FS weekly highlights—26 September 2019

FS weekly highlights—26 September 2019

In this issue

 

Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Financial crime
Conduct requirements
Competition in financial services
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
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
International—financial services and related sectors
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Brexit news

 

ECON publishes Q&As and transcript of public hearing with SRB’s Andrea Enria

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published the transcript of its public hearing with the chair of the Single Resolution Board, Andrea Enria, held on 4 September 2019, which includes the Q&As after Enria’s opening remarks. He discussed ECB banking supervision and the European Parliament, the ECB’s supervisory priorities, non-performing exposures (NPEs), Brexit preparedness, and regulatory challenges in banking for the new legislative term.

John Glen and UK Finance chair and CEO speak at annual dinner

The economic secretary to the Treasury, John Glen MP , UK Finance CEO Stephen Jones , and UK Finance chair Bob Wigley   delivered speeches at the UK Finance annual dinner in London. Topics covered included UK Finance’s 2019 priorities (which are, in addition to Brexit: purpose, competitiveness, operational resilience, safety and transparency, market reforms and adapting to technological change), the UK government’s global financial partnerships strategy, the call for evidence for the financial services Future Regulatory Framework Review and the United Nations Environment Programme Finance Initiative (UNEP FI)’s Principles for Responsible Banking.

 

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UK, EU and international regulators and bodies

 

European Parliament publishes briefings on ESRB

The European Parliament published two briefing papers on the European Systemic Risk Board (ESRB). The first covers the ESRB’s main features, mandate and accountability, the recent review of the ESRB, and the political agreement reached by the European Parliament and the Council of the EU in April 2019 on proposed changes to the ESRB Regulation (EU) 1092/2010. The second is background information for the public hearing with the chair of the ESRB, Mario Draghi, which will take place on 23 September 2019, and covers: the four main systemic risks identified in the ESRB’s last annual report, published in July 2019; recent ESRB actions and policy answers; and the ESRB’s role as input provider for the EU stress testing exercise.

BIS Quarterly Review discusses effects of escalating trade tensions

The Bank for International Settlements (BIS) published the latest issue of its Quarterly Review, which says trade and monetary policy dominated recent market developments, with the prices of risky assets falling on escalating trade tensions and rebounding on monetary easing. 

John Glen and UK Finance chair and CEO speak at annual dinner

The economic secretary to the Treasury, John Glen MP, UK Finance CEO Stephen Jones, and UK Finance chair Bob Wigley delivered speeches at the UK Finance annual dinner in London. Topics covered included UK Finance’s 2019 priorities (which are, in addition to Brexit: purpose, competitiveness, operational resilience, safety and transparency, market reforms and adapting to technological change), the UK government’s global financial partnerships strategy, the call for evidence for the financial services Future Regulatory Framework Review and the United Nations Environment Programme Finance Initiative (UNEP FI)’s Principles for Responsible Banking.

Council of EU publishes draft implementing decision appointing Yves Mersch as ECB supervisory board vice-chair

The Council of the EU published a draft implementing decision confirming the appointment of Yves Mersch as vice-chair of the supervisory board of the European Central Bank (ECB). Mersch’s appointment, which was approved by the European Parliament on 17 September 2019, will come into force on the date the decision is published in the Official Journal of the EU (OJ) and will continue until 14 December 2020. 

Sheree Howard appointed FCA executive director of risk and compliance oversight

The Financial Conduct Authority (FCA) announced that Sheree Howard was appointed as executive director of risk and compliance oversight. 

 

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Authorisation, approval and supervision

 

BoE executive director on fostering an inclusive workplace

The Bank of England (BoE) published a speech by its executive director for banking, payments & innovation, Victoria Cleland, to mark the start of the annual National Inclusion Week, setting out the BoE’s efforts to ensure it has a diverse workforce. Cleland said the BoE was ‘very aware of the impact our work has on the people around us, and we are therefore determined to ensure that our actions and decisions are inclusive of the diverse range of people we serve’.

Lloyd’s vows more female execs after harassment findings

Lloyd’s of London will set targets for better gender balance at senior levels and appoint an independent panel to ensure that its culture becomes more inclusive, the insurance market announced amid evidence of sexual harassment.

 

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Prudential requirements

 

EBA launches annual transparency exercise

The European Banking Authority (EBA) launched its latest EU-wide transparency exercise. In November 2019, together with the risk assessment report, the EBA will release up to 2.2m data points on around 130 EU banks. The data will cover capital positions, financial assets, risk exposure amounts, sovereign exposures and asset quality. As in the past, the exercise is exclusively based on supervisory reporting data, which the EBA says will keep the burden for the banks to a minimum. 

 

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Financial stability, recovery and resolution

 

ESRB sends warnings and recommendations on residential real estate vulnerabilities

The ESRB published a set of country-specific warnings and recommendations on medium-term vulnerabilities in the residential real estate sector. The ESRB can issue warnings when significant systemic risks are identified and to provide recommendations for remedial action to address such risks.

ECON publishes Q&As and transcript of public hearing with SRB’s Andrea Enria

ECON published the transcript of its public hearing with the chair of the Single Resolution Board, Andrea Enria, held on 4 September 2019, which includes the Q&As after Enria’s opening remarks. He discussed ECB banking supervision and the European Parliament, the ECB’s supervisory priorities, NPEs, Brexit preparedness, and regulatory challenges in banking for the new legislative term.

 

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Financial crime

 

Final JMLSG guidance published for credit unions, asset finance and brokerage services to funds

The Joint Money Laundering Steering Group (JMLSG) received Treasury ministerial approval of its sectoral guidance material on Sector 4 (Credit unions), Sector 12 (Asset finance) and Sector 20 (Brokerage services to funds). The sectoral guidance makes up Part II of the JMLSG guidance for the UK financial sector, ‘Prevention of money laundering/combating terrorist financing’.

MEPs call on Member States to implement AML rules, and suggest a regulation may be needed

Members of the European Parliament adopted a resolution calling for proper implementation of anti-money laundering (AML) rules, including better co-operation between the administrative, judicial and law enforcement authorities within the EU. MEPs stressed that the date of transposition of the fourth AML directive (MLD4) was June 2017 and MLD5 is January 2020 and urged Member States to implement the rules into national law.

Memorandum of understanding signed between cybercrime institutions

The Financial Services Information Sharing and Analysis Center (FS-ISAC) and Europol’s European Cybercrime Centre announced a memorandum of understanding between the two institutions to tackle cybercrime in Europe. The memorandum’s purpose is to enhance the law enforcement response to cybercriminals targeting banks and other financial institutions through the creation of a symbiotic intelligence-sharing network. According to Europol, the memorandum is due to ‘the acceleration of sophisticated cyber-attacks in recent years affecting numerous countries and jurisdictions at once’. Europol hopes that it will ‘help foster a pan-European approach to intelligence sharing, ensuring the cross-border co-operation necessary for the detection, prevention and reduction of cybercrime’.

Anti-fraud Banking Protocol detecting increasing amounts of illegal activity

UK Finance said that in the first half of 2019 over £23m of fraud was prevented and 134 arrests made thanks to the Banking Protocol, which allows bank branch staff to contact police if they suspect a customer is in the process of being scammed, with police making an immediate priority response to the branch. The protocol is now operational across the UK.

 

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Conduct requirements

 

FCA director discusses best practice for financial advisors

The FCA published a speech on improving the suitability of financial advice, by its director of life insurance and financial advice supervision, Debbie Gupta. Noting that advisers play an increasingly important role in the choices people make, and the impact of those choices on their quality of later life, Gupta set out the work the FCA was undertaking to improve financial advice, including improving standards, targeting firms that cause the most harm, supporting consumers and offering help to advisers.

 

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Competition in financial services

 

General Court: Fine imposed by the Commission on HSBC group for anticompetitive practices in Euribor cartel annulled

On 24 September 2019, the General Court issued its judgment in Case T-105/17 HSBC Holdings and Others v Commission, an appeal against the Commission’s decision of 7 December 2016 finding an infringement and imposing fines on three banks that did not settle in relation to their participation in the Euro interest rate derivates market (Case SA.39914). The General Court largely upheld the Commission’s 2016 decision but annulled the fine imposed. The General Court concluded that the Commission correctly decided that HSBC participated in an infringement of competition law. However, the General Court annulled the fine imposed because it failed to provide sufficient reasoning in relation to how it was calculated.

 

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Enforcement and redress

 

UK Finance and Pay.UK issue guidance for Thomas Cook customers

UK Finance issued advice to Thomas Cook customers in the wake of the airline and holiday firm’s collapse. Customers who are currently travelling with or scheduled to travel with Thomas Cook and have paid by credit and debit card are advised to check whether they are ATOL protected in the first instance and if not then speak with their individual bank or card issuer. Pay.UK also issued a reminder about direct debit refund options.

FSCS investigating Berkeley Burke SIPP Administration Limited’s due diligence procedures and civil liability position

The Financial Services Compensation Scheme (FSCS) announced that it is working closely with the administrators of Berkeley Burke SIPP Administration Limited (BBSAL) and is investigating the self-invested personal pension (SIPP) operator’s practices. The FSCS is open to claims against BBSAL and is seeking specifically to establish what levels of due diligence were carried out by the firm prior to permitting customers to make specific investments under their pensions.

FCA and FOS publish information for customers of Berkeley Burke SIPP Administration Limited

The FCA announced that BBSAL entered administration as it can no longer afford to defend redress claims made against it relating to its acceptance of high-risk non-standard investments (NSIs) into its non-advised SIPPs between 2010 and 2012. The Financial Ombudsman Service (FOS) informed BBSAL customers that the FSCS is now accepting claims against BBSAL. 

FCA provides information for customers of Glint Pay Services Ltd

The FCA provided information for customers of Glint Pay Services Ltd, which went into administration on 18 September 2019. Glint Pay Services Ltd (FRN 900657) is authorised and supervised by the FCA to issue e-money and provide payment services under the Electronic Money Regulations 2011 (the EMRs). Jason Daniel Baker and Geoffrey Paul Rowley of FRP Advisory LLP were appointed as joint administrators of Glint. 

BoE/PRA updates memorandum of understanding with the FSCS

The BoE and the FSCS updated their memorandum of understanding, which sets out the framework agreed between the PRA and the FSCS. Among other issues, the memorandum of understanding specifies that, annually, the PRA will outline to the FSCS its priorities in relation to the FSCS, and that the FSCS will put in place appropriate strategies and plans to deliver those priorities. Both parties also undertake to share information to allow them to fulfil their respective responsibilities, subject to any legal obligations or restrictions.

ECB fines Piraeus Bank S.A. €5m for breaching own funds provisions

The ECB imposed an administrative penalty for of €5,150,000 on Piraeus Bank S.A. for breaching own funds provisions between 2015 and 2017. Piraeus Bank S.A. was found to be in breach of own funds provisions on an individual and on a consolidated basis during six consecutive quarterly reporting periods, under the direction of the bank’s former management. 

ASA rulings for 25 September 2019

An ad linking suicides to bank crimes committed by Royal Bank of Scotland (RBS) prompted a complaint to the Advertising Standards Authority (ASA), with the complainant challenging whether the claims in the ad were misleading and could be substantiated and were likely to cause serious or widespread offence. The ASA upheld the complaint in part, along with eight others.

 

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Markets and trading

 

IASB to issue final amendments to IFRS standards in response to IBOR reform

The International Accounting Standards Board (IASB) expects to issue final amendments to IFRS standards in response to interest rate benchmark (IBOR) reform, which amend IFRS 9, IAS 39 and IFRS 7, on 26 September 2019.

ESMA chair Steven Maijoor discusses fallback provisions in relation to the BMR

The chair of ESMA, Steven Maijoor, delivered the opening remarks at the second roundtable of the working-group on euro risk free rates at the ECB in Frankfurt. Maijoor highlighted ESMA's priorities in its work under Regulation (EU) 2016/1011 (the Benchmark Regulation (BMR)), in particular the adoption by EU supervised entities of fallbacks in new and existing contracts to ensure that the relevant provision of the BMR are complied with. 

ESMA opinion supports a revised Spanish accepted market practice on liquidity contracts under MAR

ESMA published an opinion supporting a revised accepted market practice on liquidity contracts notified by the Spanish market regulator, the Comisión Nacional del Mercado de Valores pursuant to Article 13 of the Market Abuse Regulation (EU) 596/2014 (MAR).

 

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MiFID II

 

ESMA and the European Commission agree delay to RTS2 review in light of Brexit uncertainties

ESMA responded to the European Commission regarding the annual review of RTS2. RTS2 requires ESMA to submit annual reports to the Commission assessing the operation of some transparency thresholds for bonds and derivatives.

ESMA releases updated financial instrument reference database

ESMA published an updated version of its financial instrument reference database (FIRDS). The new version, released on 23 September 2019, includes new XML schemas v1.1.0—which are now the only version accepted by the system—and updates to the CFI validation rules. 

ESMA publishes updated results of annual transparency calculations for equity and equity-like instruments

ESMA published updated results of its annual transparency calculations for equity and equity-like instruments. The calculations are relevant to the pre-trade and post-trade transparency requirements under MiFID II and MiFIR. The new results reflect late corrections of the underlying data used to perform the calculations by reporting entities.

ESMA publishes opinions on MiFID II/MiFIR position limits

ESMA published two opinions on position limits regarding commodity derivatives under MiFID II and MiFIR.

FCA review suggests MiFID II research unbundling rules improve accountability

The FCA published multi-firm review findings indicating the MiFID II research unbundling rules have improved asset managers’ accountability over costs, ‘saving millions for investors’. The unbundling reforms aimed to ensure that portfolio managers act in the best interests of their clients and that their investment decisions are not unduly influenced by third parties. 

 

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Regulation of capital markets and Capital Markets Union

 

EBA consults on STS framework for synthetic securitisation

The EBA is consulting on its proposals for a simple, transparent and standardised (STS) framework for synthetic securitisation under article 45 of Regulation (EU) 2017/2402 (the Securitisation Regulation). The EBA’s discussion paper contains extensive analysis of synthetic securitisation market developments and trends in the EU, including data on historical default and loss performance. It examines the rationale of the STS synthetic product and assesses positive and negative implications of its possible introduction, both with and without differentiated regulatory treatment. The EBA’s proposals include a list of criteria to be considered when labelling the synthetic securitisation as ‘STS'. Feedback is sought by 25 November 2019.

Better Finance flags urgent need to review PRIIPs KID requirements on presentation of costs and performance scenarios

Better Finance, the European federation of investors and financial services users, published a position paper on the calculation and presentation of costs and performance scenarios in the key information document (KID) required to be produced under the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (Regulation (EU) 1286/2014) (the PRIIPs Regulation). Whilst supporting the aim of the PRIIPs Regulation, Better Finance emphasises the urgent need to review the PRIIPs level 1 and level 2 regulations to address several issues around the presentation of costs and performance scenarios.

 

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Regulation of derivatives

 

ECB article uses EMIR derived data to study interest rate derivatives and inflation-linked swap markets

The ECB announced that new data gathered under the EMIR is now available and can be used to examine interest rate derivatives and inflation-linked swap markets. In an article on derivatives transactions data and their use in central bank analysis, the authors shows how investor expectations for interest rates may be inferred through ‘positioning indicators’ that track how a set of ‘informed investors’ take positions in the market in anticipation of future interest rate movements. Such quantity-based indicators can complement other, more established indicators of interest rate expectations, such as forward rates or survey-based measures.

ESMA publishes study on EU fund industry exposure to collateralised loan obligations

ESMA published a study on the exposure of the EU fund industry to CLOs, in which it highlights regulators’ concerns about the potential risk to investors caused by the significant increase in the issuance of leveraged loans and CLOs in the EU and US. 

US CFTC addresses EMIR 2.2 and finalisation of tier 2 rules in relation to non-EU based CCPs

The US Commodity Futures Trading Commission (CFTC) published the opening statements of commissioners before the CFTC Global Markets Advisory Committee meeting. The meeting included a panel focusing on amendments to the European Market Infrastructure Regulation (EMIR 2.2) as they relate to non-EU based central counterparties (CCPs), including those under CFTC registration. The commissioners encouraged EU authorities to finalise EMIR 2.2 in a manner that strengthens financial stability while advancing home regulator deference so that CCPs and their members are not subject to conflicting and inconsistent regimes. The statements published include:

WFE wants to make CFTC’s non-US CCP supervision proposals more risk sensitive

The World Federation of Exchanges (WFE) published a letter to the CFTC) concerning two proposals on US supervision of non-US central counterparties (CCPs)—namely, the Proposal on the registration with alternative compliance for non-US derivatives clearing organizations and the Proposal for the exemption from derivatives clearing registration.

FCA update on opportunistic strategies in the credit derivatives market

The FCA published an update to its joint statement with the US Securities and Exchange Commission (SEC) and the CFTC on opportunistic strategies in the credit derivatives market, including ‘manufactured credit events’ or ‘narrowly tailored credit events’. The FCA welcomed the International Swaps and Derivatives Association (ISDA)’s recently proposed protocol which addresses the risk of ‘narrowly tailored credit events’, for instance by suggesting amendments to the 2014 ISDA Credit Derivatives Definitions.

‘Significant harmonisation’ is needed to ensure functioning derivatives markets

US CFTC commissioner, Dawn D. Stump, gave a speech at the 2019 ISDA Annual Europe Conference in London on the importance of a strong global alliance to achieve the shared goal of well-functioning derivatives markets. Stump discussed how regulatory similarities can be used to support deference between jurisdictions which will help to promote clarity and market stability. Stump stated that coordination is essential for oversight of CCPs and how coordination between regulators will improve swap data reporting. Stump also conferred the idea of rethinking the application of cross-border guidance and the limited conditions where extraterritoriality would be appropriate. Stump continued by discussing recent measures for the application of initial margin for non-centrally cleared derivatives and concluded by further advocating for update of the rules laid out by the G-20 leaders in 2008.

Concerns raised over Options Clearing Corporation’s new capital management policy

The Futures Industry Association (FIA) raised concerns over the risks and safeguarding of the Options Clearing Corporation’s (OCC) proposed new capital management policy. The policy is intended to govern the maintenance of capital at the level necessary for OCC to meet its regulatory obligations and to serve its clearing members and the public interest. As part of this, OCC is drafting a framework to ensure its target capital meets regulatory obligations, however the FIA holds concerns over ‘the lack of a minimum amount of skin in the game’ and other governance issues.

 

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Investment funds and asset management

 

IA publishes ‘Culture Framework’ to assist investment management firms evaluate and shape their culture

The Investment Association (IA), together with law firm Latham & Watkins, launched the ‘Culture Framework’, a comprehensive toolkit and self-assessment framework for investment management firms to monitor and measure factors across their operations which shape their workplace culture. With significant regulatory focus on culture and governance in the UK, with the introduction of the Senior Managers and Certification Regime (SM&CR), the toolkit also focuses on the direct relationship between culture and conduct within a business and the importance of strong conduct risk management.

Final JMLSG guidance published for credit unions, asset finance and brokerage services to funds

The JMLSG received Treasury ministerial approval of its sectoral guidance material on Sector 4 (Credit unions), Sector 12 (Asset finance) and Sector 20 (Brokerage services to funds). The sectoral guidance makes up Part II of the JMLSG guidance for the UK financial sector, ‘Prevention of money laundering/combating terrorist financing’.

FCA publishes review of governance standards for unit-linked funds

As anticipated in the FCA’s policy statement PS18/8, the FCA reviewed firms’ governance practices covering the value provided by unit-linked funds. The FCA found that insurance firms’ fund governance for unit-linked funds often does not include important considerations in assessing whether unit-linked funds provide good value for their investors. Following this review, the FCA is considering whether it needs to change its rules.

FCA insight on passive and active investment

The FCA published an insight article by Kevin R James and Daniel Mittendorf (economist and researcher in the FCA’s Economic Data Science team) about the increase in passive investment and the need to maintain a minimum of active investment, including for corporate governance and asset pricing purposes.

ESMA publishes study on EU fund industry exposure to collateralised loan obligations

ESMA published a study on the exposure of the EU fund industry to CLOs, in which it highlights regulators’ concerns about the potential risk to investors caused by the significant increase in the issuance of leveraged loans and CLOs in the EU and US.

Better Finance flags urgent need to review PRIIPs KID requirements on presentation of costs and performance scenarios

Better Finance, the European federation of investors and financial services users, published a position paper on the calculation and presentation of costs and performance scenarios in the key information document (KID) required to be produced under the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (Regulation (EU) 1286/2014) (the PRIIPs Regulation). Whilst supporting the aim of the PRIIPs Regulation, Better Finance emphasises the urgent need to review the PRIIPs level 1 and level 2 regulations to address several issues around the presentation of costs and performance scenarios.

Investment Association publishes ‘glass ceiling’ report on social mobility in financial services

As part of the 2019 National Inclusion Week, the IA published a new report which aims to encourage investment management firms to promote social mobility in their recruitment and retention practices.

 

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Banks and mutuals

 

Final JMLSG guidance published for credit unions, asset finance and brokerage services to funds

The JMLSG received Treasury ministerial approval of its sectoral guidance material on Sector 4 (Credit unions), Sector 12 (Asset finance) and Sector 20 (Brokerage services to funds). The sectoral guidance makes up Part II of the JMLSG guidance for the UK financial sector, ‘Prevention of money laundering/combating terrorist financing’.

BoE publishes guide to how banks are authorised in the UK

The BoE published Quarterly Bulletin 2019 Q3, How banks are authorised in the UK, which provides an overview of the process for authorising banks in the UK with a focus on the steps to be taken by new entrants to the market. The BoE notes that new banks—46 of which were authorised by the PRA and the FCA since April 2013—can be major drivers of innovation in a time of rapid technological change, and that a diversified banking sector can be more resilient to financial shocks.

ASA rulings for 25 September 2019

An ad linking suicides to bank crimes committed by RBS prompted a complaint to the ASA, with the complainant challenging whether the claims in the ad were misleading and could be substantiated and were likely to cause serious or widespread offence. The ASA upheld the complaint in part, along with eight others.

EBA launches annual transparency exercise

The European Banking Authority (EBA) launched its latest EU-wide transparency exercise. In November 2019, together with the risk assessment report, the EBA will release up to 2.2m data points on around 130 EU banks. The data will cover capital positions, financial assets, risk exposure amounts, sovereign exposures and asset quality. As in the past, the exercise is exclusively based on supervisory reporting data, which the EBA says will keep the burden for the banks to a minimum.

 

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Regulation of insurance

 

Decision to start winding-up proceedings in respect of Olympic Insurance Company Ltd published in the OJ

A decision to start winding-up proceedings in respect of Olympic Insurance Company Ltd was published in the OJ. The decision was published in accordance with Article 280 of Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II).

Better Finance flags urgent need to review PRIIPs KID requirements on presentation of costs and performance scenarios

Better Finance, the European federation of investors and financial services users, published a position paper on the calculation and presentation of costs and performance scenarios in the KID required to be produced under the PRIIPs Regulation. Whilst supporting the aim of the PRIIPs Regulation, Better Finance emphasises the urgent need to review the PRIIPs level 1 and level 2 regulations to address several issues around the presentation of costs and performance scenarios.

Insurance associations worldwide call for delay to IFRS 17

Insurance associations globally, including Insurance Europe, called on the IASB to make further improvements to International Financial Reporting Standards (IFRS) 17—insurance contracts, and to change the effective date to 1 January 2023 in order to allow time to address industry concerns. 

ESMA comments on IASB Exposure Draft amendments to IFRS 17

ESMA published written correspondence to the IASB and to the European Financial Reporting Advisory Group (EFRAG). The letters set out ESMA’s comments on the IASB’s Exposure Draft amendments to IFRS 17 which aims at proposing targeted changes to IFRS 17 insurance contracts in response to concerns and challenges raised by issuers while implementing the new Standard. The letter to EFRAG sets out areas where ESMA and EFRAG align in their feedback to IASB’s approach and areas where they diverge. ESMA is generally supportive of the direction of the proposed amendments, however it identified several concerns. 

PRA publishes PS18/19: Liquidity risk management for insurers

The PRA published policy statement PS18/19. This provides feedback to responses to consultation paper CP4/19 and contains the PRA’s supervisory statement SS5/19, ‘Liquidity risk management for insurers’. The PS is relevant to all UK Solvency II firms, including in respect of the Solvency II groups provisions, the Society of Lloyd’s and its managing agents, and non-directive insurers. The expectations set out in SS5/19 have immediate effect. 

PRA sets out expectations for insurance risk management

The PRA published a speech by its director of supervisory risk specialists, Charlotte Gerken, on insurance risk management in a changing world. Gerken considers what the PRA expects of insurance firms in the area of risk management, and the recent PRA consultation paper CP22/19 on the Solvency II PPP, the PRA’s supervisory statement SS5/19, ‘Liquidity risk management for insurers’, and the forthcoming update to PRA SS3/17 on investments in income-producing real estate.


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Regulation of personal pension and stakeholder products

 

FSCS investigating Berkeley Burke SIPP Administration Limited’s due diligence procedures and civil liability position

The FSCS announced that it is working closely with the administrators of BBSAL and is investigating the SIPP operator’s practices. The FSCS is open to claims against BBSAL and is seeking specifically to establish what levels of due diligence were carried out by the firm prior to permitting customers to make specific investments under their pensions.

FCA data-sf-ec-immutable="" and FOS publish information for customers of Berkeley Burke SIPP Administration Limited

The FCA announced that BBSAL entered administration as it can no longer afford to defend redress claims made against it relating to its acceptance of high-risk NSIs into its non-advised SIPPs between 2010 and 2012. The FOS informed BBSAL customers that the FSCS is now accepting claims against BBSAL. 

Money and Pensions Service announces steering group to support pensions dashboards delivery

The Money and Pensions Service announced the creation of a new steering group for its pensions dashboards, which aim to ensure UK savers have easy online access to key information about which pensions they have, who manages them, and what they are worth. The steering group is made up of representatives from consumer groups, and stakeholders within the pensions, financial services and fintech sectors.

FCA publishes retirement income market data and analysis for 2018/19

The FCA published a webpage containing 2018/19 data on the retirement income market, together with FCA analysis. The FCA collects data on the retirement income market to enable it to monitor developments in the market. The FCA began collecting such data in April 2015. The latest data covers 1 April 2018 to 31 March 2019, and given changes in the reporting population, the FCA advises users to be careful if comparing data for 2018/19 to previous periods.

 

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Payment services and systems

 

EPC updates guidance on visual presentation of mandates for the SDD Core and SDD B2B schemes

The European Payments Council (EPC) issued an updated version of its guidelines on the visual presentation of mandates issued by creditors under the Single European Payments Area (SEPA) Direct Debit (SDD) Core and SDD Business-to-Business (B2B) schemes as part of their offer to debtors to use the schemes as a way for making payments. The guidelines provide examples of ways to reduce the mandate size without losing any essential content, while remaining rulebook compliant.

UK Finance and Pay.UK issue guidance for Thomas Cook customers

UK Finance issued advice to Thomas Cook customers in the wake of the airline and holiday firm’s collapse. Customers who are currently travelling with or scheduled to travel with Thomas Cook and have paid by credit and debit card are advised to check whether they are ATOL protected in the first instance and if not then speak with their individual bank or card issuer. Pay.UK also issued a reminder about direct debit refund options.

FCA provides information for customers of Glint Pay Services Ltd

The FCA provided information for customers of Glint Pay Services Ltd, which went into administration on 18 September 2019. Glint Pay Services Ltd (FRN 900657) is authorised and supervised by the FCA to issue e-money and provide payment services under the EMRs. Jason Daniel Baker and Geoffrey Paul Rowley of FRP Advisory LLP were appointed as joint administrators of Glint.

Pay.UK report gauges industry views on ‘request to pay

Pay.UK published a report exploring industry views on the new payment system ‘request to pay’, which is currently in a closed pilot testing phase ahead of a planned market launch of the rules and standards in early 2020. Prior to that introduction, Pay.UK sought to test the market’s reaction to this new service and explore potential opportunities for, and barriers to, implementation and market uptake. 

Pay.UK Standards Authority offers stakeholders bi-lateral meetings on the New Payments Architecture

The Pay.UK Standards Authority is to hold a series of bi-lateral meetings to gather stakeholders’ perspectives and ideas to inform the design and development of standards for the New Payments Architecture. Stakeholders interested in setting up a meeting should contact the Pay.UK Standards Authority by 4 October 2019. 

Chris Hemsley outlines PSR priorities

The managing director of the Payment Systems Regulator (PSR), Chris Hemsley, set out the priorities for the PSR in a speech entitled ‘The transformation of payments’. Hemsley considered how the PSR can support innovation, improve competition in payments and protect users of payment systems.

 

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US CFTC addresses EMIR 2.2 and finalisation of tier 2 rules in relation to non-EU based CCPs

The US CFTC published the opening statements of commissioners before the CFTC Global Markets Advisory Committee meeting. The meeting included a panel focusing on amendments to EMIR 2.2 as they relate to non-EU based CCPs, including those under CFTC registration. The commissioners encouraged EU authorities to finalise EMIR 2.2 in a manner that strengthens financial stability while advancing home regulator deference so that CCPs and their members are not subject to conflicting and inconsistent regimes. The statements published include:

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Fintech and cryptoassets

 

Innovate Finance releases UK fintech census 2019 and notes that London tops list for global fintech deals in 2019

Innovate Finance (the membership association that represents the UK’s global fintech community) issued a press release announcing that a census of UK fintech firms by EY and Innovate Finance found that the UK fintech sector continues to attract rising levels of investment despite global economic uncertainty, although many still see challenges ahead in finding the right talent and the levels of consumer adoption. Innovate Finance also announced that London overtook New York for fintech investment deals, according to new research based on Pitchbook data released by London & Partners and Innovate Finance.

Innovate Finance report considers regulation of fintech

Innovate Finance, together with KPMG, published ‘Fintech: Transforming financial services in the UK’. The report considers how the UK should strengthen its position for fintech, expand the ecosystem and use fintech to remain a leading financial centre in the future. The report includes a summary of the role of the FCA in facilitating UK fintech development.

IMF blog urges policymakers to think far ahead on stablecoins

The International Monetary Fund (IMF) published a blog on digital currencies and the rise of stablecoins, saying the adoption of the new payment methods could bring significant benefits to customers and society by improving efficiency, competition, financial inclusion and innovation. But it warns of potential risks to financial stability and integrity, monetary policy effectiveness, and competition standards. 

 

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Sustainable finance

 

UNEP FI announces commitment to climate action and sustainability

The UNEP FI, a partnership between UNEP and the global financial sector that includes membership of more than 240 finance institutions around the globe to mobilise private sector finance for sustainable development, announced that leading banks and the UN have launched the Principles for Responsible Banking, with 130 banks collectively holding USD 47 trillion in assets, or one third of the global banking sector, signed up. UNEP FI also announced that 12 of world’s largest investors make unprecedented commitment to net zero emissions. 

UN General Assembly set to name UK Finance a leading Principles for Responsible Banking supporter

UK Finance said it is set to be named as ‘one of the leading banking organisations pledging its support for the United Nations Environment Programme Finance Initiative’s Principles for Responsible Banking’, at the UN General Assembly in New York on 22/23 September 2019. The six Principles set out how the banking industry can play a leading role in achieving the development goals and climate targets set out by the UN to provide a framework for businesses to ‘align their strategies to society’s ambitions’.

Coalition for Climate Resilient Investment launched

A ‘Coalition for Climate Resilient Investment’ was launched at the UN Climate Action Summit. The Coalition represents 34 companies and organisations with more than US$5trn in assets, including support from the World Economic Forum and the UK and Jamaican governments. The private sector-led initiative brings together different industries and leaders across the finance and investment value chain to develop practical solutions to advance climate change resilience. Related documents published are:

Council of EU agrees negotiating mandate for proposed Taxonomy Regulation

The Council of the EU published an ‘I’ item note regarding the proposal for a regulation on the establishment of a framework to facilitate sustainable investment (also referred to as the Taxonomy Regulation). In the note the Council confirms its agreed negotiation mandate on the Taxonomy Regulation and asks the COREPER to agree the mandate and to invite the Council of the EU’s presidency to begin negotiations with the European Parliament.

Council of EU agrees position on proposed Taxonomy Regulation

The Council of the EU’s COREPER agreed its position on the proposed regulation on the establishment of a framework to facilitate sustainable investment (2018/0178(COD)), also referred to as the Taxonomy Regulation. According to the Council’s position, the taxonomy should be established by the end of 2021 in order to ensure its full application by the end of 2022.

Industry associations ask for realistic implementation timeframe for proposed regulation on sustainability disclosures

Eight industry associations wrote to the European Commission asking for an extension of the application timeline for the proposed regulation on disclosures relating to sustainable investments and sustainability risks.

Council of the EU presidency sets out vision for a long-term strategy on sustainable growth

The presidency of the Council of the EU published a report on developing the EU’s economic base by presenting a vision for a long-term strategy on sustainable growth. The report notes that, over the years, Europe successfully created prosperity and well-being for its industries, businesses and citizens. However, the current European growth model is facing new developments such as climate change, fierce global competition, the rapid development and transformation of technologies and the need for new skills for adapting to technological and societal changes.

Mark Carney speaks on sustainable finance at the UN Secretary General’s Climate Action Summit 2019

The BoE published a speech by governor Mark Carney given during the UN Secretary General’s Climate Action Summit 2019. Carney said a sustainable financial system can help to amplify the impacts of climate policies and accelerate the transition to a lower carbon economy. He called for a step change in reporting and risk management, and argued for an optimisation of sustainable finance into everyday mainstream financial decision-making.

WFE and the UN Sustainable Stock Exchanges initiative publish sustainability report

The WFE, the global industry group for exchanges and CCPs, partnered with the UN Sustainable Stock Exchanges initiative to publish a report looking at how exchanges can embed sustainability within their operations, and to establish effective internal governance and operational processes and policies to support this. 

 

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Dates for your diary

 

DateSubjectEvent

 

27 September 2019

 

Prudential regulation

 

The deadline for responses to PRA CP14/19: Pillar 2 liquidity: PRA110 reporting frequency threshold is 27 September 2019.

 

27 September 2019Markets and trading

The deadline for responses to the BoE’s discussion paper on its risk management approach to collateral referencing LIBOR for use in the Sterling Monetary Framework is 27 September 2019.

 

30 September 2019 to 6 October 2019UK, EU and international regulators and bodies

The International Organization of Securities Commissions (IOSCO) will hold its third annual World Investor Week from 30 September to 6 October 2019.

 

30 September 2019Investment funds and asset management

FCA’s final rules on governance remedies (requiring alternative fund managers to assess whether their offering is in line with their need to act in the best interest of investors, and the independent director requirements) come into effect.

 

30 September 2019Prudential regulation

The deadline for responses to the EBA’s consultation on draft guidelines on loan origination and monitoring is 30 September 2019.

 

30 September 2019Regulation of insurance

Sections A and B of the PRA’s insurance stress test for the largest UK regulated life and general insurers must be completed by participating firms by 30 September 2019.

 

30 September 2019Regulation of insurance

The deadline for responses to EIOPA’s consultation on guidelines on outsourcing to cloud service providers is 30 September 2019.

 

30 September 2019Regulation of insurance


Sustainable finance

EIOPA will consider the responses to its consultation on a draft opinion on sustainability within Solvency II, before finalising its opinion on the issue which must be submitted to the European Commission by 30 September 2019.

 

October 2019Financial stability

The FSB will publish its next full progress report on implementation and effects of reforms in October 2019.
The FSB will also publish its final report on the effects of financial regulatory reforms on the provision of financing to small and medium-sized enterprises in October 2019.

 

October 2019Financial crime

The FATF’s work to identify best practices on beneficial ownership and to ensure that legal persons are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments is expected to be finalised by October 2019.

 

October 2019Financial crime

As part of its Economic Crime Plan the Government intends to promote digital identity services by October 2019, this will include working with FATF to produce new guidance clarifying the application of FATF’s customer due diligence requirements to digital identity products and services.

 

October 2019Brexit

The FCA expects to publish feedback to its consultation on recovering the costs of regulating credit rating agencies, trade repositories and securitisation repositories after the UK leaves the European Union – fee rates for 2019/20 in October 2019.

 

October 2019Consumer credit


Banks and mutuals

The next bi-annual roundtable for credit union trade bodies jointly organised by the FCA and PRA is to take place in October 2019. FCA Innovate will attend and discuss with credit unions how they could benefit from Innovate services when they are developing innovative propositions.

 

October 2019Investment funds and asset management

The FCA’s rules, introduced following its Asset Management Market Study, to strengthen authorised fund managers’ existing duty to act in the best interests of investors will come into effect in October 2019.

 

October 2019Payment services and systems

The Electronic Invoice Presentment and Payment Multi-Stakeholder Group (EIPP MSG) seeks to submit the ISO 20022 registration authority request to ISO 20022 by October 2019.

 

1 October 2019Prudential regulation

The PRA is aiming to implement the proposals set out in CP5/19 (in which it proposes to update the Pillar 2 capital framework to reflect continued refinements and developments in setting the PRA buffer) by 1 October 2019.

 

1 October 2019Payment services and systems

The deadline for feedback to Pay.UK’s call for information on proposed FPS rule delivering funding mechanism to reimburse no-blame victims of APP fraud is 1 October 2019.

 

1 October 2019Regulation of personal pension and stakeholder products


Sustainable finance

As per the requirements set out in SI 2018/988: Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018 from 1 October 2019 pension trustees that are required to produce a Statement of Investment Principles (SIP) must set out in the SIP how they take account of financially material considerations in the selection, retention and realisation of investments, including (but not limited to) environmental, sustainability and governance (ESG) considerations, including climate change.

 

1 October 2019Consumer credit

Under policy statement PS19/6: Rent-to-own (RTO) price cap—feedback on CP18/35 and final rules, the FCA will introduce a price cap to any existing products micro-enterprise RTO firms are offering on 1 October 2019, (unless the price of those products is increased, whereby the price cap would apply earlier).

 

2 October 2019UK, EU and international regulators and bodies

ESMA’s Board of Supervisors will hold a meeting in Helsinki on 2 October 2019.

 

2 October 2019Markets and trading

The ECB will start publishing the €STR from 2 October 2019. This date is also the projected implementation date of EONIA’s recalibrated methodology.The ECB will publish €STR at 8:00am CET on each TARGET business day, as of the start date, 2 October 2019. EMMI also confirmed that EONIA will be published at or shortly after 9:15am CET, starting on 2 October 2019.

 

3 October 2019Fintech and cryptoassets


Regulation of derivatives

The deadline for responses to FCA CP19/22: Restricting the sale to retail clients of investment products that reference crypto-assets is 3 October 2019.

 

 

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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.