FS weekly highlights—30 April 2020

FS weekly highlights—30 April 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
PRIIPs
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Complaints, compensation and claims management
Investigations, enforcement and discipline
Competition in financial services
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
Islamic finance
Dates for your diary

 

Coronavirus (COVID-19)

Coronavirus (COVID-19)–European Commission publishes banking package to facilitate lending

The European Commission adopted a banking package to facilitate lending to households and businesses in the EU, with the aim of ensuring banks can continue to lend money to support the economy and help mitigate the significant economic impact of the coronavirus (COVID-19) pandemic. The package includes an Interpretative Communication on the EU’s accounting and prudential frameworks, as well as targeted ‘quick fix’ amendments to EU banking rules set out in the Capital Requirements Regulation (EU) 575/2013 (CRR).

Sources: Coronavirus response: Commission adopts banking package to facilitate lending to households and businesses in the EUQ&As and AFME welcomes European Commission legislative proposal on Capital Requirements Regulation but more is needed.

For further information, see  CRD IV—essentials.

Coronavirus (COVID-19)—Dombrovskis summarises EU financial response

The European Commission published a speech by executive vice-president Valdis Dombrovskis on economic resilience and recovery, in which he said that while the EU had endured economic crises before, it had never had to deal with a shutdown on the current scale, and was mobilising the largest EU crisis response ever. He said the role of the financial sector now is to keep European businesses and households afloat financially by ‘keeping the liquidity taps turned on’. The EU will present ‘powerful’ budget proposals in the coming weeks, with ‘greater financing capacity than ever before, and frontloaded with large-scale investment’. The European Commission will also issue draft legislation after Basel standard-setters agreed to relax global banking rules amid the crisis.

Source: Speech by executive vice-president Valdis Dombrovskis at the Bloomberg EU Policy Series 2020: ‘Building economic resilience and recovery’.

For further information, see: Introduction to capital and liquidity—overview.

Coronavirus (COVID-19)—EU TEG states that sustainable recovery from the pandemic requires the right tools

The EU Technical Expert Group on Sustainable Finance (TEG), established to advise the European Commission on implementation of the Action Plan on Financing Sustainable Growth, has issued a statement in which it states that it believes the Sustainable Taxonomy, EU Green Bond Standard, and Paris-Aligned and Climate Transition Benchmarks can guide public and private sector plans for recovery from the coronavirus COVID-19 pandemic, including the European Council’s recently announced Roadmap to Recovery.

Source: Statement by the EU Technical Expert Group on Sustainable Finance: Sustainable recovery from the COVID-19 pandemic requires the right tools.

Coronavirus (COVID-19)—EBA provides guidance on supervisory flexibility

The European Banking Authority (EBA) published further details on how supervisory flexibility will work in relation to market risk, the Supervisory Review and Evaluation Process (SREP), recovery planning, digital operational resilience and information and communications technology (ICT) risk, and securitisation. However, the EBA also notes the need for stringent attention by supervisors and financial institutions in relation to key risks in these areas.

Source: EBA provides further guidance on the use of flexibility in relation to COVID-19 and calls for heightened attention to risks.

Coronavirus (COVID 19)—ISDA/GFMA call for ESMA/NCAs to relax supervisory action regarding EMIR Refit mandatory delegated reporting requirement

The International Swaps and Derivatives Association (ISDA) and Global Financial Markets Association (GFMA), on behalf of themselves and of the Association for Financial Markets in Europe (AFME), the Asia Securities Industry and Financial Markets Association (ASIFMA), and the Securities Industry and Financial Markets Association (SIFMA), have written to Steven Maijoor, chair of the European Securities and Markets Authority (ESMA), regarding the impact of the coronavirus (COVID-19) crisis on the ability of market participants to comply with the mandatory delegated reporting requirement under the EMIR Refit Regulation ((EU) 2019/834), which takes effect on 18 June 2020. The letter calls on ESMA to consider flexibility in supervisory action on the issue, for a period up to 21 November 2020.

Source: EMIR Refit (‘mandatory delegated’) reporting effective date/COVID-19

For further information, see: EMIR—essentials and EMIR REFIT and EMIR 2.2 roadmap.

Coronavirus (COVID 19)—BIS paper considers public guarantees for bank lending

The Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) published a paper entitled ‘Public guarantees for bank lending in response to the COVID-19 pandemic’.

Source: Public guarantees for bank lending in response to the COVID-19 pandemic.

Coronavirus (COVID-19)—BIS bulletin discusses role of prudential policy

The BIS published BIS Bulletin No 9, which discusses the role of prudential policy, including the release of some prudential buffers, in addressing the economic impact of the coronavirus (COVID-19) pandemic.

Source: Buffering Covid-19 losses—the role of prudential policy.

Coronavirus (COVID-19)—EIOPA chair discusses crisis response, and how it may change the future

The European Insurance and Occupational Pensions Authority (EIOPA) published an interview with its chair, Gabriel Bernardino, discussing the impact of the coronavirus (COVID-19) pandemic, EIOPA’s response, and how the crisis may change the insurance and pensions sectors.

Source: EIOPA's response to the coronavirus crisis.

Coronavirus (COVID-19)—Treasury Committee and UK Finance respond to Bounce Back Loans Scheme

The chair of the Treasury Committee, Mel Stride, commented on the government’s announcement of the new Bounce Back Loans Scheme (BBLS), saying financial help for businesses has been too complex and too slow. UK Finance also responded to the BBLS announcement, saying it should make the process of accessing financial assistance ‘simpler and faster for smaller businesses’.

Source: Chair comments on chancellor’s announcement of Bounce Back Loans.

Coronavirus (COVID-19)—Treasury Committee asks CBILS lenders for daily data

The Treasury Committee wrote to the lenders accredited to provide loans through the Coronavirus Business Interruption Loan Scheme (CBILS), to encourage their co-operation in ensuring that daily data on the loans being made is available to the Committee (which it will publish). The letter follows on from the Committee’s similar request to the British Business Bank (BBB) and UK Finance.

Source: Committee requests co-operation from CBILS lenders on providing daily data update.

Coronavirus (COVID-19)—Treasury Committee chair urges insurers to be clear and fair with coronavirus claimants

The Treasury Committee published comments from its chair, Mel Stride MP, following the Association of British Insurers (ABI)’s response to his letter, which was sent to the ABI’s director general, Huw Evans, on 25 March 2020 to seek answers on how the insurance sector is responding to the coronavirus COVID-19 pandemic at a time when many will look to their insurer for both flexibility and assurance.

Source: Mel Stride urges insurers to be clear and fair with coronavirus claimants.

Coronavirus (COVID-19)—Treasury Committee launches second stage of economic impact enquiry

The Treasury Committee announced the terms of reference of the second stage of its enquiry into the economic impact of the coronavirus (COVID-19) pandemic. In this stage, the Committee will examine the operational effectiveness, cost and sustainability of the government and BoE’s support packages. The Committee will also examine the impact on the economy and different sectors, the implications for public finances, and how the government can work towards a sustained recovery.

Source: Next stage of inquiry into economic impact of coronavirus (COVID-19) launched.

Coronavirus (COVID-19)–FCA publishes Dear CEO letter on ensuring fair treatment of corporate customers

The Financial Conduct Authority (FCA) published a Dear CEO letter on ensuring the fair treatment of corporate customers preparing to raise equity finance during the coronavirus (COVID-19) pandemic. In the letter the FCA outlines specific concerns around the conduct of a small number of banks and says it expects financial firms to continue to provide strong support and services to customers during this period of disruption.

Source: Dear CEO: Ensuring fair treatment of corporate customers preparing to raise equity finance.

Coronavirus (COVID 19)—FCA further statement on the impact on firms’ LIBOR transition plans

The FCA, the Bank of England (BoE) and members of the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have issued a further statement on the impact of the coronavirus (COVID-19) pandemic on firms’ LIBOR transition plans. Further to the joint statement made on 25 March 2020, it remains the central assumption that firms cannot rely on LIBOR being published after the end of 2021. The statement sets out the RFRWG’s recommendations going forward.

Sources: Further statement from the RFRWG on the impact of coronavirus on the timeline for firms’ LIBOR transition plans and  25 March 2020 statement.

Coronavirus (COVID-19)—FCA confirms motor finance and high-cost credit payment freezes

The FCA confirmed that the package of measures proposed on 17 April 2020 to support consumer credit customers facing payment difficulties due to the coronavirus (COVID-19) will take effect on 27 April 2020. Customers should be able to request a payment deferral, at any point after the guidance comes into force, for a period of three months. The measures being implemented are a three-month payment freeze for motor finance, buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking agreements; and for high-cost short-term credit (including payday loans) a one-month payment freeze during which no additional interest will be charged.

Sources: FCA confirms support for motor finance and high-cost credit customers and  FS20/4.

For further information, see Consumer credit—essentials and The regulation of high-cost short-term credit (payday lending).

Coronavirus (COVID-19)—FCA statement on the UK Coronavirus Business Interruption Loan Scheme and the new Bounce Back loan scheme

The FCA published a statement concerning the Treasury’s announcement about amendments to the UK’s CBILS scheme to support small businesses during the coronavirus (COVID-19) pandemic. The FCA’s statement sets out the FCA’s approach to its regulation of firms in relation to the government’s CBILS and BBL schemes.

Source: Statement on the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the new Bounce Back loan scheme (BBL).

Coronavirus (COVID-19)—FCA to survey small brokers

The British Insurers Brokers' Association (BIBA) published a statement advising that the FCA will conduct a survey to understand the impact of coronavirus (COVID-19) on small brokers.

Source: FCA Surveying Smaller Brokers To Determine Coronavirus Impact On Their Business.

Coronavirus (COVID-19)—PRA clarification for insurers

The Prudential Regulation Authority (PRA) published a follow-up statement addressed to PRA-regulated insurers which clarifies the PRA’s position on IFRS 9, capital requirements and loan covenants. This statement has been issued further to requests from insurance firms for clarification on how the PRA’s Dear CEO letter on IFRS 9, capital requirements and loan covenants (dated 26 March 2020) should be ‘read across to their internal assessments of loan creditworthiness and treatment of unrated assets’.

Source: Follow-up note to insurers on the letter from Sam Woods 'Covid-19: IFRS 9, capital requirements and loan covenants'.

For further information, see: Prudential requirements for UK insurers—introduction.

Coronavirus (COVID-19)—PRA statement and UK Finance comments on changes to CBILS and CLBILS

The PRA issued a statement in response to the changes to the UK CBILS and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) announced by the government on 27 April 2020. The PRA’s statement, which is intended to complement the government’s announcement, explains the regulatory treatment of the CBILS and CLBILS under the CRR.

Sources: PRA statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) and  UK Finance issues joint statement on behalf of seven largest SME lenders.

For further information, see CRD IV—essentials.

Coronavirus (COVID-19)—PSR sets out efforts to protect UK financial infrastructure

The Payment Systems Regulator (PSR) published an article setting out its efforts to protect the UK payments infrastructure during the coronavirus (COVID-19) pandemic. It discusses access to cash in isolated communities, efforts to prevent authorised push payment (APP) scams, and the rise in the limit on contactless card payments.

Source: Making sure payment systems are fit to face unprecedented challenges.

Coronavirus (COVID-19)—FSCS describes efforts to help over 2,000 customers in four days

Financial Services Compensation Scheme (FSCS) chief operating officer Jimmy Barber issued a statement setting out the numbers behind the measures the FSCS has taken to adapt its service during the coronavirus COVID-19 pandemic, to give stakeholders an idea of what a week looks like at FSCS at present.

Source: How we helped over 2,000 customers in four days.

Coronavirus (COVID 19)—LSB updates Standards of Lending Practice to reflect changes to CBILS

The Lending Standards Board (LSB) published its response to the changes to the UK CBILS announced by the government on 27 April 2020. The Standards of Lending Practice for business customers will be updated to reflect any amendments required to ensure that they do not prohibit participating firms from meeting the requirements of the CBILS.

Source: Response to the chancellor’s announcement of changes to the Coronavirus Business Interruption Loans Scheme.

Coronavirus (COVID 19)—WFE paper compares academic research, concludes short-selling bans exacerbate market volatility

The World Federation of Exchanges (WFE) published a paper that reviews the academic literature on short-selling and short-selling bans, comparing the arguments against banning short-selling with the arguments in favour. The WFE concludes that academic evidence almost unanimously points towards short-selling bans being disruptive for the orderly functioning of markets, as they are found to reduce liquidity, increase price inefficiency and hamper price discovery. Further, the evidence suggests that banning short-selling during periods of heightened uncertainty seems to exacerbate, rather than contain, market volatility.

Source: What does academic research say about short-selling bans?

For further information on short selling, see: An introduction to short selling and Different types of short selling.

Coronavirus (COVID-19)—IA warns of rise in scams

The Investment Association (IA) is warning vulnerable and at-risk groups of the potential threat posed to their savings and investments from scams and financial crime during the coronavirus (COVID-19) pandemic. New and increased financial criminal activity has been identified by investment managers and national authorities, with traditional criminal activities being given a new COVID-19 twist.

Source: IA warns savers of potential COVID-19 scam spike.

Coronavirus (COVID-19)–FATF postpones mutual evaluations and follow-up deadlines

The Financial Action Task Force (FATF) announced that it is temporarily postponing all remaining FATF mutual evaluations and follow-up deadlines, in response to the coronavirus (COVID-19) pandemic. FATF acknowledges that the gravity of the COVID-19 situation globally and consequent adoption of measures such as confinement and travel restrictions are making it ‘impossible’ for assessed jurisdictions and assessors to conduct on-site visits and in-person meetings.

Source: FATF extends its assessment and follow-up deadlines in response to COVID-19.

Coronavirus (COVID-19)—A guide to travel and Section 75 CCA/chargeback rights

UK Finance published a blog and a set of FAQs on customers’ right to a refund when travel services are cancelled. The FAQs set out key questions about chargeback rights and rights under Section 75 of the Consumer Credit Act in the context of holiday cancellations and difficulties following the coronavirus (COVID-19) pandemic.

Sources: Travel and Section 75/Chargeback rights and FAQs—chargeback rights and Section 75 and the coronavirus.

For further information, see: Redress mechanisms for consumer card payments.

Coronavirus (COVID-19)—UK Finance sets out mortgage lenders’ efforts to help customers

UK Finance announced that lenders have renewed and expanded a commitment to help existing mortgage customers easily switch to a new deal when they reach the end of their term. Under an industry-wide agreement introduced in 2018 by UK Finance, the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA), any eligible customer coming to the end of a fixed-rate mortgage is routinely offered a product transfer by their lender. Lenders are now offering product transfers to customers who are on payment holidays due to the coronavirus (COVID-19) pandemic, who would not usually be eligible.

Sources: Product transfers: Helping customers impacted by COVID-19 to switch deal and  Lenders grant 1.6 million payment holidays to mortgage holders.

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Brexit news

Brexit Bulletin—EU calls for genuine progress in negotiations in light of UK refusal to extend transition

On 24 April 2020, following the delayed second round of talks on the future UK-EU relationship, EU Chief Negotiator Michel Barnier gave a statement. In the remarks, Mr Barnier acknowledged the grave circumstances and collective responsibility to focus on tackling the coronavirus (COVID-19) crisis. However, with the clock ticking on the Brexit transition period, and with the EU taking note of the UK's refusal to extend the timeline, tangible substantive progress is essential. The priority workstreams summarised by Mr Barnier include: ensuring full implementation of the Withdrawal Agreement, preparing for the negative economic consequences that the end of transition will entail and negotiating a future partnership agreement to limit those consequences. The EU has called for serious engagement from the UK on these parallel workstreams, based on the principles and objectives agreed in the Political Declaration.

Source: Press statement by Michel Barnier following the second round of future relationship negotiations with the United Kingdom.

UK Finance sets out state of play for financial services Brexit negotiations

UK Finance published an update on the UK’s Brexit planning. It notes that while the coronavirus (COVID-19) pandemic has necessitated a refocusing of government resources in recent months, there has been no indication to date that an extension of the transition period (which must be obtained by 1 July 2020) will be sought by either side. Accordingly, the scheduled milestones for 2020 remain unchanged.

Source: Current state of play: The UK’s Departure from the EU.

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MiFID II

ESMA publishes template for quarterly non-equity SI data required under MiFID II

ESMA published the template for the publication of quarterly non-equity systematic internaliser (SI) data needed for SI tests under the Markets in Financial Instruments Directive 2014/65/EU (MiFID II). It has also clarified that the annual non-equity transparency calculations will be made available through the Financial Instrument Transparency System (FITRS) and its Registers starting on 15 July 2020.

Source: ESMA publishes templates for quarterly non-equity systematic internaliser data.

For further information, see: Systematic internalisers.

ISDA and FIA release joint response to EU investment services consultation

The International Swaps and Derivatives Association (ISDA) submitted a joint response alongside the Futures Industry Association (FIA) to ESMA’s consultation on the subject of the provision of investment services in the EU by non-European investment firms under Regulation (EU) 600/2014, the Markets in Financial Instruments Regulation. In the response, ISDA and FIA outline their key recommendations for ESMA, including some ways in which the scope of information required could be reduced, while still enabling ESMA to perform its responsibilities. They also warn that the volume of information requested could have an impact on ESMA's resources, particularly in relation to the registration requirements.

Source: ISDA responds to ESMA consultation on MiFIR – non-EU investment firms regime.

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PRIIPs

EFAMA urges completion of the PRIIPs KID review

The European Fund and Asset Management Association (EFAMA) called for the urgent completion of the review of the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs). EFAMA says the current PRIIPs KID ‘remains fundamentally flawed and provides retail investors with misleading information’.

Source: EFAMA calls for urgent completion of PRIIP KID review to protect retail investors and support economic recovery.

For further information, see: Packaged Retail and Insurance-based Investment Products (PRIIPs)—essentials.

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Authorisation, approval and supervision

BoE speech ponders the future of RegTech

The BoE published a speech on supervisor-centred automation and the role of human-centred automation in judgement-centred prudential supervision, by the PRA’s senior advisor, James Proudman.

Source: Supervisor-centred automation—the role of human-centred automation in judgement-centred prudential supervision—speech by James Proudman.

Saudi G20 Presidency and BIS announce RegTech/SupTech competition

The Saudi G20 Presidency and BIS Innovation Hub are seeking global innovators to find solutions to regulatory compliance (RegTech) and supervision (SupTech) challenges. The problem statements identify challenges in regulatory reporting, analytics, and monitoring and supervision, and have been developed from submissions received from Financial Stability Board (FSB) member jurisdictions.

Source: Saudi G20 Presidency and the Bank for International Settlements (BIS) Innovation Hub invite global innovators to find solutions to the most pressing financial regulatory & supervisory challenges.

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Prudential requirements

Coronavirus (COVID-19)—EBA provides guidance on supervisory flexibility

The EBA published further details on how supervisory flexibility will work in relation to market risk, the SREP, recovery planning, digital operational resilience and information and communications technology (ICT) risk, and securitisation. However, the EBA also notes the need for stringent attention by supervisors and financial institutions in relation to key risks in these areas.

Source: EBA provides further guidance on the use of flexibility in relation to COVID-19 and calls for heightened attention to risks.

Coronavirus (COVID-19)–European Commission publishes banking package to facilitate lending

The European Commission adopted a banking package to facilitate lending to households and businesses in the EU, with the aim of ensuring banks can continue to lend money to support the economy and help mitigate the significant economic impact of the coronavirus (COVID-19) pandemic. The package includes an Interpretative Communication on the EU’s accounting and prudential frameworks, as well as targeted ‘quick fix’ amendments to EU banking rules set out in the CRR.

Sources: Coronavirus response: Commission adopts banking package to facilitate lending to households and businesses in the EUQ&As and AFME welcomes European Commission legislative proposal on Capital Requirements Regulation but more is needed.

For further information, see CRD IV—essentials.

Coronavirus (COVID-19)—PRA clarification for insurers

The PRA published a follow-up statement addressed to PRA-regulated insurers which clarifies the PRA’s position on IFRS 9, capital requirements and loan covenants. This statement has been issued further to requests from insurance firms for clarification on how the PRA’s Dear CEO letter on IFRS 9, capital requirements and loan covenants (dated 26 March 2020) should be ‘read across to their internal assessments of loan creditworthiness and treatment of unrated assets’.

Source: Follow-up note to insurers on the letter from Sam Woods 'Covid-19: IFRS 9, capital requirements and loan covenants'.

For further information, see: Prudential requirements for UK insurers—introduction.

Coronavirus (COVID-19)—PRA statement and UK Finance comments on changes to CBILS and CLBILS

The PRA issued a statement in response to the changes to the UK CBILS and the UK CLBILS announced by the government on 27 April 2020. The PRA’s statement, which is intended to complement the government’s announcement, explains the regulatory treatment of the CBILS and CLBILS under the CRR.

Sources: PRA statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) and  UK Finance issues joint statement on behalf of seven largest SME lenders.

For further information, see CRD IV—essentials.

Basel Committee reports on banks’ implementation of the ‘Principles for effective risk data aggregation and reporting’

The Basel Committee on Banking Supervision published its latest progress report on banks’ implementation of the Principles for effective risk data aggregation and reporting. Issued in January 2013, the Principles aim to strengthen banks’ risk data aggregation and risk reporting with a view to improving their risk management, decision-making processes and resolvability. None of the banks are fully compliant with the Principles in terms of building up the necessary data architecture and, for many, IT infrastructure remains difficult. But the Committee says banks' efforts to implement the Principles have resulted in tangible progress in several key areas, including governance, risk data aggregation capabilities and reporting practices.

Source: Basel Committee issues progress report on banks’ implementation of the ‘Principles for effective risk data aggregation and reporting’.

Coronavirus (COVID-19)—BIS bulletin discusses role of prudential policy

The BIS published BIS Bulletin No 9, which discusses the role of prudential policy, including the release of some prudential buffers, in addressing the economic impact of the coronavirus (COVID-19) pandemic.

Source: Buffering Covid-19 losses—the role of prudential policy.

Coronavirus (COVID-19)—Dombrovskis summarises EU financial response

The European Commission published a speech by executive vice-president Valdis Dombrovskis on economic resilience and recovery, in which he said that while the EU had endured economic crises before, it had never had to deal with a shutdown on the current scale, and was mobilising the largest EU crisis response ever. He said the role of the financial sector now is to keep European businesses and households afloat financially by ‘keeping the liquidity taps turned on’. The EU will present ‘powerful’ budget proposals in the coming weeks, with ‘greater financing capacity than ever before, and frontloaded with large-scale investment’. The European Commission will also issue draft legislation after Basel standard-setters agreed to relax global banking rules amid the crisis.

Source: Speech by executive vice-president Valdis Dombrovskis at the Bloomberg EU Policy Series 2020: ‘Building economic resilience and recovery’.

For further information, see: Introduction to capital and liquidity—overview.

BIS paper weighs up post-crisis international financial regulatory reforms

The BIS published a working paper reviewing the post-crisis financial regulatory reforms, examining how they fit together and identifying open issues. It takes stock of new features of bank and central counterparty international standards within a unified analytical framework.

Source: BIS Working Papers No 859: Post-crisis international financial regulatory reforms: a primer.

BoE speech ponders the future of RegTech

The BoE published a speech on supervisor-centred automation and the role of human-centred automation in judgement-centred prudential supervision, by the PRA’s senior advisor, James Proudman.

Source: Supervisor-centred automation—the role of human-centred automation in judgement-centred prudential supervision—speech by James Proudman.

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Financial stability 

ECB publishes framework to assess cross-border spillover effects of macroprudential policies

The ECB published a report, prepared by its Financial Stability Committee (FSC), setting out a framework to assess cross-border spillover effects of macroprudential policies.

Source: Financial Stability Committee Framework to assess crossborder spillover effects of macroprudential policies.

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Risk management and controls

Coronavirus (COVID-19)—EBA provides guidance on supervisory flexibility

The EBA published further details on how supervisory flexibility will work in relation to market risk, the SREP, recovery planning, digital operational resilience and information and communications technology (ICT) risk, and securitisation. However, the EBA also notes the need for stringent attention by supervisors and financial institutions in relation to key risks in these areas.

Source: EBA provides further guidance on the use of flexibility in relation to COVID-19 and calls for heightened attention to risks.

Investment Association launches cyber intelligence platform

The Investment Association (IA) launched a new cyber threat intelligence platform to help investment managers protect their firms against cyber security threats.

Source: IA tackles cyber threats with launch of new intelligence service for investment managers.

For further information, see: Cybersecurity regulation and best practice in the US and UK.

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Financial crime

Coronavirus (COVID-19)—IA warns of rise in scams

The IA is warning vulnerable and at-risk groups of the potential threat posed to their savings and investments from scams and financial crime during the coronavirus (COVID-19) pandemic. New and increased financial criminal activity has been identified by investment managers and national authorities, with traditional criminal activities being given a new COVID-19 twist.

Source: IA warns savers of potential COVID-19 scam spike.

Coronavirus (COVID-19)–FATF postpones mutual evaluations and follow-up deadlines

The FATF announced that it is temporarily postponing all remaining FATF mutual evaluations and follow-up deadlines, in response to the coronavirus (COVID-19) pandemic. FATF acknowledges that the gravity of the COVID-19 situation globally and consequent adoption of measures such as confinement and travel restrictions are making it ‘impossible’ for assessed jurisdictions and assessors to conduct on-site visits and in-person meetings.

Source: FATF extends its assessment and follow-up deadlines in response to COVID-19.

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Complaints, compensation and claims management

FCA publishes report on the PPI complaints deadline campaign

The FCA published its final report on the impact of the deadline for payment protection insurance (PPI) complaints. The report highlights the outcome of the communications campaign which ran for two years, and significantly increased consumer awareness of the deadline, understanding of the issue, and how to check or complain.

Source: FCA publishes PPI complaints deadline final report.

Coronavirus (COVID-19)—FSCS describes efforts to help over 2,000 customers in four days

FSCS chief operating officer Jimmy Barber has issued a statement setting out the numbers behind the measures the FSCS has taken to adapt its service during the coronavirus COVID-19 pandemic, to give stakeholders an idea of what a week looks like at FSCS at present.

Source: How we helped over 2,000 customers in four days.

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Investigations, enforcement and discipline

FCA commences civil proceedings in relation to alleged unauthorised investment advice

The FCA issued a press release stating that it has commenced proceedings in the High Court against 24HR Trading Academy Ltd (24HTA) and its sole director, Mohammed Fuaath Haja Maideen Maricar. The FCA alleges that from 2017 onwards, 24HTA and/or Mr Maricar have been advising on investments and arranging deals in investments without FCA authorisation and engaging in financial promotions without being an authorised person or having the promotions approved by an authorised person. The FCA alleges alternatively that Mr Maricar has been knowingly concerned in 24HTA’s contraventions.

Source: FCA commences civil proceedings in relation to alleged unauthorised investment advisers.

Financial Solutions (Euro) Ltd v Financial Conduct Authority

The FCA had given a decision notice (the Decision Notice) to the applicant company pursuant to which the FCA had decided to cancel FSE's Pt 4A permission pursuant to s 55J of the Financial Services and Markets Act 2000. The Upper Tribunal (Tax and Chancery Chamber) decided that in taking the decision to issue the Decision Notice to the applicant, the FCA had failed to consider certain relevant factors. Accordingly, the tribunal allowed the reference made to it by the applicant and remitted the matter to the FCA with a direction that the FCA reconsider its decision to cancel the applicant's Pt 4A permission in accordance with the tribunal's findings.

See: [2020] All ER (D) 171 (Apr).

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Competition in financial services

Banking Competition Remedies consults on optimal individual grant sizes for redeployed £100m

Banking Competition Remedies Ltd (BCR), the independent body established to implement the £775m Royal Bank of Scotland (RBS) State Aid Alternative Remedies Package (ARP), is inviting applicants to participate in its consultation on Capability and Innovation Fund (CIF) Pool E £100m grant funding. This funding round is for the £100m returned to BCR by Metro Bank and Nationwide after their own internal strategic reviews indicated a change in direction. Feedback on the consultation is sought by 12 May 2020.

Source: Banking Competition Remedies Ltd (BCR) publishes consultation on Capability and Innovation Fund Pool E.

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Regulation of benchmarks and IBOR reform

ISDA publishes IBOR Fallback Rate Adjustments Rule Book

ISDA published an IBOR Fallback Rate Adjustments Rule Book setting out the methodology, rules and conventions that will be used to calculate rate adjustments as firms transition away from the London Inter-bank Offered Rate (LIBOR) and other IBORs, and prepare to replace them with alternative, overnight Risk Free Rates (RFRs). To address the risk that one or more IBORs are discontinued while market participants continue to have exposure to that rate, counterparties are encouraged to agree to contractual fallback provisions that would provide for adjusted versions of the RFRs as replacement rates.

Source: IBOR Fallback Rate Adjustments Rule Book.

Coronavirus (COVID 19)—FCA further statement on the impact on firms’ LIBOR transition plans

The FCA, the Bank of England (BoE) and members of the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have issued a further statement on the impact of the coronavirus (COVID-19) pandemic on firms’ LIBOR transition plans. Further to the joint statement made on 25 March 2020, it remains the central assumption that firms cannot rely on LIBOR being published after the end of 2021. The statement sets out the RFRWG’s recommendations going forward.

Sources: Further statement from the RFRWG on the impact of coronavirus on the timeline for firms’ LIBOR transition plans and  25 March 2020 statement.

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Regulation of capital markets

Coronavirus (COVID 19)—WFE paper compares academic research, concludes short-selling bans exacerbate market volatility

The WFE published a paper that reviews the academic literature on short-selling and short-selling bans, comparing the arguments against banning short-selling with the arguments in favour. The WFE concludes that academic evidence almost unanimously points towards short-selling bans being disruptive for the orderly functioning of markets, as they are found to reduce liquidity, increase price inefficiency and hamper price discovery. Further, the evidence suggests that banning short-selling during periods of heightened uncertainty seems to exacerbate, rather than contain, market volatility.

Source: What does academic research say about short-selling bans?

For further information on short selling, see: An introduction to short selling and Different types of short selling.

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Regulation of derivatives

Coronavirus (COVID 19)—ISDA/GFMA call for ESMA/NCAs to relax supervisory action regarding EMIR Refit mandatory delegated reporting requirement

ISDA and GFMA, on behalf of themselves and of AFME, the ASIFMA, and the SIFMA, have written to Steven Maijoor, chair of ESMA, regarding the impact of the coronavirus (COVID-19) crisis on the ability of market participants to comply with the mandatory delegated reporting requirement under the EMIR Refit Regulation ((EU) 2019/834), which takes effect on 18 June 2020. The letter calls on ESMA to consider flexibility in supervisory action on the issue, for a period up to 21 November 2020.

Source: EMIR Refit (‘mandatory delegated’) reporting effective date/COVID-19

For further information, see: EMIR—essentials and  EMIR REFIT and EMIR 2.2 roadmap.

ISDA issues market closure guidance in relation to the UK early May bank holiday

ISDA published guidance for parties to over-the-counter derivative transactions concerning the shift of the UK’s early May bank holiday in 2020 from Monday 4 May to Friday 8 May (to mark the 75th anniversary of VE Day). It illustrates the consequences of the market closure event based on the default provisions described in the ISDA 2006 Definitions.

Source: ISDA guidance: UK early May 2020 bank holiday change.

BIS paper weighs up post-crisis international financial regulatory reforms

The BIS published a working paper reviewing the post-crisis financial regulatory reforms, examining how they fit together and identifying open issues. It takes stock of new features of bank and central counterparty international standards within a unified analytical framework.

Source: BIS Working Papers No 859: Post-crisis international financial regulatory reforms: a primer.

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Investment funds and asset management

Investment Association launches cyber intelligence platform

The IA launched a new cyber threat intelligence platform to help investment managers protect their firms against cyber security threats.

Source: IA tackles cyber threats with launch of new intelligence service for investment managers.

For further information, see: Cybersecurity regulation and best practice in the US and UK.

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Banks and mutuals

Coronavirus (COVID-19)—EBA provides guidance on supervisory flexibility

The EBA published further details on how supervisory flexibility will work in relation to market risk, the SREP, recovery planning, digital operational resilience and information and communications technology (ICT) risk, and securitisation. However, the EBA also notes the need for stringent attention by supervisors and financial institutions in relation to key risks in these areas.

Source: EBA provides further guidance on the use of flexibility in relation to COVID-19 and calls for heightened attention to risks.

Coronavirus (COVID-19)–European Commission publishes banking package to facilitate lending

The European Commission adopted a banking package to facilitate lending to households and businesses in the EU, with the aim of ensuring banks can continue to lend money to support the economy and help mitigate the significant economic impact of the coronavirus (COVID-19) pandemic. The package includes an Interpretative Communication on the EU’s accounting and prudential frameworks, as well as targeted ‘quick fix’ amendments to EU banking rules set out in the CRR.

Sources: Coronavirus response: Commission adopts banking package to facilitate lending to households and businesses in the EUQ&As and  AFME welcomes European Commission legislative proposal on Capital Requirements Regulation but more is needed.

For further information, see CRD IV—essentials.

Basel Committee reports on banks’ implementation of the ‘Principles for effective risk data aggregation and reporting’

The Basel Committee on Banking Supervision published its latest progress report on banks’ implementation of the Principles for effective risk data aggregation and reporting. Issued in January 2013, the Principles aim to strengthen banks’ risk data aggregation and risk reporting with a view to improving their risk management, decision-making processes and resolvability. None of the banks are fully compliant with the Principles in terms of building up the necessary data architecture and, for many, IT infrastructure remains difficult. But the Committee says banks' efforts to implement the Principles have resulted in tangible progress in several key areas, including governance, risk data aggregation capabilities and reporting practices.

Source: Basel Committee issues progress report on banks’ implementation of the ‘Principles for effective risk data aggregation and reporting’.

Coronavirus (COVID-19)–FCA publishes Dear CEO letter on ensuring fair treatment of corporate customers

The FCA published a Dear CEO letter on ensuring the fair treatment of corporate customers preparing to raise equity finance during the coronavirus (COVID-19) pandemic. In the letter the FCA outlines specific concerns around the conduct of a small number of banks and says it expects financial firms to continue to provide strong support and services to customers during this period of disruption.

Source: Dear CEO: Ensuring fair treatment of corporate customers preparing to raise equity finance.

Coronavirus (COVID-19)—FCA statement on the UK Coronavirus Business Interruption Loan Scheme and the new Bounce Back loan scheme

The FCA published a statement concerning the Treasury’s announcement about amendments to the UK’s CBILS scheme to support small businesses during the coronavirus COVID-19 pandemic. The FCA’s statement sets out the FCA’s approach to its regulation of firms in relation to the government’s CBILS and BBL schemes.

Source: Statement on the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the new Bounce Back loan scheme (BBL).

Coronavirus (COVID-19)—PRA statement and UK Finance comments on changes to CBILS and CLBILS

The PRA issued a statement in response to the changes to the UK CBILS and the UK CLBILS announced by the government on 27 April 2020. The PRA’s statement, which is intended to complement the government’s announcement, explains the regulatory treatment of the CBILS and CLBILS under the CRR.

Sources: PRA statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) and  UK Finance issues joint statement on behalf of seven largest SME lenders.

For further information, see CRD IV—essentials.

Coronavirus (COVID 19)—LSB updates Standards of Lending Practice to reflect changes to CBILS

The LSB published its response to the changes to the UK CBILS announced by the government on 27 April 2020. The Standards of Lending Practice for business customers will be updated to reflect any amendments required to ensure that they do not prohibit participating firms from meeting the requirements of the CBILS.

Source: Response to the chancellor’s announcement of changes to the Coronavirus Business Interruption Loans Scheme.

Coronavirus (COVID 19)—BIS paper considers public guarantees for bank lending

The FSI of the BIS published a paper entitled ‘Public guarantees for bank lending in response to the COVID-19 pandemic’.

Source: Public guarantees for bank lending in response to the COVID-19 pandemic.

Coronavirus (COVID-19)—Treasury Committee asks CBILS lenders for daily data

The Treasury Committee wrote to the lenders accredited to provide loans through the CBILS, to encourage their co-operation in ensuring that daily data on the loans being made is available to the Committee (which it will publish). The letter follows on from the Committee’s similar request to the BBB and UK Finance.

Source: Committee requests co-operation from CBILS lenders on providing daily data update.

Banking Competition Remedies consults on optimal individual grant sizes for redeployed £100m

Banking Competition Remedies Ltd (BCR), the independent body established to implement the £775m Royal Bank of Scotland (RBS) State Aid Alternative Remedies Package (ARP), is inviting applicants to participate in its consultation on Capability and Innovation Fund (CIF) Pool E £100m grant funding. This funding round is for the £100m returned to BCR by Metro Bank and Nationwide after their own internal strategic reviews indicated a change in direction. Feedback on the consultation is sought by 12 May 2020.

Source: Banking Competition Remedies Ltd (BCR) publishes consultation on Capability and Innovation Fund Pool E.

Coronavirus (COVID-19)—Dombrovskis summarises EU financial response

The European Commission published a speech by executive vice-president Valdis Dombrovskis on economic resilience and recovery, in which he said that while the EU had endured economic crises before, it had never had to deal with a shutdown on the current scale, and was mobilising the largest EU crisis response ever. He said the role of the financial sector now is to keep European businesses and households afloat financially by ‘keeping the liquidity taps turned on’. The EU will present ‘powerful’ budget proposals in the coming weeks, with ‘greater financing capacity than ever before, and frontloaded with large-scale investment’. The European Commission will also issue draft legislation after Basel standard-setters agreed to relax global banking rules amid the crisis.

Source: Speech by executive vice-president Valdis Dombrovskis at the Bloomberg EU Policy Series 2020: ‘Building economic resilience and recovery’.

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA confirms motor finance and high-cost credit payment freezes

The FCA confirmed that the package of measures proposed on 17 April 2020 to support consumer credit customers facing payment difficulties due to the coronavirus (COVID-19) will take effect on 27 April 2020. Customers should be able to request a payment deferral, at any point after the guidance comes into force, for a period of three months. The measures being implemented are a three-month payment freeze for motor finance, BNPL, RTO and pawnbroking agreements; and for high-cost short-term credit (including payday loans) a one-month payment freeze during which no additional interest will be charged.

Sources: FCA confirms support for motor finance and high-cost credit customers and  FS20/4.

For further information, see Consumer credit—essentials and  The regulation of high-cost short-term credit (payday lending).

Coronavirus (COVID-19)—A guide to travel and Section 75 CCA/chargeback rights

UK Finance published a blog and a set of FAQs on customers’ right to a refund when travel services are cancelled. The FAQs set out key questions about chargeback rights and rights under Section 75 of the Consumer Credit Act in the context of holiday cancellations and difficulties following the coronavirus (COVID-19) pandemic.

Sources: Travel and Section 75/Chargeback rights and FAQs—chargeback rights and Section 75 and the coronavirus.

For further information, see: Redress mechanisms for consumer card payments.

Coronavirus (COVID-19)—UK Finance sets out mortgage lenders’ efforts to help customers

UK Finance announced that lenders have renewed and expanded a commitment to help existing mortgage customers easily switch to a new deal when they reach the end of their term. Under an industry-wide agreement introduced in 2018 by UK Finance, the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA), any eligible customer coming to the end of a fixed-rate mortgage is routinely offered a product transfer by their lender. Lenders are now offering product transfers to customers who are on payment holidays due to the coronavirus (COVID-19) pandemic, who would not usually be eligible.

Sources: Product transfers: Helping customers impacted by COVID-19 to switch deal and  Lenders grant 1.6 million payment holidays to mortgage holders.

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Regulation of insurance

Coronavirus (COVID-19)—PRA clarification for insurers

The PRA published a follow-up statement addressed to PRA-regulated insurers which clarifies the PRA’s position on IFRS 9, capital requirements and loan covenants. This statement has been issued further to requests from insurance firms for clarification on how the PRA’s Dear CEO letter on IFRS 9, capital requirements and loan covenants (dated 26 March 2020) should be ‘read across to their internal assessments of loan creditworthiness and treatment of unrated assets’.

Source: Follow-up note to insurers on the letter from Sam Woods 'Covid-19: IFRS 9, capital requirements and loan covenants'.

For further information, see: Prudential requirements for UK insurers—introduction

Coronavirus (COVID-19)—Treasury Committee chair urges insurers to be clear and fair with coronavirus claimants

The Treasury Committee published comments from its chair, Mel Stride MP, following the ABI’s response to his letter, which was sent to the ABI’s director general, Huw Evans, on 25 March 2020 to seek answers on how the insurance sector is responding to the coronavirus (COVID-19) pandemic at a time when many will look to their insurer for both flexibility and assurance.

Source: Mel Stride urges insurers to be clear and fair with coronavirus claimants.

Coronavirus (COVID-19)—EIOPA chair discusses crisis response, and how it may change the future

EIOPA published an interview with its chair, Gabriel Bernardino, discussing the impact of the coronavirus (COVID-19) pandemic, EIOPA’s response, and how the crisis may change the insurance and pensions sectors.

Source: EIOPA's response to the coronavirus crisis.

Coronavirus (COVID-19)—FCA to survey small brokers

The BIBA published a statement advising that the FCA will conduct a survey to understand the impact of coronavirus (COVID-19) on small brokers.

Source: FCA Surveying Smaller Brokers To Determine Coronavirus Impact On Their Business.

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Regulation of personal pension and stakeholder products

Coronavirus (COVID-19)—EIOPA chair discusses crisis response, and how it may change the future

EIOPA published an interview with its chair, Gabriel Bernardino, discussing the impact of the coronavirus (COVID-19) pandemic, EIOPA’s response, and how the crisis may change the insurance and pensions sectors.

Source: EIOPA's response to the coronavirus crisis.

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Payment services and systems

Coronavirus (COVID-19)—PSR sets out efforts to protect UK financial infrastructure

The PSR published an article setting out its efforts to protect the UK payments infrastructure during the coronavirus (COVID-19) pandemic. It discusses access to cash in isolated communities, efforts to prevent authorised push payment (APP) scams, and the rise in the limit on contactless card payments.

Source: Making sure payment systems are fit to face unprecedented challenges.

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Fintech and cryptoassets

Saudi G20 Presidency and BIS announce RegTech/SupTech competition

The Saudi G20 Presidency and BIS Innovation Hub are seeking global innovators to find solutions to regulatory compliance (RegTech) and supervision (SupTech) challenges. The problem statements identify challenges in regulatory reporting, analytics, and monitoring and supervision, and have been developed from submissions received from Financial Stability Board (FSB) member jurisdictions.

Source: Saudi G20 Presidency and the Bank for International Settlements (BIS) Innovation Hub invite global innovators to find solutions to the most pressing financial regulatory & supervisory challenges.

BoE speech ponders the future of RegTech

The BoE published a speech on supervisor-centred automation and the role of human-centred automation in judgement-centred prudential supervision, by the PRA’s senior advisor, James Proudman.

Source: Supervisor-centred automation—the role of human-centred automation in judgement-centred prudential supervision—speech by James Proudman.

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Sustainable finance

European Commission supports Council of EU position on Taxonomy Regulation

The European Commission published a communication to the European Parliament, dated 24 April 2020, in which the Commission says it accepts the Council of the EU’s position on the adoption of a Regulation on the establishment of a framework to facilitate sustainable investment and amending Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (the proposed Taxonomy Regulation).

Source: Communication from the Commission to the European Parliament pursuant to Article 294(6) of the Treaty on the Functioning of the European Union concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment 2018/0178 (COD), and amending Regulation 2019/2088 on sustainability-related disclosures in the financial services sector.

ESAs consult on ESG disclosure standards

The European Supervisory Authorities (ESAs) launched a consultation on draft regulatory technical standards (RTS) on environmental, social and governance (ESG) disclosures under Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR). The ESAs also consult on certain disclosures under the recently agreed Taxonomy Regulation. The proposals cover, amongst other issues, ‘do not significantly harm’ principle disclosures, adverse impact disclosures (entity level) and product level ESG disclosures. Feedback is requested by 1 September 2020.

Source: ESAs consult on environmental, social and governance disclosure rules.

Coronavirus (COVID-19)—EU TEG states that sustainable recovery from the pandemic requires the right tools

The EU Technical Expert Group on Sustainable Finance (TEG), established to advise the European Commission on implementation of the Action Plan on Financing Sustainable Growth, has issued a statement in which it states that it believes the Sustainable Taxonomy, EU Green Bond Standard, and Paris-Aligned and Climate Transition Benchmarks can guide public and private sector plans for recovery from the coronavirus COVID-19 pandemic, including the European Council’s recently announced Roadmap to Recovery.

Source: Statement by the EU Technical Expert Group on Sustainable Finance: Sustainable recovery from the COVID-19 pandemic requires the right tools.

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Islamic finance

The IFSB and AMF renew MoU to support promotion of sound Islamic finance

The Islamic Financial Services Board (IFSB) announced that it has entered into a memorandum of understanding (MoU) with the Arab Monetary Fund (AMF) in order to seal the continuation of collaboration between the two institutions for the period of three years. The continuation of collaboration signifies the commitment of both institutions in increasing awareness and promotion of the sound practices of Islamic finance based on its potential for the advancement of the financial services industry.

Source: The IFSB and AMF renew MoU to support the development of the Islamic finance among member countries.

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Dates for your diary

 

DateSubjectEvent
1 May 2020Payment services and systems

Deadline for responses to the PSR’s ‘Call for input: Competition and Innovation in the UK's New Payments Architecture (CP20/2)’.

 

6 May 2020Sustainable financeDeadline for responses to the European Commissions request for feedback on the following draft delegated regulations:
7 May 2020Coronavirus (COVID-19)

The Financial Policy Committee (FPC) announced in April 2020 that, given the material developments in recent weeks due to the coronavirus (COVID-19), it would publish an additional interim Financial Stability Report on 7 May 2020.

 

 

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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.