FS weekly highlights—25 July 2019

In this issue

 

Brexit
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Conduct requirements
Consumer protection and claims management regulation
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
FSMA regulated pensions activity
Payment services and systems
Fintech and virtual currencies
Sustainable finance
Dates for your diary

 

Brexit

 

FCA adds ‘Is your firm prepared for Brexit?’ overview to Brexit webpage

The Financial Conduct Authority (FCA) updated its ‘Preparing your firm for Brexit’ webpage to include a new document entitled ‘Is your firm prepared for Brexit?’. The document provides an overview of the issues the FCA expects regulated firms to consider in their Brexit preparations, including planning for a no-deal Brexit on 31 October 2019.

ISDA updates its Brexit FAQs

The International Swaps and Derivatives Association (ISDA) published an updated version of its Brexit FAQs (version 7). The update is not substantial, other than the specification that the exit day should refer to 31 October 2019 (unless another date is agreed).

HoC European Scrutiny Committee clears EMIR 2.2 from scrutiny, and highlights ‘likely uncompromising’ EU approach to Brexit

The House of Commons (HoC) European Scrutiny Committee published a summary of its 17 July meeting, along with a list of the documents it considered at the meeting. The Committee cleared from scrutiny the amendments to the European Markets Infrastructure Regulation (EMIR 2.2) but highlighted the insight this gave into the EU’s ‘likely uncompromising approach’ to Brexit. The Committee also retained scrutiny over the proposed Whistleblowing Directive.

Treasury Committee requests update to Brexit economic analysis

The Chair of the Treasury Committee, Nicky Morgan MP, wrote to both Sir Tom Scholar, Permanent Secretary of HM Treasury, and Mark Carney, Governor of the Bank of England (BoE), to request up-to-date and rigorous analysis of the economic impacts of the current key scenarios for the UK’s future economic relationship with the EU.

Think-tank urges EU to work with British regulators post-Brexit to keep capital flowing

The Centre for European Reform, a pro-European think-tank, published a policy paper, ‘The capital markets union: Should the EU shut out the City of London?’ by Sir Jonathan Faull, a former director-general for financial services at the European Commission, and Clifford Chance financial regulation expert Simon Gleeson. The authors argue that, rather than trying to develop its own large-scale capital market, the EU should work with British regulators post-Brexit to keep capital flowing between the bloc and the City of London, including formal structures to govern supervision of institutions active in both markets.

BaFin annual report 2018 highlights unilateral Brexit transition period until end-2020

Germany’s Federal Financial Supervisory Authority, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), published its 2018 annual report which includes, as one of its highlights, a summary of its preparations for Brexit. Those preparations include discussions and workshops with financial services undertakings contemplating relocation to Germany, as well as the introduction of a German Tax Act relating to Brexit which allows BaFin to provide a transitional period until the end of 2020 for UK companies passporting into Germany.

Burundi (Sanctions) (EU Exit) Regulations 2019

SI 2019/1142: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for Brexit. This enactment revokes provisions of UK subordinate legislation and retained direct EU legislation relating to sanctions in Burundi to ensure that the UK can operate an effective sanctions regime in relation to Burundi after the UK leaves the EU. It comes into force in accordance with regulations made by the Secretary of State under section 56 of the 2018 Act.

Guinea (Sanctions) (EU Exit) Regulations 2019

SI 2019/1145: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 (the Act) in preparation for Brexit. This enactment revokes two pieces of UK subordinate legislation and one piece of retained EU legislation in relation to EU sanctions regime relating to Guinea that is currently in force in the UK under EU legislation and related UK legislation in order to encourage the Government of Guinea to investigate properly the violent repression in Guinea on 28th September 2009 and the aftermath of that violent repression, and hold to account and bring criminal proceedings against the persons responsible for the violent repression and its aftermath. It comes into force in accordance with regulations made under section 56 of the Act. 

 

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UK, EU and international regulators and bodies

 

Bank of England and Financial Services Act 2016 (Commencement No 6 and Transitional Provisions) Regulations 2019

SI 2019/1136: Certain provisions of the Bank of England and Financial Services Act 2016 will come into force in the UK on different dates in the circumstances set out in relation to all other authorised individuals. Those provisions amend provisions of Part 5 of the Financial Services and Markets Act 2000 which regulated the conduct of individuals working in banks and certain investment institutions (referred to as ‘relevant authorised individuals’), extending those provisions to all authorised individuals. Transitional provisions are also made.

HM Treasury launches Future Regulatory Framework Review with call for evidence

HM Treasury launched its Future Regulatory Framework Review with a call for evidence seeking views on regulatory co-ordination in the financial services sector. The consultation seeks views on whether more can be done to better co-ordinate the work of each regulator and limit unnecessary burden. The deadline for feedback is 18 October 2019.

FCA publishes regulation round up for July 2019

The FCA published its regulation round up for July 2019, highlighting its intention to replace the Gabriel reporting platform and improve the way it collects data from firms. Other hot topics discussed include the FCA’s annual report and accounts for 2018/19, its recent conference on intergenerational differences and its associated discussion paper.

BoE and FCA update their memorandum of understanding

The BoE and the FCA updated their memorandum of understanding (MoU), setting out the high-level framework the FCA and the BoE (exercising its prudential regulation functions) will use to co-ordinate and co-operate in carrying out their respective responsibilities. It replaces the previous MoU which was adopted on 1 April 2013, and was updated to reflect the expansion of the regulators’ remit and organisational changes since then.

UKRN publishes progress report on customer experience performance scorecards

The UK Regulators Network (UKRN), together with the FCA, Ofcom, Ofgem, Ofwat and the Consumer Council for Water, issued a progress report on the development of a set of performance scorecards to measure the customer experience across key sectors. The regulators intend to publish the first iteration of the scorecards by the end of 2019.

Treasury Committee hears from financial services industry on operational resilience

The HoC Treasury Committee published oral evidence given on 17 July 2019 as part of its inquiry into IT failures in the financial services sector. Evidence was given by the head of operational resilience at Barclays, Graham Bastin, the chief executive officer of Starling Bank, Anne Boden MBE, and the chief officer and senior vice president, client services Europe at Visa, Ian Lundberg.

FCA seeks to foster culture of speaking up

The FCA published an insight piece on encouraging employees to speak up about their ideas or concerns. Although there is no magic bullet, the FCA says recognising that the employee’s decision to come forward is contingent on the subject, target and channel of communication is an important first step.

Regulators meet with Philip Hammond to discuss improvements to co-ordination

The chief executives of the Prudential Regulation Authority (PRA), FCA, Payment Systems Regulator (PSR), and Competition and Markets Authority (CMA) met with the chancellor of the exchequer, Philip Hammond, to discuss a plan to improve regulatory co-ordination. All the authorities committed to taking the work forward, with HM Treasury due to publish a call for evidence shortly.

Finnish presidency outlines 2019 priorities at ECOFIN meeting

The Council of the EU published the outcomes of the Economic and Financial Affairs Council (ECOFIN) meeting in Brussels on 9 July 2019. The Finnish presidency outlined its priorities for the duration of its term, which runs from July to December 2019, including more robust and better-functioning financial markets.

ECB opines on draft Slovenian law on conversion of Swiss franc loans

The European Central Bank (ECB) issued an opinion on a draft law in the Republic of Slovenia on relations between lenders and borrowers concerning credit agreements in Swiss francs. In the opinion, the ECB considers the compatibility of the draft law with the prohibition on monetary financing.

SRB chair Elke König presents 2018 annual report in ECON public hearing

The chair of the Single Resolution Board (SRB), Elke König, presented the SRB’s 2018 annual report in a public hearing with the European Parliament’s Committee on Economic and Monetary Affairs (ECON) on 22 July 2019. In her speech, Ms König discussed the SRB’s mission, its main achievements, its progress in implementing the single resolution framework, and how it proposes to improve the framework for financial stability going forward. 

 

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Authorisation, approval and supervision

 

Bank of England and Financial Services Act 2016 (Commencement No 6 and Transitional Provisions) Regulations 2019

SI 2019/1136: Certain provisions of the Bank of England and Financial Services Act 2016 will come into force in the UK on different dates in the circumstances set out in relation to all other authorised individuals. Those provisions amend provisions of Part 5 of the Financial Services and Markets Act 2000 which regulated the conduct of individuals working in banks and certain investment institutions (referred to as ‘relevant authorised individuals’), extending those provisions to all authorised individuals. Transitional provisions are also made. 

 

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Prudential requirements

 

EIOPA sets out principles and guidelines for its stress-test methodology

The European Insurance and Occupational Pensions Authority (EIOPA) published a discussion paper on methodological principles of insurance stress testing. The paper sets out principles and guidelines for the conduct and assessment of an EU-wide stress test exercise, aiming to enhance EIOPA's methodology for bottom-up supervisory stress testing. EIOPA says the principles and guidelines in the paper will be the ‘toolbox’ to facilitate both the design and execution phase of its future stress test exercises. Feedback is sought by 8 October 2019.

PRA consults on treatment of banks’ internal model limitations and assumptions under CRR

The PRA published consultation paper CP17/19, Counterparty credit risk: Treatment of model limitations in banks’ internal models, which sets out the PRA’s proposed changes to supervisory statement 12/13 (SS12/13) ‘Counterparty credit risk’ to clarify expectations regarding the treatment of model limitations and assumptions under Part Three, Title II, Chapter 6 (counterparty credit risk) of the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR). Feedback is sought by 25 October 2019.

PRA publishes policy statement (PS14/19) on credit risk mitigation—eligibility of financial collateral

The PRA published policy statement 14/19 (PS14/19) on credit risk mitigation: eligibility of financial collateral. PS14/19 provides feedback to responses to consultation paper 1/19 (CP1/19), in which the PRA consulted on clarifications to expectations regarding the eligibility of financial collateral as funded credit protection under the CRR.

EBA publishes roadmap on IFRS 9 deliverables and launches benchmarking exercise

The European Banking Authority (EBA) published its roadmap on International Financial Reporting Standard (IFRS) 9 deliverables, giving a comprehensive overview of its plans for continued monitoring of IFRS 9 implementation. It also launched an IFRS 9 benchmarking exercise on a sample of institutions, aimed at analysing the different modelling practices followed by institutions and how IFRS 9 implementation impacts the amount of expected credit losses (ECL) in terms of own funds and regulatory ratios.

EBA updates list of CET1 instruments and accompanying report

The EBA published an updated list of CRR common equity tier 1 (CET1) instruments of EU institutions. The list is accompanied by an updated CET1 report, which includes information on the underlying objectives of the monitoring as well as on the consequences of including or excluding instruments in or from the CET1 list.

EBA staff paper examines ways to improve the EU-wide stress test

The EBA published a staff working paper asking whether official-sector stress tests (as required under the CRR) are fit for purpose and deliver what they are designed for. The paper, ‘Are stress tests beauty contests?’, discusses whether some improvements to the design of the EU-wide stress test could better align the incentives of the different stakeholders involved. In particular, it explores whether there is room for mitigating the problem that banks are ‘more interested in showing that they are outperforming others than in identifying actual risks in an adverse scenario’.

EBA highlights link between AML/CFT concerns and prudential supervision

The EBA published an opinion on the link between anti-money laundering and counter terrorist financing (AML/CFT) concerns and prudential objectives. The EBA invites prudential supervisors to send a common message to institutions that prudential supervisors factor AML/CFT issues into the prudential supervisory process and co-operate closely with AML/CFT supervisors for this purpose. 

 

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Financial stability, recovery and resolution

 

SRB chair Elke König presents 2018 annual report in ECON public hearing

The chair of the Single Resolution Board (SRB), Elke König, presented the SRB’s 2018 annual report in a public hearing with ECON on 22 July 2019. In her speech, Ms König discussed the SRB’s mission, its main achievements, its progress in implementing the single resolution framework, and how it proposes to improve the framework for financial stability going forward. 

 

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Risk management and controls

 

FCA sends Dear CEO letter setting out risks and supervision strategy for wealth management and stockbroking firms

The FCA published a Dear CEO letter, dated 13 June 2019, from its director for life insurance and financial advice, Debbie Gupta, setting out the regulator’s view of the key risks of harm that wealth management and stockbroking firms pose to their customers or to the markets in which they operate.

G7 finance ministers and central bank governors discuss cyber issues, innovation and green finance

The G7 finance ministers and central bank governors reaffirmed the importance of their close co-operation to address the current and future economic and financial challenges and say they are committed to ‘work together for a more inclusive, equal and sustainable economic model’. The group met on 17 and 18 July 2019 to discuss current risks in the global economy and the financial system, and how to accelerate the work to tackle new challenges, including cybersecurity and climate change.

Work and Pensions Committee hears from Lloyds Bank unions on executive pension levels

The HoC Work and Pensions Committee heard evidence from Lloyds Bank Group staff unions Unite and Accord on their views on executive pension levels at the bank, following evidence in Parliament from chief executive António Horta-Osório and RemCo chair Stuart Sinclair on 19 June.

All Party Parliamentary Group report calls for whistleblowing reforms

The All Party Parliamentary Group (APPG) published a report addressing current whistleblower legislation. The APPG gives recommendations in the form of a ‘10 point plan’ following analysis of over 400 pieces of evidence. 

 

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Financial crime

 

European Commission calls for better implementation of AML/CTF rules

The European Commission adopted a communication and four reports that stress the need for full implementation of the fourth and fifth Anti-Money Laundering Directives (MLD4 and MLD5) while underlining that a number of structural shortcomings in the implementation of the EU’s AML/CTF rules still need to be addressed. The package will serve as a basis for future policy choices on how to further strengthen the EU AML/CFT framework.

Commission Report says EU-US co-operation on tackling terrorist financing continues to produce results

The European Commission published a report and staff working document on the joint review of the implementation of the agreement between the EU and the US on the processing and transfer of financial messaging data from the EU to the US for the purposes of the Terrorist Finance Tracking Programme (TFTP).

EBA highlights link between AML/CTF concerns and prudential supervision

The EBA published an opinion on the link between AML/CTF concerns and prudential objectives. The EBA invites prudential supervisors to send a common message to institutions that prudential supervisors factor AML/CTF issues into the prudential supervisory process and co-operate closely with AML/CTF supervisors for this purpose.

European Ombudsman publishes decision on Commission’s refusal to grant public access to AML/CTF documents

The European Ombudsman, Emily O'Reilly, published her decision in case 925/2019/MIG. The case concerned a request for public access to documents drawn up by the European Commission assessing the risk of money laundering and terrorist financing in 54 third countries. The Commission refused to make public the documents, arguing that disclosure would undermine international relations, public security and the financial, monetary or economic policy of the EU. The Ombudsman inspected the documents at issue and found that the Commission was justified in refusing access to the documents. She thus closed the inquiry, finding no maladministration.

Man jailed for £115k cheques scam targeting business customers

UK Finance announced that Colin Mosdell, 33, was jailed at Inner London Crown Court for committing over £115,000 of cheque fraud at bank branches across the UK. The conviction follows a successful investigation by the Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit sponsored by the banking and finance industry.

JMLSG provides progress update on its money laundering and terrorism financing guidance

The Joint Money Laundering Steering Group (JMLSG) thanked respondents to the public consultation on sectors 4 (Credit unions) and 20 (Brokerage services to funds). It says that final board-approved texts were submitted to HM Treasury for approval, and notification of approval will be published on the JMLSG website once received. 

 

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Conduct requirements

 

FCA update on the Retail distribution review and the Financial advice market review

The FCA published an update on the feedback it received following the May 2019 call for input on the evaluation of the Retail distribution review and the Financial advice market review. The FCA says as the feedback it received broadly supports the proposed scope it outlined, it will now proceed with its review in line with that scope. 

 

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Consumer protection and claims management regulation

 

FCA launches consultation GC19/3 guiding firms on the fair treatment of vulnerable customers

The FCA launched a consultation (GC19/3) setting out its proposed guidance for firms on the fair treatment of vulnerable customers. The aim of the guidance is to provide regulatory clarity for firms involved in the supply of products or services to retail customers who are actually or potentially vulnerable. The first stage of this two-stage consultation closes on 4 October 2019.

Discussion paper on fair pricing in financial services: FCA sets out responses and next steps

Further to its discussion paper 18/9 (DP18/9) on the fairness of certain pricing practices in financial services, the FCA published a feedback statement which summarises the main themes from the responses, provides further clarification on how the FCA will apply its framework in practice, and outlines next steps. 

 

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Enforcement and redress

 

Complaints Commissioner criticises FCA in 2018/19 annual report

The Office of the Complaints Commissioner published its annual report for 2018/19, which gives an account of the operation of the statutory Complaints Scheme as well as opinions of the Commissioner, Antony Townsend, on some of the themes which have emerged from the complaints considered during the year. Almost all of the complaints related to the FCA, which published a response to the report.

FCA fines Standard Life Assurance Limited £30m for annuity sales failures

The FCA fined Standard Life Assurance Limited (SLAL) £30,792,500 for failures related to non-advised sales of annuities. The FCA found that SLAL failed to put in place adequate controls to monitor the quality of the calls between its call handlers and non-advised customers. At the same time, it offered front-line staff large financial incentives to sell annuities, which encouraged them to place their own financial interests ahead of their customers.

CPR 86 interpleader, serving application and evidence on interested third parties (Global Currency Exchange Network Limited v Osage 1 Limited)

Dispute Resolution analysis: This decision considers a Civil Procedure Rules 1998 (CPR) Part 8 claim in the form of an interpleader application pursuant to CPR 86. CPR 86 applies where—‘(a) a person is under a liability in respect of a debt or in respect of any money, goods or chattels—and (b) competing claims are made or expected to be made against that person in respect of that debt or money or for those goods or chattels by two or more persons.’ The claimant, Global Currency Exchange Network Limited (GCEN), being in possession of certain funds (the funds) in accounts referable to the defendant, Osage 1 Limited (Osage), sought directions as to service of its application and supporting evidence on various investors to allow them the opportunity to make legal claims to the funds. The decision examines the position taken by GCEN and Osage in relation to the funds. It considers, in particular, whether GCEN was justified in anticipating competing claims relating to the funds and seeking directions from the court (as GCEN contended) or whether GCEN was seeking, via its Part 86 application, an indemnity to which it was not entitled and, if so, whether it should instead simply hand the funds back to Osage (Osage’s position).

 

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Markets and trading

 

EMMI confirms EONIA publication time

The European Money Markets Institute (EMMI) confirmed that the euro overnight index average (EONIA) will be published at or shortly after 9:15am CET, starting on 2 October 2019. The announcement came after the ECB announced its decision to publish the euro short-term rate (€STR) at 8:00am CET on each TARGET business day, as of the start date, 2 October 2019. 

 

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MiFID II

 

ESMA updates register of MiFIR derivative contracts subject to the trading obligation

ESMA updated the public register of derivative contracts subject to the trading obligation under the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) MiFIR. ESMA added to the list three recently authorised French venues, where some of the classes of derivatives subject to the trading obligation are available for trading.

ESMA publishes opinions on product intervention measures by Bulgaria, Denmark and Croatia

ESMA issued four positive opinions on product intervention measures taken by the National Competent Authorities (NCAs) of Bulgaria, Denmark and Croatia in accordance with MiFIR. ESMA finds that the proposed measures are justified and proportionate and that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures.

Amendments to EEA Agreement Annex IX (Financial services) published in Official Journal

A number of decisions of the European Economic Area (EEA) Joint Committee amending Annex IX (Financial Services) to the EEA Agreement were published in the Official Journal. Pursuant to the amendments, several delegated regulations and implementing decisions related to EMIR, MiFIR and Regulation (EU) 909/2014 (the CSD Regulation) were incorporated into the EEA Agreement. The following decisions were published:

 

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Regulation of capital markets and Capital Markets Union

 

Amendments to EEA Agreement Annex IX (Financial services) published in Official Journal

A number of decisions of the EEA Joint Committee amending Annex IX (Financial Services) to the EEA Agreement were published in the Official Journal. Pursuant to the amendments, several delegated regulations and implementing decisions related to EMIR, MiFIR and the CSD Regulation were incorporated into the EEA Agreement. The following decisions were published:

New rules on raising money on capital markets in EU come into effect

The European Commission announced that companies in the EU which seek to raise money on capital markets will now find it easier to grow under new rules exempting different types of issuers from the burden of producing lengthy prospectuses (new rules). The new rules will harmonise the scrutiny criteria for the prospectuses and procedures for approving prospectuses and create a new category of prospectuses for small and medium-sized enterprises so that they can more easily get the funds they need. The new rules are introduced as a step forward for the Capital Markets Union and replace and repeal the Prospectus Directive 2003/71/EC.

European Securities Committee to vote on draft implementing decisions on CRA III regulatory equivalence

The European Securities Committee is due to vote by 25 July 2019 on nine draft implementing decisions recognising the legal and supervisory framework of non-EU jurisdictions as equivalent to the requirements of the Credit Rating Agencies Regulation (Regulation (EU) 1060/2009) (CRA Regulation) or repealing earlier equivalence determinations.

ESMA publishes XML schema and validation rules for Securitisation Regulation reporting

ESMA published a set of XML schema and validation rules for securitisation reporting under the Securitisation Regulation. The documents, which were published alongside an updated version of ESMA’s Securitisation Regulation Q&As, are intended to assist market participants in implementing the draft technical standards on disclosure requirements for the Securitisation Regulation published by ESMA in January 2019.

FSB adjusts implementation timeline for SFT recommendations

The Financial Stability Board (FSB) announced adjustments to the implementation timelines for its recommendations on securities financing transactions (SFTs), specifically those related to minimum haircut standards for non-centrally cleared SFTs.

GLEIF publishes updated Entity Legal Forms code list

The Global Legal Entity Identifier Foundation (GLEIF) published the Entity Legal Forms (ELF) code list. This new version lists more than 2,100 ELF across more than 90 jurisdictions.

Think-tank urges EU to work with British regulators post-Brexit to keep capital flowing

The Centre for European Reform, a pro-European think-tank, published a policy paper, ‘The capital markets union: Should the EU shut out the City of London?’ by Sir Jonathan Faull, a former director-general for financial services at the European Commission, and Clifford Chance financial regulation expert Simon Gleeson. The authors argue that, rather than trying to develop its own large-scale capital market, the EU should work with British regulators post-Brexit to keep capital flowing between the bloc and the City of London, including formal structures to govern supervision of institutions active in both markets. 

 

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Regulation of derivatives

 

BCBS and IOSCO agree one-year extension of financial implementation of margin requirements for non-centrally cleared derivatives

The Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) issued a joint statement acknowledging the progress made to implement the framework for margin requirements for non-centrally cleared derivatives and confirming that they agreed to extend by one year, to 1 September 2021, the final implementation of the margin requirements.

ISDA updates its Brexit FAQs

ISDA published an updated version of its Brexit FAQs (version 7). The FAQs were not substantially updated other than specifying that the exit day should refer to 31 October 2019 (unless another date is agreed).

EMIR 2.2 from scrutiny, and highlights ‘likely uncompromising’ EU approach to Brexit

The HoC European Scrutiny Committee published a summary of its 17 July meeting, along with a list of the documents it considered at the meeting. The Committee cleared from scrutiny the amendments to EMIR 2.2 but highlighted the insight this gave into the EU’s ‘likely uncompromising approach’ to Brexit. The Committee also retained scrutiny over the proposed Whistleblowing Directive.

ESMA updates register of MiFIR derivative contracts subject to the trading obligation

ESMA updated the public register of derivative contracts subject to the trading obligation under MiFIR. ESMA added to the list three recently authorised French venues, where some of the classes of derivatives subject to the trading obligation are available for trading.

ESMA publishes opinions on product intervention measures by Bulgaria, Denmark and Croatia

ESMA issued four positive opinions on product intervention measures taken by the NCAs of Bulgaria, Denmark and Croatia in accordance with MiFIR. ESMA finds that the proposed measures are justified and proportionate and that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures. 

ESMA publishes latest peer review report on CCP supervision

ESMA published its annual peer review report on the overall supervision of EU central counterparties (CCPs) by NCAs. The review focuses on the effectiveness of NCAs’ supervisory practices to assess CCPs’ compliance with Regulation (EU) 648/2012 (EMIR) requirements on collateral and funding arrangements. Overall, the review found NCAs’ supervisory activities satisfactory. However, the use by NCAs of quantitative metrics to assess the liquidity and low market risk of collateral was found to be quite limited.

Amendments to EEA Agreement Annex IX (Financial services) published in Official Journal

A number of decisions of the EEA Joint Committee amending Annex IX (Financial Services) to the EEA Agreement were published in the Official Journal. Pursuant to the amendments, several delegated regulations and implementing decisions related to EMIR, MiFIR and the CSD Regulation were incorporated into the EEA Agreement. The following decisions were published:

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Investment funds and asset management

 

ESMA issues guidelines for MMF stress testing and reporting

ESMA issued two sets of guidelines regarding the stress testing of MMFs and reporting on MMFs to NCAs, aimed at ensuring a coherent application of the MMF Regulation (EU) 2017/1131.

IOSCO publishes statement on its liquidity recommendations for open ended investment funds in response to Bank of England’s Financial Stability Report

IOSCO published a statement responding to the BoE Financial Policy Committee’s Financial Stability Report, as to whether the IOSCO liquidity risk management recommendations for investment funds (published in February 2018) are an adequate protection against liquidity problems for open ended funds. 

 

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Banks and mutuals

 

PRA consults on treatment of banks’ internal model limitations and assumptions under CRR

The PRA published consultation paper CP17/19, Counterparty credit risk: Treatment of model limitations in banks’ internal models, which sets out the PRA’s proposed changes to supervisory statement 12/13 (SS12/13) ‘Counterparty credit risk’ to clarify expectations regarding the treatment of model limitations and assumptions under Part Three, Title II, Chapter 6 (counterparty credit risk) of the CRR. Feedback is sought by 25 October 2019.

EBA publishes roadmap on IFRS 9 deliverables and launches benchmarking exercise

The EBA published its roadmap on International Financial Reporting Standard (IFRS) 9 deliverables, giving a comprehensive overview of its plans for continued monitoring of IFRS 9 implementation. It also launched an IFRS 9 benchmarking exercise on a sample of institutions, aimed at analysing the different modelling practices followed by institutions and how IFRS 9 implementation impacts the amount of ECL in terms of own funds and regulatory ratios.

European Parliament publishes briefing on banking union and the ‘home/host’ debate

The European Parliament published a briefing paper giving an overview of the home/host debate in banking legislation and the extent to which the new ‘banking package’ of legislation—including the recast Capital Requirements Directive (CRD V) and CRR II—and other moves towards the banking union changed the balance.

Work and Pensions Committee hears from Lloyds Bank unions on executive pension levels

The HoC Work and Pensions Committee heard evidence from Lloyds Bank Group staff unions Unite and Accord on their views on executive pension levels at the bank, following evidence in Parliament from chief executive António Horta-Osório and RemCo chair Stuart Sinclair on 19 June.

 

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Consumer credit, mortgage and home finance

 

FCA publishes report on alternatives to high‑cost credit

The FCA published its Alternatives to high‑cost credit report. It sets out actions and recommendations to improve the availability and awareness of alternatives to high-cost credit. The review identified significant harm to consumers using high-cost credit, many of whom are vulnerable. As a result, the FCA is implementing wide-ranging reforms of the rent-to-own, catalogue credit and store cards, buy-now pay-later offers, home-collected credit and overdraft markets. 

 

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Regulation of insurance

 

EIOPA sets out principles and guidelines for its stress-test methodology

EIOPA published a discussion paper on methodological principles of insurance stress testing. The paper sets out principles and guidelines for the conduct and assessment of an EU-wide stress test exercise, aiming to enhance EIOPA's methodology for bottom-up supervisory stress testing. EIOPA says the principles and guidelines in the paper will be the ‘toolbox’ to facilitate both the design and execution phase of its future stress test exercises. Feedback is sought by 8 October 2019.

PRA publishes consultation paper 16/19 (CP16/19) on group availability of subordinated liabilities and preference shares under Solvency II

The PRA published consultation paper 16/19 (CP16/19) on group availability of subordinated liabilities and preference shares under Solvency II. In CP16/19, the PRA sets out its proposed approach to the determination of the availability of subordinated liabilities and preference shares in group own funds, and its expectations of firms in presenting relevant analysis to the PRA. Responses are requested by 21 October 2019.

PRA updates webpage on insurance special purpose vehicles

The PRA updated its webpage on insurance special purpose vehicles (ISPVs), to include updated application forms, accompanying notes, and a new set of FAQs. All entities that wish to be established as an ISPV must apply to the PRA for a ‘Part 4A Permission’ to undertake the regulated activity of ‘insurance risk transformation’ (as defined in Regulation 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)).

EIOPA examines national ‘general good’ rules under the IDD

EIOPA published a report analysing national ‘general good’ rules in the context of the proper functioning of the Insurance Distribution Directive (IDD) and the internal market. General good rules are provisions which are part of the legal system of the host Member State. The basic principle underlying the general good in the insurance sector is that an insurance undertaking or an insurance intermediary operating under the respective arrangements laid down by Solvency II or the IDD is obliged to adapt its activities to the host Member State rules if the measures enforced against it serve the general good, irrespective of whether it carries on those activities through freedom of establishment (namely, as a branch) or under the freedom to provide services.

PRA and FCA decision to start winding-up proceedings in respect of Stronghold Insurance Company Limited published in the Official Journal

Winding-up proceedings: Decision to start winding-up proceedings in respect of Stronghold Insurance Company Limited (2019/C 245/04) was published in the Official Journal. On 22 July 2019, the PRA and the FCA published a decision to start winding-up proceedings in respect of Stronghold Insurance Company Limited. 

 

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FSMA regulated pensions activity

 

Work and Pensions Committee hears from Lloyds Bank unions on executive pension levels

The HoC Work and Pensions Committee heard evidence from Lloyds Bank Group staff unions Unite and Accord on their views on executive pension levels at the bank, following evidence in Parliament from chief executive António Horta-Osório and RemCo chair Stuart Sinclair on 19 June. 

 

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Payment services and systems

 

PSR publishes research and seeks views on cash use and access

The PSR published its second call for views paper (CP19/6) on access to cash. The paper focuses on what consumers’ cash needs are, building on research carried out into cash access, use and acceptance, and includes research on how UK consumers and small businesses use and accept cash. The PSR is seeking views on the cash needs and preferences of consumers and businesses in light of its research findings. Responses are sought by 23 August 2019.

PSR announces change of timetable for the card-acquiring market review interim report

The PSR provided an update on the timings of its card-acquiring market review, which it is conducting following concerns that the supply of these services may not be working well for merchants, and ultimately consumers. The PSR says it now plans to publish its interim report for consultation in Q1 2020, rather than by the end of 2019 as originally set out in the terms of reference. The PSR says that during its information gathering and analysis phase, it considered a number of additional issues in the submissions it received about the information it will be collecting. This, together with onboarding and conducting due diligence on the consultants appointed to help with our analysis, impacted on the PSR’s original timetable.

EPC compiles recent articles on payments and fintech

The European Payments Council (EPC) published a compilation of articles about payments published last quarter. The selection includes articles by the ECB and UK Finance, and covers areas such as fintech and AI, cashless payment options and the landscape for card payments in the EU. The articles that the EPC links to are:

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Fintech and virtual currencies

 

EBA publishes findings of its review of the regulatory framework applicable to fintech firms when accessing the market

The EBA published a  report on the regulatory framework applicable to fintech firms when accessing the market. The report illustrates developments on the regulatory perimeter across the EU, the regulatory status of fintech firms, and the approaches followed by national regulators when granting authorisation for banking and payment services.

EPC compiles recent articles on payments and fintech

The EPC published a compilation of articles about payments published last quarter. The selection includes articles by the ECB and UK Finance, and covers areas such as fintech and AI, cashless payment options and the landscape for card payments in the EU. The articles that the EPC links to are:

G7 working group on stablecoins identifies key considerations to address risks

The Bank for International Settlements’ Committee on Payments and Market Infrastructures issued an update from Benoît Cœuré, the chair of the G7 working group on stablecoins—ie crypto-assets which seek to reduce volatility by anchoring the ‘coin’ to a reference asset (eg a sovereign currency) or a basket of assets.

G7 finance ministers and central bank governors discuss cyber issues, innovation and green finance

The G7 finance ministers and central bank governors reaffirmed the importance of their close co-operation to address the current and future economic and financial challenges and say they are committed to ‘work together for a more inclusive, equal and sustainable economic model’. The group met on 17 and 18 July 2019 to discuss current risks in the global economy and the financial system, and how to accelerate the work to tackle new challenges, including cybersecurity and climate change. 

 

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Sustainable finance

 

ESMA publishes technical advice and final guidelines on credit rating agencies’ sustainability considerations and disclosures

ESMA published its technical advice on sustainability considerations in the credit rating market and its final guidelines on disclosure requirements applicable to credit ratings agencies.

G7 finance ministers and central bank governors discuss cyber issues, innovation and green finance

The G7 finance ministers and central bank governors reaffirmed the importance of their close co-operation to address the current and future economic and financial challenges and say they are committed to ‘work together for a more inclusive, equal and sustainable economic model’. The group met on 17 and 18 July 2019 to discuss current risks in the global economy and the financial system, and how to accelerate the work to tackle new challenges, including cybersecurity and climate change.

 

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Dates for your diary

 

DateSubjectEvent

 

26 July 2019

 

Funds and asset management

 

The deadline for feedback to FCA CP19/21: Proxy Advisors (Shareholders’ Rights) Regulation Implementation (DEPP and EG) is 26 July 2019.

 

26 July 2019

Sustainable finance

 

The deadline for stakeholders to provide written submissions for the Treasury Committee’s inquiry into the decarbonisation of the UK economy and green finance is 26 July 2019.

 

26 July 2019

Regulation of insurance

Sustainable finance

 

 

 
The deadline for responses to EIOPA’s consultation on a draft opinion on sustainability within Solvency II is 26 July 2019.
29 July 2019

Regulation of derivatives

 

The deadline for responses to ESMA’s consultation on tiering, comparable compliance and fees under EMIR 2.2 is 29 July 2019.

 

29 July 2019

Regulation of derivatives

 

 

 

 

The deadline for responses to the Association of National Numbering Agencies (ANNA)’s Derivatives Service Bureau (DSB)’s second consultation on proposed amendments to functionality, data submission process, service levels, service availability & cybersecurity for its 2020 service provision is 29 July 2019.

 

29 July 2019

Funds and asset management

The deadline for responses to ESMA’s consultation on potential short-term pressures on corporations stemming from the financial sector is 29 July 2019.

 

29 July 2019

Financial crime

 

 

 

 

 

 

 

The FCA will host a Global AML & Financial Crime Tech Sprint to explore the potential for new technologies to enhance information sharing between financial institutions, regulators and law enforcement across jurisdictions to detect and prevent financial crime. The TechSprint will be held in conjunction with fellow regulators Abu Dhabi Global Markets (ADGM), Australian Transaction Reports & Analytics Centre (AUSTRAC) and Monetary Authority Singapore (MAS), and in consultation with Europol and will take place between 29 July and 2 August 2019.

 

29 July 2019Fintech and crypto-assets

The deadline for responses to IOSCO’s consultation report on issues, risks and regulatory considerations relating to crypto-asset trading platforms is 29 July 2019.

 

29 July to 2 August 2019Financial crime

The FCA’s 2019 global AML and financial crime TechSprint, runs from 29 July to 2 August 2019.

 

30 July 2019Banks and mutuals

The anticipated deadline for the CMA’s phase one decision in relation to its investigation of the potential acquisition by One Savings Bank PLC of Charter Court Financial Services Group PLC is 30 July 2019.

 

30 July 2019Financial crime

The UK Government will deliver, in conjunction with the private sector, and Economic Crime Plan in July 2019.

 

31 July 2019Prudential regulation

The EBA will publish a full report on the results of its Basel III implementation assessment by the end of July 2019.

 

31 July 2019Payment services and systems

Electronic money institutions and authorised payment institutions must attest to the FCA by 31 July 2019 that their safeguarding arrangements fully meet the FCA’s requirements.

 

31 July 2019Markets and trading

The chair of the supervisory board of the ECB requested that recipients of his letter, regarding the ongoing interest rate benchmark reforms mandated by the FSB, and the use of risk-free rates, provide by 31 July 2019, a board-approved summary of their institution’s assessment of key risks related to the benchmark reform and a detailed action plan to:
—mitigate those risks
—address pricing issues, for example through the alignment of front office and risk-management systems and parallel pricing in both EONIA and €STR for the transition phase, and
—implement process changes such as changes in the modelling set-up or potential unavailability of historical data for back-testing, validation or calibration in pricing engines.

 

31 July 2019

Fintech and crypto-assets

Regulation of insurance

The deadline for applications to join EIOPA’s multidisciplinary consultative expert group which will advise EIOPA in the development of a set of principles of digital responsibility in insurance (the consultative expert group may also act as a sounding board for EIOPA in other related policy initiatives in the area of InsurTech, for instance by supporting EIOPA’s InsurTech Task Force in the development of a sound governance framework around the use of big data analytics tools such as artificial intelligence and machine learning in insurance) is 31 July 2019.

 

31 July 2019Regulation of insurance

The PRA published updated versions of the Remuneration Policy Statement (RPS) reporting template for PRA Category 1 and 2 firms for the 2018 performance year, which Category 1 and 2 firms may use to demonstrate compliance with the Solvency II remuneration requirements, together with the Solvency II staff table. Firms in scope are asked to submit a copy of their RPS for their most recent reporting period to the Bank of England Electronic Data Submission (BEEDS) portal as an Occasional Submission by 31 July 2019.

 

31 July 2019Financial crime

Directive (EU) 2019/1153 laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences will enter into force on 31 July 2019.

 

31 July 2019

Brexit

Payment services and systems

 

The notification window for EEA payment services and e-money firms, for temporary permission will open on 31 July 2019.

 

31 July 2019Enforcement and redress

The deadline to register with the FCA as an investor of ‘Asset Land’ companies is 31 July 2019.

 

31 July 2019

Consumer credit

The deadline for informal comments on the FCA’s market study examining how the credit information market operates, and the impact of the credit information market on consumers is 31 July 2019.

 

31 July 2019Sustainable finance

The European Commission technical expert group (TEG) on sustainable finance is expected to publish a call for feedback on its June 2019 interim report on climate benchmarks. The call for feedback is expected to run until the end of July.

 

1 August 2019

Banks and mutuals

Prudential regulation

 

The PRA’s Systemic Risk Buffer rates for ring-fenced banks and large building societies are applicable from 1 August 2019.

 

1 August 2019Conduct of business

Expiry date of ESMA decision 2019/509 which renewed and amended ESMA decision (EU) 2018/796 which imposes a temporary ban on the marketing, distribution or sale of binary options. The ban may be renewed for a period of no more than three months at a time.

 

1 August 2019

Conduct requirements

Payment services and systems

 

Firms will have to comply with the rules and guidance set out in FCA ‘PS19/3: General standards and communication rules for the payment services and e-money sectors’ from 1 August 2019, as set out in the Payment Services and Electronic Money (Principles for Businesses and Conduct of Business) Instrument 2019 (FCA 2019/5).

 

1 August 2019

Banks and mutuals

Consumer credit

Regulation of insurance

  

The deadline for responses to the FCA’s discussion paper on intergenerational differences (DP19/2: Intergenerational differences) is 1 August 2019.

 

1 August 2019

MiFID II

Regulation of derivatives

 

ESMA’s restrictions on the marketing, distribution or sale of contracts for difference to retail clients will expire on 1 August 2019.

 

1 August 2019

Conduct requirements

 

Payment services and systems

 

FCA rules amending the Principles for Business and BCOBS in relation to general standards on communication for the payment services and e-money sectors enter into force. The rules are set out in PS19/3: General standards and communication rules for the payment services and e-money sectors.

 

1 August 2019

Claims management regulation

Prudential regulation

 

Prudential resources requirement for claims management companies come into force (PS18/23).

 

1 August 2019Payment services and systems

The deadline for responses to the PSR’s consultation MR18/1.6: Consultation on our proposed approach to the profitability analysis is 1 August 2019.

 

1 August 2019

MiFID II

Regulation of derivatives

 

The FCA’s new rules restricting the sale, marketing and distribution of contracts for difference (CFDs) to retail customers will apply from 1 August 2019.

 

1 August 2019Funds and asset management

Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings and amending Regulation (EU) 345/2013(the European Venture Capital Funds (EuVECA) Regulation), Regulation (EU) 346/2013 (the European Social Entrepreneurship Funds (EuSEF) Regulation) and Regulation (EU) 1286/2014 (the PRIIPs Regulation) will apply from 1 August 2019 (a small number of provisions will apply from August 2021—see below). Directive (EU) 2019/1160 amending Directive 2009/65/EC (the UCITS Directive) and Directive 2011/61/EU (the Alternative Investment Fund Managers Directive) with regard to cross-border distribution of collective investment undertakings, will enter into force on 1 August 2019.

 

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