FS weekly highlights—21 November 2019

FS weekly highlights—21 November 2019

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Conduct requirements
Competition in financial services
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
Information and cyber security for financial services firms
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer protection and claims management regulation
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Islamic finance
Dates for your diary

 

Brexit news

 

Dombrovskis proposes renewal of UK CCP temporary equivalence beyond 30 March 2020

The European Commission published a speech by its vice-president, Valdis Dombrovskis, centred on the Commission’s priorities for sustainability and green finance. But Dombrovskis also used the speech to propose the renewal of the central clearing time-limited equivalence decision beyond 30 March 2020, in order to ‘prepare for any eventuality’.

FCA publishes its response to independent panels' annual reports for 2018/19

Further to the requirement that the Financial Conduct Authority (FCA) consult on the impact of its work, the FCA published its response to the annual reports of four independent statutory panels. The panels represent the interests of consumers, regulated firms and markets, and advise and challenge the FCA on its policies and practices. The panels’ annual reports detail the panels' activities for the year and comment on the FCA's work. The FCA responds to common issues raised by the panels’ reports, including: Brexit; operational and cyber resilience; cryptoassets; the FCA’s Mortgages Market Study; proposals for a duty of care; and fair pricing. The FCA’s response also considers specific issues raised by individual panels. 

 

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UK, EU and international regulators and bodies

 

FCA publishes its response to independent panels' annual reports for 2018/19

Further to the requirement that the FCA consult on the impact of its work, the FCA published its response to the annual reports of four independent statutory panels. The panels represent the interests of consumers, regulated firms and markets, and advise and challenge the FCA on its policies and practices. The panels’ annual reports detail the panels' activities for the year and comment on the FCA's work. The FCA responds to common issues raised by the panels’ reports, including: Brexit; operational and cyber resilience; cryptoassets; the FCA’s Mortgages Market Study; proposals for a duty of care; and fair pricing. The FCA’s response also considers specific issues raised by individual panels. 

ESMA publishes letters on IASB exposure drafts

The European Securities and Markets Authority (ESMA) published letters to the International Accounting Standards Board (IASB) and the European Financial Reporting Advisory Group (EFRAG) on exposure drafts published by IASB on disclosure of accounting policies and deferred tax relating to assets and liabilities arising from a single transaction. The letters published were:

 

 

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Authorisation, approval and supervision

 

FCA guide to submitting CASS audit reports via Connect platform

The FCA published a document explaining how to submit client asset reports, following the introduction of a new process by the FCA. The document outlines the registration process and provides a step-by-step user guide for audit firms, which should now submit annual reports via the FCA’s Connect platform. There are no changes to the rules in the FCA handbook or to the deadline for submitting reports. 

FCA Q&As outline expectations to minimise conduct risk arising from LIBOR transition

The FCA published key questions and answers for firms on conduct risk arising from the London Inter-bank Offered Rate (LIBOR) transition. The Q&As outline in detail the FCA’s core expectations of firms during the transition away from LIBOR. They set out what firms should do in relation to issues including: governance and accountability; treating customers fairly when replacing LIBOR; offering new products with risk-free rates (RFRs) or alternative rates; communicating with customers about LIBOR and alternative rates/products; and acting in the best interests of clients when making investment decisions in relation to LIBOR and RFR-linked products.

Council of the EU publishes information note on the amending regulation on the proposed reforms to the European system of financial supervision

The Council of the EU published an information note from the General Secretariat of the Council to the Permanent Representatives Committee/Council on the draft regulation on the reforms of the European system of financial supervision (ESFS). It contains the text of the amended proposed regulation amending the regulations establishing the European Supervisory Authorities (ESAs), along with regulations on European venture capital funds, social entrepreneurship funds and long-term investment funds, MiFIR, the Benchmarks Regulation, the Prospectus Regulation and MLD4. 

ESMA withdraws DG International Ratings SRL's CRA registration

ESMA announced that it withdrew the credit rating agency (CRA) registration of DG International Ratings SRL (previously Dagong Europe Credit Rating Srl) (DG International). 

 

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Prudential requirements

 

BCBS consults on Pillar 3 disclosure documents

The Basel Committee on Banking Supervision (BCBS) is consulting on two consultative documents related to Pillar 3 disclosure. The first proposes a set of revised disclosure requirements related to the market risk framework finalised in January 2019. The second concerns voluntary disclosure templates related to banks' sovereign exposures. Feedback is sought by 14 February 2020. 

EBA consults on draft amended ITS and RTS on passport notification under CRD IV

The European Banking Authority (EBA) published a consultation paper which deals with the review of two sets of technical standards on passport notification, developed by the EBA in accordance with the mandate set out in Articles 35, 36 and 39 of the Capital Requirements Directive (Directive 2013/36/EU) (CRD IV) as subsequently amended, and enacted by the European Commission under Commission Delegated Regulation (EU) No 1151/2014 and Commission Implementing Regulation (EU) No 926/2014. 

ECJ rules on merged bank’s liability to make ex ante and ex post contributions under BRRD

In State Street Bank International GmbH v Banca d’Italia (Case C‑255/18), the European Court of Justice (ECJ) ruled that a bank which ceased to be under the supervision of a national resolution authority following a cross-border merger through acquisition by its parent company was obliged to pay in full the ordinary ex ante contributions to resolution financing arrangements due for the contribution year in which the merger took place, but not obliged to pay extraordinary ex post contributions raised by the national resolution authority after the date of the merger.

 

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Financial stability, recovery and resolution 

 

Financial Stability Review shows the euro area financial stability environment remains challenging

The European Central Bank (ECB) published its latest Financial Stability Review (FSR), which is issued twice a year. It provides an overview of potential risks to financial stability in the euro area and aims to promote awareness in the financial industry and among the public of euro area financial stability issues.

FSB publishes 2019 Resolution Report

The Financial Stability Board (FSB) published its 2019 Resolution Report. The report provides an update on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions, and sets out plans for further work. The report concludes that authorities and firms need to be mindful of any remaining gaps as they work towards making resolution strategies and plans operational in all sectors.

Council information note on proposed regulation amending the regulation on macro-prudential oversight of the financial system and the European Systemic Risk Board

The Council of the EU published an information note from the General Secretariat of the Council to the Permanent Representatives Committee/Council on the proposal for a regulation amending Regulation (EU) No 1092/2010 on EU macro-prudential oversight of the financial system and establishing a European Systemic Risk Board. The information note states that after finalisation of the adopted text by the legal linguists, on 14 November 2019, the European Parliament approved a corrigendum to the position adopted at first reading.

ECB publishes working paper on interconnected banks and systemically important exposures

The ECB Eurosystem published a working paper (No 2331/November 2019) entitled: ‘Interconnected banks and systemically important exposures’. Supervisory data collected by the ECB covering 26 large banks in the euro area were used for this review. Findings include that an internationally diversified network of exposures is more resilient than a more domestic one for small shocks, but less resilient for big shocks.

ECB’s Pentti Hakkarainen on the financial stability case for EDIS

The ECB published a speech by a member of its supervisory board, Pentti Hakkarainen, on the regulatory framework for the European banking sector. Hakkarainen said that while some industry voices are calling for elements of the post-crisis banking reforms to be rolled back, the ECB ‘remains of the view that capital reforms have not gone too far, and that what is needed is a full and faithful implementation of the final elements of Basel III’. He called for further action on capital markets union (CMU), with a priority focus on the European deposit insurance scheme (EDIS), which he said would act as a confidence mechanism that would reduce the likelihood of bank runs. 

FSB RCG for the Middle East and North Africa discuss cyber, stablecoin and LIBOR

The FSB regional consultative group (RCG) for the Middle East and North Africa (MENA) met on 17 November 2019 in Riyadh at a meeting hosted by the Saudi Arabian Monetary Authority. Among the topics discussed were cyber incident response and recovery, the end of LIBOR, and stablecoin. 

 

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Risk management and controls

 

FCA publishes research note on gender diversity in UK financial services

The FCA published a research note on gender diversity in UK financial services. The note states that while the general lack of diversity in UK financial services firms is well known, how visible women are across different levels of seniority is not. Existing research on female representation is also often restricted to key market leaders and consistent measurement was challenging.

FSI publishes paper on red team cyber resilience testing

The Financial Stability Institute (FSI) published ‘Varying shades of red: how red team testing frameworks can enhance the cyber resilience of financial institutions’, which aims to facilitate deeper understanding by financial sector authorities of different existing approaches that authorities have pursued in establishing red team testing frameworks. A red team test is a simulated cyber attack in which attackers (the red team) and defenders (the blue team) test assumptions about an organisation’s cyber security. 

TSB publishes independent review of 2018 IT migration

The board of TSB published an independent review of the bank’s 2018 migration to a new IT platform, which it commissioned on 30 April 2018 from the law firm Slaughter and May. 

 

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Financial crime

 

Pay.UK says no industry consensus on central fund for victims of APP fraud

Pay.UK announced its conclusions and recommendations following a call for information in connection with a change request from seven Faster Payments Service (FPS) Direct Participants. The request, proposed via UK Finance, was for a change to the FPS Rules for the payment of a fee by FPS participants to finance a central fund to be used to reimburse victims of authorised push payment (APP) fraud in a ‘no-blame’ situation (where neither the customer nor their payment service provider is at fault).

Yves Mersch on the need for cross-sectoral co-ordination on AML/CTF

The vice-chair of the supervisory board of the ECB, Yves Mersch, delivered a speech on anti-money laundering and combating the financing of terrorism (AML/CTF) from the ECB’s perspective, taking in its recent initiatives and role. Mersch, also a member of the ECB’s executive board, discussed the objectives of AML/CTF, and how the European framework might develop in the future. 

Countries must become more effective implementing Financial Action Task Force standards

The executive secretary of the Financial Action Task Force (FATF), David Lewis, delivered a speech at the Royal United Services Institute, outlining the context for the forthcoming FATF strategic review. Lewis stated that FATF identified some positive results among its member states, but that most countries are failing in terms of effectiveness and many are also failing when it comes to technical compliance. Lewis also stated that the current challenge is the implementation of the FATF standards, not the standards themselves, and that the strategic review will focus on how FATF’s evaluation of countries can better promote and enable more effective AML measures and measures to CFT.

 

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Conduct requirements

 

FCA Q&As outline expectations to minimise conduct risk arising from LIBOR transition

The FCA published key questions and answers for firms on conduct risk arising from LIBOR transition. The Q&As outline in detail the FCA’s core expectations of firms during the transition away from LIBOR. They set out what firms should do in relation to issues including: governance and accountability; treating customers fairly when replacing LIBOR; offering new products with RFRs or alternative rates; communicating with customers about LIBOR and alternative rates/products; and acting in the best interests of clients when making investment decisions in relation to LIBOR and RFR-linked products.

 

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Competition in financial services

 

CMA updates timetable for investigation into suspected anti-competitive FS arrangements

The Competition and Markets Authority (CMA) updated the timetable for its investigation into suspected anti-competitive arrangements in the financial services sector which may infringe Chapter I of the Competition Act 1998 and/or Article 101 of the Treaty on the Functioning of the European Union (TFEU). The period for the initial investigation continuing, including review and analysis of information gathered, will run until April 2020. 

 

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Enforcement and redress

 

FSCS asks Alpha Insurance A/S policyholders to submit their premium refund claim

The Financial Services Compensation Scheme (FSCS) is asking thousands of Alpha Insurance A/S (Alpha) latent defect policyholders to submit their premium refund claim to the Alpha claims portal on the Danish insurer’s website. So far, the FSCS issued premium refund payments to around 14,000 Alpha latent defect policyholders. The FSCS is now asking that the remaining policyholders register their claim on the Alpha claims portal so they can be compensated.

FCA and PRA publish decision notices given to former CEO who paid excessive remuneration to his wife to reduce his tax liability

The FCA and the PRA published decision notices in which the regulators have decided to ban and fine Stuart Malcolm Forsyth, the former CEO of a small mutual insurer, £78,318 and £76,180 respectively. The regulators’ respective decision-making committees found, following a joint investigation, that between February 2010 and July 2016 Mr Forsyth transferred excessive amounts of his own remuneration to his wife to reduce his own tax liability and took steps to conceal that arrangement. 

FCA fines Henderson Investment Funds Limited £1.9m for failing to treat customers fairly

The FCA fined Henderson Investment Funds Limited (HIFL) £1,867,900 for failing to treat fairly more than 4,500 retail investors in two of its funds, the Henderson Japan Enhanced Equity Fund and the Henderson North American Enhanced Equity Fund (the Japan and North American Funds). This was in contravention of Principle 6 of the FCA’s Principles for Business. HIFL agreed to resolve the matter and qualified for a 30% (stage 1) discount under the FCA’s executive settlement procedures. Were it not for this discount, the FCA would have imposed a financial penalty of £2,668,547.

ESMA withdraws DG International Ratings SRL's CRA registration

ESMA announced that it withdrew the CRA registration of DG International Ratings SRL (previously Dagong Europe Credit Rating Srl) (DG International). 

Permission to appeal granted in N v Royal Bank of Scotland

The Court of Appeal granted N permission to appeal the decision in N v Royal Bank of Scotland from the order of Robin Knowles J in the High Court of Justice, Queens Bench Division Commercial Court dated 8 July 2019. The case is to be heard by 29 October 2020. 

Call for information stage in Connaught independent review closes

The call for information stage of the independent review into the approach by the Financial Services Authority (FSA)/FCA to the Connaught Income Fund Series 1, is now closed. The announcement follows a call for information from individuals affected by the Fund to ensure that a range of stakeholders were able to formally contribute their views to assist Raj Parker in assessing the FSA/FCA’s actions and identifying any lessons which should be learned.

Profi Credit Polska S.A. v W; Profi Credit Polska S.A. v OH

European Union – Consumer protection. Articles 1(1), 3(1), 6(1) and 7(1) of Council Directive (EEC) 93/13 had to be interpreted as not precluding national legislation which made it possible to stipulate in a consumer credit agreement an obligation on the borrower to issue a blank promissory note, and which made the lawfulness of the issuance of such a note subject to the prior conclusion of a promissory note agreement determining the detailed rules in accordance with which that note could be completed, provided that that stipulation and that agreement complied with arts 3 and 5 of that directive and art 10 of Directive (EC) 2008/48, a matter which was for the referring court to verify. The Court of Justice of the European Union so held in proceedings concerning demands for the settlement of debts arising under blank promissory notes issued by the latter parties in respect of sums owed under loan agreements.

 

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Markets and trading

 

UK Finance publishes members’ guide on LIBOR transition

UK Finance published a guide for its members which is intended for business customers who hold LIBOR-linked financial products, including loans, to help them understand more about the discontinuation and what they should expect to hear from their bank or lender in the coming months.

ECSDA updates Settlement Fail Penalties Framework

The European Central Securities Depositories Association (ECSDA) updated the ECSDA Central Securities Depositories Regulation Settlement Fail Penalties Framework. It can be used by CSDs and their participants as a market practice guide on how CSDs should develop harmonised penalties mechanisms. The document was signed off by the ECSDA board.

FSB encourages ISDA to add pre-cessation triggers

The FSB published a letter to the International Swaps and Derivatives Association (ISDA), in which the co-chairs of the FSB’s Official Sector Steering Group (OSSG) of regulators and central banks encourage ISDA to add a ‘pre-cessation’ trigger alongside the cessation trigger as standard language in the definitions for new derivatives and in a single protocol, without embedded optionality, for outstanding derivative contracts referencing key interbank offered rates (IBORs). The FSB states this would help to reduce systemic risk and market fragmentation by ensuring that as much of the swaps market as possible falls back to alternative rates in a co-ordinated fashion. 

International Swaps and Derivatives Association to make benchmark fallback adjustments

The Brattle Group published its report on behalf of ISDA summarising consultation responses on the final parameters for the spread and term adjustments in derivatives fallbacks for IBORs. The report covers technical issues on specific methodologies for two preferences—the compound setting in arrears rate to address differences in tenor between IBORs and overnight RTFs and the historical mean/median approach to deal with differences in credit risks. Following the results of the consultation, ISDA will adjust the 2016 ISDA definitions and publish a protocol enabling participants to include fallbacks within legacy IBOR contracts. Implementation is expected in 2020. 

 

 

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MiFID II

 

Council of the EU publishes corrigendum on Directive amending MiFID II and Solvency II

The General Secretariat of the Council issued an information note to the Permanent Representatives Committee of the Council (COREPER) on the outcome of the European Parliament's first reading and corrigendum procedure concerning a proposal for a Directive amending Directive 2014/65/EU on markets in financial instruments (MiFID II) and Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II).

SMSG publishes advice to ESMA on call for evidence on effects of CFD and binary option product intervention measures

The Securities and Markets Stakeholder Group (SMSG) published its advice to the ESMA on ESMA’s 30 September 2019 call for evidence on the effects of product intervention measures regarding CFDs and binary options on market participants and clients. The SMSG fully supports the call for evidence, but requests more information on a number of important statements in the call, advises ESMA to resolve a number of interpretation issues, and takes position on a number of issues which should be taken into account in the MiFID/MiFIR and PRIIPs Regulation reviews.

ESMA chair weighs up MiFID II implementation and ongoing work

The chair of the ESMA, Steven Maijoor, delivered the keynote address at the Governance Risk Management and Compliance Day of Euro Finance Week in Frankfurt. Maijoor looked back at the implementation of MiFID II, and highlighted forthcoming MiFID II-related work, such as ESMA’s contribution to the Commission's report on the disclosure of fees, commissions and non-monetary benefits (inducements), as well as the report on the mechanism for banning certain products (product intervention), PRIIPS, and the consolidated tape for equity instruments.

 

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Regulation of capital markets and Capital Markets Union

 

ESMA issues updated Q&As on Securitisation Regulation

ESMA updated it Q&As on the Securitisation Regulation. The update includes new questions on securitisation repositories, STS notification and disclosure requirements, and templates. In addition, ESMA added a summary table giving an easy overview of the list of Q&As and adjusted the order of some Q&As compared to the previous version, with a view to grouping Q&As treating similar topics.

Commission announces composition of high-level forum on future of CMU

The European Commission announced the composition of a high-level forum on the future of the CMU. The group of experts will provide insight and support the Commission's goal to develop further a CMU encompassing all Member States. Among other issues, the forum will focus on the creation of an ecosystem to enable greater capital raising. It will submit a set of policy recommendations by the end of May 2020. 

 

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Information and cyber security for financial services firms

 

FSB RCG for the Middle East and North Africa discuss cyber, stablecoin and LIBOR

The FSB RCG for the MENA met on 17 November 2019 in Riyadh at a meeting hosted by the Saudi Arabian Monetary Authority. Among the topics discussed were cyber incident response and recovery, the end of LIBOR, and stablecoin.

 

Back to top of page

 

Regulation of derivatives

 

Dombrovskis proposes renewal of UK CCP temporary equivalence beyond 30 March 2020

The European Commission published a speech by its vice-president, Valdis Dombrovskis, centred on the Commission’s priorities for sustainability and green finance. But Dombrovskis also used the speech to propose the renewal of the central clearing time-limited equivalence decision beyond 30 March 2020, in order to ‘prepare for any eventuality’.

International Swaps and Derivatives Association to make benchmark fallback adjustments

The Brattle Group published its report on behalf of ISDA summarising consultation responses on the final parameters for the spread and term adjustments in derivatives fallbacks for IBORs. The report covers technical issues on specific methodologies for two preferences—the compound setting in arrears rate to address differences in tenor between IBORs and overnight RTFs and the historical mean/median approach to deal with differences in credit risks. Following the results of the consultation, ISDA will adjust the 2016 ISDA definitions and publish a protocol enabling participants to include fallbacks within legacy IBOR contracts. Implementation is expected in 2020.

SMSG publishes advice to ESMA on call for evidence on effects of CFD and binary option product intervention measures

The SMSG published its advice to the ESMA on ESMA’s 30 September 2019 call for evidence on the effects of product intervention measures regarding CFDs and binary options on market participants and clients. The SMSG fully supports the call for evidence, but requests more information on a number of important statements in the call, advises ESMA to resolve a number of interpretation issues, and takes position on a number of issues which should be taken into account in the MiFID/MiFIR and PRIIPs Regulation reviews. 

 

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Investment funds and asset management

 

Audit report on centralised EU interventions for venture capital funds published in the Official Journal

The European Court of Auditors (ECA)’s Special Report No 17/2019 entitled ‘Centrally managed EU interventions for venture capital: in need of more direction’ was published in the OJ. The audit covered six centrally managed EU interventions that were set up in 1998 (currently managed by the European Investment Fund (EIF) on behalf of the Commission). It also considered the proposals for a successor instrument under the next multiannual financial framework (2021–2027).

AIMA launches survey of hedge funds’ ESG investing

The Alternative Investment Management Association (AIMA) is conducting a survey to gain insights into how hedge funds are responding to the rise of environmental, social and governance (ESG) investing, and to help define best practices in this emerging field. The results will be published in a global research report that will be made available to all participants in February 2020. 

FCA fines Henderson Investment Funds Limited £1.9m for failing to treat customers fairly

The FCA fined HIFL £1,867,900 for failing to treat fairly more than 4,500 retail investors in two of its funds, the Henderson Japan Enhanced Equity Fund and the Henderson North American Enhanced Equity Fund (the Japan and North American Funds). This was in contravention of Principle 6 of the FCA’s Principles for Business. HIFL agreed to resolve the matter and qualified for a 30% (stage 1) discount under the FCA’s executive settlement procedures. Were it not for this discount, the FCA would have imposed a financial penalty of £2,668,547.

Call for information stage in Connaught independent review closes

The call for information stage of the independent review into the approach by the FSA/FCA to the Connaught Income Fund Series 1, is now closed. The announcement follows a call for information from individuals affected by the Fund to ensure that a range of stakeholders were able to formally contribute their views to assist Raj Parker in assessing the FSA/FCA’s actions and identifying any lessons which should be learned.

 

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Banks and mutuals

 

BCBS consults on Pillar 3 disclosure documents

The BCBS is consulting on two consultative documents related to Pillar 3 disclosure. The first proposes a set of revised disclosure requirements related to the market risk framework finalised in January 2019. The second concerns voluntary disclosure templates related to banks' sovereign exposures. Feedback is sought by 14 February 2020.

BCBS report on open banking and APIs identifies challenges for banks and supervisors

The BCBS published a report on open banking and application programming interfaces (APIs). The report monitors the evolving trend of open banking observed in Basel Committee member jurisdictions and the use of APIs, and discusses the implications of these developments on banks and banking supervision. It builds upon the findings of the BIS Sound Practices paper on ‘Implications of fintech developments for banks and bank supervisors’, published in February 2018.

ECB publishes working paper on interconnected banks and systemically important exposures

The ECB Eurosystem published a working paper (No 2331/November 2019) entitled: ‘Interconnected banks and systemically important exposures’. Supervisory data collected by the ECB covering 26 large banks in the euro area were used for this review. Findings include that an internationally diversified network of exposures is more resilient than a more domestic one for small shocks, but less resilient for big shocks. 

 

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Consumer protection and claims management regulation

 

FCA’s director of competition on the regulation of Open Finance

The FCA published a speech by its director of competition, Sheldon Mills, delivered at the Investments and Savings Alliance (TISA) Open Finance conference in London. Mills discussed the FCA’s interest in Open Finance and its work ensuring that it ‘unlocks consumer benefits’ while balancing the potential risks. 

Profi Credit Polska S.A. v W; Profi Credit Polska S.A. v OH

European Union – Consumer protection. Articles 1(1), 3(1), 6(1) and 7(1) of Council Directive (EEC) 93/13 had to be interpreted as not precluding national legislation which made it possible to stipulate in a consumer credit agreement an obligation on the borrower to issue a blank promissory note, and which made the lawfulness of the issuance of such a note subject to the prior conclusion of a promissory note agreement determining the detailed rules in accordance with which that note could be completed, provided that that stipulation and that agreement complied with arts 3 and 5 of that directive and art 10 of Directive (EC) 2008/48, a matter which was for the referring court to verify. The Court of Justice of the European Union so held in proceedings concerning demands for the settlement of debts arising under blank promissory notes issued by the latter parties in respect of sums owed under loan agreements.

 

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Regulation of insurance

 

Solvency II Commission Implementing Regulation laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September 2019 until 30 December 2019 published in Official Journal

Commission Implementing Regulation (EU) 2019/1902 of 7 November 2019 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September 2019 until 30 December 2019 in accordance with the Solvency II Directive published in the OJ. 

IAIS consults on liquidity risk management application paper

The International Association of Insurance Supervisors (IAIS) is consulting on its draft application paper on liquidity risk management. Feedback is sought by 20 January 2020. As part of the development of the holistic framework for systemic risk in the insurance sector, the IAIS revised certain Insurance Core Principles (ICPs) and the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) material integrated therein. During this process the IAIS enhanced the enterprise risk management (ERM) requirements in ICP 16 (enterprise risk management for solvency purposes) to more explicitly address liquidity risk.

Solvency capital requirement: PRA reminds firms of 1 January 2020 delegated regulation changes

The PRA issued a statement reminding firms that on 1 January 2020 the deferred part of the delegated regulation changes published by the European Commission on 18 June 2019 will come into effect, which may impact the calculation of the solvency capital requirement. 

FCA publishes finalised guidance on the general insurance distribution chain

The FCA published finalised guidance 19/05: General insurance distribution chain—Finalised guidance for insurance product manufacturers and distributors. FG19/05 intends to provide clarity to firms about the FCA’s expectations, in particular on the design and distribution of insurance products and the requirement to act in accordance with the customer’s best interests. FG19/05 follows the FCA’s consultation on new non-Handbook guidance in GC19/2 in April 2019. The FCA made some revisions to the guidance following the feedback it received. A summary of the feedback is also published. 

Council of the EU publishes corrigendum on Directive amending MiFID II and Solvency II

The General Secretariat of the Council issued an information note to COREPER on the outcome of the European Parliament's first reading and corrigendum procedure concerning a proposal for a Directive amending Directive 2014/65/EU on MiFID II and Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II).

IAIS conference adopts ‘comprehensive’ reforms for cross-border supervision of insurance groups

IAIS held its annual conference and adopted a comprehensive set of reforms that it says will enable effective cross-border supervision of insurance groups and contribute to global financial stability. In light of the announcement, the FSB decided to suspend global systemically important insurers (G-SII) identification as from the beginning of 2020.

IAIS responds to consultation feedback on its recovery planning application paper

IAIS published its responses to feedback received in the consultation on its recovery planning application paper. The consultation ran from 12 November 2018 to 08 January 2019, with the paper aiming to provide guidance with respect to draft supervisory material related to recovery planning in the ICPs and the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame). 

EIOPA publishes second European Insurance Overview

The European Insurance and Occupational Pensions Authority (EIOPA) published its second annual European Insurance Overview, an extension of its statistical services that aims to provide an easy-to-use and accessible overview of the European insurance sector. It is based on annually reported Solvency II information. This ensures that the data has a high coverage in all countries and is reported in a consistent manner across the European Economic Area.

Keynote speech at EIOPA’s 9th annual conference addresses climate change

The chair of EIOPA, Gabriel Bernardino, delivered a keynote speech, ‘Insurance and Pensions: Leading the future’, at EIOPA’s ninth annual conference. Bernardino addressed climate change, digital ethics, CMU, including the pan-European personal pension product (PEPP), cyber-risks and EIOPA’s 2020 review of Solvency II.

PRA publishes Solvency II policy statement on maintenance of the transitional measure on technical provisions

The PRA published policy statement PS25/19, Solvency II: Maintenance of the transitional measure on technical provisions, in which the PRA provides feedback on responses to consultation paper CP11/19, Solvency II: Maintenance of the transitional measure on technical provisions. The appendix to the policy statement also contains the PRA’s updated supervisory statement SS6/16, Maintenance of the ‘transitional measure on technical provisions’ under Solvency II.

PRA makes Solvency II insurance supervisory disclosures

The PRA published supervisory disclosures in line with its obligations under Article 31(2) of the Solvency II Directive. The public disclosure is designed to foster a uniform level of transparency and accountability between supervisory authorities. The material published will be of primary interest to PRA-authorised insurance companies.

ICPs and ComFrame assessment methodology consultation: IAIS comments on responses

IAIS published its responses to comments it received in the consultation on revisions to the IAIS glossary, introduction to ICPs, and development of the ComFrame assessment methodology and ICP 7. The consultation ran from 14 June to 15 August 2019, with a public discussion session scheduled for 26 November 2019. 

Korea signs up to IAIS supervisory co-operation and information exchange agreement

The Korea Financial Services Commission and Korea Financial Supervisory Service became members of the IAIS Multilateral Memorandum of Understanding (MMoU)—an international supervisory co-operation and information exchange agreement that promotes enhanced consumer protection. The MMoU sets minimum standards to which signatories must adhere. All applicants are subject to review and approval by an independent team of IAIS members. 

 

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Payment services and systems

 

Pay.UK says no industry consensus on central fund for victims of APP fraud

Pay.UK announced its conclusions and recommendations following a call for information in connection with a change request from seven FPS Direct Participants. The request, proposed via UK Finance, was for a change to the FPS Rules for the payment of a fee by FPS participants to finance a central fund to be used to reimburse victims of APP fraud in a ‘no-blame’ situation (where neither the customer nor their payment service provider is at fault). 

EPC announces that the four 2019 SEPA payment scheme rulebooks are now in force

The European Payments Council announced that the 2019 Single Euro Payments Area (SEPA) Credit Transfer (SCT), SEPA Instant Credit Transfer (SCT Inst), SEPA Direct Debit (SDD) Core and SDD Business-to-Business (B2B) rulebooks version 1.0 entered into force on 17 November 2019 and are applicable until 21 November 2021. The EPC SEPA payment scheme rulebooks are updated every two years to reflect market needs and evolutions in the technical standards.

Which? calls for stronger Consumer and Competition Authority

Which? published its consumer agenda ahead of the general election, setting out commitments for the next government to make UK consumers’ lives simpler, fairer and safer. These include better connectivity, an enforcement system fit for purpose, greater protection from online harms and insecure products, banking services that work for everyone, fair and transparent pensions and a future trade policy and food strategy that delivers for consumers. 

 

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Fintech and cryptoassets

 

Cryptoassets to be treated as property, LawTech Delivery Panel statement concludes

The Chancellor of the High Court and chair of the UK Jurisdiction Taskforce, Sir Geoffery Vos, launched the LawTech Delivery Panel’s legal statement on cryptoassets and smart contracts. In his speech at the launch, Vos stated that following ‘rigorous legal analysis’, the legal statement concludes that cryptoassets generally have all the legal indicia of property and are to be treated as property, according to English legal principle. 

BIS’s Agustín Carstens discusses personal data and digital financial innovation

The general manager of the Bank for International Settlements (BIS), Agustín Carstens, gave a speech on data, technology and policy co-ordination, in which he discussed the role of personal data in digital financial innovation. Carstens said the use of new technology with such data ‘holds great promise’, but it also presents new and complex policy trade-offs, and a clear need for domestic and international policy co-ordination. 

BIS publishes speech on welfare implications of digital financial innovation

The BIS published a speech on welfare implications of digital financial innovation based on remarks by BIS deputy general manager Luiz Awazu Pereira da Silva, with Jon Frost and Leonardo Gambacorta at the Santander International Banking Conference: ‘Banking on trust: building confidence in the future’.

FSB RCG for the Middle East and North Africa discuss cyber, stablecoin and LIBOR

The FSB RCG for the MENA met on 17 November 2019 in Riyadh at a meeting hosted by the Saudi Arabian Monetary Authority. Among the topics discussed were cyber incident response and recovery, the end of LIBOR, and stablecoin.

 

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Sustainable finance

 

AIMA launches survey of hedge funds’ ESG investing

AIMA is conducting a survey to gain insights into how hedge funds are responding to the rise of ESG investing, and to help define best practices in this emerging field. The results will be published in a global research report that will be made available to all participants in February 2020. 

Dombrovskis proposes renewal of UK CCP temporary equivalence beyond 30 March 2020

The European Commission published a speech by its vice-president, Valdis Dombrovskis, centred on the Commission’s priorities for sustainability and green finance. But Dombrovskis also used the speech to propose the renewal of the central clearing time-limited equivalence decision beyond 30 March 2020, in order to ‘prepare for any eventuality’.

IA publishes industry-wide definitions to boost sustainable investment

The Investment Association (IA) published industry-wide definitions and clear product categorisation for responsible investment approaches, aiming to provide clarity and consistency and to allow savers to compare funds with a focus on environmental or social outcomes. IA says a variety of terms and phrases are currently used in different ways, which could leave customers confused or ‘unable to find the investment opportunities to match their diverse responsible investment goals’. 

TheCityUK publishes report on financing low-carbon infrastructure

TheCityUK published a report, ‘Financing low-carbon infrastructure’, which states that current investment in low-carbon infrastructure is ‘well below’ what is needed in order to meet climate change targets in most major markets. According to the Committee on Climate Change, in the UK investment needs to double to an average of £20bn annually in order to reach net zero emissions by 2050. Globally, an additional $1.1tn annually is needed until 2040 in order to meet the International Energy Agency’s green energy target.

Keynote speech at EIOPA’s 9th annual conference addresses climate change

The chair of EIOPA, Gabriel Bernardino, delivered a keynote speech, ‘Insurance and Pensions: Leading the future’, at EIOPA’s ninth annual conference. Bernardino addressed climate change, digital ethics, CMU, including the PEPP, cyber-risks and EIOPA’s 2020 review of Solvency II. 

Task Force on Climate-related Financial Disclosures to prepare guidance on implementing scenario analysis

The Task Force on Climate-related Financial Disclosures (TCFD) is forming an advisory group to assist it in developing practical guidance on climate-related scenario analysis. The TCFD says companies have faced challenges constructing appropriate scenarios, understanding how scenario analysis informs strategy formulation, and determining and disclosing the resiliency of a company’s strategy under different climate-related scenarios. The TCFD aims to provide guidance on implementing scenario analysis to better understand how climate-related issues could affect companies’ business strategies. 

 

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Islamic finance

 

Islamic finance conference makes case for global innovation and collaboration

The 14th Islamic Financial Services Board (IFSB) Summit 2019 saw consensus between thought leaders, market players, and regulators that technological innovation would create positive impacts in sustaining Islamic finance development that are in line with the global sustainable development agenda. 

IFSB provides overview of its first Innovation Forum

The IFSB provided an overview of its first Innovation Forum on Revitalising creativity and sustaining competitive value. The Forum was inaugurated in Jakarta to showcase innovative Islamic finance products and services with a strong impact on financial inclusion, economic growth and sustainable development. The innovations will advance the economic value propositions of Islamic finance and bring the industry to its next level of development.

 

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Dates for your diary

 

DateSubjectEvent

 

22 November 2019

 

Markets and trading

 

The BoE will continue to offer indexed long-term repo operations on a weekly basis until end-November 2019.

 

22 November 2019

MiFID II

Regulation of derivatives

The deadline for feedback to ESMA’s consultation on aligning the MiFIR derivatives trading obligation with EMIR REFIT is 22 November 2019.

 

22 November 2019

Regulation of insurance

Sustainable finance

The deadline for comment and views on the PRA cross industry working group’s report entitled ‘A framework for assessing financial impacts of physical climate change: A practitioner’s aide for the general insurance sector’ is 22 November 2019.

 

24 November 2019Authorisation, approval and supervision

The FCA extended the deadline for solo-regulated firms to opt up into the core or enhanced tiers of the SM&CR, which will apply to solo-regulated firms from 9 December 2019. Core and limited scope firms wishing to opt up to a higher category will need to submit a Form O by 24 November 2019. Solo-regulated Enhanced firms should submit Form K conversion notifications using Connect to notify the FCA which of their currently approved individuals will convert to a mapped SMF by 24 November 2019.

 

25 November 2019Prudential requirements

The Council of the EU adopted a set of legislative reforms which are part of progress towards the CMU. Those measures include the Regulation and Directive on the prudential supervision of investment firms.
The measures will be signed in Strasbourg in the week beginning 25 November 2019.

 

25 November 2019Regulation of capital markets

The deadline for feedback to the EBA consultation on its proposals to create a STS framework for synthetic securitisation is 25 November 2019.

 

26 November 2019Regulation of insurance

The IAIS will hold a public discussion session via teleconference on the outcome of the consultation on:

  • Draft revised IAIS Glossary

  • Draft ComFrame Assessment Methodology

  • Revisions to the Introduction to ICPs and ICP 7 (Corporate Governance), related to ComFrame development

  • Draft revised ICP 22 (Anti-Money Laundering and Combating the Financing of Terrorism)

  • Application Paper on Recovery Planning

on 26 November 2019.

 

28 to 29 November 2019

Regulation of insurance

Sustainable finance

UN Environment Programme Finance Initiative (UNEP FI) will hold its second Regional Roundtable for Europe in Luxembourg on 28–29 November 2019.

 

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About the author:
Pietra has completed the Bar Professional Training Course at the University of Law and was called to the Bar in 2019. Prior to the BPTC, Pietra undertook a law degree at the University of Bristol.