FS weekly highlights—28 May 2020

FS weekly highlights—28 May 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Risk management and controls
Financial crime
Complaints, compensation and claims management
Competition in financial services
Markets and trading
Regulation of capital markets
Securities financing transactions
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

Coronavirus (COVID-19)–EBA publishes first insights into impact of the crisis on EU banks

The European Banking Authority (EBA) published a preliminary assessment of the impact of the coronavirus (COVID-19) on the EU banking sector. The EBA notes that banks entered the health crisis with strong capital and liquidity buffers, and managed operational pressures by activating their contingency plans. As a result, whilst the crisis is expected to affect asset quality and therefore profitability of banks going forward, the EBA says they should be able to withstand the potential credit risk losses.

Source: COVID-19 is placing unprecedented challenges on EU banks.

Coronavirus (COVID-19)–ECB chair responds to questions on possible policy responses

The European Central Bank (ECB) published a letter from the chair of its supervisory board, Andrea Enria, to a member of the German Bundestag, Frank Schäffler, regarding possible policy responses to the crisis caused by the coronavirus (COVID-19) pandemic. In the letter Enria responded to questions from Schäffler on the potential creation of a European asset management company and the development of non-performing loans (NPLs).

Source: Letter from Andrea Enria, chair of the supervisory board, to Mr Schäffler, member of the German Bundestag, on possible policy responses to the crisis.

Coronavirus (COVID-19)–ECON proposes changes to draft adjustments to CRR

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published its draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR II) as regards adjustments in response to the coronavirus (COVID-19) pandemic. The report, dated 20 May 2020, sets out a number of proposed amendments to the draft amending regulation.

Source: ECON draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards adjustments in response to the COVID-19 pandemic (COM(2020)0310 – C9-0122/2020 – 2020/0066(COD)).

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—ECB opinion on amendments to prudential requirements

The ECB published an opinion in which it supports a proposed regulation amending the CRR and CRR II. The proposed amendments are intended to further increase the ability of banks to lend and absorb losses related to the coronavirus (COVID-19) pandemic, while ensuring continued resilience.

Source: Opinion of the European Central Bank of 20 May 2020 on amendments to the Union prudential framework in response to the COVID-19 pandemic (CON/2020/16).

Coronavirus (COVID-19)—European Scrutiny Committee presses government on proposed amendments to CRR

The chair of the European Scrutiny Committee, Sir William Cash MP, wrote to the economic secretary to the Treasury, John Glen MP, asking for further details of the UK government’s position on the European Commission’s 28 April 2020 proposal for changes to the CRR to soften the impact of prudential rules on banks’ lending to businesses during the coronavirus (COVID-19) pandemic.

Source: Letter from the chair to John Glen MP regarding amendments to the EU’s Capital Requirement Regulation, dated 21 May 2020.

Coronavirus (COVID-19)—House of Commons ESC reviews proposed adjustments to CRR

The House of Commons European Scrutiny Committee (ESC) published a list of documents to be reported to the House as legally and/or politically important. These include a number of EU documents on proposed adjustments to the capital requirements framework designed to maximise the ability of banks to lend during the coronavirus pandemic, while also ensuring their continued resilience.

Source: Ninth Report of Session 2019-21 (section 6 CRR).

Coronavirus (COVID-19)—BoE to discontinue three-month Contingent Term Repo Facility operations

The Bank of England (BoE) announced that, in light of more stable funding market conditions and recent usage patterns, it will discontinue three-month Contingent Term Repo Facility (CTRF) operations at the end of May 2020. The final operation is scheduled to take place on 28 May.

Source: Update on the Contingent Term Repo Facility (CTRF)—Market Notice 22 May 2020.

FCA Primary Market Bulletin No. 28—Guidance on corporate reporting, financial statements, shareholder engagement and capital raising during coronavirus (COVID-19)

The Financial Conduct Authority (FCA) published the 28th edition of the Primary Market Bulletin, the FCA newsletter for primary market participants. The special edition provides guidance for issuers in the context of the coronavirus (COVID-19) pandemic, confirms temporary relief to listed companies for half yearly financial reports, includes a statement on going concern assessments in financial statements and encourages shareholder engagement and the delivery of soft pre-emption rights.

Sources: Primary Market Bulletin Issue No. 28 coronavirus (Covid-19) updateStatement of Policy: Delaying annual company accounts during the coronavirus crisisESMA issues guidance on financial reporting deadlines in light of COVID-19Joint statement by the FCA, FRC and PRAStatement of Policy: listed companies and recapitalisation issuances during the coronavirus crisis and  Market Watch 63 Newsletter on market conduct and transaction reporting issues.

Coronavirus (COVID-19)—FCA Market Watch No. 63—market conduct and discipline in the context of coronavirus

The FCA published Market Watch issue 63, setting out its expectations of market conduct in the context of increased capital raising events and alternative working arrangements due to the coronavirus (COVID-19) pandemic.

Source: Market Watch issue 63: market conduct and discipline in context of coronavirus.

Coronavirus (COVID-19)—FCA consults on mortgage holiday extension plans

The FCA published new draft guidance for lenders which will set out the expectations for firms and the options available to their customers in relation to mortgage payments in the context of the coronavirus (COVID-19) pandemic. The proposals include extending the application period for a mortgage holiday until 31 October 2020 so customers that have not yet had a payment holiday and are experiencing financial difficulty will be able to request one. The current ban on repossessions of homes will be continued to the same date. The FCA seeks feedback on the proposals by 26 May 2020.

Sources: Help with mortgages to continue for homeowners affected by coronavirus and  FCA announces support for customers who are struggling to pay their mortgage due to coronavirus.

For further information, see: FCA: Treating Customers Fairly—essentials and  Mortgage and home finance conduct of business—responsible lending, charges and arrears requirements.

Coronavirus (COVID-19)—FCA responds to inquiry

The FCA published its response to the Treasury Select Committee’s inquiry into the economic impact of coronavirus. In its response, the FCA commented on how consumers’ credit ratings should not be affected by arrears as a result of coronavirus. In particular, the FCA referred to Credit Reference Agencies (CRAs)’s guidance to lenders on how they should report accounts subject to payment deferrals.

Source: FCA response to COVID-19 Inquiry phase 1 follow-up questions, dated 12 May 2020.

Coronavirus (COVID-19)—PRA guidance on regulatory capital and IFRS 9 requirements for extended payment holidays

The Prudential Regulation Authority (PRA) issued a statement setting out its high-level view on the regulatory capital and IFRS 9 implications of the FCA’s draft guidance on extended support for mortgage customers, published on 22 May 2020.

Source: Statement by the PRA on regulatory capital and IFRS 9 requirements for payment holidays.

Coronavirus (COVID-19)—FSB convenes meeting with financial policymakers and private sector firms

The Bank for International Settlements (BIS) announced that financial policymakers and international standard setters held a virtual meeting on 26 May 2020 with private sector executives to discuss international policy responses to the coronavirus (COVID-19). The meeting brought together senior representatives from central banks, regulatory authorities and finance ministries, as well as about 30 international banks, insurance firms, asset managers, market infrastructures and credit rating agencies.

Source: Financial policymakers discuss responses to COVID-19 with the private sector.

Coronavirus (COVID-19)—Financial Inclusion Policy Forum discusses policy responses

HM Treasury published a summary of the fifth meeting of the Financial Inclusion Policy Forum, held via video conference on 27 April 2020. The forum brings together leaders from industry, the third sector, ministers and the regulator, to ensure collaboration across government and with the sector on financial inclusion. The forum is co-chaired by the economic secretary to the Treasury (John Glen) and the Minister for Pensions and Financial Inclusion (Guy Opperman), and meets bi-annually.

Source: Summary of Financial Inclusion Policy Forum meeting April 2020.

Coronavirus (COVID-19)—Government applies dormant account funding to charities, social enterprises and vulnerable individuals

The culture secretary, Oliver Dowden, announced that £150m from dormant bank and building society accounts is to be unlocked to help charities, social enterprises and vulnerable individuals during the coronavirus (COVID—19) pandemic. This includes accelerating the release of £71m of new funds from dormant accounts alongside £79m already unlocked that will be repurposed to help charities’ coronavirus response and recovery.

Source: Government unlocks £150m from dormant accounts for coronavirus response.

For further information, see: Dormant accounts.

Coronavirus (COVID-19)—Pay.UK discusses contactless payment options

Pay.UK published an article setting out tips for managing non-card payments made through a bank or building society account. It points out that, after two months of social distancing, many consumers have changed the way they manage their finances and pay bills. The article sets out ways to make payments safely and securely from home while the coronavirus (COVID-19) restrictions remain in place.

Source: Tips on how to make payments and manage your finances as social distancing continues.

Coronavirus (COVID-19)—The CMA updates case timetable for FS review

The Competition and Markets Authority (CMA) updated its timetable relating to its investigation of suspected anti-competitive arrangements in the financial services sector which may infringe Chapter I of the Competition Act 1998 (CA98) and/or Article 101 of the Treaty on the Functioning of the European Union (TFEU). The CMA’s updated timetable indicates that its initial investigation, including review and analysis of additional evidence, originally due to finish in April 2020, will be continuing until December 2020.

Source: Financial services sector: suspected anti-competitive arrangements.

Coronavirus (COVID-19): ICMA chief executive discusses effect on capital markets

The International Capital Market Association (ICMA) published an audio-link in which its chief executive, Martin Scheck, talks about coronavirus (COVID-19) and its effect on capital markets, and how ICMA is adapting its approach to supporting its global membership.

Source: Message from Martin Scheck, ICMA’s chief executive.

Coronavirus (COVID-19)—Treasury publishes latest business loan scheme information

HM Treasury published management information about the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS). It lists value and number of facilities approved alongside total number of applications.

Source: HM Treasury coronavirus (COVID-19) business loan scheme statistics.

Coronavirus (COVID-19)—UK Finance considers the 12-week rule and furloughing of SMFs

UK Finance published an article entitled ‘The ‘12-week rule’ and furloughing of Senior Management Function holders.’ The article considers what happens to senior managers’ regulatory approval following furlough and the implications for their overall responsibility in both dual and solo-regulated firms. It addresses the 12-week rule in relation to temporary arrangements to cover absence in circumstances such as illness or furlough and makes a number of recommendations for the training of temporary senior managers.

Source: The ‘12-week rule’ and furloughing of Senior Management Function holders.

For further information, see: Senior Managers and Certification Regime—essentials for solo-regulated firms and  Senior Managers and Certification Regime—essentials for SM&CR banking firms.

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Brexit news

For further information on Brexit and its impact on financial services, see: Financial Services passporting, equivalence and the UK post-Brexit.

Brexit Bulletin—Frost and Gove questioned on UK-EU future relationship

The Commons Future Relationship with the European Union Committee questioned Chancellor of the Duchy of Lancaster, Michael Gove, and UK Chief Negotiator, David Frost, on progress following the third round of negotiations on the future UK-EU relationship on 27 May 2020. Frost admitted that although the timescales are accelerated, the UK and EU are still at a relatively early stage in the negotiations. The High Level Conference, scheduled for June 2020, is expected to go ahead though no date has been confirmed. Although time is short, the UK side remains optimistic that a deal can be reached and its position on extending the transition period remains unchanged.

Sources: Future Relationship with the European Union Committee: Wednesday 27 May 2020 and  Committee questions Michael Gove and David Frost.

Lloyd's of London issues Part VII transfer update

Lloyd's of London (Lloyd's) confirmed that it has received approval from the High Court for its Part VII of the Financial Services and Markets Act 2000 strategy to notify policyholders about the proposed transfer of its existing business in the European Economic Area (EEA).

Source: Lloyd’s Part VII transfer moves ahead to ensure continuity of cover for customers.

Lloyd’s issues statement on post-Brexit insurance position

Lloyd’s issued a statement noting that, after the Brexit transition period, it is anticipated that its members will no longer benefit from EU passporting provisions and will no longer have permission to underwrite EEA (re)insurance business. However, Lloyd's says its members will continue to be able to provide reinsurance to cedants in the EEA (with the exception of Germany) on a cross-border basis, provided relevant local requirements are complied with.

Source: Brexit: what happens next?

Summary of UK-EU negotiations to date

The House of Commons Library published a report providing a timeline of the first three rounds of negotiations on the future UK-EU relationship and a summary of the draft new partnership treaty proposed by the EU in March 2020.

Source: The UK-EU future relationship: the March 2020 EU draft treaty and negotiations update .

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MiFID II

ESMA agrees ICMA’s proposal for reporting central bank repos under MiFIR

The International Capital Market Association (ICMA) stated that the European Securities and Markets Authority (ESMA) confirmed the main aspects of the proposal for reporting repos with central banks under the Markets in Financial Instruments  Regulation (EU) 600/2014 (MiFIR), which ICMA submitted to ESMA in November 2019.

Source: ESMA confirms ICMA proposals for reporting of central bank repos under MiFIR.

For further information, see: MiFID I, MiFID II and MiFIR—essentials.

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UK, EU and international regulators and bodies

FCA publishes Handbook Notice No 77

The FCA published Handbook Notice No 77, which includes changes to the FCA Handbook made by the FCA board on 13 and 21 May 2020. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Handbook Notice or in separate feedback statements.

Source: Handbook Notice 77.

Coronavirus (COVID-19)—FSB convenes meeting with financial policymakers and private sector firms

The BIS announced that financial policymakers and international standard setters held a virtual meeting on 26 May 2020 with private sector executives to discuss international policy responses to the coronavirus (COVID-19). The meeting brought together senior representatives from central banks, regulatory authorities and finance ministries, as well as about 30 international banks, insurance firms, asset managers, market infrastructures and credit rating agencies.

Source: Financial policymakers discuss responses to COVID-19 with the private sector.

Coronavirus (COVID-19)—Financial Inclusion Policy Forum discusses policy responses

HM Treasury published a summary of the fifth meeting of the Financial Inclusion Policy Forum, held via video conference on 27 April 2020. The forum brings together leaders from industry, the third sector, ministers and the regulator, to ensure collaboration across government and with the sector on financial inclusion. The forum is co-chaired by the economic secretary to the Treasury (John Glen) and the Minister for Pensions and Financial Inclusion (Guy Opperman), and meets bi-annually.

Source: Summary of Financial Inclusion Policy Forum meeting April 2020.

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Authorisation, approval and supervision

BoE updates on its work to transform the hosting and use of regulatory data

The BoE announced the next steps in its work to transform the hosting and use of regulatory data over the next decade, in order to decrease the burden on industry and increase the timeliness and effectiveness of data in supporting supervisory judgements. During the next phase of the review, which will run until the end of autumn 2020, the BoE will be working with industry to shape the feedback it has received into a transformation plan for data collection. The plan will set out the vision, approach and next steps.

Source: Transforming data collection from the UK financial sector.

FSCS announces 2020/21 levy

The Financial Services Compensation Scheme (FSCS) announced that its levy for 2020/21 will be £649m, £14m more than was forecast in its Plan and Budget 2020/21 in mid-January. The figure includes an amount of £74.7m for management expenses which are the costs of running the Scheme.

Source: FSCS announces its levy for 2020/21 at £649m.

ECB publishes guidance on SHS reporting by banking groups

The ECB published a set of guidance notes to reporting agents on statistics on holdings of securities (SHS) regulation, focusing on the reporting of SHS by reporting banking groups. The document provides guidance and more detailed information on the data reporting requirements set out in Regulation (EU) 1011/2012 of the ECB concerning SHS (ECB/2012/24) (the SHS Regulation).

Source: Guidance notes to reporting agents on SHS regulation for statistics on holdings of securities by reporting banking groups (SHSG).

Coronavirus (COVID-19)—UK Finance considers the 12-week rule and furloughing of SMFs

UK Finance published an article entitled ‘The ‘12-week rule’ and furloughing of Senior Management Function holders.’ The article considers what happens to senior managers’ regulatory approval following furlough and the implications for their overall responsibility in both dual and solo-regulated firms. It addresses the 12-week rule in relation to temporary arrangements to cover absence in circumstances such as illness or furlough and makes a number of recommendations for the training of temporary senior managers.

Source: The ‘12-week rule’ and furloughing of Senior Management Function holders.

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Prudential requirements

Coronavirus (COVID-19)–ECON proposes changes to draft adjustments to CRR

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) published its draft report on the proposal for a regulation of the European Parliament and of the Council amending the CRR and CRR II as regards adjustments in response to the coronavirus (COVID-19) pandemic. The report, dated 20 May 2020, sets out a number of proposed amendments to the draft amending regulation.

Source: ECON draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards adjustments in response to the COVID-19 pandemic (COM(2020)0310 – C9-0122/2020 – 2020/0066(COD)).

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—ECB opinion on amendments to prudential requirements

The ECB published an opinion in which it supports a proposed regulation amending the CRR and CRR II. The proposed amendments are intended to further increase the ability of banks to lend and absorb losses related to the coronavirus (COVID-19) pandemic, while ensuring continued resilience.

Source: Opinion of the European Central Bank of 20 May 2020 on amendments to the Union prudential framework in response to the COVID-19 pandemic (CON/2020/16).

Coronavirus (COVID-19)—European Scrutiny Committee presses government on proposed amendments to CRR

The chair of the European Scrutiny Committee, Sir William Cash MP, wrote to the economic secretary to the Treasury, John Glen MP, asking for further details of the UK government’s position on the European Commission’s 28 April 2020 proposal for changes to the Capital Requirements Regulation (EU) 575/2013 (CRR) to soften the impact of prudential rules on banks’ lending to businesses during the coronavirus (COVID-19) pandemic.

Source: Letter from the chair to John Glen MP regarding amendments to the EU’s Capital Requirement Regulation, dated 21 May 2020.

Coronavirus (COVID-19)—House of Commons ESC reviews proposed adjustments to CRR

The House of Commons European Scrutiny Committee (ESC) published a list of documents to be reported to the House as legally and/or politically important. These include a number of EU documents on proposed adjustments to the capital requirements framework designed to maximise the ability of banks to lend during the coronavirus pandemic, while also ensuring their continued resilience.

Source: Ninth Report of Session 2019-21 (section 6 CRR).

Coronavirus (COVID-19)–EBA publishes first insights into impact of the crisis on EU banks

The EBA published a preliminary assessment of the impact of the coronavirus (COVID-19) on the EU banking sector. The EBA notes that banks entered the health crisis with strong capital and liquidity buffers, and managed operational pressures by activating their contingency plans. As a result, whilst the crisis is expected to affect asset quality and therefore profitability of banks going forward, the EBA says they should be able to withstand the potential credit risk losses.

Source: COVID-19 is placing unprecedented challenges on EU banks.

Coronavirus (COVID-19)—PRA guidance on regulatory capital and IFRS 9 requirements for extended payment holidays

The PRA issued a statement setting out its high-level view on the regulatory capital and IFRS 9 implications of the FCA’s draft guidance on extended support for mortgage customers, published on 22 May 2020.

Source: Statement by the PRA on regulatory capital and IFRS 9 requirements for payment holidays.

EBA supports one-year extension of French measure imposing tighter large exposure limits

The EBA published an opinion (EBA-Op-2020-09) regarding the French notification of an extension of the period of application of a stricter national measure based on Article 458(9) of the CRR. The EBA does not object to the Haut Conseil de stabilité financière’s (HCSF) decision to extend by a year, for French globally systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs), the large-exposure limits applicable to large and highly indebted non-financial corporations (NFCs) resident in France or groups of connected NFCs assessed to be highly indebted and based in France.

Source: EBA issues opinion on measures to address macroprudential risk following notification by French High Council for Financial Stability (HSCF).

For further information, see: The treatment of large exposures under CRD IV.

ESRB supports one-year extension of French measure imposing tighter large exposure limits

The Council of the EU published an opinion of the European Systemic Risk Board (ESRB), dated 19 May 2020, regarding the French notification of an extension of the period of application of a stricter national measure based on Article 458 of the CRR. The opinion supports the Haut Conseil de stabilité financière’s (HCSF) decision to extend by a year a measure imposing tighter large exposure limits in relation to highly indebted large NFCs on French G-SIIs and O-SIIs.

Source: Opinion of the European Systemic Risk Board of 19 May 2020 regarding the French notification of an extension of the period of application of a stricter national measure based on Article 458 of Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms (ESRB/2020/5).

NGFS guide for supervisors on integrating climate risks into prudential supervision

The Central Banks and Supervisors Network for Greening the Financial System (NGFS) published a ‘Guide for supervisors: integrating climate-related and environmental risks into prudential supervision’. The guide is designed to assist prudential supervisors in integrating the financial risks resulting from climate change and environmental degradation into their work, and to allow financial institutions to learn how supervisors are identifying climate-related and environmental risks, as well as how supervisors expect banks and insurers to address these risks.

Source: NGFS publication—Guide for supervisors: integrating climate-related and environmental risks into prudential supervision.

SRB publishes final MREL

The Single Resolution Board (SRB) published its final ‘Minimum requirements for own funds and eligible liabilities (MREL) policy under the Banking Package’, together with a summary of responses to the consultation.

Source: SRB publishes MREL policy under the Banking Package.

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Risk management and controls

Insurance Europe calls for assessment of GDPR implementation

Insurance Europe (IE) published a briefing on the General Data Protection Regulation (EU) 2016/679 (GDPR) two years on, saying the European Commission—which is due to review the legislation—should examine its innovation impact, the role of the European Data Protection Board (EDPB) and the regulation’s application consistency.

Source: Insight Briefing: GDPR two years on—EC should examine innovation impact, role of EDPB & application consistency.

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Financial crime

ECB publishes opinion on draft Belgian law implementing MLD5

The ECB published an opinion dated 25 May 2020 on a draft Belgian law on cash limitations concerning postal payments and anti-money laundering (AML) measures (CON/2020/17), which implements Directive (EU) 2018/843 (MLD5). In its opinion, the ECB does not raise any objections to the draft law, but it does recommend that the Nationale Bank van België (NBB) (also known as the Banque Nationale de Belgique) clarify a number of points in the explanatory memorandum.

Source: Opinion of the European Central Bank of 25 May 2020 on cash limitations concerning postal payments and anti-money laundering measures (CON/2020/17).

European Parliament study looks at ways to improve EU AML policy

The European Parliament published a study on improving anti-money laundering (AML) policy. It evaluates four measures discussed by the European Parliament, the European Commission and others, to improve AML policy. The study looks first at identifying high-risk countries through blacklisting, then at reducing money laundering through letterbox or shell companies. It discusses the possible harmonisation of EU AML policies through regulations, and at strengthening the European executive, eg through a European public prosecutor, a European financial investigation unit, a European supervisor, or a European police force.

Source: European Parliament study: Improving anti-money laundering policy.

For further information, see: The anti-money laundering regime.

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Complaints, compensation and claims management

FSCS announces 2020/21 levy

The FSCS announced that its levy for 2020/21 will be £649m, £14m more than was forecast in its Plan and Budget 2020/21 in mid-January. The figure includes an amount of £74.7m for management expenses which are the costs of running the Scheme.

Source: FSCS announces its levy for 2020/21 at £649m.

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Competition in financial services

BCR outlines Capability and Innovation Fund Pool E details

Banking Competition Remedies Ltd (BCR) published an update on the Capability and Innovation Fund (CIF) Pool E. It confirms the grant sizes for Pool E and outlines the process and timeline for applications. In light of the coronavirus (COVID-19) pandemic, BCR says it has gained HM Treasury and RBS agreement to implement the £100m Pool E funding earlier than originally foreseen.

Sources: Banking Competition Remedies Ltd (BCR) update on Capability and Innovation Fund Pool E and  Correspondence from Godfrey Cromwell relating to Banking Competition Remedies update, dated 14 May 2020.

Coronavirus (COVID-19)—The CMA updates case timetable for FS review

The Competition and Markets Authority (CMA) updated its timetable relating to its investigation of suspected anti-competitive arrangements in the financial services sector which may infringe Chapter I of the Competition Act 1998 (CA98) and/or Article 101 of the Treaty on the Functioning of the European Union (TFEU). The CMA’s updated timetable indicates that its initial investigation, including review and analysis of additional evidence, originally due to finish in April 2020, will be continuing until December 2020.

Source: Financial services sector: suspected anti-competitive arrangements.

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Markets and trading

Coronavirus (COVID-19)—FCA Market Watch No. 63—market conduct and discipline in the context of coronavirus

The FCA published Market Watch issue 63, setting out its expectations of market conduct in the context of increased capital raising events and alternative working arrangements due to the coronavirus (COVID-19) pandemic.

Source: Market Watch issue 63: market conduct and discipline in context of coronavirus.

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Regulation of capital markets

FCA Primary Market Bulletin No. 28—Guidance on corporate reporting, financial statements, shareholder engagement and capital raising during coronavirus (COVID-19)

The FCA published the 28th edition of the Primary Market Bulletin, the FCA newsletter for primary market participants. The special edition provides guidance for issuers in the context of the coronavirus (COVID-19) pandemic, confirms temporary relief to listed companies for half yearly financial reports, includes a statement on going concern assessments in financial statements and encourages shareholder engagement and the delivery of soft pre-emption rights.

Sources: Primary Market Bulletin Issue No. 28 coronavirus (Covid-19) updateStatement of Policy: Delaying annual company accounts during the coronavirus crisisESMA issues guidance on financial reporting deadlines in light of COVID-19Joint statement by the FCA, FRC and PRAStatement of Policy: listed companies and recapitalisation issuances during the coronavirus crisis and  Market Watch 63 Newsletter on market conduct and transaction reporting issues.

European Commission consults on investment protection proposals

The European Commission published a roadmap and an update on its proposal for a regulation on investment protection and facilitation of investment within the EU, aimed at clarifying, filling gaps and modernising the EU’s rules protecting intra-EU investments. The proposal also aims to improve the enforcement of the rules when disputes between investors and Member States arise, and to introduce measures to facilitate and promote cross-border investments in the EU. Feedback on the inception impact assessment is sought by 23 June 2020, while the full public consultation is open until 8 September 2020.

Source: Capital markets union: Commission launches public consultation on the protection and facilitation of investment within the EU.

Coronavirus (COVID-19): ICMA chief executive discusses effect on capital markets

The ICMA published an audio-link in which its chief executive, Martin Scheck, talks about coronavirus (COVID-19) and its effect on capital markets, and how ICMA is adapting its approach to supporting its global membership.

Source: Message from Martin Scheck, ICMA’s chief executive.

ICMA raises concerns over CSDR provisions for cash compensation in the case of bond markets

The ICMA published a briefing note outlining deficiencies in the Central Securities Depositories Regulation (CSDR) provisions for cash compensation in the case of bond markets, as well as highlighting some of the potential market solutions under discussion. The note was produced in conjunction with ICMA’s dedicated CSDR Cash Compensation Workstream, part of ICMA’s CSDR-SD Working Group.

Sources: ICMA publishes briefing note on CSDR Settlement Discipline—cash compensation in the case of bond markets and  ICMA submits letter to European Commission and ESMA outlining industry concerns on timely implementation of CSDR mandatory buy-in provisions.

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

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Securities financing transactions

ESMA agrees ICMA’s proposal for reporting central bank repos under MiFIR

The International Capital Market Association (ICMA) stated that the European Securities and Markets Authority (ESMA) confirmed the main aspects of the proposal for reporting repos with central banks under the Markets in Financial Instruments Regulation (EU) 600/2014 (MiFIR), which ICMA submitted to ESMA in November 2019.

Source: ESMA confirms ICMA proposals for reporting of central bank repos under MiFIR.

For further information, see: MiFID I, MiFID II and MiFIR—essentials.

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Banks and mutuals

SRB publishes final MREL

The Single Resolution Board (SRB) published its final ‘MREL policy under the Banking Package’, together with a summary of responses to the consultation.

Source: SRB publishes MREL policy under the Banking Package.

Coronavirus (COVID-19)–EBA publishes first insights into impact of the crisis on EU banks

The EBA published a preliminary assessment of the impact of the coronavirus (COVID-19) on the EU banking sector. The EBA notes that banks entered the health crisis with strong capital and liquidity buffers, and managed operational pressures by activating their contingency plans. As a result, whilst the crisis is expected to affect asset quality and therefore profitability of banks going forward, the EBA says they should be able to withstand the potential credit risk losses.

Source: COVID-19 is placing unprecedented challenges on EU banks.

Coronavirus (COVID-19)–ECB chair responds to questions on possible policy responses

The ECB published a letter from the chair of its supervisory board, Andrea Enria, to a member of the German Bundestag, Frank Schäffler, regarding possible policy responses to the crisis caused by the coronavirus (COVID-19) pandemic. In the letter Enria responded to questions from Schäffler on the potential creation of a European asset management company and the development of NPLs.

Source: Letter from Andrea Enria, chair of the supervisory board, to Mr Schäffler, member of the German Bundestag, on possible policy responses to the crisis.

Coronavirus (COVID-19)–ECON proposes changes to draft adjustments to CRR

ECON published its draft report on the proposal for a regulation of the European Parliament and of the Council the CRR and CRR II as regards adjustments in response to the coronavirus (COVID-19) pandemic. The report, dated 20 May 2020, sets out a number of proposed amendments to the draft amending regulation.

Source: ECON draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards adjustments in response to the COVID-19 pandemic (COM(2020)0310 – C9-0122/2020 – 2020/0066(COD)).

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—ECB opinion on amendments to prudential requirements

The ECB published an opinion in which it supports a proposed regulation amending the CRR and CRR II. The proposed amendments are intended to further increase the ability of banks to lend and absorb losses related to the coronavirus (COVID-19) pandemic, while ensuring continued resilience.

Source: Opinion of the European Central Bank of 20 May 2020 on amendments to the Union prudential framework in response to the COVID-19 pandemic (CON/2020/16).

The House of Commons ESC published a list of documents to be reported to the House as legally and/or politically important. These include a number of EU documents on proposed adjustments to the capital requirements framework designed to maximise the ability of banks to lend during the coronavirus pandemic, while also ensuring their continued resilience.

Source: Ninth Report of Session 2019-21 (section 6 CRR).

Coronavirus (COVID-19)—European Scrutiny Committee presses government on proposed amendments to CRR

The chair of the European Scrutiny Committee, Sir William Cash MP, wrote to the economic secretary to the Treasury, John Glen MP, asking for further details of the UK government’s position on the European Commission’s 28 April 2020 proposal for changes to the CRR to soften the impact of prudential rules on banks’ lending to businesses during the coronavirus (COVID-19) pandemic.

Source: Letter from the chair to John Glen MP regarding amendments to the EU’s Capital Requirement Regulation, dated 21 May 2020.

Coronavirus (COVID-19)—PRA guidance on regulatory capital and IFRS 9 requirements for extended payment holidays

The PRA issued a statement setting out its high-level view on the regulatory capital and IFRS 9 implications of the FCA’s draft guidance on extended support for mortgage customers, published on 22 May 2020.

Source: Statement by the PRA on regulatory capital and IFRS 9 requirements for payment holidays.

Coronavirus (COVID-19)—Government applies dormant account funding to charities, social enterprises and vulnerable individuals

The culture secretary, Oliver Dowden, announced that £150m from dormant bank and building society accounts is to be unlocked to help charities, social enterprises and vulnerable individuals during the coronavirus (COVID—19) pandemic. This includes accelerating the release of £71m of new funds from dormant accounts alongside £79m already unlocked that will be repurposed to help charities’ coronavirus response and recovery.

Source: Government unlocks £150m from dormant accounts for coronavirus response.

For further information, see: Dormant accounts.

Coronavirus (COVID-19)—Treasury publishes latest business loan scheme information

HM Treasury published management information about the CBILS, CLBILS and BBLS. It lists value and number of facilities approved alongside total number of applications.

Source: HM Treasury coronavirus (COVID-19) business loan scheme statistics.

EBA supports one-year extension of French measure imposing tighter large exposure limits

The EBA published an opinion (EBA-Op-2020-09) regarding the French notification of an extension of the period of application of a stricter national measure based on Article 458(9) of the CRR. The EBA does not object to the Haut Conseil de stabilité financière’s (HCSF) decision to extend by a year, for French G-SIIs and O-SIIs, the large-exposure limits applicable to large and highly indebted NFCs resident in France or groups of connected NFCs assessed to be highly indebted and based in France.

Source: EBA issues opinion on measures to address macroprudential risk following notification by French High Council for Financial Stability (HSCF).

For further information, see: The treatment of large exposures under CRD IV.

ESRB supports one-year extension of French measure imposing tighter large exposure limits

The Council of the EU published an opinion of the ESRB, dated 19 May 2020, regarding the French notification of an extension of the period of application of a stricter national measure based on Article 458 of the CRR. The opinion supports the Haut Conseil de stabilité financière’s (HCSF) decision to extend by a year a measure imposing tighter large exposure limits in relation to highly indebted large NFCs on French G-SIIs and O-SIIs.

Source: Opinion of the European Systemic Risk Board of 19 May 2020 regarding the French notification of an extension of the period of application of a stricter national measure based on Article 458 of Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms (ESRB/2020/5).

ECB publishes guidance on SHS reporting by banking groups

The ECB published a set of guidance notes to reporting agents on SHS regulation, focusing on the reporting of SHS by reporting banking groups. The document provides guidance and more detailed information on the data reporting requirements set out in the SHS Regulation.

Source: Guidance notes to reporting agents on SHS regulation for statistics on holdings of securities by reporting banking groups (SHSG).

NGFS guide for supervisors on integrating climate risks into prudential supervision

The Central Banks and Supervisors NGFS published a ‘Guide for supervisors: integrating climate-related and environmental risks into prudential supervision’. The guide is designed to assist prudential supervisors in integrating the financial risks resulting from climate change and environmental degradation into their work, and to allow financial institutions to learn how supervisors are identifying climate-related and environmental risks, as well as how supervisors expect banks and insurers to address these risks.

Source: NGFS publication—Guide for supervisors: integrating climate-related and environmental risks into prudential supervision.

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA consults on mortgage holiday extension plans

The FCA published new draft guidance for lenders which will set out the expectations for firms and the options available to their customers in relation to mortgage payments in the context of the coronavirus (COVID-19) pandemic. The proposals include extending the application period for a mortgage holiday until 31 October 2020 so customers that have not yet had a payment holiday and are experiencing financial difficulty will be able to request one. The current ban on repossessions of homes will be continued to the same date. The FCA seeks feedback on the proposals by 26 May 2020.

Sources: Help with mortgages to continue for homeowners affected by coronavirus and  FCA announces support for customers who are struggling to pay their mortgage due to coronavirus.

For further information, see: FCA: Treating Customers Fairly—essentials and  Mortgage and home finance conduct of business—responsible lending, charges and arrears requirements.

Coronavirus (COVID-19)—PRA guidance on regulatory capital and IFRS 9 requirements for extended payment holidays

The PRA issued a statement setting out its high-level view on the regulatory capital and IFRS 9 implications of the FCA’s draft guidance on extended support for mortgage customers, published on 22 May 2020.

Source: Statement by the PRA on regulatory capital and IFRS 9 requirements for payment holidays.

Coronavirus (COVID-19)—FCA responds to inquiry

The FCA published its response to the Treasury Select Committee’s inquiry into the economic impact of coronavirus. In its response, the FCA commented on how consumers’ credit ratings should not be affected by arrears as a result of coronavirus. In particular, the FCA referred to CRAs’s guidance to lenders on how they should report accounts subject to payment deferrals.

Source: FCA response to COVID-19 Inquiry phase 1 follow-up questions, dated 12 May 2020.

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Regulation of insurance

PRA publishes SS1/20 and PS14/20 on the Solvency II ‘prudent person’ principle

The PRA published policy statement PS14/20 which provides feedback to responses to its consultation paper CP22/19 ‘Solvency II: Prudent Person Principle’ (PPP), and contains supervisory statement SS1/20 setting out its final policy for investment by firms in accordance with the PPP, as set out in chapters 2 to 5 of the Investments Part of the PRA Rulebook which transpose Article 132 of the Solvency II Directive (2009/138/EC). SS1/20 comes into effect on 27 May 2020.

Sources: Solvency II: Prudent Person PrinciplePRA policy statement 14/20 ‘Solvency II: Prudent Person Principle’ and  PRA supervisory statement 1/20 ‘Solvency II: Prudent Person Principle’.

For further information, see: Solvency II—essentials.

Lloyd's of London issues Part VII transfer update

Lloyd's of London (Lloyd's) confirmed that it has received approval from the High Court for its Part VII of the Financial Services and Markets Act 2000 strategy to notify policyholders about the proposed transfer of its existing business in the EEA.

Source: Lloyd’s Part VII transfer moves ahead to ensure continuity of cover for customers.

Lloyd’s issues statement on post-Brexit insurance position

Lloyd’s issued a statement noting that, after the Brexit transition period, it is anticipated that its members will no longer benefit from EU passporting provisions and will no longer have permission to underwrite EEA (re)insurance business. However, Lloyd's says its members will continue to be able to provide reinsurance to cedants in the EEA (with the exception of Germany) on a cross-border basis, provided relevant local requirements are complied with.

Source: Brexit: what happens next?.

PRA publishes updated ISPV rules

The PRA published policy statement PS13/20, Insurance special purpose vehicles: Updates to authorisation and supervision (PS13/20), which provides feedback to responses to consultation paper CP19/19, Insurance special purpose vehicles: Updates to authorisation and supervision and the PRA’s final policy.

Source: Insurance special purpose vehicles: Updates to authorisation and supervision.

Insurance Europe calls for assessment of GDPR implementation

Insurance Europe (IE) published a briefing on the General Data Protection Regulation (EU) 2016/679 (GDPR) two years on, saying the European Commission—which is due to review the legislation—should examine its innovation impact, the role of the European Data Protection Board (EDPB) and the regulation’s application consistency.

Source: Insight Briefing: GDPR two years on—EC should examine innovation impact, role of EDPB & application consistency.

 

Regulation of personal pension and stakeholder products

PLSA forum to find pension answer to climate risk

The Pensions and Lifetime Savings Association (PLSA) is inviting pension schemes, the wider financial services industry, the public and stakeholders to give their views on the practical ways the retirement savings sector can address climate risk.

Source: PLSA opens forum to find pension answer to climate risk.

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Payment services and systems

Coronavirus (COVID-19)—Pay.UK discusses contactless payment options

Pay.UK published an article setting out tips for managing non-card payments made through a bank or building society account. It points out that, after two months of social distancing, many consumers have changed the way they manage their finances and pay bills. The article sets out ways to make payments safely and securely from home while the coronavirus (COVID-19) restrictions remain in place.

Source: Tips on how to make payments and manage your finances as social distancing continues.

FCA consults on further guidance for payments firms

The FCA is consulting on additional guidance for payments firms to strengthen the way in which they look after customers’ money. Feedback is sought by 5 June 2020. If confirmed, the final guidance will be published at the end of June.

Source: FCA acts to strengthen protections for customers using payment firms.

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Sustainable finance

NGFS guide for supervisors on integrating climate risks into prudential supervision

The Central Banks and Supervisors NGFS published a ‘Guide for supervisors: integrating climate-related and environmental risks into prudential supervision’. The guide is designed to assist prudential supervisors in integrating the financial risks resulting from climate change and environmental degradation into their work, and to allow financial institutions to learn how supervisors are identifying climate-related and environmental risks, as well as how supervisors expect banks and insurers to address these risks.

Source: NGFS publication—Guide for supervisors: integrating climate-related and environmental risks into prudential supervision.

PLSA forum to find pension answer to climate risk

The PLSA is inviting pension schemes, the wider financial services industry, the public and stakeholders to give their views on the practical ways the retirement savings sector can address climate risk.

Source: PLSA opens forum to find pension answer to climate risk.

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Dates for your diary

 

DateSubjectEvent

29 May 2020

 

Regulation of benchmarks and IBOR reform

 

ESMA will hold an open hearing for its consultation paper on draft regulatory technical standards (RTS) under the Benchmarks Regulation.

 

1 June 2020

 

Regulation of insurance

 

Changes to ICOBs following FCA policy statement ‘PS20/3’ come into force on this date.

 

1 June 2020

 

Regulation of benchmarks and IBOR reform

 

The PRA and FCA decided to resume full supervisory engagement on LIBOR from 1 June 2020, including data reporting at the end of Q2.

 

 

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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.