FS weekly highlights—22 August 2019

In this issue

 

Brexit news
UK, EU and international regulators and bodies
Prudential requirements
Financial stability, recovery and resolution
Financial crime
Consumer protection and claims management regulation
Competition in financial services
Enforcement and redress
Markets and trading
Regulation of capital markets and Capital Markets Union
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

 

European Union (Withdrawal) Act 2018 (Commencement No 4) Regulations 2019

SI 2019/1198: This enactment is made in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment brings into force a certain provision of the 2018 Act, relating to the repeal of the European Communities Act 1972, in the UK on 17 August 2019. 

 

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UK, EU and international regulators and bodies

 

EESC opinion on Investment Plan for Europe published in the Official Journal

An opinion of the European Economic and Social Committee (EESC) on the Communication from the European Commission to the European Parliament, the Council of the EU, the European Central Bank (ECB), the EESC, the Committee of the Regions and the European Investment Bank (EIB) entitled ‘Investment Plan for Europe—stock taking and next steps’ (COM(2018) 771 final) was published in the Official Journal of the EU (OJ).

EESC opinion on international role of the euro published in the Official Journal

An opinion of the EESC on the Communication from the European Commission to the European Parliament, the European Council (Euro Summit), the Council of the EU, the ECB, the EESC and the Committee of the Regions entitled ‘Towards a stronger international role of the euro’ (COM(2018) 796 final) was published in the OJ.

Chair of ECB Supervisory Board outlines its supervisory role and approach in letter to MEPs

The chair of the ECB’s Supervisory Board, Andrea Enria, wrote to three members of the European Parliament (MEPs) in response to a letter from those MEPs regarding a bank under ECB supervision. The ECB says it cannot comment on individual credit institutions and their business decisions for professional secrecy reasons under the Capital Requirements Directive 2013/36/EU (CRD IV), but instead it sets out some considerations that may help the MEPs to better understand the ECB’s supervisory role. 

 

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Prudential requirements

 

EBA updates reporting framework 2.9

The European Banking Authority (EBA) published phase two of its technical package on reporting framework 2.9. The new release of reporting framework 2.9 includes the validation rules, the DPM data dictionary and XBRL taxonomies. The update reflects the amendments to the Implementing Technical Standards (ITS) under the Capital Requirements Regulation on supervisory reporting related to FINREP and those to the ITS on benchmarking of internal approaches, both published on 16 July 2019.

Chair of ECB Supervisory Board outlines its supervisory role and approach in letter to MEPs

The chair of the ECB’s Supervisory Board, Andrea Enria, wrote to three MEPs in response to a letter from those MEPs regarding a bank under ECB supervision. The ECB says it cannot comment on individual credit institutions and their business decisions for professional secrecy reasons under the CRD IV, but instead it sets out some considerations that may help the MEPs to better understand the ECB’s supervisory role.

FSB publishes responses to consultation on public disclosure of resolution planning and resolvability

The FSB published the five public responses it received to its consultation on the public disclosure of resolution planning and resolvability. The discussion paper, issued on 3 June 2019, explored how general and firm-specific disclosures on resolution planning and resolvability could be further enhanced, focusing mainly on disclosures of resolution planning for global systemically important banks (G-SIBs) although many of the disclosure approaches discussed are also relevant to domestic systemically important banks and other firms subject to a resolution planning requirement.

FSB publishes responses to consultation on solvent wind-down of derivatives and trading portfolios

The FSB published the three public responses it received to its consultation on the solvent wind-down of derivatives and trading portfolios by G-SIBs. The discussion paper, issued on 3 June 2019, sets out considerations that may be relevant for authorities and firms for both recovery and resolution planning. 

 

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Financial stability, recovery and resolution

 

BIS publishes speech on digitalisation, competition and financial stability in the banking markets

The Bank for International Settlements (BIS) published a speech by Claudia Buch, vice-president of the Deutsche Bundesbank, at the seminar ‘Statistics on Fintech—Bringing Together Demand and Supply to Measure its Impact’ in Kuala Lumpur on 17 August 2019. In the speech, Ms Buch discussed digitalisation, competition and financial stability in the banking markets.

FSB publishes responses to its evaluation of financial regulatory reforms on SMEs

The Financial Stability Board (FSB) published responses to its consultation on its evaluation of the effects of post-crisis financial regulatory reforms on the financing of small and medium-sized enterprises (SMEs). 

 

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Financial crime

 

FATF publishes global AML/CTF ratings and four follow-up reports

The Financial Action Task Force (FATF) published an updated overview of the anti-money laundering (AML) and counter-terrorist financing (CTF) ratings of the 205 jurisdictions that have each committed to implementing the FATF Recommendations. It also published follow-up reports on the AML and CTF regimes in Bangladesh, Cambodia, Fiji and  Myanmar.

SFO and FCA provide advice to London Capital & Finance investors as investigation proceeds

The Serious Fraud Office (SFO) wrote to investors in London Capital & Finance (LCF) setting out details of its investigation into the sale of mini-bonds and ISA bonds, and providing advice on the steps investors need to take now. The Financial Conduct Authority (FCA), whose investigation will proceed jointly with the SFO’s, also updated its webpage with similar advice and information for those affected.

Account-takeover fraud totals on the rise, KPMG reports

The amount of money criminals plundered from bank and credit card accounts rose 57% in the first half of this year, bucking a trend for falling sums in other kinds of fraud, according to a report published. 

 

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Consumer protection and claims management regulation

 

FOS quarterly data includes CMC complaints for first time

The Financial Ombudsman Service (FOS) published its latest quarterly data showing the number of complaints it received between April and June 2019. A significant number of complaints relate to PPI, however, the FOS highlights that it is upholding a high proportion of complaints about high cost credit. For the first time, the FOS also published data relating to the complaints it received about claims management companies (CMCs) since becoming responsible for complaints about CMCs in April 2019. 

 

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Competition in financial services

 

CMA launches merger inquiry into MUFG Bank’s proposed acquisition of DVB Bank’s aviation business

The Competition and Markets Authority (CMA) announced that it is investigating the anticipated acquisition by MUFG Bank Ltd relating to the aviation business of DVB Bank SE. The inquiry will consider whether the proposed acquisition would result in a relevant merger situation under the Enterprise Act 2002 and, if so, whether that situation might be expected to result in a ‘substantial lessening of competition’ within any UK market or markets for goods or services. The CMA is inviting comments from interested parties by 3 September 2019, to help it to reach its decision by the current statutory deadline of 14 October 2019.

BIS publishes speech on digitalisation, competition and financial stability in the banking markets

The BIS published a speech by Claudia Buch, vice-president of the Deutsche Bundesbank, at the seminar ‘Statistics on Fintech—Bringing Together Demand and Supply to Measure its Impact’ in Kuala Lumpur on 17 August 2019. In the speech, Ms Buch discussed digitalisation, competition and financial stability in the banking markets.

 

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Enforcement and redress

 

FSCS to compensate Alpha Insurance latent defect premium insurance policyholders as replacement cover deal collapses

The FSCS updated its webpage for customers of Alpha Insurance A/S, the Danish insurance company declared bankrupt on 8 May 2018. In the update, the FSCS confirms that it will compensate Alpha Insurance latent defect premium insurance policyholders, following the collapse of the deal arranged by BCR Legal Group Ltd to provide replacement cover for Alpha’s 10-year latent defect and structural damage insurance policies due to various last-minute issues.

FOS quarterly data includes CMC complaints for first time

The FOS published its latest quarterly data showing the number of  complaints it received between April and June 2019. A significant number of complaints relate to PPI, however, the FOS highlights that it is upholding a high proportion of complaints about high cost credit. For the first time, the FOS also published data relating to the complaints it received about CMCs since becoming responsible for complaints about CMCs in April 2019.

SFO and FCA provide advice to London Capital & Finance investors as investigation proceeds

The SFO wrote to investors in LCF setting out details of its investigation into the sale of mini-bonds and ISA bonds, and providing advice on the steps investors need to take now. The FCA, whose investigation will proceed jointly with the SFO’s, also updated its webpage with similar advice and information for those affected.

Upper Tribunal finds ex-Barclays COO breached obligation to act with integrity

Following the referral of a 2016 Decision Notice issued by the FCA, the Upper Tribunal found that Andrew Tinney, a former chief operating officer (COO) of Barclays Wealth and Investment Management, breached his obligation as an approved person to act with integrity. The Upper Tribunal found that Mr Tinney was reckless in giving the impression that a critical document he saw did not exist, though it said that the FCA did not prove separate allegations that Mr Tinney made false or misleading statements regarding the document. The judgment is available at [2019] UKUT 227 (TCC).

ASA rules cryptocurrency trading platform advert breached CAP Code

The Advertising Standards Authority (ASA) ruled that an advert for the cryptocurrency trading platform BitMEX, seen on 3 January 2019, misleadingly exaggerated the return on investment and failed to illustrate the risk of the investment, and was therefore in breach of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code). 

 

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Markets and trading

 

Euro risk-free rates working group issues recommendations on transition from EONIA to €STR

The ECB published a report by the private sector working group on euro risk-free rates, which sets out recommendations on the transition from the euro overnight index average (EONIA) to the euro short-term rate (€STR) for cash and derivatives products. The report urges market participants to prepare for the change in EONIA’s publication time that will follow the change in EONIA’s methodology as of 2 October 2019 and the discontinuation of EONIA on 3 January 2022.

IASB begins phase two of its work on IBOR reform

The International Accounting Standards Board (IASB) added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—IBOR reform—to its work plan.

ISDA backs request for clarification on benchmark reform impact for legacy derivatives transactions

The International Swaps and Derivatives Association (ISDA) wrote to the European Commission and the European Securities and Markets Authority (ESMA), in support of an urgent request by the chair of the EU Risk-free Rate Working Group for a statement clarifying that changes made to existing transactions for benchmark reform purposes would not result in margin or clearing obligations being imposed under the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). 

 

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Regulation of capital markets and Capital Markets Union

 

ECB opinion examines draft law on sale and purchase of credit facilities

The ECB published an opinion of 16 August 2019 on the sale and purchase of credit facilities (CON/2019/30), following a request from the Ministry of Finance of Cyprus for an opinion on a draft law amending Cyprus’s ‘law on the sale and purchase of credit facilities’. 

 

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Regulation of derivatives

 

ISLA, FIA, ICMA and ISDA seek views on new SFTR and EMIR master reporting agreement

The International Securities Lending Association (ISLA), the Futures Industry Association (FIA), the International Capital Market Association (ICMA) and ISDA are consulting on a new master reporting agreement, which will provide for both mandatory and delegated reporting of securities financing transactions under Regulation (EU) 2015/2365 (SFTR) and derivative transactions under EMIR entered into under standard industry documentation. Feedback is sought by 23 August 2019.

FMLC publishes letter to HM Treasury on review of EMIR implementing regulations

The Financial Markets Law Committee (FMLC) published a letter it sent to HM Treasury regarding the Treasury’s review of the Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013, which implemented EMIR in the UK. The review may result in proposed changes to the Part VII of the Companies Act 1989.

ISDA backs request for clarification on benchmark reform impact for legacy derivatives transactions

ISDA wrote to the European Commission and ESMA, in support of an urgent request by the chair of the EU Risk-free Rate Working Group for a statement clarifying that changes made to existing transactions for benchmark reform purposes would not result in margin or clearing obligations being imposed under EMIR.

WFE publishes white paper on sustainability and commodity derivatives

The WFE published a white paper on sustainability and commodity derivatives, which explores sustainability in the context of commodity derivatives markets and is intended to stimulate discussion among WFE members and the wider commodity derivatives industry about how they might respond to the potential impact of sustainability issues on commodity markets. 

 

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Investment funds and asset management

 

Investment Association publishes updated model trust deed for CAIFs

The Investment Association (IA) published an updated version of its model trust deed for charity authorised investment funds (CAIFs). The model trust deed is available on the IA’s website alongside a guide, produced jointly by the IA, the Charity Investors Group and the Charity Law Association, for managers wishing to set up a CAIF.

ASA rulings for 21 August 2019

The Advertising Standards Authority (ASA) ruled that adverts for investment advisory service Stockmarket Insider, seen in March 2019, were in breach of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code). The ASA concluded the adverts were misleading as they contained unsubstantiated claims regarding the service’s performance, in addition to customer testimonials for which there was no evidence relating to their veracity. 

 

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Banks and mutuals

 

ECB decision on recognising non-euro area Member States as reporting Member States under the AnaCredit Regulation published in the Official Journal

A decision by the ECB on the procedure for recognising non-euro area Member States as reporting Member States under Regulation (EU) 2016/867 on the collection of granular credit and credit risk data (the AnaCredit Regulation) was published in the OJ. The decision was adopted by the ECB on 18 July 2019 and will enter into force on 5 September 2019.

CMA launches merger inquiry into MUFG Bank’s proposed acquisition of DVB Bank’s aviation business

The CMA announced that it is investigating the anticipated acquisition by MUFG Bank Ltd relating to the aviation business of DVB Bank SE. The inquiry will consider whether the proposed acquisition would result in a relevant merger situation under the Enterprise Act 2002 and, if so, whether that situation might be expected to result in a ‘substantial lessening of competition’ within any UK market or markets for goods or services. The CMA is inviting comments from interested parties by 3 September 2019, to help it to reach its decision by the current statutory deadline of 14 October 2019.

CMA revokes directions to Lloyds Banking Group on app-to-app redirection functionality

The CMA revoked the directions given to Lloyds Banking Group (LBG) on 1 April 2019 on confirmation by the implementation trustee that LBG was compliant with Article 14.1 of the Retail Banking Market Investigation Order 2017 with respect to app-to-app redirection functionality.

EBA updates reporting framework 2.9

The EBA published phase two of its technical package on reporting framework 2.9. The new release of reporting framework 2.9 includes the validation rules, the DPM data dictionary and XBRL taxonomies. The update reflects the amendments to the ITS under the Capital Requirements Regulation on supervisory reporting related to FINREP and those to the ITS on benchmarking of internal approaches, both published on 16 July 2019.

Open Banking Implementation Entity publishes service quality indicators APIs

The Open Banking Implementation Entity published the latest service quality indicators application programming interfaces (APIs). The indicators are one of the measures required by the CMA following its investigation into the UK retail banking market. This data is published every six months and ultimately enables people to compare service levels provided by banks.

BIS publishes speech on digitalisation, competition and financial stability in the banking markets

The BIS published a speech by Claudia Buch, vice-president of the Deutsche Bundesbank, at the seminar ‘Statistics on Fintech—Bringing Together Demand and Supply to Measure its Impact’ in Kuala Lumpur on 17 August 2019. In the speech, Ms Buch discussed digitalisation, competition and financial stability in the banking markets.

Chair of ECB Supervisory Board outlines its supervisory role and approach in letter to MEPs

The chair of the ECB’s Supervisory Board, Andrea Enria, wrote to three MEPs in response to a letter from those MEPs regarding a bank under ECB supervision. The ECB says it cannot comment on individual credit institutions and their business decisions for professional secrecy reasons under the CRD IV, but instead it sets out some considerations that may help the MEPs to better understand the ECB’s supervisory role.

ECB’s BIRD website closed until further notice following security breach

The ECB closed its Banks’ Integrated Reporting Dictionary (BIRD) website until further notice. It said unauthorised parties breached the security measures protecting the website, which is hosted by an external provider. Neither ECB internal systems nor market-sensitive data were affected. 

 

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Regulation of insurance

 

FSCS to compensate Alpha Insurance latent defect premium insurance policyholders as replacement cover deal collapses

The FSCS updated its webpage for customers of Alpha Insurance A/S, the Danish insurance company declared bankrupt on 8 May 2018. In the update, the FSCS confirms that it will compensate Alpha Insurance latent defect premium insurance policyholders, following the collapse of the deal arranged by BCR Legal Group Ltd to provide replacement cover for Alpha’s 10-year latent defect and structural damage insurance policies due to various last-minute issues.

Insurance Europe welcomes greater focus by IAIS on systemic risk

Insurance Europe published its response to the International Association of Insurance Supervisors’ (IAIS) consultation on its new holistic framework for assessing systemic risk in insurance. Insurance Europe considers that a greater focus by the IAIS on potentially systemic activities of the insurance sector as a whole is warranted.

Re Prudential Assurance Company Ltd and another company

The Chancery Division held that it was not appropriate in the present case to exercise the court's discretion under s 111(3) of the Financial Services and Markets Act 2007 on an application to sanction a scheme for the transfer of annuity policies to a new company. Even though an independent expert was of the opinion, with which the regulators did not disagree, that the implementation of the scheme would cause no material adverse effect upon the security or benefits and reasonable expectations of the transferring policyholders as regards service standards and governance, such views were not determinative of whether it was appropriate in all the circumstances to exercise the discretion to sanction the scheme, and there were a number of factors that weighed heavily against the exercise of the court's discretion. 

 

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Regulation of personal pension and stakeholder products

 

FCA consumer video explains defined benefit pension transfer process

The FCA published a video to help consumers understand pension transfer advice. The video, entitled ‘FCA explains: Our expectations of financial advisers when advising you on your pension transfer,’ is designed to assist those who have transferred out of their defined benefit pension and are unclear whether they received good quality advice—including former members of the British Steel Pension Scheme. It will also be of interest to those who are considering transferring out of a defined benefit pension scheme and want to understand what the process should look like before they start.

Re Prudential Assurance Company Ltd and another company

The Chancery Division held that it was not appropriate in the present case to exercise the court's discretion under s 111(3) of the Financial Services and Markets Act 2007 on an application to sanction a scheme for the transfer of annuity policies to a new company. Even though an independent expert was of the opinion, with which the regulators did not disagree, that the implementation of the scheme would cause no material adverse effect upon the security or benefits and reasonable expectations of the transferring policyholders as regards service standards and governance, such views were not determinative of whether it was appropriate in all the circumstances to exercise the discretion to sanction the scheme, and there were a number of factors that weighed heavily against the exercise of the court's discretion. 

 

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Payment services and systems

 

ECB decision on oversight of systemically important payment systems published in the Official Journal

The ECB decision of 26 July 2019 on the procedure and conditions for exercise by a competent authority of certain powers in relation to oversight of systemically important payment systems was published in the OJ. The decision will enter into force on 5 September 2019.

FCA’s Dear CEO letter sets out approach to SCA deadline under PSD2

Following the FCA announcement of an agreed industry plan to give the payments and e-commerce industry extra time to implement strong customer authentication under the revised Payment Services Directive (EU) 2015/2366 (PSD2), the FCA  published a Dear CEO letter which details its approach. The FCA’s announcement reflected the EBA’s opinion that more time was needed to implement SCA given the complexity of the requirements, a lack of preparedness and the potential for a significant impact on consumers. 

 

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Fintech and cryptoassets

 

EBA and ESMA publish joint letter to Commission on crypto-assets

The EBA and ESMA published a joint response to a letter from the European Commission dated 19 July regarding crypto-assets, including ‘stablecoins’. In their response, the EBA and ESMA welcomed the Commission’s work to address the issues identified by the authorities in their January 2019 reports on crypto-assets and initial coin offerings, and agree it is vital that further work progresses with urgency to inform potential actions by the new European Commission.

BIS publishes speech on digitalisation, competition and financial stability in the banking markets

The BIS published a speech by Claudia Buch, vice-president of the Deutsche Bundesbank, at the seminar ‘Statistics on Fintech—Bringing Together Demand and Supply to Measure its Impact’ in Kuala Lumpur on 17 August 2019. In the speech, Ms Buch discussed digitalisation, competition and financial stability in the banking markets.

ASA rules cryptocurrency trading platform advert breached CAP Code

The ASA ruled that an advert for the cryptocurrency trading platform BitMEX, seen on 3 January 2019, misleadingly exaggerated the return on investment and failed to illustrate the risk of the investment, and was therefore in breach of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code). 

 

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Sustainable finance

 

EESC opinion on making the EU a climate neutral economy published in the Official Journal

An opinion of the EESC on the Communication from the European Commission to the European Parliament, the European Council, the Council of the EU, the EESC, the Committee of the Regions and the EIB entitled ‘Clean Planet for All—European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy’ (COM(2018) 773 final) was published in the OJ.

WFE publishes white paper on sustainability and commodity derivatives

The World Federation of Exchanges (WFE) published a white paper on sustainability and commodity derivatives, which explores sustainability in the context of commodity derivatives markets and is intended to stimulate discussion among WFE members and the wider commodity derivatives industry about how they might respond to the potential impact of sustainability issues on commodity markets.

PIMFA responds to BSI technical advice framework on embedding sustainable finance in financial services

The Personal Investment Management & Financial Advice Association (PIMFA) published its response to the BSI draft technical advice (PAS 7340) framework for embedding sustainable finance principles in financial services organisations. PIMFA explains the vital role the financial services sector must play in promoting sustainable development and re-orientating the global economy towards a sustainable investment model. 

 

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Dates for your diary 

 

DateSubjectEvent

 

23 August 2019

 

Payment services and systems

 

The deadline for responses to the European Payments Council’s (EPC) consultation on Electronic Invoice Presentment and Payment – draft documents for submission to ISO 20022 of new servicing messages is 23 August 2019.

 

23 August 2019Payment services and systems

The deadline for responses to the Payment Systems Regulator’s (PSR) CP19/6—Call for views: The PSR’s research into cash access, use and acceptance is 23 August 2019.

 

23 August 2019Regulation of derivatives

The deadline for submission of feedback to the FIA, ICMA, ISDA and ISLA, concerning a new master reporting agreement, which will provide for both mandatory and delegated reporting of SFTR and derivative transactions under EMIR entered into under standard industry documentation, is 23 August 2019.

 

24 August 2019Payment services and systems

The deadline for responses to the EPC’s consultation on draft mobile initiated Single Euro Payments Area (SEPA) credit transfer (MSCT) interoperability implementation guidelines (including SEPA credit transfer instant) is 24 August 2019.

 

25 August 2019

Regulated activities

Consumer protection

 

The deadline for responses to HM Treasury’s consultation on the government’s proposed regulatory framework for bringing funeral plans within the remit of the FCA is 25 August 2019.

 

26 August 2019Payment services and systems

The deadline for feedback to the EPC’s public consultation on possible modifications to the SEPA Proxy Lookup Scheme Rulebook is 26 August 2019.

 

27 August 2019

Regulation of derivatives

The deadline for responses to ESMA’s consultation on guidelines on periodic information and notification of material changes to be submitted to ESMA by trade repositories is 27 August 2019.

 

27 August 2019

Brexit

Regulation of capital markets

 

The deadline for feedback to FCA CP19/26: Draft technical standards on the content and format of STS notifications under the onshored Securitisation Regulation is 27 August 2019.

 

28 August 2019

Risk management and controls

Financial stability

 

The deadline for responses to the FSB’s survey on responses to and recovery from cyber incidents is 28 August 2019.

 

29 August 2019Complaints Enforcement and redress 

The final deadline for consumers to make a complaint about potentially being mis-sold a PPI policy.

 

 

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