FS weekly highlights—27 August 2020

FS weekly highlights—27 August 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
UK, EU and international regulators and bodies
Financial stability, recovery and resolution
Financial crime
Complaints, compensation and claims management
Investigations, enforcement and discipline
Markets and trading
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Consumer credit, mortgage and home finance
Regulation of insurance
Regulation of personal pension and stakeholder products
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

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

ISLA Securities Lending Market Report considers impact of coronavirus (COVID-19)

The International Securities Lending Association (ISLA) published a special edition of its Securities Lending Market Report, set against the backdrop of the ongoing COVID-19 pandemic. Among other topics, the report explores themes of environmental, social and governance (ESG) investing, Basel IV rules and the digital future that continue to dominate regulatory and business priorities across all financial markets.

Source: ISLA publishes 13th edition of the Securities Lending Market Report.

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Brexit news

Brexit Bulletin—‘clock is ticking’ for deadlocked future UK-EU relationship negotiations

In a familiar round of remarks, the UK and EU reported continued deadlock on core issues following the seventh round of talks on the future UK-EU relationship. Once again, both sides reported constructive discussions and positive progress in some technical areas, but they also highlighted considerable differences on their respective red-lines. UK chief negotiator, David Frost, held the EU answerable for making negotiations ‘unnecessarily difficult’ by refusing to engage on broader issues and draft treaty text until the UK offers concessions on State aid and fisheries. EU chief negotiator, Michel Barnier, suggesting talks ‘were going backwards more than forwards’, said the UK must soften its position on these areas for talks to progress. Despite the deadlock, the talks will continue into September 2020, with negotiators on both sides still aiming to reach an agreement.

Sources: GOV.UK—David Frost's statement following the conclusion of round 7 negotiations with the EU and  European Commission—Remarques de Michel Barnier suite au septième round de négociations sur un futur partenariat entre l'Union européenne et le Royaume-Uni.

FCA updates webpage on the temporary permissions regime

The Financial Conduct Authority (FCA) updated its webpage on the temporary permissions regime (TPR) and the temporary marketing permissions regime (TMPR) for inbound passporting European Economic Area (EEA) firms and funds. The webpage also refers to the financial services contracts regime (FSCR). The notification window for the TPR and the TMPR is currently closed but will be re-opened on 30 September 2020.

Source: Temporary permissions regime.

 

UK, EU and international regulators and bodies

Commission reports on the management of the guarantee fund of the EFSI in 2019

The Council of the EU published a European Commission report to the European Parliament, the Council of the EU and the Court of Auditors on the management of the guarantee fund of the European Fund for Strategic Investment (EFSI GF) in 2019 and an accompanying staff working document.

Sources: Report from the Commission to the European Parliament, the Council and the Court of Auditors on the management of the Guarantee Fund of the European Fund for Strategic Investments in 2019 and  Commission Staff Working Document accompanying the document report from the Commission to the European Parliament, the Council and the Court of auditors on the management of the Guarantee Fund of the European Fund for Strategic Investments in 2019.

FSB publishes financial statements for 2019-2020

The Financial Stability Board (FSB) published its audited financial statements for the financial year April 2019 to March 2020, together with details on the FSB’s governance arrangements and the transparency and accountability mechanisms. The report also notes that the FSB will publish its annual report on the implementation and effects of the financial reforms in November 2020.

Source: FSB financial statements: 2019/2020.

Dame Gillian Guy appointed as the new FOS independent assessor

The Financial Ombudsman Service (FOS) announced that Dame Gillian Guy has been appointed as its new independent assessor, starting in October 2020.

Source: Financial Ombudsman Service’s board appoints new independent assessor.

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Financial stability 

EBA updates data used for the identification of G-SIIs

The European Banking Authority (EBA) published 12 indicators and updated the underlying data from the 37 largest institutions in the EU, whose leverage ratio exposure measure exceeds EUR 200bn. This end-2019 data contributes to the internationally agreed basis on which a smaller subset of banks will be identified as global systemically important institutions (G-SIIs), following the final assessments from the Basel Committee on Banking Supervision (BCBS) and the FSB.

Source: The EBA updates data used for the identification of global systemically important institutions (G-SIIs).

European Court of Auditors to examine post-2008 financial assistance monitoring

The European Court of Auditors (ECA) is to examine post-programme surveillance for Member States that received financial assistance after the 2008 crisis. The Commission’s post-programme surveillance applies to Member States exiting an adjustment programme and aims to ensure that they have the capacity to repay the financial assistance provided. The ECA has started work on an audit examining the design, implementation and effectiveness of surveillance for the five Member States (Ireland, Portugal, Spain, Cyprus and Greece) that received financial support.

Source: Auditors to examine post-programme surveillance for Member States that received financial assistance after 2008 crisis.

FSB to hold virtual workshop as part of its too-big-to-fail reform evaluation

The FSB is to host a virtual consultation workshop on the evaluation of the effects of too-big-to-fail (TBTF) reforms at 13.00 (CEST) on 4 September 2020. The workshop—part of the FSB’s programme to examine the effects of post-crisis financial reforms agreed by the G20—will cover market perceptions of the reforms, banks’ responses and broader effects.

Source: Virtual workshop on the evaluation of the effects of too-big-to-fail reforms.

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Financial crime

EBA updates data used for the identification of G-SIIs

The European Banking Authority (EBA) published 12 indicators and updated the underlying data from the 37 largest institutions in the EU, whose leverage ratio exposure measure exceeds EUR 200bn. This end-2019 data contributes to the internationally agreed basis on which a smaller subset of banks will be identified as global systemically important institutions (G-SIIs), following the final assessments from the Basel Committee on Banking Supervision (BCBS) and the FSB.

Source: The EBA updates data used for the identification of global systemically important institutions (G-SIIs).

European Court of Auditors to examine post-2008 financial assistance monitoring

The European Court of Auditors (ECA) is to examine post-programme surveillance for Member States that received financial assistance after the 2008 crisis. The Commission’s post-programme surveillance applies to Member States exiting an adjustment programme and aims to ensure that they have the capacity to repay the financial assistance provided. The ECA has started work on an audit examining the design, implementation and effectiveness of surveillance for the five Member States (Ireland, Portugal, Spain, Cyprus and Greece) that received financial support.

Source: Auditors to examine post-programme surveillance for Member States that received financial assistance after 2008 crisis.

FSB to hold virtual workshop as part of its too-big-to-fail reform evaluation

The FSB is to host a virtual consultation workshop on the evaluation of the effects of too-big-to-fail (TBTF) reforms at 13.00 (CEST) on 4 September 2020. The workshop—part of the FSB’s programme to examine the effects of post-crisis financial reforms agreed by the G20—will cover market perceptions of the reforms, banks’ responses and broader effects.

Source: Virtual workshop on the evaluation of the effects of too-big-to-fail reforms.

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Complaints, compensation and claims management

FOS publishes latest complaints data alongside coronavirus (COVID-19) insights

The FOS published data showing the number of complaints it received between April and June 2020, including complaints related to claims management companies (CMCs). It has also published insights into themes it is beginning to see in complaints from consumers and small and medium enterprises (SMEs) resulting from the COVID-19 pandemic.

Source: We’ve published our latest quarterly data—alongside insight about complaints related to COVID-19.

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Investigations, enforcement and discipline

FCA update on LF Equity Income Fund (formerly LF Woodford Equity Income Fund)

The FCA provided a capital distribution and accounting update on LF Equity Income Fund (LFEIF). On 18 January 2020 Link Fund Solutions Ltd (LFS), the authorised corporate director of LFEIF, started winding up the fund. Since this date, LFEIF has returned £2.267bn to investors in the form of two capital distributions: £2.124bn in January 2020 and £143.2m in March 2020.

Source: Capital distribution and accounting update on LF Equity Income Fund (formerly LF Woodford Equity Income Fund).

LC&F independent investigation to be delayed further

In a letter to the FCA, Dame Elizabeth Gloster confirmed that she will not be able to complete her independent investigation into the FCA’s regulation of London Capital & Finance (LC&F) by the target date of 30 September 2020. Gloster cited the large volume of additional documentation and information provided by the FCA ‘so late in the process’ as the cause of this further delay. The report is now expected to be delivered by 23 November 2020.

Sources: Letter from Dame Elizabeth Gloster to Charles Randell 21 August 2020 and  Letter from Charles Randell to Dame Elizabeth Gloster 22 August 2020.

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Markets and trading

ISDA calls on FSB GUUG to improve co-ordination of global UTI implementation

The International Swaps and Derivatives Association (ISDA) published a letter to the Financial Stability Board (FSB) Working Group on Unique Transaction Identifier (UTI) and Unique Product Identifier (UPI) governance (GUUG). It notes that individual jurisdictions are currently amending or drafting transaction reporting rules, and requests more active, improved co-ordination of global UTI implementation timelines and alignment to the CPMI-IOSCO Harmonisation Group recommendations, even while the final International Governance Body is being established.

Source: ISDA letter to FSB GUUG—Global UTI implementation.

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Regulation of benchmarks and IBOR reform

Alternative Reference Rate Committee updates recommended Best Practices

The Alternative Reference Rate Committee (ARRC) updated its recommended Best Practices in anticipation of the ISDA’s upcoming IBOR Fallback Protocol (the Protocol). The update recommends that a subset of derivatives market participants adhere to the Protocol during the escrow period as promptly as possible in order to promote adoption on a timely basis. The ARRC has also updated its Best Practices to reflect its current understanding of the timing of the ISDA protocol process, recommending that other market participants adhere to the ISDA’s Fallback Protocol for Interbank Offered Rates within the three to four month period after it is published and before the amendments to embed the fallbacks in legacy transactions take effect.

Source: ARRC Updates Best Practices to Encourage Adherence to ISDA Protocol During Escrow Period.

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Regulation of capital markets

Commission Delegated Regulation deferring entry into force of CSDR settlement discipline regime published in Official Journal

Commission Delegated Regulation (EU) 2020/1212 (the Amending Delegated Regulation), which amends Delegated Regulation (EU) 2018/1229 supplementing Regulation (EU) 909/2014 (the CSDR) with regard to regulatory technical standards (RTS) on settlement discipline, has been published in the Official Journal. The Amending Delegated Regulation defers the entry into force of the RTS on settlement discipline, which was previously scheduled for 13 September 2020, until 1 February 2021.

Source: Commission Delegated Regulation (EU) 2020/1212 of 8 May 2020 amending Delegated Regulation (EU) 2018/1229 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on settlement discipline.

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

ICMA publishes amendments to its Primary Market Handbook

The International Capital Markets Association (ICMA) published the amendments to its Primary Market Handbook.

Source: Amendments to the ICMA Primary Market Handbook published.

ISLA publishes pro forma letters and Q&As on the revised Shareholders Rights Directive

The International Securities Lending Association (ISLA) published a series of documents on the implementation of the Shareholders Rights Directive (SRD II) and how it would apply in several securities lending scenarios. The series includes pro forma letters for use by tri-party collateral managers and agent lenders for onward transmission to clients.

Source: ISLA publishes a series of SRD II pro forma letters & supporting Q&As.

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Regulation of derivatives

June 2020 SESFOD finds widespread tightening of credit terms and conditions

The European Central Bank (ECB) published the results of the June 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets (SESFOD). Survey respondents reported the most widespread tightening of credit terms and conditions over a three-month review period since the SESFOD was launched in 2013.

Source: Results of the June 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).

FIA recognises ‘critical role’ of technology in CFTC electronic trading proposal

The Futures Industry Association (FIA) and FIA Principal Traders Group (collectively FIA) wrote in support of the Commodity Futures Trading Commission’s (CFTC) Electronic Trading Risk Principles rule proposal. The FIA finds that the proposal ‘reflects a carefully reasoned principles-based approach that builds on the industry’s efforts over the years to mitigate the risks of electronic trading’. FIA ‘commends the CFTC for its deliberate approach to this rulemaking and welcomes the opportunity to continue to work with the CFTC…to promote safe, reliable and vibrant electronic markets’.

Source: FIA and FIA PTG comment in support of the CFTC’s electronic trading proposal.

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Investment funds and asset management

Coronavirus (COVID-19): FCA launches open-ended funds liquidity mismatch review survey

The FCA updated its ‘Coronavirus (COVID-19): Information for firms’ webpage to announce that it has launched a survey for the joint Bank of England (BoE) and FCA review of liquidity mismatch in open-ended funds. This is a voluntary exercise and the data will provide an important element for the joint review. Asset managers included in this survey are asked to respond to the questions on a best-effort basis by 30 September 2020.

Source: Coronavirus (COVID-19): Information for firms (26 Aug update: Open-ended funds review survey).

EFAMA updates its European Fund Classification—EFC Categories

The European Fund and Asset Management Association (EFAMA) published the second edition of the European Fund Classification—EFC Categories, which adapts the classification criteria to recent market evolutions. The European Fund Classification (EFC) is a pan-European classification system of investment funds, which is maintained by a task force of EFAMA.

Source: European fund classification categori​​es updated.

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Consumer credit, mortgage and home finance

FCA and PRA issue further guidance for firms as end of coronavirus (COVID-19) mortgage payment deferrals looms

The FCA proposed new draft guidance to ensure that firms provide support to mortgage borrowers who have benefitted from payment deferrals under the FCA’s existing guidance and who continue to face financial difficulties, as well as those whose financial situation may be newly affected by COVID-19 after the current guidance ends. The deadline for comments is 1 September 2020. In response to the FCA’s guidance, the Prudential Regulation Authority (PRA) has issued a statement for firms on International Financial Reporting Standard (IFRS) 9 and capital requirements.

Sources: Mortgages and coronavirus: Additional guidance for firms and  PRA statement on COVID-19: IFRS 9 and capital requirements—Guidance as COVID-19 specific payment deferrals come to an end.

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

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Regulation of insurance

Coronavirus (COVID-19)—European pandemic insurance schemes developing quickly

Standard and Poor's have​ reported that creating a public-private sector insurance scheme in Europe would usually take many years of work, but there are signs that such a scheme could be months away, rather than years, in an effort to revive the economy after the COVID-19 pandemic.

Source: Progress on Europe's pandemic insurance schemes could be rapid despite hurdles.

FSB publishes Key Attributes Assessment Methodology for the insurance sector

The FSB published a Key Attributes Assessment Methodology for the insurance sector (‘insurance KAAM’), which sets out essential criteria to guide the assessment of the compliance of a jurisdiction’s insurance resolution framework with the FSB’s key attributes of effective resolution regimes for financial institutions (‘key attributes’). It was developed in collaboration with experts from FSB jurisdictions, relevant standard-setting bodies, the International Monetary Fund and the World Bank, and is designed to promote consistent assessments across jurisdictions and to provide guidance to jurisdictions when adopting or amending their resolution regimes to implement the key attributes.

Source: FSB publishes Key Attributes Assessment Methodology for the insurance sector.

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Regulation of personal pension and stakeholder products

FCA and TPR campaign warns of dangers of pensions scams

The FCA issued a press release warning of the dangers of pensions scams and publicising a regulatory campaign to raise awareness of the issues involved. New research by Action Fraud finds more than £30m has been lost to scammers since 2017, though the FCA says the amount is likely to be much higher as savers fail to spot the signs of a scam and don’t know how much is in their pension pots.

Source: Pension savers claim over £30 million lost to scams as regulators urge footie fans to show scammers the red card.

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Fintech and cryptoassets

Exploring the impact of coronavirus (COVID-19) on AI in financial services

The BoE published a webinar recorded on 10 August 2020, examining the ways the COVID-19 pandemic is accelerating the shift towards a more contactless environment and increasingly digital financial services. Participants, including those from the BoE, Google and the World Bank, discussed the possible ways in which the pandemic will impact financial firms’ adoption and use of artificial intelligence (AI).

Source: Artificial intelligence, financial services and the impact of COVID-19.

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Sustainable finance

Insurance Europe calls on EU to be ambitious in its strategy on adaptation to climate change

Insurance Europe (IE) published a position paper in response to the European Commission’s consultation on the EU’s ‘Strategy on adaptation to climate change’, which was announced in the European Green Deal. IE considers that climate change mitigation measures are no longer enough to address the economic, social and environmental implications of a changing climate and calls for more prominence to be given to adaptation.

Source: Insurers call on EC to give more prominence to adaptation in EU climate change strategy.

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Dates for your diary

 

DateSubjectEvent

 

28 August 2020

 

 

COVID-19



Regulation of capital markets

 

 

Deadline for responses to the FCA’s consultation on a proposal to delay by one year the implementation of the European Single Electronic Format (ESEF) reporting requirements under the Transparency Directive 2004/109/EC due to the exceptional circumstances caused by the COVID-19 crisis.

 

28 August 2020

 

Regulation of insurance



COVID-19

 

Deadline for responses to the IAIS’s request for feedback on the impact of COVID-19.

 

30 August 2020

 

Payment services and systems

 

Deadline for responses to the EPC’s consultation on the draft rulebook it developed for its new Single Euro Payments Area (SEPA) Request-to-Pay (SRTP) scheme.

 

31 August 2020

 

Fintech and crypto-assets

 

Deadline for responses to the Bank for International Settlements Innovation Hub (BISIH) centre in Hong Kong SAR and the Hong Kong Monetary Authority’s (HKMA) ‘TechChallenge - Digitising Trade Finance’ initiative, a competition which aims to demonstrate the potential for new technologies to enhance and safeguard trade finance mechanisms.

 

31 August 2020

 

Prudential requirements



Banks and mutuals

 

Deadline for responses to the EBA’s consultation on draft amended RTS on own funds and eligible liabilities.

 

31 August 2020

 

Financial crime

 

Deadline for responses to the FATF’s proposals for amendments to Recommendation 1 and its interpretive note to require countries and the private sector to identify and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions (TFS) related to proliferation financing, as contained in FATF Recommendation 7, and to take action to mitigate these risks.

 

 

 

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About the author:
Prior to joining LexisNexis in 2016 as a paralegal, Lauren was an adjudicator at the Financial Ombudsman Service. There she resolved consumers’ complaints, and gained knowledge about a wide variety of financial products. Before this she studied Law at Nottingham Trent University.