FS weekly highlights—22 October 2020

FS weekly highlights—22 October 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Consumer protection
Complaints, compensation and claims management
Dispute resolution for financial services lawyers
Markets and trading
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Crowdfunding
Consumer credit, mortgage and home finance
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

For further information on the effects of COVID-19 on financial services, see: Coronavirus (COVID-19)—key developments for financial services lawyers and   Coronavirus (COVID-19)—key financial services issues.

Coronavirus (COVID-19)—FCA sets out additional guidance for insurance and premium finance firms for customers in financial difficulty

The Financial Conduct Authority (FCA) published proposals on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of the coronavirus (COVID-19) pandemic, after 31 October 2020. The guidance follows temporary measures that have been in place since May 2020, and sets out how firms should provide tailored support to consumers who have already had a payment deferral and those newly in financial difficulty due to changed circumstances relating to COVID-19.

Source: FCA proposes additional measures to help insurance customers in financial difficulty because of coronavirus.

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

Coronavirus (COVID-19)—Christine Lagarde speech on rebuilding and sustaining EU growth

The president of the European Central Bank (ECB), Christine Lagarde, delivered a speech on rebuilding and sustaining EU growth, at the G30 International Banking Seminar in Frankfurt am Main. Lagarde discussed the economic impact of the coronavirus (COVID-19) pandemic and the EU’s response, and noted that the acceleration of the pre-existing spread of digitalisation was set to permanently reshape economies and societies.

Source: President of the ECB Christine Lagarde speech: Rebuilding and sustaining growth—G30 International Banking Seminar, Frankfurt am Main, 18 October 2020.

Ornamental Horticulture Industry (Coronavirus, Financial Assistance) Scheme Regulations (Northern Ireland) 2020

SR 2020/219: Provisions are made to provide a financial assistance scheme following market disturbance to ornamental horticulture producers who have suffered a financial loss as a consequence of the COVID-19 coronavirus pandemic in Northern Ireland. These Regulations come into force on 14 October 2020.

Read the official version of this legislation and the explanatory memorandum.

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Brexit news

Brexit Bulletin—UK calls businesses to prepare for no-deal scenario at end of transition period

With agreement on the future UK-EU relationship in doubt following the conclusion of the October European Council, Prime Minister, Boris Johnson, and Chancellor of the Duchy of Lancaster, Michael Gove, have called on business leaders‘to step up their efforts to get ready’ for inevitable changes taking effect at the end of the transition period. The ‘call to action’ comes as the government launches a fresh information campaign aiming to prepare business leaders for what they refer to as ‘Australia-style’ arrangements at the end of the Brexit transition period on 31 December 2020. The campaign ‘Time is running out’, aims to spread awareness of ‘guaranteed changes’ taking place when the transitional arrangements under the Withdrawal Agreement come to an end and new arrangements come into effect on 1 January 2021. Gove has also ordered the XO Cabinet Committee to convene daily, chairing the 150th meeting of the operations committee in COBR next week. Meanwhile, HM Revenue & Customs (HMRC) has written to VAT-registered businesses to remind them of actions required to prepare for the end of the transition period and beyond. Further new and updated guidance may be issued as the transition period progresses, so stakeholders are advised to monitor these pages for updates. Full implementation of the Withdrawal Agreement is an agreed priority in any event. The fourth ordinary meeting of the Withdrawal Agreement Joint Committee took place on 19 October 2020 with both sides committing to intensify their work.

Sources: GOV.UK—Press release: Time is running out for businesses to prepareGOV.UK—Correspondence: Letters to businesses about new trade arrangements with the EU from 1 January 2021,   Hansard, House of Commons, 19 October 2020 and EU Exit: Update on negotiations and the work of the Joint Committee.

PRA publishes CP17/20 on further implementation of CRD V

The Prudential Regulation Authority (PRA) published consultation paper CP17/20, which sets out proposed changes to the PRA’s rules, supervisory statements and statements of policy to implement elements of Directive (EU) 2019/878 (CRD V). It also proposes to update aspects of the UK framework as a result of amendments made to the Capital Requirements Regulation (EU) 575/2013 (CRR) by Regulation (EU) 2019/87 (CRR II), which apply during the Brexit transition period. The consultation closes on 17 November 2020.

Source: Capital Requirements Directive V (CRD V): Further implementation.

HM Treasury publishes outcome of consultation on BRRD II transposition

HM Treasury published the outcome of its consultation on the UK implementation of the Bank Recovery and Resolution Directive II (Directive (EU) 2019/879) (BRRD II). Under the Withdrawal Agreement the UK is required to transpose BRRD II by 28 December 2020, although it does not plan to transpose requirements that do not need to be complied with until after the end of the UK’s Brexit transition period, in particular Article 1(17) which revises the framework for MREL requirements across the EU. Various sunset clauses will also be introduced which will mean that certain BRRD provisions introduced by BRRD II will cease to have effect in the UK from 1 January 2021.

Source: Consultation on the transposition of the Bank Recovery and Resolution Directive II.

For further information, see: Impact of Brexit: BRRD—quick guide.

HM Treasury publishes summary of responses to consultation on updating UK prudential regime before end of Brexit transition period

HM Treasury published a summary of the responses it received to its consultation on updating the UK’s prudential regime before the end of the Brexit transition period, which outlined how the government intends to implement the Fifth Capital Requirements  Directive (EU) 2019/878 (CRD V). The Directive updates the prudential legislative framework that applies to banks and systemic investment firms. The consultation sought comment on the government’s proposals for new requirements on financial holding companies, changes to the macro-prudential toolkit and the intention to exempt non-systemic investment firms from the scope of CRD V.

Sources: Consultation outcome: Consultation on updating the UK’s prudential regime before the end of the transition period and Updating the UK’s prudential regime before the end of the transition period: Consultation response.

For further information, see: Impact of Brexit: CRR and prudential regulation—quick guide.

FCA/PRA Dear CEO Letter to PRA-regulated insurance firms sets out final preparations for end of Brexit transition period

Anna Sweeney and Charlotte Gerken, both executive directors at PRA Insurance Supervision, and Matt Brewis, director of the FCA Insurance and Conduct Specialists, published a Dear CEO letter to PRA-regulated insurance firms preparing for the end of the Brexit transition period. The letter emphasised that it is imperative that firms continue to build on their preparatory work to ensure that they, and to the extent possible their clients, are ready for a range of scenarios at the end of the transition period. The letter set out key areas requiring final preparations, including: contingency planning and continuity of cross-border business in respect of EU liabilities; Part VII saving provision; data; EEA bank account closures; EEA passporting firms; and TPR firms’ Part 4A submission timeline.

Source: Joint FCA/PRA Dear CEO Letter to PRA-regulated insurance firms preparing for the end of the transition period.

HM Treasury consultation on the post-EU Future Regulatory Framework (FRF) Review

HM Treasury published a consultation to mark the launch of Phase II of the Financial Services Future Regulatory Framework Review (the FRF Review) to follow up from Phase I, which was launched in June 2019 following the then chancellor’s Mansion House speech. The FRF Review is a major long-term review into the future of the UK’s regulatory framework following the UK’s exit from the EU.

Source: Financial Services Future Regulatory Framework Review: Phase II consultation.

UK government introduces Financial Services Bill

The UK government introduced the Financial Services Bill in Parliament. The Bill is intended to ensure the UK’s regulatory framework continues to function effectively for the UK after leaving the EU. Among other things, the Bill includes provisions to amend the Benchmarks Regulation, which is intended to help manage and direct an orderly wind-down of critical benchmarks such as LIBOR.

Sources: Financial Services Bill introduced todayFCA welcomes Financial Services Bill and Financial Services Bill 2019-21.

HM Treasury update on financial services EU exit instruments

HM Treasury published an update on financial services statutory instruments (EU exit instruments) made under the European Union (Withdrawal) Act 2018 (EU(W)A 2018), as amended by the European Union (Withdrawal Agreement) Act 2020 (EU(WA)A 2020).

Source: Update: Financial Services EU Exit Statutory Instruments.

Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Communities Act 1972, and the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is proposed to amend five pieces of UK primary legislation, seven pieces of UK secondary legislation, and one piece of retained EU legislation in relation to financial services and markets in order to address failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the UK from the EU. It comes into force partly on 28 December 2020, and fully on IP completion day.

The full draft legislation can be found here. The draft explanatory memorandum can be found  here.

For further information, see: Quick Look Brexit Financial Services Legislation Status Guide—BRRD and BRRD II.

Brexit Bulletin—government opts to extend power to depart from retained EU case law to Court of Appeal

The government published its response to the Ministry of Justice (MoJ) consultation on proposed changes to the rules governing the departure from retained EU case law by UK courts and tribunals after IP completion day. The consultation outlined government proposals for exercising powers introduced into the European Union (Withdrawal) Act 2018 (EU(W)A 2018) by the European Union (Withdrawal Agreement) Act 2020 (EU(WA)A 2020), to introduce regulations designating additional courts and tribunals with the power to depart from retained EU case law. Under the original provisions, only the UK Supreme Court (and in some cases the High Court of Justiciary in Scotland) have such powers. Despite concern within the legal services sector, legal academics, businesses and other organisations (representing over 50% of the respondents), the government is proceeding with regulations extending the powers to depart from retained EU case law to the Court of Appeal and its equivalents. The government’s aim is to allow retained EU case law to evolve at a faster rate, without overburdening the Supreme Court and High Court of Justiciary. To this end, a draft Brexit SI was laid in Parliament as the consultation outcome was issued. Professor Adam Cygan, of the University of Leicester, and Sally Shorthose, partner at Bird & Bird, comment on the outcome.

Sources: MoJ Consultation: Departure from retained EU case law by UK courts and tribunals and   Draft European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020.

European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is proposed to provide which courts are relevant courts for the purposes of section 6 of the 2018 Act. It comes into force on IP completion day.

The full draft legislation can be found here. The draft explanatory memorandum can be found  here.

European Union Withdrawal (Consequential Modifications) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 and the European Union (Withdrawal Agreement) Act 2020 in preparation for IP completion day. This draft enactment is proposed to amend 16 pieces of UK primary legislation and two pieces of UK secondary legislation in relation to EU withdrawal. It comes into force partly immediately before IP completion day, and fully on IP completion day.

The full draft legislation can be found here. The draft explanatory memorandum can be found  here.

Draft Financial Holding Companies (Approval etc) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020 published

A draft version of the Financial Holding Companies (Approval etc) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020 has been published. The draft Regulations are laid before Parliament under paragraph 2 of Schedule 2 to the European Communities Act 1972 and paragraph 1(1) of Schedule 7 to the European Union (Withdrawal) Act 2018, for approval by resolution of each House of Parliament.

Source: Draft Financial Holding Companies (Approval etc) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020.

Financial Holding Companies (Approval etc) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Communities Act 1972, the Financial Services and Markets Act 2000, and the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is proposed to amend one piece of UK primary legislation and five pieces of UK secondary legislation in relation to financial services. It comes into force partly on the day after the day on which these Regulations are made, and 28 December 2020, and fully on 29 December 2020.

The full draft legislation can be found here. The draft explanatory memorandum can be found  here.

For further information, see: Quick Look Brexit Financial Services Legislation Status Guide—CRR.

Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment is laid in exercise of legislative powers under the European Communities Act 1972 and the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is laid to amend three pieces of UK primary legislation, 31 pieces of UK secondary legislation, and six pieces of retained EU legislation, and revoke one piece of retained EU legislation in relation to securities financing transactions. It comes into force partly on the day after the day on which these Regulations are made, and fully on IP completion day.

The full draft legislation can be found here. The draft explanatory memorandum can be found  here.

For further information, see: Quick Look Brexit Financial Services Legislation Status Guide—Securitisation Regulation.

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MiFID II

European Parliament rejects Commission’s coronavirus (COVID-19) proposal to amend MiFID II information requirements, product governance and position limits to help recovery

In a draft report (2020/0152)(COD)), the European Parliament rejected the European Commission proposal for a regulation to amend Directive 2014/65/EU (MiFID II) in relation to information requirements, product governance and position limits to aid recovery from the coronavirus (COVID-19) pandemic.

Sources: European Parliament rejection and European Commission May Communication.

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UK, EU and international regulators and bodies

2021 European Commission work programme—financial services aspects

The European Commission published its work programme for 2021. It includes plans to revise the framework for handling EU bank failures, take measures to boost cross-border investment in the EU, and step up the fight against money laundering. The Commission will also continue progress on sustainable financing, notably by proposing to establish an EU green bond standard.

Source: 2021 Commission work programme—from strategy to delivery.

BoE co-organises international workshop on capital flows and financial policies

The Bank of England (B0E), the Banque de France, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have launched their first annual joint workshop on international capital flows and financial policies. The objective is to deepen the understanding of the benefits and risks of global capital flows and advance the debate on the appropriate financial policy toolkit, including through discussion of the effectiveness and externalities of various policies.

Source: 1st joint Bank of England—Banque de France—IMF—OECD workshop on international capital flows and financial policies.

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Authorisation, approval and supervision

FCA insight paper addresses diversity

The FCA published an insight paper entitled ‘The people science revolution—improving diversity objectively’. The authors argue that measuring more ‘traditional’ aspects of identity diversity, such as gender and ethnicity, is valuable as a starting point, but while numbers provide an essential benchmark, it is important to have a clear grasp of what they can and cannot show and to have an analytical framework for driving change.

Source: FCA insight—The people science revolution—improving diversity objectively.

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Prudential requirements

ECB presents on trends and patterns in 2020 financial regulation

The ECB published presentation slides from a meeting between Edouard Fernandez-Bollo, a member of the Supervisory Board of the ECB, and Mazars and the Official Monetary and Financial Institutions Forum (OMFIF), regarding financial regulation in 2020: trends in the EU and global patterns. According to the ECB, measures taken during the coronavirus crisis were prompt, balanced, risk-sensitive and transparent, making use of the flexibility contained in the Capital Requirements Regulation. However, it warns there is no room for complacency in facing the challenges of a ‘new normal’.

Source: Financial regulation in 2020: trends in the EU and global patterns.

PRA publishes CP17/20 on further implementation of CRD V

The PRA published consultation paper CP17/20, which sets out proposed changes to the PRA’s rules, supervisory statements and statements of policy to implement elements of Directive (EU) 2019/878 (CRD V). It also proposes to update aspects of the UK framework as a result of amendments made to the Capital Requirements Regulation (EU) 575/2013 (CRR) by Regulation (EU) 2019/87 (CRR II), which apply during the Brexit transition period. The consultation closes on 17 November 2020.

Source: Capital Requirements Directive V (CRD V): Further implementation.

EBA and ESRB support extension of Swedish measure under CRR to address property bubbles

The European Banking Authority (EBA) and the European Systemic Risk Board (ESRB) have both issued opinions following a notification by Finansinspektionen, the Swedish Financial Supervisory Authority (FSA), of its intention to extend a measure which aims to enhance the resilience of Swedish banks to potential severe downward corrections in residential real estate markets. Based on the evidence submitted, the EBA and the ESRB have confirmed that they do not object to the extension of the measure, which will apply from 31 December 2020 until 30 December 2021.

Sources: ESRB opinion regarding the Swedish notification of an extension period of the period of application of a stricter national measure based on under Art. 458 CRR and   EBA issues opinion on measures to address macroprudential risk following notification by Finansinspektionen.

ECB working paper examines factors affecting money market functioning

The ECB published a working paper on money markets, central bank balance sheet and regulation. It analyses money market developments since 2005, and the factors that have affected money market functioning. The paper finds that, with regard to the impact of Basel III regulations, the leverage ratio regulation impacts money markets at quarter-ends due to ‘window-dressing’ effects, reducing money market volumes and rates.

Source: ECB working paper series: Money markets, central bank balance sheet and regulation.

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Financial stability 

Chancellor of the Exchequer and BoE governor discuss August 2020 Financial Stability Report

HM Treasury published a record of the 15 September 2020 meeting between the governor of the Bank of England (BoE) and the chancellor of the Exchequer to discuss the latest Financial Stability Report, which was published on 6 August 2020. The governor and the chancellor noted the results of the Financial Policy Committee (FPC) reverse stress test, which showed there is capacity in the banking sector to continue to support the real economy, and the FPC’s judgement that it would take an economic scenario much more severe than the current situation to compromise banks’ ability and willingness to continue lending.

Source: HMT record of Financial Stability Report meeting: August 2020.

ESRB monitoring report highlights cyclical and structural NBFI risks

The ESRBpublished its EU Non-bank Financial Intermediation (NBFI) Risk Monitor 2020, the fifth issue in an annual series that contributes to the monitoring of a part of the financial system that has grown in recent years and accounts for around 40% of the EU financial system. The report sets out a number of cyclical risks identified for the NBFI sector as well as key structural risks and vulnerabilities.

Source: ESRB publishes EU Non-bank Financial Intermediation Risk Monitor 2020.

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Risk management and controls

FCA article Future Market Dynamics examines data, trust and consumer freedom issues

The FCA published a third insight piece on data sharing, trust and consumer freedoms, as part of its series of articles on Future Market Dynamics.

Source: FCA newsletter—Future Market Dynamics Part 3—data sharing, trust and a world of choice (16 October 2020).

FSB final report on effective practices for cyber incident response and recovery

The Financial Stability Board (FSB) published its final report on ‘Effective practices for cyber incident response and recovery’ (CIRR).

Source: FSB CIRR final report.

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Financial crime

FATF speech at G20 finance ministers and central bank governors meeting

The Financial Action Task Force (FATF) published a speech by its president, Marcus Pleyer, at the 14 October 2020 meeting of G20 finance ministers and central bank governors. The G20 has also expressed its support for FATF’s work to address money laundering (ML) and terrorist financing (TF) risks arising from the coronavirus (COVID-19) pandemic, and from stablecoins.

Sources: G20 supports the FATF’s work to address money laundering and terrorist financing risks arising from the COVID-19 pandemic and so-called stablecoins (14 October 2020) and   FATF President remarks to G20 finance ministers and central bank governors meeting.

Treasury Committee seeks update from FCA and NCA on the Bank Signature Forgery Campaign

The Treasury Committee chair, Mel Stride MP, wrote to the FCA and the National Crime Agency (NCA) asking for an update on their review of the evidence of the Bank Signature Forgery Campaign, which alleges potential criminal activity occurred at banks whereby home repossessions and other such documents were not being signed by the authorised signatory.

Source: Treasury Committee seeks update on Bank Signature Forgery Campaign.

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Consumer protection

FCA consults on minor changes to the Breathing Space Regulations

The FCA published consultation paper CP20/21: Breathing Space Regulations: changes to our Handbook, which sets out minor changes resulting from regulations on problem debt that are expected to come into force in England and Wales in May 2021. Feedback is sought by 6 January 2021.

Source: CP20/21: Breathing Space Regulations: changes to our Handbook.

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

FCA publishes occasional paper on understanding consumer financial wellbeing through banking data

The FCA published an occasional paper which aims to better understand consumer financial wellbeing through survey responses, analysis of banking data and the objective factors most closely associated with money management stress.

Source: Occasional paper No. 58: Understanding consumer financial wellbeing through banking data.

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Complaints, compensation and claims management

Coronavirus (COVID-19)—FCA updates statement on complaints handling

The FCA amended its statement on firms' handling of complaints during coronavirus to update the information on PPI complaints and to reinforce messaging about the importance of continuing to comply with complaint handling requirements.

Source: Firm handling of complaints during coronavirus.

FSCS updates information for claimants in LCF judicial review

The Financial Services Compensation Scheme (FSCS) updated its timeline on the judicial review of its decision in respect of London Capital & Finance plc (LCF).

Source: FSCS—updated webpage re London Capital & Finance plc.

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Dispute resolution for financial services lawyers

APPG on Fair Business Banking granted permission to intervene in Supreme Court duress case

The All-Party Parliamentary Group (APPG) on Fair Business Banking has been granted permission by the Supreme Court to intervene in Pakistan International Airline Corporation (Respondent) v Times Travel (UK) Ltd (Appellant) UKSC 2019/0142, a landmark appeal on the doctrine of duress. The APPG says the move will allow the Supreme Court to take account of the APPG’s experience of how the doctrine of lawful act duress operates in the banking context, particularly where it restricts bank customers from challenging settlements with lenders entered under duress.

Source: Supreme Court grants APPG permission to intervene in first ever appeal on lawful act duress.

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Markets and trading

ESMA’s Newsletter discusses CCP committee appointments, the latest TRV and the MAR review

The European Securities and Markets Authority (ESMA) published issue 17 of its Newsletter, which covers appointments to its Central Counterparty Supervisory Committee, its latest Trends, Risks and Vulnerabilities (TRV) report, and its review of the Market Abuse Regulation (MAR).

Source: ESMA Newsletter.

ESRB publishes recommendation on identifying legal entities

The ESRB published a recommendation (dated 24 September 2020) on identifying legal entities (ESRB/2020/12).

Source: Recommendation of the European Systemic Risk Board of 24 September 2020 on identifying legal entities (ESRB/2020/12).

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Regulation of benchmarks and IBOR reform

FSB publishes global transition roadmap for LIBOR

The FSB published a global transition roadmap for LIBOR which sets out clear actions for financial firms and their clients to take in order to ensure a smooth LIBOR transition.

Source: Global transition roadmap for LIBOR.

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Regulation of capital markets

Coronavirus (COVID-19)—capital markets recovery package: Council agrees its position

Member States’ ambassadors to the EU agreed the Council’s position on the capital markets recovery package, which contains targeted amendments to the EU capital market rules to help EU companies raise capital on public markets, support the lending capacity of banks and boost investment in the real economy. The Council’s position includes a number of amendments. On the basis of this negotiating mandate, the presidency will start negotiations with the European Parliament as soon as the Parliament has adopted its position.

Source: Capital Markets Recovery Package: Council agrees its position.

For further information, see: Coronavirus (COVID-19)—EU capital markets recovery package.

ESMA publishes list of national thresholds below which the prospectus obligation does not apply

ESMA published a list of national thresholds below which the obligation to publish a prospectus does not apply. It contains a short description of the thresholds, a summary of any national rules which apply to offers below that threshold, and hyperlinks to the relevant national legislation and rules.

Source: ESMA list of national thresholds pursuant to the Prospectus Regulation.

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Regulation of derivatives

ESMA consultation on CCPs EMIR 2.2 draft RTS

ESMA published a consultation paper (ESMA70-151-3023) on draft regulatory technical standards (RTS) on conditions under which additional services or activities to which a central counterparty (CCP) wishes to extend its business are not covered by the initial authorisation and conditions under which changes to the CCP's models and parameters are significant under EMIR 2.2 ((EU) 2019/2099 amending the EMIR Regulation (EU) No 648/2012).

Source: Consultation paper: Regulatory technical standards on conditions under which additional services or activities to which a CCP wishes to extend its business are not covered by the initial authorisation and conditions under which changes to the models and parameters are significant under EMIR.

For further information, see: EMIR REFIT and EMIR 2.2 roadmap.

John Glen letter to the European Scrutiny Committee in relation to EU supervision of UK central counterparties under EMIR 2.2

In a letter dated 16 October 2020, the economic secretary to the Treasury and City minister John Glen responded to a letter from Sir William Cash (chair of the European Scrutiny Committee) of 24 September 2020, in which he asked for an update on EU supervision of UK central counterparties (CCPs) under the amended EMIR 2.2.

Source: John Glen letter to William Cash of the European Scrutiny Committee dated 16 October 2020.

BoE and CFTC sign updated MoU on supervision of cross-border clearing organisations

The Commodity Futures Trading Commission (CFTC) and the BoE signed an updated memorandum of understanding (MoU) regarding co-operation and the exchange of information in the supervision and oversight of clearing organisations that operate on a cross-border basis in the US and in the UK.

Source: CFTC and BoE sign new MoU for supervision of cross-border clearing organisations.

Further ISDA Whitepapers on Smart Contracts and DLT published

The International Swaps and Derivatives Association (ISDA) published four white papers analysing the legal issues surrounding the use of smart derivatives contracts on distributed ledger technology (DLT). The four papers consider the legal issues from a French, Irish, Japanese and New York private law perspective, and look at two particular issues: whether the introduction of a DLT platform to a traditional trading relationship would impact the resolution of contractual disputes, and how to identify the legal situs of digital assets in order to effect payment or exchange collateral on certain DTL platforms.

Source: ISDA Launches New Legal Papers on Smart Contracts and DLT.

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Investment funds and asset management

European Commission consultation on ELTIF Regulation review

The European Commission launched a public consultation on the review of the European Long-Term Investment Fund (ELTIF) Regulation ((EU) 2015/760) (ELTIF Regulation).

Sources: Long-term investment funds—review of EU rules,   Capital markets union: Commission launches public consultation on EU rules for long-term investment funds (ELTIF) and  EC should make European Long-Term Investment Funds more attractive to long-term institutional investors.

For further information, see: European Long-Term Investment Funds Regulation (the ELTIF Regulation).

ESMA chair discusses MiFID client categories and the PRIIPS KID

The chair of ESMA, Steven Maijoor, delivered a keynote address at the Irish Funds ‘Annual Global Funds’ online conference. Among other topics, Maijoor addressed MiFID client categories and the PRIIPS KID.

Source: Steven Maijoor delivers keynote at Irish Funds Annual Global Funds online conference.

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Crowdfunding

EU crowdfunding regulation and directive published in Official Journal

Regulation (EU) 2020/1503 on European crowdfunding service providers for business (the EU Crowdfunding Regulation) has been published in the Official Journal of the EU, together with Directive (EU) 2020/1504, which excludes crowdfunding service providers from the scope of Directive 2014/65/EU on markets in financial instruments (MiFID II). Both instruments were adopted by the European Parliament and Council on 7 October 2020 and will enter into force on 9 November 2020.

Sources: Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 and  Directive (EU) 2020/1504 of the European Parliament and of the Council of 7 October 2020 amending Directive 2014/65/EU on markets in financial instruments.

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Regulation of insurance

EIOPA launches targeted training on insurance supervision for NCAs

The European Insurance and Occupational Pensions Authority (EIOPA) launched a program of targeted training on insurance supervision for 17 national competent authorities (NCAs). The training will enhance supervisory capacity of insurance NCAs to ‘reinforce high-quality and effective supervision, the protection of policyholders and beneficiaries and financial stability’.

Source: EIOPA—Supporting a common supervisory culture: Targeted training on insurance supervision.

EIOPA publishes statistical overview of European insurance sector

EIOPA has published its third annual European insurance overview, an extension of its statistical services in order to provide an easy-to-use and accessible overview of the sector. The report is based on annually reported Solvency II information, ensuring that the data has a high coverage in all countries and is reported in a consistent manner across the European Economic Area.

Source: EIOPA publishes third annual European insurance overview.

HM Treasury seeks views on reforming Solvency II

HM Treasury published a Review of Solvency II: Call for evidence, to seek views on reforming the prudential regulation of the UK insurance sector. The call for evidence is the first stage of the review of Solvency II.

Source: Policy paper: Solvency II review: Call for evidence.

For further information, see: Solvency II—essentials.

ESRB letter to Commission sets out position on review of Solvency II

The ESRB published a letter from its chair, Christine Lagarde, to the executive vice-president of the European Commission, Valdis Dombrovskis, setting out the ESRB General Board’s position on the review of Solvency II. The ESRB concludes that Solvency II has contributed to making individual insurers safer, but it calls for the review to result in a revised framework that better reflects macroprudential considerations; a harmonised recovery and resolution framework; a framework that ensures risks are properly captured; and a framework which addresses lessons learned from the COVID-19 pandemic. The letter also details five key lessons the ESRB has identified from the pandemic.

Source: Response letter to a consultation of the European Commission on the review of Solvency II.

FCA publish coronavirus (COVID-19) Business Interruption test case declarations

The FCA published the declarations made in respect of its business interruption insurance test case resulting from the coronavirus (COVID-19) lockdown. The FCA will also publish a guide to the declarations for policyholders, who are encouraged to speak to their insurers and insurance intermediaries. The FCA has also reiterated that it is continuing discussions with policyholders and insurers, in parallel with its leapfrog application to appeal the decision of the High Court to the Supreme Court.

Source: Latest updates: Business interruption insurance.

For further information ,see: Coronavirus (COVID-19)—business interruption insurance.

FCA/PRA Dear CEO Letter to PRA-regulated insurance firms sets out final preparations for end of Brexit transition period

Anna Sweeney and Charlotte Gerken, both executive directors at PRA Insurance Supervision, and Matt Brewis, director of the FCA Insurance and Conduct Specialists, have published a Dear CEO letter to PRA-regulated insurance firms preparing for the end of the Brexit transition period. The letter emphasises that it is imperative that firms continue to build on their preparatory work to ensure that they, and to the extent possible their clients, are ready for a range of scenarios at the end of the transition period. The letter sets out key areas requiring final preparations, including: contingency planning and continuity of cross-border business in respect of EU liabilities; Part VII saving provision; data; EEA bank account closures; EEA passporting firms; and TPR firms’ Part 4A submission timeline.

Source: Joint FCA/PRA Dear CEO Letter to PRA-regulated insurance firms preparing for the end of the transition period.

IE​​ publishes response on insurance stress testing paper

​Insurance Europe (IE) published its response to EIOPAs second insurance stress testing discussion paper. IE stated any stress test exercise should have clear objectives, appropriate timescales and be appropriately communicated, and the results should be published at aggregate level only.

Source: Insurers see merit in climate change stress testing, but not EU-wide liquidity or multi-period stress tests.

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Payment services and systems

EPA responds to HMT Payments Landscape Review

The Emerging Payments Association (EPA), which promotes collaboration and innovation across payments, has responded to HM Treasury’s Payments Landscape Review: Call for evidence. The EPA believes that the government is meeting its objective that UK payments networks operate for the benefit of end-users, but that more can be done over time to create an even fairer playing field.

Source: EPA response to HMT Payments Landscape Review.

HM Treasury launches call for evidence on access to cash

HM Treasury published a call for evidence setting out the government’s aims for protecting access to cash throughout the UK. It seeks views on how the government can ensure the UK maintains an appropriate network of cash withdrawal and deposit-taking facilities over time through legislation, including the potential role of cashback. The government wants to further understand the factors affecting cash acceptance, and is seeking industry views on whether it should give a single regulator overall statutory responsibility for maintaining access to cash. Feedback is sought by 25 November 2020.

Sources: Press release: Access to cash: Call for evidence and  Access to cash: Call for evidence.

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Fintech and cryptoassets

European Parliament publishes summary version of report on fintech sandboxes and hubs

The European Parliament published an ‘at a glance’ briefing on fintech regulatory sandboxes and innovation hubs, which summarises the September 2020 document ‘Regulatory sandboxes and innovation hubs for fintech: Impact on innovation, financial stability and supervisory convergence’. The report and the briefing examine the setting up of regulatory sandboxes and innovation hubs as part of the overall strategies pursued by jurisdictions in response to fintech developments.

Sources: Regulatory sandboxes and innovation hubs for fintech and  Full report.

IA opens applications for fourth fintech cohort

The Investment Association (IA) opened applications for the fourth cohort of fintech innovators to join Engine, its specialist accelerator and innovation hub for the investment management industry. Firms with market-viable technology are being invited to apply for the six-month programme by 11 December 2020.

Source: Investment Association’s fintech hub opens search for new engine cohort.

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Sustainable finance

Loan Market Association publishes guides on green loan principles in real estate investment finance

The Loan Market Association (LMA) launched two new guidance documents highlighting potential applications of the green loan principles (GLP) in the real estate investment finance context. They include analysis of the key considerations that lenders and borrowers should take into account when entering into these types of transactions.

Source: New guidance documents published highlighting potential applications of the GLP in the real estate context.

Pensions and insurance bodies respond to ESA proposals for ESG disclosure templates

Insurance Europe (IE) and PensionsEurope published responses to a survey by the European Supervisory Authorities (ESAs) on proposals for mandatory disclosure templates of pre-contractual and periodic disclosures for products that ‘promote’ environmental, social and governance (ESG) characteristics and products with sustainability objectives under the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (SFDR).

Sources: ESAs’ proposals for ES disclosure templates would not improve transparency for consumers and  PensionsEurope’s response to ESAs' survey on templates for ESG product disclosures.

Bank of England considers role of capital markets in tackling climate change

Executive Director for Markets at the BoE, Andrew Hauser, noted the role capital markets, including asset managers, have to play in tackling climate change. In a speech delivered to the Investment Association on 16 October 2020, Hauser detailed the three main ways to build more effective capital markets infrastructure, namely, climate disclosure, climate-linked capital instruments and climate-focused asset allocation strategies.

Source: From hot air to cold hard facts: how financial markets are finally getting a grip on how to price climate risk and return – and what needs to happen next - speech by Andrew Hauser.

AFME/ISDA joint response to ECB Guide on Climate and Environmental risks

The Association for Financial Markets in Europe (AFME) and ISDA published a joint response to the ECB Guide on Climate and Environmental risks. AFME and ISDA note, amongst other things, that the ECB has, for the second year in a row, identified climate-related and environmental risks as a key risk driver in the Single Supervisory Mechanism Risk Map for the euro area banking system.

Source: ECB Guide on Climate and Environmental risks—AFME and ISDA response (general comments) September 2020.

BIS publishes speech on a 'new regulatory and policy landscape for sustainable finance’

The co-chair of the Task Force on Climate-related Financial Risks (TFCR) of the Basel Committee on Banking Supervision, Kevin J Stiroh, has given a speech at a panel session on the new regulatory and policy landscape for sustainable finance, at the 2020 IIF Annual Membership Meeting, 14 October 2020.

Source: The Basel Committee’s initiatives on climate-related financial risks.

CLLS and Law Society respond to FCA consultation on climate-related disclosures

The City of London Law Society (CLLS) published a paper prepared by a joint working party of the company law committees of the CLLS and the Law Society of England and Wales in response to the FCA’s consultation paper CP20/3: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations.

Source: City of London Law Society Company Law Committee: FCA consultation paper CP20/3: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligation.

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Dates for your diary

 

DateSubjectEvent

 

23 October 2020

 

 

Banks and mutuals

 

 

Deadline for responses to the PRA’s consultation paper (CP10/20): ‘Simplified obligations for recovery planning’. This sets out proposed changes to supervisory statement SS9/17 ‘Recovery planning’, which will simplify and reduce certain firms’ obligations under the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) (Simplified obligations).

 

23 October 2020

 

Prudential requirements

 

Deadline for responses to the EBA’s consultation paper (EBA/CP/2020/14) on draft regulatory technical standards (RTS) under Article 390(9) of Regulation (EU) 575/2013 (CRR), as amended by Regulation (EU) 2019/876 (CRR II). The draft RTS specify how institutions should determine indirect credit exposures to underlying clients of derivatives and credit default derivatives.

 

25 October 2020

 

Financial crime



Fintech and cryptoassets

 

Deadline for responses to HM Treasury consultation on its proposal to bring certain cryptoassets into the scope of financial promotions regulation.

 

25 October 2020Financial crime

Deadline for responses to HM Treasury consultation on its proposals to establish a regulatory ‘gateway’ through which authorised firms must pass before they can approve the financial promotions of unauthorised firms.

 

26 October 2020

 

Fintech and cryptoassets

 

Deadline for responses to IOSCO’s consultation on proposed guidance that member jurisdictions may consider adopting to address the conduct risks associated with the development, testing and deployment of artificial intelligence (AI) and machine learning (ML) by market intermediaries and asset managers.

 

26 October 2020

 

Financial crime

 

The Proceeds of Crime Act 2002 (References to Financial Investigators) (Amendment) (England and Wales) Order 2020 comes into force.

 

27 October 2020

 

Regulation of benchmarks and IBOR reform

 

The BoE published a joint statement with the FCA which states that, following close engagement with market participants, the FCA and BoE support and encourage liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA instead of LIBOR from 27 October 2020.

 

28 October 2020

 

Regulation of derivatives

 

The European Union Agency for the Cooperation of Energy Regulators (ACER) launched a call for experts to form a new consultative expert group on wholesale energy market trading. Applications are invited by 28 October 2020.

 

 

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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.