FS weekly highlights—31 October 2019

FS weekly highlights—31 October 2019

In this issue

 

 

Brexit news
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Conduct requirements
Enforcement and redress
Markets and trading
MiFID II
Regulation of capital markets and Capital Markets Union
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Consumer protection and claims management regulation
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

 

FMLC urges government to pass Financial Services (Implementation of Legislation) Bill in case of no-deal Brexit

The Financial Markets Law Committee (FMLC) wrote to HM Treasury urging the government to ‘resuscitate’ the Financial Services (Implementation of Legislation) Bill in order to ensure HMT holds the power—in the event of a no-deal Brexit—to implement and make changes to a category of legislation which the Bill describes as ‘in-flight’. These are pieces of EU financial services legislation that were adopted by the EU but do not yet apply so cannot be captured by the Withdrawal Act, or are currently in negotiation and may be adopted within two years after exit day. 

Financial Services (Miscellaneous) (Amendment) (EU Exit) (No 3) Regulations 2019

SI 2019/1390: This enactment is made in exercise of legislative powers under the European Communities Act 1972, the Financial Services and Markets Act 2000 (FSMA 2000), and the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment amends UK primary and subordinate legislation, and amends and revokes retained direct EU legislation in relation to financial services in order to ensure a coherent and functioning financial services regulatory regime once the UK leaves the EU. It comes into force partly at 11:59pm on 24 October 2019, partly on 25 October 2019, partly immediately before exit day, and fully on exit day. (Updated from draft on 25 October 2019).

Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc, and Transitional Provision) (EU Exit) (No 2) Regulations 2019

SI 2019/1416: This enactment is made in exercise of legislative powers under the European Communities Act 1972 and the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment amends UK primary and subordinate legislation and retained direct EU legislation in relation to over–the–counter (OTC) derivatives, central counterparties (CCPs) and trade repositories (TRs) in order to ensure that the related legislation continue to operate effectively at the point at which the UK leaves the EU. It comes into force partly on 30 October 2019 and fully on exit day. (Updated from draft on 30 October 2019). 

Brexit Bulletin―EU agrees to extend Article 50 withdrawal period until 31 January 2020

On 28 October 2019, the EU27 Ambassadors reconvened to consider the UK’s request to extend the Article 50 withdrawal period until 31 January 2020. Following extended talks, European Council President Donald Tusk announced the EU27’s provisional approval for an extension until 31 January 2020. According to the announcement, the extension will be granted on flexible terms, so that the extended withdrawal period lasts only as long as necessary, and no longer than 31 January 2020. The terms are to be finalised using the written procedure while MPs turn their attention to an early general election. Kieran Laird, partner at Gowling WLG, looks at the implications. 

FCA guidance on Brexit delay: TPR notification date extended

The Financial Conduct Authority (FCA) published a statement entitled ‘UK’s exit from the EU delayed’. It notes that the EU and the UK agreed to extend the date for the UK’s departure from the EU and therefore firms do not need to act to implement Brexit contingency plans for 31 October 2019. The FCA is extending the date by which firms and funds should notify it for entry into the temporary permissions regime (TPR) to 30 January 2020. Fund managers will have until 15 January 2020 to inform the FCA if they want to make changes to their existing notification.

FCA publishes policy statement on strong customer authentication in the event of a no-deal Brexit

The FCA published policy statement PS19/26, Brexit—Regulatory technical standards for strong customer authentication and common and secure open standards of communication, which confirms that, in the event of a no-deal Brexit, the FCA will make regulatory technical standards for strong customer authentication substantially the same as those in Commission Delegated Regulation (EU) 2018/389. 

FCA director discusses the future of financial services regulation

The executive director of international at the FCA, Nausicaa Delfas, gave a speech at the UK Financial Services Industry Beyond Brexit Summit in London on the future of financial services regulation in the UK. Delfas said that the FCA will continue to work closely with its EU counterparts after Brexit and that it will continue its activity in support of the development of sound international standards, rooted in strong regulatory co-operation. 

ESMA provides update on Brexit preparations

The European Securities and Markets Authority (ESMA) informed stakeholders that, following the European Council’s decision to extend the period under Article 50(3) relating to the UK’s withdrawal from the EU, its previous statements relating to its preparations for a no-deal Brexit on 31 October no longer apply. 

EBF publishes factsheet on WTO implications for banks in a no-deal Brexit

The European Banking Federation (EBF), together with Herbert Smith Freehills, published a factsheet on the global trade rules that will apply to European banks in the event of a no-deal Brexit. In the case of such a scenario, all trade between the EU and UK will be governed by the international rules agreed at the level of the World Trade Organisation (WTO). The factsheet specifically addresses the WTO implications for banks.

Equivalence and exemption directions laid before Parliament

The economic secretary to the Treasury, John Glen, laid before Parliament two further directions in preparation for the UK’s withdrawal from the EU. One amends an existing direction to refer to prospectuses being prepared under the Prospectus Regulation rather than the Directive. The other ensures certain EEA central banks can continue to carry on their activities in the UK without disruption at exit. 

John Glen calls for ‘the highest standards of regulation’ post-Brexit

The economic secretary to the Treasury and City minister, John Glen, delivered a speech to financial sector leaders at the fifth UK Financial Services Beyond Brexit Summit. Glen said the government wanted to see a ‘deep and comprehensive relationship with the EU in financial services’ after Brexit, and was ‘absolutely committed to upholding open financial markets, underpinned by the highest standards of regulation and appropriate supervisory oversight’.

Sanctions against Russia for actions in Ukraine to be continued after Brexit

The Office of Financial Sanctions Implementation (OFSI) updated its guidance on post-Brexit sanctions to include a new document on the sanctions regime imposed on Russia, which will come into force in the event of a no-deal Brexit. The guidance sets out the financial and investment restrictions in the Russia (Sanctions) (EU Exit) Regulations 2019, SI 2019/855. The sanctions under SI 2019/855 will enter into force the day the UK exits the EU and will replace the current EU sanctions regime relating to Russia’s action in Ukraine. 

Banks and alternative lenders sign charter to confirm support for SMEs through and after Brexit

Seventeen UK banks and alternative lenders (including Bank of Scotland, Barclays UK, Close Brothers, Funding Circle, HSBC, Lloyds Bank, NatWest, RBS and Santander UK) made concrete commitments to support small and medium-sized enterprises (SMEs) through and after Brexit under the SME Finance Charter. 

Chancellor confirms no budget for 6 November 2019

The Chancellor of the Exchequer, Sajid Javid, wrote to the Treasury Select Committee confirming the budget will not take place on 6 November 2019. The letter, written 25 October 2019, acknowledges Parliament voted for a delay to the UK’s withdrawal from the European Union and that the government is calling for a general election.

 

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UK, EU and international regulators and bodies

 

FCA director discusses the future of financial services regulation

The executive director of international at the FCA, Nausicaa Delfas, gave a speech at the UK Financial Services Industry Beyond Brexit Summit in London on the future of financial services regulation in the UK. Delfas said that the FCA will continue to work closely with its EU counterparts after Brexit and that it will continue its activity in support of the development of sound international standards, rooted in strong regulatory co-operation. 

Andrew Bailey discusses fintech, transparency and the regulatory perimeter

The FCA published a speech by its CEO, Andrew Bailey, in which he set out an overview of global financial markets and regulation, as well as looking at specific UK issues affecting the FCA, including the rise of fintech, the regulatory perimeter, and the balance between risk taking and consumer protection.

Mel Stride elected chair of the Treasury Committee

The Treasury Committee announced that Mel Stride MP was elected as its new chair, taking the position with immediate effect. 

Council of the EU publishes outcome of October ECOFIN meeting

The Council of the EU published the outcome of the Economic and Financial Affairs meeting held in Luxembourg on 10 October 2019. The meeting debated a number of items and approved a number of other items. 

Mark Carney joins calls for action on disability inclusion

The governor of the Bank of England (BoE), Mark Carney, co-signed a letter calling for CEOs from around the globe to accelerate disability inclusion. The letter was written with other leading members of the disability inclusion campaign Valuable 500, which aims to sign up 500 national and multinational firms by the end of 2019. 

 

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Authorisation, approval and supervision

 

FCA says little progress made on gender diversity in ‘more accountable grades’

The FCA said analysis of the historic Approved Persons register and the new Senior Managers and Certification Regime (SM&CR) showed ‘little changed on gender diversity at more accountable grades in the past 15 years’. 

 

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Prudential requirements

 

PRA consults on changes to the regulatory capital regime for credit unions

The Prudential Regulation Authority (PRA) published consultation paper CP28/19, Credit unions: Review of the capital regime, in which the PRA sets out its proposed changes to the capital requirements that apply to credit unions. The consultation closes on 24 January 2020. 

Council publishes texts of new prudential legislation for investment firms

The Council of the EU published texts of the regulation on the prudential requirements of investment firms and the directive on the prudential supervision of investment firms, which were adopted by the European Parliament in April 2019. The General Secretariat of the Council advised that the Council should be in a position to approve the Parliament’s position at first reading.

 

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Financial stability, recovery and resolution 

 

Draft Council conclusions on ECA report on EU-wide stress test

The Financial Services Committee of the General Secretariat of the Council of the European Union examined a special report by the European Court of Auditors (ECA), entitled: ‘EU-wide stress tests for banks: unparalleled amount of information on banks provided but greater co-ordination and focus on risks needed’, published in July 2019. The Financial Services Committee, and later the Economic and Financial Committee, agreed the text of draft Council conclusions on the report. The Permanent Representatives Committee (COREPER) is invited to approve the draft Council conclusions and submit them to the Council for adoption (I/A Item Note 13371/19).

EBA’s second opinion on Deposit Guarantee Schemes Directive considers DGS pay-outs

The European Banking Authority (EBA) published the second of three opinions on the implementation of the recast Deposit Guarantee Schemes Directive 2014/49/EU (DGSD) in the EU. The proposals aim to enhance depositor protection and financial stability, and improve operational effectiveness. The second opinion focuses on deposit guarantee scheme (DGS) pay-outs. The first opinion (on the eligibility of deposits, coverage level and co-operation between DGSs) was published on 8 August 2019. The remaining opinion (on DGS funding and the uses of DGS funds) is due to be published later in 2019. 

Single Resolution Board publishes work programme for 2020

The Single Resolution Board (SRB) published its work programme for 2020, setting out its priorities and core tasks for the year ahead. 2020 is the final year of the SRB’s 2018–2020 multiannual work programme and will mark the fifth anniversary of the SRB taking on its full powers within the Single Resolution Mechanism.

 

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Risk management and controls

 

IT failures in financial services sector on the rise—regulators urged to take action

The current level of IT failures in the financial services sector is unacceptably high, the House of Commons Treasury Committee found. In a report published on IT failures in financial services, the committee called on regulators to act to improve the operational resilience of the sector and recommends that levies are increased so financial regulators can hire experienced staff.

 

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Financial crime

 

FCA provides information on AML/CTF regime for cryptoassets

The FCA updated its webpage Cryptoassets: our work, adding information on the FCA’s role as anti-money laundering and counter-terrorist financing (AML/CTF) supervisor for firms carrying out certain cryptoasset activity from 10 January 2020. The FCA also published a new webpage, Cryptoassets: AML/CTF regime, which provides information on the application of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692 (as amended) (the MLRs) to cryptoassets. 

FATF guidance tackles misuse of anonymous shell companies for crime and terrorism

The Financial Action Task Force (FATF) published best practice guidance on beneficial ownership for legal persons. It aims to help countries ‘get rid of the cloak of secrecy’ concerning the ultimate owner of a company, foundation, association or any other legal person, and prevent the misuse of anonymous shell companies for crime and terrorism.

Effectiveness and technical compliance integral to Financial Action Task Force assessment

FATF issued its methodology for assessing compliance with the FATF recommendations and the effectiveness of systems designated anti-money laundering (AML) and countering the financing of terrorism (CFT). FATF sets out that assessment is focussed around two areas—effectiveness and technical compliance. The methodology will be employed by FATF, FATF-style regional bodies and other assessment bodies such as the International Monetary Fund and the World Bank.

Sanctions against Russia for actions in Ukraine to be continued after Brexit

The OFSI updated its guidance on post-Brexit sanctions to include a new document on the sanctions regime imposed on Russia, which will come into force in the event of a no-deal Brexit. The guidance sets out the financial and investment restrictions in the Russia (Sanctions) (EU Exit) Regulations 2019,  SI 2019/855. The sanctions under SI 2019/855 will enter into force the day the UK exits the EU and will replace the current EU sanctions regime relating to Russia’s action in Ukraine. 

 

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Conduct requirements

 

ESMA SMSG opines on the ESMA report on performance and cost of retail investment products

ESMA’s Securities and Markets Stakeholder Group (SMSG) published an opinion (dated 3 October 2019) on ESMA’s report on ‘Performance and costs of retail investment products in the EU’, published in January 2019. The SMSG believes that the report is a very valuable tool for retail investors as well as for the industry. Moreover, clear and comprehensive information on performance and costs of products offered across the EU can be beneficial to regulators and policymakers too. The SMSG also appreciates the discussion in the report about methodological issues and data limitations.

 

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Enforcement and redress

 

Council of the EU paper aims to encourage uniform enforcement of the single market rules

The Council of the European Union published a Trio Presidency note on improving enforcement of the single market, ahead of the meeting of the High Level Working Group on Competitiveness and Growth on 7 November 2019. The paper emphasises the importance of effective and uniform enforcement of single market rules for the growth and competitiveness of the EU, and aims to encourage debate on how to ensure enforcement and monitoring of the rules so as to create a level playing field for EU businesses and citizens.

CashEuroNet UK LLC enters administration

The FCA announced that CashEuroNet UK LLC, trading as QuickQuid, Pounds to Pocket and Onstride, was placed into administration on 25 October. CashEuroNet is a high cost short term lender, otherwise known as a payday lender, which lends small sums to customers until the next payday or for a few months.

Persons identified in Schedule 1 of the Claim Form (the SL Claimants) v Tesco plc; Manning & Napier Fund, Inc. (a company incorporated in the United States of America) and another company v Tesco plc

Company – Shares. In proceedings brought pursuant to section 90A and Schedule 10A of the FSMA 2000 in circumstances where the claimants held shares as registered owners of members of the Certificateless Registry for Electronic Share Transfer (CREST) using custodians to acquire, hold or dispose of the shares, the Chancery Division, dismissing the defendant Tesco plc's application for the claims to be struck out, held that, rights of persons holding intermediated securities through CREST, notwithstanding that they were in a custody chain, comprised an interest in securities such as to confer standing to sue under FSMA 2000 for compensation in respect of any untrue or misleading statement or omission in the issuer's published information if they were able to show that they acquired, continued to hold or disposed of the securities in question in reliance upon that statement or omission, which the claimants in the present case were able to show. For further information, see: [2019] EWHC 2858 (Ch).

 

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Markets and trading

 

Stakeholder views sought on exposure draft reference rate selection agreement

The Loan Market Association (LMA) published its exposure draft reference rate selection agreement (RRS agreement) for transition of legacy transactions from the London Inter-Bank Offered Rate (LIBOR) to alternative, risk-free rates. The RRS agreement is published as an exposure draft and does not constitute a recommended form of the LMA—it is intended to be read alongside the exposure drafts of the compounded risk-free rate facility agreements for sterling and US dollars, dated 23 September 2019. The exposure draft RSS agreement is available to LMA members, and the LMA is welcoming feedback on the draft.

RFRs working group seeks presentations on incorporating SONIA capability

The BoE’s working group on sterling risk-free reference rates (RFRs) is asking providers of Loans Management Systems and Treasury Management Systems to present on their readiness to incorporate compounded SONIA capability into their products. Presentations would be made primarily to the infrastructure sub-group, though the main working group itself would be interested to hear directly from those that are most advanced in their implementation.

FMLC highlights legal uncertainties caused by ‘onshoring’ the Benchmarks Regulation

The FMLC published a paper which highlights the challenges of providing a new benchmark into the EU post-Brexit, once the UK (for the purposes of EU law) becomes a third country. The paper also sets out legal uncertainties arising from the Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (Benchmarks SI), including territorial scope. 

ISDA releases Interest Rate Benchmarks Review for third quarter of 2019

The International Swaps and Derivates Association (ISDA) released its Interest Rate Benchmarks Review for the third quarter of 2019. ISDA in the review analyses trading volumes of interest rate derivatives transactions in the US, referencing the Secured Overnight Financing Rate and other selected alternative risk-free rates, including the Sterling Overnight Index Average, the Swiss Average Rate Overnight and the Tokyo Overnight Average Rate. ISDA also intends to add the Euro Short-Term Rate to the analysis once there is trading activity. Data in the review is provided by the Depository Trust & Clearing Corporation swap data repository. As a result, it only includes trades that are required to be disclosed by US regulations.

ESMA chair speaks on Benchmarks Regulation and interest rates reform

The chair of ESMA, Steven Maijoor, delivered a speech at a conference organised by the Comisión Nacional del Mercado de Valores Madrid on ESMA’s role under the Benchmarks Regulation, and more generally in the global reform of interest rates. 

 

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MiFID II

 

ESMA to publish systematic internaliser and bond market liquidity data on 8 November 2019

ESMA announced that it will publish the systematic internaliser (SI) regime data for equity, equity-like instruments and bonds, and the quarterly liquidity assessment for bonds on 8 November 2019. The requirements based on this publication will apply from 16 November 2019. This follows the latest developments around the departure of the UK from the EU.

Equivalence and exemption directions laid before Parliament

The economic secretary to the Treasury, John Glen, laid before Parliament two further directions in preparation for the UK’s withdrawal from the EU. One amends an existing direction to refer to prospectuses being prepared under the Prospectus Regulation rather than the Directive. The other ensures certain EEA central banks can continue to carry on their activities in the UK without disruption at exit. 

 

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Regulation of capital markets and Capital Markets Union

 

ESAs publish guidance on the application of the PRIIPs Regulation to bonds

The European Supervisory Authorities (ESAs) issued a joint supervisory statement in order to ensure a consistent application of the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation to bonds.

Equivalence and exemption directions laid before Parliament

The economic secretary to the Treasury, John Glen, laid before Parliament two further directions in preparation for the UK’s withdrawal from the EU. One amends an existing direction to refer to prospectuses being prepared under the Prospectus Regulation rather than the Directive. The other ensures certain EEA central banks can continue to carry on their activities in the UK without disruption at exit. 

ESMA SMSG provides advice on draft disclosure guidelines under the Prospectus Regulation

ESMA’s SMSG published its 2 October 2019 advice to ESMA on its consultation paper setting out draft guidelines on disclosure requirements under the Prospectus Regulation (ESMA31–62–1239, 12 July 2019). The SMSG welcomes the draft guidelines in general, but sets out a number of recommendations for improvement.

European Court of Auditors to assess progress on capital markets union

The European Court of Auditors launched an assessment of how successful the European Commission’s action was so far in building the capital markets union (CMU). Although the direct impact of the CMU project remains to be seen, the auditors intend to assess its effectiveness and the progress made so far, and provide recommendations for a ‘future reboot’ if necessary.

LEI ROC consults on LEI eligibility for general government entities

The Regulatory Oversight Committee (ROC) for the legal entity identifier (LEI) launched a consultation on LEI eligibility for general government entities. The consultation closes on 6 December 2019.

 

 

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Regulation of derivatives

 

EMIR 2.2 completes legislative procedure

The Regulation amending Regulation (EU) 648/2012 (EMIR) as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs (EMIR 2.2) was signed on 23 October 2019. This completes the legislative procedure for EMIR 2.2, which is expected to be published in the Official Journal of the EU (OJ) on 12 December 2019 and will enter into force 20 days later.

Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc, and Transitional Provision) (EU Exit) (No 2) Regulations 2019

SI 2019/1416: This enactment is made in exercise of legislative powers under the European Communities Act 1972 and the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment amends UK primary and subordinate legislation and retained direct EU legislation in relation to OTC) derivatives, CCPs and TRs in order to ensure that the related legislation continue to operate effectively at the point at which the UK leaves the EU. It comes into force partly on 30 October 2019 and fully on exit day. (Updated from draft on 30 October 2019). 

ISDA releases Interest Rate Benchmarks Review for third quarter of 2019

ISDA released its Interest Rate Benchmarks Review for the third quarter of 2019. ISDA in the review analyses trading volumes of interest rate derivatives transactions in the US, referencing the Secured Overnight Financing Rate and other selected alternative risk-free rates, including the Sterling Overnight Index Average, the Swiss Average Rate Overnight and the Tokyo Overnight Average Rate. ISDA also intends to add the Euro Short-Term Rate to the analysis once there is trading activity. Data in the review is provided by the Depository Trust & Clearing Corporation swap data repository. As a result, it only includes trades that are required to be disclosed by US regulations.

 

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Investment funds and asset management

 

FRC publishes revised Stewardship Code and FCA publishes feedback statement on building a regulatory framework for effective stewardship

The Financial Reporting Council (FRC) published a revised version of the Stewardship Code (the Code) which will apply to reporting years beginning on or after 1 January 2020. At the same time the FCA published feedback statement FS19/7—Building a regulatory framework for effective stewardship. The revised Code and feedback statement are relevant to FCA-regulated asset management firms and life insurers and other asset owners and investors. They will also affect public companies, issuers of debt and their advisors, and current and future signatories to the Code. Nick Dawson, managing director at Proxy Insight, stated that the original Code ‘was perfect for its time’, but the new Code enables more insight for observers into the true behaviours of each investor. Simon Daniel, partner at Eversheds Sutherland, added that ‘now is clearly an ideal time’ for the revision and strengthening of the Code due to a transformation of the attitudes, practices and regulatory expectations in the investment markets since the Code was last revised in 2012.

EFAMA publishes ‘IIFA Cybersecurity Program Basics'

As part of a global initiative led by the International Investment Funds Association (IIFA) and supported by investment fund associations from around the world, the European Fund and Asset Management Association (EFAMA) published a document entitled ‘IIFA Cybersecurity Program Basics', which lays out the key cyber-prevention standards for investment management companies.

 

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Banks and mutuals

 

PRA consults on changes to the regulatory capital regime for credit unions

The PRA published consultation paper CP28/19, Credit unions: Review of the capital regime, in which the PRA sets out its proposed changes to the capital requirements that apply to credit unions. The consultation closes on 24 January 2020.

EBF publishes factsheet on WTO implications for banks in a no-deal Brexit

The EBF, together with Herbert Smith Freehills, published a factsheet on the global trade rules that will apply to European banks in the event of a no-deal Brexit. In the case of such a scenario, all trade between the EU and UK will be governed by the international rules agreed at the level of the World Trade Organisation (WTO). The factsheet specifically addresses the WTO implications for banks.

EBA report examines impediments to cross-border banking and payment services

The EBA published a report on potential impediments to the cross-border provision of banking and payment services. It sets out recommended actions for the European Commission to remove barriers to entry and facilitate the scaling up of banking and payments activities across the EU. A set of FAQs on the report is published alongside, explaining the context and next steps.

EBA’s second opinion on Deposit Guarantee Schemes Directive considers DGS pay-outs

The EBA published the second of three opinions on the implementation of the recast DGSD) in the EU. The proposals aim to enhance depositor protection and financial stability, and improve operational effectiveness. The second opinion focuses on DGS pay-outs. The first opinion (on the eligibility of deposits, coverage level and co-operation between DGSs) was published on 8 August 2019. The remaining opinion (on DGS funding and the uses of DGS funds) is due to be published later in 2019. 

Barclays Bank abandons proposal to stop its customers withdrawing cash from Post Offices

Barclays Bank reversed its decision to withdraw its access to cash agreement with local post offices. The Business, Energy and Industrial Strategy (BEIS) Committee report on the Future of the Post Office Network described the original decision from Barclays as a ‘highly retrograde step’ which would hurt vulnerable customers, undermine the Post Office network, and hit poorly remunerated sub-postmasters.

Singularis Holdings Ltd (in official liquidation) (a company incorporated in the Cayman Islands) v Daiwa Capital Markets Europe Ltd

Bank – Banker/client relationship. The Court of Appeal was correct in dismissing the appellant bank and brokerage firm's appeal on the ground that, among other things, the judge correctly concluded that it would be wrong to attribute the director of the respondent company's conduct and fraudulent knowledge to the company, so as to bar the company's claim under Barclays Bank plc v Quincecare Ltd (breach of duty owed by a bank to its customer) (Quincecare) on grounds of illegality. The Supreme Court held that the purpose of the Quincecare duty was to protect the company against just the sort of misappropriation of its funds as took place in the present case, and the appellant should have realised that something suspicious was going on and suspended payment until it made reasonable enquiries to satisfy itself that the payments were properly to be made, but that the company, and through the company its creditors, was a victim of the appellant's negligence. For further information, see: [2019] All ER (D) 182 (Oct).

 

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Consumer credit, mortgage and home finance

 

FCA policy statement confirms help for mortgage prisoners

The FCA published policy statement PS19/27: Changes to mortgage responsible lending rules and guidance—feedback on CP19/14 and final rules, in which the FCA confirmed that it removed barriers that stop some mortgage customers from finding a cheaper mortgage deal. Changes were made to the FCA’s responsible lending rules, which allow lenders to use a different and more proportionate affordability assessment for consumers who are up to date with their existing mortgage and want to switch to a more affordable mortgage without borrowing more (except to finance certain fees). The amended rules also aim to reduce the time and costs of switching for all consumers meeting this definition. 

CashEuroNet UK LLC enters administration

The FCA announced that CashEuroNet UK LLC, trading as QuickQuid, Pounds to Pocket and Onstride, was placed into administration on 25 October. CashEuroNet is a high cost short term lender, otherwise known as a payday lender, which lends small sums to customers until the next payday or for a few months.

 

 

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Consumer protection and claims management regulation

 

Financial Services Duty of Care Bill [HL]

House of Lords first reading 29 October 2019. 

 

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Regulation of insurance

 

FRC publishes revised Stewardship Code and FCA publishes feedback statement on building a regulatory framework for effective stewardship

The Financial Reporting Council (FRC) published a revised version of the Stewardship Code (the Code) which will apply to reporting years beginning on or after 1 January 2020. At the same time the FCA published feedback statement FS19/7—Building a regulatory framework for effective stewardship. The revised Code and feedback statement are relevant to FCA-regulated asset management firms and life insurers and other asset owners and investors. They will also affect public companies, issuers of debt and their advisors, and current and future signatories to the Code. Nick Dawson, managing director at Proxy Insight, stated that the original Code ‘was perfect for its time’, but the new Code enables more insight for observers into the true behaviours of each investor. Simon Daniel, partner at Eversheds Sutherland, added that ‘now is clearly an ideal time’ for the revision and strengthening of the Code due to a transformation of the attitudes, practices and regulatory expectations in the investment markets since the Code was last revised in 2012.

IE announces UNEP FI to hold Regional Roundtable Europe and Global Landscapes Forum

Insurance Europe (IE) issued a press release announcing that the UN Environment Programme Finance Initiative (UNEP FI), a global partnership between UN Environment and the financial sector, will hold its second Regional Roundtable for Europe in Luxembourg on 28–29 November 2019. IE is taking part as an event partner. 

EIOPA updates Risk Dashboard with 2Q 2019 data

The European Insurance and Occupational Pensions Authority (EIOPA) updated its Risk Dashboard, based on Solvency II data for the second quarter 2019. EIOPA says the results show that the risk exposures of the European insurance sector remained stable overall compared to July. Macro and market risks continue at a high level.

Insurers respond to EIOPA consultation on methodological principles of stress testing

IE published a joint response with the CRO—CFO Forum to a consultation by EIOPA on its discussion paper on methodological principles of insurance stress testing. The response calls on EIOPA to ensure that the objectives of future stress testing exercises are clearly defined and articulated. It says stress testing ‘must not be used as a parallel to Solvency II and should not be designed or used in a manner which leads to an amplification of capital requirements’.

Joint industry response to EIOPA consultation on Solvency II supervisory reporting and public disclosure

IE published a joint response with the CRO Forum and CFO Forum (together, the industry) to a consultation by EIOPA on its proposals for the Solvency II 2020 review package on supervisory reporting and public disclosure, which were developed in response to a call for advice by the European Commission.

 

 

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Regulation of personal pension and stakeholder products

 

Pension Schemes Bill [HL]

House of Lords second reading due 30 October 2019. 

Pension transfer advice: PIMFA calls for the regulator to raise the bar

The Personal Investment Management & Financial Advice Association (PIMFA), the trade association for the personal investment and financial advice industry, responded to the FCA’s pension transfer advice on contingent charging, asking for the regulator to ‘raise the bar’, in their pursuit to ban contingent charging. PIMFA highlighted that the proposal would represent a significant intervention in the financial advice market, and as a result would expect the evidential bar to be set significantly higher, in order to justify the change. 

 

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Payment services and systems

 

EPC updates paper on banknote recirculation

The European Payments Council (EPC) revised its ‘Recirculation paper’, which aims to foster the best and most efficient ways to handle cash in the first levels of the cash circulation cycle, ie consumers, retailers and payment service providers, before currency reaches the level of cash centres and, ultimately, national central banks. The paper says a better understanding of how cash handling is evolving will enable stakeholders in the cash value chain to anticipate market shifts and plan for the retaining and reallocation of workforces accordingly.

ECB amends TARGET2 guidelines

The European Central Bank (ECB) adopted an amendment to its guidelines on the trans-European automated real-time gross settlement express transfer system (TARGET2). The amendment reflects the new single shared platform functionality which enables the processing of very critical and critical payments in a contingency.

EBA report examines impediments to cross-border banking and payment services

The EBA published a report on potential impediments to the cross-border provision of banking and payment services. It sets out recommended actions for the European Commission to remove barriers to entry and facilitate the scaling up of banking and payments activities across the EU. A set of FAQs on the report is published alongside, explaining the context and next steps. 

FCA publishes policy statement on strong customer authentication in the event of a no-deal Brexit

The FCA published policy statement PS19/26, Brexit—Regulatory technical standards for strong customer authentication and common and secure open standards of communication, which confirms that, in the event of a no-deal Brexit, the FCA will make regulatory technical standards for strong customer authentication substantially the same as those in Commission Delegated Regulation (EU) 2018/389.

Barclays Bank abandons proposal to stop its customers withdrawing cash from Post Offices

Barclays Bank reversed its decision to withdraw its access to cash agreement with local post offices. The BEIS Committee report on the Future of the Post Office Network described the original decision from Barclays as a ‘highly retrograde step’ which would hurt vulnerable customers, undermine the Post Office network, and hit poorly remunerated sub-postmasters. 

 

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Fintech and cryptoassets

 

FCA provides information on AML/CTF regime for cryptoassets

The FCA updated its webpage Cryptoassets: our work, adding information on the FCA’s role as AML/CTF supervisor for firms carrying out certain cryptoasset activity from 10 January 2020. The FCA also published a new webpage, Cryptoassets: AML/CTF regime, which provides information on the application of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692 (as amended) (the MLRs) to cryptoassets.

FMLC publishes paper on the issues of legal uncertainty in virtual currencies

The FMLC published a paper which explores the ways in which regulators and legislators attempted to grapple with the many varieties of virtual currencies, and those which arguably come to function as money for legal purposes. 

Dave Ramsden sets out BoE’s approach to fintech

The BoE published a speech by its deputy governor for markets & banking, Dave Ramsden, entitled ‘Openness and integration—the new finance and new economy in a global context’, which sets out the BoE’s approach to fintech. Speaking at the Bund Summit in Shanghai, Ramsden said the BoE’s role was to provide robust but dynamic regulation that is appropriate for emerging innovations, and to weigh potential benefits to efficiency and resilience against potential risks to financial stability. He discussed machine learning, plans to help SMEs harness the power of their data, and the importance of global regulators working together on financial technology issues.

UK announces £10m aid support for Kenyan fintechs to drive financial inclusion

The Lord Mayor of the City of London, Peter Estlin, announced £10m of UK aid support for Kenyan fintech companies to increase financial inclusion for low-income and underserved consumers. Estlin was in Nairobi ahead of the first UK-Africa Investment Summit, in 2020, which will bring together businesses, governments and international institutions to encourage investment in a range of sectors, including fintech. 

EBA report examines impediments to cross-border banking and payment services

The EBA published a report on potential impediments to the cross-border provision of banking and payment services. It sets out recommended actions for the European Commission to remove barriers to entry and facilitate the scaling up of banking and payments activities across the EU. A set of FAQs on the report is published alongside, explaining the context and next steps.

 

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Sustainable finance

 

Council of the EU publishes text of Low Carbon Benchmarks Regulation

The Council of the EU published the text of the draft regulation amending Regulation (EU) 2016/1011 (Benchmarks Regulation) as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks, which were adopted by the European Parliament on 26 March 2019. After finalisation of the adopted text by the legal linguists, the Parliament approved a corrigendum to that position at its plenary session from 9 to 10 October 2019. It reflects the compromise agreement reached between the Institutions and should, therefore, be acceptable to the Council. 

IE announces UNEP FI to hold Regional Roundtable Europe and Global Landscapes Forum

IE issued a press release announcing that the UNEP FI, a global partnership between UN Environment and the financial sector, will hold its second Regional Roundtable for Europe in Luxembourg on 28–29 November 2019. IE is taking part as an event partner.

Treasury Committee seeks clarification on impact of Paris Agreement on regulators’ remit

In a letter dated 29 October 2019, the chair of the Treasury Committee, Mel Stride MP, asked the chancellor of the exchequer, Sajid Javid MP, to clarify the government’s plans in a number of areas, including the impact of the government’s Green Finance Strategy on the UK regulators’ remit. Following the announcement that the government no longer intends to bring forward the budget on 6 November, in anticipation of a general election, Stride requested that HM Treasury clarify the timeline for formalising the change in the regulators’ remit to take account of the COP21 Paris Agreement (in which 195 countries agreed to keep global temperatures well below 2 degrees Celsius).

 

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Dates for your diary

 

DateSubjectEvent

 

31 October 2019

 

Prudential requirements

 

The EBA’s consultation on draft guidelines for determining weighted average maturity of contractual payments due under the tranche of a securitisation transaction under CRR closes on 31 October 2019.

 

31 October 2019Payment services and systems

The deadline for feedback on the PSR’s  consultation CP19/7 on its updated Powers and Procedures Guidance is 31 October 2019.

 

31 October 2019Investment funds and asset management

The deadline for feedback to ESMA’s consultation setting out draft guidelines on performance fees under the UCITS Directive closes on 31 October 2019. The draft guidelines aim to harmonise the way in which performance fees can be charged to UCITS and their investors while ensuring common standards of disclosure across the EU.

 

31 October 2019UK, EU and international regulators and bodies

Christine Lagarde is to succeed Mario Draghi as ECB President for a non-renewable eight-year term.

 

31 October 2019Regulation of insurance

The deadline for submissions to the PRA’s 2019 Insurance stress test for section C scenarios is 31 October 2019.

 

November 2019Prudential requirements

The FSB will begin the process of identifying global systemically important banks in November 2019.

 

November 2019Financial stability, recovery and resolution

The FSB expects to publish its final report on its evaluation of the effects of post-crisis financial regulatory reforms on the financing of small and medium-sized enterprises in November 2019.

 

November 2019Payment services and systems

Pay.UK aims to publish its decision on a change request from UK Finance by the end of November 2019.

 

November 2019Regulation of insurance

IAIS scheduled to adopt new ComFrame and ICS version 2.00, and to publish these materials.

 

November 2019Fintech and cryptoassets

The Department for International Trade and HM Treasury two Fintech Bridge pilot programs, with Hong Kong and Australia, will run until November 2019.

 

1 November 2019

Investment funds and asset management

Regulation of capital markets

Regulation of derivatives

Consumer credit, mortgage and home finance

The deadline for feedback to the FCA quarterly consultation paper no 24: CP19/27 for chapters 3–6 and 8 is 1 November 2019.

 

1 November 2019Consumer credit, mortgage and home finance

The Lending Standards Board (LSB) threshold under its Standards of Lending Practice for business customers will increase to protect businesses with a turnover over of up to £25m. The increase in threshold will come into effect on 1 November 2019 when the current set of standards will become obsolete.

 

1 November 2019Authorisation, approval and supervision

CMCs are encouraged to submit Form A by 1 November 2019.

 

1 November 2019Regulation of personal pension and stakeholder products

Changes to the FCA’s rules on wake-up packs, retirement risk warnings and reminder changes as set out in the Conduct of Business Sourcebook (Retirement Outcomes Review) Instrument 2019 appended to PS19/1 come into force.

 

4 November 2019MiFID II

The deadline for ESMA’s call for evidence on the effects of product intervention measures under MiFIR is 4 November 2019.

 

5 November 2019Regulation of personal pension and stakeholder products

The Treasury Committee asked the FCA to respond to its letter on pension scheme trustees’ ESG stewardship policy request by 5 November 2019.

 

5 November 2019Markets and trading


Regulation of capital markets

The deadline for feedback to the Law Commission’s call for evidence asking individual investors, institutions and experts for their views on how well the system of intermediated securities works and where improvement is needed is 5 November 2019.

 

7 November 2019Enforcement and redress

The meeting of the High Level Working Group on Competitiveness and Growth is to take place on 7 November 2019.

 

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About the author:
Pietra has completed the Bar Professional Training Course at the University of Law and was called to the Bar in 2019. Prior to the BPTC, Pietra undertook a law degree at the University of Bristol.