FS weekly highlights—24 October 2019

FS weekly highlights—24 October 2019

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Regulated activities
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Conduct requirements
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

 

FCA updates Brexit preparation webpage with data protection guidance

The Financial Conduct Authority (FCA) updated its webpage setting out guidance for firms preparing for Brexit, flagging the current state of play under the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019. 

ISDA FAQs on no-deal Brexit

The International Swaps and Derivatives Association (ISDA) published no-deal Brexit FAQs which provide a high-level summary of the key impacts of a no-deal Brexit on the over-the-counter derivatives market and ISDA documentation. The FAQs also cover suggested preparations, including in connection with regulatory obligations under MiFID II and EMIR and authorisations, impacts on ISDA documentation (including delegated reporting arrangements, contractual recognition of bail-in and resolution stays) and legacy ISDA master agreements.

Equivalence MoU between HMT, the BoE, the PRA and the FCA

HM Treasury (HMT), the Bank of England (BoE), the Prudential Regulation Authority (PRA) and the FCA entered into a memorandum of understanding (MoU) on equivalence and exemptions pursuant to Regulation 6(3) of the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019.

Treasury Committee calls on government to update economic analysis ahead of Brexit vote

The Chancellor of the Exchequer, Sajid Javid, wrote to Catherine McKinnell, interim chair of the House of Commons Treasury Committee, in response to a request for HMT to publish its updated economic analysis ahead of the meaningful vote on the Withdrawal Agreement. In the letter, Javid says that the long-term economic analysis of EU exit published in November 2018 was based on a generic, ‘average’ free trade agreement (FTA) with the EU and that the specifics of the actual FTA will be the subject of the next phase of negotiations. He says that HMT ‘will keep Parliament updated throughout those discussions and provide analysis at appropriate points’.

European Scrutiny Committee queries government on UK’s access to EU financial services market after Brexit

The House of Commons European Scrutiny Committee published its first report of session 2019/2020. Among other issues, the Committee has cleared from scrutiny the communication from the European Commission entitled ‘Equivalence in the area of the financial services’, and brought it to the attention of the Treasury Committee and the Committee on Exiting the EU. The Committee asks the economic secretary to the Treasury, John Glen MP, to (among other things) clarify by 31 October 2019 if the government is seeking any changes to the sections of the Political Declaration on the future UK-EU relationship related to financial services. 

Lloyd’s Market Association sets out guidance on the impact of Brexit on the SCAP protocol

The Lloyd’s Market Association (LMA) published a bulletin setting out the positions of Lloyd’s Brussels and other European Economic Area (EEA) insurers under the Single Claims Agreement Party (SCAP) protocol in the event of a no deal Brexit. The SCAP protocol, which went live in February 2018, is a contractual provision which delegates sole claims handling responsibility to the slip leader. It aims to provide a more efficient process for the settlement of lower value, non-complex claims (£250,000 and below) where multiple agreement parties exist.

TheCityUK urges government to secure Brexit transition period

TheCityUK’s CEO, Miles Celic, called on the government to ensure a transition period and avoid a no-deal Brexit. Following the Saturday 19 September debate in parliament Celic said the ‘central issue for our industry remains avoiding a no-deal Brexit. The interests of customers and communities across the UK and the EU will be best served by the delivery of a transition period and the rapid negotiation of a close future economic relationship.’ 

TheCityUK welcomes possible new Brexit deal and urges approval

TheCityUK responded to the government’s new Brexit deal, calling it ‘an encouraging development’. CEO Miles Celic said it was important that the deal is now approved so that ‘we can avert the damage and disruption a no-deal Brexit would cause to customers, industry and the wider economy here in the UK and in the EU’. 

Cross-Border Distribution of Funds, Proxy Advisors, Prospectus and Gibraltar (Amendment) (EU Exit) Regulations 2019

SI 2019/1370: This enactment is made in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment amends pieces of UK subordinate legislation, and amends and revokes retained direct EU legislation relating to cross-border distribution of funds, proxy advisors, prospectus and Gibraltar in order to address deficiencies in retained EU law so that the UK’s regulatory regime for financial services will continue to operate effectively from the point at which the UK leaves the EU. It comes into force partly immediately before exit day and fully on exit day.

Brexit Bulletin—Speaker rules against government plan for a further vote on Brexit deal

On 19 October 2019, MPs voted to amend a government motion to approve the revised Brexit deal, delaying its decision and triggering a requirement for the Prime Minister to seek an extension to the Article 50 withdrawal period. Following this defeat, the government announced plans to bring a further motion to approve the deal. However, this plan raised points of order concerning the proper procedure. On 21 October 2019, having considered the matter, the Speaker gave a statement. Citing Erskine May, and applying the same question convention, the Speaker ruled that it was out of order to bring a further motion on the Brexit deal in substantially similar terms to the motion considered on the previous sitting day.

Brexit bulletin—Withdrawal Agreement Bill introduced

On 21 October 2019, the government introduced the European Union (Withdrawal Agreement) Bill (EU(WA)B) for its First Reading in Parliament. The Bill makes provision for the ratification and implementation of the Withdrawal Agreement in domestic law. It also makes provision for implementation of the EEA EFTA Separation Agreement and the Swiss Citizens’ Rights Agreement. The Bill contains provisions on various separation issues addressed in the Withdrawal Agreement, including the transition period, financial provision and the operation of the Northern Ireland Protocol. It incorporates several amendments to the European Union (Withdrawal) Act 2018 (EU(W)A 2018), particularly for the purpose of legislating for transition, deferring several provisions from exit day to the end of the transition (or ‘implementation’) period. The government announced plans to fast-track the Bill through Parliament, threatening to pull the legislation altogether if MPs reject their proposed timescale. Adam Cygan, professor at the University of Leicester, provides commentary on the Bill. 

European Union (Withdrawal Agreement) Bill

House of Commons second reading & committee stage 22 October 2019.

 

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UK, EU and international regulators and bodies

 

FCA set to open dialogue on the future of financial regulation

The FCA published a speech by its executive director of strategy and competition, Christopher Woolard, on the future of regulation. Woolard said the FCA was keen see an open discussion about the type of regulation that will best deliver for the public, which ‘boils down to one simple question: what outcomes do we want from financial services?’

FCA commits to ISO sustainability targets

The FCA published an environmental policy statement, setting out how it aims to ensure its environmental impacts meet the requirements of ISO14001:2015. The FCA says it is committed to becoming a more sustainable organisation and will develop and maintain ‘challenging environmental management targets and objectives’, which it will report on in its annual report and accounts. 

Speaker outlines procedure for election of new Treasury Committee chair

The Speaker of the House of Commons, John Bercow MP, outlined the procedure for the election of the next chair of the Treasury Committee, following Nicky Morgan MP’s appointment as secretary of state for Digital, Culture, Media and Sport. An election was due to take place on 11 September 2019, but was postponed because the House was not sitting.

Christine Lagarde appointed ECB president

The European Council appointed Christine Lagarde as the president of the European Central Bank (ECB) for a non-renewable term of eight years. Lagarde will replace the outgoing president, Mario Draghi, as of 1 November 2019.

 

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Regulated activities

 

Andrew Bailey comments on the government’s rejection of increased transparency for perimeter changes

The Treasury Committee published comments from the chief executive of the FCA, Andrew Bailey, on the government’s rejection of the Treasury Committee’s proposal to regularly and transparently consider what activities are covered by FCA regulation.

 

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Authorisation, approval and supervision

 

PRA consults on proposals to update its supervisory statement on liquidity and funding risk

The PRA published consultation paper CP27/19, which sets out proposals to update supervisory statement SS24/15, The PRA’s approach to supervising liquidity and funding risk, to reflect updates to the BoE’s Market Operations Guide and to reiterate relevant expectations set out in SS9/17, ‘Recovery planning’. The CP is relevant to PRA-authorised UK banks, building societies, and PRA-designated UK investment firms. Feedback is sought by 17 November 2019. 

FCA Insight article considers how to foster a culture of challenge

The FCA published an Insight article entitled ‘Removing our biases: some behavioural tools for the workplace’. The article considers how firms can avoid ‘groupthink’ and ensure effective organisational decision-making based on challenge and planning around existing biases. It follows on from previous FCA insight articles on diversity and developing a ‘speak up, listen-up’ culture and a Banking Standards Board (BSB) article on ideas for encouraging a ‘speak-up culture’ to reduce the risk of groupthink. 

FCA publishes Market Watch 62

The FCA published Market Watch issue 62. This issue covers personal account dealing and transaction reporting.

ISDA consultation response looks at ways to reduce reporting burdens

ISDA responded to HM Treasury’s Future Regulatory Framework Review, looking at how firms and regulators can work together to make authorisation, supervision and enforcement more efficient. In particular, ISDA’s response looks at how firms and regulators can take advantage of new technology to make supervisory reporting more efficient, more flexible and less burdensome.

 

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Prudential requirements

 

Commission consults on new CRR reporting requirements

The European Commission launched a targeted consultation on the alternative standardised approach for market risk. The consultation asks a number of specific questions about a proposed delegated act amending the Capital Requirements Regulation to implement a reporting requirement based on the new market risk framework that was published by the Basel Committee on Banking Supervision (BCBS) in January 2016. Feedback is sought by 11 November 2019. 

BoE: annual stress test results to be announced on 10 December 2019

The BoE set out the timetable for the publication of the UK annual stress test results, which will be published on 10 December 2019. The BoE received banks’ initial stress-testing submissions and is in the process of analysing the results. The full annual stress test results will be published with the Financial Stability Report at 17.00 hrs (GMT) on 10 December 2019. No results for individual firms will be published prior to this date. 

Council of the EU information notes state Council should be in position to approve European Parliament's position on IFD and IFR

The Council of the EU published two information notes from the General Secretariat to COREPER concerning the outcome of the European Parliament's first reading and corrigendum procedure in relation to the texts of the proposed Prudential Supervision of Investment Firms Directive (IFD) and Prudential Requirements of Investment Firms Regulation (IFR). 

Industry bodies respond to PRA CP17/19

ISDA, the Association for Financial Markets in Europe (AFME) and UK Finance (the Associations) published their response to the PRA’s consultation paper CP17/19, Counterparty credit risk: Treatment of model limitations in banks’ internal models. 

 

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Financial stability, recovery and resolution

 

SRB consults on ‘Expectations for banks’

The Single Resolution Board (SRB) launched its first consultation on its ‘Expectations for banks’ document, which outlines best practice on key aspects of resolvability. The SRB says the consultation is part of its commitment to listening to the views of banks and other stakeholders and being transparent about its approaches and decisions. Feedback is sought by 4 December 2019. 

 

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Risk management and controls

 

FCA speech: turning technology against financial crime

The FCA’s executive director of supervision for investment, wholesale and specialists, Megan Butler, delivered a speech entitled: Turning technology against financial crime. She explains that although new technologies provide innovative products and services, they also provide criminals with sophisticated tools to use the financial system for their own ends. She considers how technology can be used to detect and disrupt financial crime, and ultimately the criminals who seek to exploit the system. She also considers the implications of innovation for FCA supervision. 

 

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Financial crime

 

BIS publishes toolkit to reduce the risk of wholesale payments fraud related to end point security

The Bank for International Settlements (BIS)’s Committee on Payments and Market Infrastructures (CPMI) prepared a ‘toolkit’ to support central banks to reduce the risk of wholesale payments fraud related to endpoint security in their institutions and jurisdictions. 

HMT provides update on AML/CTF supervision under the Economic Crime Plan

The economic secretary to HMT, John Glen MP, wrote to the Treasury Select Committee (TSC) on the UK’s anti-money laundering and counter-terrorist financing (AML/CTF) supervision regime. Glen provides an update on progress towards HMRC’s commitment to enhance its risk-based approach to AML/CTF supervision by March 2021 under the UK government’s Economic Crime Plan, and sets out the process by which HMT will respond to a recommendation from the Office for Professional Body AML Supervision (OPBAS) to remove a professional body’s status as an AML/CTF supervisor. 

FATF publishes outcomes of its October 2019 plenary and makes other statements and HMT publishes advisory notice

The Financial Action Task Force (FATF) published the outcomes of its plenary session held in Paris between 16 and 18 October 2019. During the three-day meeting, over 800 delegates representing 205 jurisdictions and international organisations discussed major strategic initiatives, mutual evaluations and follow-up and other strategic initiatives. Following the session, FATF published a document on the money laundering risks from ‘stablecoins’ and other emerging assets, a public statement on the continuing risks posed by North Korea and Iran, and a note which identifies the jurisdictions that have strategic AML/CFT deficiencies for which they developed an action plan with the FATF. HMT also published an advisory notice in light of the FATF’s statements. 

FCA letter on SARs and STORs

The FCA published a letter to UK Finance in which the FCA gives an overview of the suspicious activity report (SAR) and suspicious transaction and order report (STOR) regimes. 

FCA speech: turning technology against financial crime

The FCA’s executive director of supervision for investment, wholesale and specialists, Megan Butler, delivered a speech entitled: Turning technology against financial crime. She explains that although new technologies provide innovative products and services, they also provide criminals with sophisticated tools to use the financial system for their own ends. She considers how technology can be used to detect and disrupt financial crime, and ultimately the criminals who seek to exploit the system. She also considers the implications of innovation for FCA supervision.

Public-private working group on information-sharing for economic crime assembled

HMT confirmed that the public-private working group on information-sharing for economic crime purposes has begun its review and a steering group has been assembled. The group is made up of public and cross-sectoral private sector representatives, from the Home Office, HM Treasury, the National Economic Crime Centre, UK Finance, the Information Commissioner's Office, the Legal Sector Affinity Group, and the Accountancy Affinity Group.

SFO closes all strands of LIBOR manipulation investigation

The Serious Fraud Office (SFO) announced the closure of all strands of its investigation into LIBOR manipulation, with no further charges to brought in the case. The investigation saw charges of conspiracy to defraud brought against 13 individuals. 

 

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Conduct requirements

 

FCA publishes Market Watch 62

The FCA published Market Watch issue 62. This issue covers personal account dealing and transaction reporting.

 

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Enforcement and redress

 

FCA releases complaints figures for H1 2019

The FCA published the complaints figures for regulated firms for the first half of 2019. The data showed an increase in complaints from 3.91m in the second half (H2) of 2018 to 4.29m for the first half (H1) of 2019. The FCA says the increase was mainly driven by a 34% increase in the volume of payment protection insurance (PPI) complaints received.

FCA provides update on RFX Financial Services Limited

The FCA provided an update on RFX Financial Services Limited. The press release noted that on 10 October 2019 RFX Financial Services Limited voluntarily agreed to a number of FCA requirements put in place to protect the interests of the firm’s customers. 

FCA starts compensation proceedings against Park First Limited

The FCA announced that it started proceedings against Park First Limited, its senior managers (including its chief executive officer) and a number of other companies connected to the Park First group. The FCA is seeking compensation orders in favour of investors in respect of losses they suffered in the Park First scheme. 

FCA announces P2P firm FundingSecure Ltd has entered administration

The FCA announced that FundingSecure Ltd, an FCA-regulated peer-to peer (P2P) firm, has been placed into administration, with CG Recovery Ltd appointed as administrators.

CMA directs Nationwide to pay £2m in refunds for PPI breaches

The Competition and Markets Authority (CMA) issued Nationwide with legal directions after it failed to send—or sent inaccurate—PPI reminders. The directions require Nationwide to put in place procedures to ensure that similar problems do not happen again.

 

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Markets and trading

 

ECB working group on Euro RFRs publishes communication toolkit

The European Central Bank (ECB)’s working group on euro risk-free rates (RFRs) published a ‘communication toolkit’ on its webpage designed to assist market participants in making a smooth transition to using the euro short-term rate (€STR). The toolkit is designed for interested parties to use in their own communications and education efforts. It currently consists of FAQs, a checklist and presentation slides entitled ‘Preparing for the interest rate benchmark reforms’.

SFO closes all strands of LIBOR manipulation investigation

The SFO announced the closure of all strands of its investigation into London interbank offered rate (LIBOR) manipulation, with no further charges to brought in the case. The investigation saw charges of conspiracy to defraud brought against 13 individuals.

BoE requests domestic and international authorities to consider regulatory barriers impacting on transition away from LIBOR

The Bank of England’s working group on sterling risk free reference rates published letters to the European Commission, the BCBS, the PRA and the FCA regarding regulatory barriers that impact on the transition away from LIBOR. These letters request that the issues raised are considered and concrete actions are taken where necessary to ensure a smooth transition, reducing risks to safety and soundness from continued reliance on a benchmark that is expected to cease at the end of 2021. 

ISDA benchmarks fallback survey finds no consensus on pre-cessation triggers

ISDA published a report summarising responses to a consultation on pre-cessation issues for LIBOR and certain other interbank offered rates (IBORs). The consultation took place between May and July 2019, and sought comment on how derivatives contracts should address a regulatory announcement that LIBOR or certain other IBORs categorised as critical benchmarks under the EU Benchmarks Regulation are no longer representative of an underlying market.

ESMA signs benchmarks MoU with the Australian Securities and Investments Commission

The European Securities and Markets Authority (ESMA) and the Australian Securities and Investments Commission signed a MoU setting out co-operation arrangements in respect of Australian benchmarks.

ECB report on risk management implications of euro risk-free rates transition

The working group on euro risk-free rates of the ECB issued recommendations to address the impact of the transition from EONIA to €STR and the introduction of €STR-based fallbacks for EURIBOR (euro risk-free rates transition) on risk management. The report highlights risks for financial institutions and sets out detailed recommendations. It mainly focuses on the overall implications for interest rate risk management (rather than on the effects of the transition on specific financial instruments). 

 

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MiFID II

 

FCA publishes Market Watch 62

The FCA published Market Watch issue 62. This issue covers personal account dealing and transaction reporting. 

 

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Regulation of capital markets and Capital Markets Union

 

EBA opinion looks at obstacles to NPE securitisations

The European Banking Authority (EBA) delivered an opinion to the European Commission on the regulatory treatment of non-performing exposure (NPE) securitisations. The opinion sets out recommendations on the matters that the European Commission may wish to reassess or review in the EU securitisation framework for the purposes of future legislative amendments. 

ESMA sets out enforcement priorities for financial reports of listed companies

ESMA set out the priorities that European enforcers will consider when examining the 2019 annual financial reports of listed companies. The 2019 enforcement priorities reflect the changes introduced in recent financial reporting standards and consider issues identified by national competent authorities (NCAs) through their enforcement activities in 2019.

 

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Regulation of derivatives

 

ISDA FAQs on no-deal Brexit

ISDA published no-deal Brexit FAQs which provide a high-level summary of the key impacts of a no-deal Brexit on the over-the-counter derivatives market and ISDA documentation. The FAQs also cover suggested preparations, including in connection with regulatory obligations under MiFID II and EMIR and authorisations, impacts on ISDA documentation (including delegated reporting arrangements, contractual recognition of bail-in and resolution stays) and legacy ISDA master agreements. 

ISDA benchmarks fallback survey finds no consensus on pre-cessation triggers

ISDA published a report summarising responses to a consultation on pre-cessation issues for LIBOR and certain other interbank offered rates (IBORs). The consultation took place between May and July 2019, and sought comment on how derivatives contracts should address a regulatory announcement that LIBOR or certain other IBORs categorised as critical benchmarks under the EU Benchmarks Regulation are no longer representative of an underlying market.

FAQs on Legal Entity Identifiers outline how to obtain one

ISDA and the Global Financial Markets Association released an FAQ sheet on the subject of the legal entity identifier (LEI). According to the ISDA, ‘several regulators around the world require or are anticipated to require that market participants obtain a LEI for transaction reporting and for other uses where clear identification of entities is needed’.

ESMA publishes peer review on quality of data reported under EMIR

ESMA published the results of its peer review into supervisory actions of regulators in the UK, Germany, France, Ireland, Cyprus and the Netherlands regarding their approaches to derivative data reported under EMIR. ESMA findings include that there is significant room for improving data reporting under EMIR. The suggested actions in the report may also be used (amongst other things) in connection with market abuse surveillance and assist all NCAs (not just the six that were included in the peer review). 

 

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Investment funds and asset management

 

FCA starts compensation proceedings against Park First Limited

The FCA announced that it started proceedings against Park First Limited, its senior managers (including its chief executive officer) and a number of other companies connected to the Park First group. The FCA is seeking compensation orders in favour of investors in respect of losses they suffered in the Park First scheme. 

 

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Banks and mutuals

 

Commission consults on new CRR reporting requirements

The European Commission launched a targeted consultation on the alternative standardised approach for market risk. The consultation asks a number of specific questions about a proposed delegated act amending the Capital Requirements Regulation to implement a reporting requirement based on the new market risk framework that was published by the BCBS in January 2016. Feedback is sought by 11 November 2019.

BoE: annual stress test results to be announced on 10 December 2019

The BoE set out the timetable for the publication of the UK annual stress test results, which will be published on 10 December 2019. The BoE received banks’ initial stress-testing submissions and is in the process of analysing the results. The full annual stress test results will be published with the Financial Stability Report at 17.00 hrs (GMT) on 10 December 2019. No results for individual firms will be published prior to this date.

ECON report calls for swift implementation of the banking union

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on the ECB annual report for 2018 (2019/2129(INI)). The Committee says it is ‘extremely worried’ about the risks due to the delay in setting up the banking union, and calls for the swift completion of the banking union with a fully mutualised European deposit guarantee scheme. 

EBA issues opinion on disclosure to consumers of banking services through digital means under the DMD

The EBA published an opinion of 23 October 2019, on disclosure to consumers of banking services through digital means under the Distance Marketing of Financial Services Directive 2002/65/EC (DMD) (EBA-OP-2019–12).

Industry bodies respond to PRA CP17/19

ISDA, the AFME and UK Finance (the Associations) published their response to the PRA’s consultation paper CP17/19, Counterparty credit risk: Treatment of model limitations in banks’ internal models.

CMA directs Nationwide to pay £2m in refunds for PPI breaches

The CMA issued Nationwide with legal directions after it failed to send—or sent inaccurate—PPI reminders. The directions require Nationwide to put in place procedures to ensure that similar problems do not happen again. 

 

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Consumer credit, mortgage and home finance

 

FCA updates guidance for social landlords

The FCA published an updated version of FG18/6: Helping tenants find alternatives to high-cost credit and what this means for social housing landlords. The update reflects the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2019, SI 2019/1067, which excludes registered social landlords (RSLs) from the scope of the credit broking regulated activity under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001,  SI 2001/544 (as amended).

Goods Mortgages Bill

Bill to make provision for a new form of non-possessory security that may be created over goods owned by individuals; to repeal the Bills of Sales Acts 1878 and 1882; and for connected purposes. 

 

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Regulation of insurance

 

EIOPA launches call for research proposals

The European Insurance and Occupational Pensions Authority (EIOPA) launched a call for research proposals aiming at addressing open questions related to a number of topics with a special emphasis on policy angles. The background for the call is the ongoing policy and regulatory debates related to the European financial system that was increasingly focused on beyond banking topics, including the insurance and pension sectors. According to EIOPA, many questions which need to be addressed require both appropriate theoretical foundations as well as deep empirical analysis.

The FCA launches its fourth general insurance value measures pilot

The FCA launched the fourth general insurance (GI) value measures pilot. Participating insurers will begin to report their value measures data to the FCA in Q1 2020. Data on the following areas should be reported: claims frequencies; claims acceptance rates and average; and claims pay-outs. The FCA aims to publish this data in Q1 2020.

Insurance Europe responds to EIOPA consultation on insurance guarantee schemes

Insurance Europe (IE) published its response to EIOPA’s July 2019 consultation on the harmonisation of national insurance guarantee schemes (IGS). IE opposes the harmonisation of EU IGS and warns that even a minimum level of harmonisation would create significant costs and involve complex challenges for which there may not be acceptable solutions.

Lloyd’s Market Association sets out guidance on the impact of Brexit on the SCAP protocol

The LMA published a bulletin setting out the positions of Lloyd’s Brussels and other EEA insurers under the SCAP protocol in the event of a no deal Brexit. The SCAP protocol, which went live in February 2018, is a contractual provision which delegates sole claims handling responsibility to the slip leader. It aims to provide a more efficient process for the settlement of lower value, non-complex claims (£250,000 and below) where multiple agreement parties exist.

 

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Payment services and systems

 

European Parliament publishes draft report on the Commission’s proposed VAT amending directive covering payment service providers

The European Parliament published a draft report on the Commission’s proposed directive amending the VAT Directive, introducing specific requirements for payment service providers. This proposed directive is intended to solve e-commerce VAT fraud by strengthening the co-operation between tax authorities and payment service providers. The draft report suggests the Commission should re-evaluate whether virtual currencies exchange platforms should be covered by PSD2.

 

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Fintech and cryptoassets

 

Next round of FCA’s regulatory sandbox open for applications

The FCA announced that cohort 6 of its regulatory sandbox is open for applications until 31 December 2019. The FCA identified two specific technology areas where it would like to see more innovation and testing: federated learning and travelling algorithms, and complex scenario modelling and simulation. 

FATF publishes outcomes of its October 2019 plenary and makes other statements and HMT publishes advisory notice

FATF published the outcomes of its plenary session held in Paris between 16 and 18 October 2019. During the three-day meeting, over 800 delegates representing 205 jurisdictions and international organisations discussed major strategic initiatives, mutual evaluations and follow-up and other strategic initiatives. Following the session, FATF published a document on the money laundering risks from ‘stablecoins’ and other emerging assets, a public statement on the continuing risks posed by North Korea and Iran, and a note which identifies the jurisdictions that have strategic AML/CFT deficiencies for which they developed an action plan with the FATF. HMT also published an advisory notice in light of the FATF’s statements. 

G7 working group and FSB set out potential global regulatory responses to stablecoins

The BIS’s CPMI published a report by the G7 working group on stablecoins, investigating their global impact and calling for public authorities to ensure a sound legal basis in all relevant jurisdictions. The Financial Stability Board (FSB) also published a report on stablecoins, raising similar issues and setting out how the FSB will fulfil its G20 mandate to advise on multilateral responses to existing and emerging cryptoasset risks.

Financial Stability Institute examines global developments in suptech

The BIS’s Financial Stability Institute (FSI) published a report on ‘suptech’—the use of innovative technology by supervisory agencies to support supervision. The report notes that an increasing number of supervisory authorities are beginning to explore suptech applications in different areas of supervision, while other non-supervisory financial authorities (eg financial intelligence units) also used or experimented with innovative technologies to support their work. The report examines these developments by analysing suptech initiatives in 39 financial authorities globally.

FCA TechSprint judge on privacy and innovation

The executive director for technology and innovation at the Information Commissioner’s Office, Simon McDougall, wrote a blog on his experience of being a judge at the FCA’s 2019 TechSprint. Describing the event as ‘a brilliant example of exactly how privacy and innovation can work together in practice’, he said it brought together teams from around the world to focus on how financial institutions can share data in order to prevent money laundering, while still meeting their confidentiality and privacy obligations. 

 

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Sustainable finance

 

EU and countries worldwide join forces to mobilise private investors for financing the green transition

The EU announced the launch of the International Platform on Sustainable Finance together with relevant authorities from Argentina, Canada, Chile, China, India, Kenya, and Morocco. Valdis Dombrovskis, vice-president in charge of financial stability, financial services and capital markets union, introduced the newly-created platform at the International Monetary Fund (IMF) and World Bank Group annual meetings in Washington DC. The initiative is part of the international efforts to meet the Paris Agreement commitments. 

Regulator outlines the climate change information investors want in reports

The Financial Reporting Council’s (FRC) Reporting Lab released a new report, Climate-related corporate reporting, in which the lab highlights the gap between current company reporting and the disclosure expectations of investors. In the report, the FRC Reporting Lab also provides practical guidance for companies on how to improve their reporting and outlines what information investors want from climate change disclosures. Such information includes how company boards consider and assess climate change and what scenarios might affect company sustainability and viability. 

High-level CMU group publishes report on savings and sustainable investment

The Capital Markets Union High-Level Expert Group, composed of experts from Germany, France, the Netherlands, Italy, Spain, Poland and Sweden, published its final report on the CMU, entitled ‘Savings and Sustainable Investment Union’. The report calls for ‘better, cheaper, and simpler investment products’, a focus on long-term equity financing, simplified access to the public markets for SMEs and mid-caps, and a ‘reassessment of the regulatory and supervisory balance’.

Japan launches Principles for Responsible Banking

The United Nations Environmental Programme’s Finance Initiative, together with the Japanese Principles for Financial Action, the sustainable finance forum, co-organised the Japanese launch event of the Principles for Responsible Banking in Tokyo on 10 October 2019. 

 

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Dates for your diary

 

DateSubjectEvent

 

25 October 2019

 

Prudential regulation

 

The deadline for feedback to PRA CP17/19: Counterparty credit risk: Treatment of model limitations in banks’ internal models is 25 October 2019.

 

28 October 2019Payment services and systems

The deadline for feedback to the PSR review of its Specific Direction 8 (SD8) is 28 October 2019.

 

29 October 2019Prudential regulation

The EU Commission’s Directorate General for financial stability, financial services and capital markets union (DG FISMA), organised a conference to discuss the impact and challenges of implementing the finalised Basel III standards in the EU. The deadline to register for the conference is 29 October 2019.

 

30 October 2019

Brexit


Investment funds and asset management

The closing date of the FCA notification window for incoming EEA firms and fund managers to enter the temporary permissions regime is 30 October 2019.

 

30 October 2019Regulation of personal pension and stakeholder products

The deadline for feedback to FCA CP19/25: Proposed ban on contingent charging (and other changes) is 30 October 2019.

 

31 October 2019Prudential regulation

The EBA’s consultation on draft guidelines for determining weighted average maturity of contractual payments due under the tranche of a securitisation transaction under CRR closes on 31 October 2019.

 

31 October 2019Payment services and systems

The deadline for feedback on the PSR’s  consultation CP19/7 on its updated Powers and Procedures Guidance is 31 October 2019.

 

31 October 2019Investment funds and asset management

The deadline for feedback to ESMA’s consultation setting out draft guidelines on performance fees under the UCITS Directive closes on 31 October 2019. The draft guidelines aim to harmonise the way in which performance fees can be charged to UCITS and their investors while ensuring common standards of disclosure across the EU.

 

31 October 2019Brexit

If the UK’s Withdrawal Agreement with the EU is not ratified by the House of Commons prior to 31 October 2019, and the UK does not indicate an alternative way forward, the UK will leave the EU without an agreement at 11.00 pm on 31 October 2019, defined as ‘exit day’ in the European Union (Withdrawal) Act 2018, as amended by the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No.2) Regulations 2019.

 

31 October 2019Regulation of insurance

The deadline for submissions to the PRA’s 2019 Insurance stress test for section C scenarios is 31 October 2019.

 

31 October 2019UK, EU and international regulators and bodies

Christine Lagarde is to succeed Mario Draghi as ECB President for a non-renewable 8-year term.

 

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