisions in the Bill for the financial services sector in order to protect consumers and financial stability. The provisions will ‘help to ensure that the UK’s existing special insolvency regimes for financial sector firms remain effective, and that financial market participants have the legal certainty so that financial markets function effectively’.

Source: Financial services exemptions in forthcoming Corporate Insolvency and Governance Bill.

Coronavirus (COVID-19)—FCA sets out further details of its business interruption insurance test case

The FCA published a webpage setting out how it is interacting with firms as regards its High Court test case on business interruption (BI) insurance during the coronavirus (COVID-19) pandemic. In response to continuing and widespread concern about the lack of a positive response of some BI insurance policies, and the basis on which some insurers are making decisions in relation to claims, the FCA announced on 1 May 2020 that it intended to obtain court declarations aimed at resolving contractual uncertainty in selected BI insurance policies.

Source: Business interruption insurance during the coronavirus pandemic—High Court test case.

Coronavirus (COVID-19)—FCA update on LIBOR reporting and supervisory engagement

The FCA updated its webpage on the impact of the coronavirus (COVID-19) pandemic on the timeline for firms’ LIBOR transition plans.

Source: Further statement from the RFRWG on the impact of coronavirus on the timeline for firms’ LIBOR transition plans.

For further information, see: LIBOR transition.

Coronavirus (COVID-19)—PSR board meeting addresses COVID-19 and CoP

The Payment Systems Regulator (PSR) published the minutes of its board meeting held on 18 March 2020. Among other issues, progress on Confirmation of Payee (CoP) and the estimated impact of the COVID-19 virus on payment systems were discussed.

Source: PSR Board minutes—March 2020.

Coronavirus (COVID-19)—HMT extends CLBILS maximum loan size to £200m

HM Treasury (HMT) announced that it is extending the maximum loan size available through the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from £50m to £200m. The expanded loans will be available to large businesses affected by the coronavirus (COVID-19) outbreak from 26 May 2020, to help ensure large firms that do not qualify for the Bank of England (BoE) COVID Corporate Financing Facility (CCFF) have enough finance to meet cashflow needs during the outbreak.

Source: Larger businesses to benefit from loans of up to £200m.

Coronavirus (COVID-19)—HMT publishes updates to the COVID Corporate Financing Facility

HMT published details of an update to the terms of the COVID Corporate Financing Facility (CCFF) and, with the BoE, published a Consolidated Market Notice on the CCFF. It describes the operation of the facility and replaces all previous Market Notices on the subject.

Sources: Joint HM Treasury and Bank of England COVID Corporate Financing Facility (CCFF)—Consolidated Market Notice 19 May 2020 and  Update to the COVID Corporate Financing Facility.

Coronavirus (COVID-19)—AFME queries whether European action taken is enough

The Association for Financial Markets in Europe (AFME) published a blog by its head of prudential regulation, Michael Lever. In the blog, Lever argues that the measure introduced at EU level (eg the targeted changes to the existing the CRR and the changes made to ameliorate the capital impacts from IFRS 9) are not going to be sufficient to furnish banks with enough capacity to provide the support to their customers that is going to be needed in the coming downturn and any subsequent recovery.

Source: Is Europe doing too little too late again?

Coronavirus (COVID-19)—BEIS and HMT publish Future Fund Convertible Loan Agreement template

The Department for Business, Energy & Industrial Strategy (BEIS) and HMT published a draft version of the coronavirus (COVID-19) Future Fund Convertible Loan Agreement. The Future Fund opens to applications on 20 May 2020, issuing convertible loans between £125,000 and £5m to innovative companies facing financing difficulties due to the coronavirus outbreak.

Source: Apply for the coronavirus Future Fund.

Coronavirus (COVID-19)—Man pleads guilty to sending COVID-19 scam text messages following DCPCU investigation

UK Finance reported that Mohammed Khan, 20, from Camden has pleaded guilty to one count of fraud by false representation and one count of possession of articles for use in fraud, after being arrested and charged by the Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit funded by the banking industry. The plea relates to the sending out of many fraudulent text messages linked to the coronavirus COVID-19 pandemic, and follows an investigation by the DCPCU officers.

Source: Man pleads guilty to sending COVID-19 scam text messages following DCPCU investigation.

Coronavirus (COVID-19)—Payments industry taskforce helps government and HMRC as payments surge

Pay.UK published an article setting out the efforts of the UK’s retail payments industry to ensure that payments are safely and securely distributed throughout the coronavirus (COVID-19) economic response. An industry taskforce has been established to offer payments advice and services to the government during the pandemic. The Retail Payments Taskforce also worked closely with HMRC to ensure that necessary ‘Payment overlay services’ were incorporated into the system architecture of the Self-Employment Income Support Scheme.

Source: UK retail payments industry acts to ensure COVID-19 support payments are made safely and at scale.

Coronavirus (COVID-19)—UK Finance sets out actions taken to assist with payments in lockdown

UK Finance published a blog setting out the actions that have been taken to help those who are self-isolating during the coronavirus (COVID-19) pandemic and who do not have the skills or means to access digitally. The blog sets out the ways that UK Finance has worked with volunteer organisations and other bodies in co-ordinating the unprecedented volunteer response to COVID-19 to provide advice and guidance on the available payment options.

Source: Payments in lockdown: More than just an app.

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Brexit news

Brexit Bulletin—EU welcomes publication of UK drafts but calls for 'serious engagement' to avoid stalemate

On 20 May 2020, EU chief negotiator, Michel Barnier wrote in response to the recent correspondence from UK chief negotiator, David Frost and the publication of the UK’s draft treaty texts for the future UK-EU relationship. In the letter, Mr Barnier noted that the EU welcomes publication of the UK’s draft legal documents, and shares the UK’s commitment to moving the talks forward. However, he also highlighted concerns over the tone of recent correspondence, warning that ‘mutual respect and constructive engagement’ are essential to progress and the talks should not be hampered by correspondence on substantive points in the negotiations.

Source: Reply from Michel Barnier, Chief Negotiator, to David Frost, UK Chief Negotiator, 20 May 2020.

House of Commons European Scrutiny Committee expresses concern on UK’s approach to equivalence

The House of Commons European Scrutiny Committee published a list of documents to be reported to the House as legally and/or politically important. These include the European Commission’s July 2019 communication setting out its financial services equivalence policy with non-EU countries (COM(2019) 349). The Committee expresses concerns about what progress has been made in the equivalence assessment process since the UK left the EU on 31 January 2020.

Source: 8th report—Documents considered by the Committee on 14 May 2020.

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

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MiFID II

Better Finance publishes response to MiFID II/MiFIR review consultation

Better Finance–the European federation of investors and financial services users–has published its response to the European Commission’s consultation on the review of the MiFID II and MiFIR regulatory framework. In its response, Better Finance says the review of the MiFID II framework is timely and should be co-ordinated with other ongoing actions and policy areas. It also suggests that the Commission should adopt a co-ordinated approach concerning the insurance market, particularly insurance-based investment products.

Source: Better Finance response to the European Commission Public consultation on the review of the MiFID II/MiFIR regulatory framework.

For further information, see: MiFID I, MiFID II and MiFIR—essentials.

ICMA responds to European Commission review consultation on MiFID II/MiFIR

The International Capital Market Association (ICMA) responded to the European Commission’s MiFID II/MiFIR review consultation paper.

Source: ICMA responds to European Commission MiFID II/R review consultation paper.

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UK, EU and international regulators and bodies

ECB announces new programme to encourage gender balance of its staff

The European Central Bank (ECB) announced a new programme to further improve the gender balance of its staff at all levels. The strategy defines target percentages focusing on the annual share of women being appointed to new and open positions as well as targets for the overall share of female staff at various salary levels. The strategy covers the period until 2026, so as to fall within the mandate of ECB president Christine Lagarde.

Source: ECB announces new measures to increase share of female staff members.

LSB publishes 2020/21 business plan and budget

The Lending Standards Board (LSB) published its 2020/21 business plan and budget. The LSB plans, amongst other things, to review the current Contingent Reimbursement Model Code for Authorised Push Payments (the CRM Code).

Source: The LSB’s Business Plan & Budget 2020/21.

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Prudential requirements

Coronavirus (COVID-19)—European Parliament to consider adjustments to CRR in June plenary session

The European Parliament’s procedural file on adjustments in response to the coronavirus (COVID-19) pandemic has been updated to indicate that it will examine the Regulation amending the CRR at its plenary session on 18 June 2020.

Source: 2020/0066(COD) Capital Requirements Regulation: adjustments in response to the COVID-19 pandemic.

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—European Parliament to debate further bank lending

The European Parliament’s Committee on Economic and Monetary Affairs will look into the proposed targeted amendments to the CRR on 18 May 2020. The objective of these amendments to the EU prudential framework for banks is to further facilitate bank lending in order to mitigate the economic effects of the coronavirus (COVID-19) pandemic. The proposals cover various issues including the adaptation of timelines and a more favourable treatment of public guarantees granted during the crisis.

Source: EU banking prudential rules: committee debate COVID-19 adjustments.

EBA consults on contractual recognition of stay powers RTS

The European Banking Authority (EBA) launched a public consultation on draft regulatory technical standards (RTS) for contractual recognition of stay powers under the Bank Recovery and Resolution Directive 2014/59/EU (BRRD). The consultation closes on 15 August 2020.

Sources: Consultation paper: Draft regulatory technical standards on the contractual recognition of stay powers under Article 71a(5) of Directive 2014/59/EU and  EBA consults on technical standards for contractual recognition of stay powers under the BRRD.

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

SRB consults on proposed data set for valuation of banks in resolution

The Single Resolution Board (SRB) launched a consultation on its ‘standardised data set’ proposals, which aim to ensure that a minimum level of data is available to support a robust valuation of banks in resolution. The proposals follow up on the SRB’s 2019 Framework for Valuation and are intended to form the ‘second key building block of the SRB’s approach to valuation’. The consultation closes on 30 June 2020 at 12:00 (Brussels time).

Source: SRB launches public consultation on its ‘standardised data set’ proposals.

EBA report examines connection between recovery and resolution planning under the BRRD

The EBA published a report assessing interlinkages between recovery and resolution planning under the BRRD, with the aim of enhancing synergies between the two phases and ensuring consistency in their potential implementation.

Source: EBA publishes report on interlinkages between recovery and resolution planning.

PRA publishes PS11/20, with feedback on responses to CP21/19 on credit risk

The Prudential Regulation Authority (PRA) published policy statement PS11/20, providing feedback to responses to consultation paper CP21/19, ‘Credit risk: Probability of Default and Loss Given Default estimation’, which consulted on proposals to implement the European Banking Authority’s regulatory products that relate to Probability of Default (PD) estimation and Loss Given Default (LGD) estimation. It also contains in the appendix the PRA’s final policy in an updated supervisory statement SS11/13, ‘Internal Ratings Based (IRB) approaches’.

Sources: Credit risk: Probability of Default and Loss Given Default estimation and  Occasional Consultation Paper—October 2019.

Coronavirus (COVID-19)—AFME queries whether European action taken is enough

The AFME published a blog by its head of prudential regulation, Michael Lever. In the blog, Lever argues that the measure introduced at EU level (eg the targeted changes to the existing CRR and the changes made to ameliorate the capital impacts from IFRS 9) are not going to be sufficient to furnish banks with enough capacity to provide the support to their customers that is going to be needed in the coming downturn and any subsequent recovery.

Source: Is Europe doing too little too late again?

ECB consults on its expectations for banks’ governance of climate-related and environmental risks

The ECB published a guide for consultation that explains how it expects banks to safely and prudently manage climate-related and environmental risks, and how firms should disclose such risks transparently under the current prudential framework. The ECB wants banks to account for these risks given that they drive existing prudential risk categories and can substantially impact the real economy and banks. Feedback is sought by 25 September 2020.

Source: ECB launches public consultation on its guide on climate-related and environmental risks.

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Financial stability 

Coronavirus (COVID-19)—ESRB sets out actions to support the EU financial system

At its extraordinary meeting on 6 May 2020, the General Board of the ESRB discussed a first set of actions in five priority areas identified to address the impact of the coronavirus (COVID-19) emergency on the financial system from a macroprudential perspective. The ESRB continues work in the five priority areas and the next extraordinary meeting of the General Board will take place on 27 May 2020.

Source: The General Board of the European Systemic Risk Board takes first set of actions to address the coronavirus emergency at its extraordinary meeting on 6 May 2020.

Coronavirus (COVID-19)—ESMA statement in support of ESRB recommendation

The ESMA published a statement in support of the ESRB’s recommendation to ESMA, which forms part of a set of actions to address the coronavirus (COVID-19) emergency from a macroprudential perspective. In its statement, ESMA says that it supports the ESRB actions to address COVID-related systemic vulnerabilities. The ESRB recommends in particular that ESMA should co-ordinate a supervisory exercise involving investment funds which have exposures to corporate debt or real estate.

Source: ESMA supports ESRB actions to address COVID-related systemic vulnerabilities.

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Financial crime

Commission urges states to implement Fifth Money Laundering Directive

The European Commission sent letters urging eight Member States and the UK to fully transpose the Fifth Money Laundering Directive 2018/843 (MLD5), the deadline for which was 10 January 2020. As part of the Commission’s six-point plan to improve the EU’s fight against money laundering and terrorist financing, MLD5 must be implemented. If the Commission does not receive a ‘satisfactory response’ from Member States in four months, the Commission may send reasoned opinions. The Commission has also sent a letter of formal notice to Estonia ‘on the grounds that it incorrectly transposed’ the Fourth Money Laundering Directive 2015/849 (MLD4), despite the state’s notification of complete transposition on 14 January 2019.

Source: May infringements package: key decisions.

For further information, see: The anti-money laundering regime and  MLD5—key provisions for financial services firms—one minute guide.

JMLSG consults on pooled client accounts guidance

The Joint Money Laundering Steering Group (JMLSG) launched a consultation on its proposed new guidance on pooled client accounts (PCAs). The consultation closes on 10 June 2020.

Source: The Joint Money Laundering Steering Group (JMLSG) today publishes a proposed new piece on pooled client accounts.

Coronavirus (COVID-19)—Man pleads guilty to sending COVID-19 scam text messages following DCPCU investigation

UK Finance reported that Mohammed Khan, 20, from Camden has pleaded guilty to one count of fraud by false representation and one count of possession of articles for use in fraud, after being arrested and charged by the Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit funded by the banking industry. The plea relates to the sending out of many fraudulent text messages linked to the coronavirus COVID-19 pandemic, and follows an investigation by the DCPCU officers.

Source: Man pleads guilty to sending COVID-19 scam text messages following DCPCU investigation.

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Investigations, enforcement and discipline

BBRS publishes interim findings on SME banking dispute resolution

The Business Banking Resolution Service (BBRS) published Live Pilot: Interim findings, which sets out the interim findings of the BBRS’s study of how a new, more supportive approach to settling disagreements between SMEs and banking service providers could work.

Source: BBRS publishes new study.

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Competition in financial services

CMA publishes Retail Banking Market Investigation Order 2017 update

The Competition and Markets Authority (CMA) published a notice of approval of changes to the agreed timetable and project plan under the Retail Banking Market Investigation Order 2017. The updated timetable and plan are set out on page three of the notice.

Source: Retail Banking Market Investigation Order 2017.

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Markets and trading

Coronavirus (COVID-19)—ESMA Dashboard shows ‘very high’ risks across all areas of its remit

ESMA published the first complete risk dashboard for 2020, highlighting very high risks in all areas of ESMA’s remit. The assessment remains at the same level as the separate risk update published on 2 April 2020.

Source: ESMA sees potential decoupling of financial market performance and underlying economic activity.

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Regulation of benchmarks and IBOR reform

ESMA to hold open hearing on Benchmarks Regulation RTS

ESMA is to hold an open hearing for its consultation paper on draft regulatory technical standards (RTS) under the Benchmarks Regulation (BMR) on 29 May 2020 via conference call (2pm to 4.30pm, Paris time). The consultation seeks the views of interested parties on the proposed draft RTS covering the governance of administrators, methodology of benchmarks, reporting of infringements, mandatory administration of critical benchmarks and the compliance statement. The consultation period will end on 8 June 2020.

Source: ESMA announces open hearing on benchmarks consultation paper.

For further information, see: Benchmarks Regulation—essentials.

Coronavirus (COVID-19)—FCA update on LIBOR reporting and supervisory engagement

The FCA updated its webpage on the impact of the coronavirus (COVID-19) pandemic on the timeline for firms’ LIBOR transition plans.

Source: Further statement from the RFRWG on the impact of coronavirus on the timeline for firms’ LIBOR transition plans.

For further information, see: LIBOR transition.

ISDA to publish cessation fallbacks for derivatives referencing LIBOR in July 2020

The International Swaps and Derivatives Association (ISDA) published a report that summarises the final responses to its consultation on the implementation of pre-cessation fallbacks for derivatives referencing LIBOR.

Source: ISDA publishes report summarizing final results of consultation on pre-cessation fallbacks for LIBOR.

 

Regulation of capital markets

Coronavirus (COVID-19)–ESMA notes non-renewal and early termination of national short selling bans

ESMA published a statement noting that national competent authorities (NCAs) in Austria, Belgium, France, Greece and Spain will not be renewing their emergency restrictions on short selling and similar transactions, and that Italy’s Commission Nazionale per la Società e la Borsa (CONSOB) is terminating its emergency restrictions, which were due to expire on 18 June 2020, early. ESMA co-ordinated the recent emergency restriction renewals and contributed to this aligned action by the NCAs.

Source: ESMA–non-renewal and termination of short selling bans by Austrian FMA, Belgian FSMA, French AMF, Greek HCMC, Italian CONSOB and Spanish CNMV.

For further information, see: An introduction to short selling.

Coronavirus (COVID-19)—ESMA statement on half-yearly financial reports of listed issuers

ESMA issued a public statement addressing the implications of the coronavirus (COVID-19) pandemic on the half-yearly financial reports of listed issuers. ESMA emphasises the role of audit committees in promoting high-quality half-yearly financial reports ‘at this difficult junction in time’.

Source: ESMA calls for transparency on COVID-19 effects in half-yearly financial reports.

Coronavirus (COVID-19)—HMT publishes updates to the COVID Corporate Financing Facility

HMT published details of an update to the terms of the CCFF and, with the BoE, published a Consolidated Market Notice on the CCFF. It describes the operation of the facility and replaces all previous Market Notices on the subject.

Sources: Joint HM Treasury and Bank of England COVID Corporate Financing Facility (CCFF)—Consolidated Market Notice 19 May 2020 and  Update to the COVID Corporate Financing Facility.

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Regulation of derivatives

HM Treasury statement on ECJ ruling on VAT treatment of commodity derivatives

HMT updated its webpage giving information on the European Commission’s infraction proceedings against the UK in respect of the VAT treatment of certain commodity derivatives trading under the Terminal Markets Order (TMO) to include a statement on the ruling issued by the European Court of Justice (ECJ) on 15 May 2020.

Source: Statement on infraction proceedings on VAT treatment of certain commodity derivatives trading.

For further information, see: Commodity derivatives.

ISDA to publish cessation fallbacks for derivatives referencing LIBOR in July 2020

ISDA published a report that summarises the final responses to its consultation on the implementation of pre-cessation fallbacks for derivatives referencing LIBOR.

Source: ISDA publishes report summarizing final results of consultation on pre-cessation fallbacks for LIBOR.

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Investment funds and asset management

Coronavirus (COVID-19)—ESMA statement in support of ESRB recommendation

ESMA published a statement in support of the European Systemic Risk Board (ESRB)’s recommendation to ESMA, which forms part of a set of actions to address the coronavirus (COVID-19) emergency from a macroprudential perspective. In its statement, ESMA says that it supports the ESRB actions to address COVID-related systemic vulnerabilities. The ESRB recommends in particular that ESMA should co-ordinate a supervisory exercise involving investment funds which have exposures to corporate debt or real estate.

Source: ESMA supports ESRB actions to address COVID-related systemic vulnerabilities.

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Banks and mutuals

Coronavirus (COVID-19)—European Parliament to consider adjustments to CRR in June plenary session

The European Parliament’s procedural file on adjustments in response to the coronavirus (COVID-19) pandemic has been updated to indicate that it will examine the Regulation amending the CRR at its plenary session on 18 June 2020.

Source: 2020/0066(COD) Capital Requirements Regulation: adjustments in response to the COVID-19 pandemic.

For further information, see: CRD IV—essentials.

PRA publishes PS11/20, with feedback on responses to CP21/19 on credit risk

The PRA published policy statement PS11/20, providing feedback to responses to consultation paper CP21/19, ‘Credit risk: Probability of Default and Loss Given Default estimation’, which consulted on proposals to implement the European Banking Authority’s regulatory products that relate to Probability of Default (PD) estimation and Loss Given Default (LGD) estimation. It also contains in the appendix the PRA’s final policy in an updated supervisory statement SS11/13, ‘Internal Ratings Based (IRB) approaches’.

Sources: Credit risk: Probability of Default and Loss Given Default estimation and  Occasional Consultation Paper—October 2019.

Coronavirus (COVID-19)—European Parliament to debate further bank lending

The European Parliament’s Committee on Economic and Monetary Affairs will look into the proposed targeted amendments to the CRR on 18 May 2020. The objective of these amendments to the EU prudential framework for banks is to further facilitate bank lending in order to mitigate the economic effects of the coronavirus (COVID-19) pandemic. The proposals cover various issues including the adaptation of timelines and a more favourable treatment of public guarantees granted during the crisis.

Source: EU banking prudential rules: committee debate COVID-19 adjustments.

SRB consults on proposed data set for valuation of banks in resolution

The SRB launched a consultation on its ‘standardised data set’ proposals, which aim to ensure that a minimum level of data is available to support a robust valuation of banks in resolution. The proposals follow up on the SRB’s 2019 Framework for Valuation and are intended to form the ‘second key building block of the SRB’s approach to valuation’. The consultation closes on 30 June 2020 at 12:00 (Brussels time).

Source: SRB launches public consultation on its ‘standardised data set’ proposals.

BBRS publishes interim findings on SME banking dispute resolution

The BBRS published Live Pilot: Interim findings, which sets out the interim findings of the BBRS’s study of how a new, more supportive approach to settling disagreements between SMEs and banking service providers could work.

Source: BBRS publishes new study.

CMA publishes Retail Banking Market Investigation Order 2017 update

The Competition and Markets Authority (CMA) published a notice of approval of changes to the agreed timetable and project plan under the Retail Banking Market Investigation Order 2017. The updated timetable and plan are set out on page three of the notice.

Source: Retail Banking Market Investigation Order 2017.

HM Treasury publishes signatories to the Investing in Women Code

HMT published the list of signatories to the Investing in Women Code, which is a commitment by financial services firms to improve female entrepreneurs’ access to tools, resources and finance. In addition to the 13 founder firms, there are now 19 signatories to the Code.

Source: Investing in Women Code—Updated with list of signatories.

EBA consults on contractual recognition of stay powers RTS

The EBA launched a public consultation on draft RTS for contractual recognition of stay powers under the BRRD. The consultation closes on 15 August 2020.

Sources: Consultation paper: Draft regulatory technical standards on the contractual recognition of stay powers under Article 71a(5) of Directive 2014/59/EU and  EBA consults on technical standards for contractual recognition of stay powers under the BRRD.

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

EBA report examines connection between recovery and resolution planning under the BRRD

The EBA published a report assessing interlinkages between recovery and resolution planning under the BRRD, with the aim of enhancing synergies between the two phases and ensuring consistency in their potential implementation.

Source: EBA publishes report on interlinkages between recovery and resolution planning.

ECB consults on its expectations for banks’ governance of climate-related and environmental risks

The ECB published a guide for consultation that explains how it expects banks to safely and prudently manage climate-related and environmental risks, and how firms should disclose such risks transparently under the current prudential framework. The ECB wants banks to account for these risks given that they drive existing prudential risk categories and can substantially impact the real economy and banks. Feedback is sought by 25 September 2020.

Source: ECB launches public consultation on its guide on climate-related and environmental risks.

Coronavirus (COVID-19)—AFME queries whether European action taken is enough

AFME published a blog by its head of prudential regulation, Michael Lever. In the blog, Lever argues that the measure introduced at EU level (eg the targeted changes to the existing Capital Requirements Regulation (Regulation (EU) 648/2012) (CRR) and the changes made to ameliorate the capital impacts from IFRS 9) are not going to be sufficient to furnish banks with enough capacity to provide the support to their customers that is going to be needed in the coming downturn and any subsequent recovery.

Source: Is Europe doing too little too late again?

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Regulation of insurance

Coronavirus (COVID-19)—FCA introduces measures for insurance and premium finance customers in temporary financial difficulty

Following a short consultation, the FCA published guidance setting out its expectations for insurance and premium finance firms dealing with customers in temporary financial difficulty due to coronavirus (COVID-19). The FCA also published a feedback statement (FS20/5) on its consultation on the guidance, in addition to the COVID-19 Premium Finance Instrument 2020 (FCA 2020/20) which implements consequential changes to the FCA Handbook. The guidance come into force on 18 May 2020. It will be reviewed in the next three months and revised if appropriate.

Sources: FCA confirms measures to help insurance customers who may be suffering financial difficulties as a result of coronavirusFeedback statement FS20/5Coronavirus and customers in temporary financial difficulty: guidance for insurance and premium finance firms and  COVID-19 Premium Finance Instrument 2020.

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

Coronavirus (COVID-19)–EIOPA’s latest Risk Dashboard shows increased risk exposures for insurance sector

EIOPA published its updated Risk Dashboard, which sets out the authority’s quarterly risk assessment of the EU insurance industry based on Q4 2019 Solvency II data. The results show that the EU insurance sector’s risk exposures increased as the coronavirus (COVID-19) outbreak strongly affected the lives of all European citizens with disruptions in all financial sectors and economic activities.

Source: European insurers face increased risk exposures due to COVID-19, but market perceptions and imbalances remained at medium level.

For further information, see: Solvency II—essentials.

Coronavirus (COVID-19)—EIOPA moves to two-weekly production of RFR/EDA information

Due to the coronavirus (COVID-19) outbreak, EIOPA changed the frequency of current extraordinary processes for risk-free interest rate term structures (RFR) and symmetric adjustment to equity risk (EDA) productions from a weekly basis to every two weeks. The new two-weekly frequency will apply from the week starting on 25 May. A calendar for the next extraordinary RFR/EDA processes will be also published on the dedicated area of the EIOPA website.

Source: Change of extraordinary RFR/EDA productions from weekly to bi-weekly frequency.

Coronavirus (COVID-19)—FCA sets out further details of its business interruption insurance test case

The FCA published a webpage setting out how it is interacting with firms as regards its High Court test case on business interruption (BI) insurance during the coronavirus (COVID-19) pandemic. In response to continuing and widespread concern about the lack of a positive response of some BI insurance policies, and the basis on which some insurers are making decisions in relation to claims, the FCA announced on 1 May 2020 that it intended to obtain court declarations aimed at resolving contractual uncertainty in selected BI insurance policies.

Source: Business interruption insurance during the coronavirus pandemic—High Court test case.

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Payment services and systems

EBF publishes CBPR2 guidance

The European Banking Federation (EBF) has published guidance on the revised Cross-Border Payments Regulation (EU) 2019/518 (CBPR2). It is intended to help EBF members in their implementation of CBPR2, primarily the new transparency requirements for currency conversions for card-based payments and credit transfers.

Source: Cross-Border Payments Regulation—Implementation guidance.

For further information, see: SEPA Regulation and cross-border payments—essentials.

Coronavirus (COVID-19)—PSR board meeting addresses COVID-19 and CoP

The PSR published the minutes of its board meeting held on 18 March 2020. Among other issues, progress on Confirmation of Payee (CoP) and the estimated impact of the COVID-19 virus on payment systems were discussed.

Source: PSR Board minutes—March 2020.

PSR’s head of policy discusses innovation, inclusion and security in UK payments

The PSR published a speech given by its head of policy, Genevieve Marjoribanks, on next steps for digital payments in the UK: innovation, inclusion, security and regulation on 19 May 2020, in which she discussed the PSR’s work to protect access to cash in isolated communities, to prevent authorised push payment fraud, and to support the smooth functioning of the UK economy during the coronavirus (COVID-19) pandemic.

Source: Genevieve Marjoribanks Westminster Business eForum speech—19 May 2020.

Coronavirus (COVID-19)—Payments industry taskforce helps government and HMRC as payments surge

Pay.UK published an article setting out the efforts of the UK’s retail payments industry to ensure that payments are safely and securely distributed throughout the coronavirus (COVID-19) economic response. An industry taskforce has been established to offer payments advice and services to the government during the pandemic. The Retail Payments Taskforce also worked closely with HMRC to ensure that necessary ‘Payment overlay services’ were incorporated into the system architecture of the Self-Employment Income Support Scheme.

Source: UK retail payments industry acts to ensure COVID-19 support payments are made safely and at scale.

Coronavirus (COVID-19)—UK Finance sets out actions taken to assist with payments in lockdown

UK Finance published a blog setting out the actions that have been taken to help those who are self-isolating during the coronavirus (COVID-19) pandemic and who do not have the skills or means to access digitally. The blog sets out the ways that UK Finance has worked with volunteer organisations and other bodies in co-ordinating the unprecedented volunteer response to COVID-19 to provide advice and guidance on the available payment options.

Source: Payments in lockdown: More than just an app.

LSB publishes 2020/21 business plan and budget

The LSB published its 2020/21 business plan and budget. The LSB plans, amongst other things, to review the current Contingent Reimbursement Model Code for Authorised Push Payments (the CRM Code).

Source: The LSB’s Business Plan & Budget 2020/21.

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Fintech and cryptoassets

Coronavirus (COVID-19)—FCA Innovation Hub seeks firms who may have tools to help support consumers and small businesses

The Financial Conduct Authority (FCA) updated its webpage on how to request Innovation Hub support, encouraging proposals from firms—both start-ups and established companies—that may have creative and innovative solutions to the challenges posed by the coronavirus (COVID-19) pandemic.

Source: Request Innovation Hub support.

Financial Services Skills Commission says FS firms need to speed up digitisation of the workforce

TheCityUK highlighted the work of the newly established Financial Services Skills Commission on how the global coronavirus (COVID-19) pandemic has rapidly accelerated the digitisation of the workforce, making it more urgent than ever for financial services firms to address their digital skills gaps. The Commission aims to ensure the broadest possible talent and skills pipeline for the UK financial services sector. It suggests that the sector’s move to remote working, assisting customers to access services digitally and the migration of systems into the cloud has thrown up new reskilling and upskilling challenges and new ways of working.

Source: COVID-19 accelerating skills challenges faced by financial sector.

Loan Market Association announces findings from its latest fintech survey

The Loan Market Association (LMA) published the results of its recent survey of how its members are using or planning to adopt new financial/legal technology. For approximately two thirds of loan market participants who took part, the use of fintech in the syndicated loan product sector is seen as an opportunity rather than a threat, but the survey highlighted a knowledge gap with over 75% of respondents saying they did not know as much as they needed to about fintech in the context of their businesses.

Source: LMA releases results of its fintech survey.

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Sustainable finance

Draft European Parliament document recommends adopting Taxonomy Regulation without amendment

The European Parliament has published a draft recommendation for a second reading of the proposed regulation on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (the Taxonomy Regulation). The draft recommendation confirms that the Council of the EU’s position at first reading (published in April 2020) reflects the political agreement reached by the European institutions and recommends that the Parliament should adopt that position without amendment at plenary.

Source: Draft Recommendation for Second Reading on the Council position at first reading with a view to the adoption of a regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088.

ECB consults on its expectations for banks’ governance of climate-related and environmental risks

The ECB published a guide for consultation that explains how it expects banks to safely and prudently manage climate-related and environmental risks, and how firms should disclose such risks transparently under the current prudential framework. The ECB wants banks to account for these risks given that they drive existing prudential risk categories and can substantially impact the real economy and banks. Feedback is sought by 25 September 2020.

Source: ECB launches public consultation on its guide on climate-related and environmental risks.

EIB publishes updated Circular Economy Guide

The European Investment Bank (EIB) published an updated version of its Circular Economy Guide, which aligns with the European Commission’s recently adopted Circular Economy Action Plan, one of the main pillars of the European Green Deal. It also integrates the findings of report, Categorisation system for the circular economy, drafted by the European Commission’s Expert Group on Circular Economy Finance.

Source: EIB publishes new Circular Economy Guide.

ISLA publishes second position paper on sustainable securities lending

The International Securities Lending Association (ISLA)’s Council for Sustainable Finance published ‘Reinforcing global sustainable finance by improving guidance on securities lending’, its second position paper on sustainable securities lending.

Source: ICSF publishes second position paper.

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Dates for your diary

 

DateSubjectEvent

24 May 2020

 

Islamic finance

 

Deadline for responses to IFSB consultation on a new exposure draft (ED-24) setting out principles for investor protection in Islamic capital markets.

 

25 May 2020

 

Regulation of benchmarks and IBOR reform

 

Deadline for responses to IASB consultation on further proposed ‘phase II’ amendments to the International Financial Reporting Standards (IFRS) as a result of the interest rate benchmark reform.

 

25 May 2020

 

Islamic finance

 

Deadline for responses to IFSB consultation on a new exposure draft (ED-25) of a standard on disclosures to promote transparency and market discipline for takāful/retakāful (Islamic insurance and reinsurance) undertakings.

 

27 May 2020

 

Regulation of benchmarks and IBOR reform

 

LexisNexis® Webinars will hold a webinar on LIBOR transactions .
LexisNexis® Webinars are available on subscription or for individual purchase. For further information regarding this webinar and how to subscribe visit lexiswebinars.co.uk

 

 

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About the author:
Prior to joining LexisNexis in 2016 as a paralegal, Lauren was an adjudicator at the Financial Ombudsman Service. There she resolved consumers’ complaints, and gained knowledge about a wide variety of financial products. Before this she studied Law at Nottingham Trent University.