FS weekly highlights—29 October 2020

FS weekly highlights—29 October 2020

In this issue

 

 

Brexit news
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Consumer protection
Complaints, compensation and claims management
Investigations, enforcement and discipline
Dispute resolution for financial services lawyers
Regulation of benchmarks and IBOR reform
Regulation of capital markets
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

Beyond Brexit—UK–Japan Comprehensive Economic Partnership Agreement signed

The UK–Japan Comprehensive Economic Partnership Agreement (CEPA) was concluded during a meeting in Tokyo between International Trade Secretary, Liz Truss, and Japanese Minister for Foreign Affairs, Motegi Toshimitsu, on 23 October 2020. The UK–Japan CEPA—first comprehensive free trade agreement to be signed by the UK as an independent trading nation—‘goes beyond’ the EU-Japan Economic Partnership Agreement, guaranteeing ‘bespoke benefits’ for businesses in the digital and data, financial services, food and drink, and creative industries. Strategically viewed as ‘an important step’ towards the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the UK hopes that the UK–Japan CEPA will ‘strengthen trade ties’ between the UK and the CPTPP’s eleven members, while the UK also assumes the G7 presidency in 2021. With an ambition to secure free trade agreements with countries ‘covering 80% of UK trade’ by 2022, the Department for International Trade (DIT) is continuing its engagement with a number of existing EU trade partners.

Sources: GOV.UK—World news story: UK and Japan sign free trade agreementGOV.UK—Press release: UK and Japan sign historic free trade agreementGOV.UK—Guidance: Summary of the UK-Japan Comprehensive Economic Partnership AgreementGOV.UK—Collection: UK-Japan Comprehensive Economic Partnership AgreementGOV.UK—Promotional material: The UK-Japan comprehensive economic partnership: benefits for the UKGOV.UK—Policy paper: The UK’s trade relationship with Japan: parliamentary report and GOV.UK—Impact assessment: UK-Japan CEPA: final impact assessment.

ESMA sets out final position on share trading obligation following end of Brexit transition

The European Securities and Markets Authority (ESMA) released a public statement that clarifies the application of the EU trading obligation for shares (STO) following the end of the UK’s transition from the EU on 31 December 2020. The statement outlines that the trading of shares with a European Economic Area (EEA) ISIN on a UK trading venue in UK pound sterling (GBP) by EU investment firms will not be subject to the EU STO. Therefore, those trades will not be subject to the EU STO under Article 23 of the Markets in Financial Instruments Regulation (MiFIR). This currency approach supplements the EEA-ISIN approach outlined in a previous ESMA statement of May 2019.

Source: ESMA sets out final position on share trading obligation.

For further information, see: The impact of Brexit on the MiFID II regime.

ESMA statement on endorsement of UK CRAs following end of Brexit transition period

ESMA published an update to its March 2019 statement on the endorsement of credit ratings from the UK. The statement has been updated in order to provide clarity on whether endorsement can proceed following the end of the transition period on 31 December 2020. ESMA confirms that EU credit rating agencies (CRAs) will be able to endorse credit ratings elaborated in the UK after the end of the transition period.

Source: ESMA updates statement to address credit ratings from the UK.

For further information, see: Impact of Brexit: EMIR—quick guide.

ESMA adds UK venues to list of TCTV for transparency and position limits opinions under MiFID II/MiFIR

ESMA added UK venues to the list of third-country venues (TCTVs) in the context of the opinions on post-trade transparency and position limits under Directive 2014/65/EU (MiFID II) and Regulation (EU) 600/2014 (MiFIR). ESMA has also updated the related guidance to take into account feedback received from market participants on the identification of bonds and US Treasuries, as well as on the treatment of venues without a market identifier code (MIC).

Source: ESMA adds UK venues to opinions on third-country trading venues.

For further information, see: MiFID II & MiFIR—third-country regime.

FCA responds to Treasury Committee letter on potential UK banks’ closure of EU current accounts

The Financial Conduct Authority (FCA)’s chief executive, Nikhil Rathi, wrote to the Treasury Select Committee on the subject of UK bank closures of the current accounts of customers living in the EU after the withdrawal transition period. Replying to the Treasury Committee’s 29 September 2020 letter, Rathi sets out the contractual position for affected customers, firms’ obligations to treat customers fairly, and the FCA’s work with large banking groups on their plans for servicing EEA-based customers after the transition period.

Source: Our letter to the TSC on passive servicing issues after the transition period.

UK—US Financial Regulatory Working Group holds October 2020 virtual meeting

HM Treasury and US Department of the Treasury issued a joint statement on the third meeting of the UK—US Financial Regulatory Working Group.

Source: Policy paper: Joint statement: UK—US Financial Regulatory Working Group.

European Union Withdrawal (Consequential Modifications) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment replaces the previous draft SI published on 8 October 2020. This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 and the European Union (Withdrawal Agreement) Act 2020 in preparation for IP completion day. This draft enactment is proposed to amend 16 pieces of UK primary legislation and one piece of UK secondary legislation in relation to EU withdrawal. It comes into force partly immediately before IP completion day, and fully on IP completion day. This draft enactment was re-laid with technical corrections, principally deleting Part 8 of the draft SI which previously made consequential amendments to the Financial Services and Markets Act 2000 (Qualifying EU Provisions) Order 2013, SI 2013/419.

The full draft legislation can be found here. The draft explanatory memorandum can be found  here.

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MiFID II

ESMA adds UK venues to list of TCTV for transparency and position limits opinions under MiFID II/MiFIR

ESMA added UK venues to the list of third-country venues (TCTVs) in the context of the opinions on post-trade transparency and position limits under Directive 2014/65/EU (MiFID II) and Regulation (EU) 600/2014 (MiFIR). ESMA has also updated the related guidance to take into account feedback received from market participants on the identification of bonds and US Treasuries, as well as on the treatment of venues without a market identifier code (MIC).

Source: ESMA adds UK venues to opinions on third-country trading venues.

For further information, see: MiFID II & MiFIR—third-country regime.

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UK, EU and international regulators and bodies

FCA publishes Handbook Notice No 81

The FCA published Handbook Notice No 81, which includes changes to the FCA Handbook and binding technical standards (BTS) made by the FCA board on 23 July, 30 September and 22 October 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 No 81.

Council of the EU sets out progress on financial services legislative files

The Council of the EU published a document concerning the state of play of legislative proposals in the field of financial services.

Source: Progress on financial services legislative files.

Enria addresses ECON on climate change, Brexit and the crisis caused by coronavirus (COVID-19)

The chair of the European Central Bank (ECB) Supervisory Board, Andrea Enria, delivered introductory remarks at the European Parliament’s Economic and Monetary Affairs Committee (ECON). Enria emphasised the need for banks to be proactive in managing the upcoming deterioration in asset quality, and also addressed Brexit and climate change.

Source: Introductory remarks at hearing at the European Parliament’s Economic and Monetary Affairs Committee.

TheCityUK convenes future industry leaders to challenge consensus and nurture talent

TheCityUK held the first meeting of its new Next Generation Leadership Council on 27 October 2020, bringing together 23 high-potential future leaders from across the financial and related professional services industry.

Source: TheCityUK convenes future industry leaders to challenge consensus and nurture talent.

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Authorisation, approval and supervision

FCA confirms publication dates for dual and solo-regulated firms’ Directory Persons data

The FCA announced the publication dates for dual and solo-regulated firms’ Directory Persons data on the Financial Services Register. The FCA’s directory of certified and assessed persons on the Register will be published as part of the Senior Managers and Certification Regime (SM&CR).

Source: Directory of certified and assessed persons.

For further information, see: Directory Persons and the Financial Services Register.

Coronavirus (COVID-19)—FCA PS20/12 extends SM&CR implementation deadlines for solo-regulated firms

The FCA published policy statement PS20/12: Extending implementation deadlines for the Certification Regime and Conduct Rules. PS20/12 sets out the FCA’s final rules which require solo-regulated firms (except benchmark administrators) to fully implement the Certification Regime and Conduct Rules, and report information on Directory Persons, by 31 March 2021. The deadlines have been extended to give solo-regulated firms significantly affected by the coronavirus pandemic (COVID-19) time to fully and properly implement the Certification Regime and to train staff effectively in the Conduct Rules; both are key components of the wider SM&CR.

Source: PS20/12: Extending implementation deadlines for the Certification Regime and Conduct Rules.

For further information, see: SM&CR—essentials for solo-regulated firms.

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Prudential requirements

Commission publishes draft delegated regulation amended liquidity coverage rules to cater for covered bonds under CRR

The European Commission published a draft Commission Delegated Regulation amending Delegated Regulation (EU) 2015/61 to supplement the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR) of the European Parliament and the Council, with regard to liquidity coverage requirement for credit institutions.

Source: Bonds trading—amended liquidity coverage rules to cater for covered bonds (delegated act) under CRR.

For further information, see: CRD IV—essentials.

PRA consults on Bank Recovery and Resolution Directive II

The Prudential Regulation Authority (PRA) published consultation paper CP18/20 on the Bank Recovery and Resolution Directive II (BRRD II), setting out proposals relating to the PRA’s Contractual Recognition of Bail-in (CROB) and Stay in Resolution (Stays) Rules. The purpose of the proposals is to support the UK’s transposition of BRRD II, which amends the BRRD. The UK is required to transpose the BRRD II amendments by 28 December 2020. Responses to the consultation are sought by 30 November 2020.

Source: Bank Recovery and Resolution Directive II, consultation paper 18/20.

For further information, see: UK implementation of the Bank Recovery and Resolution Directive.

BoE and PRA consult on proposals relating to operational continuity in resolution

The Bank of England (BoE) and the PRA are consulting in parallel on a package of proposals relating to operational continuity in resolution (OCIR) policy. The BoE consultation is published at the same time as PRA consultation paper CP19/20 ‘Resolution assessments: Amendments to reporting and disclosure dates’ and PRA consultation paper CP20/20 ‘Operational continuity in resolution: Updates to the policy’.

Sources: Updates to the Bank of England’s approach to assessing resolvability, consultation papers CP19/20 and CP20/20Resolution assessments: Amendments to reporting and disclosure dates and Operational continuity in resolution: Updates to the policy.

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Financial stability 

ECB’s Andrea Enria calls for European initiative to deal with NPLs

The ECB published an opinion piece by the chair of its Supervisory Board, Andrea Enria, entitled ‘Bank asset quality: this time we need to do better’. Enria believes the EU must prepare for the worst-case scenario that non-performing loans (NPLs) at euro area banks could reach €1.4trn, well above the levels of the financial and sovereign debt crisis. Enria considers that the coronavirus (COVID-19) pandemic creates favourable conditions for agreement on a European initiative based on a European asset management company to support a recovery of national economies. The initiative would allow the EU to be faster in dealing with NPLs and address its structurally fragile banking sector.

Source: Bank asset quality: this time we need to do better.

Elke König discusses SRB priorities at ECON meeting

The Single Resolution Board (SRB) published a speech delivered by its chair, Elke König, to the European Parliament ECON Committee on 27 October 2020, in which she discussed the SRB’s annual report for 2019 and its forthcoming multi-annual work programme, which will focus on operational resolvability and the necessary build-up of MREL (minimum requirement for own funds and eligible liabilities), a key tool in resolution.

Source: Speech by Elke König to European Parliament ECON Committee.

European Parliament publishes briefing note on the SRB annual report 2019

The European Parliament published a briefing note on the SRB 2019 annual report, ahead of an ordinary public hearing with SRB chair Elke König on 27 October 2020.

Source: Public hearing with Elke König, chair of the Single Resolution Board, ECON on 27 October 2020.

SRB hosting online ‘Bank resolution in times of COVID-19’

The SRB and the Florence School of Banking and Finance (European University Institute) are organising an online interdisciplinary academic event on ‘Bank resolution in times of COVID-19’, on 27 November 2020.

Source: SRB-FBF academic event: agenda available & registrations open.

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Risk management and controls

FCA sets out information and case studies for potential whistleblowers

The FCA published a number of webpages on whistleblowing, setting out how to report instances to the FCA, how the regulator can act, protecting whistleblowers’ identity, case studies, contact information, and what happens to disclosed information after a report is made.

Source: Whistleblowing.

For further information, see: FCA and PRA whistleblowing requirements—one minute guide.

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Financial crime

Treasury Committee seeks views for economic crime inquiry

The Treasury Committee launched an inquiry to review what progress has been made in combatting economic crime since its last inquiry, carried out under the previous parliament. The inquiry will focus on anti-money laundering systems and the sanctions regime, and on consumers, including trends which have resulted from the coronavirus (COVID-19) pandemic and authorised push payment fraud. Stakeholders may submit evidence until 27 November 2020.

Source: Committee launches new Economic Crime inquiry .

FCA commences proceedings for conspiracy to pervert course of justice

The FCA announced that criminal proceedings against Stephen Allen in relation to conspiracy to pervert the course of justice by disguising Renwick Haddow’s (Allen’s conspirator) interest in a property and, as such, its availability as an asset for satisfying an order that might be made in proceedings brought by the FCA against Haddow, have commenced. The case was sent to Southwark Crown Court for a plea and trial preparation hearing due to take place on 25 November 2020.

Source: FCA charges Stephen Allen with conspiracy to pervert the course of justice.

Goldman Sachs fined over US$2.9bn for involvement in foreign bribery scheme

The US Department of Justice (DOJ) announced that Goldman Sachs Group Inc. and its subsidiary, Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia) have pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act 1977 (FCPA 1977). The guilty plea is in connection with a scheme involving over US$1m in bribery payments to Malaysian and Abu Dhabi officials in order to ‘obtain lucrative business’ relating to 1Malaysia Development Bhd (1MDB) which earned the bank approximately US$606m in fees and revenue. Goldman Sachs has agreed to pay a criminal penalty of over US$2.9bn as part of its resolution with the US, UK, Singapore and elsewhere. Jamas Hodivala QC, of Matrix Chambers, comments on key aspects of the case.

Source: Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion.

Importance of FATF highlighted during first G20 Anti-Corruption Ministerial

The G20 members called for the ‘effective implementation’ of the FATF standards during the first G20 Anti-Corruption Ministerial. The FATF recommendations have been elaborated to help address financial crime. The FATF President, Dr Marcus Pleyer, highlighted that efforts to stop money laundering must be maintained during the coronavirus (COVID-19) crisis as ‘money is flowing out of economies at precisely the time health services need it most’. In order to tackle corruption and lead the way, FATF has elaborated three actions that should be undertaken by G20 members: investing in law enforcement, making available beneficial ownership information, and increasing oversight of the non-financial sectors. Dr Pleyer also mentioned that by tackling money laundering, corruption will also be countered.

Source: G20 recognises the role of the FATF in the fight against corruption.

FATF President considers allocation of ‘sufficient resources’ during coronavirus (COVID-19)

The President of the FATF, Dr Marcus Pleyer, issued a statement regarding the significance of allocating sufficient resources to anti-money laundering (AML) and counter-terrorist financing (CTF) schemes during the coronavirus (COVID-19) pandemic. Pleyer documents how criminals have continued to exploit the coronavirus pandemic through various means, including counterfeiting medical goods, investment fraud, cyber-crime scams and the exploitation of many governments’ economic stimulus measures. Meanwhile AML and CTF crimes have been on the rise, Pleyer notes that many government and private sectors have further struggled to ‘implement measures to detect, prevent and investigate’ the criminal activity, with over half of responses to a recent survey pointing to the negative impact that coronavirus has had on preventative measures.

Source: The importance of allocating sufficient resources to AML/CFT regimes during the COVID-19 pandemic.

FATF plenary assesses strategic initiatives and country-specific processes

The FATF published the outcomes of its 21–23 October 2020 plenary meeting. The meeting covered the FATF’s strategic initiatives, country-specific processes and other strategic initiatives—namely strengthening measures to prevent the financing of proliferation of weapons of mass destruction and planning the next joint experts’ meeting, which will be held virtually between 23–25 November 2020. The plenary meeting also resulted in the publication of a new list of jurisdictions under increased monitoring and updated FATF recommendations on combating money laundering (ML) and terrorist financing (TF).

Source: Outcomes FATF Plenary, 21-23 October 2020.

FCA update on money laundering and the Bank Account Portal

The FCA updated its webpage on money laundering regulations to note that, as the Bank Account Portal (BAP) remains under development, firms are not therefore expected to comply with those parts of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

Source: Money Laundering Regulations.

SFO publishes chapter outlining its approach to Deferred Prosecution Agreements

The Serious Fraud Office (SFO) published a chapter from its handbook that provides ‘comprehensive guidance’ on how the SFO approaches Deferred Prosecution Agreements (DPA). A DPA is an agreement between a company and a prosecutor at the SFO or the Crown Prosecution Service that has been approved by a court. It provides an alternative to prosecutor of the company in question when it is seen as in the best public interest.

Source: Serious Fraud Office releases guidance on Deferred Prosecution Agreements.

For further information, see: The SFO's approach to Deferred Prosecution Agreements (DPAs).

SFO seeks approval of DPA with Airline Services Limited

The SFO announced that it has reached a deferred prosecution agreement (DPA) with Airline Services Limited, which is subject to approval by the court. Approval is to be sought from Mrs Justice May at Southwark Crown Court on 30 October 2020.

Source: SFO confirms DPA in principle with Airline Services Limited.

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Consumer protection

Coronavirus (COVID-19)—FCA webpages set out firm and consumer advice for those struggling to make repayments

The FCA published a webpage urging consumers struggling to make repayments due to the impact of coronavirus (COVID-19) to speak to their lenders about options available to them. The FCA has put in place a package of support for people in difficulty to ensure help is available after 31 October 2020. The measures come as an FCA survey finds that two million people have moved into the ‘not financially resilient’ category since February 2020.

Source: FCA highlights continued support for consumers struggling with payments.

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

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Complaints, compensation and claims management

FOS’s Ombudsman News looks at impact of coronavirus (COVID-19) on complaints and SMEs

The Financial Ombudsman Service (FOS) published the latest edition of Ombudsman News, which contains articles on the impact of coronavirus (COVID-19) on complaints and small-to-medium enterprises (SMEs), as well as the FOS’s new apprenticeship programme and changes to its Independent Assessor and board of directors.

Source: Ombudsman News issue 154.

FCA Dear CEO letter sets out portfolio strategy for CMCs

The FCA published a Dear CEO letter addressed to the CEOs of claims management companies (CMCs) setting out its strategy for supervising firms in the ‘Claims Management portfolio’. This portfolio includes lead generators (which seek out, refer and identify claims), and other claims management companies which advise a claimant or potential claimant, investigate a claim, or represent a claimant in relation to claims across the six sectors. These are personal injury, financial services and products, housing disrepair, specified benefit, criminal injuries and employment matters.

Source: Portfolio strategy: Claims management companies (CMCs).

For further information, see: FCA regulation of claims management companies—essentials.

FSCS states it has worked to enable 11,500 Reyker Securities clients to have access to their assets

The Financial Services Compensation Scheme (FSCS) issued a press release stating that around 11,500 former clients of wealth management firm Reyker Securities have taken ‘a major step forward’ toward being able to access their assets. Reyker Securities plc is a fund custodian that holds and safeguards cash and assets on behalf of its clients. The firm was placed in special administration by the High Court following an application by its directors on 8 October 2019. 

Source: FSCS works to enable 11,500 Reyker Securities clients to have access to their assets.

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Investigations, enforcement and discipline

FCA censures Aviva for misleading 2018 statement on preliminary year-end results

The FCA publicly censured Aviva plc for making an announcement that had the potential to mislead the market. The announcement was made on 8 March 2018 and concerned Aviva’s preliminary year-end results. The FCA has found the breach to be serious but not intentional and recognises that Aviva acted to clarify the announcement and provided a payment scheme for affected preference shareholders. The FCA Executive Director of Enforcement and Market Oversight, Mark Steward, said that but for these prompt actions, the case could have led to a financial penalty.

Source: FCA censures Aviva plc for listing and transparency rules breach .

Goldman Sachs fined over US$2.9bn for involvement in foreign bribery scheme

The US Department of Justice (DOJ) announced that Goldman Sachs Group Inc. and its subsidiary, Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia) have pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act 1977 (FCPA 1977). The guilty plea is in connection with a scheme involving over US$1m in bribery payments to Malaysian and Abu Dhabi officials in order to ‘obtain lucrative business’ relating to 1Malaysia Development Bhd (1MDB) which earned the bank approximately US$606m in fees and revenue. Goldman Sachs has agreed to pay a criminal penalty of over US$2.9bn as part of its resolution with the US, UK, Singapore and elsewhere. Jamas Hodivala QC, of Matrix Chambers, comments on key aspects of the case.

Source: Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion.

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Dispute resolution for financial services lawyers

ECJ sets aside judgment to annul ECB’s decision on Espírito Santo Financial Group

The European Court of Justice (Sixth Chamber) has given a judgment in case C‑396/19 P, ECB v Insolvent Estate of Espírito Santo Financial Group SA. This was an appeal by the ECB of the judgment by the General Court of the European Union (General Court) of 13 March 2019 in Espírito Santo Financial Group v ECB (T‑730/16). It concerned, amongst other things, access to ECB documents and confidentiality of meetings and deliberations of ECB bodies under Articles 4(1)(a) and 10.4 of ECB Decision 2004/258/EC on public access to ECB documents, as amended by ECB Decision (EU) 2015/529.

Source: Case C‑396/19 P ECB v Insolvent Estate of Espírito Santo Financial Group SA.

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Regulation of benchmarks and IBOR reform

ISDA IBOR Fallbacks Supplement and IBOR Fallbacks Protocol launched

The International Swaps and Derivatives Association (ISDA) announced the launch of the IBOR Fallbacks Supplement and IBOR Fallbacks Protocol. ISDA says the launch marks a major step in reducing the systemic impact of a key interbank offered rate (IBOR) becoming unavailable while market participants continue to have exposure to that rate.

Source: ISDA launches IBOR Fallbacks Supplement and Protocol.

BoE announces that it has signed up to ISDA's IBOR Fallbacks Protocol

The BoE announced that it has signed up to the ISDA ‘IBOR Fallbacks Protocol’ in respect of its own activities as a market participant, consistent with its leading role in supporting transition away from LIBOR by the end of 2021.

Source: Bank of England signs up to ISDA’s IBOR Fallbacks Protocol.

UK Finance and LSB publish guidance on LIBOR transition for SMEs

UK Finance and the Lending Standards Board (LSB) launched a report setting out best practice guidance on the transition from LIBOR for small-to-medium (SME) customers. It aims to support the transition from LIBOR to alternative reference rates, champion good outcomes for business customers, and collectively promote good practice throughout the process.

Sources: Press release: Best practice guidance—Transition from LIBOR for SME customersTransition from LIBOR for SME customers: Best practice guidance October 2020Blog: Best practice guidance: Transition from LIBOR for SME customers and  Lending Standards Board and UK Finance publish guidance for LIBOR transition.

For further information, see: LIBOR transition.

FMLC paper looks at LIBOR transition uncertainties and potential solutions

The Financial Markets Law Committee (FMLC) published a paper on issues of legal uncertainty in LIBOR transition and the mitigation steps being taken by authorities around the world. It sets out a brief overview of the Committee’s views as to the risks arising in respect of benchmark reform, and analyses Brexit uncertainties and the complexities the UK’s withdrawal adds to the adoption of a successor rate.

Source: Report: LIBOR Transition—Issues of legal uncertainty: 23 October 2020.

ARRC updates ISDA IBOR fallbacks protocol statement to include letter to FHLBank

The Alternative Reference Rates Committee (ARRC) updated its statement welcoming the announcement by ISDA that its IBOR Fallbacks Protocol and IBOR Fallbacks Supplement would launch on 23 October 2020. The statement has been updated to include a letter of 21 October 2020 from the Federal Housing Finance Agency to the Federal Home Loan Bank (FHLBank) on ISDA’s IBOR Fallbacks Protocol.

Source: ARRC Supports Forthcoming ISDA IBOR Fallbacks Protocol and Encourages Adherence.

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Regulation of capital markets

European Commission adopts Commission Delegated Regulation deferring entry into force of CSDR settlement discipline regime to 1 February 2022

The European Commission adopted the Commission Delegated Regulation of 23.10.2020 amending Commission Delegated Regulation (EU) 2018/1229 concerning the regulatory technical standards on settlement discipline, as regards its entry into force (C(2020) 7186 final). The new Commission Delegated Regulation defers the entry into force of the settlement discipline regime under the Central Securities Depositories Regulation (EU) 909/2014 (CSDR) to 1 February 2022 and will enter into force on the third day following its publication in the Official Journal of the EU.

Source: Commission Delegated Regulation (EU) …/... amending Delegated Regulation (EU) 2018/1229 concerning the regulatory technical standards on settlement discipline, as regards its entry into force.

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

AFME publishes report on European capital markets performance in 2020

The Association for Financial Markets in Europe (AFME) published a third edition of the Capital Markets Union Key Performance Indicators report, which looks at European capital markets performance in 2020. The report shows that funding from capital markets instruments has increased by 44% year on year, resulting in the proportion of market finance for EU businesses rising from 11% in 2019 to 14.5% in 2020. In addition, 27% of sustainable bond issuance in Europe in the first half of 2020 was categorised as social, covered bond issuance has increased 82% year on year as a result of the significant increase in new lending during the coronavirus (COVID-19) pandemic and ongoing central bank support, and bank lending to EU27 SMEs reached €573bn in the first half of 2020. No significant deterioration of European integration has been recorded, however, integration with the rest of the world has deteriorated ‘slightly’ in the first half of 2020.

Source: AFME report tracks European capital markets performance in 2020.

Launch of Eurosystem Collateral Management System postponed until November 2023

The governing council of the ECB decided to reschedule the launch of the Eurosystem Collateral Management System (ECMS) from November 2022 to November 2023, following the earlier decision to extend the timeline of the TARGET2 and T2S consolidation project by one year. The ECB says the postponement addresses the concerns of market participants that the current adverse environment would hamper their preparations.

Source: New launch date for the Eurosystem Collateral Management System.

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Regulation of derivatives

ESMA publishes consultation on standards for CCP activities and model amendments under EMIR

ESMA launched a consultation on draft regulatory technical standards (RTS) related to changes to central counterparties (CCPs)’ activities and models under Articles 15 and 49 of the European Market Infrastructure Regulation (Regulation (EU)648/2012) (EMIR). Specifically, the RTS relate to the conditions for a CCP to add new additional services or activities to its business, that are not already covered by the initial authorisation. The RTS also set out the conditions under which changes to CCP models and parameters are significant under EMIR. The closing date for responses is 16 November 2020.

Source: ESMA consults on standards for CCP activities and model amendments.

For further information, see: EMIR—essentials.

ESMA publishes consultation on CCP supervisory reviews and evaluation processes under EMIR

ESMA launched a consultation on guidelines addressing the consistency of supervisory reviews and evaluation processes of CCP under Article 21 of the EMIR. The closing date for responses is 16 November 2020.

Source: ESMA consults on CCP supervisory reviews and evaluation processes.

ESMA postpones application of updated EMIR validation rules to 8 March 2021

ESMA postponed the applicability date of the updated EMIR validation rules from 1 February to 8 March 2021.

Source: EMIR Reporting Validation Rules applicable from 8 March 2021.

ISDA highlights importance of fallbacks for derivatives users

ISDA commented on the importance of fallbacks for derivatives users around the world. ISDA Chief Executive Officer, Scott O'Malia, explained that while fallbacks should not be used as the ‘primary means’ of transitioning to risk-free rates (RFR), ‘they will act as a critical safety net and risk mitigant, ensuring contracts that continue to reference IBORs switch to the adjusted RFR fallback if an IBOR ceases to exist or, in the case of LIBOR, is deemed by the UK Financial Conduct Authority to be non-representative of its underlying market’. Going forward, O’Malia stressed that ‘building momentum and liquidity in the alternative rates must now be a priority for the whole market’ seeing as only 14 months remain until LIBOR will ‘likely cease publication’.

Source: A Major Milestone for Benchmark Reform.

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Investment funds and asset management

Commission consults on review of AIFMD

The European Commission opened the feedback period for its consultation on the review of the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD). The Commission is seeking views from stakeholders on how to make the EU alternative investment fund (AIF) market more efficient, effective and competitive, while also maintaining a stable financial system. Responses (via an online questionnaire) are due by 29 January 2021.

Source: Financial services—review of EU rules on alternative investment fund managers.

For further information, see: AIFMD—essentials.

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Banks and mutuals

SRB hosting online ‘Bank resolution in times of COVID-19’

The SRB and the Florence School of Banking and Finance (European University Institute) are organising an online interdisciplinary academic event on ‘Bank resolution in times of COVID-19’, on 27 November 2020.

Source: SRB-FBF academic event: agenda available & registrations open.

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Consumer credit, mortgage and home finance

FCA introduces support for closed book mortgage borrowers and coronavirus (COVID-19)-related guidance on interest-only/part-and-part mortgage borrowers

The FCA published policy statement PS20/11, Mortgages: Removing barriers to intra‑group switching and helping borrowers with maturing interest‑only and part‑and‑part mortgages, which sets out a new rule to support some closed book mortgage borrowers, some of whom may be mortgage prisoners, and guidance to help borrowers with interest-only and partial capital repayment (part-and-part) mortgages whose mortgages have matured since 20 March 2020 or will do so in the next 12 months, given the impact of the coronavirus (COVID-19) pandemic.

Sources: FCA confirms measures to support closed book and interest-only/part-and-part mortgage borrowers and  PS20/11.

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

FCA publishes terms of reference for Woolard Review into unsecured credit market regulation

The FCA published information about its review into unsecured credit market regulation, chaired by Christopher Woolard (the Woolard Review). The review will concentrate on how regulation can better support a healthy unsecured lending market. It will take into account the impact of coronavirus (COVID-19) on employment security and credit scores, changes in business models, and new developments in unsecured lending, including the growth of unregulated products in retail and the workplace. The FCA has published the terms of reference (ToRs) for the review.

Source: FCA Review into change and innovation in the unsecured credit market (The Woolard Review).

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Regulation of insurance

Insurance Europe opposes compulsory AI insurance

Insurance Europe has stated that it considers mandatory insurance for artificial intelligence (AI) would be premature at this stage, due to insufficient underwriting data. This announcement follows the plenary vote in the European Parliament on 20 October 2020, regarding its legal affairs committee reports on a civil liability regime for AI and a framework of ethical aspects of AI.

Source: It is premature to call for mandatory AI insurance due to insufficient underwriting data and lack of similarity between risks.

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Regulation of personal pension and stakeholder products

FCA issues data request to Rolls-Royce DC pension scheme advisers

The FCA issued a data request to certain advisers who have advised on transfers from the Rolls-Royce defined benefit (DB) pension scheme. The FCA, the Money and Pensions Service (MaPS) and the Pensions Regulator (TPR) have been engaging with Rolls-Royce and trustees of the scheme so as to be vigilant against the risks associated with higher transfer requests resulting from redundancies. The FCA, MaPS and TPR believe transferring out of a DB pension scheme is unlikely to be in consumers’ best interests.

Sources: FCA, TPR and MaPS joint statement on Rolls-Royce defined-benefit pensions scheme and  FCA TPR and MaPS joint statement on Rolls Royce defined benefit pensions scheme.

PDP publishes pensions dashboards timeline alongside other publications

The Pensions Dashboard Programme (PDP) published its second Progress Update Report, which sets out a timeline for the development of pensions dashboards. The timeline was published following extensive engagement with the government and various stakeholders, including regulators, and industry, suppliers and consumer advocates. The PDP also released a summary of findings from a Call for Input on data standards, which saw responses from industry and organisations representing potential dashboard users, as well as qualitative research with pension providers and schemes undertaken by PwC.

Sources: Pensions Dashboards Programme progress update report: October 2020 and  PLSA WELCOMES PENSIONS DASHBOARDS PROGRAMME’S REALISTIC TIMELINE.

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Payment services and systems

ECB consults on Eurosystem oversight framework for electronic payment instruments, schemes and arrangements

The ECB published for consultation its draft oversight framework for electronic payment instruments, schemes and arrangements (PISA). Comments are requested by 31 December 2020 on three draft documents—the oversight framework, assessment methodology and exemption policy. The draft oversight framework extends to all relevant actors in the payments market, including big tech firms.

Sources: Public consultation on the draft Eurosystem oversight framework for electronic payment instruments, schemes and arrangementsDraft Eurosystem oversight framework for electronic payment instruments, schemes and arrangementsDraft Eurosystem assessment methodology for electronic payment instruments, schemes and arrangements and Draft Exemption policy for the Eurosystem oversight framework for electronic payment instruments, schemes and arrangements.

EPC publishes valuation criteria for non-EEA participants in SEPA schemes

The European Payments Council (EPC) published v5 (dated April 2020) of the evaluation criteria it will use to determine whether a community of banks or financial institutions from a non-EEA country or territory which is not yet within the geographical scope of the Single Euro Payments Area (SEPA) schemes (as set out in EPC409-09) could be considered eligible to participate in those SEPA schemes.

Source: Criteria for participation in SEPA schemes.

For further information, see: SEPA Regulation and cross-border payments—essentials.

FMLC responds to HMT’s call for evidence on Payments Landscape Review

The FMLC responded to the HM Treasury (HMT) call for evidence on its Payments Landscape Review of July 2020. The FMLC urged HMT to consider privacy risks posed by distributed ledger technology (DLT)-based innovation in payment systems. The FMLC also highlighted that broader payments network activities may currently fall outside the scope of regulated payment services and systems activities, and asked HMT to consider widening the scope of the current regulated activities so they also cover payment network administrators.

Source: Response to call for evidence: Payments Landscape Review: 20 October 2020.

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Fintech and cryptoassets

BoE publishes minutes of the first meeting of AIPPF

The BoE published minutes of the first meeting of the Artificial Intelligence Public-Private Forum (AIPPF) held on 12 October 2020. In the opening remarks, co-chairs Dave Ramsden (BoE) and Sheldon Mills (Financial Conduct Authority) emphasised the importance of the AIPPF, namely the ability for stakeholders to collaboratively identify issues and remedies, and its potential to help the public and private sectors better understand the key issues, clarify the priorities and determine what actions may be needed to support the safe adoption of artificial intelligence (AI) in UK financial services.

Source: Artificial Intelligence Public-Private Forum—First meeting.

BoE’s director of fintech discusses weathering the coronavirus (COVID-19) storm, and the challenges of CBDCs

The BoE published a speech by its director for fintech, Tom Mutton, at the Bund Summit on digital currency, fintech and inclusive finance, in which he set out why fintech matters to the BoE, how innovation has helped the economy respond to the shock of the coronavirus (COVID-19) pandemic, and the BoE’s approach to a central bank digital currency (CBDC).

Source: Response, and recovery: fintech during the COVID crisis and beyond—speech by Tom Mutton.

FMLC responds to HMT proposal to regulate cryptoasset promotions

The Financial Markets Law Committee (FMLC) has set out its response to HM Treasury’s consultation on its proposal to bring certain cryptoassets into the scope of financial promotions regulation. The FMLC’s response expresses concern with regards to the definition of a ‘qualifying cryptoasset’ set out in the proposal. The FMLC also encourages HMT to take note of the proliferation of sometimes conflicting or overlapping definitions internationally of cryptoassets for the purposes of regulation.

Sources: Press release and FMLC response.

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Sustainable finance

EIF and UNDP sign MoU on sustainable finance and sustainable development goals

The European Investment Fund (EIF) announced that it has signed a memorandum of understanding (MoU) with the United Nations Development Programme (UNDP) to develop joint initiatives for sustainable finance and the implementation of the Sustainable Development Goals (SDGs).

Source: EIF and UNDP to strengthen co-operation for sustainable finance.

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Dates for your diary

 

DateSubjectEvent

 

29 October 2020

 

 

Payment services and systems

 

 

Commission Delegated Regulation (EU) 2020/1423 specifies the criteria to be applied when determining the circumstances when the appointment of a central contact point is appropriate, and the functions of those contact points, and enters into force on 29 October 2020.

 

30 October 2020

 

Payment services and systems

 

The Payment Systems Regulator (PSR) is seeking industry feedback relating to choice in payment methods, as part of its strategic review, by this date.

 

30 October 2020

 

Payment services and systems

 

The European Payments Council (EPC) is seeking independent candidates for a replacement member on its Scheme Management Board—the body responsible for the administration and evolution of the Single Euro Payments Area (SEPA) schemes. Applications close by this date.

 

30 October 2020

 

Fintech and crypto-assets

 

Deadline for applications to the FCA’s digital sandbox pilot.

 

30 October 2020

 

Regulation of insurance

 

Deadline for responses to the PRA’s consultation paper on its proposed expectations and guidance relating to external auditors’ work on the matching adjustment (MA) under Solvency II (Directive 2009/138/EC).

 

31 October 2020

 

Authorisation, approval and supervision

 

Deadline for responses to the EBA and ESMA’s consultation on their revised joint guidelines on the assessment of the suitability of members of the management body and key function holder.

 

31 October 2020

 

Authorisation, approval and supervision

 

Deadline for responses to the EBA’s consultation on revised guidelines on internal governance is 31 October 2020.

 

31 October 2020

 

MiFID II

 

Deadline for responses to ESMA’s call for evidence in the context of its intention to review Commission Delegated Regulation (EU) 2017/587 (RTS 1) and Commission Delegated Regulation (EU) 2017/583 (RTS 2) starting from Q4 2020-Q1 2021.

 

31 October 2020

 

Regulation of insurance



Coronavirus (COVID-19)

 

The FCA’s guidance and rules setting out its expectations for insurance and premium finance firms when considering the fair treatment of existing customers in financial difficulty, due to circumstances arising from the coronavirus (COVID-19) pandemic, entered into force on 11 August 2020 and will remain in place until 31 October 2020.

 

31 October 2020

 

Banks and mutuals

 

The EBA announced that it is looking for ways to optimise supervisory reporting requirements and reduce reporting costs for institutions, especially smaller ones. To facilitate this effort, the EBA has launched a questionnaire addressed to European banks and a call for case studies to obtain evidence on reporting costs as well as industry views on ways to reduce such costs and make the supervisory reporting more efficient. Submission of the case studies are expected by 31 October 2020.

 

31 October 2020

 

Consumer credit, mortgage and home finance



Coronavirus (COVID-19)

 

The FCA’s temporary COVID-19 guidance on credit cards (including retail revolving credit)personal loansmotor finance agreementshigh-cost short-term credit, and rent-to-own, buy-now pay-later and pawnbroking agreements expires. The FCA’s additional guidance on consumer credit and overdrafts will continue to apply after that date.

 

1 November 2020

 

Regulation of insurance



Coronavirus (COVID-19)

 

The FCA’s guidance for insurance and premium finance firms for customers in financial difficulty will come into force by 1 November 2020. It supplements that published by the FCA in August 2020.

 

 

4 November 2020

 

 

Brexit

 

 

Deadline for responses to Chapter 4 of FCA consultation paper ‘CP20/18: Quarterly Consultation Paper No. 29’ regarding onshoring changes to the FCA Handbook for legislative provisions and/or relevant technical changes needed to the FCA’s rules as a result of onshoring over the transition period for EU withdrawal.

 

 

 

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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.