FS weekly highlights—5 November 2020

FS weekly highlights—5 November 2020

In this issue

 

 

Brexit news
Coronavirus (COVID-19)
UK, EU and international regulators and bodies
Prudential requirements
Risk management and controls
Financial crime
Complaints, compensation and claims management
Markets and trading
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
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

 

Brexit news

FCA announces open banking changes to limit Brexit payments disruption

The FCA announced changes to the open banking identification requirements aimed at limiting the risk of disruption to open banking services after Brexit. In policy statement PS20/13, Amendments to the open banking identification requirements (eIDAS certificates), the FCA says it will permit UK-based third-party providers (TPPs) to use an alternative to eIDAS certificates to access customer account information from account providers, or initiate payments, after Brexit. The FCA says firms must act to ensure they can continue to provide open banking services.

Sources: FCA announces changes to open banking identification requirements and  OBIE response to the FCA’s report on eIDAS consultation.

FCA confirms position on share trading obligation post-Brexit

The FCA confirmed its approach to the share trading obligation (STO) at the end of the Brexit transition period, if mutual equivalence is not agreed. The FCA says it will use its Temporary Transitional Power (TTP) to avoid disruption and allow firms to continue trading all shares on EU trading venues and systematic internalisers (SIs).

Source: FCA sets out its approach to the share trading obligation.

FCA publishes webpages on market making exemptions and reporting net short positions in preparation for Brexit

The FCA published webpages for firms considering the use of market making exemptions from January 2021, reminding firms of the need to notify the FCA before the end of the Brexit transition period, and for firms that report net short positions.

Sources: Market making exemptions and preparing for Brexit and  Net short positions reporting and preparing for Brexit.

House of Lords EU Services sub-committee seeks views on financial services after Brexit

The House of Lords EU Services sub-committee is inviting written contributions to its ongoing inquiry into financial services after Brexit. It seeks evidence on the priorities for the future UK-EU relationship in the financial services sector and the potential consequences if no free trade agreement is reached. The committee is particularly keen to hear from practitioners and small businesses across the UK, including the regions and devolved nations. Responses are sought by 20 November 2020.

Source: Committee invites fresh evidence to its inquiry on financial services after Brexit.

For further information, see: Brexit—impact on financial services.

Services and investment sectors—new Brexit transition webpage

The government published a fresh webpage for UK businesses in the services and investment sectors collating existing stakeholder and sectoral guidance on preparation for the end of the transition period. Subjects covered include visiting Europe from 1 January 2021, auditing, complying with the new immigration policies for recruiting from overseas, .eu domain names, eCommerce Directive, data protection and NIS Regulations, among other things. The majority of the guidance within the new webpage is not new but has been collated by sector for ease of reference and bookmarking. Some of the guidance may change as the transition period progresses, so stakeholders are advised to monitor these pages for updates.

Source: Services and investment sector: end of transition period guidance.

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Coronavirus (COVID-19)

Coronavirus (COVID-19)—ECB’s Enria discusses supervisory challenges of the pandemic and beyond

The European Central Bank (ECB) published a speech by the chair of its supervisory board, Andrea Enria, on supervisory challenges in light of the coronavirus (COVID-19) pandemic. Enria discusses ECB Banking Supervision’s countercyclical response to the pandemic, the need for banks to proactively manage credit risks, the importance of ensuring there is no repeat of history with regard to asset quality, and the urgent need to address pre-crisis structural weaknesses.

Source: ECB speech: Supervisory challenges of the pandemic and beyond.

Coronavirus (COVID-19)—Yves Mersch discusses supervisory responses

The ECB published a speech by Yves Mersch, a member of its executive board and vice-chair of its supervisory board, delivered at the European System of Central Banks (ESCB) Legal Conference. Mersch explored the legal framework governing the ECB’s response to the coronavirus (COVID-19) pandemic, and called for innovative supervisory measures to tackle the crisis.

Source: Legal aspects of the ECB’s response to the coronavirus (COVID-19) pandemic—an exclusive but narrow competence.

ESMA sets out corporate reporting enforcement priorities in light of coronavirus (COVID-19)

The European Securities and Markets Authority (ESMA) issued its annual public statement on European common enforcement priorities, which sets out the priorities that EEA corporate reporting enforcers will consider when examining listed companies’ 2020 annual financial reports. The aim is to promote the consistent application of the International Financial Reporting Standards (IFRS) and other financial and non-financial reporting requirements, and to provide adequate transparency regarding the consequences of the coronavirus (COVID-19) pandemic.

Source: European accounting enforcers to enhance transparency on COVID-19 impact.

Eurogroup discusses coronavirus (COVID-19), banking union and digital euro

The Eurogroup discussed coronavirus (COVID-19), banking union and the euro as a digital currency in a video conference on 3 November 2020. The President of the Eurogroup, Paschal Donohoe, says that ministers see the digital euro as a top priority.

Source: Video conference of the Eurogroup, 3 November 2020.

FCA updates advice to mutual societies on coronavirus (COVID-19) and general meetings

The Financial Conduct Authority (FCA) updated its webpage on mutual societies to provide a coronavirus (COVID-19) update on general meetings.

Source: FCA updated webpage on coronavirus (COVID-19) and mutual societies.

UK Finance welcomes coronavirus (COVID-19) business lending extensions

UK Finance responded to HM Treasury’s announcement that the deadline for applications to the government-backed lending schemes and the Future Fund have been extended until 31 January 2021.

Source: UK Finance responds to extension of COVID-19 lending schemes until 31 January 2021.

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UK, EUand international regulators and bodies

ESAs’ Board of Appeal dismisses case against EIOPA on alleged non-application of EU law

The Joint Board of Appeal of the European Supervisory Authorities (ESAs) published its decision in relation to an alleged non-application of Union law by six national competent authorities (NCAs) brought by Mr Howerton against the European Insurance and Occupational Pensions Authority (EIOPA). In its decision, the Board of Appeal dismissed the appellant’s claim as inadmissible as the facts described did not seem to involve insurances and occupational pension funds or any other subject-matter within the remit of EIOPA nor of the Board of Appeal.

Source: ESAs’ Board of Appeal dismisses case against EIOPA on alleged non-application of Union law as manifestly inadmissible.

ESMA’s fast track peer review of Wirecard collapse finds ‘deficiencies’ in German supervisory system

ESMA published the results of its fast track peer review of the events leading to the collapse of Wirecard AG and the supervisory response by BaFin (Bundesanstalt für Finanzdienstleistungaufsicht) and the Financial Reporting Enforcement Panel (FREP). The report identifies a number of ‘deficiencies, inefficiencies and legal and procedural impediments’ relating to the independence of BaFin from issuers and government, market monitoring by both BaFin and FREP, examination procedures of FREP, and the effectiveness of the supervisory system in the area of financial reporting.

Sources: ESMA identifies deficiencies in German supervision of Wirecard’s financial reportingPeer review report: Fast track peer review on the application of the Guidelines on the Enforcement of Financial Information (ESMA/2014/1293) by BaFIN and FREP in the context of Wirecard and  Questions and answers: Fast track peer review on the Wirecard case.

FCA publishes board minutes of September 2020 meeting

The FCA published the minutes of its virtual board meeting held on 17 September 2020. The board discussed the General Insurance Pricing Practices (GIPP) Market Study, and the potential impact of its proposed remedies on competition, as well as the Perimeter Annual Report 2019/20 and general coronavirus (COVID-19) issues.

Source: FCA board minutes: 17 September 2020.

October 2020 edition of ISDA in review published

The International Swaps and Derivatives Association (ISDA) published the October 2020 edition of its ‘ISDA In Review’ series. The article includes links to new documents, research papers, press releases and comment letters published in October 2020.

Source: ISDA In Review – October 2020.

PRA publishes Regulatory Digest for October 2020

The Prudential Regulation Authority (PRA) published its Regulatory Digest for October 2020, setting out key news and publications delivered for the month. The issue highlights the coronavirus (COVID-19)-related letter sent from the PRA’s Credit Union Supervision Team to directors of PRA-regulated credit unions, and the £96.6m fine imposed by the PRA and the Financial Conduct Authority on Goldman Sachs International for risk management failures in connection with 1MDB.

Source: PRA Regulatory Digest—October 2020.

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Prudential requirements

BCBS reports to G20 leaders on Basel III implementation and coronavirus (COVID-19) measures

The Basel Committee on Banking Supervision (BCBS) published a report to the G20 leaders for their summit on 21-22 November 2020, providing updates on member jurisdictions’ progress in implementing the Basel III regulatory reforms, and on the Basel framework-related measures taken by Basel Committee members in response to the coronavirus (COVID-19) pandemic.

Source: Basel Committee reports to G20 leaders on Basel III implementation.

EBA consults on revised guidelines on sound remuneration policies

The European Banking Authority (EBA) is consulting on revisions to its 2015 guidelines on sound remuneration policies. The revised guidelines take into account the amendments introduced by the fifth Capital Requirements Directive (CRD V) (Directive (EU) 2019/878) in relation to institutions’ sound remuneration policies and in particular the requirement that those remuneration policies should be gender neutral. The consultation runs until 29 January 2021.

Source: EBA launches consultation on revised guidelines on sound remuneration policies.

EBA publishes final draft RTS and revised guidelines on global systemically important institutions

The EBA published revised final draft regulatory technical standards (RTS) to specify how to identify the indicators of global systemic importance, as well as revised guidelines on their disclosure. The need for this revision was prompted by the revised framework introduced by the Basel Committee on Banking Supervision (BCBS) in July 2018 to identify global systemically important banks (G-SIBs) as well as by new requirements laid down in the fifth Capital Requirements Directive (CRD V).

Source: EBA publishes revised final draft technical standards and guidelines on methodology and disclosure for global systemically important institutions.

EBA report on own funds and loss absorbing instruments under CRR

The EBA published its first monitoring report under Article 80(1) of the Capital Requirements Regulation (CRR) on minimum requirement for own funds and eligible liabilities (MREL) and total loss absorbing capacity (TLAC) instruments. This report is intended to inform stakeholders about the implementation review performed by the EBA on TLAC-MREL instruments. It also sets out the EBA’s views and current recommendations on specific features that are common in these instruments.

Source: EBA issues first monitoring report on TLAC-MREL instruments accompanied by 15 recommendations.

ECB publishes overview and cost-benefit questionnaire for the Eurosystem Integrated Reporting Framework

The ECB published an overview of the key facts and information on the Eurosystem Integrated Reporting Framework (IRef) and how it fits in with the broader European System of Central Banks (ESCB)/Single Supervisory Mechanism data integration strategy. The ECB has also published a cost-benefit assessment (CBA) questionnaire on the IReF for the banking industry.

Sources: The Eurosystem Integrated Reporting Framework: an overview and  Cost-benefit assessment questionnaire on the Integrated Reporting Framework for the banking industry.

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Risk management and controls

EFAMA issues statement on IIFA Cybersecurity program basics

The European Fund and Asset Management Association (EFAMA) issued a statement on a global initiative on cyber security led by the International Investment Funds Association (IIFA) and supported by fund associations around the world. IIFA has published a document ‘IIFA Cybersecurity program basics’ which sets out key cyber prevention standards for investment management companies.

Source: EFAMA announcement on IIFA Cybersecurity program basics.

SEC awards $US 28m to whistleblower who provided significant information

The US Securities and Exchange Commission (SEC) announced that it has awarded over $US 28m to a whistleblower who provided significant information which allowed the SEC to bring a successful enforcement action. The whistleblower reported the information internally which prompted the company to initiate an internal investigation. The whistleblower then went on to provide testimony and identified a key witness. The Chief of the SEC’s Office, Jane Norberg, said: 'I hope our recent awards will continue to incentivize whistleblowers to come forward to report potential fraud or other wrongdoing.'

Source: SEC Awards Over $28 Million to Whistleblower .

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Financial crime

CPS cracks down on major investment scammers

The Crown Prosecution Service (CPS) announced that its specialist prosecutors have brought three major investment scammers to justice since the end of September 2020. The investigations included a five-year investment scam which resulted in a loss of £1,200,000 and two Ponzi schemes, one worth £20m which lasted 10 years and one which lasted 13 years.

Source: Specialist prosecutors bring major investment scammers to justice.

EBA publishes opinion on AML/CFT issues for prudential supervisors in the context of the SREP

The EBA published an opinion setting out in high-level terms how prudential supervisors should consider money laundering and terrorist financing (ML/TF) risks in the context of the supervisory review and evaluation process (SREP).

Source: EBA sets out how prudential supervisors should take money laundering and terrorist financing risks into account in the Supervisory Review and Evaluation Process.

ECOFIN discusses anti-money laundering and terrorism financing, and NPLs

Economics and finance ministers of EU member states discussed anti-money laundering and terrorism financing, and non-performing loans (NPLs) in an Economic and Financial Affairs Council (ECOFIN) meeting that took place by video conference on 4 November 2020. Following the meeting, the Council of the EU endorsed conclusions that will help set the European Commission’s agenda on anti-money laundering and terrorism financing for the year ahead.

Sources: Video conference of economics and finance ministers, 4 November 2020 and Remarks by executive vice-president Dombrovskis at the ECOFIN press conference.

Evidence on corporate criminal liability inconclusive says government

The government published its response to its call for evidence concerning corporate liability for economic crime. Evidence was sought on whether the identification doctrine is deficient in effectively enforcing criminal law against large modern companies. Following consideration of the evidence received, the government has concluded that the evidence submitted was inconclusive and further work is required before considering changing the law. The government has commissioned an expert review into the matter by the Law Commission.

Source: Corporate liability for economic crime: call for evidence.

FATF publishes consolidated assessment ratings table

The Financial Action Task Force (FATF) published a consolidated assessment ratings table which provides an overview of the ratings that assessed countries have obtained for effectiveness and technical compliance. The FATF, through its nine FATF-Style Regional Bodies (FSRBs), unites a global network of 205 jurisdictions that have each committed at the highest level, to implementing the FATF recommendations. The FATF and FSRBs conduct peer reviews to assess how effectively their respective members have implemented the FATF recommendations.

Source: Consolidated assessment ratings.

Law Commission launches project analysing corporate criminal liability

The Law Commission launched a review investigating corporate criminal liability laws and providing ways to reform them, following a request from various government departments. The review follows concerns over the effectiveness of current laws which criminalise acts by corporate entities committing economic crime and fear the UK will fall behind international standards. The Law Commission will draft an Options Paper analysing the effectiveness of the law and scope for improvement. Commercial and Common Law Commissioner, Sarah Green, said that the Law aims to publish the Options Paper in in late 2021.

Source: Law Commission begins project on Corporate Criminal Liability .

Money launderer sent back to prison after breaching SCPO

The National Crime Agency (NCA) announced that Shafiq Ahmed, a money transfer business owner, responsible for a £5m money laundering scheme has been sentenced to a year in prison at Kingston Crown Court after the NCA discovered he breached his Serious Crime Prevention Order (SCPO). Ahmed was originally sentenced in June 2013 at Blackfriars Crown Court to eight years in prison for laundering millions of pounds, he was later released on licence in July 2017 having served half his sentence. At the same court, on 23 October 2014, Ahmed was made subject to a confiscation order and ordered to give over £829,427 in profits obtained through his criminal activities and a SCPO was made. On 5 August 2020, NCA officers arrested Ahmed and conducted a search of his home, seizing a mobile phone and SIM cards plus documentation relating to multiple undeclared accounts, companies, and properties as well as cash and credit and debit cards. Following a second NCA investigation, Ahmed has been sent back to prison.

Source: Money launderer sent back to prison after second NCA investigation.

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Complaints, compensation and claims management

Complaints Commissioner publishes final reports on complaints against FCA

The Complaints Commissioner published four final reports which relate to complaints made against the FCA and were issued in October 2020. The Complaints Commissioner partially upheld one of the complaints and issued recommendations to the FCA regarding its complaints handling.

Sources:

  • FCA00749—Issued 16 October 2020, published 3 November 2020—the CC did not uphold this complaint, but it did ask the FCA to consider whether, in all cases where a significant degree of compensation is being sought but is not agreed, the FCA should explain to complainants that they may wish to take legal advice about alternatives

  • FCA00813—Issued 16 October 2020, published 3 November 2020—the CC partially upheld the complaint, and recommended that the FCA should (a) offer £50 to the complainant for its service failings and the distress and inconvenience caused and (b) review its complaints handling practices in response to points made in the CC’s report (both of which the FCA accepted)

  • FCA00808—Issued 14 October 2020, published 3 November 2020—complaint not upheld

  • FCA00823—Issued 13 October 2020, published 3 November 2020—complaint not upheld

Complaints Commissioner highlights possible gap in Friendly Society Act 1992

The Complaints Commissioner published its final report on a complaint regarding the review by the PRA of a friendly society’s application to convert to a company. While the Commissioner did not uphold the complaint, it suggested that the PRA consider whether a gap exists in the Friendly Society Act 1992 that needs to be addressed.

Source: PRA00015—Issued 16 October 2020 published 03 November 2020.

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Markets and trading

ESMA final report on MAR technical standards on SME growth markets

ESMA published its final report on the technical standards under the Market Abuse Regulation (MAR), as amended by the SME Growth Markets (SME GMs) Regulation. The final report sets out technical standards supplementing MAR in the areas of SME GMs, in particular on liquidity contracts for issuers of financial instruments admitted to trading on an SME GM and their liquidity providers, and insider lists for SME GMs issuers.

Source: ESMA submits two draft technical standards under the revised Market Abuse Regulation to the European Commission.

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Regulation of benchmarks and IBOR reform

ECB opinion on proposed amendments to the Benchmarks Regulation published in Official Journal

The opinion of the European Central Bank (ECB) of 18 September 2020 on a proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1011 (Benchmarks Regulation) as regards the exemption of certain third country foreign exchange benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation (CON/2020/20) has been published in the Official Journal.

For further information, see: Benchmarks Regulation—essentials.

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Regulation of capital markets

Coronavirus (COVID-19)—ECON proposes changes to capital markets recovery package

The European Parliament’s Economic and Monetary Affairs Committee (ECON) agreed an amended version of the proposed amendments to MiFID II included in the European Commission’s capital markets recovery package.

Source: COVID-19 recovery: balance investor protection and compliance costs for firms.

For further information, see: Coronavirus (COVID-19)—EU capital markets recovery package.

ICMA ERCC issues fifth edition of its SFTR recommendations

The International Capital Markets Association (ICMA) European Repo and Collateral Council (ERCC) published an updated version of the ICMA Recommendations for Reporting under the Securities Financing Transactions Regulation (SFTR). This is the fifth public edition of the document, which was initially released on 24 February 2020 and previously updated on 7 September 2020.

Source: ICMA ERCC publishes fifth edition of its SFTR recommendations.

For further information, see: Securities Financing Transactions Regulation (SFTR)—essentials.

ICMA Electronic Trading Council publishes paper on axe distribution best practice standards

The Electronic Trading Council (ETC) of the International Capital Market Association (ICMA) published a paper on axe distribution best practice standards. ‘Axe’ is the term commonly used in fixed income to advertise buy or sell interests, similar to ‘indication of interest’ (IOI) in equity markets.

Source: ICMA Electronic Trading Council (ETC) publishes paper on Axe Distribution Best Practice Standards.

IOSCO report discusses ways to develop emerging capital markets

The International Organization of Securities Commissions (IOSCO) Growth and Emerging Markets Committee (GEMC) published a report examining the challenges and opportunities that emerging markets jurisdictions (EMs) face when developing their capital markets as key drivers of economic growth and financial resilience and inclusion. The report makes five key recommendations that EMs should consider when seeking to strengthen their capital markets.

Source: IOSCO recommendations aim to help develop emerging capital markets.

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Regulation of derivatives

BIS report looks at risks and benefits of FX execution algorithms

The Bank for International Settlements (BIS) Markets Committee published a report which examines the drivers and implications of the increase in execution algorithm (EA) usage in FX markets. EAs are designed to buy or sell FX according to a set of user instructions. The report draws on a survey of 70 sophisticated market participants globally, and extensive industry-wide outreach, and provides various perspectives on the use of EAs, including by central banks.

Source: FX execution algorithms contribute to market functioning but bring new challenges.

CCP12 updates its public quantitative disclosure template and adds FAQs

CCP12, the global association for central counterparties (CCPs), ha released an updated CCP12 public quantitative disclosure (PQD) template in XLSX format, and a new PQD FAQs guide. The new PQD template provides further clarity in relation to populating the disclosure fields in a standardised approach, whilst ensuring machine readable data.

Source: CCP12 releases new public quantitative disclosure documents.

FCA provides information on process for existing intra-group margin exemptions under EMIR

The FCA updated its EMIR webpage to provide information on the process for existing intra-group exemptions from margin between UK and third-country group entities. The FCA also issued requirements and directions under Regulations 8(4) and (7) of the Financial Services and Markets Act 2000 (Over the Counter Derivatives, etc) Regulations 2013, SI 2013/504 (the requirements and directions).

Sources: EMIR webpage and Requirements and directions under Regulations 8(4) and (7) of the Financial Services and Markets Act 2000 (Over the Counter Derivatives, etc) Regulations 2013.

For further information, see: EMIR—essentials.

FIA white paper on impact of pandemic volatility on CCP margin requirements

The Futures Industry Association (FIA) issued a white paper on the impact of pandemic volatility on central counterparty (CCP) requirements, as part of its continuing effort to enhance risk management in the clearing system. Findings include that the CCP margin requirements increased ‘dramatically’ during the coronavirus (COVID-19) pandemic. In order to reduce liquidity risk, FIA recommends improvements to margin models, including improved design and application of margin floors.

Source: FIA issues white paper on the impact of pandemic volatility on CCP margin requirements.

ISDA publishes sixth set of legal guidelines for smart derivatives contracts: credit derivatives

ISDA published the sixth in a series of legal guidelines for smart derivatives contracts, which are intended to support technology developers, lawyers and other key stakeholders in the development of smart derivatives contracts and other technology solutions in the credit derivatives (CDS) market.

Source: Legal guidelines for smart derivatives contracts: credit derivatives.

ISDA updates global OTC derivatives compliance calendar

ISDA updated its calendar which contains both compliance deadlines and regulatory dates for the over-the-counter (OTC) derivatives space.

Source: Updated OTC Derivatives Compliance Calendar.

SESFOD survey reports easing of overall credit terms and decrease in valuation disputes

The ECB published a summary of the results of its September 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD). Respondents reported an easing of overall credit terms and conditions—a partial reversal of the tightening recorded in the previous two quarterly survey rounds. The survey also found an increase in pressure to obtain more favourable conditions, in particular from non-financial corporate counterparties, and that valuation disputes decreased for both securities financing and derivatives transactions.

Source: Results of the September 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).

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Banks and mutuals

Coronavirus (COVID-19)—ECB’s Mersch ponders bad banks and dividend bans

Yves Mersch, a member of the Executive Board of the ECB and vice-chair of its Supervisory Board, said that while a cross-border ‘bad bank’ could make sense for the EU, it is a long way off. Speaking on 30 October 2020 at an online UBS event on the European economic and policy outlook, he also discussed the prospects of a further ban on dividends in light of the second wave of coronavirus (COVID-19).

Source: ECB: Yves Mersch Q&A at UBS event.

EBA issues second report on implementation of product oversight and governance guidelines

The EBA published its second report on how the industry has implemented the EBA guidelines on product oversight and governance arrangements (POG). The report identifies a range of good practices and encourages financial institutions to use them, while noting that many financial institutions do not focus sufficiently on ensuring that consumers’ needs are met in line with the guidelines.

Source: EBA encourages financial institutions to put the required focus on consumers’ interests when applying product oversight and governance arrangements.

LSB publishes guidance on application of the Access to Banking Standard

The Lending Standards Board (LSB) published guidance on the Access to Banking Standard, to help provide greater consistency in the way the Standard is applied by its signatory firms. The Standard is designed to ensure that customers affected by branch closures receive sufficient communication and clarity on the reasons for the closure and adequate support in accessing alternative banking services.

Source: Industry guidance on the Access to Banking Standard published by the LSB.

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA director outlines priorities for consumer credit

The executive director of supervision—retail and authorisations at the FCA, Jonathan Davidson, spoke about the challenges of the coronavirus (COVID-19) crisis for the consumer credit market, the FCA’s expectations around forbearance, the operational challenges firms will need to overcome, the importance of treating vulnerable customers appropriately, and the future direction of the industry.

Source: Acting flexibly and treating customers fairly in the face of a pandemic.

Coronavirus (COVID-19)—FCA proposes additional guidance for consumer credit

The FCA announced proposals for further support to consumer credit borrowers impacted by coronavirus (COVID-19). The FCA is proposing to extend payment deferrals and other support to personal loans, credit cards, motor finance, rent-to-own, buy-now-pay-later and pawnbroking customers who are experiencing payment difficulties because of coronavirus. It is asking for comment on the proposals by 6 November 2020.

Source: FCA announces proposals for further support to consumer credit borrowers impacted by coronavirus.

For further information, see: FCA: Treating Customers Fairly—essentials and Coronavirus (COVID-19)—implications for consumer credit, overdrafts and mortgages.

Coronavirus (COVID-19)—FCA sets out further proposals to support mortgage borrowers

The FCA published details of its further proposals to support mortgage borrowers impacted by the coronavirus (COVID-19) pandemic. In light of increasing restrictions announced by the government in recent weeks to address the pandemic, the FCA is proposing to enhance the measures it introduced in September 2020 to support consumers who are experiencing payment difficulties due to the coronavirus. Feedback on the proposals is sought by 10am on 5 November 2020.

Sources: FCA announces further proposals to support mortgage borrowers impacted by coronavirus and  UK Finance and Building Societies Association respond to announcement of FCA consultation on mortgage payment deferrals.

FCA launches call for input into the Woolard Review on change and innovation in the unsecured credit market

The FCA launched a call for input in relation to a review of change and innovation in the unsecured consumer credit market and how regulation can support a healthy lending market. In September 2020 the FCA board asked Christopher Woolard, the then outgoing interim chief executive of the FCA, to report in the New Year on how this market is changing, particularly in the light of coronavirus (COVID-19), the benefits and risks which change brings, and how regulation can meet the challenges and support the future opportunities.

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

FCA publishes mortgage intermediaries Dear CEO letter

The FCA published a Dear CEO letter addressed to mortgage intermediaries, in which it states that the mortgage intermediary market is working well but there are potential harms. The FCA notes that its Mortgages Market Study (MMS) (MS16/2) found that the mortgage market works well in many respects: engagement is high and consumers are getting mortgages that are suitable and affordable. However, the FCA notes that the MMS identified a few potential harms relating to the regulator’s mortgage advice and selling standards, and as a result, the FCA recently issued policy statement PS20/01, which summarises the feedback it received and sets out the FCA’s final rules.

Source: Mortgage intermediaries portfolio letter.

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Regulation of insurance

Coronavirus (COVID-19)—FCA reminds insurance firms to review product value

The FCA published a webpage reminding insurance firms to review the value of their products in light of the impacts of the coronavirus (COVID-19) pandemic. The FCA says firms are expected to complete their reviews by 3 December 2020. In addition, the FCA has confirmed additional measures to help customers in financial difficulty.

Source: FCA reminds insurance firms to review the value of their products in light of the impacts of coronavirus.

FCA business interruption test case—Supreme Court grants permission to appeal

The ​Supreme Court granted the FCA, Arch, Argenta, Hiscox, MS Amlin, QBE, RSA and the Hiscox Action Group as intervenors, permission to appeal the decision of the FCA business interruption test case, concerning non-damage business interruption insurance claims, arising out of the coronavirus (COVID-19) lockdown. The hearing will take place remotely before Lord Reed, Lord Hodge, Lord Kitchin, Lord Hamblen and Lord Leggatt. The hearing will commence on 16 November 2020 and it is estimated to last four days.

For further information ,see: Coronavirus (COVID-19)—business interruption insurance.

FCA 'Dear CEO’ letter sets out supervision strategy for Lloyd’s and London Market Intermediaries and Managing General Agents

The FCA published a Dear CEO letter relating to its supervision strategy for Lloyd’s and London Market Intermediaries and Managing General Agents (LLMI). The letter sets out the FCA’s view of the key risks of harm to customers or markets which are posed by LLMI firms, outlines the FCA’s expectations of those firms and their CEOs (including how they should be mitigating those key risks), and asks CEOs to consider to what extent their firms present such risks and their strategies for mitigating them.

Source: Dear CEO letter: FCA supervision strategy for Lloyd’s & London Market Intermediaries and Managing General Agents (LLMI).

Insurers say EIOPA and ESRB approach to Solvency II review would undermine EU sustainability objectives

Insurance Europe (IE)—together with other insurance sector bodies—has written to the European Commission expressing concerns about the approach of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Systemic Risk Board (ESRB) to the Solvency II review. IE says the review provides an opportunity to enhance insurers’ ability to support the Commission’s growth and sustainability objectives, but warns that the EIOPA/ESRB approach to the review would ‘needlessly undermine’ their ability to do so.

Source: EIOPA and ESRB approach to Solvency II review would undermine insurers in facilitating EC CMU and Green Deal objectives.

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Payment services and systems

BoE publishes CHAPS & RTGS ISO 20022 migration: revised approach and final schemas

The Bank of England (BoE) published CHAPS & RTGS ISO 20022 migration: revised approach and final schemas October 2020. It forms a new baseline document for all of the BoE’s ISO 20022-related documentation and should be used as a handbook for CHAPS Direct Participants, reserves and settlement account holders, and related stakeholders and technology providers.

Source: CHAPS & RTGS ISO 20022 migration: revised approach and final schemas.

EPC publishes updated version 1.2 of the 2019 SEPA payment rulebooks

The European Payments Council (EPC) published an updated version 1.2 of the 2019 Single European Payments Area (SEPA) payment rulebooks. This version has no impact on the business and operational rules compared to the versions 1.0 and 1.1 of the 2019 rulebooks, or on any specification in the related implementation guidelines.

Sources: The updated version 1.2 of the 2019 EPC SEPA payment scheme rulebooks2019 SEPA Credit Transfer rulebook version 1.22019 SEPA Instant Credit Transfer rulebook version 1.22019 SEPA Direct Debit Core rulebook version 1.2 and 2019 SEPA Direct Debit Business-to-Business rulebook version 1.2.

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

EPC sets out measures for PSPs to process cross-border SEPA payments post-Brexit

The EPC issued a statement reminding payment service providers (PSPs) of the need to implement without delay measures to ensure a continued smooth processing of cross-border Single Euro payments area (SEPA) payments involving a UK-based SEPA payment scheme participant after the Brexit transition period ends on 31 December 2020.

Source: Brexit reminder: How to get ready for the end of the transition period.

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

FSB RCG for Asia discusses coronavirus (COVID-19) recovery, and cross-border payments roadmap

The Financial Stability Board (FSB) regional consultative group (RCG) for Asia held a virtual meeting where members discussed recent global and regional macroeconomic and financial market developments, including possible financial stability implications from the coronavirus (COVID-19) pandemic, steps to support a sound economic recovery, and the need to develop exit strategies. Members considered the financial stability implications for emerging markets of broader financial market developments, including those stemming from the rising debt levels and access to dollar funding where conditions have eased thanks to co-ordinated action by central banks.

Source: FSB Asia group discusses responses to COVID-19 and enhancing cross-border payments.

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Fintech and cryptoassets

European Parliament report looks at the fintech supervisory implications of Wirecard

The European Parliament published a study examining the supervisory implications of the Wirecard case. It highlights several lessons for the regulation and supervision of fintech companies, and emphasises that regulators need a deep understanding of fintech’s technologies and business models. The report argues that the global scope of fintech’s activities also calls for convergence and co-ordination of rules and supervisory practices at the European level and beyond.

Source: What are the wider supervisory implications of the Wirecard case?

FCA publishes MoU with Reserve Bank of India on fintech collaboration

The FCA published a Regulatory Co-operation Agreement on fintech with the Reserve Bank of India (RBI) (MoU). This is intended to provide a framework for collaboration and referrals between the innovation functions of each authority. It also sets out how the authorities plan to share and use information on innovation in their respective markets.

Source: Regulatory Co-operation Agreement on fintech between Reserve Bank of India (RBI) and FCA.

FIA announces nine fintech startups chosen for sixth annual Innovators Pavilion

The Futures Industry Association (FIA) announced that nine companies have been chosen to exhibit in the FIA Innovators Pavilion at the 36th Annual Futures and Options Expo, which will take place in a virtual environment on 10-12 November 2020.

Source: FIA announces fintech startups chosen for sixth annual Innovators Pavilion.

FSB announces fintech virtual workshops

The Financial Stability Board (FSB) is to hold fintech virtual workshops on 4 and 5 November 2020 from 13.00-15.00 (CET).

Source: FSB virtual workshops on fintech issues.

Global Financial Innovation Network seeks firms for cross-border testing of financial products

The FCA announced that it will be among 23 regulators taking part in the cross-border testing initiative organised by the Global Financial Innovation Network (GFIN), a group of over 60 international organisations committed to supporting financial innovation in the interests of consumers. GFIN is inviting applications from firms to test innovative financial products, services, business models or regulatory technology across more than one country or jurisdiction.

Source: FCA to participate in GFIN cross-border testing of financial products and services.

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Sustainable finance

Council agrees its position on Commission’s revised InvestEU proposal

The Council of the European Union announced that Member States’ EU ambassadors have agreed its partial mandate for negotiations with the European Parliament on a revised European Commission proposal for the InvestEU programme. InvestEU aims to encourage public and private investor participation in financing and investment operations by providing guarantees from the EU budget to address failures and sub-optimal investment situations.

Source: InvestEU: Council agrees its position on revised Commission proposal.

EBA seeks views on ESG risk management and supervision, ahead of final report

The EBA published a discussion paper on environmental, social and governance (ESG) risk management and supervision, aiming to collect feedback for the preparation of its final report on the topic. The discussion paper provides a comprehensive proposal on how ESG factors and ESG risks could be included in the regulatory and supervisory framework for credit institutions and investment firms. Responses are sought by 3 February 2021.

Source: The EBA launches consultation to incorporate ESG risks into the governance, risk management and supervision of credit institutions and investment firms.

ESAs publish letter from European Commission on the application of the Regulation on sustainability-related disclosures

ESMA, EIOPA and the EBA (the ESAs) published a letter dated 20 October 2020 from the European Commission on the application of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector. The letter confirms that all application dates are being maintained as laid down by the Regulation with effect from 2021, notwithstanding that the timetable for responding to the ESAs’ joint consultation on ESG disclosures (JC 2020 16) will not permit regulatory technical standards (RTS) to be developed by the ESAs by the original target date of 30 December 2020.

Source: Letter from European Commission to the ESAs on the application of Regulation (EU) 2019/2088 on the sustainability-related disclosures in the financial services sector.

ISLA announces changes to its ESG working structure

The International Securities Lending Association (ISLA) announced its decision to bring all of its environmental, social and governance (ESG) activity into its working group structure. As a result, its Council for Sustainable Finance will no longer exist as a separate entity within ISLA, but instead relevant aspects of ESG impacting ISLA member firms will be covered by the main ESG working group or new or existing groups or subgroups as appropriate. ISLA says this will lead to efficiencies from a delivery perspective, as the ESG debate moves from a concept and design phase to one of detailed implementation.

Source: Important changes to ICSF & ISLA’s plans to take the ESG agenda forward.

TFCD presents 2020 status report and launches consultation on future metrics

The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB), published its 2020 status report. The report reviewed 1,700 companies’ reports in relation to disclosure of climate-related financial information. It found that the amount of reports which aligned with the TCFD recommendations had steadily increased since 2017, when the recommendations were first published. The TFCD has also launched a consultation on forward-looking financial sector metrics to be disclosed by institutions, which remains open until 27 January 2021.

Read the full consultation document here.

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Dates for your diary

 

DateSubjectEvent
6 November 2020Regulation of benchmarks and IBOR reformDeadline for responses to ESMA’s consultation on fees for benchmark administrators is 6 November 2020.
6 November 2020Risk management and controlsDeadline for responses to the Basel Committee’s consultative documents on proposed principles for operational resilience, as well as views on updating its principles for the sound management of operational risk (PSMOR).
6 November 2020Prudential requirementsDeadline for responses to PRA’s consultation paper CP15/20, which sets out its proposals to update its expectations regarding the measurement of risks not in value at risk (RNIV), and the meaning of ‘period of significant financial stress relevant to the institution’s portfolio’ for stressed value at risk (sVaR) calculation.
9 November 2020Crowdfunding platformsRegulation (EU) 2020/1503 on European crowdfunding service providers for business (the EU Crowdfunding Regulation) and Directive (EU) 2020/1504, which amends MiFID II to exclude crowdfunding service providers from its scope, both enter into force on 10 November 2020.
12 November 2020Prudential requirements


Banks and mutuals
Deadline for responses to the EBA’s consultation (EBA/CP/2020/21) on draft guidelines on criteria for the use of data inputs in the risk-measurement model referred to in Article 325bc of the Capital Requirements Regulation (Regulation (EU) No 575/2013) (CRR) under the Internal Model Approach (IMA) for market risk.

 

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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.