FS weekly highlights—4 June 2020

FS weekly highlights—4 June 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
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
Securities financing transactions
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Dates for your diary

 

Coronavirus (COVID-19)

For further information on the effects of coronavirus (COVID-19) on financial services, see: Coronavirus (COVID-19)—key developments for financial services lawyers and  Coronavirus (COVID-19)—key financial services issues.

Coronavirus (COVID-19)—European Parliament publishes briefing on banking union impact

The European Parliament updated its briefing paper on the impact of the coronavirus (COVID-19) pandemic on the banking union. It summarises the European Banking Authority’s 25 May 2020 preliminary assessment, which examined banks’ funding positions and the role of banks’ loan commitments (also known as lines of credit) and their impact on financial stability.

Source: Banking union: Corona crisis effects.

For further information, see: Banking Union: The EU banking package

Coronavirus (COVID-19)—Commission adopts delegated regulation amending RTS on prudent valuation under CRR

The European Commission adopted a delegated regulation amending Delegated Regulation (EU) 2016/101 supplementing Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (CRR) with regard to regulatory technical standards for prudent valuation under Article 105(14) of CRR.

Source: COVID-19: European Commission adopts Delegated Regulation on revisions to RTS on prudent valuation under CRR.

For further information, see: CRD IV—essentials.

Coronavirus (COVID-19)—EBA issues guidelines to close ‘data gaps’ in supervisory reporting and disclosure

The European Banking Authority (EBA) published new guidelines on reporting and disclosure of exposures subject to measures applied in response to the coronavirus (COVID-19) crisis, including legislative moratoria on loan repayments and public guarantees in Member States. The guidelines are intended to address data gaps associated with these measures to ensure an appropriate understanding of institutions’ risk profiles and the asset quality on their balance sheets, both for supervisors and the wider public.

Source: EBA issues guidelines to address gaps in reporting data and public information in the context of COVID-19.

ESMA newsletter discusses coronavirus (COVID-19) response and CLO credit ratings

The European Securities and Markets Authority (ESMA) published its 14th newsletter, containing an update on ESMA's recent activities related to the coronavirus (COVID-19) pandemic as well a look at the thematic report on collateralised loan obligations credit ratings in the EU. It also highlights deadlines for closing consultations in June 2020 and a catch up on the full list of publications from April and May 2020.

Source: ESMA newsletter—No 14.

FCA issues final guidance for insurance firms on product value and coronavirus (COVID-19)

The Financial Conduct Authority (FCA) confirmed guidance for insurance firms to consider the impact of coronavirus (COVID-19) on the value of their insurance products. The guidance is relevant to all firms carrying on regulated activities relating to all non-investment insurance products, ie general insurance and protection policies and, in particular, firms that have manufactured these products.

Sources: FCA confirms guidance for insurance firms on assessing product valueProduct value and coronavirus: guidance for insurance firms and  FS20/7: Product Value and coronavirus: guidance for insurance firms.

Coronavirus (COVID-19)—FCA confirms support firms should offer mortgage customers

The FCA confirmed the support firms should give to mortgage customers who are either coming to the end of a payment holiday or who are yet to request one. The FCA is also reminding customers that if they can afford to resume payments, they should. The guidance comes into force on 4 June 2020 and only applies to mortgages. It does not apply to consumer credit products, which are covered by separate guidance which the FCA says will be updated in due course.

Source: FCA confirms support for customers who are struggling to pay their mortgage due to coronavirus.

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

Coronavirus (COVID-19)—FCA update on business interruption claims test case

The FCA published an update on the progress of its court action on business interruption (BI) insurance policies. It gives further detail on the proposed court action, including identifying the representative sample of policy wordings to be examined in the test case, insurers that use those wordings, and which of those insurers the FCA has invited, and have agreed, to participate in the proceedings.

Source: Update on FCA test case of the validity of business interruption claims.

FCA publishes update on its mutual societies registration function, including temporary coronavirus (COVID-19) measures

The FCA published an update on its mutual societies registration function for 2019-20. It gives an overview of developments in the last year, including its response to the coronavirus (COVID-19) pandemic, and a breakdown of societies on the register. The Mutual Societies Order 2013 (exercising powers in the Financial Services Act 2012) requires the FCA to have ongoing arrangements to determine whether mutual societies are complying with the relevant legislation.

Source: Mutual societies registration function: 2019-20.

Coronavirus (COVID-19)—Right to carry over CPD

The FCA published guidance on allowing certain individuals to carry over continuing professional development (CPD) to the next CPD year in ‘exceptional circumstances’. The FCA expects this to have an impact particularly on firms which employ retail investment advisers who need to complete the required minimum 35 hours of CPD and individuals carrying on insurance distribution activities, who must complete a minimum of 15 hours of professional training or development in each 12-month period.

Source: Allowing individuals to carry over continuing professional development (CPD) because of coronavirus.

FCA to survey 13,000 firms to understand impact of coronavirus (COVID-19)

The FCA will shortly be issuing a mandatory survey to 13,000 regulated firms across 15 sectors, including advice, wealth management and platform firms. The FCA is gathering the information to help it assess the impact of coronavirus (COVID-19) on the financial resilience of firms.

Sources: Coronavirus (Covid-19) Financial Resilience Survey and  13,000 regulated firms to receive FCA survey request.

FOS publishes 2019/20 complaints figures and future strategy

The Financial Ombudsman Service (FOS) published its future strategy, alongside figures showing that it received 270,000 new complaints about financial businesses in the 2019/20 financial year. Among other things, the FOS plans to respond to the consequences of coronavirus (COVID-19) by helping businesses and customers resolve complaints fairly and engaging with stakeholders to help prevent disputes arising.

Source: Financial Ombudsman Service publishes 2019/20 figures alongside future strategy.

Coronavirus (COVID-19)—PRA provides clarity on use of electronic signatures

The Prudential Regulation Authority (PRA) issued a statement on the use of electronic signatures to evidence forms and other regulatory documents submitted to the PRA. In the statement, the PRA confirms that—in the absence of any specific legal provisions to the contrary—firms may use electronic signatures for submitting these documents, although it may in specific instances request a ‘wet signature’ where it is appropriate to do so.

Source: PRA statement on the use of electronic signatures to evidence forms and other documents delivered to the PRA.

Coronavirus (COVID-19)—PRA publishes Q&As on CRR property valuation requirements

The PRA published Q&As on the requirements under the CRR for property valuations for residential and commercial real estate exposures. In particular, the Q&As address the difficulties identified by firms in conducting physical inspections due to social distancing measures, obtaining reliable property valuations and determining appropriate approaches to suspended or unreliable house price indices.

Source: Q&A on Capital Requirements Regulation (CRR) requirements for property valuations.

Coronavirus (COVID-19)—750,000 businesses receive over £31bn through loan schemes

HM Treasury updated its management information concerning the Coronavirus (COVID-19) Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS) and Future Fund. The figures reveal that lenders have approved over £31.3bn to over 745,000 businesses through government-backed schemes.

Sources: HM Treasury coronavirus (COVID-19) business loan scheme statistics and Lenders back 750,000 businesses with more than £31 billion through Covid-19 loan schemes.

Coronavirus (COVID-19)—BSB presentation on managing mental wellbeing during a crisis

The Banking Standards Board (BSB) published an audio presentation by Paul Litchfield, chair of the What Works Centre for Wellbeing, on managing mental wellbeing during a crisis.

Source: Managing mental wellbeing during a crisis; sharing challenges and experiences.

Coronavirus (COVID-19)—IAIS outlines updates to 2020/2021 work programme and roadmap

The International Association of Insurance Supervisors (IAIS) published its newsletter for April/May 2020, in which it outlines further adjustments to its 2020/2021 work programme to address the impact of the coronavirus (COVID-19) pandemic on the insurance industry. The IAIS also updated its roadmap for 2020/2021 to reflect the changes to its work programme and other adjusted timelines.

Source: IAIS newsletter April-May 2020.

Coronavirus (COVID-19)—FSB RCG for Europe discuss policy responses

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Europe held a conference call to discuss global and regional macroeconomic and financial market developments and their potential impact on European economies.

Source: FSB Europe group discusses financial vulnerabilities and responses to the COVID-19 pandemic.

Coronavirus (COVID-19)—IOSCO issues statement on importance of issuers’ timely and high-quality disclosure

The board of the International Organization of Securities Commissions (IOSCO) issued a public statement highlighting the importance to investors and other stakeholders of having ‘timely and high-quality information’ about the impact of the coronavirus (COVID-19) pandemic on issuers' operating performance, financial position and prospects.

Source: IOSCO encourages issuers’ fair disclosure about COVID-19 related impacts.

Coronavirus (COVID-19)—Pay.UK webinar on retail payments industry’s response

Pay.UK is to hold a webinar on how the retail payments industry is responding to the impact of the coronavirus (COVID-19) pandemic, on 11 June 2020, 13.00—13.45 (BST). Pay.UK staff will be joined by the director of payments at UK Finance, Rebecca Clements, and the CEO of Vocalink, Gregor Dobbie, for a discussion on the challenges payment service providers are currently facing, and how the industry is supporting them to respond.

Source: Webinar: How the retail payments industry is responding to the impact of COVID-19.

Coronavirus (COVID-19)—SRB board member Sebastiano Laviola speaks on the future of European banking regulation in the aftermath of the pandemic

The Single Resolution Board (SRB) published details of a speech by SRB board member Sebastiano Laviola given at the Financial Institutions Conference organised by UniCredit on the future of European banking regulation in the aftermath of the coronavirus (COVID-19) pandemic. The speech outlined the response to date and possible implications for banks and regulators.

Source: Financial Institutions Conference by UniCredit—Speech by SRB Board Member Sebastiano Laviola: The future of European Banking regulation in the aftermath of COVID-19.

Coronavirus (COVID-19)—UK Finance provides update on payment holidays

UK Finance reported that customers facing temporary financial difficulties due to the coronavirus (COVID-19) pandemic have been granted almost 1.5m payment holidays by lenders on their credit cards and personal loans. As of 21 May 2020, 877,800 customer accounts had been given a payment freeze on their credit cards.

Source: Lenders approve almost 1.5m payment holidays on credit cards and personal loans.

Coronavirus (COVID-19)—WFE publishes report on cyber resilience measures

The World Federation of Exchanges (WFE) has published a report on measures the industry has taken to adapt and enhance existing cyber resilience tools during the coronavirus (COVID-19) pandemic, as exchanges and central counterparties (CCPs) have moved to operate remotely.

Source: The World Federation of Exchanges publishes update on industry cyber efforts during the pandemic.

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Brexit news

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

Brexit Bulletin—Frost and Gove questioned further on UK-EU negotiations

The Lords European Union Committee questioned Chancellor of the Duchy of Lancaster, Michael Gove, and UK Chief Negotiator, David Frost, on progress in negotiations on the future UK-EU relationship on 28 May 2020. This session followed a similar line of questioning to the evidence session with the Commons Future Relationship with the European Union Committee on 27 May 2020, expanding on some subjects in a little more detail. In evidence, Frost was questioned on timing for the High Level Conference due to take place in June 2020 and whether it was considered a watershed moment given that the UK and EU are far from the broad outline agreement the UK hoped to reach by that point. The date is yet to be confirmed, but Frost indicated that it might possibly go ahead in the last week of June 2020, and he hoped that it might provide new impetus for further negotiating rounds in June/July 2020. Beyond that point, it was noted that the UK will need to balance the need to continue talks for as long as it is constructive against the need to provide certainty and prioritise domestic readiness for the end of the transition period on 31 December 2020.

Sources: European Union Select Committee Thursday 28 May 2020 and  David Frost and Michael Gove MP answer questions on future relationship negotiation.

Brexit Bulletin—fisheries tops agenda for fourth round of future UK-EU relationship talks

The UK and EU have published the agenda for the fourth round of negotiations on the future UK-EU relationship, which will take place between 2 and 5 June 2020. Round four focuses on fisheries, with a reduced schedule of sessions on trade in goods and services, level playing field and governance. Sessions on law enforcement and judicial cooperation are also scheduled, as well as sessions on energy, participation in EU programmes, social security coordination and thematic cooperation. Meanwhile, the Institute for Government has published analysis of the key flashpoints in the talks, highlighting four big issues on the agenda and the distance between UK and EU positions on fisheries, internal security, level playing field and governance.

Sources: Fourth round UK-EU future relationship negotiations: 2-5 June 2020House of Commons Library—Fisheries: UK-EU future relationship negotiations and  IfG—UK–EU future relationship negotiations: key flashpoints.

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MiFID II

ESMA updates Q&As on MiFID II and MiFIR transparency and market structure topics

ESMA updated its Q&As on transparency and market structure topics under the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and the Markets in Financial Instruments Regulation (EU) 600/2014 (MiFIR).

Source: ESMA updates its Q&As on MiFID II and MiFIR transparency and market structures topics.

For further information, see: MiFID II & MiFIR—pre- and post-trade transparency and  MiFID II and MiFIR—market structure.

ESMA updates Q&As on the implementation of MiFID II/MiFIR investor protection topics

ESMA updated its Q&As on the implementation of investor protection topics under MiFID II/ MiFIR. The Q&As cover investor protection and intermediaries’ topics, and include a new answer on ‘MiFID inducements’, providing clarification on the application of the MiFID definition of ‘acceptable minor non-monetary benefits’.

Source: ESMA updates Q&As on MiFID II investor protection.

For further information, see: MiFID II conduct of business and investor protection requirements.

ESMA updates transparency and position limits opinions for third-country trading venues

ESMA published updated opinions concerning post-trade transparency and position limits under MiFID II and MiFIR. The opinions follow ESMA’s assessment of over 200 third-country trading venues (TCTV) against criteria published in 2017.

Source: ESMA updates transparency and position limit options for 3rd country venues.

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

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UK, EU and international regulators and bodies

PRA publishes May 2020 Regulatory Digest

The PRA published its Regulatory Digest for May 2020. The PRA Regulatory Digest is for people working in the UK financial services industry and highlights key regulatory news and publications delivered for the month.

Source: PRA monthly digest—May.

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Authorisation, approval and supervision

FCA publishes final rules on applying SMR to benchmark administrators

The FCA published Extending the Senior Managers Regime to benchmark administrators (PS20/5), which summarises the feedback received to consultation paper CP19/31, and the FCA’s response, and sets out the FCA’s final rules and guidance for applying the Senior Managers Regime (SMR) to benchmark administrators authorised in the UK that do not undertake any other regulated activities. PS20/5 also affects Appointed Representatives and their principals. The SMR and the Conduct Rules will come into force for benchmark administrators that do not undertake any other regulated activities on 7 December 2020.

Sources: PS20/5: Extending the Senior Managers Regime to benchmark administrators: final rules and  Extending the Senior Managers Regime to benchmark administrators: final rules.

For further information, see: Senior Managers and Certification Regime—one minute guide.

BoE consults on fees regime for 2020/21 FMI supervision

The Bank of England (BoE) published a consultation paper setting out the expected fee rates for 2020/21 for financial market infrastructures (FMI) that are recognised by BoE and subject to the FMI fee regime. The consultation closes on 29 July 2020.

Source: Fees regime for financial market infrastructure supervision 2020/21 and other related policy changes.

EBA report examines convergence of supervisory practices in 2019

The EBA published a report on the convergence of supervisory practices in 2019. Overall, it finds that the key topics for supervisory attention identified in the EBA 2019 convergence plan have been largely implemented in supervisory work across the EU. The report is part of the EBA’s work to actively foster and promote supervisory convergence across the EU in order to bring about strong supervisory standards and a common supervisory culture.

Source: EBA sees considerable achievements in supervisory convergence and good level of engagement in supervisory colleges across the EU.

FCA publishes update on its mutual societies registration function, including temporary coronavirus (COVID-19) measures

The FCA published an update on its mutual societies registration function for 2019-20. It gives an overview of developments in the last year, including its response to the coronavirus (COVID-19) pandemic, and a breakdown of societies on the register. The Mutual Societies Order 2013 (exercising powers in the Financial Services Act 2012) requires the FCA to have ongoing arrangements to determine whether mutual societies are complying with the relevant legislation.

Source: Mutual societies registration function: 2019-20.

Coronavirus (COVID-19)—EBA issues guidelines to close ‘data gaps’ in supervisory reporting and disclosure

The EBA published new guidelines on reporting and disclosure of exposures subject to measures applied in response to the coronavirus (COVID-19) crisis, including legislative moratoria on loan repayments and public guarantees in Member States. The guidelines are intended to address data gaps associated with these measures to ensure an appropriate understanding of institutions’ risk profiles and the asset quality on their balance sheets, both for supervisors and the wider public.

Source: EBA issues guidelines to address gaps in reporting data and public information in the context of COVID-19.

Supervisory Coordination Network winding down

ESMA announced the finalisation of the work of the Supervisory Coordination Network (SCN), established in May 2017 as a response to emerging supervisory convergence risks relating to the treatment of authorisation requests by EU27 national competent authorities (NCAs) in the context of the UK’s withdrawal from the EU. The SCN will hold a final follow-up meeting before the end of 2020 to take stock of the relocation situation and close its work. ESMA will continue to work with NCAs in preparation for the end of the transition period.

Source: ESMA’s Supervisory Coordination Network concludes its work.

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Prudential requirements

Coronavirus (COVID-19)—Commission adopts delegated regulation amending RTS on prudent valuation under CRR

The European Commission adopted a delegated regulation amending Delegated Regulation (EU) 2016/101 supplementing the CRR with regard to regulatory technical standards for prudent valuation under Article 105(14) of CRR.

Source: COVID-19: European Commission adopts Delegated Regulation on revisions to RTS on prudent valuation under CRR.

For further information, see: CRD IV—essentials.

EBA consults on draft amended RTS on own funds and eligible liabilities

The EBA published a consultation paper on amendments to Commission Delegated Regulation (EU) 241/2014 (RTS on own funds), a Level 2 measure under the CRR. The amendments to the RTS on own funds reflect changes made to the CRR by Regulation (EU) 2019/876, part of the EU banking package adopted in May 2019.

Source: EBA consults on draft amended technical standards on own funds and eligible liabilities.

EBA sets out expected timelines for work on new prudential regime for investment firms

The EBA published a ‘Roadmap on Investment Firms’, which sets out the EBA’s planned work and expected timelines in relation to the Investment Firm Directive (EU) 2019/2034 (IFD) and the Investment Firm Regulation (EU) 2019/2033 (IFR), both of which will begin to apply on 26 June 2021.

Source: EBA roadmap on investment firms.

For further information, see: Review of the prudential framework for investment firms.

EBA sets out guidelines on loan origination and monitoring

The EBA published guidelines on loan origination and monitoring, setting out the EBA’s expectation that institutions should develop robust and prudent standards to ensure newly originated loans are assessed properly. The guidelines also aim to ensure that the institutions’ practices are aligned with consumer protection rules and respect fair treatment of consumers. The guidelines—developed as part of the effort to tackle the high level of non-performing loans—will apply from 30 June 2021, but the EBA has set a series of transitional arrangements.

Source: EBA seeks to future proof loan origination standards taking into consideration significant transition periods to facilitate implementation.

Coronavirus (COVID-19)—European Parliament publishes briefing on banking union impact

The European Parliament updated its briefing paper on the impact of the coronavirus (COVID-19) pandemic on the banking union. It summarises the European Banking Authority’s 25 May 2020 preliminary assessment, which examined banks’ funding positions and the role of banks’ loan commitments (also known as lines of credit) and their impact on financial stability.

Source: Banking union: Corona crisis effects.

For further information, see: Banking Union: The EU banking package

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Financial stability 

Coronavirus (COVID-19)—European Parliament publishes briefing on banking union impact

The European Parliament updated its briefing paper on the impact of the coronavirus (COVID-19) pandemic on the banking union. It summarises the European Banking Authority’s 25 May 2020 preliminary assessment, which examined banks’ funding positions and the role of banks’ loan commitments (also known as lines of credit) and their impact on financial stability.

Source: Banking union: Corona crisis effects.

For further information, see: Banking Union: The EU banking package

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Risk management and controls

ESMA seeks comments on cloud outsourcing guidelines

ESMA launched a consultation on guidelines on outsourcing to cloud service providers. Specifically, the guidelines aim to aid firms and competent authorities to ‘identify, address and monitor the risks and challenges that arise from cloud outsourcing arrangements.’ The deadline for comments is 1 September 2020.

Source: ESMA consults on cloud outsourcing guidelines.

IOSCO consults on outsourcing principles

IOSCO is requesting feedback on proposed updates to its principles for regulated entities that outsource tasks to service providers. Feedback is sought by 1 October 2020.

Source: IOSCO consults on outsourcing principles to ensure operational resilience.

Coronavirus (COVID-19)—WFE publishes report on cyber resilience measures

The WFE published a report on measures the industry has taken to adapt and enhance existing cyber resilience tools during the coronavirus (COVID-19) pandemic, as exchanges and central counterparties (CCPs) have moved to operate remotely.

Source: The World Federation of Exchanges publishes update on industry cyber efforts during the pandemic.

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Financial crime

JMLSG publishes final amendments to Parts I, II and III of its guidance

The Joint Money Laundering Steering Group (JMLSG) published final amendments to Parts I, II and III of its guidance. The board approved revisions take account of comments received on the consultation text that was published in February 2020, and have been submitted to HM Treasury for ministerial approval.

Source: JMLSG today publishes final amendments to Parts I, II and III of its guidance.

Serious Fraud Office responds to recommendations made in case progression review

The Serious Fraud Office (SFO) formally responded to the recommendations and observations made in HM Crown Prosecution Service Inspectorate’s (HMCPSI) review into case progression and leadership and management at the SFO, published in October 2019. Seven recommendations were made by HMCPSI, six of which were accepted by the SFO, with one recommendation accepted in part only. The SFO also highlighted that the Document and Case Management System project team participated in a series of workshops designed to ensure effective transfer of material from the intelligence to the case teams, it published a Business Plan and is developing a strategic performance dashboard.

Sources: SFO formally responds to HMCPSI reports and  Response to HMCPSI Case Progression Review – October 2019.

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Complaints, compensation and claims management

Complaints Commissioner identifies deficiencies in FCA complaints deferral process

The Office of the Complaints Commissioner (OCC) published its final report (FCA00707), dated 13 May 2020, concerning a complaint made against the FCA in relation to Woodford and Link Fund Solutions. In the report, the OCC considers the FCA’s deferral process for complaints in the context where there is ongoing regulatory action. The FCA has also published its response, accepting the OCC’s recommendations.

Sources: FCA00707—Issued 13 May 2020. Published 2 June 2020 and  The FCA’s response to the Complaints Commissioner’s Report FCA00707.

For further information, see: Complaints against UK financial services regulators.

Complaints Commissioner report sets out useful FCA guidance on regulatory powers over mutuals

The OCC published its final report (FCA00627), dated 13 May 2020, regarding a complaint made against the FCA about its handling of a dispute between the complainant and a charitable mutual society. The report sets out a helpful explanation of when the FCA will call a special meeting of a mutual society to deal with an individual dispute, and suggests that the FCA consider including the explanation in its published guidance.

Source: FCA00627—Issued 18 May 2020. Published 2 June 2020.

FOS publishes 2019/20 complaints figures and future strategy

The FOS published its future strategy, alongside figures showing that it received 270,000 new complaints about financial businesses in the 2019/20 financial year. Among other things, the FOS plans to respond to the consequences of coronavirus (COVID-19) by helping businesses and customers resolve complaints fairly and engaging with stakeholders to help prevent disputes arising.

Source: Financial Ombudsman Service publishes 2019/20 figures alongside future strategy.

Don’t rush negotiation of collective redress directive, trade associations warn

A number of European trade associations have warned the Council of the EU and the European Parliament against rushing to conclude trilogue discussions on the European Commission’s collective redress proposal while many complex issues remain unresolved. They call on legislators to ‘prioritise quality over expediency’ in finalising the new directive.

Sources: Rushing an agreement on EC collective redress proposal will not get it right and  Joint Business Statement on the Proposal on Representative Actions (Collective Redress).

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Investigations, enforcement and discipline

FCA bars Cypriot firms that used unauthorised celebrity CFD endorsements

The FCA took action to stop four Cypriot investment firms from continuing to offer high-risk contracts for difference (CFDs) to UK investors. It appears that these firms used unauthorised celebrity endorsements on social media as part of their marketing. The orders require them to stop selling CFDs to UK customers, to close existing positions with UK customers, to return UK customers’ money and to notify UK customers of the FCA’s action.

Source: FCA bars Cypriot firms that used unauthorised celebrity endorsements.

London Capital and Finance (LC&F) investigation delayed to 30 September 2020

Dame Elizabeth Gloster wrote to the FCA to notify the regulator that it will not be possible to complete her investigation into the regulation of London Capital and Finance (LC&F) by 10 July 2020. The revised date of delivery for Dame Elizabeth’s report is 30 September 2020. Gloster said the delay to the report arose because of the FCA’s ‘delays and difficulties’ in supplying documents and information.

Source: Dame Elizabeth Gloster letter to Charles Randell.

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Competition in financial services

BCR publishes progress updates on public commitments from Pools A, B, C and D Capability and Innovation Fund recipients

Banking Competition Remedies Ltd (BCR), the independent body established to implement the £775m Royal Bank of Scotland State Aid Alternative Remedies Package, has published the fourth update from Pool A recipients, third update from Pool B and D recipients, and second update from Pool C recipients, which provide a summary of performance against their public commitments in the period to 31 March 2020.

Source: Banking Competition Remedies Ltd (BCR) publishes progress updates on Public Commitments from Pool A, B, C and D Capability and Innovation Fund recipients.

CMA publishes details of refunds secured on overdrafts for banks’ failure to send text alerts

The Competition and Markets Authority (CMA) published details of action taken against five of the UK’s biggest banks and building societies for breaching Part 6 of the Retail Banking Market Investigation Order 2017 (the Order). This required that customers with personal current accounts must receive a text alert warning of fees before banks charge them for an unarranged overdraft. A total of just over £47m in refunds has been secured since the CMA started enforcing the Order in 2018, including new refund amounts from Royal Bank of Scotland Group (RBSG) and Santander.

Sources: £47m in overdraft refunds to bank customers after CMA action and  CMA letter to RBSG.

For further information, see: The FCA’s competition law powers — FCA market studies, calls for input and other competition reviews

CMA updates its Investment Consultants Market Investigation

The CMA amended its webpage on the Investment Consultants Market Investigation to provide an update on the process and timing for submitting compliance statements.

Source: Investment consultants market investigation (update on process and timing for compliance statements).

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Regulation of benchmarks and IBOR reform

Alternative Reference Rates Committee issue FAQs for market participants

The Alternative Reference Rates Committee (ARRC) compiled a list of 17 FAQs to be used by market participants. The FAQs include questions on what the ARRC is and what it does, but mainly focus on comparisons between the London Inter-bank Offered Rate (LIBOR) and Secured Overnight Financing Rate (SOFR). The answers contain information about who will be impacted by the transition from LIBOR to SOFR, what the impacts will be, and if there are other ‘IBOR’ alternatives. ARRC has made clear that the FAQs will evolve as and when developments take place and new questions are asked.

Source: Frequently Asked Questions.

ISDA factsheet details why changes to benchmark fallbacks are necessary

The International Swaps and Derivatives Association (ISDA) published a factsheet titled ‘Understanding IBOR Benchmark Fallbacks,’ which explains why changes to benchmark fallbacks are necessary. Following this publication, ISDA plans to publish a supplement to the 2006 ISDA Definitions in July 2020 to incorporate new fallbacks for derivatives that reference certain key interbank offered rates, followed by a new protocol that will enable market participants to decide whether to incorporate revisions into their legacy derivatives trades.

Source: Factsheet: Understanding IBOR Benchmark Fallbacks.

For further information, see: LIBOR transition.

LIBOR taskforce publishes paper on ‘tough legacy’ issues

The Working Group on Sterling Risk-Free Reference Rates published a paper on the identification of tough legacy issues for contracts that prove unable to convert or be amended to include fallbacks ahead of LIBOR discontinuation.

Source: Paper on the identification of tough legacy issues.

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Regulation of capital markets

ESMA updates Q&As on the Securitisation Regulation

The ESMA updated its Q&As on the Securitisation Regulation (Regulation (EU) 2017/2402) laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation). The new Q&As mainly clarify templates set out in the draft technical standards on disclosure (published on the website of the European Commission).

Source: ESMA updates its questions and answers on the Securitisation Regulation.

For further information, see: Securitisation Regulation—essentials.

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Regulation of derivatives

ESMA publishes final report on FRANDT commercial terms for the provision of clearing services

The ESMA has published its final report with technical advice to the European Commission on the fair, reasonable, non-discriminatory and transparent (FRANDT) commercial terms for the provision of clearing services.

Source: ESMA publishes final report on FRANDT commercial terms for clearing services.

ESMA updates EMIR Q&As

The ESMA updated its Q&As on implementation of the European Market Infrastructure Regulation (EU) 648/2012 (EMIR). Trade Repository Q&A 54 has been added to provide clarification on reporting of over-the-counter derivatives by a financial counterparty on behalf of a non-financial counterparty below the clearing threshold.

Source: ESMA publishes updates to EMIR Q&As.

For further information, see: EMIR—essentials.

ISDA updates derivatives compliance calendar

The International Swaps and Derivatives Association has updated its global calendar of compliance deadlines and regulatory dates for the over-the-counter derivatives space. The calendar was updated on 1 June 2020.

Source: Updated OTC Derivatives Compliance Calendar.

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Investment funds and asset management

Coronavirus (COVID-19)—IOSCO issues statement on importance of issuers’ timely and high-quality disclosure

The board of the IOSCO issued a public statement highlighting the importance to investors and other stakeholders of having ‘timely and high-quality information’ about the impact of the coronavirus (COVID-19) pandemic on issuers' operating performance, financial position and prospects.

Source: IOSCO encourages issuers’ fair disclosure about COVID-19 related impacts.

FCA bars Cypriot firms that used unauthorised celebrity CFD endorsements

The FCA took action to stop four Cypriot investment firms from continuing to offer high-risk contracts for difference (CFDs) to UK investors. It appears that these firms used unauthorised celebrity endorsements on social media as part of their marketing. The orders require them to stop selling CFDs to UK customers, to close existing positions with UK customers, to return UK customers’ money and to notify UK customers of the FCA’s action.

Source: FCA bars Cypriot firms that used unauthorised celebrity endorsements.

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Securities financing transactions

ISLA position paper on DAC 6

The International Securities Lending Association (ISLA) published a position paper on Directive (EU) 2018/822 (DAC 6).

Source: ISLA publishes position paper on DAC 6.

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Banks and mutuals

EBA sets out guidelines on loan origination and monitoring

The EBA published guidelines on loan origination and monitoring, setting out the EBA’s expectation that institutions should develop robust and prudent standards to ensure newly originated loans are assessed properly. The guidelines also aim to ensure that the institutions’ practices are aligned with consumer protection rules and respect fair treatment of consumers. The guidelines—developed as part of the effort to tackle the high level of non-performing loans—will apply from 30 June 2021, but the EBA has set a series of transitional arrangements.

Source: EBA seeks to future proof loan origination standards taking into consideration significant transition periods to facilitate implementation.

EBA consults on draft amended RTS on own funds and eligible liabilities

The EBA published a consultation paper on amendments to Commission Delegated Regulation (EU) 241/2014 (RTS on own funds), a Level 2 measure under the CRR. The amendments to the RTS on own funds reflect changes made to the CRR by Regulation (EU) 2019/876, part of the EU banking package adopted in May 2019.

Source: EBA consults on draft amended technical standards on own funds and eligible liabilities.

FCA publishes update on its mutual societies registration function, including temporary coronavirus (COVID-19) measures

The FCA published an update on its mutual societies registration function for 2019-20. It gives an overview of developments in the last year, including its response to the coronavirus (COVID-19) pandemic, and a breakdown of societies on the register. The Mutual Societies Order 2013 (exercising powers in the Financial Services Act 2012) requires the FCA to have ongoing arrangements to determine whether mutual societies are complying with the relevant legislation.

Source: Mutual societies registration function: 2019-20.

Coronavirus (COVID-19)—European Parliament publishes briefing on banking union impact

The European Parliament updated its briefing paper on the impact of the coronavirus (COVID-19) pandemic on the banking union. It summarises the European Banking Authority’s 25 May 2020 preliminary assessment, which examined banks’ funding positions and the role of banks’ loan commitments (also known as lines of credit) and their impact on financial stability.

Source: Banking union: Corona crisis effects.

For further information, see: Banking Union: The EU banking package

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Consumer credit, mortgage and home finance

Mortgage Credit Directive: European Commission seeks views on effectiveness ahead of full review

The European Commission appointed consultants led by Risk & Policy Analysts to evaluate Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property (the Mortgage Credit Directive (MCD)). The Commission is seeking evidence on whether the current framework is still fit for purpose, identifying areas where an update of the MCD could be needed. The consultation is open until 12 June 2020.

Sources: Mortgage Credit Directive Study consultation phase and  European Commission letter: Study on the evaluation of the EU mortgage credit directive.

For further information, see: Mortgage Credit Directive (MCD)—essentials.

Coronavirus (COVID-19)—FCA confirms support firms should offer mortgage customers

The FCA confirmed the support firms should give to mortgage customers who are either coming to the end of a payment holiday or who are yet to request one. The FCA is also reminding customers that if they can afford to resume payments, they should. The guidance comes into force on 4 June 2020 and only applies to mortgages. It does not apply to consumer credit products, which are covered by separate guidance which the FCA says will be updated in due course.

Source: FCA confirms support for customers who are struggling to pay their mortgage due to coronavirus.

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

CMA publishes details of refunds secured on overdrafts for banks’ failure to send text alerts

The CMA published details of action taken against five of the UK’s biggest banks and building societies for breaching Part 6 of the Retail Banking Market Investigation Order 2017 (the Order). This required that customers with personal current accounts must receive a text alert warning of fees before banks charge them for an unarranged overdraft. A total of just over £47m in refunds has been secured since the CMA started enforcing the Order in 2018, including new refund amounts from Royal Bank of Scotland Group (RBSG) and Santander.

Sources: £47m in overdraft refunds to bank customers after CMA action and  CMA letter to RBSG.

For further information, see: The FCA’s competition law powers — FCA market studies, calls for input and other competition reviews

Coronavirus (COVID-19)—UK Finance provides update on payment holidays

UK Finance reported that customers facing temporary financial difficulties due to the coronavirus (COVID-19) pandemic have been granted almost 1.5m payment holidays by lenders on their credit cards and personal loans. As of 21 May 2020, 877,800 customer accounts had been given a payment freeze on their credit cards.

Source: Lenders approve almost 1.5m payment holidays on credit cards and personal loans.

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Regulation of insurance

FCA issues final guidance for insurance firms on product value and coronavirus (COVID-19)

The FCA confirmed guidance for insurance firms to consider the impact of coronavirus (COVID-19) on the value of their insurance products. The guidance is relevant to all firms carrying on regulated activities relating to all non-investment insurance products, ie general insurance and protection policies and, in particular, firms that have manufactured these products.

Sources: FCA confirms guidance for insurance firms on assessing product valueProduct value and coronavirus: guidance for insurance firms and  FS20/7: Product Value and coronavirus: guidance for insurance firms.

Coronavirus (COVID-19)—FCA update on business interruption claims test case

The FCA published an update on the progress of its court action on business interruption (BI) insurance policies. It gives further detail on the proposed court action, including identifying the representative sample of policy wordings to be examined in the test case, insurers that use those wordings, and which of those insurers the FCA has invited, and have agreed, to participate in the proceedings.

Source: Update on FCA test case of the validity of business interruption claims.

Coronavirus (COVID-19)—IAIS outlines updates to 2020/2021 work programme and roadmap

The IAIS published its newsletter for April/May 2020, in which it outlines further adjustments to its 2020/2021 work programme to address the impact of the coronavirus (COVID-19) pandemic on the insurance industry. The IAIS has also updated its roadmap for 2020/2021 to reflect the changes to its work programme and other adjusted timelines.

Source: IAIS newsletter April-May 2020.

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Payment services and systems

Pay.UK launches ‘Request to Pay’ rules and standards framework

Pay.UK launched the Request to Pay Framework—the message standards, rules, and terms and conditions for the development of Request to Pay services. The new framework can now be used by organisations to create the first Request to Pay propositions, set to underpin ‘a vibrant new market’ of payment messaging services.

Source: Request to Pay rules and standards framework launched.

European Payments Council consults on SEPA request-to-pay rulebook

The European Payments Council (EPC) launched a consultation on the draft rulebook it developed for its new Single Euro Payments Area (SEPA) Request-to-Pay (SRTP) scheme. The deadline for comments is 30 August 2020. The EPC plans to publish the SRTP rulebook by the end of November 2020.

Sources: Public consultation on the SEPA Request-to-Pay Scheme Rulebook and  SEPA Request-To-Pay (SRTP) Scheme Rulebook.

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

PSR policy head speaks on innovation in payments and the ‘new normal’

Genevieve Marjoribanks, head of policy at the Payment Systems Regulator (PSR), spoke at the Payment Systems Innovation and Regulation Summit about the ways in which the PSR has supported innovation and competition and will continue to do so in the future.

Source: Genevieve Marjoribanks Payment Systems Innovation and Regulation Summit speech.

UK Finance report shows continued increase in card payments in 2019

UK Finance published its 2020 report on UK payment markets, which considers trends in payments in the UK up until the end of 2019, identifies key recent trends in payments, and discusses what this means for consumers, businesses and government. According to UK Finance, the report shows that ‘recent trends in payments have inadvertently left the UK far better prepared to cope with payments under lockdown than we would have been a decade earlier.’

Sources: UK Payment Markets Summary 2020Cards used for half of payments for first time last year and  Long-term payment trends – preparing us for lockdown?

Coronavirus (COVID-19)—Pay.UK webinar on retail payments industry’s response

Pay.UK is to hold a webinar on how the retail payments industry is responding to the impact of the coronavirus (COVID-19) pandemic, on 11 June 2020, 13.00—13.45 (BST). Pay.UK staff will be joined by the director of payments at UK Finance, Rebecca Clements, and the CEO of Vocalink, Gregor Dobbie, for a discussion on the challenges payment service providers are currently facing, and how the industry is supporting them to respond.

Source: Webinar: How the retail payments industry is responding to the impact of COVID-19.

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Fintech and cryptoassets

International Capital Market Association publishes first edition of fintech newsletter

The International Capital Market Association (ICMA) shared the first edition of its fintech newsletter, focusing on ICMA’s work from the perspective of fintech and market electronification. ICMA hopes that, through the newsletter, it can ‘bring [its] members up to speed’ on the cross-cutting technology initiatives across key market areas, as well as providing insights into regulatory updates, consultation papers and other publications.

Source: First edition of ICMA’s FinTech Newsletter.

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Sustainable finance

European Parliament committees table recommendation for Taxonomy Regulation

The European Parliament Committees on Economic and Monetary Affairs and on Environment, Public Health and Food Safety have tabled their recommendation for second reading in plenary for the European Commission’s proposal for a regulation on the establishment of a framework to facilitate sustainable investment (the EU Taxonomy Regulation), following a vote in joint committee on 28 May 2020.

Source: Framework to facilitate sustainable investment.

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Dates for your diary

 

DateSubjectEvent

5 June 2020

 

 

Coronavirus (COVID-19)

Payment services and systems

 

Deadline for responses to FCA consultation on additional guidance for payments firms to strengthen the way in which they look after customers’ money.

 

8 June 2020

 

Regulation of benchmarks and IBOR reform

 

Deadline for responses to ESMA ‘Consultation Paper: Draft Regulatory Technical Standards under the Benchmarks Regulation ESMA70-156-1464

 

10 June 2020

 

Financial crime

 

Deadline for responses to the JMLSG’s consultation on pooled client accounts guidance.

 

10 June 2020

 

Prudential requirements

 

Deadline for responses to EBA Consultation Paper on draft RTS on the treatment of non-trading book positions subject to foreign-exchange risk or commodity risk (EBA-CP-2020-01).

 

11 June 2020

 

Sustainable finance

 

Deadline for responses to the European Commissions consultation on the review of the Non-Financial Reporting Directive (Directive 2014/95/EU).

 

 

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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.