FS weekly highlights—6 June 2019

In this issue

 

Brexit news
UK regulator updates
European regulator updates
Regulated activities
Authorisation, approval and supervision
Prudential requirements
Financial stability
Risk management and controls
Enforcement and redress
International and US enforcement and redress regulation
FCA conduct requirements
Claims management regulation
Competition in financial services
Markets and trading
MiFID II
Regulation of capital markets
Regulation of derivatives
Investment funds and asset management
Banks and mutuals
Consumer credit, mortgage and home finance
Insurance and pensions
Payment services and systems
Fintech and virtual currencies
Sustainable finance
Islamic finance
Dates for your diary

 

Brexit news

 

FCA and Dutch AFM formally agree to share information and expertise in a deal or no deal scenario

The Financial Conduct Authority (FCA) and the Dutch Authority for the Financial Markets (AFM) signed a joint agreement to formalise their partnership; agreeing to work more closely together to protect and enhance the integrity and stability of the countries’ financial systems. The agreement aims to foster a stronger and sustainable relationship between the regulators. The agreement will apply whether the UK withdraws from the EU with or without a withdrawal agreement and will accompany the multilateral memorandum of understanding (MoU) between the FCA and EU regulators announced in February 2019.

Lords Select Committee to hear evidence on impact of Brexit on financial services exports

The House of Lords EU Financial Affairs Sub-Committee announced that it discussed the UK’s financial services exports in the context of Brexit in a one-off evidence session held on 5 June 2019. The session was attended by Anjalika Bardalai, chief economist and head of research at TheCityUK. 

 

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UK regulator updates

 

PRA publishes Regulatory Digest for May 2019

The Prudential Regulation Authority (PRA) published its Regulatory Digest for April 2019. The issue contains banking publications and updates; systemic risk buffer rates for ring-fenced banks and large building societies; insurance publications and updates including CP11/19 ‘Solvency II: Maintenance of the transitional measure on technical provisions’; information on PRA open consultations that close in June 2019; upcoming prudential regulation communications; other PRA publications and speeches during May 2019; and the regular Bank Underground, Bank Overground, KnowledgeBank, and European and international developments sections.

Chancellor announces Bank of England appointments

The Chancellor of the Exchequer, Philip Hammond, announced that Ben Broadbent, Deputy Governor of the Bank of England (BoE) with responsibility for monetary policy, was reappointed for a further term, effective from 1 July 2019. The Chancellor also announced the appointment of three new non-executive directors to the BoE’s Court of Directors.

Baroness Zahida Manzoor to chair Financial Ombudsman Service

The FCA announced that Baroness Zahida Manzoor CBE was appointed chair of the Financial Ombudsman Service (FOS). The appointment was made by the FCA board with the approval of HM Treasury. Baroness Manzoor will take up the role on 2 August 2019, succeeding Sir Nicholas Montagu. 

 

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European regulator updates

 

ESMA chair on international co-operation in financial regulation and supervision

The chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, addressed the opening of the Federation of European Securities Exchanges’ 2019 convention in Dublin. He focused on cross-border regulation and supervision, the equivalence process and the impact of Brexit on the exchange of secondary market data.

ESMA issues request for investor protection experts

ESMA invited volunteers to partake in its Consultative Working Group (CWG), which advises its Investor Protection and Intermediaries Standing Committee (IPISC). CWG members are selected for a renewable term of two years. Applicants are asked to send their application by 4 July 2019.

ECB publishes updated AnaCredit Reporting Manual

The European Central Bank (ECB) published an updated version (Part IPart II and Part III) of the AnaCredit Reporting Manual. The Manual was updated to acknowledge and incorporate additional explanations provided in the Q&As published on the ECB’s website between July 2017 and December 2018. It also incorporates a number of adjustments to address previous inconsistencies.

May 2019 issue of the European Commission’s Banking and Finance Newsletter

The European Commission published the May 2019 edition of its Banking and Finance Newsletter, which contains an interview with Michelle Barnier discussing the negotiations with the UK, how Brexit will affect European financial markets, and what lessons the EU should draw from the UK’s decision to leave. The issue also contains a look ahead at the European leaders meeting in Sibiu later in June 2019, where financial challenges priorities for the next few years will be discussed. 

 

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Regulated activities

 

HM Treasury consults on bringing funeral plans into FCA remit

HM Treasury is consulting on the government’s proposed regulatory framework for bringing funeral plans within the remit of the FCA. Following concerns about the risk of consumer detriment in the pre-paid funeral plan market, the government launched a call for evidence on the regulation of the sector in June 2018, which confirmed the need for compulsory regulation. Feedback is sought by 25 August 2019. 

 

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Authorisation, approval and supervision

 

FCA webcast for solo regulated firms—preparing for the SM&CR

The FCA made available its webinar aired on 3 June 2019: Preparing for the Senior Managers & Certification Regime (SM&CR). The webcast can now be viewed on-demand. The webinar considers how solo-regulated firms should prepare for the SM&CR, which comes into effect on 9 December 2019. The SM&CR will replace the Approved Persons Regime for firms that are solely regulated by FCA. 

 

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Prudential requirements

 

Implementation Regulation amending ITS on supervisory disclosure published in Official Journal

Commission Implementing Regulation (EU) 2019/912 of 28 May 2019 amending Implementing Regulation (EU) 650/2014 laying down implementing technical standards (ITS) with regard to the format, structure, contents list and annual publication date of the supervisory information to be disclosed by competent authorities in accordance with Directive 2013/36/EU (the Capital Requirements Directive (CRD IV)) was published in the Official Journal of the EU. 

 

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Financial stability

 

European Systemic Risk Board sets out principles on risk and regulatory complexity

The Advisory Scientific Committee of the European Systemic Risk Board (ESRB) published a report discussing how excessive regulatory complexity can contribute to systemic risk, and possible ways to address the issue, in view of the existing significant complexity and uncertainty in the financial system. The report aims to contribute to the ongoing debate on the optimal form of financial regulation, taking an approach focused on addressing systemic risk in the whole financial system within the context of a continuously evolving environment.

FSB general secretary on financial resilience and global co-operation

The secretary general of the Financial Stability Board (FSB), Dietrich Domanski, gave a speech on ‘Co-operation for the common good’, the evolving risk backdrop, and on global financial resilience at the Federal Reserve Bank of San Francisco and Monetary Authority of Singapore (MAS) symposium on Asian banking and finance. 

 

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Risk management and controls

 

Industry launch of ‘Operational resilience in financial services’ report welcomed by BoE

TheCityUK, in collaboration with PwC, published a report: ‘Operational resilience in financial services: time to act’. The report makes a series of recommendations for industry and regulators to enhance operational resilience. In a speech given at the launch by Lyndon Nelson, deputy CEO & executive director, regulatory operations and supervisory risk specialists, the BoE welcomed the report. At the same time UK Finance, in collaboration with EY, published ‘Perspectives: Operational resilience in financial services’. Both reports address issues raised in the joint discussion paper ‘Building the UK financial sector’s operational resilience’, published in July 2018 (BoE DP1/18, PRA DP1/18 and FCA DP18/04). 

 

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Enforcement and redress

 

FCA reports on joint FCA and PRA fine of Raphaels Bank for outsourcing failings

The FCA issued a press release reporting that the FCA and the PRA fined R. Raphael & Sons plc (Raphaels) for failing to manage its outsourcing arrangements properly between April 2014 and December 2016. Raphaels received separate fines of £775,100 from the FCA and £1,112,152 from the PRA in respect of these breaches (resulting in a combined fine of £1,887,252).

FCA fines Cathay International, its CEO and finance director for breaches of the Listing Principles and DTRs

The FCA published decision notices concerning Cathay International Holdings Limited and two of its directors, Mr Jin-Yi Lee and Mr Eric Siu. The FCA considers that Cathay breached the FCA’s Listing Principles and Disclosure Rules and Transparency Rules (DTR) and imposed a fine of £411,000. In the FCA’s view, Mr Lee was knowingly concerned in the company’s breaches and so was fined £214,300. The FCA also considers that Mr Siu was knowingly concerned in one of the company’s breaches and was fined £40,200.

FCA press release notes banning of Terry Farr

The FCA issued a press release noting that it prohibited former Martins Brokers (UK) Ltd broker Terry Farr from performing any function in relation to any regulated financial activity, on the basis that he acted dishonestly and lacked integrity, and as a result is not fit and proper to perform any function in relation to any regulated activity.

Complaints Commissioner criticises FCA complaints handling in relation to fraud allegations

The Office of the Complaints Commissioner published final reports (FCA00484 and  FCA00535) criticising the FCA for its supervision of a firm where complaints were made involving allegations of inappropriate investments and fraudulent activity. The FCA also published its response to the reports (FCA Response to Report FCA00484 and FCA Response to Report FCA00535).

FSCS updates on London Capital & Finance investigation

The Financial Services Compensation Scheme (FSCS) issued an update on its investigation into London Capital & Finance (LCF). Over the last few weeks the FSCS reviewed whether there may be grounds for compensation, and it believes there are sufficient grounds to carry on exploring these issues.

Baroness Zahida Manzoor to chair Financial Ombudsman Service

The FCA announced that Baroness Zahida Manzoor CBE was appointed chair of the FOS. The appointment was made by the FCA board with the approval of HM Treasury. Baroness Manzoor will take up the role on 2 August 2019, succeeding Sir Nicholas Montagu.

 

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International and US enforcement and redress regulation

 

FINRA—SEC approves changes to non-party response times in arbitrations​

The US Securities Exchange Commission (SEC) approved the Financial Industry Regulatory Authority’s (FINRA) proposed amendments to the relevant rules of the FINRA Code of Arbitration Procedure for Industry Disputes and the FINRA Code of Arbitration Procedure for Customer Disputes to extend time periods for non-parties to respond to subpoenas and other orders and to make related changes to enhance the discovery process for users. The amendments will be effective for cases filed on or after 1 July 2019. 

 

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FCA conduct requirements

 

FCA publishes PS19/14 setting out new rules for loan and investment based crowdfunding platforms

Following consultation, the FCA published PS19/14 introducing rules aimed at preventing harm to investors without stifling innovation in the peer-to-peer (P2P) sector. The new rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner. They include a limit on investments in P2P agreements for retail customers new to the sector of 10% of investable assets. P2P platforms need to implement the changes by 9 December 2019, except for the application of the Mortgage and Home Finance Conduct of Business (MCOB), which applies with immediate effect.

FCA to hold live events to discuss the RDR and the FAMR

The FCA is holding a series of afternoon events across the UK to discuss issues around the retail distribution review (RDR) and the financial advice market review (FAMR). The reviews aim to improve consumer outcomes from financial advice and guidance. The FCA is reviewing their impact on the market to date, and assessing how the market may develop in the future. The events are open to participants from regulated firms and invited stakeholders. 

 

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Claims management regulation

 

FCA Dear CEO letter on its expectations of CMCs when carrying out financial promotions

The FCA published a Dear CEO letter it sent to claims management companies (CMCs) that are within the FCA's CMC temporary permission regime. The letter reminds CMCs of its expectations when acting for customers and/or carrying out financial promotions. The FCA reiterates in the letter its expectations, including reminders about which claims management activities come under its regulation, that CMCs should always get letters of authority before acting for customers, and that financial promotions should be fair, clear and not misleading. 

 

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Competition in financial services

 

Competition watchdog probes £1.3bn subprime lender merger

Britain's competition regulator announced it is investigating short-term lender Non-Standard Finance (NSF)’s proposed £1.3bn ($1.64bn) hostile takeover of rival Provident Financial, citing concerns that jettisoning parts of its business could still reduce options for consumers who struggle to borrow cash from mainstream lenders. The Competition and Markets Authority (CMA) also said it's accepting comments on the impact of the merger, which if approved would combine rivals and some of the UK’s largest home credit providers.

CMA investigates potential merger of OneSavings Bank PLC and Charter Court Financial Services Group PLC

The CMA is investigating the potential acquisition by OneSavings Bank PLC of Charter Court Financial Services Group PLC. The CMA is considering ‘whether it is or may be the case that the transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services’. Comments are sought by 19 June 2019. The anticipated deadline for the CMA’s phase 1 decision is 30 July 2019.

Second application window for RBS Incentivised Switching Scheme opens

Banking Competition Remedies Ltd (BCR), the independent body established to implement the £775m Royal Bank of Scotland (RBS) State Aid Alternative Remedies Package, announced the opening of the second application window for the Incentivised Switching Scheme (ISS). The second application window is open to entities who meet the published criteria (which remain unchanged) but are not yet part of ISS.

 

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Markets and trading

 

IOSCO and FSB reports examine regulatory-driven market fragmentation

The board of the International Organization of Securities Commissions (IOSCO) and the FSB drafted reports that examine instances of financial activities where supervisory practices and regulatory policies may give rise to market fragmentation, ahead of the G20 finance ministers and central bank governors meeting on 8-9 June 2019 in Fukuoka. The IOSCO report focuses on market fragmentation in wholesale securities and derivatives markets that arises as an unintended consequence of financial regulation. The areas the FSB report examines are the trading and clearing of over-the-counter derivatives across borders; banks’ cross-border management of capital and liquidity; and the sharing of data and other information internationally.

CPMI and IOSCO say US has implemented the PFMI for payment systems, central security depositories and securities settlement systems

The Committee on Payments and Market Infrastructures (CPMI) and IOSCO released a report in which they conclude that the US legal, regulatory and oversight frameworks for systemically important payment systems, central security depositories (CSDs) and securities settlement systems (SSSs) are complete and consistent with the principles for financial market infrastructures (PFMI).

IOSCO press release notes annual meeting takes forward the IOSCO 2019 Workplan

IOSCO issued a press release stating that its members met at IOSCO´s 44th Annual Meeting in Sydney in May 2019 to discuss priority issues facing securities market regulators and supervisors. The meeting, which was hosted by the Australian Securities and Investments Commission (ASIC), was attended by some 350 IOSCO members. Participants discussed different aspects of IOSCO´s priority work, including cryptoassets, fintech, sustainability, data privacy, market fragmentation, asset management and retail distribution and digitalization. It also discussed technical assistance and capacity building.

FSB guide on overnight risk-free rates

The FSB published a new guide on overnight risk free rates (RFR) which outlines how such rates are calculated and clarifies how the rates are used in cash products. In providing the guide, the FSB noted that it supports the development and adoption of the rates where appropriate, for example in business where term properties are not needed, or where exposure to bank credit risk is not necessary or desirable, to enhance financial stability.

PRA and FCA: next steps on transition from LIBOR to RFRs

The PRA and the FCA published a statement in which they set out some observations from their work to date on firms’ preparations for the transition from the London interbank offered rate (LIBOR) to RFRs, including key themes, good practice and next steps. The deputy governor for markets & banking at the BoE, Dave Ramsden, discussed the findings at an event on ‘last orders’ for new exposures to LIBOR, in which he focused on sterling LIBOR and its successor, the sterling overnight index average (SONIA). The FCA also published a feedback statement on its Dear CEO letter on LIBOR transition.

ECB calculates one-off spread between €STR and EONIA

The ECB calculated the spread between the euro short-term rate (€STR) and the euro overnight index average (EONIA) at 0.085% (8.5 basis points). The spread is based on the methodology recommended by the working group on euro RFRs and adopted by the European Money Market Institute (EMMI) for the recalibration of the EONIA methodology as of 2 October 2019 and until its discontinuation by EMMI.

EMMI adopts changes to the methodology for calculating EONIA

EMMI adopted changes to the methodology for calculating EONIA to ensure a smooth transition to €STR. On 31 May 2019 EMMI published the feedback summary. In view of the responses received, EMMI adopted the new methodology recommended by the working group, which will take effect on 2 October 2019.

BoE RFR working group publishes May 2019 newsletter

The BoE’s Working group on sterling RFRs published its newsletter for May 2019, with updates on RFR transition in sterling markets and others. The newsletter sets out milestone dates, market developments, official sector updates, key liquidity indicators and non-sterling RFR updates.

Banks must take LIBOR's end seriously, Fed's vice chair says

The Federal Reserve’s top official for supervision urged banks to take seriously the impending end of LIBOR and start preparing for it now, saying the biggest banks can expect to feel more pressure from the agency’s examiners to make sure they’re ready. In pre-recorded remarks to a New York audience, Fed vice chairman Randal Quarles said the financial industry already possesses the tools it needs to begin moving away from LIBOR, the troubled interest-rate benchmark that trillions of dollars of financial instruments are tied to but that UK regulators have pledged to support only through the end of 2021. 

 

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MiFID II

 

ESMA sets out implementation expectations for MiFIR pre-trade transparency requirements in commodity derivatives

The European Securities and Markets Authority (ESMA) published a supervisory briefing to ensure compliance with the Regulation (EU) No 600/2014 (Markets in Financial Instruments Regulation (MiFIR)) pre-trade transparency requirements in commodity derivatives. The briefing was developed after ESMA became aware that the provisions were not implemented in a consistent manner across the EU. It aims to increase supervisory convergence among national competent authorities (NCAs) in their implementation of the requirements, and to provide a common timetable for the enforcement of the commodity derivatives pre-trade transparency regime, with the objective of ensuring a level playing field across EU trading venues.

ESMA launches common supervisory action on MiFID II appropriateness rules

ESMA launched a common supervisory action (CSA) on the application of the requirements in Directive 2014/65/EU (the recast Markets in Financial Instruments Directive (MiFID II)) on the assessment of appropriateness. Participant NCAs will carry out the CSA simultaneously in the second half of 2019.

Translations for ESMA’s Guidelines on the application of C6 and C7 of Annex 1 of MiFID II published

ESMA issued the official translations of its Guidelines on the application of C6 and C7 of Annex 1 of MiFID II. National competent authorities to which these Guidelines apply must now notify ESMA whether they comply or intend to comply with the Guidelines, within two months.

ESMA updates MiFID II transparency Q&As

ESMA updated its Q&As on transparency issues under MiFID II and MiFIR. The updated Q&As are on the mandatory systematic internaliser (SI) regime, the voluntary SI regime, and the quoting obligation for SIs in non-trading on a trading venue (non-TOTV) instruments. 

 

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Regulation of capital markets

 

Corrigendum to Transparency Directive RTS published in OJ

corrigendum to Commission Delegated Regulation (EU) 2018/815 of 17 December 2018 supplementing the Transparency Directive 2004/109/EC with regard to regulatory technical standards (RTS) on the specification of a single electronic reporting format was published in the Official Journal of the EU.

FCA publishes PS19/12 and near-final Handbook rules to implement the Prospectus Regulation

The FCA published PS19/12 setting out the near-final rules on the changes the FCA plans to make to the Handbook to align it with the Prospectus Regulation. It also summarises the feedback received to the consultation paper (CP19/6) and the FCA's response. The consultation closed on 28 March 2019. 

 

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Regulation of derivatives

 

CPMI and IOSCO publish paper on CCP default management auctions

The CPMI and IOSCO published a discussion paper on central counterparty (CCP) default management auctions. Comments should be submitted by 9 August 2019. A default management auction is one of the tools that a CCP may use to transfer a defaulting participant's positions to a non-defaulting participant, thereby restoring the CCP to a matched book.

Trade associations ask US regulators for clarification on IM documentation requirements

Several trade associations sent a joint letter to US regulators asking them to provide clarification that covered swap entities and their counterparties which will become subject to the initial margin (IM) requirements of the margin and capital requirements for covered swap entities or the margin requirements for uncleared swaps for swap dealers and major swap participants as of 1 September 2019 (Phase IV) and on or after 1 September 2020 (Phase V) do not need to comply with the specified documentation requirements unless the bilateral IM amount exceeds $50m.

Bank of England working paper discusses the costs of clearing fragmentation

The BoE released Staff Working Paper No 800, which discusses the topic of clearing fragmentation. The paper contends that fragmenting clearing across multiple CCPs is costly, as dealers providing liquidity on a global scale cannot net trades cleared in different CCPs, increasing their financial costs, which in turn are passed on to their clients through price distortions. Using proprietary data, the authors of the paper provide an economically significant CCP basis for dollar swap contracts cleared at both the Chicago Mercantile Exchange and the London Clearing House. They provide empirical evidence consistent with a collateral cost explanation of this basis. 

 

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Investment funds and asset management

 

Council of the EU publishes ‘I/A’ item notes with regard to cross-border distribution of collective investment undertakings

The Council of the EU published an ‘I/A’ item note inviting the Council to adopt a directive amending Directive 2009/65/EC (the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive) and Directive 2011/61/EU (the Alternative Investment Fund Managers Directive (AIFMD)) with regard to cross-border distribution of collective investment undertakings. It also published an ‘I/A’ item note inviting the Council to adopt a regulation on facilitating cross-border distribution of collective investment undertakings and amending Regulation (EU) 345/2013 (the European Venture Capital Funds (EuVECA) Regulation), Regulation (EU) 346/2013 (the European Social Entrepreneurship Funds (EuSEF) Regulation) and Regulation (EU) 1286/2014 (the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation).

ESMA updates AIFMD and UCITS Q&As

ESMA updated its Q&As on the application of the AIFMD and the UCITS Directive.

FCA publishes final rules implementing the revised Shareholder Rights Directive

The FCA published a PS19/13 following CP19/7 on proposals to implement requirements of the revised Shareholder Rights Directive (SRD II) and improve shareholder engagement. The policy statement summarises the feedback the FCA received to the consultation—which closed on 27 March 2019—and the FCA’s response to it. It also sets out the final rules.

FCA update on suspension in dealing in units of open-ended fund LF Woodford

The FCA published an update following the announcement on 3 June 2019 that dealing in the units of the LF Woodford Equity Income Fund (the Fund) were suspended. The FCA’s statement provides additional information about the purpose of suspension, the FCA's role, and addresses commentary around the decision to list some of the Fund’s assets in Guernsey.

Pensions industry group complains to FCA over fund failings

A leading UK pensions association called on the FCA to investigate the lack of transparency around fund managers’ voting polices—particularly around climate change, executive pay and gender diversity—complaining of ‘opacity and lack of comparability’. The Association of Member Nominated Trustees (AMNT)—which represents UK pension schemes—said a review of fund manager voting policies found poor transparency and accountability that is preventing pension scheme trustees from operating a stewardship policy on the environmental, social and governance (ESG) of the companies in which they invest via fund managers. 

 

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Banks and mutuals

 

FSB publishes discussion paper on ex-ante disclosure of resolution planning and resolvability and on solvent wind-down of derivatives and trading portfolios

The FSB published a discussion paper for public consultation on public disclosure of resolution planning and resolvability. The discussion paper explores how general and firm-specific disclosures on resolution planning and resolvability could be further enhanced, focusing mainly on disclosures of resolution planning for global systemically important banks (G-SIBs). The FSB also published a discussion paper on solvent wind-down of derivatives and trading portfolios by G-SIBs. The discussion paper sets out considerations that may be relevant for authorities and firms for both recovery and resolution planning.

Presidency of Council of EU publishes progress report on banking union

The Presidency of the Council of the European Union published a progress report on banking union for the permanent representatives committee (COREPER). It invites COREPER to suggest that the Council endorse the report. The report addresses progress on risk reduction measures and the establishment of the European deposit insurance scheme (EDIS). The report is designed to facilitate the task of the incoming Presidency.

Commission agrees extended timetable for EBA advice on benchmarking of national loan enforcement frameworks

The European Commission published a letter of 23 May 2019 agreeing to a six-month extension of the timetable for delivery of the EBA’s advice for the purposes of a benchmarking of national loan enforcement frameworks (including insolvency frameworks) from a bank creditor perspective.

Second application window for RBS Incentivised Switching Scheme opens

BCR, the independent body established to implement the £775m RBS State Aid Alternative Remedies Package, announced the opening of the second application window for the ISS. The second application window is open to entities who meet the published criteria (which remain unchanged) but are not yet part of ISS.

UKAR publishes 2019 annual report & accounts

UK Asset Resolution Limited (UKAR), which incorporates Bradford & Bingley plc (B&B) and NRAM Ltd (NRAM) issued its results for the year ended 31 March 2019. UKAR says its mission is to maximise value for the taxpayer, whilst serving its customers well and treating all its stakeholders fairly. Since formation in 2010 UKAR says it made significant progress and after the year end all outstanding B&B and NRAM government loans from HM Treasury were repaid, enabling it to move to the final stage of achieving its overarching objective of disposing of the government’s investments in both companies.

Cypriot bank wins £5.5m as judge calls out dishonesty

A London judge dismissed a claim brought by a developer seeking to compel Bank of Cyprus to write off his outstanding loans, concluding that the alleged written agreement on which the suit was based was not genuine or binding. Property developer Phytos Stavrinides and two of his companies will need to pay Bank of Cyprus £5.5m in overdue loan repayments, after Judge John Kimbell dismissed their claim at the High Court. For the full judgment, see: Stavrinides and others v Bank of Cyprus Public Co Ltd  [2019] EWHC 1328 (Ch)

 

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Consumer credit, mortgage and home finance

 

Advocate General Kokott opines on the relationship between different pre-contractual obligations on the creditor under the Consumer Credit Directive

In Michel Schyns v Belfius Banque SA Case (C 58/18) EU:C:2019:120, Advocate General Kokott was asked to clarify the relationship between different pre-contractual obligations on the creditor under the Consumer Credit Directive (Directive 2008/48/EC) (CCD). In particular, following a referral from a Belgian court, the specific points at issue were, first, the extent of the pre-contractual obligation to provide explanations under Article 5(6) of the CCD and, second, the potential importance of the assessment of the creditworthiness of the consumer provided for in Article 8 of the CCD for the conclusion of the agreement.

FOS outlines approach to mortgage prisoner complaints

The Treasury Committee published correspondence with the FOS on the FOS’s approach to dealing with mortgage prisoner complaints. The FOS identifies three groups of mortgage prisoners but does not put forward a specific mortgage prisoner category within its data. The FOS says that it is not possible to provide an exact figure for mortgage prisoner complaints, but that over the last six financial years the FOS received between 9,000 and 12,500 complaints each year in total about mortgages across a wide range of issues and mortgage prisoner cases make up a small proportion of those. 

 

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Insurance and pensions

 

EIOPA consults on draft opinion on sustainability within Solvency II

The European Insurance and Occupational Pensions Authority (EIOPA) launched a consultation on a draft opinion on sustainability within Solvency II. The draft opinion forms part of EIOPA's strategic activities on sustainable finance and follows a call for opinion from the European Commission. Feedback is sought by 26 July 2019. EIOPA says it will consider the responses it receives to the consultation and finalise the opinion for submission to the EU institutions by 30 September 2019.

The Council of the EU has published ‘I/A’ item notes inviting the Council to adopt the draft pan-European Personal Pension Product Regulation

The ‘I/A’ item note states that on 16 April 2019, the European Parliament adopted its position at first reading on the European Commission’s proposal. The outcome of voting in the European Parliament reflects the compromise agreement reached between the institutions and should, therefore, be acceptable to the Council. However,  statements from the Czech Republic and the Netherlands show some resistance to the proposal.

Money and Pensions Service appoints principal to drive pensions dashboards

The Money and Pensions Service appointed Chris Curry as principal of the Pensions Dashboard Industry Delivery Group. Pensions dashboards aim to ensure people get easy access to key information about what pensions they are entitled to, who manages them and what they are worth, ‘revolutionising how people engage with their pensions throughout their lives’.

Pensions industry group complains to FCA over fund failings

A leading UK pensions association called on the FCA to investigate the lack of transparency around fund managers’ voting polices—particularly around climate change, executive pay and gender diversity—complaining of ‘opacity and lack of comparability’. The AMNT—which represents UK pension schemes—said a review of fund manager voting policies found poor transparency and accountability that is preventing pension scheme trustees from operating a stewardship policy on the ESG of the companies in which they invest via fund managers.

 

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Payment services and systems

 

PSR publishes specific direction to Visa Europe and responses to consultation on the direction

The Payment Systems Regulator (PSR) published Specific Direction 9 requiring Visa Europe to review and adopt appropriate incident communication strategy and response plans. The Direction is intended to make sure Visa does all it can to ensure its participants, service users and other stakeholders are given enough information, in case any future incident occurs where Visa's services are unexpectedly unavailable. The PSR also published responses to its consultation on the Direction.

PSR publishes open letter to Pay.UK Limited

The PSR published an open letter to Pay.UK Limited (the body that currently operates important payment systems, including Bacs and Faster Payments). The open letter sets out the PSR’s thinking about potential risks and issues in relation to its statutory objectives—in particular, competition and innovation—which could arise from potential outcomes of Pay.UK’s procurement process for the New Payment Architecture central infrastructure services.

Handbook Notice No. 66: FCA adopts changes to SUP 16

The FCA published Handbook Notice No. 66, which includes changes to chapter 16 of the Supervision Manual (SUP) in the FCA Handbook made by the FCA board on 30 May 2019 to ensure the accuracy of capital adequacy reporting. It also includes feedback on the Quarterly Consultation Paper No 22 (CP18/24).

BoE’s Victoria Cleland speaks on diversity in payments

The BoE published a speech by its executive director for banking, payments and innovation, Victoria Cleland, at the European Women Payments Network annual conference in Amsterdam. Ms Cleland reflected on the importance of having a diverse workforce, and the benefits of having a diverse payment system. 

 

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Fintech and virtual currencies

 

FSB reports on work to address crypto-asset risks

The FSB published a report on crypto-assets, which considers work under way, regulatory approaches and potential gaps. The report is being delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Fukuoka, Japan on 8-9 June 2019. It recommends that the G20 keep the topic of regulatory approaches and potential gaps, including the question of whether more coordination is needed, under review.

ECB and BoJ publish results of phase 3 of their joint research project into distributed ledger technologies

The ECB and the Bank of Japan (BoJ) jointly published the results of phase 3 of Project Stella, their joint research project which has contributed to the ongoing debate surrounding the emergence of distributed ledger technologies (DLT) and its potential use in the future for financial market infrastructures which support payments and securities settlement. Phase 3, ‘Synchronised cross-border payments’, builds on the insights gained from the previous two phases to bring the research into the broader sphere of cross border payments.

FCA’s director of innovation on how the regulator is embracing change

The FCA published a speech by its director of innovation, Nick Cook, on the role of innovation in financial services and in the FCA itself, in which he said the regulator wants to help create a culture where innovation and new ways of approaching old problems are considered business as usual, rather than being undertaken in a ring-fenced or siloed function unique and distinct from the organisation that it sits in.

BoE executive director on the challenges raised by AI for boards and governance

The BoE published a speech delivered by its executive director of UK deposit takers supervision, James Proudman, at the FCA conference on governance in banking, in which he looked at the rise of artificial intelligence (AI) in financial firms. The speech looked at a number of challenges for boards raised by AI and its governance. Mr Proudman noted that the introduction of AI and machine learning poses significant challenges around the proper use of data, and said boards should attach priority to its modelling and testing.

Fintech groups launch Regtech network in Asia

Fintech associations in Singapore, Hong Kong and Japan joined forces to launch the Asia-Pacific (APAC) Regtech Network, aimed at combating financial crime and promoting the implementation of technology to streamline regulatory processes. The APAC Regtech Network is comprised of the regtech committees of the Singapore Fintech Association, the Fintech Association of Japan and the Fintech Association of Hong Kong, and will hold regular meetings to address central issues in regulatory technology, according to a video posted by the Asia Capital Markets Institute announcing the initiative. 

 

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Sustainable finance

 

Task Force on Climate-related Financial Disclosures publishes 2019 status report

The FSB’s Task Force on Climate-related Financial Disclosures (TCFD) published its 2019 status report. The report provides an overview of the extent to which companies in their 2018 reports included information aligned with the core TCFD recommendations published in June 2017. The report finds encouraging progress on climate-related financial disclosure, but also a need for further progress to consider financial risks.

IOSCO: emerging market regulators issue recommendations related to sustainable finance

The Growth and Emerging Market Committee (GEMC) of IOSCO published a report: Sustainable finance in emerging markets and the role of securities regulators. It provides 10 recommendations for emerging market member jurisdictions to consider when issuing regulations or guidance regarding sustainable financial instruments. Among other things, the recommendations include requirements for reporting and disclosure of material ESG specific risks, aimed at enhancing transparency.

EIOPA consults on draft opinion on sustainability within Solvency II

EIOPA launched a consultation on a draft opinion on sustainability within Solvency II. The draft opinion forms part of EIOPA's strategic activities on sustainable finance and follows a call for opinion from the European Commission. Feedback is sought by 26 July 2019. EIOPA says it will consider the responses it receives to the consultation and finalise the opinion for submission to the EU institutions by 30 September 2019.

Treasury Committee launches inquiry into decarbonisation of the UK economy

The Treasury Committee launched an inquiry into the decarbonisation of the UK economy and green finance. The inquiry will scrutinise the role of HM Treasury, regulators and financial services firms in supporting the government’s climate change commitments, and examine the economic potential of decarbonisation for the UK economy. The inquiry aims to consider how to leverage the opportunities for the UK to lead the way in green finance and environmental innovation, and to ensure that the UK’s climate policies are effectively funded. 

 

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Islamic finance

 

The IFSB publishes Working Paper on risk-sharing in Islamic banking

The Islamic Financial Services Board (IFSB) published its 10th research (WP-10) in the IFSB Working Paper series which explores the risk-sharing practices in the Islamic banking sector. This working paper describes the views of both Islamic banks and regulatory and supervisory authorities on the practices of Islamic banks in IFSB member jurisdictions. This is in relation to the governance rights of unrestricted profit-sharing investment account (UPSIA) holders, as well as likely reasons that may account for the limited usage of equity-based contracts (such as muḍārabah and mushārakah) especially on the asset side of the balance sheet of Islamic banks.

IFSB publishes analysis of inter-sectoral linkages within the Islamic financial services industry

The IFSB issued a working paper which explores the inter-sectoral linkages within the Islamic financial services industry (IFSI) and between IFSI and the real sector via a financial network analysis. The paper extracted Islamic banking balance sheet data covering 2013 to 2017 from the IFSB Prudential and Structural Islamic Financial Indicators (PISIFIs) database to generate a bilateral exposure adjacency matrix that indicates assets and liabilities across sectors of the IFSI and the real economy.

The IFSB announces global summit to discuss Islamic finance for sustainable development in the era of technological innovations

The IFSB announced that the 14th edition of the IFSB Global Summit will be held from 12 to 14 November 2019 in Jakarta, Indonesia. Bank Indonesia is hosting the Summit, in conjunction with the Indonesia Sharia Economic Festival (ISEF) which will be held on 12 to 15 November 2019. A MoU was signed by Bank Indonesia and the IFSB which signifies the collaboration and commitment of both parties in ensuring the success of this landmark event. 

 

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Dates for your diary

 

Date

SubjectEvent

 

6 June 2019

 

European regulator updates

Regulatory fees and levies

 

 

The deadline for feedback to the ECB’s consultation on proposed changes to the ECB Regulation on supervisory fees is 6 June 2019.

 

6 June 2019European regulator updates

The deadline for applications to be appointed as a member of the Administrative Board of Review of the ECB is 6 June 2019.

 

8–9 June 2019International regulator updates

The FSB, G20 Finance Ministers and Central Bank Governors will meet in Fukuoka, Japan on 8-9 June.

 

10 June 2019

Regulatory fees and levies


Financial market infrastructure

 

The deadline for feedback to BoE ‘CP: Fees regime for financial market infrastructure supervision 2019/20 and other related policy changes’ is 10 June 2019.

 

10 June 2019

Financial crime


Anti-money laundering

 

The deadline for responses to HM Treasury’s consultation on the transposition of the Fifth Money Laundering Directive (MLD5) is 10 June 2019.

 

10 June 2019Shareholder Rights Directive

Deadline for Member States to implement SRD II.

 

10 June 2019Shareholder Rights Directive

The Proxy Advisors (Shareholders’ Rights) Regulations 2019 will enter into force on 10 June 2019.

 

11 June 2019

Mortgages and home finance


Market data

 

The next edition of the FCA and PRA mortgage lending statistics will be published on 11 June 2019.

 

11 June 2019Mortgages and home finance

As part of its live and local series the FCA will host its ‘Ask the regulator’ Q&A roundtable discussion with FCA and industry panel on 11 June 2019 in Leeds.

 

11 June 2019Investment funds

Commission Delegated Regulation (EU) 2019/819 supplementing the EuSEF Regulation with regard to conflicts of interest, social impact measurement and information to investors in the area of European social entrepreneurship funds will enter into force on 11 June 2019.

 

11 June 2019Investment funds

Commission Delegated Regulation (EU) 2019/820 supplementing the EuVECA Regulation with regard to conflicts of interest in the area of European venture capital funds will enter into force on 11 June 2019.

 

11 June 2019Insurance

As part of its live and local series the FCA will host its ‘Regulatory update focusing on the extension of the SM&CR and the Insurance Distribution Directive’ Workshop in Basingstoke on 11 June 2019.

 

11 June 2019Asset management

According to its administrative timetable the CMA statutory deadline for implementing remedial action (following its final report on its market investigation of investment consultancy and fiduciary management services) is 11 June 2019.

 

11 June 2019Enforcement and redress

As part of its consultation ‘CP10/19: Enforcement: Changes to the PRA’s settlement policy consultation paper’ the PRA will host a roundtable event for law firms working in this area on 11 June 2019.

 

11 June 2019

Financial crime

Cybercrime


Sanctions

  
SI 2019/956: The Cyber-Attacks (Asset-Freezing) Regulations 2019 will enter into force on 11 June 2019.
12 June 2019

Markets and trading


Benchmarks

 

The deadline for feedback to the ECB’s working group on euro RFRs public consultation on its draft recommendations to address the legal implications for new and legacy contracts referencing EONIA as a result of the proposed transition from EONIA to €STR is 12 June 2019.

 

13 June 2019

Payment systems and services


Card-acquiring services

 
The deadline for feedback to the PSR’s consultation MR18/1.4—Consultation on our proposed approach to the merchant survey is 13 June 2019.
13 June 2019

Prudential requirements


PRA Pillar 2

 

The deadline for responses to the PRA’s CP5/19, in which it proposes to update the Pillar 2 capital framework to reflect continued refinements and developments in setting the PRA buffer (also referred to as Pillar 2B) is 13 June 2019.

 

 

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