FS weekly highlights—6 August 2020

FS weekly highlights—6 August 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
PRIIPs
UK, EU and international regulators and bodies
Authorisation, approval and supervision
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Financial crime
Consumer protection
Complaints, compensation and claims management
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Securities financing transactions
Crowdfunding
Banks and mutuals
Consumer credit, mortgage and home finance
Regulation of insurance
Business interruption insurance test case
Regulation of personal pension and stakeholder products
Payment services and systems
Fintech and cryptoassets
Islamic finance
Dates for your diary

 

Coronavirus (COVID-19)

For further information on the effects of 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)—FCA consults on levy rates for additional debt advice funding

The Financial Conduct Authority (FCA) launched a consultation (CP20/16) on the rates at which it proposes to charge levies for additional funding for the Money and Pensions Service (MaPS) and the devolved authorities so they can meet an increase in demand for debt advice in 2020/21 due to the COVID-19 pandemic. The consultation closes on 30 September 2020.

Source: CP20/16: Debt advice levy rates for 2020/21 – additional funding .

Coronavirus (COVID-19)—FCA launches consultation on consumer cancellation and refund guidance

The FCA launched a consultation on guidance for firms to help their customers identify the quickest and easiest options to claim for cancelled travel or plans due to the COVID-19 pandemic. The guidance is aimed at credit and debit card firms, as well as insurance providers and consumer organisations, providing them with assistance on how to handle enquiries and claims in a ‘reasonable timescale, fairly and in a way that minimises inconvenience to the consumer’. The consultation closes on 13 August 2020.

Source: Cancellations and refunds: helping consumers with rights and routes to refunds.

Coronavirus (COVID-19)—EESC issues opinion on InvestEU and Solvency Support proposals

The Council of the EU published an opinion, given by its European Economic and Social Committee (EESC), on the European Commission’s new proposal for a regulation establishing the InvestEU Programme and on its proposal for a regulation amending  Regulation (EU) 2015/1017 as regards the creation of a Solvency Support Instrument (SSI). Both regulations were proposed in response to the COVID-19 pandemic.

Source: OPINION European Economic and Social Committee - Proposal for a regulation of the European Parliament and of the Council establishing the InvestEU Programme [COM(2020) 403 final – 2020/0108 (COD)] - Proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2015/1017 as regards creation of a Solvency Support Instrument [COM(2020) 404 final – 2020/0106 (COD)].

HMT announces more businesses to benefit from CBILS due to State Aid changes

HM Treasury announced that more businesses will benefit from the Coronavirus Business Interruption Loan Scheme (CBILS) due to changes to state aid rules following UK government and industry lobbying. Previously businesses classed as 'undertakings in difficulty' (those with high levels of debt and accumulated losses) were unable to access the funding because of restrictions in the EU’s Temporary State Aid Framework. From today, businesses classed in this category that have less than 50 employees and a turnover of less than £9m can apply to CBILS. In addition, the Economic Secretary to the Treasury, John Glen MP, and the Small Business Minister, Paul Scully MP, have written to the Chair of UK Finance, Bob Wigley, highlighting their expectations that these changes are implemented to ensure more businesses are receiving financial support.

Source: More businesses set to benefit from government loan scheme.

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Brexit news

Brexit Bulletin―government estimates 250-300 Brexit SIs before IP completion day

The Secondary Legislation Scrutiny Committee (SLSC) published correspondence with the Leader of the House of Commons, Jacob Rees Mogg, following its request for clarification on the anticipated flow and volume of Brexit SIs to be introduced in the UK Parliament before the end of the transition/implementation period (IP completion day). The government expects to lay approximately 250-300 more Brexit SIs before the end of December 2020. Approximately half of those SIs will be subject to the affirmative procedure, with volumes 'likely to be concentrated' in September and October 2020.

Source: Secondary Legislation Scrutiny Committee—24th Report of Session 2019–21: Appendix 2.

Brexit Bulletin—briefing examines prospects and process for finalising deal on future UK-EU relationship

The House of Commons Library published a briefing looking at the status of negotiations on the future UK-EU relationship, following intensified talks and negotiating rounds held in June and July 2020. It looks at the negotiating timeline, following the recent announcement of further talks, and examines the prospects and process for finalising a deal by the end of the transition period on 31 December 2020.

Source: UK-EU future relationship negotiations update: is an agreement possible?

For further information, see: Financial Services passporting, equivalence and the UK post-Brexit.

PRA consults on implementation of CRD V

The Prudential Regulation Authority (PRA) published Consultation Paper CP12/20 Capital Requirements Directive V (CRD V) (CP12/20), in which it consults on the implementation in the UK of elements of the Capital Requirements Directive (EU) 2019/878 (CRD V). The consultation closes on 30 September 2020.

Source: Capital Requirements Directive V (CRD V).

For further information, see: Impact of Brexit: CRR and prudential regulation—quick guide.

Brexit: HM Treasury statement on securitisation repository registration

HM Treasury announced that it will soon bring forward legislation to ensure the FCA has the relevant powers to enable a well-functioning securitisation regime following the end of the Brexit transition period. This legislation will cover securitisation repository registration arrangements under the UK Securitisation Regulation. It is intended to assist the FCA when considering draft applications for registration from prospective securitisation repositories prior to the end of the Brexit transition period.

Source: Securitisation repository application arrangements under the UK Securitisation Regulation .

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

ISDA paper finds Brexit may have ‘cliff-edge’ effect on OTC derivatives market

The International Swaps and Derivatives Association (ISDA), alongside the Italian Financial Markets Intermediaries Association (Associazione Intermediari Mercati Finanziari, or ASSOSIM), the Swedish Securities Dealers Association (Svenska Fondhandlareföreningen), the European Banking Federation and the Danish Securities Dealers Association (Børsmæglerforening Danmark), published a paper responding to concerns about the impact of Brexit on EU and UK firms and their EU and UK clients after IP completion day. The paper sets out reasons why IP completion day, unless mitigating action is take, will generate a ‘cliff-edge’ change in the EU regulatory requirements that apply to the over-the-counter (OTC) derivatives business, adversely affecting EU or UK firms and their EU and UK clients.

Source: The Impact of a Cliff-edge Brexit on OTC Derivatives .

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MiFID II

ESMA publishes data for the systematic internaliser calculations for equity, equity-like instruments, bonds and other non-equity instruments

The European Securities and Markets Authority (ESMA) published data for the systematic internaliser (SI) quarterly calculations for equity, equity-like instruments, bonds and, for the first time, for other non-equity instruments under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

Source: ESMA publishes data for the systemic internaliser calculations for equity, equity-like instruments, bonds and other non-equity instruments.

For further information, see: Systematic internalisers.

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PRIIPs

HM Treasury policy paper on amendments to onshored PRIIPs Regulation

HM Treasury published a policy paper on amendments to Regulation (EU) 1286/2014 (PRIIPs Regulation), providing an update on HM Treasury’s proposed approach to bringing forward amendments to the onshored PRIIPs Regulation to avoid consumer harm and provide the appropriate certainty to industry once the UK ceases to be bound by the EU regime. HM Treasury intends to legislate for these amendments when parliamentary time allows.

Source: Amendments to the PRIIPs Regulation.

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

EFAMA urges commission to extend UCITS exemption and review PRIIPs Regulation

The European Fund and Asset Management Association (EFAMA) wrote a letter to the European Commission on the draft regulatory technical standards (RTS) for PRIIPs, calling for an immediate extension of the exemption for Undertakings for Collective Investment in Transferable Securities (UCITS), as well as an urgent Level 1 review of the PRIIPs Regulation. EFAMA maintains that the UCITS Key Investor Information Document (KIID) should not be replaced with a PRIIPs Key Information Document (KID) before the PRIIPs KID’s flaws are remedied.

Source: PRIIPS – EFAMA calls for urgent Level 1 review and extension of the UCITS exemption .

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UK, EU and international regulators and bodies

ESMA launches call for interest in Consultative Working Group

ESMA launched a call for expressions of interest from prospective candidates wishing to join the Consultative Working Group (CWG) of the ESMA Secondary Markets Standing Committee (SMSC). Members are selected for the CWG for a two-year renewable term and the current term is due to expire shortly, so ESMA is starting the process to renew its composition. The CWG advises and assists the SMSC on technical standards to be submitted to the European Commission. The deadline for expressing interest is 14 September 2020.

Source: ESMA is seeking secondary market experts to join its consultative working group.

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Authorisation, approval and supervision

EBA and ESMA consult on revised joint guidelines for assessing the suitability of members of the management body and key function holders, EBA consults on revised guidelines on internal governance

The European Banking Authority (EBA) and ESMA launched a consultation on their revised joint guidelines on the assessment of the suitability of members of the management body and key function holders. In addition, the EBA has launched a consultation on revised guidelines on internal governance. Both reviews take into account the amendments introduced by CRD V and the Investment Firms Directive (IFD). The consultations close on 31 October 2020.

Sources: EBA and ESMA launch consultation to revise joint guidelines for assessing the suitability of members of the management body and key function holder and   EBA launches consultation to revise its Guidelines on internal governance.

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Prudential requirements

EBA publishes final draft ITS on MREL and TLAC reporting and disclosures

The EBA published its final draft implementing technical standards (ITS) on disclosure and reporting relating to the minimum requirement for own funds and eligible liabilities (MREL) and total loss-absorbing capacity (TLAC). The ITS, which were developed in accordance with mandates under Regulation (EU) 575/2013 (CRR) and Directive 2014/59/EU (BRRD), are seen as a key milestone in the implementation of the EBA roadmaps on Pillar 3 disclosures and on supervisory reporting.

Source: EBA publishes final draft technical standards on disclosure and reporting on MREL and TLAC.

For further information, see: Bank Recovery and Resolution Directive (BRRD)—essentials and   CRD IV—essentials.

PRA consults on implementation of CRD V

The PRA published Consultation Paper CP12/20 Capital Requirements Directive V (CRD V) (CP12/20), in which it consults on the implementation in the UK of elements of CRD V. The consultation closes on 30 September 2020.

Source: Capital Requirements Directive V (CRD V).

For further information, see: Impact of Brexit: CRR and prudential regulation—quick guide.

PRA supervisory disclosures

The PRA published information on rules and guidance, options and discretions, supervisory review and evaluation process (SREP), and aggregate statistical data. The PRA is required to publish this information as well as submitting it to the EBA in accordance with Article 143 of CRD IV and Commission Implementing Regulation 650/2014.

Source: Banking supervisory disclosures: rules and guidance, options and discretions, SREP, and aggregate statistical data.

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Financial stability 

EBA agrees on timeline and sample of 2021 EU-wide stress test

The Board of Supervisors (BoS) of the EBA agreed on the timeline and sample of the 2021 EU-wide stress test which will be carried out on ‘51 banks, of which 39 will be from the euro area, covering 70% of banking sector in the euro area, each non-Eurozone Member States and Norway’. The 2021 EU-wide stress test is expected to be launched in late January 2021 and the results are expected to be published late July 2021.

Source: EBA updates on 2021 EU-wide stress test timeline, sample and potential future changes to its framework .

EIOPA publishes Financial Stability Report of the (re)insurance and occupational pensions sector

The European Insurance and Occupational Pensions Authority (EIOPA) published its July 2020 Financial Stability Report of the (re)insurance and occupational pensions sector in the European Economic Area. The report states among other things that the COVID-19 pandemic proved the importance of the Solvency II regulatory framework and that the insurance sector had a ‘solid and comfortable capital buffer (median SCR ratio of 213%) which helped insurers to withstand the initial severe market shocks experienced with the Covid-19 crisis’ as of the year-end of 2019. However, it notes that ‘a high level of uncertainty on the magnitude of economic disruption increases downside risks going forward.’

Source: EIOPA outlines key financial stability risks of the European insurance and pensions sector.

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Risk management and controls

CP20/14: FCA consults on proposals to update dual-regulated firms Remuneration Code to reflect CRD V

The FCA published consultation paper CP20/14: ‘Updating the Dual-regulated firms Remuneration Code to reflect CRD V which contains proposals to amend its Dual-regulated firms Remuneration Code and relevant non-Handbook guidance in line with CRD V.

Source: FCA announces proposals to update Dual-regulated firms Remuneration Code.

For further information, see: Remuneration Code for Dual Regulated Firms.

FCA sets out views on employer salary advance schemes

The FCA issued a statement explaining its view of the risks and benefits of employer salary advance schemes (ESAS) and what employers and employees should consider when using them. ESAS are commonly promoted as an alternative to high cost credit and have a broadly similar economic effect.

Source: FCA sets out views on employer salary advance schemes.

FSB publishes responses to consultation on cyber incident response and recovery

The Financial Stability Board (FSB) published responses to its April 2020 consultation on effective practices for cyber incident response and recovery, which closed on 20 July 2020. The consultative document provides a toolkit of effective practices to assist financial institutions before, during and after a cyber incident.

Source: Public responses to consultation on Effective Practices for Cyber Incident Response and Recovery .

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Financial crime

European Ombudsman decision on the right to banking services and MLD4

The European Ombudsman published a decision in case Q4/2020/MHZ on the right to banking services (including a basic bank account and payment facilities) under the Payments Accounts Directive (2014/92/EU) (PAD) for an individual who is unable to comply with the provisions of the Fourth EU Anti-Money Laundering Directive ((EU) 2015/849) (MLD4).

Source: Report of the European Ombudsman closing query Q4/2020/MHZ from the Office of the Ombudsman of the Republic of Latvia concerning the right to access basic banking services, such as a basic bank account and payment facilities, notably where an individual is unable to comply with the provisions of the EU Anti-Money Laundering Directive .

First sanctions under EU cyber regime backed by Foreign Secretary

The Foreign Secretary, Dominic Raab, welcomed the first set of sanctions under the EU’s cyber sanctions regime. The EU sanctions were directed at nine individuals and organisations from North Korea, China and Russia for their part in ‘state sponsored...malicious cyber activity’, which targeted democratic institutions, national infrastructure, media outlets and international organisations. The sanctions raise the penalty for engaging in such activities. The UK will continue to implement the regime at the end of the transition period through its own UK Cyber Sanctions regime, which will allow for travel bans to be imposed on cyber actors and for the assets of such individuals and organisations to be frozen.

Source: Foreign Secretary welcomes first EU sanctions against malicious cyber actors.

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Consumer protection

Lending Standards Board offers training session on vulnerable customers

As part of its coronavirus (COVID 19) insights series, Life after lockdown, the Lending Standards Board (LSB) has created a training session for registered firms on supporting customers after lockdown. Sharing case studies and key insights from the LSB’s work, the training aims to provide considerations for firms dealing with potentially vulnerable customers.

Source: Life after lockdown—supporting case studies and guidance notes.

CISI motivates UK financial planning community to sign up to its Financial Planning Week

The Chartered Institute for Securities & Investment (CISI) encouraged the UK’s financial planning community to sign up to its Financial Planning Week taking place on 5–11 October 2020. The CISI runs the event annually and encourages the financial planning community to commit to offering their time and expertise to give consumers a free session either via video call or over the phone. The sessions are confidential and allow consumers to ‘experience first-hand the life-changing guidance offered by the financial planning profession.’ Financial planners can also get involved in the event by taking part in ‘Ask a Planner’ online sessions and providing talks to local schools about a career in the financial planning profession.

Source: CISI encourages UK’s financial planning community to sign up to Financial Planning Week 5-11 October to offer consumers a “steadying hand in this year unlike any other” .

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Complaints, compensation and claims management

PRA publishes final policy on coverage under the FSCS for Temporary High Balances

The PRA published policy statement PS19/20 setting out its feedback to the responses it received to Consultation Paper CP6/20: Financial Services Compensation Scheme – Temporary High Balances Coverage Extension. It also includes final policy in the form of amendments to the Depositor Protection Part of the PRA Rulebook (Appendix 1) and the updated Statement of Policy (SoP) ‘Deposit Guarantee Scheme’ (Appendix 2). The policy statement (PS) is relevant to retail financial consumers who are, or may become, Temporary High Balance (THB) depositors, in addition to the Financial Services Compensation Scheme (FSCS) and to all PRA-authorised deposit takers.

Sources: Financial Services Compensation Scheme – Temporary High Balance Coverage ExtensionPS19/20 'Financial Services Compensation Scheme - Temporary High Balances Coverage Extension' and  Deposit Guarantee Scheme.

FCA updates statement on how firms should handle complaints during coronavirus (COVID-19) pandemic

The FCA updated its statement about how firms should handle complaints during the coronavirus pandemic. The regulator says it knows that COVID-19 and the associated public health measures are causing many firms serious practical challenges, including in their operations dealing with consumer complaints. This statement therefore clarifies the FCA’s position on complaint handling in the current circumstances. The FCA first published the statement on 1 May 2020 and reviewed it at the end of July 2020. The regulator has re-published it with some minor additions and revisions. The FCA intends to review this statement again by the end of October 2020 at the latest.

Source: Firm handling of complaints during coronavirus.

Complaints Commissioner cites failings in FCA’s handling of video footage

The Complaints Commissioner upheld a complaint against the FCA regarding the unauthorised use of footage of an individual and their two children in a video about vulnerability that appeared on the FCA’s website. The FCA accepted the Commissioner’s criticisms and recommendations and made a formal apology, together with an ex gratia payment.

Sources: Final report by the Complaints Commissioner: Complaint number FCA00741 and   The FCA’s response to the Complaints Commissioner’s Report FCA00741.

Better Finance announces Q&A Catalogue for Wirecard Investors

Better Finance announced that its German member organisation, Deutsche Schutzverein für Wertpapiersitz (DSW), published a series of Q&As for duped individual investors and pension savers in light of the Wirecard AG scandal and the accompanying, corporate governance, external auditing and supervisory failures.

Source: Q&A Catalogue for Wirecard Investors.

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Regulation of benchmarks and IBOR reform

FCA director highlights path ahead for LIBOR transition for second half of 2020

Director of Markets and Wholesale Policy at the FCA, Edwin Schooling Latter, gave a speech at a webinar hosted by ISDA, concerning the tasks ahead in relation to the LIBOR transition during the second half of 2020.

Source: LIBOR transition – the critical tasks ahead of us in the second half of 2020.

For further information, see: LIBOR transition.

IA and EY joint report on LIBOR transition for investment managers

The Investment Association (IA) and EY published a joint report: ‘TIME TO ACT NOW - LIBOR transition for investment managers’. It sets out practical steps investment managers should take in connection with the switch from LIBOR to SONIA and other risk-free rates.

Source: BUY-SIDE MAKES SIGNIFICANT PROGRESS IN LIBOR SWITCH.

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Regulation of capital markets

ESMA’s temporary decision on net-short notifications published in Official Journal

On 10 June 2020, ESMA renewed its decision to temporarily lower the notification thresholds for net short positions to 0.1% of the issued share capital. This decision ((EU) 2020/1123) has now been published in the Official Journal. The decision took effect on 17 June 2020 and applies for a period of three months from this date.

Source: European Securities and Markets Authority Decision (EU) 2020/1123 of 10 June 2020 renewing the temporary requirement to natural or legal persons who have net short positions to temporarily lower the notification thresholds of net short positions in relation to the issued share capital of companies whose shares are admitted to trading on a regulated market to notify the competent authorities above a certain threshold in accordance with point (a) of Article 28(1) of Regulation (EU) No 236/2012 of the European Parliament and of the Council

FMSB publishes spotlight review on challenges FICC participants face in market surveillance

The FICC Markets Standards Board (FMSB) published a spotlight review on the current and future challenges fixed income, commodities and currencies (FICC) market participants encounter in market surveillance. The two main challenges considered are firstly, data quality and availability, and secondly, the increasing sophistication of trading strategies and technologies used to support them. The FMSB believes the review will be helpful to a broad audience across financial institutions, such as those managing conduct risk, compliance, surveillance and those working on the application of machine learning.

Sources: FMSB publishes Spotlight Review on monitoring FICC markets and the impact of machine learning and Monitoring FICC markets and the impact of machine learning.

Coronavirus (COVID-19)—Better Finance calls for greater investor protection in EU capital markets recovery package

Better Finance, the representative of EU citizens as users of financial services, expressed its disappointment with the European Commission’s ‘capital market recovery package’, which aims to make it easier for capital markets to support European businesses following the COVID-19 pandemic, because it proposes a reduction in investor protection levels. While Better Finance ‘sympathises with the need for temporary measures’, it believes the proposed changes ‘put individual investors at risk and erode their trust in capital markets once more’. Moreover, the recovery package includes no ‘counterbalance’ to the reduction in investor protection.

Source: The EU Capital Markets Recovery Package should take Individual Investors and the Wirecard case into account.

Commission opens applications for membership of the Technical Expert Stakeholder Group on SMEs

The European Commission announced that it is inviting applications for membership of the Technical Expert Stakeholder Group (TESG) on Small and Medium-sized Enterprises (SMEs). The TESG aims to bring together relevant stakeholders to monitor and assess the functioning of the SME growth markets, and to provide expertise and input on other areas of SME access to public markets. The deadline for applications is 15 September 2020.

Source: The Commission is inviting applications with a view to selecting members of the Technical Expert Stakeholder Group on SMEs (TESG).

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Regulation of derivatives

CCP12 publishes paper explaining the use of credit stress testing by CCPs

CCP12, the global association of central counterparties (CCPs), published ‘Primer on Credit Stress Testing – A CCP12 White Paper’, the second instalment in its series of white papers providing ‘informative and educational background information’ on central counterparties (CCPs). The paper introduces the role and objective of credit stress testing in the context of a CCP’s overall risk management approach, gives a conceptual overview, sets out the regulatory expectations of a CCP’s credit stress testing framework, discusses the different approaches to stress testing and describes the independent review and validation of stress testing.

Source: PRESS RELEASE: CCP12 PUBLISHES PRIMER ON CREDIT STRESS TESTING.

ISDA publishes paper reviewing non-default losses at central counterparties

ISDA published a paper reviewing non-default losses (NDL) at CCPs, covering who should pay for specific types of losses. In addition, the paper provides an analysis of several resolution tools for NDL within the context of a simplified CCP balance sheet. The paper makes many considerations, including what an NDL is, how it can be allocated, and when clearing members should bear some of the sustained loss.

Source: CCP Non-Default Losses.

ISDA, FIA and IIF collectively respond to FSB on CCP resources consultation

ISDA, the Futures Industry Association (FIA) and the Institute of International Finance (IIF) collectively responded to the Financial Stability Board’s (FSB) consultation on CCPs’ resources in resolution. In their general comments, the associations ‘welcome the work the FSB have done with this consultation paper in seeking to provide more detailed guidance on CCP resolution which would advance financial stability…[and] support the focus on systemic risk and agree with the need to ensure taxpayers are not impacted’.

Source: ISDA, FIA and IIF Respond to FSB’s Consultation on CCP Resources in Resolution.

Treatment of CCP equity in resolution requires a ‘considered approach’, says the WFE

The World Federation of Exchanges (WFE) called for a ‘careful and considered approach’ to the treatment of CCP equity in any change to the resolution arrangements for CCP’s. The global industry group for CCP’s and exchanges believes that ‘upsetting the tried and tested balance of incentives’ could negatively affect stability and increase systemic risk. The WFE’s comments follow on from the FSB’s consultation on the treatment of CCP equity in resolution, adding too that ‘resolution measures should be considered in conjunction with incentives for market participants to participate effectively in any default management and recovery process’.

Source: The World Federation Of Exchanges calls for considered approach to treatment of CCP equity in resolution.

ISDA asks Allen & Overy to provide memo on creditors’ loss in CCP resolution

ISDA has asked Allen & Overy to produce a memorandum considering the type and nature of loss to which the equity of EEA CCP could be exposed on a CCP resolution based on the European Commission’s proposal for a regulation on a framework for the recovery and resolution of CCPs and in particular, whether CCP equity would be expected to be written down whenever a resolution occurs.

Source: A&O Memorandum on CCP Equity and No-Creditor-Worse-Off .

ISDA releases informal comments of CEO on important OTC derivatives issues

ISDA released the informal comments of its chief executive Scott O’Malia on the subject of important OTC derivatives issues in derivatiViews. In his comments, O’Malia discusses the new package of measures agreed by the Council of the European Union and the European Parliament, which O’Malia believes ‘strikes a good balance between the positions of the two legislative bodies, and includes a number of critical safeguards’.

Source: A Step Forward in CCP Safety.

ESMA withdraws TR registration of NEX Abide Trade Repository AB

ESMA withdrew the trade repository (TR) registration of NEX Abide Trade Repository AB (NATR). This follows the official notification to ESMA by NATR of its intention to renounce its registration as a TR.

Source: ESMA withdraws registration of NEX Abide Trade Repository AB.

ISDA updates OTC Derivatives Compliance Calendar

ISDA released its updated OTC Derivatives Compliance Calendar. The Calendar sets out compliance deadlines and regulatory dates that the ISDA believes important in the over-the-counter (OTC) derivatives space.

Source: Updated OTC Derivatives Compliance Calendar.

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Investment funds and asset management

CP20/15: FCA seeks views on new rules aiming to improve open-ended property fund structures

The FCA launched consultation paper CP20/15: Liquidity mismatch in authorised open-ended property funds, containing proposals to decrease the potential harm to investors from the liquidity mismatch in open-ended property funds. The proposals introduce new rules which would require investors to give notice, of up to potentially 180 days, before their investment is redeemed. The FCA is seeking feedback on its proposals and any suggestions for alternative measures. The deadline for feedback is 3 November 2020. The FCA aims to publish a policy statement with final rules as soon as possible in 2021.

Sources: FCA consults on new rules to improve open-ended property fund structuresCP20/15: Liquidity mismatch in authorised open-ended property funds and  Liquidity mismatch in authorised open-ended property funds.

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Securities financing transactions

ICMA provides update on the enforceability of close-out netting in China

The International Capital Market Association (ICMA) published an update on the enforceability of close-out netting in the People’s Republic of China (PRC). The update refers to the consultation draft of a ‘Notice on Issues Relating to the Rules for the Measurement of Default Risk Assets of Counterparties in the Trading of Derivatives,’ which was launched by the China Banking and Insurance Regulatory Commission (CBIRC) earlier in 2020. According to ICMA, the notice could have an impact on the industry opinion obtained by ICMA on the Global Master Repurchase Agreement (GMRA) for the PRC.

Source: Update on netting enforceability in the People's Republic of China .

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Crowdfunding

European Commission endorses Council’s position on new rules for crowdfunding platforms

The European Commission published a communication to the European Parliament endorsing the Council of the EU’s positions at first reading on a regulation on European crowdfunding service providers for business and a directive amending MiFID II.

Source: COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT.

For further information, see: The regulation of crowdfunding platforms.

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Banks and mutuals

European Parliament adopts text of 2019 annual banking union report

The European Parliament adopted the text of the annual report on the banking union for 2019. The report notes that progress has been made, but says further progress has to be made on risk sharing and also on risk reduction in order to tackle challenges that remain in specific institutions.

Source: Text adopted: Banking union—annual report 2019.

LSB updates Standards of Lending Practice for business customers to reflect CBILS and BBLS

The LSB updated the Standards of Lending Practice for business customers to take account of the UK government’s Coronavirus Business Interruption Loans Scheme (CBILS) and Bounce Back Loan Scheme (BBLS). The FCA agreed to maintain its recognition of the standards and the changes that have been made.

Sources: Update to the Standards of Lending Practice for business customers - Coronavirus Business Interruption Loans Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) and   FS20/1: Recognition of codes: feedback on QCP 25 CP19/27 (update) .

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Consumer credit, mortgage and home finance

Coronavirus (COVID-19)—FCA calls for input on ongoing payment deferrals guidance

The FCA is asking for early views on its temporary guidance to firms on providing payment deferrals for mortgage and consumer credit products, which, at present, will remain in effect until 31 October 2020. The FCA is keen to find out from credit and mortgage providers, as well as consumer groups, what support consumers who remain in difficulty may need, whether any aspect of the current guidance should remain in place beyond 31 October 2020, and if not, what other form of support should takes its place. The deadline for submitting responses is 7 August 2020.

Source: Call for Input: Ongoing support for consumers affected by coronavirus: mortgages and consumer credit.

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Regulation of insurance

Solvency II Commission Implementing Regulation laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 June 2020 until 29 September 2020 published in Official Journal

Commission Implementing Regulation (EU) 2020/1145 of 31 July 2020 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 June 2020 until 29 September 2020 in accordance with the Solvency II Directive published in the Official Journal.

Source: Commission Implementing Regulation (EU) 2020/1145 of 31 July 2020 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 June 2020 until 29 September 2020 in accordance with Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Text with EEA relevance)

For further information, see: Solvency II—essentials.

PRA consults on expectations of external auditors’ work on Solvency II matching adjustment

The PRA launched a consultation (CP11/20) on its proposed expectations and guidance relating to external auditors’ work on the matching adjustment (MA) under Solvency II (Directive 2009/138/EC). The consultation paper includes clarifications relating to the existing position and also proposes several new PRA expectations that relate to communications by auditors on the subject of the MA. The consultation closes on 30 October 2020.

Source: Solvency II: The PRA’s expectations for the work of external auditors on the matching adjustment.

EIOPA launches Solvency II single rulebook

EIOPA announced the launch of its first Single Rulebook. This an online tool focused on the Solvency II Directive that enables navigation across different legal acts as well as EIOPA guidelines, recommendations, opinions and supervisory standards. EIOPA plans to expand the scope of the single rulebook by adding Q&As in the near future.

Source: EIOPA launches its Solvency II Single Rulebook.

European insurers call for free access to credit ratings for internal and regulatory purposes

Insurance Europe has published its response to ESMA’s call for evidence on the availability and use of credit rating information and data. The response highlights the importance of credit ratings in meeting requirements under the Solvency II (Directive 2009/138/EC) framework and in reporting to public authorities. Additionally, credit ratings are a vital part of an insurer’s approach to risk management, its investment portfolios and strategy, and are a key component in helping insurers carry out their core business and activities. The response demonstrates insurers to be dependent on credit rating agencies (CRAs), due to their large and broad investment portfolios.

Sources: European insurers call for free access to credit ratings for internal and regulatory purposes and Response to ESMA call for evidence on credit rating information and data.

FCA issues statement to insurers on data provision under the Civil Liability Act 2018

The FCA published a statement on data provision under the Civil Liability Act 2018. In the statement, the FCA reminds insurers of the information they are required to provide to it about the effect that changes to the law under the Act will have on motor insurance premiums. The relevant data must be provided in a single return by 1 October 2023 using a template published by the FCA, to which a link is provided in the statement.

Source: Data Provision under the Civil Liability Act 2018.

Insurance Europe responds to Commission consultation on roadmap for CMU action plan

In its response to the European Commission’s consultation on its roadmap for the Capital Markets Union (CMU) action plan, Insurance Europe has welcomed the objectives set out in the roadmap and highlighted a number of specific priorities, including recommendations to address regulatory barriers to long-term and sustainable investment and to improve the participation of retail consumers in the CMU.

Source: European insurers respond to EC roadmap for Capital Markets Union action plan.

Report highlights challenges for insurers in maximising benefits of AI

Insurance Europe published an insight briefing concerning the European insurance industry’s views on artificial intelligence (AI). The briefing states that insurers are already using and embracing AI ‘to improve customer service, increase efficiency, provide greater insight into customers’ needs and to prevent fraudulent transactions’. However, there are three challenges insurers are experiencing concerning the maximisation of the benefit for both themselves and consumers when using AI. Regarding the future, it is predicted that AI will help insurers improve the accuracy of predicting risk and help to use ‘enhanced foresight’ to swiftly deploy new products in response to developing risks.

Sources: New insight briefing: European insurers’ views on artificial intelligence and The European insurance industry’s views on artificial intelligence.

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Business interruption insurance test case

Coronavirus (COVID-19)—FCA statement on non-damage BI settlements and deductions in relation to government support

The FCA issued a statement ‘on non-damage business interruption (BI) settlements and deductions in relation to government support’. In the statement, the FCA acknowledges policyholder concerns regarding how insurers are calculating non-damage BI claim payments where liability has been agreed. The FCA confirms that where insurers have accepted liability, they should continue to handle and access non-damage BI claims ‘promptly and fairly, and to treat their customers fairly in accordance with Principle 6’. The statement also notes that the FCA is waiting for the High Court judgment on the test trial case.

Source: Statement on non-damage BI settlements and deductions in relation to government support.

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Regulation of personal pension and stakeholder products

PLSA issues guidance on new trustee investment disclosure duties

The Pensions and Lifetime Savings Association (PLSA) published guidance to help defined benefit and defined contribution pension scheme trustees navigate the new requirements to publicly disclose their investment and responsible investment activity over the previous year in an “Implementation Statement”.

Source: PLSA launches guide on new trustee investment disclosure duties.

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Payment services and systems

PSR to analyse consumer protections in efforts to increase competition and innovation in interbank payments

Head of Policy at the Payment Systems Regulator (PSR), Genevieve Marjoribanks, issued a statement on ‘driving innovation and competition in real-time payments’. The statement highlights that the PSR wants consumers to have ‘great choice’ when making payments, including access to real-time payment services, and that the best way to deliver this is through competition and innovation. The PSR is aiming to develop new ways of driving this competition and innovation in interbank payments, while also ensuring they serve the best interests of its users. To do this, the PSR is analysing the consumer protections which are currently available and will be working with industry to ensure their concerns and ideas are included in their assessment.

Source: Consumer protection: Driving innovation and competition in real-time payment.

Bank of England to work with Accenture to renew RTGS Service Renewal Programme

The Bank of England (BoE) announced that it has appointed Accenture as the Technology Delivery Partner for the Real Time Gross Settlement (RTGS) Service Renewal Programme. The BoE will work alongside Accenture to develop and build a new ‘world class payments service’.

Source: The Bank of England appoints Accenture as the Technology Delivery Partner for the Real Time Gross Settlement Service Renewal Programme.

Access to cash factsheet—July 2020

The PSR published a factsheet which provides a quick reference guide to the regulator’s Access to Cash work. The factsheet sets out how people access their cash, the decline in cash usage and the rise in digital payment methods over a number of years

Source: Access to cash factsheet - July 2020.

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Fintech and cryptoassets

Challenge invites solutions to TradeTech operational challenges

The Bank for International Settlements Innovation Hub (BISIH) centre in Hong Kong SAR and the Hong Kong Monetary Authority (HKMA) launched the ‘TechChallenge - Digitising Trade Finance’ initiative, a competition which aims to demonstrate the potential for new technologies to enhance and safeguard trade finance mechanisms. The competition invites firms to submit ‘innovative solutions’ which address TradeTech operational challenges. Firms who develop successful responses will be awarded financial sponsorship. The solutions will be judged by a panel representing the public and private sectors from the partnering organisation. The deadline for submissions is 31 August 2020. The top solutions will be announced at Hong Kong Fintech Week in November 2020.

Source: BIS Innovation Hub and HKMA invite global innovators to participate in a trade finance digitisation TechChallenge.

ISDA and ISLA confirm commitment to digital future for financial markets

ISDA, the International Securities Lending Association (ISLA) and other organisations have written a letter to the FSB, the International Organization of Securities Commissions and the Basel Committee on Banking Supervision confirming their joint commitment to ‘defining and promoting the development of a digital future for financial markets’.

Source: Joint Association Letter on a Digital Future for Financial Markets.

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Islamic finance

The IFSB to launch Islamic Financial Services Industry Stability Report 2020

The Islamic Financial Services Board (IFSB) announced that the eighth edition of its Islamic Financial Services Industry (IFSI) Stability Report 2020 will be launched during its Members and Industry Engagement Session (MIES), which is to be held via online platform on 6 August 2020 at 15:30 (MYT).

Source: The IFSB to Launch Islamic Financial Services Industry Stability Report 2020 at the Members and Industry Engagement Session (MIES) .

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Dates for your diary

 

DateSubjectEvent

 

11 August 2020

 

 

Prudential requirements



Banks and mutuals

 

 

The PRA published PS17/19 in September 2019, which set out feedback to responses to its consultation paper CP8/19 ‘Supervising international banks: Revision of the Branch Return’ and the PRA’s final amendments to the PRA Rulebook. PS17/19 is relevant to PRA-supervised branches of international banks and PRA-designated investment firms which are not UK headquartered. Firms will need to submit their first revised return by no later than 11 August 2020.

 

11 August 2020

 

Brexit



Prudential requirements



Banks and mutuals

 

Deadline for responses to HM Treasury’s consultation on the UK’s approach to the transposition of the BRRD II.

 

 

 

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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.