FS weekly highlights—28 November 2019

FS weekly highlights—28 November 2019

In this issue

 

 

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

 

Brexit news

 

FCA publishes Handbook Notice No. 71

The Financial Conduct Authority (FCA) published Handbook Notice No. 71, which includes changes to the FCA Handbook made or consented to by the FCA board on 24 October 2019 and 21 November 2019. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Notice or in separate policy statements (PSs).

Source: FCA Handbook Notice No 71

FMLC writes to HM Treasury on issues of legal uncertainty in Article 59 of BRRD II

The Financial Markets Law Committee (FMLC) wrote to HM Treasury on 20 November 2019 to highlight some issues of legal uncertainty in respect of Article 59 of the Bank Recovery and Resolution Directive II (Directive (EU) 2019/879) (BRRD II), particularly in light of Brexit. The letter attaches another letter, sent by the FMLC to the European Commission on the same date, in which the FMLC outlines its areas of concern and offers to meet to discuss the issues raised.

Sources: Letter to HM Treasury: Article 59 of BRRD II: 20 November 2019 and Press release

ISDA requests extension to RTS on novation

The CEO of the International Swaps and Derivatives Association (ISDA), Scott O’Malia, wrote to the head of ESMA’s markets department, Fabrizio Planta, and the head of financial markets infrastructures at the European Commission—DG FISMA, Patrick Pearson, to request an extension to the regulatory technical standards (RTS) related to novation (Novation RTS), to ensure they achieve their intended objective and apply in the event of a no-deal Brexit on 31 January 2020.

Source: ISDA requests extension of relief on Brexit-related novations

 

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UK, EU and international regulators and bodies

 

Financial Policy Committee announces new publication format and schedule

The Financial Policy Committee (FPC) is moving to a model of publishing the FPC Statement and Record on the same day. The combined publication will be called the ‘Financial Policy Summary and Record’. In quarters in which the FPC publish a Financial Stability Report (FSR), the Record of the Committee’s Policy meeting will be published alongside the FSR.

Source: Revised approach to publication of Financial Policy Committee Statement and Record and updated publication dates for 2019

 

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Authorisation, approval and supervision

 

FCA publishes Handbook Notice No. 71

The Financial Conduct Authority (FCA) published Handbook Notice No. 71, which includes changes to the FCA Handbook made or consented to by the FCA board on 24 October 2019 and 21 November 2019. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Notice or in separate policy statements (PSs).

Source: FCA Handbook Notice No 71

 

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Prudential requirements

 

EBA and ECB chairs discuss future of stress tests in the banking sector at research workshop

The European Banking Authority (EBA) is holding a research workshop on the future of stress tests in the banking sector on 27 and 28 November 2019, bringing together economists from national supervisory authorities and leading academics to discuss the future of stress testing for banks and explore what measures policymakers could take to best benefit from the exercise. The EBA and the European Central Bank (ECB) published speeches given at the workshop by EBA chair José Manuel Campa and ECB supervisory board chair Andrea Enria.

Source: EBA holding research workshop on the future of stress tests in the banking sector and The future of stress testing—some further thoughts

EBA launches first consultation on fundamental review of the trading book under CRR II

The EBA launched a consultation on specific supervisory reporting requirements for market risk—the first elements of the fundamental review of the trading book (FRTB) introduced by the Capital Requirements Regulation II (CRR II) in the EU’s prudential framework. The consultation closes on 7 January 2020.

Source: EBA consults on specific supervisory reporting requirements for market risk

EBA consults on ITS on disclosure and reporting of MREL and TLAC

The EBA launched a public consultation on the draft implementing technical standard (ITS) on disclosure and reporting of the minimum requirement for own funds and eligible liabilities (MREL) and the total loss absorbency requirement (TLAC). The deadline for the submission of comments is 22 February 2020.

Sources: Consultation paper: Draft implementing technical standards on disclosure and reporting of MREL and TLAC and EBA launches consultation on disclosure and reporting of MREL and TLAC

ECON workshop announced on the EU liquidation regime for banks

The European Parliament's Economic and Monetary Affairs Committee (ECON) is organising a banking union workshop on an EU liquidation regime for banks, which will be held on 4 December 2019 (14:30–16:30) in Brussels. The event will be web streamed.

Source: 04-12-2019—Banking union workshop on an EU liquidation regime for banks

EBA publishes roadmap on delivering its mandates under the banking package

The EBA published a set of roadmaps outlining its approach and timelines for delivering the mandates stemming from the risk reduction package (also known as the banking package) adopted by the Council of the EU and the European Parliament on 20 May 2019. The mandates are mainly focused on governance and remuneration, large exposures, resolution, and reporting and disclosure.

Sources: EBA publishes its roadmap on the risk reduction measures packageEBA risk reduction package roadmaps

Commission publishes roadmap on implementation of final Basel III reforms

The European Commission published an inception impact assessment (or ‘roadmap’) of its initiative to amend the Capital Requirements Regulation (EU) 575/2013 (CRR) as part of a legislative package together with a proposal to amend the Capital Requirements Directive 2013/36/EU (CRD IV). The package aims to implement the final reforms under the internationally agreed Basel III framework of prudential standards for credit institutions into EU law. Feedback on the roadmap is sought by 18 December 2019.

Source: Alignment EU rules on capital requirements to international standards (prudential requirements and market discipline)

ECB provides update on the Targeted Review of Internal Models

The European Central Bank (ECB) published its third update on the Targeted Review of Internal Models (TRIM). TRIM is a multi-year project launched at the end of 2015 by the ECB in close co-operation with the national competent authorities that are part of the Single Supervisory Mechanism (SSM).

Source: Update on the Targeted Review of Internal Models (TRIM)

BCBS issues guiding principles for operationalisation of a sectoral CCyB

The Basel Committee on Banking Supervision (BCBS) published guiding principles for the operationalisation of a sectoral countercyclical capital buffer (SCCyB), a tool that can be used to complement the Basel III countercyclical capital buffer (CCyB).

Source: Basel Committee issues guiding principles for the operationalisation of a sectoral countercyclical capital buffer

FSB and BCBS publish information on G-SIBs

The Financial Stability Board (FSB) published the 2019 list of global systemically important banks (G-SIBs) using end-2018 data and an assessment methodology designed by the BCBS. In addition, BCBS published further information related to the 2019 assessment of G-SIBs, including additional details underlying the scoring methodology.

Sources: Basel Committee publishes more details on global systemically important banks and FSB publishes 2019 G-SIB list

BSCB and BCG joint statement on proportionality in implementing the Basel Framework

The Bank for International Settlements (BIS) published a joint statement by the BCBS and the Basel Consultative Group (BCG) on the use of proportionality in implementing the Basel framework.

Source: Joint BCBS-BCG statement on proportionality.

Commission welcomes agreement on new collateral rules to avoid build-up of NPLs

The European Commission welcomed an agreement by Member States to start interinstitutional negotiations on new rules for the accelerated extrajudicial enforcement of collateral. The rules aim to increase the efficiency of enforcement regimes, helping to prevent the future build-up of non-performing loans (NPLs) while maintaining a high level of borrower protection.

Sources: Capital markets union and banking union: Commission welcomes agreement by Member States on new measures to avoid build-up of non-performing loans and Non-performing loans: Council adopts position on a new mechanism for out-of-court enforcement.

Andrea Enria discusses the proportionality of bank regulation and supervision

The ECB published a speech by the chair of its supervisory board, Andrea Enria, on regulation, proportionality and the sustainability of banking, in which he made the case for a proportionate approach to regulating smaller banks, as well as discussing sustainable finance.

Source: Regulation, proportionality and the sustainability of banking

The European Parliament published a briefing paper, ‘Which supervisory or regulatory treatment of banks’ exposures to sovereign risks?’ The paper takes stock of where the banking union stands in terms of sovereign exposures, home bias and concentration risks; outlines international regulatory developments; presents ways to address sovereign risks under the existing supervisory and regulatory framework; and provides an insight into available policy options.

Source: Which supervisory or regulatory treatment of banks’ exposures to sovereign risks?

 

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Financial stability, recovery and resolution 

 

FSB updates report on haircuts on non-centrally cleared securities financing transactions

The FSB updated its report: ‘Transforming shadow banking into resilient market-based finance—Regulatory framework for haircuts on non-centrally cleared securities financing transactions’, to reflect that this framework was extended to non-bank-to-non-bank transactions. Financing provided to banks and broker-dealers subject to adequate capital and liquidity regulation on a consolidated basis is excluded.

Source: Regulatory framework for haircuts on non-centrally cleared securities financing transactions.

ECA reports on contingent liabilities arising under SRMR

The European Court of Auditors (ECA) published a report in which it found that the Single Resolution Board (SRB) and the European Commission did not, in the financial year 2018, disclose any contingent liabilities potentially arising from ongoing judicial proceedings against their role in winding up failing euro area banks, as they assessed the likelihood of an ‘outflow of economic resources’ to be ‘remote’. The ECA found no evidence to contradict those assessments but recommended that the SRB’s process should be strengthened further.

Source: EU’s potential liability in winding up failing banks assessed as ‘remote’.

 

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Risk management and controls

 

Whistleblowing Directive published in the Official Journal

Directive (EU) 2019/1937 on the protection of persons who report breaches of Union law (Whistleblowing Directive) was published in the Official Journal of the EU on 26 November 2019. The Whistleblowing Directive was proposed by the Commission in April 2018 with the aim of establishing safe internal and external channels of reporting for whistleblowers within a variety of different organisations.

Source: Official Journal

ESMA Management Board Decision adopting internal rules concerning restrictions of certain rights of data subjects in relation to processing of personal data published in the Official Journal

Decision of the Management Board of the European Securities and Markets Authority (ESMA) of 1 October 2019 adopting internal rules concerning restrictions of certain rights of data subjects in relation to processing of personal data in the framework of the functioning of ESMA, was published in the Official Journal.

Source: Official Journal

FCA and PRA launch new self-assessment questionnaire on cyber resilience

The FCA updated its webpage on cyber resilience to include a link to a new self-assessment questionnaire (CQUEST), created jointly by the FCA and the Prudential Regulation Authority (PRA). CQUEST is intended to help both firms and the regulators to understand the firms’ cyber resilience capability at a high level.

Source: FCA: New self-assessment questionnaire on cyber resilience

UK Finance published a blog post on the need to ensure that security measures evolve in order to defeat cyber threats of various forms, including from organised criminals, ‘lone wolves’ as well as ‘disgruntled employees’ and ‘nation-state-sponsored actors’.

Source: Security measures must evolve to defeat the cyber threat

The PRA imposed a combined financial penalty on Citigroup Global Markets Limited (CGML), Citibank N.A. (CBNA) London branch and Citibank Europe Plc (CEP) UK branch (together, Citi) of £43.9m for failings in relation to their internal controls and governance arrangements underpinning compliance with PRA regulatory reporting requirements. The PRA considered that the pervasiveness of the errors and misstatements identified in Citi’s returns raised fundamental concerns about the effectiveness of its UK regulatory reporting control framework; did not provide the PRA with an accurate picture of CGML’s capital or liquidity position; and negatively impacted the PRA’s ability to supervise Citi.

Sources: PRA press release and PRA Final Notice

 

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Financial crime

 

FATF speech sets out the context for its consultation on digital ID

The Financial Action Task Force (FATF) published a speech by its executive secretary, David Lewis, on global developments in digital identity, and FATF’s work developing guidance to clarify how digital ID systems can be used by banks and others to identify and verify a person’s identity. Lewis said digital ID could be a critical part of preventing money laundering and terrorist financing.

Source: Remarks at AI & blockchain summit, 21 November 2019

Valdis Dombrovskis sets out financial services commitments

The European Parliament published a briefing document setting out commitments made by commissioners-designate, including Valdis Dombrovskis, in which he outlined the Sustainable Europe Investment Plan and his support for green and digital transformations. Moves will also be made to ‘break the current deadlock’ on the banking union, and to develop the EDIS.

Source: Commitments made at the hearings of the Commissioners-designate—Von der Leyen Commission, 2019—2024

FCA secures confiscation order following fraud conviction

The FCA secured a confiscation order of £291,070.36 against Mark Barry Starling in Southwark Crown Court. It follows an FCA prosecution in which Starling was sentenced to five years’ imprisonment for defrauding investors of just under £3m in relation to unauthorised investment schemes he operated between 2008 and 2017.

Source: FCA secures confiscation order totalling £291,070 against convicted fraudster

 

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Conduct requirements

 

FCA publishes new webpage on approving financial promotions of unauthorised persons

The FCA published a new webpage with guidance to FCA-authorised persons on approving the financial promotions of unauthorised persons (‘product providers’). The guidance explains the FCA’s applicable existing financial promotion rules and guidance (existing requirements), rather than setting out new standards, and highlights the FCA’s concerns, particularly about promotions of retail investments, including unlisted debt securities (mini bonds). It sets out the FCA’s temporary rules on the marketing of speculative illiquid securities that will apply from 1 January 2020 to 31 December 2020.

Source: Approving financial promotions

 

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Competition in financial services

 

CMA revokes directions to Santander on delay in delivering Open Banking programme

The Competition and Markets Authority (CMA) revoked directions it gave to Santander on 1 April 2019 under the Retail Banking Market Investigation Order 2017, regarding its delay in complying with certain aspects of the Open Banking programme. The directions were revoked on confirmation by the implementation trustee that Santander was compliant with Article 14.1 of the Order with respect to app-to-app redirection functionality.

Source: Retail banking market investigation: Santander directions revoked

 

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Enforcement and redress

 

FCA policy statement sets out new powers to discipline and investigate proxy advisors

The FCA published policy statement PS19/28: Proxy Advisors (Shareholders’ Rights) Regulations Implementation (DEPP and EG), which sets out changes to the FCA’s Decision Procedure and Penalties Manual (DEPP) and Enforcement Guide now that the FCA holds new powers to discipline and investigate proxy advisors.

Source: PS19/28: Proxy Advisors (Shareholders’ Rights) Regulations Implementation (DEPP and EG)

FSCS releases default figures for August-October 2019

The Financial Services Compensation Scheme (FSCS) declared 35 failed regulated firms in default between 1 August and 31 October 2019, it announced. The firms are listed on the web address below, and the FSCS urges consumers who lost money in dealings with them to get in touch.

See: LNB News 22/11/2019 52.

Source: FSCS declared 35 firms in default between Aug and Oct 2019.

PRA fines Citibank £44m for failings in regulatory reporting governance and controls

The PRA imposed a combined financial penalty on CGML, Citibank N.A. (CBNA) London branch and Citibank Europe Plc (CEP) UK branch (together, Citi) of £43.9m for failings in relation to their internal controls and governance arrangements underpinning compliance with PRA regulatory reporting requirements. The PRA considered that the pervasiveness of the errors and misstatements identified in Citi’s returns raised fundamental concerns about the effectiveness of its UK regulatory reporting control framework; did not provide the PRA with an accurate picture of CGML’s capital or liquidity position; and negatively impacted the PRA’s ability to supervise Citi.

Sources: PRA press release and PRA Final Notice

FCA secures confiscation order following fraud conviction

The FCA secured a confiscation order of £291,070.36 against Mark Barry Starling in Southwark Crown Court. It follows an FCA prosecution in which Starling was sentenced to five years’ imprisonment for defrauding investors of just under £3m in relation to unauthorised investment schemes he operated between 2008 and 2017.

Source: FCA secures confiscation order totalling £291,070 against convicted fraudster

FCA publishes Handbook Notice No. 71

The Financial Conduct Authority (FCA) published Handbook Notice No. 71, which includes changes to the FCA Handbook made or consented to by the FCA board on 24 October 2019 and 21 November 2019. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Notice or in separate policy statements (PSs).

Source: FCA Handbook Notice No 71

FCA gets OK for plan to repay scammed investors

Law 360, London: A judge at a London court gave the FCA the green light on 21 November 2019 to begin partially repaying investors defrauded out of £18.7m (US$24.2m) in rogue investments, saying the plan was the fairest outcome ‘for this thorny issue’.

See News Analysis: FCA gets OK for plan to repay scammed investors

 

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Markets and trading

 

FCA consults on best practice note for government departments, industry regulators and public bodies on inside information

The FCA launched a guidance consultation (GC19/5) on a proposed best practice note for government departments, industry regulators and public bodies, on identifying, controlling and disclosing inside information. The note is intended to provide up-to-date guidance which reflects developments in the relevant legislation as well as changes to the regulatory landscape that took place. The consultation closes on 15 January 2020.

Source: GC19/5: Primary Market Bulletin No. 25

FCA director outlines next steps in LIBOR transition

The FCA published a speech by its director of markets and wholesale policy, Edwin Schooling Latter, outlining the next steps in the transition from LIBOR. Schooling Latter said the aim was to end the use of LIBOR in new sterling loans from Q3 2020, and make it standard to quote based on SONIA in sterling swap markets.

Source: Next steps in transition from LIBOR.

BoE seeks members for RFR task forces

The Bank of England (BoE)’s working group on sterling risk-free reference rates (RFRs) is seeking members to join three new groups: the Tough Legacy; Cash Market Legacy Transition; and Loans Flow Enablers Task Forces. The BoE is looking for interested market participants with relevant expertise.

Source: Invitations for membership of the Tough Legacy; Cash Market Legacy Transition and Loans Flow Enablers Task Forces.

ECB publishes minutes of the working group on euro risk-free rates

The ECB published the minutes of a meeting of its working group on euro RFRs. At the meeting, held on 16 October 2019, the working group discussed topics including the first publication of the €STR and of the recalibrated EONIA, which both took place on 2 October 2019; the status of three information documents currently being prepared for market participants; and an update from ISDA on its plans for a consultation on EURIBOR fallbacks.

Source: Meeting of the working group on euro risk-free rates

 

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Regulation of capital markets and Capital Markets Union

 

FCA bans mass marketing of speculative mini-bonds to retail customers

The FCA is to ban the mass marketing of speculative mini-bonds to retail customers. It is introducing the restriction without consultation, using its product intervention powers. The restriction will come into force on 1 January 2020 and last for 12 months while the FCA consults on making permanent rules.

Source: FCA to ban promotion of speculative mini-bonds to retail consumers

ICMA survey finds CSDR buy-in regime will hit bond market liquidity and efficiency

The International Capital Markets Association (ICMA) published a study on the expected impact of the new mandatory buy-in regime, to be introduced in 2020 under the EU Central Securities Depositories Regulation (EU) 909/2014 (CSDR), on bond markets in Europe. ICMA says the results of its member survey, representing buy-side firms, sell-side firms and repo and securities lending desks, show that the new regime will negatively impact bond market liquidity and efficiency.

Source: New market buy-in regime threatens European bond market liquidity

ECSDA reports on ‘Towards financial infrastructures of tomorrow’ conference

The European Central Securities Depositories Association (ECSDA) published details about the ‘Towards financial infrastructures of tomorrow’ conference held at the National Bank of Belgium in Brussels on 20 November 2019.

Source: #ECSDA2019: A day towards financial infrastructures of tomorrow.

AFME MD on the future of the CMU

The Association for Financial Markets in Europe (AFME) published a blog by Rick Watson, the association’s managing director, head of capital markets, membership and events, outlining the state of play of the capital markets union. Watson warns that ‘simply rebranding the project’ won’t be enough: ‘There are a vast range of issues to be tackled which will require strong political leadership and a renewed focus on the top priority issues.’

Source: Europe’s unfinished business—what is left to do on CMU?

 

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Regulation of derivatives

 

FCA publishes Handbook Notice No. 71

The FCA published Handbook Notice No. 71, which includes changes to the FCA Handbook made or consented to by the FCA board on 24 October 2019 and 21 November 2019. Feedback on the relevant CPs is set out in Chapter 3 of the Notice or in separate PSs.

Source: FCA Handbook Notice No 71

ESMA seeks full-time members of CCP supervisory committee

ESMA holds vacancies for its new Central Counterparty (CCP) Supervisory Committee, which it is required to establish under EMIR 2.2. ESMA is recruiting for the position of chair and two independent members.

Source: ESMA begins recruitment of chair and members for its CCP Supervisory Committee

ISDA requests extension to RTS on novation

The CEO of ISDA, Scott O’Malia, wrote to the head of ESMA’s markets department, Fabrizio Planta, and the head of financial markets infrastructures at the European Commission—DG FISMA, Patrick Pearson, to request an extension to the RTS related to novation (Novation RTS), to ensure they achieve their intended objective and apply in the event of a no-deal Brexit on 31 January 2020.

Source: ISDA requests extension of relief on Brexit-related novations

 

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Investment funds and asset management

 

ICMA AMIC publishes latest Review

The International Capital Market Association (ICMA) Asset Management and Investors Council (AMIC) published its latest annual AMIC Review, on the day of its conference in London. The Review, which is written by experts on current asset management industry issues and trends, seeks to highlight the role of the buy-side community within ICMA, remind readers of the objectives and priorities of AMIC, and outline the work of its working groups, alongside some topics of pertinence for AMIC.

Source: ICMA AMIC publishes its latest Review

UNEP FI, PRI and The General Foundation launch new research into sustainability impact in investor decision-making

The United Nations Environment Programme Finance Initiative (UNEP FI), the Principles for Responsible Investment (PRI) and The Generation Foundation announced the launch of pioneering research—‘A legal framework for impact’—with global law firm Freshfields Bruckhaus Deringer, to analyse whether and how legal frameworks allow for, and incentivise, investors to consider sustainability impact across major markets.

Source: Groundbreaking work to assess real-world sustainability impact for investors: A legal framework for impact

PIMFA says Labour’s proposed financial transaction tax ‘a step in the wrong direction’

The Personal Investment Management and Financial Advice Association (PIMFA) issued a press release in response to Labour’s financial transaction tax (FTT) manifesto proposal, saying the additional costs inherent in the scheme would ultimately be passed on to the consumer. PIMFA CEO Liz Field said the proposed tax, where both purchase and sale transactions attract a duty, is ‘a step in the wrong direction, away from encouraging retail share ownership’.

Source: PIMFA responds to financial transaction tax

ESMA chair discusses liquidity risk and investor protection

The chair of ESMA, Steven Maijoor, delivered the keynote address at the European Fund and Asset Management Association (EFAMA) Investment Management Forum in Brussels. Maijoor discussed liquidity in the asset management sector, ESMA’s risk assessment and strategy in relation to fund liquidity, and the adequacy of the main requirements regarding liqiduity risk under the UCITS framework.

Source: Keynote address: EFAMA Investment Management Forum 22 November 2019, Brussels

IA announces first eight firms chosen for ‘Velocity Birmingham’ fintech hub

The Investment Association (IA) announced the first eight firms and tech communities chosen to take part in Velocity Birmingham, a new state-of-the-art fintech hub. Velocity Birmingham will provide a hub for fintech innovation and development, supporting fintechs based in the West Midlands, and those chosen to take part will be able to access a network of existing investment management firms and 5,000 square feet of co-working space, to develop technology ‘to help Britain’s savers and investors’.

Source: First cohort of firms unveiled at launch of Birmingham fintech hub

EIB investment report rings warning bells on EU economy and climate mitigation efforts

The European Investment Bank (EIB) published its investment report for 2019/20, highlighting uncertainty weighing on EU firm investment. It says the economic climate in the EU is worsening and investment by EU firms is likely to slow down in 2020, with EU climate mitigation investment stagnating and falling behind the US and China.

Source: EIB Investment report 2019: Uncertainty weighing on EU firm investment.

 

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Banks and mutuals

 

EBA and ECB chairs discuss future of stress tests in the banking sector at research workshop

The EBA is holding a research workshop on the future of stress tests in the banking sector on 27 and 28 November 2019, bringing together economists from national supervisory authorities and leading academics to discuss the future of stress testing for banks and explore what measures policymakers could take to best benefit from the exercise. The EBA and the European Central Bank (ECB) published speeches given at the workshop by EBA chair José Manuel Campa and ECB supervisory board chair Andrea Enria.

Source: EBA holding research workshop on the future of stress tests in the banking sector and The future of stress testing—some further thoughts

EBA launches first consultation on fundamental review of the trading book under CRR II

The EBA launched a consultation on specific supervisory reporting requirements for market risk—the first elements of the FRTB introduced by the CRR II in the EU’s prudential framework. The consultation closes on 7 January 2020.

Source: EBA consults on specific supervisory reporting requirements for market risk

EBA consults on ITS on disclosure and reporting of MREL and TLAC

The EBA launched a public consultation on the draft ITS on disclosure and reporting of MREL and TLAC. The deadline for the submission of comments is 22 February 2020.

Sources: Consultation paper: Draft implementing technical standards on disclosure and reporting of MREL and TLAC and EBA launches consultation on disclosure and reporting of MREL and TLAC

ECON workshop announced on the EU liquidation regime for banks

ECON is organising a banking union workshop on an EU liquidation regime for banks, which will be held on 4 December 2019 (14:30–16:30) in Brussels. The event will be web streamed.

Source: 04-12-2019—Banking union workshop on an EU liquidation regime for banks

EBA publishes roadmap on delivering its mandates under the banking package

The EBA published a set of roadmaps outlining its approach and timelines for delivering the mandates stemming from the risk reduction package (also known as the banking package) adopted by the Council of the EU and the European Parliament on 20 May 2019. The mandates are mainly focused on governance and remuneration, large exposures, resolution, and reporting and disclosure.

Sources: EBA publishes its roadmap on the risk reduction measures packageEBA risk reduction package roadmaps

ECB provides update on the Targeted Review of Internal Models

The ECB published its third update on TRIM. TRIM is a multi-year project launched at the end of 2015 by the ECB in close co-operation with the national competent authorities that are part of the SSM.

Source: Update on the Targeted Review of Internal Models (TRIM)

BCBS issues guiding principles for operationalisation of a sectoral CCyB

The BCBS published guiding principles for the operationalisation of a SCCyB, a tool that can be used to complement the Basel III CCyB.

Source: Basel Committee issues guiding principles for the operationalisation of a sectoral countercyclical capital buffer

FCA publishes current account service metrics

The FCA published tables of collected metrics on speed of service and on major incidents for current account providers. The information is intended to help consumers and small businesses find the right service for them, get the most out of it, and get help if things go wrong. It will also help others such as comparison services and the media to compare current accounts.

Source: FCA mandated and voluntary information on current account services—November 2019 table Updated webpage

FMLC writes to HM Treasury on issues of legal uncertainty in Article 59 of BRRD II

The FMLC wrote to HM Treasury on 20 November 2019 to highlight some issues of legal uncertainty in respect of Article 59 of the BRRD II, particularly in light of Brexit. The letter attaches another letter, sent by the FMLC to the European Commission on the same date, in which the FMLC outlines its areas of concern and offers to meet to discuss the issues raised.

Sources: Letter to HM Treasury: Article 59 of BRRD II: 20 November 2019 and Press release

Council of the EU publishes progress report on banking union

The Council of the European Union published a progress report on the banking union, which says the Council ‘worked constructively towards strengthening the banking union while monitoring progress on risk reduction and other foreseen measures’. The report sets out the state of play of negotiations for a European deposit insurance scheme (EDIS), and discusses the implementation of the banking package.

Source: Strengthening of the banking union—Progress report

European Parliament briefing paper on banks’ sovereign exposures

The European Parliament published a briefing paper, ‘Which supervisory or regulatory treatment of banks’ exposures to sovereign risks?’ The paper takes stock of where the banking union stands in terms of sovereign exposures, home bias and concentration risks; outlines international regulatory developments; presents ways to address sovereign risks under the existing supervisory and regulatory framework; and provides an insight into available policy options.

Source: Which supervisory or regulatory treatment of banks’ exposures to sovereign risks?

FSB and BCBS publish information on G-SIBs

The FSB published the 2019 list of G-SIBs using end-2018 data and an assessment methodology designed by the BCBS. In addition, BCBS published further information related to the 2019 assessment of G-SIBs, including additional details underlying the scoring methodology.

Sources: Basel Committee publishes more details on global systemically important banks and FSB publishes 2019 G-SIB list

Commission welcomes agreement on new collateral rules to avoid build-up of NPLs

The European Commission welcomed an agreement by Member States to start interinstitutional negotiations on new rules for the accelerated extrajudicial enforcement of collateral. The rules aim to increase the efficiency of enforcement regimes, helping to prevent the future build-up of non-performing loans (NPLs) while maintaining a high level of borrower protection.

Sources: Capital markets union and banking union: Commission welcomes agreement by Member States on new measures to avoid build-up of non-performing loans and Non-performing loans: Council adopts position on a new mechanism for out-of-court enforcement

CMA revokes directions to Santander on delay in delivering Open Banking programme

The CMA revoked directions it gave to Santander on 1 April 2019 under the Retail Banking Market Investigation Order 2017, regarding its delay in complying with certain aspects of the Open Banking programme. The directions were revoked on confirmation by the implementation trustee that Santander was compliant with Article 14.1 of the Order with respect to app-to-app redirection functionality.

Source: Retail banking market investigation: Santander directions revoked

ECB speech on future-proofing the European banking market

The ECB published a speech on ‘Future-proofing the European banking market—removing the obstacles to exit’ by the vice-chair of its supervisory board and member of its executive board, Yves Mersch, at S&P Global’s European Financial Institutions Conference in Paris. In his speech Mersch discussed the need to allow banks to fail in an orderly and well-managed manner, and the potential benefits of consolidation as an alternative way for non-viable banks to exit the market.

Source: Future-proofing the European banking market—removing the obstacles to exit

Andrea Enria discusses the proportionality of bank regulation and supervision

The ECB published a speech by the chair of its supervisory board, Andrea Enria, on regulation, proportionality and the sustainability of banking, in which he made the case for a proportionate approach to regulating smaller banks, as well as discussing sustainable finance.

Source: Regulation, proportionality and the sustainability of banking

ECB publishes opinion on draft Swedish law requiring credit institutions to provide cash services

The ECB published an opinion dated 26 November 2019 (CON/2019/41) on a draft legislative proposal from the Swedish Government regarding the obligations of certain credit institutions and branches to provide cash services. The ECB decided to deliver an own initiative opinion on the draft law, as it was not formally consulted by the Swedish authorities

Source: Opinion of the European Central Bank of 26 November 2019 on the requirement for certain credit institutions and branches to provide cash services (CON/2019/41)

ECB publishes opinion on increasing special levy on Slovak banks

The ECB published an opinion dated 26 November 2019 (CON/2019/40) in response to a request from the Slovak Ministry of Finance for an opinion on a draft law amending Law No 384/2011 Coll on a special levy on selected financial institutions and on amendments to certain laws.

Source: Opinion of the European Central Bank of 26 November 2019 on increasing the special levy on selected financial institutions (CON/2019/40)

 

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Consumer credit, mortgage and home finance

 

FCA publishes Handbook Notice No. 71

The Financial Conduct Authority (FCA) published Handbook Notice No. 71, which includes changes to the FCA Handbook made or consented to by the FCA board on 24 October 2019 and 21 November 2019. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Notice or in separate policy statements (PSs).

Source: FCA Handbook Notice No 71

 

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Regulation of insurance

 

IDD Commission Delegated Regulation on adapting base euro amounts for PII and financial capacity of intermediaries published in the Official Journal

Commission Delegated Regulation (EU) 2019/1935 of 13 May 2019 amending the Insurance Distribution Directive (Directive (EU) 2016/97) (IDD) of the European Parliament and of the Council with regard to RTS adapting the base euro amounts for professional indemnity insurance and for financial capacity of insurance and reinsurance intermediaries, was published in the Official Journal.

Source: Official Journal

EIOPA updates Solvency II Q&As

The European Insurance and Occupational Pensions Authority (EIOPA) updated its Q&As on the Solvency II Directive (Insurance and Reinsurance) (EU) No 2009-138. The November 2019 update includes additional guidance on the treatment of equipment for own use in terms of the solvency capital requirement.

Source: Answers to (EU) No 2009-138 Solvency II Directive (Insurance and Reinsurance)

IAIS to hold public background session on the holistic framework for systemic risk in the insurance sector

The International Association of Insurance Supervisors (IAIS) announced that on 10 December 2019, from 14.00–15.30 CET (Basel time), it will hold a public background and discussion session via teleconference related to the holistic framework for systemic risk in the insurance sector.

Source: IAIS to hold public background session on the holistic framework for systemic risk in the insurance sector

IAIS reports on peer review of mandates and supervisory powers for ICPs 1 and 2

IAIS published a report on the peer review of mandates and supervisory powers relative to the standards set out in Insurance Core Principles (ICPs) 1 and 2. It sets out aggregate assessment results and observations from the peer review process (PRP), in which 72 authorities participated.

Source: IAIS: Peer review of mandates and supervisory powers relative to the standards set out in Insurance Core Principles 1 and 2

IAIS responds to feedback on ICS version 2.0 consultation

IAIS published its response to feedback received from the 2018 public consultation on Insurance Capital Standard (ICS) version 2.0. The consultation ran between 31 July and 30 October 2018, with numerous comments received from both members and stakeholders ‘that provided valuable input for further improvements and revisions’, the IAIS says.

Source: IAIS: Summary of main comments received during the 2018 public consultation on ICS Version 2.0 and their resolution

EIOPA speech looks at industry response to climate change

The BIS published a keynote speech by Frank Elderson, the executive director of supervision of the Netherlands Bank, delivered at EIOPA 9th Annual Conference, on 19 November 2019. Elderson discussed how climate change impacts insurance companies and pension funds, and the industry’s response.

Source: Frank Elderson: Are we doing enough?

 

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Regulation of personal pension and stakeholder products

 

PASA publishes master trust transition guidance

The Pensions Administration Standards Association (PASA) published master trust transition guidance, which provides guidance and instructions for all stakeholders involved in the administration processes for master trust transitions.

Source: PASA publishes master trust transition guidance as further consolidation expected

EIOPA speech looks at industry response to climate change

The BIS published a keynote speech by Frank Elderson, the executive director of supervision of the Netherlands Bank, delivered at EIOPA 9th Annual Conference, on 19 November 2019. Elderson discussed how climate change impacts insurance companies and pension funds, and the industry’s response.

Source: Frank Elderson: Are we doing enough?

 

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Payment services and systems

 

EPC publishes report on e-invoice presentment and payment

The European Payments Council (EPC) published a report by the multi-stakeholder group on e-invoice presentment and payment (EIPP), the group responsible for co-ordinating the work on standardisation of ISO 20022 messages for EIPP. The report sets out the work done in 2019 and provides details on the related standardisation steps on the way to implementing the Euro Retail Payments Board’s vision of a pan-European eco-system for EIPP.

Source: E-invoice presentment and payment: 2019 report

ECB speech on future retail payments

The ECB Eurosystem published a speech by Benoît Cœuré, a member of the executive board of the ECB, at the joint conference of the ECB and the National Bank of Belgium on ‘crossing the chasm to the retail payments of tomorrow’. Cœuré stressed that there is still not a Europe-wide card scheme (ten European countries have national card schemes that do not accept cards from other EU countries). This led to an increased use of non-European cards for non-cash payments (which amounted to two-thirds of all card transactions at the end of 2016).

Source: Towards the retail payments of tomorrow: a European strategy

FCA publishes Handbook Notice No. 71

The Financial Conduct Authority (FCA) published Handbook Notice No. 71, which includes changes to the FCA Handbook made or consented to by the FCA board on 24 October 2019 and 21 November 2019. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Notice or in separate policy statements (PSs).

Source: FCA Handbook Notice No 71

 

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Fintech and cryptoassets

 

Joint Council and Commission statement on stablecoins nears finalisation

The Council of the EU published a note to the Permanent Representatives Committee (COREPER), inviting COREPER to agree that the text of the Joint Council and Commission statement on stablecoins be submitted to the Council (ECOFIN) for approval at its meeting on 5 December 2019.

Source: Joint Council and Commission statement on stablecoins

FATF speech sets out the context for its consultation on digital ID

FATF published a speech by its executive secretary, David Lewis, on global developments in digital identity, and FATF’s work developing guidance to clarify how digital ID systems can be used by banks and others to identify and verify a person’s identity. Lewis said digital ID could be a critical part of preventing money laundering and terrorist financing.

Source: Remarks at AI & blockchain summit, 21 November 2019

Valdis Dombrovskis sets out financial services commitments

The European Parliament published a briefing document setting out commitments made by commissioners-designate, including Valdis Dombrovskis, in which he outlined the Sustainable Europe Investment Plan and his support for green and digital transformations. Moves will also be made to ‘break the current deadlock’ on the banking union, and to develop the EDIS.

Source: Commitments made at the hearings of the Commissioners-designate—Von der Leyen Commission, 2019—2024

ECB speech on digital transformation and the licensing of fintechs

The ECB published a speech on financial markets and the digital revolution, by Edouard Fernandez-Bollo, a member of its supervisory board, at the Financial Regulatory Outlook Conference. Fernandez-Bollo discussed firms’ use of technology cross the EU, and the ECB’s work to regulate digital and fintech developments.

Source: Financial markets and the digital revolution

IA announces first eight firms chosen for ‘Velocity Birmingham’ fintech hub

The IA announced the first eight firms and tech communities chosen to take part in Velocity Birmingham, a new state-of-the-art fintech hub. Velocity Birmingham will provide a hub for fintech innovation and development, supporting fintechs based in the West Midlands, and those chosen to take part will be able to access a network of existing investment management firms and 5,000 square feet of co-working space, to develop technology ‘to help Britain’s savers and investors’.

Source: First cohort of firms unveiled at launch of Birmingham fintech hub

ECSDA reports on ‘Towards financial infrastructures of tomorrow’ conference

ECSDA published details about the ‘Towards financial infrastructures of tomorrow’ conference held at the National Bank of Belgium in Brussels on 20 November 2019.

Source: #ECSDA2019: A day towards financial infrastructures of tomorrow

WealthTech event discusses ‘democratisation of wealth management’

Innovate Finance published a blog discussing the points raised at its ‘Shining a Spotlight on WealthTech’ event, held on 12 November 2019, where wealth managers shared their experience of striking a balance between new fintech solutions and the more traditional personal advisor relationships. Topics included ‘the democratisation of wealth management’, impact investing, and scaling up.

Source: Fintechs and incumbents collaborating to fuel change in wealth management

 

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Sustainable finance

 

EIB investment report rings warning bells on EU economy and climate mitigation efforts

The European Investment Bank (EIB) published its investment report for 2019/20, highlighting uncertainty weighing on EU firm investment. It says the economic climate in the EU is worsening and investment by EU firms is likely to slow down in 2020, with EU climate mitigation investment stagnating and falling behind the US and China.

Source: EIB Investment report 2019: Uncertainty weighing on EU firm investment

UNEP FI, PRI and The General Foundation launch new research into sustainability impact in investor decision-making

UNEP FI, the PRI and The Generation Foundation announced the launch of pioneering research—‘A legal framework for impact’—with global law firm Freshfields Bruckhaus Deringer, to analyse whether and how legal frameworks allow for, and incentivise, investors to consider sustainability impact across major markets.

Source: Groundbreaking work to assess real-world sustainability impact for investors: A legal framework for impact

More global firms sign up to the Net-Zero Asset Owner Alliance

UNEP FI announced that AXA, Aviva, CNP Assurances and Fonds de Réserve pour les Retraites (FRR) are joining the UN-convened Net-Zero Asset Owner Alliance, raising total assets under management targeting carbon neutrality by 2050 to more than $3.9tn. The Alliance is a group of the world’s largest pension funds and insurers committing to fully decarbonise their portfolios to avoid a global temperature increase above 1.5°C.

Source: AXA, Aviva, CNP, FRR join UN-convened asset owner alliance pushing for net-zero portfolios by 2050

Valdis Dombrovskis sets out financial services commitments

The European Parliament published a briefing document setting out commitments made by commissioners-designate, including Valdis Dombrovskis, in which he outlined the Sustainable Europe Investment Plan and his support for green and digital transformations. Moves will also be made to ‘break the current deadlock’ on the banking union, and to develop the EDIS.

Source: Commitments made at the hearings of the Commissioners-designate—Von der Leyen Commission, 2019—2024

Andrea Enria discusses the proportionality of bank regulation and supervision

The ECB published a speech by the chair of its supervisory board, Andrea Enria, on regulation, proportionality and the sustainability of banking, in which he made the case for a proportionate approach to regulating smaller banks, as well as discussing sustainable finance.

Source: Regulation, proportionality and the sustainability of banking

ECB vice-president: equity investors may hold key to low-carbon economy investment

The ECB published a speech by its vice-president, Luis de Guindos, on the implications of the transition to a low-carbon economy for the euro area financial system, in which he said the necessary transition to a low-carbon economy entails risks for the financial system that, at present, are insufficiently understood. Correctly assessing these risks, he said, would require a higher quantity and quality of disclosures.

Source: Implications of the transition to a low-carbon economy for the euro area financial system

EIOPA speech looks at industry response to climate change

The BIS published a keynote speech by Frank Elderson, the executive director of supervision of the Netherlands Bank, delivered at EIOPA 9th Annual Conference, on 19 November 2019. Elderson discussed how climate change impacts insurance companies and pension funds, and the industry’s response.

Source: Frank Elderson: Are we doing enough?

UNEP FI uploads video on fiduciary duty in the 21st century

The United Nations Environment Programme’s Finance Initiative (UNEP FI) uploaded a video on to its website entitled Fiduciary duty in the 21st century—From a legal case to regulatory clarification around ESG. The video, a collaboration between UNEP FI and the Principles for Responsible Investment (PRI), contributes an extensive evidence base to end the debate on whether fiduciary duty is a legitimate barrier to the integration of environmental, social and governance (ESG) issues in investment practice and decision-making.

Source: Video: Fiduciary duty in the 21st century—from a legal case to regulatory clarification around ESG

ECB research bulletin emphasises importance of equity markets in decarbonising the economy

The ECB published a research bulletin entitled ‘Finance and decarbonisation: why equity markets do it better’. The article argues that economies receiving more funding from stock markets than credit markets generate less carbon, and calls for supporting equity-based initiatives rather than policies aimed at decarbonising the European economy through the banking sector.

Source: Finance and decarbonisation: why equity markets do it better

 

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Dates for your diary

 

DateSubjectEvent

 

28 to 29 November 2019

 

Regulation of insurance

Sustainable finance

 

 

UNEP FI will hold its second Regional Roundtable for Europe in Luxembourg on 28-29 November 2019.

29 November 2019Markets and trading

The deadline for feedback to ESMA’s consultation on the provisions of the Market Abuse Regulation (EU) 596/2014 (MAR) is 29 November 2019.

 

29 November 2019

Banks and mutuals

Financial stability, recovery and resolution

The EBA will publish its 2019 risk assessment report and transparency exercise (with bank data covering around 130 EU banks).

 

29 November 2019

Financial crime

Fintech and cryptoassets

Payment services and systems

The deadline for feedback to FATF’s consultation on digital identity systems for customer due diligence is 29 November 2019.

 

 

29 November 2019Payment services and systems

On 29 November 2019, HMRC regulations ensuring that interest payments made on certain hybrid instruments issued by banks and insurers as regulatory capital continue to receive a tax deduction, come into force.

 

December 2019Financial crime

As part of its Economic Crime Plan the Government:
expects to resolve evidence gaps in its threat and performance metrics through a long-term research strategy, and put in place a baseline operational performance system to measure what works in combatting economic crime by December 2019
—intends to implement the Disclosure Review recommendations by December 2019
plans to ensure the confidentiality of the suspicious activity reports (SARs) regime by December 2019, and
—plans to improve education and awareness-raising on economic crime threats and the recovery of criminal assets by December 2019.

 

December 2019Regulation of derivatives

The FIA, ICMA, ISDA and ISLA intend to publish their new master reporting agreement, which will provide for both mandatory and delegated reporting of SFTR and derivative transactions under EMIR entered into under standard industry documentation in December 2019.

 

December 2019Enforcement and redress

The FSCS anticipates that claims against Beaufort Securities Ltd will be completed by the end of December 2019.

 

December 2019MiFID II

ESMA is expecting to deliver MiFID II/MiFIR reports in relation to:
—Prices for pre and post trade data, and
—Consolidated Tape (Equity)
to the European Commission by December 2019.

 

December 2019Enforcement and redress

FOS will consult on its 2019/20 plans and budget in December 2019.

 

December 2019Investment funds and asset management

ESMA expects to deliver a report to the European Commission on short-termism in financial markets by December 2019.

 

December 2019Investment funds and asset management

The Cost Transparency Initiative (CTI) expects asset managers to be in a position to report against December 2019 year-ends following the adoption of new CTI tools.

 

December 2019

Banks and mutuals

Prudential requirements

The deadline for the EBA to provide a preliminary analysis of data to the European Commission for the purposes of a benchmarking of national loan enforcement frameworks (including insolvency frameworks) from a bank creditor perspective is December 2019.

 

1 December 2019Regulation of capital markets

The deadline for national competent authorities to notify ESMA on whether they comply, or intend to comply, with the guidelines on prospectus risk factors is 1 December 2019.

 

2 December 2019Fintech and cryptoassets

The deadline to apply to the Investment Association’s third cohort of fintech innovators for Velocity is 2 December 2019.

 

2 December 2019

Banks and mutuals

Prudential requirements

There will be a public hearing on 2 December 2019 at the EBA premises, which will cover all consultations on reporting in the context of the banking package (of which CRR II forms part).

 

2 December 2019Regulation of derivatives

The deadline for feedback to ESMA’s consultation on commercial terms for providing client clearing services under EMIR is 2nd December 2019.

 

2 to 13 December 2019Sustainable finance

UNEP FI will hold its second Regional Roundtable for Europe in Luxembourg on 28-29 November 2019.

 

3 December 2019Regulation of insurance

The deadline for feedback to PRA consultation paper (CP19/19) ‘Insurance special purpose vehicles: Updates to authorisation and supervision’ is 3 December 2019’.

 

3 December 2019UK, EU and international regulators and bodies

The next FPC policy meeting will be held on 3 December 2019.

 

4 December 2019

Banks and mutuals

 

Prudential requirements

ECON is organising a banking union workshop on an EU liquidation regime for banks, which will be held on 4 December 2019 (14:30–16:30). It will be held in Brussels and web streamed.

 

4 December 2019

Financial crime

Markets and trading

The FCA will hold a day-long seminar on navigating the public disclosure regime for small to medium sized issuers (SME), particularly with regard to the application of MAR.

 

4 December 2019Regulation of capital markets

ESMA’s guidelines on prospectus risk factors apply from 4 December 2019.

 

4 December 2019

Prudential requirements

Financial stability, recovery and resolution

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

 

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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.