FS weekly highlights—23 April 2020

FS weekly highlights—23 April 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
Conduct requirements
Complaints, compensation and claims management
Competition in financial services
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Securities financing transactions
PRIIPs
Crowdfunding
Banks and mutuals
Consumer credit, mortgage and home finance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

Coronavirus (COVID-19)—ECB Banking Supervision provides temporary relief for capital requirements for market risk

The European Central Bank (ECB) announced a temporary reduction in capital requirements for market risk, by reducing a supervisory measure for banks—the qualitative market risk multiplier—which is set by supervisors and is used to compensate for the possible underestimation by banks of their capital requirements for market risk. This is a response to the extraordinary levels of volatility recorded in financial markets since the coronavirus (COVID-19) outbreak. As well as smoothing procyclicality, it aims to maintain banks’ ability to provide market liquidity and to continue market-making activities.

Source: ECB Banking Supervision provides temporary relief for capital requirements for market risk.

Coronavirus (COVID-19)—President of ECB makes statement

The President of the ECB, Christine Lagarde, released a statement at the 41st meeting of the International Monetary and Financial Committee regarding the coronavirus (COVID-19) pandemic. Lagarde stated that ‘in the euro area, we have taken decisive action to mitigate the impact of the crisis over recent weeks. However, a global challenge of this nature also needs to be met with global solutions.’

Source: IMFC Statement.

ECB regulation on extension of deadlines for statistical reporting published in Official Journal

Regulation (EU) 2020/533 of the ECB of 15 April 2020 on the extension of deadlines for the reporting of statistical information (ECB/2020/23) was published in the Official Journal of the EU. This regulation delegates to the Executive Board of the ECB power to extend the deadlines for the reporting of certain statistical information where necessary because of the impact of the coronavirus (COVID-19) pandemic and enters into force on 18 April 2020.

Source: Regulation (EU) 2020/533 of the European Central Bank of 15 April 2020 on the extension of deadlines for the reporting of statistical information (ECB/2020/23).

Coronavirus (COVID-19)—ESMA publishes new Q&A on alternative performance measures

The European Securities and Markets Authority (ESMA) added a new Q&A to its Q&As on the ESMA Guidelines on Alternative Performance Measures (APMs) to provide detailed guidance to issuers on the application of the APM Guidelines in the context of the coronavirus (COVID-19) pandemic.

Source: ESMA issues new Q&A on alternative performance measures in the context of COVID-19.

ESMA agrees to five short selling bans on national competent authorities due to coronavirus (COVID-19)

ESMA issued an official opinion agreeing to the renewal of the emergency restrictions on short selling and similar transactions by the Finanzmarktaufsicht (FMA) of Austria, the Financial Securities and Markets Authority (FSMA) of Belgium, the Autorité des Marchés Financiers (AMF) of France, the Hellenic Capital Market Commission (HCMC) of Greece and the Comisión Nacional del Mercado de Valores (CNMV) of Spain. All five national competent authorities (NCA) imposed restrictions in March 2020 due to the coronavirus (COVID-19) pandemic, which were due to expire in April 2020. The NCAs decided to renew the restrictions until 18 May with the possibility of further extension, as approved by ESMA. The restrictions may be lifted before the deadline if the risks of a loss of market confidence is reduced.

Source: ESMA ISSUES POSITIVE OPINIONS ON SHORT SELLING BANS BY AUSTRIAN FMA, BELGIAN FSMA, FRENCH AMF, GREEK HCMC AND SPANISH CNMV.

For further information on short selling, see:  An introduction to short selling and  Different types of short selling.

ESMA publishes thirteenth edition of its newsletter

ESMA published the thirteenth edition of its newsletter. The newsletter notes that ESMA has launched its new page on coronavirus (COVID-19) as it continues to closely monitor the situation in view of the impact the virus is having on EU financial markets. Also in this issue, ESMA take a closer look at its full list of publications and at some important statements delivered by its chair, Steven Maijoor, on the measures ESMA has taken to address the effects of COVID-19.

Source: ESMA Newsletter—Nº13.

Coronavirus (COVID-19)—Dombrovskis and EU finance ministers emphasise the importance of banks in tackling the economic impact of the pandemic

Executive Vice-President of the European Commission, Valdis Dombrovskis and EU ministers of finance published remarks following the virtual Economic and Financial Affairs Council (ECOFIN) meeting which took place on 16 April 2020. Both stress the importance of banks in continuing to finance European companies and households.

Sources: ECOFIN: press remarks by EVP Dombrovskis on EU's response to the economic impact of COVID19 and Statement of EU ministers of finance on continuing bank lending and on maintaining a well-functioning insurance sector amid the COVID-19 pandemic.

Coronavirus data-sf-ec-immutable="" (COVID-19)—G20 financial services communique

The G20 published a communique following an urgent virtual meeting of finance ministers and central bank governors on 15 April 2020 due to the coronavirus (COVID-19) pandemic. The communique covers a number of aspects that are relevant to the regulation of various financial services sectors during the pandemic.

Source: G20 communique from April 2020 meeting of finance ministers and central bank governors: financial services aspects.

John Glen praises ‘herculean efforts’ of frontline financial services workers

The economic secretary to the Treasury, John Glen, wrote to frontline bank, building society, credit union and Post Office staff working to provide essential banking services. In the letter, Glen thanks them for their hard work during the coronavirus (COVID-19) pandemic.

Source: Letter to front line staff providing essential banking services.

Coronavirus (COVID-19)—PRA publishes Q&A on the usability of liquidity and capital buffers

The Prudential Regulation Authority (PRA) published a document to answer some commonly asked questions on the usability of liquidity and capital buffers and their operation as set out in PRA rules and guidelines and in response to the coronavirus (COVID-19) outbreak.

Source: PRA Q&A on the usability of liquidity and capital buffers.

For further information, see:  CRD IV capital buffers.

Coronavirus (COVID-19)—FCA extends submission deadlines for regulatory returns

Given the impact of coronavirus, the Financial Conduct Authority (FCA) extended the submission deadlines for firms submitting certain regulatory returns that are due up to and including 30 June 2020; these are listed on its new webpage and include returns required by chapter 16 of the FCA’s Supervision Manual (SUP16). Over the coming weeks the FCA will continue to monitor the situation and will keep these changes under review.

Source: FCA webpage—Changes to regulatory reporting up to 30 June 2020.

Coronavirus (COVID-19)—FCA proposes measures for motor finance and high cost credit customers

The FCA announced an additional proposed package of measures aimed at supporting consumers encountering payment issues following the coronavirus (COVID-19) pandemic. The measures are intended to be temporary and cover motor finance and high cost credit agreements, including high-cost short-term credit (including payday loans), buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking. The FCA is seeking comments on its proposals by 5pm on 20th April 2020 and expects to finalise proposals by 24 April 2020. The short timescale for this work is in recognition of the significant impact coronavirus is having on consumers' finances right now.

Sources: FCA proposes help for motor finance and high cost credit customersCOVID-19 MOTOR FINANCE AND HIGH COST CREDIT INSTRUMENT 2020Motor finance agreements and coronavirus: draft temporary guidance for firmsHigh-cost short-term credit and coronavirus: draft temporary guidance for firms and  Rent-to-own, buy-now pay-later and pawnbroking agreements and coronavirus: draft temporary guidance for firms.

For further information, see  Consumer credit—essentials and  The regulation of high-cost short-term credit (payday lending).

Coronavirus (COVID-19)—FCA sets out expectations for wet-ink signatures in light of pandemic restrictions

The FCA published a webpage which sets out the regulator’s expectations of firms when dealing with the need for 'wet-ink' signatures (ie signing a document by hand using a pen), specifically in relation to agreements and forms.

Source: FCA expectations for wet-ink signatures in light of coronavirus (Covid-19) restrictions.

Coronavirus (COVID-19)—FCA sets out its position on PII for financial advisers

The FCA published a new webpage, setting out its position and the work it is undertaking on the impact the coronavirus (COVID-19) crisis is having on professional indemnity insurance (PII) for financial advisers. The FCA’s position remains that firms need to have PII policies in place.

Source: FCA webpage—Professional indemnity insurance for financial advisers.

Coronavirus (COVID-19)—FCA update on professional qualification requirements

The FCA updated its coronavirus (COVID-19) webpage to provide information on the regulator’s requirements as regards professional qualification exams. The FCA notes that accredited bodies and other professional qualification providers are cancelling exams because of the pandemic, with no specific arrangements in place to reschedule them. This will have an impact on firms that must ensure their employees complete appropriate qualifications within a specific time limit, in line with FCA requirements. Accordingly, the FCA is extending time limits within which certain employees need to have attained qualifications.

Source: FCA COVID-19 update—professional exams.

Coronavirus (COVID-19)—FCA updates expectations on firm resilience for FCA solo-regulated firms

The FCA updated its webpage which sets out its expectations of how firms should continue operating in light of the coronavirus (COVID-19) outbreak.

Source: FCA’s expectations on financial resilience for FCA solo-regulated firms – statement update.

Coronavirus (COVID-19)—FCA updates webpage

The Financial Conduct Authority (FCA) has updated its webpage on coronavirus (COVID-19) to include information on the revised cross border payments regulation (Regulation (EU) 2019/518 amending Regulation (EC) No 924/2009). The update includes information on the EU Commissions statement on 9 April which ‘reminds payment service providers of the forthcoming application date of 19 April for currency conversion transparency requirements’. The FCA recognises that during the pandemic it may be hard to apply the requirements and understands that national competent authorities may have to enforce the new rules in a flexible manner.

Source: FCA information for firms on coronavirus (Covid-19) response.

PSR extends deadline for its call for input on competition and innovation in the NPA

The Payment Systems Regulator (PSR) extended the deadline for its call for input on competition and innovation in the UK's New Payments Architecture (NPA). The new deadline is 1 May 2020 at 5pm.

Source: Update on our call for input: Competition and innovation in the UK's New Payments Architecture.

Coronavirus (COVID-19)—IA guidelines on UK equity income and global equity income sectors

New guidelines have been issued by the Investment Association (IA) on the UK equity income and global equity income sectors, to ensure that in light of the coronavirus COVID-19 pandemic they can continue to function effectively in the best interests of savers and investors.

Source: IA issues new guidance on equity income sectors in light of COVID-19.

Coronavirus (COVID-19)—AFME finds Europe’s capital markets have performed well despite market stress from pandemic

The Association for Financial Markets in Europe (AFME) published new research on the initial impact of the coronavirus COVID-19 on Europe’s capital markets. The report analyses the recent trends during the current abnormal market circumstances. It also summarises AFME’s approach to COVID-19 and the areas AFME has been focusing on to ensure that markets remain well-functioning and liquid.

Source: AFME data finds Europe’s capital markets have performed well despite market stress from COVID-19.

Coronavirus (COVID-19)—UK Finance collaborates to stop scam text messages

The UK mobile industry, banking and finance sector and the National Cyber Security Centre (NCSC) launched an initiative targeting scam text messages exploiting the coronavirus COVID-19 crisis. It aims to identify and block fraudulent SMS texts, and safeguard messages from legitimate businesses and organisations.

Source: Banking and mobile industries unite to tackle COVID-19 text message scams.

Coronavirus (COVID-19)—UK Finance welcomes extension of CBIL scheme to large firms

The chief executive of UK Finance, Stephen Jones, responded to the announcement by the chancellor of the exchequer, Rishi Sunak, of further details of the Coronavirus Large Business Interruption Loan Scheme, saying banks and finance providers are committed to helping British businesses. Jones said over £1.1bn had already been lent to small and medium-sized firms through the CBIL scheme, and the launch of the new scheme for larger businesses will help to expand this support during challenging economic conditions.

Source: UK Finance responds to the chancellor’s announcement of the expansion of the coronavirus loan scheme for larger businesses.

Coronavirus (COVID-19)—arrests and confiscations in crack down on pandemic-related scams

The Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit funded by the banking industry, executed several warrants across the UK in a crackdown on criminals sending scam text messages and emails exploiting the coronavirus COVID-19 outbreak.

Source: Banking industry-funded police unit cracks down on COVID-19 text message scams.

Coronavirus (COVID-19)—protecting people affected by dementia from financial fraud

The Personal Finance Society (PFS) published a four-step guide on ways to avoid coronavirus scams. The guide has been developed by Insurance United Against Dementia, a movement of the charity Alzheimer’s Society created and championed by leaders from across the insurance sector aiming to galvanise the industry to support people living with dementia and fund vital research.

Source: Coronavirus scams on vulnerable people.

Coronavirus (COVID-19)—FSI publishes briefing on expected loss provisioning

The Financial Stability Institute (FSI) published a briefing paper on expected loss provisioning under a global pandemic, which notes that prudential authorities face difficult trade-offs as they confront the most severe economic crisis in modern times. The paper argues that encouraging the use of flexibility in applicable accounting standards, while preserving market trust and transparency in the reported financial statements of banks, will be key in fostering both economic and financial stability.

Source: Expected loss provisioning under a global pandemic.

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Brexit news

Financial Services (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 proposed to amend 16 pieces of UK secondary legislation, five pieces of retained EU legislation, and revoke two pieces 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 the day after the day on which these Regulations are made and fully on IP completion day.

Source: The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 and  draft explanatory memorandum.

FCA publishes information for prospective UK securitisation repositories

The FCA updated its securitisation webpage to add a new section on securitisation repositories (SR). The new section provides information on the transfer of powers to register and supervise UK SRs from the European Securities and Markets Authority (ESMA) to the FCA at the end of the Brexit transition period, and outlines what prospective UK SRs should be doing to prepare.

Source: Updated FCA webpage: Securitisation.

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MiFID II

Council of the EU publishes final compromise texts for crowdfunding proposals

The Council of the EU published final compromise texts for two proposals relating to crowdfunding—the proposed Regulation on European crowdfunding service providers for business and amending the Prospectus Regulation (EU) 2017/1129 (the ECSP Regulation) and the proposed directive amending the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) in relation to crowdfunding (the Amending Directive).

Sources: Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and amending Regulation (EU) No 2017/1129 and Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments—Confirmation of the final compromise text with a view to agreementProposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and amending Regulation (EU) No 2017/1129—Confirmation of the final compromise text with a view to agreementProposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments—Confirmation of the final compromise text with a view to agreement and  Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and amending Regulation (EU) No 2017/1129 and Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments—Confirmation of the final compromise text with a view to agreement (correction).

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UK, EU and international regulators and bodies

ECB regulation on extension of deadlines for statistical reporting published in Official Journal

Regulation (EU) 2020/533 of the ECB of 15 April 2020 on the extension of deadlines for the reporting of statistical information (ECB/2020/23) has been published in the Official Journal of the EU. This regulation delegates to the Executive Board of the ECB power to extend the deadlines for the reporting of certain statistical information where necessary because of the impact of the coronavirus (COVID-19) pandemic and enters into force on 18 April 2020.

Source: Regulation (EU) 2020/533 of the European Central Bank of 15 April 2020 on the extension of deadlines for the reporting of statistical information (ECB/2020/23).

Regulator network outlines achievements and future approach in annual report

The UK Regulators Network (UKRN) released its annual report and 2020-2021 work plan. In the report and work plan, its authors outline the organisation’s achievements and its approach for the future. The report focuses on three priority areas, namely collaboration on infrastructure and investment, using data to support consumers in vulnerable circumstances and working better together.

Source: UKRN publishes its Annual Report and Workplan for 2020/21.

ESMA publishes thirteenth edition of its newsletter

ESMA published the thirteenth edition of its newsletter. The newsletter notes that ESMA has launched its new page on coronavirus (COVID-19) as it continues to closely monitor the situation in view of the impact the virus is having on EU financial markets. Also in this issue, ESMA take a closer look at its full list of publications and at some important statements delivered by its chair, Steven Maijoor, on the measures ESMA has taken to address the effects of COVID-19.

Source: ESMA Newsletter—Nº13.

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Authorisation, approval and supervision

Coronavirus (COVID-19)—FCA extends submission deadlines for regulatory returns

Given the impact of coronavirus, the FCA extended the submission deadlines for firms submitting certain regulatory returns that are due up to and including 30 June 2020; these are listed on its new webpage and include returns required by chapter 16 of the FCA’s Supervision Manual (SUP16). Over the coming weeks the FCA will continue to monitor the situation and will keep these changes under review.

Source: FCA webpage—Changes to regulatory reporting up to 30 June 2020.

Coronavirus (COVID-19)—FCA update on professional qualification requirements

The FCA updated its coronavirus (COVID-19) webpage to provide information on the regulator’s requirements as regards professional qualification exams. The FCA notes that accredited bodies and other professional qualification providers are cancelling exams because of the pandemic, with no specific arrangements in place to reschedule them. This will have an impact on firms that must ensure their employees complete appropriate qualifications within a specific time limit, in line with FCA requirements. Accordingly, the FCA is extending time limits within which certain employees need to have attained qualifications.

Source: FCA COVID-19 update—professional exams.

Coronavirus (COVID-19)—FCA sets out its position on PII for financial advisers

The FCA published a new webpage, setting out its position and the work it is undertaking on the impact the coronavirus (COVID-19) crisis is having on professional indemnity insurance (PII) for financial advisers. The FCA’s position remains that firms need to have PII policies in place.

Source: FCA webpage—Professional indemnity insurance for financial advisers.

Coronavirus (COVID-19)—FCA sets out expectations for wet-ink signatures in light of pandemic restrictions

The FCA published a webpage which sets out the regulator’s expectations of firms when dealing with the need for 'wet-ink' signatures (ie signing a document by hand using a pen), specifically in relation to agreements and forms.

Source: FCA expectations for wet-ink signatures in light of coronavirus (Covid-19) restrictions.

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Prudential requirements

EBA agrees European Commission’s amendments to draft RTS on risk weights for specialised lending exposures

The EBA published its opinion on the European Commission’s proposed amendments the EBA’s final draft regulatory technical standards (RTS) on assigning risk weights to specialised lending exposures under Article 153(9) of Regulation (EU) 575/2013 (Capital Requirements Regulation). The EBA submitted the final draft RTS to the Commission on 13 June 2016. The EBA is of the view that the proposed changes do not alter the draft RTS in a significant manner, as they still maintain a good balance between the flexibility and risk sensitivity required for the IRB approach and the need for a harmonised regulatory framework.

Sources: EBA agrees with the European Commission’s amendments to standards on risk weights to specialised lending exposures and  Opinion of the European Banking Authority on the European Commission’s amendments relating to the final draft Regulatory Technical Standards on Assigning Risk Weights to Specialised Lending Exposures under Article 153(9) of Regulation (EU) No 575/2013.

For further information, see CRD IV—essentials.

Coronavirus (COVID-19)—PRA publishes Q&A on the usability of liquidity and capital buffers

The PRA published a document to answer some commonly asked questions on the usability of liquidity and capital buffers and their operation as set out in PRA rules and guidelines and in response to the coronavirus (COVID-19) outbreak.

Source: PRA Q&A on the usability of liquidity and capital buffers.

For further information, see: CRD IV capital buffers.

Coronavirus (COVID-19)—ECB Banking Supervision provides temporary relief for capital requirements for market risk

The ECB announced a temporary reduction in capital requirements for market risk, by reducing a supervisory measure for banks—the qualitative market risk multiplier—which is set by supervisors and is used to compensate for the possible underestimation by banks of their capital requirements for market risk. This is a response to the extraordinary levels of volatility recorded in financial markets since the coronavirus (COVID-19) outbreak. As well as smoothing procyclicality, it aims to maintain banks’ ability to provide market liquidity and to continue market-making activities.

Source: ECB Banking Supervision provides temporary relief for capital requirements for market risk.

Coronavirus (COVID-19)—FCA updates expectations on firm resilience for FCA solo-regulated firms

The FCA updated its webpage which sets out its expectations of how firms should continue operating in light of the coronavirus (COVID-19) outbreak.

Source: FCA’s expectations on financial resilience for FCA solo-regulated firms – statement update.

Coronavirus (COVID-19)—FSI publishes briefing on expected loss provisioning

The FSI published a briefing paper on expected loss provisioning under a global pandemic, which notes that prudential authorities face difficult trade-offs as they confront the most severe economic crisis in modern times. The paper argues that encouraging the use of flexibility in applicable accounting standards, while preserving market trust and transparency in the reported financial statements of banks, will be key in fostering both economic and financial stability.

Source: Expected loss provisioning under a global pandemic.

EBA updates confidentiality equivalence guidelines

The EBA updated its guidelines on the equivalence of confidentiality and professional secrecy regimes (the Guidelines) by adding the New York State Department of Financial Services (United States) to the current list of non-EU supervisory authorities whose confidentiality regimes can be regarded as equivalent.

Source: EBA issues updated Guidelines on equivalence of non-EU authorities for participation in supervisory colleges.

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Financial stability 

ECB paper discusses dynamics of NPLs during banking crises

The ECB published a working paper, ‘The dynamics of non-performing loans during banking crises: a new database’. This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises in 78 countries since 1990. This includes all major regional and global crises during this period (eg, the Nordic banking crisis, the Asian financial crisis, the GFC/Euro Area crisis), and numerous standalone crises in transition and low-income economies. For each crisis, NPLs are reported over an 11-year long window that starts three years before the crisis and extends to seven years afterwards.

Source: The dynamics of non-performing loans during banking crises: a new database.

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Risk management and controls

FSB consults on cyber incident response and recovery toolkit

The Financial Stability Board (FSB) published a consultation report on Effective Practices for Cyber Incident Response and Recovery, which was sent to G20 Finance Ministers and Central Bank Governors for their virtual meeting on 15 April 2020. The toolkit of effective practices aims to assist financial institutions in their cyber incident response and recovery activities. The final toolkit, taking on board the feedback from this public consultation will be sent to the October G20 Finance Ministers and Central Bank Governors meeting and published.

Source: FSB consults on effective practices for cyber incident response and recovery.

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Financial crime

FOS paper on how to avoid scams and fraud

The Financial Ombudsman Service (FOS) published an insight paper on how to avoid scams and fraud. Recent scam emails FOS has seen cover topics such as free school meals and coronavirus cash sums.

Source: Avoiding scams and fraud: help from the ombudsman.

Coronavirus (COVID-19)—UK Finance collaborates to stop scam text messages

The UK mobile industry, banking and finance sector and the NCSC launched an initiative targeting scam text messages exploiting the coronavirus COVID-19 crisis. It aims to identify and block fraudulent SMS texts, and safeguard messages from legitimate businesses and organisations.

Source: Banking and mobile industries unite to tackle COVID-19 text message scams.

Coronavirus (COVID-19)—arrests and confiscations in crack down on pandemic-related scams

The DCPCU, a specialist police unit funded by the banking industry, executed several warrants across the UK in a crackdown on criminals sending scam text messages and emails exploiting the coronavirus COVID-19 outbreak.

Source: Banking industry-funded police unit cracks down on COVID-19 text message scams.

Coronavirus (COVID-19)—protecting people affected by dementia from financial fraud

The PFS published a four-step guide on ways to avoid coronavirus scams. The guide has been developed by Insurance United Against Dementia, a movement of the charity Alzheimer’s Society created and championed by leaders from across the insurance sector aiming to galvanise the industry to support people living with dementia and fund vital research.

Source: Coronavirus scams on vulnerable people.

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Consumer protection

Coronavirus (COVID-19)—protecting people affected by dementia from financial fraud

The PFS published a four-step guide on ways to avoid coronavirus scams. The guide has been developed by Insurance United Against Dementia, a movement of the charity Alzheimer’s Society created and championed by leaders from across the insurance sector aiming to galvanise the industry to support people living with dementia and fund vital research.

Source: Coronavirus scams on vulnerable people.

FOS paper on how to avoid scams and fraud

The FOS published an insight paper on how to avoid scams and fraud. Recent scam emails FOS has seen cover topics such as free school meals and coronavirus cash sums.

Source: Avoiding scams and fraud: help from the ombudsman.

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Conduct requirements

Coronavirus (COVID-19)—FCA sets out expectations for wet-ink signatures in light of pandemic restrictions

The FCA published a webpage which sets out the regulator’s expectations of firms when dealing with the need for 'wet-ink' signatures (ie signing a document by hand using a pen), specifically in relation to agreements and forms.

Source: FCA expectations for wet-ink signatures in light of coronavirus (Covid-19) restrictions.

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Complaints, compensation and claims management

CMA announces Metro Bank customers receive £10.5m overdraft fee refund

The Competition and Markets Authority (CMA) announced that Metro Bank has committed to repay more than £10.5m after it breached a legal order by failing to send texts warning people about unarranged overdraft charges.

Source: Metro Bank customers receive £10.5m overdraft fee refund.

Complaints Commissioner reiterates calls for FCA/BoE consultation on complaints scheme

The Office of the Complaints Commissioner (OCC) published its final report (FCA00700), dated 3 April 2020, concerning a complaint made against the Financial Conduct Authority (FCA) with regards to its handling of regulatory applications and decisions affecting the complainant and firms that the complainant was involved with. The Commissioner’s report reiterates calls for the FCA and Bank of England (BoE) to issue a consultation on proposals to improve the Complaints Scheme, including clarity on compensation. The report also addresses ex-gratia payments, and third-party rights.

Source: FCA00700—Issued 3 April 2020. Published 21 April 2020 / FCA response.

FCA complaint figures increase is due to an increase in PPI complaints

The FCA released data which shows the complaint figures for regulated firms for the second half of 2019. The data shows that the number of complaints have increased, from 4.29m in the first half of 2019 to 6.02m in the second half. The FCA has stated that the increase is due to a 75% increase in the volume of PPI complaints received (from 2.12m to 3.71m) which made up 62% of all complaints received. This is the highest number of PPI complaints to be reported to the FCA.

Source: FCA data show 6.02m complaints in the second half of 2019.

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Competition in financial services

CMA announces Metro Bank customers receive £10.5m overdraft fee refund

The Competition and Markets Authority (CMA) announced that Metro Bank has committed to repay more than £10.5m after it breached a legal order by failing to send texts warning people about unarranged overdraft charges.

Source: Metro Bank customers receive £10.5m overdraft fee refund.

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Regulation of benchmarks and IBOR reform

ESMA signs MOU on Singapore benchmarks

ESMA and the Monetary Authority of Singapore (MAS) signed a memorandum of understanding (MoU) which completes the process to allow the use of Singapore’s financial benchmarks in the EU. As a result, financial institutions in the EU will be able to continue using SIBOR and the Singapore Dollar Swap Offer Rate (SOR) as reference rates in their contracts.

Source: ESMA and MAS sign MOU on Singapore’s financial benchmarks.

ISDA publishes Interest Rate Benchmarks Review for first quarter 2020

The International Swaps and Derivatives Association (ISDA) released its Interest Rate Benchmarks Review for the first quarter of 2020. The review analyses trading volumes of interest rate derivatives transactions in the US, referencing the Secured Overnight Financing Rate (SOFR) and other selected alternative risk-free rates (RFRs), including the Sterling Overnight Index Average (SONIA), the Swiss Average Rate Overnight (SARON), the Tokyo Overnight Average Rate (TONA) and the Euro Short-Term Rate (€STR). In addition, the report analyses IRD-traded notional referencing LIBOR denominated in US dollars, sterling, Swiss franc, yen and euro, as well as EURIBOR and TIBOR.

Source: Interest Rate Benchmarks Review: First quarter of 2020.

ISDA releases preliminary results for its consultation on pre-cessation fallbacks

ISDA released preliminary results for its consultation on pre-cessation fallbacks for derivatives references to LIBOR. The preliminary results show that ‘a significant majority of respondents are in favor of including both pre-cessation and permanent cessation fallbacks as standard language in the amended 2006 ISDA Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades’. The results are going to be examined further by ISDA, but ISDA expects ‘to move forward on the basis that pre-cessation fallbacks would apply to all new and legacy derivatives referencing LIBOR that incorporate the amended 2006 ISDA Definitions. The updated definitions for other covered interbank offered rates (IBORs) will continue to include permanent cessation fallbacks only’.

Source: ISDA Announces Preliminary Results of Consultation on Pre-cessation Fallbacks for LIBOR.

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Regulation of capital markets

ECSDA updates the CSDR settlement fail penalties framework

The European Central Securities Depositories Association (ECSDA) updated the ECSDA Central Securities Depositories Regulation Settlement Fail Penalties Framework (the ECSDA Framework). It can be used by Central Securities Depositories (CSDs) and their participants as a market practice on how CSDs should develop harmonised settlement fail penalties mechanisms, under the CSD Regulation (EU 909/2014) and its standards (CSDR). Updated items in the document are highlighted in grey.

Source: ECSDA updates the CSDR settlement fail penalties framework.

For further information, see: Central Securities Depositories Regulation—essentials.

ESMA agrees to five short selling bans on national competent authorities due to coronavirus (COVID-19)

ESMA issued an official opinion agreeing to the renewal of the emergency restrictions on short selling and similar transactions by the Finanzmarktaufsicht (FMA) of Austria, the Financial Securities and Markets Authority (FSMA) of Belgium, the Autorité des Marchés Financiers (AMF) of France, the Hellenic Capital Market Commission (HCMC) of Greece and the Comisión Nacional del Mercado de Valores (CNMV) of Spain. All five national competent authorities (NCA) imposed restrictions in March 2020 due to the coronavirus (COVID-19) pandemic, which were due to expire in April 2020. The NCAs decided to renew the restrictions until 18 May with the possibility of further extension, as approved by ESMA. The restrictions may be lifted before the deadline if the risks of a loss of market confidence is reduced.

Source: ESMA ISSUES POSITIVE OPINIONS ON SHORT SELLING BANS BY AUSTRIAN FMA, BELGIAN FSMA, FRENCH AMF, GREEK HCMC AND SPANISH CNMV.

For further information on short selling, see:  An introduction to short selling and   Different types of short selling.

ESMA updates list of market makers and authorised primary dealers using exemption under Short Selling Regulation

ESMA updated its list of market makers and authorised primary dealers who are using the exemption under Article 17 of Regulation (EU) 236/2012 (the Short Selling Regulation).

Source: List of market makers and authorised primary dealers who are using the exemption under the Regulation on short selling and credit default swaps.

Coronavirus (COVID-19)—ESMA publishes new Q&A on alternative performance measures

ESMA added a new Q&A to its Q&As on the ESMA Guidelines on Alternative Performance Measures (APMs) to provide detailed guidance to issuers on the application of the APM Guidelines in the context of the coronavirus (COVID-19) pandemic.

Source: ESMA issues new Q&A on alternative performance measures in the context of COVID-19.

Coronavirus (COVID-19)—AFME finds Europe’s capital markets have performed well despite market stress from pandemic

AFME published new research on the initial impact of the coronavirus COVID-19 on Europe’s capital markets. The report analyses the recent trends during the current abnormal market circumstances. It also summarises AFME’s approach to COVID-19 and the areas AFME has been focusing on to ensure that markets remain well-functioning and liquid.

Source: AFME data finds Europe’s capital markets have performed well despite market stress from COVID-19.

FCA publishes information for prospective UK securitisation repositories

The FCA updated its securitisation webpage to add a new section on securitisation repositories (SR). The new section provides information on the transfer of powers to register and supervise UK SRs from the European Securities and Markets Authority (ESMA) to the FCA at the end of the Brexit transition period, and outlines what prospective UK SRs should be doing to prepare.

Source: Updated FCA webpage: Securitisation.

The 2020 ICMA legal opinions support the Global Master Repurchase Agreement

International Capital Market Association (ICMA) published the 2020 legal opinions on 16 April 2020, which support the Global Master Repurchase Agreement (GMRA). The GMRA is the standard agreement for international repo transactions.

Source: ICMA publishes 2020 legal opinions on global master repo agreement.

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Regulation of derivatives

ISDA publishes Interest Rate Benchmarks Review for first quarter 2020

The International Swaps and Derivatives Association (ISDA) released its Interest Rate Benchmarks Review for the first quarter of 2020. The review analyses trading volumes of interest rate derivatives transactions in the US, referencing the Secured Overnight Financing Rate (SOFR) and other selected alternative risk-free rates (RFRs), including the Sterling Overnight Index Average (SONIA), the Swiss Average Rate Overnight (SARON), the Tokyo Overnight Average Rate (TONA) and the Euro Short-Term Rate (€STR). In addition, the report analyses IRD-traded notional referencing LIBOR denominated in US dollars, sterling, Swiss franc, yen and euro, as well as EURIBOR and TIBOR.

Source: Interest Rate Benchmarks Review: First quarter of 2020.

ISDA releases preliminary results for its consultation on pre-cessation fallbacks

ISDA released preliminary results for its consultation on pre-cessation fallbacks for derivatives references to LIBOR. The preliminary results show that ‘a significant majority of respondents are in favor of including both pre-cessation and permanent cessation fallbacks as standard language in the amended 2006 ISDA Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades’. The results are going to be examined further by ISDA, but ISDA expects ‘to move forward on the basis that pre-cessation fallbacks would apply to all new and legacy derivatives referencing LIBOR that incorporate the amended 2006 ISDA Definitions. The updated definitions for other covered interbank offered rates (IBORs) will continue to include permanent cessation fallbacks only’.

Source: ISDA Announces Preliminary Results of Consultation on Pre-cessation Fallbacks for LIBOR.

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Investment funds and asset management

Investment Association rebrands former ‘Velocity’ fintech hub as ‘Engine’

The IA announced that its six-month fintech accelerator programme and fintech hub, formerly known as Velocity, will be rebranded ‘Engine’, and has unveiled the latest five firms chosen to take part in the programme. The IA has also announced the launch of its new Global Fintech Partners Programme.

Source: First cohort of firms join rebranded IA fintech hub—Engine.

Coronavirus (COVID-19)—IA guidelines on UK equity income and global equity income sectors

New guidelines have been issued by the IA on the UK equity income and global equity income sectors, to ensure that in light of the coronavirus COVID-19 pandemic they can continue to function effectively in the best interests of savers and investors.

Source: IA issues new guidance on equity income sectors in light of COVID-19.

International Capital Market Association responds to EU Ecolabel consultation

The International Capital Market Association’s (ICMA) Asset Management and Investors Council (AMIC) has responded to the European Commission’s consultation on the EU Ecolabel. AMIC has said the idea of an EU quality stamp is supported for environmental, social and governance (ESG) retail investment funds, but warns that changes are required to ensure the success of the new label.

Source: ICMA AMIC publishes its response to the EC consultation on the EU Ecolabel for financial products.

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Securities financing transactions

ICMA’s ERCC publishes updated guide to reporting under the SFTR

The International Capital Market Association (ICMA) European Repo and Collateral Council (ERCC) updated its guide to reporting repo transactions under the EU Securities Financing Transactions Regulation (Regulation 2015/2365) (SFTR). Among other things, the updated guide reflects the recently granted three-month delay to the first phase of the SFTR go-live.

Source: ICMA ERCC releases updated version of its SFTR recommendations.

For further information, see:  Securities Financing Transactions Regulation (SFTR)—essentials.

The 2020 ICMA legal opinions support the Global Master Repurchase Agreement

International Capital Market Association (ICMA) published the 2020 legal opinions on 16 April 2020, which support the Global Master Repurchase Agreement (GMRA). The GMRA is the standard agreement for international repo transactions.

Source: ICMA publishes 2020 legal opinions on global master repo agreement.

ISLA seeks members for new digital working group

The International Securities Lending Association (ISLA) is forming a new digital working group and inviting member firms to join. The group will initially help to form responses to the European Commission’s consultation on its digital finance strategy and the Bank of England (BoE)’s 7 January 2020 discussion paper on RegTech. ISLA says the working group would then focus on the Common Domain Model (CDM) and other fintech topics.

Source: ISLA to form new digital working group.

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PRIIPs

Better Finance appeals to EU not to reject PRIIPs KID changes

Better Finance and not-for-profit network AGE Platform Europe wrote to the European Parliament’s ECON Committee expressing concern at the European Commission’s potential rejection of the European Supervisory Authorities (ESAs)’ draft regulatory technical standards (RTS) for the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs).

Source: Open letter ECON Committee: ESMA’s and EIOPA’s draft level 2 rules for the Key Information Document (KID) of ‘retail investment products (PRIIPs).

For further information, see:  Packaged Retail and Insurance-based Investment Products (PRIIPs)—essentials.

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Crowdfunding

Council of the EU publishes final compromise texts for crowdfunding proposals

The Council of the EU published final compromise texts for two proposals relating to crowdfunding—the proposed Regulation on European crowdfunding service providers for business and amending the Prospectus Regulation (EU) 2017/1129 (the ECSP Regulation) and the proposed directive amending the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) in relation to crowdfunding (the Amending Directive).

Sources: Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and amending Regulation (EU) No 2017/1129 and Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments—Confirmation of the final compromise text with a view to agreementProposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and amending Regulation (EU) No 2017/1129—Confirmation of the final compromise text with a view to agreementProposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments—Confirmation of the final compromise text with a view to agreement and  Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business and amending Regulation (EU) No 2017/1129 and Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments—Confirmation of the final compromise text with a view to agreement (correction).

For further information on crowdfunding, see: The regulation of crowdfunding platforms.

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Banks and mutuals

Coronavirus (COVID-19)—Dombrovskis and EU finance ministers emphasise the importance of banks in tackling the economic impact of the pandemic

Executive Vice-President of the European Commission, Valdis Dombrovskis and EU ministers of finance have published remarks following the virtual Economic and Financial Affairs Council (ECOFIN) meeting which took place on 16 April 2020. Both stress the importance of banks in continuing to finance European companies and households.

Sources: ECOFIN: press remarks by EVP Dombrovskis on EU's response to the economic impact of COVID19 and Statement of EU ministers of finance on continuing bank lending and on maintaining a well-functioning insurance sector amid the COVID-19 pandemic.

Coronavirus (COVID-19)—ECB Banking Supervision provides temporary relief for capital requirements for market risk

The ECB announced a temporary reduction in capital requirements for market risk, by reducing a supervisory measure for banks—the qualitative market risk multiplier—which is set by supervisors and is used to compensate for the possible underestimation by banks of their capital requirements for market risk. This is a response to the extraordinary levels of volatility recorded in financial markets since the coronavirus (COVID-19) outbreak. As well as smoothing procyclicality, it aims to maintain banks’ ability to provide market liquidity and to continue market-making activities.

Source: ECB Banking Supervision provides temporary relief for capital requirements for market risk.

Coronavirus (COVID-19)—UK Finance welcomes extension of CBIL scheme to large firms

The chief executive of UK Finance, Stephen Jones, responded to the announcement by the chancellor of the exchequer, Rishi Sunak, of further details of the Coronavirus Large Business Interruption Loan Scheme, saying banks and finance providers are committed to helping British businesses. Jones said over £1.1bn had already been lent to small and medium-sized firms through the CBIL scheme, and the launch of the new scheme for larger businesses will help to expand this support during challenging economic conditions.

Source: UK Finance responds to the chancellor’s announcement of the expansion of the coronavirus loan scheme for larger businesses.

John Glen praises ‘herculean efforts’ of frontline financial services workers

The economic secretary to the Treasury, John Glen, wrote to frontline bank, building society, credit union and Post Office staff working to provide essential banking services. In the letter, Glen thanks them for their hard work during the coronavirus (COVID-19) pandemic.

Source: Letter to front line staff providing essential banking services.

EBA updates guide on reporting the IMF Financial Soundness Indicators

The EBA updated its guide on how to report the International Monetary Fund (IMF) Financial Soundness Indicators (FSIs) and published a revised methodological guide on how to compile risk indicators and detailed risk analysis tools. FSIs provide insight into the financial health and soundness of countries’ financial institutions as well as their corporate and household sectors, thus supporting the economic and financial stability analysis.

Source: EBA updates its list of risk indicators, IMF-FSI mapping and respective guides.

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA proposes measures for motor finance and high cost credit customers

The FCA announced an additional proposed package of measures aimed at supporting consumers encountering payment issues following the coronavirus (COVID-19) pandemic. The measures are intended to be temporary and cover motor finance and high cost credit agreements, including high-cost short-term credit (including payday loans), buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking. The FCA is seeking comments on its proposals by 5pm on 20th April 2020 and expects to finalise proposals by 24 April 2020. The short timescale for this work is in recognition of the significant impact coronavirus is having on consumers' finances right now.

Sources: FCA proposes help for motor finance and high cost credit customersCOVID-19 MOTOR FINANCE AND HIGH COST CREDIT INSTRUMENT 2020Motor finance agreements and coronavirus: draft temporary guidance for firmsHigh-cost short-term credit and coronavirus: draft temporary guidance for firms and  Rent-to-own, buy-now pay-later and pawnbroking agreements and coronavirus: draft temporary guidance for firms.

CMA announces Metro Bank customers receive £10.5m overdraft fee refund

The CMA announced that Metro Bank has committed to repay more than £10.5m after it breached a legal order by failing to send texts warning people about unarranged overdraft charges.

Source: Metro Bank customers receive £10.5m overdraft fee refund.

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Payment services and systems

EPC announces results of the poll on the average market share of cash at the POS by 2025 in the euro area

The European Payments Council (EPC) announced results of the poll on the average market share of cash at the point-of-sale (POS) by 2025 in the euro area. According to the poll, almost two thirds of respondents agreed that cash will have a market share of 50% or less by 2025 as a % of the total number of POS payments in the euro area. Slightly over a third of respondents voted for a market share of more than 50%.

Source: Results of the EPC poll on the average market share of cash at the POS by 2025 in the euro area.

Coronavirus (COVID-19)—FCA updates webpage

The FCA updated its webpage on coronavirus (COVID-19) to include information on the revised cross border payments regulation (Regulation (EU) 2019/518 amending Regulation (EC) No 924/2009). The update includes information on the EU Commission’s statement on 9 April which ‘reminds payment service providers of the forthcoming application date of 19 April for currency conversion transparency requirements’. The FCA recognises that during the pandemic it may be hard to apply the requirements and understands that national competent authorities may have to enforce the new rules in a flexible manner.

Source: FCA information for firms on coronavirus (Covid-19) response.

PSR extends deadline for its call for input on competition and innovation in the NPA

The PSR extended the deadline for its call for input on competition and innovation in the UK's NPA. The new deadline is 1 May 2020 at 5pm.

Source: Update on our call for input: Competition and innovation in the UK's New Payments Architecture.

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Fintech and cryptoassets

ISLA seeks members for new digital working group

The International Securities Lending Association (ISLA) is forming a new digital working group and inviting member firms to join. The group will initially help to form responses to the European Commission’s consultation on its digital finance strategy and the Bank of England (BoE)’s 7 January 2020 discussion paper on RegTech. ISLA says the working group would then focus on the Common Domain Model (CDM) and other fintech topics.

Source: ISLA to form new digital working group.

Investment Association rebrands former ‘Velocity’ fintech hub as ‘Engine’

The IA announced that its six-month fintech accelerator programme and fintech hub, formerly known as Velocity, will be rebranded ‘Engine’, and has unveiled the latest five firms chosen to take part in the programme. The IA also announced the launch of its new Global Fintech Partners Programme.

Source: First cohort of firms join rebranded IA fintech hub—Engine.

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Sustainable finance

Council adopts Taxonomy Regulation

The Council of the EU adopted the Taxonomy Regulation at first reading by written procedure. It now needs to be adopted by the European Parliament at second reading, before it can be published in the Official Journal of the EU and enter into force. The Taxonomy Regulation sets out an EU-wide classification system (‘taxonomy’) for ‘environmentally sustainable economic activities’. It is intended to enable the EU to become climate neutral by 2050 and achieve the Paris Agreement's 2030 targets, including a 40% cut in greenhouse gas emissions. It also aims to prevent illegitimate use of the ‘green’ or ‘sustainable’ label (‘green washing’).

Source: Sustainable finance: Council adopts a unified EU classification system.

International Capital Market Association responds to EU Ecolabel consultation

The ICMA Asset Management and Investors Council (AMIC) responded to the European Commission’s consultation on the EU Ecolabel. AMIC has said the idea of an EU quality stamp is supported for environmental, social and governance (ESG) retail investment funds, but warns that changes are required to ensure the success of the new label.

Source: ICMA AMIC publishes its response to the EC consultation on the EU Ecolabel for financial products.

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Dates for your diary

 

DateSubjectEvent
24 April 2020Investment funds and asset management

Deadline for responses to the European Commissions call for tender ‘Disclosure, Inducements and Suitability Rules for Retail Investors Study’.

 

28 April 2020MiFID II

Deadline for responses to ESMA consultation ‘draft technical standards on the provision of investment services and activities in the Union by third-country firms under MiFID II and MiFIR’.

 

30 April 2020Prudential requirements

Deadline for responses to PRA consultation paper CP2/20, Pillar 2A: Reconciling capital requirements and macroprudential buffers.

 

 

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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.