FS weekly highlights—7 May 2020

FS weekly highlights—7 May 2020

In this issue

 

 

Coronavirus (COVID-19)
Brexit news
MiFID II
UK, EU and international regulators and bodies
Regulated activities
Authorisation, approval and supervision
Prudential requirements
Risk management and controls
Financial crime
Complaints, compensation and claims management
Investigations, enforcement and discipline
Regulation of benchmarks and IBOR reform
Regulation of capital markets
Regulation of derivatives
Banks and mutuals
Consumer credit, mortgage and home finance
Securities financing transactions
Regulation of insurance
Regulation of personal pension and stakeholder products
Payment services and systems
Fintech and cryptoassets
Sustainable finance
Islamic finance
Dates for your diary

 

Coronavirus (COVID-19)

Coronavirus (COVID-19)—European Commission note discusses prudential frameworks for bank lending

The Council of the EU published a Commission Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending to support businesses and households amid the coronavirus (COVID-19) pandemic. It outlines actions taken by central banks, supervisors and the Commission to provide banks with the necessary measures, and discusses the flexibility within the regulatory framework.

Source: Communication from the Commission to the European Parliament and the Council: Commission Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending Supporting businesses and households amid COVID-19.

Coronavirus (COVID-19)—ECON members to exchange views with chair of the supervisory board of the ECB

The European Parliament announced that at 11:00–12:00 CET on 5 May 2020, members of the Parliament’s Committee on Economic and Monetary Affairs (ECON) were due to hold an exchange of views with the chair of the supervisory board of the European Central Bank (ECB), Andrea Enria. This was the first public hearing with the Single Supervisory Mechanism (SSM) chair in ECON in 2020. The banking sector plays a decisive role in mitigating the negative economic effects of the coronavirus (COVID-19) pandemic. Topics addressed include therefore the various measures taken by the prudential supervisor supporting the banking sector so that it can fulfil this role effectively.

Source: Exchange of views with chair of the supervisory board of the ECB.

Coronavirus (COVID-19)—ECB’s Andrea Enria warns against national bias in policy responses

The European Parliament published a briefing note prepared in connection with the exchange of views in the ECON Committee on 5 May 2020 with the chair of the supervisory board of the ECB, Andrea Enria, on the economic impact and the response to the coronavirus (COVID-19) pandemic. It also published Enria’s opening remarks at the meeting, in which he set out the EU’s economic response and measures and discussed the road ahead.

Sources: Exchange of views with Andrea Enria, chair of the supervisory board of the ECB, ECON on 5 May 2020 and  Public hearing at the European Parliament’s Economic and Monetary Affairs Committee.

Coronavirus (COVID-19)—ESAs issue joint statement on publication of bilateral margin RTS amendments under EMIR in response to pandemic 

In response to the coronavirus (COVID-19) outbreak, the European Supervisory Authorities (ESAs) (notably the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA)) published joint draft regulatory technical standards (RTS) to amend the Delegated Regulation on the risk mitigation techniques for non-centrally cleared over-the-counter (OTC) derivatives (bilateral margining), under the European Markets Infrastructure Regulation (Regulation 648/2012) (EMIR), to incorporate a one-year deferral of the two implementation phases of the bilateral margining requirements.

Sources: Joint RTS on amendments to the bilateral margin requirements under EMIR in response to the COVID-19 outbreak and  Final report: EMIR RTS on various amendments to the bilateral margin requirements in view of the international framework.

For further information, see:  EMIR—essentials and  OTC and exchange traded derivatives—key features and concepts.

Coronavirus (COVID-19)—ESMA reminds firms of MiFID II conduct of business obligations in context of increasing retail investor activity

ESMA issued a public statement on the risks for retail investors when trading under the highly uncertain market circumstances due to the coronavirus (COVID-19) pandemic. ESMA’s statement draws firms’ and clients’ attention to these risks and reminds investment firms of the key conduct of business obligations under the Markets in Financial Instruments Directive (MiFID II) when providing services to retail investors.

Source: ESMA reminds firms of conduct of business obligations under MiFID II.

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

Coronavirus (COVID-19)—EBA launches additional bank transparency exercise

The EBA launched an additional EU-wide transparency exercise to provide market participants with updated information on the financial conditions of EU banks as of 31 December 2019, prior to the start of the coronavirus COVID-19 pandemic. The EBA is aiming to publish the results of this exercise at the beginning of June 2020. 

Source: EBA launches additional EU-wide transparency exercise.

Coronavirus (COVID-19)—EIOPA extends timetable for Solvency II Review advice to December 2020

EIOPA revised its timetable for advice on the Solvency II Review. It has decided to deliver its advice to the European Commission at the end of December 2020, to take into account the importance of assessing the impact of the current coronavirus (COVID-19) situation on the Solvency II Review. As previously announced, the deadline of the information request for the holistic impact assessment of the Review has been extended by two months, to 1 June 2020.

Source: EIOPA revises its timetable for advice on Solvency II Review until end December 2020.

Coronavirus (COVID-19)—FCA gives details of delayed activities and regulatory change

The Financial Conduct Authority (FCA) provided details of its review of its work plans to delay or postpone activity that is not critical to protecting consumers and market integrity in the short-term. The FCA is extending the closing date for responses to open consultation papers and calls for input until 1 October 2020 and rescheduling most other planned work. It has also scaled back its programme of routine business interactions, especially through meetings so that it only contacts firms on business-critical requests and responses to the current situation. The FCA will continue with a small number of regulatory changes that support consumers, particularly the most vulnerable, or where major long-term programmes would be disrupted.

Source: Coronavirus (COVID-19): delayed activities and regulatory change.

Coronavirus (COVID-19)—FCA gives firms extra six months to implement SCA for e-commerce

In light of the ongoing coronavirus (COVID-19) pandemic, the FCA is giving the industry an additional six months to implement strong customer authentication (SCA) for e-commerce. The FCA says this will minimise potential disruption to consumers and merchants. The new timeline of 14 September 2021 replaces the 14 March 2021 date.

Source: Strong customer authentication and coronavirus.

Coronavirus (COVID-19)—FCA guidance for insurers on access to premises

The FCA updated its coronavirus (COVID-19) webpage for insurers, setting out its expectations around access to premises. The FCA says it does not expect insurers to void policies or reduce potential claims as a result of temporary inability to access premises.

Source: Update to FCA webpage insurance and coronavirus.

Coronavirus (COVID-19)—FCA guidance on customer access to restricted savings accounts

The FCA updated its coronavirus (COVID-19) webpage with guidance on customer access to restricted savings accounts. The FCA welcomes the steps several firms have already taken to allow access and to waive penalty fees or charges on restricted savings products, and sets out factors firms should consider around sudden financial vulnerability.

Source: Update to FCA webpage information for firms COVID-19 response.

Coronavirus (COVID-19)—FCA guidance on cyber security as number of scams rises

The FCA updated its coronavirus (COVID-19) webpage providing information for firms, adding in a new section on information security in light of the rising number of cyber criminals exploiting coronavirus related themes for their own gain. In the UK, the NCSC (National Cyber Security Centre) has detected more UK ‘government-branded’ scams relating to coronavirus than any other subject.

Source: FCA updated webpage info for firms—new section on information security.

Coronavirus (COVID-19)—FCA issues updates on mortgage prisoners and those experiencing financial difficulty

The FCA issued a statement on its work to help mortgage prisoners, saying its work in this area has continued during the disruption caused by the coronavirus (COVID-19) pandemic. In light of the situation it has extended by three months the window in which firms must write to affected customers informing them of switching options. The FCA also wrote to mortgage lenders and administrators managing closed mortgage books to remind them of their obligation to treat customers fairly.

Sources: Statement on mortgage prisoners and Letter to mortgage lenders and administrators managing closed mortgage books.

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

Coronavirus (COVID-19)—FCA offers SM&CR waivers for solo-regulated firms using temporary arrangements

In light of the coronavirus (COVID-19) pandemic, the FCA made a new modification by consent available to solo-regulated firms using temporary arrangements, extending the period in which an individual can cover for a senior manager without being approved. Solo-regulated firms can also allocate an absent senior manager’s prescribed responsibilities to the individual covering the role.

Sources: Modification by consent: SUP 10C.3.13 and SYSC 24.1.2Period to cover absent senior managers extended due to coronavirus (COVID-19)Waivers and modifications by consent and  Senior Managers and Certification Regime (SM&CR) and coronavirus (COVID-19): our expectations of solo-regulated firms.

For further information see:  Senior Managers and Certification Regime—essentials for solo-regulated firms.

Coronavirus (COVID-19)—FCA publishes guidance on maintaining financial crime controls

The FCA published a webpage setting out its expectations on how firms should apply their systems and controls to combat and prevent financial crime during the coronavirus (COVID-19) crisis. The FCA notes that criminals are already taking advantage of the pandemic to carry out fraud and exploitation scams through a variety of methods, including cyber-enabled fraud. Those seeking to launder criminal proceeds or finance terrorism are likely to also exploit any weaknesses in firms’ systems.

Source: New FCA webpage—Financial crime systems and controls during coronavirus situation.

Coronavirus (COVID-19)—FCA court action on business interruption insurance and consultations on support for consumers and businesses who hold insurance products

The FCA announced that it intends to obtain a court declaration to resolve contractual uncertainty in business interruption (BI) insurance cover. The FCA is also consulting on guidance setting out its expectations for insurers and insurance intermediaries to consider the value of their products in light of the exceptional circumstances arising out of the coronavirus (COVID-19) pandemic, and guidance setting out the FCA’s expectations for firms when dealing with customers of general insurance and pure protection contracts who may be experiencing temporary financial difficulty as a result of the pandemic. James Denison, partner at Weightmans LLP, has offered his comments on the potential impacts of the judicial clarification on BI insurance.

Sources: FCA seeks legal clarity on business interruption insurance alongside package of measures to help consumers and small businessesFCA statement—Insuring SMEs: business interruption and Mel Stride comments on FCA seeking court ruling on business interruption insurance.

Coronavirus (COVID-19)–FCA announces plans to pilot ‘digital sandbox’

The FCA announced that it will be piloting a ‘digital sandbox’, in collaboration with key strategic partners and the industry, to provide enhanced regulatory support to innovative firms tackling the challenges caused by the coronavirus (COVID-19) pandemic. The FCA had been exploring the concept of a digital sandbox prior to the pandemic and has now accelerated its plans.

Source: New FCA page: Digital sandbox—coronavirus (COVID-19) pilot.

Coronavirus (COVID-19)—Delfas speech on FCA’s response to pandemic and Brexit

The executive director of international at the FCA, Nausicaa Delfas, gave a speech at the Deloitte Annual Conduct Risk Conference on the FCA’s national and international response to coronavirus (COVID-19) and Brexit. Among other points, Delfas tells firms and senior managers to act appropriately and with integrity in response to the challenges of the pandemic, and to avoid a future ‘tail of misconduct.’ She encourages firms to prepare for all Brexit outcomes.

Source:  FCA’s national and international response to coronavirus (COVID-19) and Brexit.

Coronavirus (COVID-19)–FOS approach to CBILS and BBLS complaints outlined in correspondence with FCA

The FCA published correspondence between its interim chief executive, Christopher Woolard, and the chief ombudsman and chief executive of the Financial Ombudsman Service (FOS), Caroline Wayman, regarding the government’s Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).

Sources: FCA letter to the Financial Ombudsman Service regarding the government’s Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme and  Financial Ombudsman Service's response to FCA regarding the government’s Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme.

Coronavirus (COVID-19)—PSR updates webpage setting out expectations and areas of focus

The Payment Systems Regulator (PSR) updated its coronavirus (COVID-19) webpage, which contains contact detail and general information on the PSR’s expectations, updates, and information relating to decisions and developments.

Source: COVID-19: PSR sets out general expectations.

Coronavirus (COVID-19)—Treasury announces BBLS launch, chancellor writes to lenders, BoE updates TFSME and PRA issues statement on credit risk mitigation

HM Treasury issued a press release announcing the launch of the BBLS whereby Britain’s small businesses will be able to apply for quick and easy-to-access loans of up to £50,000. The government has also published a letter from the chancellor of the exchequer, Rishi Sunak, addressed to accredited lenders clarifying the approach he is taking to a number of matters relevant to the design and operation of BBLS. In addition, the Bank of England (BoE) announced a change to the Term Funding Scheme with additional incentives for SMEs (TFSME) to support the BBLS and the Prudential Regulation Authority (PRA) issued a statement on credit risk mitigation eligibility and leverage ratio treatment of loans under the BBLS.

Sources: New Bounce Back Loans to launch todayBounce Back Loan Scheme and Updating the TFSME to reflect HMT’s new Bounce Back Loans Scheme.

Coronavirus (COVID-19)—Treasury Committee ‘insists’ on daily loan data

The chair of the Treasury Committee, Mel Stride MP, repeated the Committee’s call for UK Finance to provide daily updates on coronavirus (COVID-19) business loans. UK Finance has declined this request, in part citing concerns around the daily data’s robustness. Stride replied on 30 April to say that as UK Finance was already providing daily data on CBILS to the government, the Committee should also receive that data.

Source: UK Finance must provide daily updates on coronavirus business loans.

Coronavirus (COVID-19)—Chartered Institute for Securities & Investment publishes consumer finance guides

The Chartered Institute for Securities & Investment (CISI) published a series of money guides for the consumer, containing tips on managing finances in the context of the coronavirus (COVID-19) economic disruption. They are aimed at consumers across the board, including the employed, self-employed and small business owners.

Source: UK Certified Financial Planner professionals share free money guides for consumers.

Coronavirus (COVID-19)—LSB updates guidance on CBILS and BBLS

Following the chancellor’s announcement on 27 April 2020 regarding changes to the CBILS and the introduction of the new BBLS from 4 May 2020, the Lending Standards Board (LSB) has made further revisions to its Information for Practitioners to take account of the way that these products operate within the Standards of Lending Practice for business customers. The updates concern product information, product sale, treatment of customers in financial difficulty, customers in vulnerable circumstances, and governance and oversight.

Source: Update to Standards of Lending Practice for business customers: Coronavirus Business Interruption Loans Scheme and Bounce Back Loan Scheme 4 May 2020.

FATF collates policy responses on the threat of money laundering amid coronavirus (COVID-19)

The Financial Action Task Force (FATF) published a paper identifying the challenges, good practices and policy responses towards new money laundering and terrorist financing threats and vulnerabilities arising from the coronavirus (COVID-19) crisis. The ability of the government and private sector to implement anti-money laundering and counter terrorist financing (AML/CFT) obligations has been significantly impacted by the pandemic observed the FATF. As such, the body has amassed policy responses from across the globe to help support the swift and effective implementation of measures to respond to AML/CFT risks brought about by the pandemic. Examples of responses include supporting electronic and digital payment options, encouraging the full use of a risk-based approach to customer due diligence, and strengthening communication with the private sector.

Source: COVID-19-related Money Laundering and Terrorist Financing Risks and Policy Responses.

Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020

SI 2020/480: Amendments are made to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to remove from the scope of consumer credit regulatory regime loans of £25,000 or less that are made by commercial lenders to sole traders, unincorporated associations and partnerships of fewer than four people under the BBLS. This Order comes into force on 4 May 2020.

Source: The Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020 and the  explanatory memorandum.

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Brexit news

Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020

SI 2020/Draft: This draft enactment replaces the previous draft SI published on 22 April 2020. This draft enactment is laid in exercise of legislative powers under the European Communities Act 1972 and the European Union (Withdrawal) Act 2018 in preparation for IP completion day. This draft enactment is proposed to amend 16 pieces of UK secondary legislation, five pieces of retained EU legislation, and revoke two pieces of retained EU legislation in relation to financial services and markets in order to address failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the UK from the EU. It comes into force partly on the day after the day on which these Regulations are made and fully on IP completion day. This draft enactment was re-laid with technical corrections.

Source: The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 and  explanatory memorandum.

Government letter provides clarity on UK-EU future financial services relationship and EMIR 2.2

The government published a letter from the economic secretary to the Treasury, John Glen, to the chair of the House of Commons European Scrutiny Committee, Sir William Cash, clarifying the government’s position on certain aspects of trade in financial services under the future UK-EU economic partnership. The letter, sent in response to a letter from the Committee, addresses UK-EU institutional arrangements on financial services, equivalence assessments and EMIR 2.2.

Source: HM Treasury letter regarding trade in financial services under the future UK-EU economic partnership.

For further information, see:  EMIR REFIT and EMIR 2.2 roadmap.

Brexit Bulletin—ESC calls for a debate on UK-EU negotiations and urges 'fullest possible transparency' from the government

On 6 May 2020, the European Scrutiny Committee (ESC) published a report having consulted a number of parliamentary Select Committees on the implications of the EU's mandate for negotiating the future UK-EU relationship on the UK's vital national interests. Prior to publishing its report, the ESC wrote to interested Select Committees seeking their input, having examined the main elements of the EU's and UK's respective negotiating positions. It consulted 24 Committees and received 23 responses. The report outlines these responses, the key issues highlighted, and the reasons for putting forward a motion for debate in the House of Commons. The motion calls for the government to conduct negotiations with the EU with the fullest possible transparency, proper parliamentary scrutiny, regular progress reports and stakeholder consultation.

Source: ESC—The EU's mandate for negotiating a new partnership with the UK: outcome of Select Committee consultation.

HMT sets out post-transition period trade repository registration arrangements

HM Treasury published guidance setting out its intention to enable trade repositories to register with the FCA or apply in advance to operate in the UK immediately following the end of the Brexit transition period, under the UK Securities Financing Transactions Regulation (SFTR).

Source: Trade repository registration arrangements under the UK Securities Financing Transactions Regulation.

BoE, PRA and FCA statements on temporary transitional powers

The BoE, the PRA and the FCA published statements on HM Treasury’s intention to ‘shift’ regulators’ temporary transitional power (TTP) so it will be available for up to two years after the end of the transition period.

Sources: Joint Bank and PRA statement on the proposed use of temporary transitional powers at the end of the transition period and  Temporary Transitional Power directions and Brexit policy statement (PS19/5).

For further information, see:  Brexit and financial services—temporary permissions, temporary recognition regimes and the financial services contracts regime for inbound passporting EEA firms and funds.

Coronavirus (COVID-19)—Delfas speech on FCA’s response to pandemic and Brexit

The executive director of international at the FCA, Nausicaa Delfas, gave a speech at the Deloitte Annual Conduct Risk Conference on the FCA’s national and international response to coronavirus (COVID-19) and Brexit. Among other points, Delfas tells firms and senior managers to act appropriately and with integrity in response to the challenges of the pandemic, and to avoid a future ‘tail of misconduct.’ She encourages firms to prepare for all Brexit outcomes.

Source:  FCA’s national and international response to coronavirus (COVID-19) and Brexit.

 

MiFID II

ESMA launches consultation on SME growth markets

ESMA launched a consultation on the functioning of the small and medium enterprises (SME) growth market regime under the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and on two draft technical standards introduced by the amendments to the Market Abuse Regulation (EU) 596/2014 for the promotion of the use of SME growth markets. The consultation closes on 15 July 2020.

Source: ESMA consults on SME growth markets.

SMGS responds to draft technical standards on the MIFID II third-country regime

The Securities and Markets Stakeholder Group (SMSG) of ESMA responded to ESMA’s consultation on draft technical standards on the provision of investment services and activities in the EU by third-country firms under MiFID II and MiFIR. Under this new regime, third country entities need to register with ESMA and produce certain annual information to ESMA. In its response, SMSG states that the information provided by third-country firms should, amongst other things, enable ESMA to identify potential circumvention of EU law by the third-country entity. SMSG views reverse solicitation by third-country entities as a major concern in this respect.

Source: SMSG response to the consultation paper on draft technical standards on the provision of investment services and activities in the Union by third-country firms under MiFID II and MiFIR.

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

Coronavirus (COVID-19)—ESMA reminds firms of MiFID II conduct of business obligations in context of increasing retail investor activity

ESMA issued a public statement on the risks for retail investors when trading under the highly uncertain market circumstances due to the coronavirus (COVID-19) pandemic. ESMA’s statement draws firms’ and clients’ attention to these risks and reminds investment firms of the key conduct of business obligations under MiFID II when providing services to retail investors.

Source: ESMA reminds firms of conduct of business obligations under MiFID II.

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

ESMA makes available annual bond transparency calculations, systematic internaliser calculations and new bond liquidity data

ESMA published the annual transparency calculations of the large in scale (LIS) and size specific to the instruments (SSTI) thresholds for bonds; systematic internaliser calculations for equity, equity-like instruments and bonds; and new data for bonds subject to the pre- and post-trade requirements of MiFID II and MiFIR.

Source: ESMA publishes annual bond transparency calculations, systematic internalisers calculations and new bond liquidity data.

FCA updates position limits for certain commodity derivatives

The FCA published updated position limits for certain commodity derivative contracts traded on UK trading venues. The limits have been established under the Markets in Financial Instruments Regulations 2017 (SI 2017/701). The changes to limits will apply immediately.

Source: Update of position limits for certain commodity derivative contracts.

For further information, see:  Commodity derivatives.

Better Finance says ESMA should have conducted its own investigation into inducements

Better Finance issued a press release expressing concern that ESMA asked the European Commission to further deepen its assessment of ‘inducements’ and on the disclosure of costs and charges under MiFID II.

Sources: The EU supervisor falls short of advising a complete ban on commissions for ‘retail’ investment advisors and  Final report: ESMA’s Technical Advice to the Commission on the impact of the inducements and costs and charges disclosure requirements under MiFID II.

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UK, EU and international regulators and bodies

Coronavirus (COVID-19)—FCA gives details of delayed activities and regulatory change

The Financial Conduct Authority (FCA) provided details of its review of its work plans to delay or postpone activity that is not critical to protecting consumers and market integrity in the short-term. The FCA is extending the closing date for responses to open consultation papers and calls for input until 1 October 2020 and rescheduling most other planned work. It has also scaled back its programme of routine business interactions, especially through meetings so that it only contacts firms on business-critical requests and responses to the current situation. The FCA will continue with a small number of regulatory changes that support consumers, particularly the most vulnerable, or where major long-term programmes would be disrupted.

Source: Coronavirus (COVID-19): delayed activities and regulatory change.

FCA publishes Handbook Notice No 76

The FCA published Handbook Notice No 76, which includes changes to the FCA Handbook made by the FCA board on 3, 8, 23 and 30 April 2020. Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Handbook Notice or in separate feedback statements.

Source: Handbook Notice 76.

FCA publishes arrangements for personal data exchanges with US, Australian and Hong Kong authorities

The FCA published four agreements setting out the terms of the administrative arrangements for transferring personal data between the FCA and other regulators. The agreements, which were all signed in the past week, relate to the exchange of personal data with regulators in the US, Australia and Hong Kong.

Sources: Administrative arrangement for the transfer of personal data between the FCA and United States Securities and Exchange Commission (SEC)Administrative arrangement for the transfer of personal data between the FCA and the Australian Securities and Investments Commission (ASIC)Administrative arrangement for the transfer of personal data between the FCA and United States Commodity Futures Trading Commission (CFTC) and  Administrative arrangement for the transfer of personal data between the FCA and the Securities and Futures Commission of Hong Kong (SFC).

FCA May 2020 policy development update

The FCA published its policy development update for May 2020, providing information on its recent and upcoming publications.

Source: Policy development update.

PRA publishes April 2020 Regulatory Digest

The Prudential Regulation Authority (PRA) has published the April 2020 edition of its Regulatory Digest, which highlights key regulatory news and publications delivered for the month, including regulatory measures for firms in response to coronavirus (COVID-19).

Source: PRA Regulatory Digest—April 2020.

SRB chair discusses recent work and outstanding issues in speech to ECON

The Single Resolution Board (SRB) published a speech given by its chair, Elke König, to the European Parliament’s Committee on Economic and Monetary Affairs (ECON) on 5 May 2020. In her speech, König covered a range of topics including the impact of the coronavirus (COVID-19) pandemic, the SRB’s main activities in recent months, and outstanding issues including the need to complete the banking union and the capital markets union.

Source: Speech by Elke König to European Parliament ECON Committee.

Sandra Boss steps down from PRC and RTGS/CHAPS board

Sandra Boss, an external member of the BoE’s Prudential Regulation Committee (PRC) and the senior independent member of the Real-Time Gross Settlement (RTGS)/CHAPS board has stepped down.

Source: Sandra Boss steps down from the Prudential Regulation Committee and the RTGS renewal team.

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Regulated activities

Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020

SI 2020/480: Amendments are made to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to remove from the scope of consumer credit regulatory regime loans of £25,000 or less that are made by commercial lenders to sole traders, unincorporated associations and partnerships of fewer than four people under the BBLS. This Order comes into force on 4 May 2020.

Source: The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 and  explanatory memorandum.

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Authorisation, approval and supervision

Coronavirus (COVID-19)—FCA offers SM&CR waivers for solo-regulated firms using temporary arrangements

In light of the coronavirus (COVID-19) pandemic, the FCA made a new modification by consent available to solo-regulated firms using temporary arrangements, extending the period in which an individual can cover for a senior manager without being approved. Solo-regulated firms can also allocate an absent senior manager’s prescribed responsibilities to the individual covering the role.

Sources: Modification by consent: SUP 10C.3.13 and SYSC 24.1.2Period to cover absent senior managers extended due to coronavirus (COVID-19)Waivers and modifications by consent and  Senior Managers and Certification Regime (SM&CR) and coronavirus (COVID-19): our expectations of solo-regulated firms.

For further information see:  Senior Managers and Certification Regime—essentials for solo-regulated firms.

Coronavirus (COVID-19)—Delfas speech on FCA’s response to pandemic and Brexit

The executive director of international at the FCA, Nausicaa Delfas, gave a speech at the Deloitte Annual Conduct Risk Conference on the FCA’s national and international response to coronavirus (COVID-19) and Brexit. Among other points, Delfas tells firms and senior managers to act appropriately and with integrity in response to the challenges of the pandemic, and to avoid a future ‘tail of misconduct.’ She encourages firms to prepare for all Brexit outcomes.

Source:  FCA’s national and international response to coronavirus (COVID-19) and Brexit.

FCA publishes guidance for lending firms seeking authorisation

The FCA published guidance for lending firms preparing a business plan as part of their application for authorisation. The FCA says some applications take longer because the business plan is not detailed enough.

Source: FCA sample business plan and guidance for lending firms.

For further information, see: Financial Conduct Authority—preparing for authorisation.

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Prudential requirements

EBA publishes final draft ITS on specific reporting requirements for market risk under the CRR

The EBA published its final draft implementing technical standards (ITS) on specific reporting requirements for market risk under the Capital Requirements Regulation (Regulation (EU) 575/2013) (CRR). These ITS introduce the first elements of the Fundamental Review of the Trading Book (FRTB) into the EU prudential framework by means of a reporting requirement. The ITS are expected to apply from September 2021.

Source: EBA publishes final draft technical standards on specific reporting requirements for market risk.

EBA publishes final report and guidelines on determination of weighted average maturity of contractual payments under the CRR

The EBA published its final guidelines on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche of a securitisation transaction, as laid down in the CRR. These guidelines (developed according to Article 257(4) of the CRR) aim to ensure that the methodology applicable for the determination of the WAM for regulatory purposes is sufficiently transparent and harmonised in order to increase consistency and comparability in the own funds held by institutions.

Sources: EBA publishes final guidelines on the methodology to determine the weighted average maturity of contractual payments due under the tranche of a securitisation transaction and  Final report: EBA guidelines on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche in accordance with point (a) of Article 257(1) of Regulation (EU) No 575/2013.

EBA publishes final guidelines on credit risk mitigation and the advanced IRB approach

The EBA published final guidelines on credit risk mitigation (CRM) in the context of the advanced internal ratings-based (A-IRB) approach. The guidelines, which are part of the EBA's regulatory review of the IRB approach, aim to eliminate the remaining significant differences in approaches in the area of CRM, which are due to either different supervisory practices or bank-specific choices.

Source: EBA publishes final guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGDs.

EBA publishes updated calculation tool for the liquidity coverage ratio

The EBA published its updated calculation tool for the liquidity coverage ratio, with the aim of providing additional support for reporting institutions. This Excel-based tool takes into account the amendments in the liquidity coverage requirement introduced by Commission Delegated Regulation (EU) 2018/1620 that applies from 30 April 2020. The EBA stresses that the tool is provided for information purposes only and has no legal value.

Source: EBA publishes updated calculation tool of liquidity coverage ratio.

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

EBA publishes updated ITS package for 2021 benchmarking exercise

The EBA published an update to its ITS on benchmarking of internal approaches. The draft updated ITS set out all benchmarking portfolios that will be used for the 2021 benchmarking exercise, including two additional annexes which have been introduced to incorporate the new IFRS 9 accounting standard.

Source: EBA updated ITS package for 2021 benchmarking exercise includes IFRS 9 template.

FSB consults on guidance on assessing the adequacy of financial resources for CCP resolution

The Financial Stability Board (FSB) published a public consultation report on guidance on financial resources to support central counterparty (CCP) resolution and on the treatment of CCP equity in resolution. The guidance will assist CCP resolution authorities. Central clearing of standardised OTC derivatives is a key pillar of the G20 Leaders’ commitment to reform OTC derivatives markets in response to the 2008 financial crisis. In addition, more collateral is in place to reduce counterparty credit risks. At the same time, CCPs’ criticality to the overall safety and soundness of the financial system means that authorities must take steps to ensure that CCPs do not themselves become a source of systemic risk and that they can be successfully resolved without exposing taxpayers to loss. The FSB welcomes responses to the questions set out in the public consultation report by 31 July 2020.

Sources: FSB consults on guidance on assessing the adequacy of financial resources for CCP resolution and  Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution: Consultative document.

Coronavirus (COVID-19)—Treasury announces BBLS launch, chancellor writes to lenders, BoE updates TFSME and PRA issues statement on credit risk mitigation

HM Treasury issued a press release announcing the launch of the BBLS whereby Britain’s small businesses will be able to apply for quick and easy-to-access loans of up to £50,000. The government also published a letter from the chancellor of the exchequer, Rishi Sunak, addressed to accredited lenders clarifying the approach he is taking to a number of matters relevant to the design and operation of BBLS. In addition, the BoE announced a change to the Term Funding Scheme with additional incentives for SMEs (TFSME) to support the BBLS and the PRA issued a statement on credit risk mitigation eligibility and leverage ratio treatment of loans under the BBLS.

Sources: New Bounce Back Loans to launch todayBounce Back Loan Scheme and Updating the TFSME to reflect HMT’s new Bounce Back Loans Scheme.

Coronavirus (COVID-19)—European Commission note discusses prudential frameworks for bank lending

The Council of the EU published a Commission Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending to support businesses and households amid the coronavirus (COVID-19) pandemic. It outlines actions taken by central banks, supervisors and the Commission to provide banks with the necessary measures, and discusses the flexibility within the regulatory framework.

Source: Communication from the Commission to the European Parliament and the Council: Commission Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending Supporting businesses and households amid COVID-19.

Coronavirus (COVID-19)—ECON members to exchange views with chair of the supervisory board of the ECB

The European Parliament announced that at 11:00–12:00 CET on 5 May 2020, members of the Parliament’s Committee on Economic and Monetary Affairs (ECON) were due to hold an exchange of views with the chair of the supervisory board of the European Central Bank (ECB), Andrea Enria. This was the first public hearing with the Single Supervisory Mechanism (SSM) chair in ECON in 2020. The banking sector plays a decisive role in mitigating the negative economic effects of the coronavirus (COVID-19) pandemic. Topics addressed include therefore the various measures taken by the prudential supervisor supporting the banking sector so that it can fulfil this role effectively.

Source: Exchange of views with chair of the supervisory board of the ECB.

Amendment to PRA supervisory statement SS24/15 takes effect

The PRA updated its webpage giving information on supervisory statement SS24/15, The PRA’s approach to supervising liquidity and funding risks, to confirm that the amended version of SS24/15 published on 17 December 2019 is effective from 1 May 2020. The amendment updated paragraph 6.2A of SS24/15 to align the PRA110 threshold for reporting frequency in stress with the updated PRA Rulebook.

Source: The PRA’s approach to supervising liquidity and funding risks.

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Risk management and controls

Coronavirus (COVID-19)—FCA guidance on cyber security as number of scams rises

The FCA updated its coronavirus (COVID-19) webpage providing information for firms, adding in a new section on information security in light of the rising number of cyber criminals exploiting coronavirus related themes for their own gain. In the UK, the NCSC has detected more UK ‘government-branded’ scams relating to coronavirus than any other subject.

Source: FCA updated webpage info for firms—new section on information security.

ESRB paper analyses cyber security vulnerabilities within the financial sector

The European Systemic Risk Board (ESRB) published an occasional paper on the making of a cyber crash: a conceptual model for systemic risk in the financial sector. It examines cyber security vulnerabilities within the financial sector, and their potential impact on financial stability and the real economy. The paper sets out a model geared towards disruption arising from cyber incidents, but which could also be used for any source of operational disruption.

Source: The making of a cyber crash: a conceptual model for systemic risk in the financial sector

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Financial crime

FATF collates policy responses on the threat of money laundering amid coronavirus (COVID-19)

The FATF published a paper identifying the challenges, good practices and policy responses towards new money laundering and terrorist financing threats and vulnerabilities arising from the coronavirus (COVID-19) crisis. The ability of the government and private sector to implement anti-money laundering and counter terrorist financing (AML/CFT) obligations has been significantly impacted by the pandemic observed the FATF. As such, the body has amassed policy responses from across the globe to help support the swift and effective implementation of measures to respond to AML/CFT risks brought about by the pandemic. Examples of responses include supporting electronic and digital payment options, encouraging the full use of a risk-based approach to customer due diligence, and strengthening communication with the private sector.

Source: COVID-19-related Money Laundering and Terrorist Financing Risks and Policy Responses.

LSB summary report on the APP CRM Code finds areas of good practice but room for improvement

The LSB published its summary report, ‘Review of approach to reimbursement of customers—provision R2(1) (c) of the contingent reimbursement model code for authorised push payment (APP) scams’ (the Code). The LSB found areas where the Code was applied correctly, resulting in good practice, but also identified key areas for improvement. The Payment Systems Regulator (PSR) welcomed the report but said while there were ‘some encouraging signs’ that the systems and processes are beginning to align and take shape, ‘they aren’t there yet’.

Sources: CRM Code for APP Scams: Review of approach to reimbursement of customers—provision R2(1)(c) summary reportSummary report: Review of approach to reimbursement of customers—provision R2(1)(c) of the CRM Code for APP scams and  PSR responds to the Lending Standards Board's summary report on the CRM code.

Coronavirus (COVID-19)—FCA publishes guidance on maintaining financial crime controls

The FCA published a webpage setting out its expectations on how firms should apply their systems and controls to combat and prevent financial crime during the coronavirus (COVID-19) crisis. The FCA notes that criminals are already taking advantage of the pandemic to carry out fraud and exploitation scams through a variety of methods, including cyber-enabled fraud. Those seeking to launder criminal proceeds or finance terrorism are likely to also exploit any weaknesses in firms’ systems.

Source: New FCA webpage—Financial crime systems and controls during coronavirus situation.

EBA chair Campa outlines work to assess Member States’ approaches to AML/CFT supervision

The EBA published a letter from its chair, José Manuel Campa, to the European Commission’s director-general for financial stability, services and capital markets union, John Berrigan, regarding requests to investigate possible breaches of EU law under Article 17 of Regulation (EU) 1093/2010. The letter outlines the work carried out by the EBA following allegations of money laundering at Danske Bank, ABLV Bank and Swedbank.

Source: Requests to investigate a possible breaches of Union law under Article 17 of Regulation (EU) No 1093/2010.

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Complaints, compensation and claims management

Complaints Commissioner considers FCA actions in relation to independent review into collapse of Connaught Fund

The Office of the Complaints Commissioner (OCC) published its final report (FCA00504), dated 9 April 2020, concerning a complaint made against the FCA in relation to the establishment of an independent review into the collapse of the Connaught Fund. The report also addresses the FCA’s approach to reviewing enforcement processes, appointing an independent reviewer and ex-gratia payments. 

Sources: Complaint number FCA00504 and  The FCA’s response to the Complaints Commissioner’s Report FCA00504.

Complaints Commissioner urges FCA to consider PII market in context of DB transfers

The OCC published its final report (FCA00689), dated 22 April 2020, concerning the FCA’s handling of the situation which arose when the complainant’s firm was denied professional indemnity insurance (PII) cover for defined benefit (DB) pensions transfer business. The OCC observes that the impact of the shrinking PII market and withdrawal of cover from reputable, professional firms, is clearly a serious issue for clients, firms and the FCA.

Source: Complaint number FCA00689.

Coronavirus (COVID-19)–FOS approach to CBILS and BBLS complaints outlined in correspondence with FCA

The FCA published correspondence between its interim chief executive, Christopher Woolard, and the chief ombudsman and chief executive of the FOS, Caroline Wayman, regarding the government’s CBILS and the BBLS.

Sources: FCA letter to the Financial Ombudsman Service regarding the government’s Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme and  Financial Ombudsman Service's response to FCA regarding the government’s Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme.

FSCS to begin issuing decisions on individual LCF advice claims by end of May

The Financial Services Compensation Scheme (FSCS) has announced that it has begun reviewing individual claims against London Capital & Finance (LCF) regarding misleading advice given to its customers, and will start issuing decisions by the end of May 2020. The FSCS says it expects to complete the process of reviewing claims by the end of September 2020.

Source: FSCS to start issuing decisions on LCF advice claims by the end of May.

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Investigations, enforcement and discipline

FCA announces court order for restitution to victims of unauthorised share scheme

The FCA announced that following an FCA investigation, the High Court has ordered four individuals and one company to pay nearly £3.62m in restitution to members of the public who bought shares that were promoted unlawfully. The FCA warns consumers to avoid any unsolicited investment offers from unauthorised advisers or brokers.

Source: FCA secures orders for victims of unauthorised share scheme.

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Regulation of benchmarks and IBOR reform

ESMA no action letter on benchmark ESG disclosures

ESMA published a no action letter asking national competent authorities (NCAs) not to prioritise supervisory action on environmental, social and governance (ESG) disclosures under the Benchmark Regulation. These requirements were due to apply to benchmarks administrators from 30 April 2020, but related delegated acts have not yet been adopted. Therefore, ESMA has also published an opinion asking the European Commission to adopt these delegated acts promptly. 

Source: ESMA issues no action letter on the new ESG disclosure requirements under the Benchmarks Regulation.

For further information, see:  Benchmarks Regulation—essentials.

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Regulation of capital markets

EBA publishes proposal for framework for STS synthetic securitisation

The EBA published a report, dated 30 April 2020, on its proposal for developing a simple, transparent and standardised (STS) framework for synthetic securitisation under Article 45 of the Securitisation Regulation ((EU) 2017/2402). The proposal, which is limited to balance-sheet securitisation, includes a list of criteria to be considered when labelling the synthetic securitisation as ‘STS' and provides the pros and cons of a potential differentiated capital treatment for this type of securitisation.

Sources: EBA proposes framework for STS synthetic securitisation and  EBA report on STS framework for synthetic securitisation (EBA/Op/2020/07, 30 April 2020).

ESMA launches consultation on SME growth markets

ESMA launched a consultation on the functioning of the small and medium enterprises (SME) growth market regime under MiFID II and on two draft technical standards introduced by the amendments to the Market Abuse Regulation (EU) 596/2014 for the promotion of the use of SME growth markets. The consultation closes on 15 July 2020.

Source: ESMA consults on SME growth markets.

ICMA guide summarises ESG developments for EU capital markets

The International Capital Market Association (ICMA) published an update memorandum on the EU’s sustainability disclosure regime. It aims to give a comprehensive and practical overview of new and amended EU legislation introducing significant sustainability and ESG-related disclosure requirements that will impact European capital markets.

Source: ICMA publishes update memorandum on the EU’s sustainability disclosure regime.

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Regulation of derivatives

Coronavirus (COVID-19)—ESAs issue joint statement on publication of bilateral margin RTS amendments under EMIR in response to pandemic 

In response to the coronavirus (COVID-19) outbreak, the ESAs (notably the EBA, the EIOPA and the ESMA) have published joint draft regulatory technical standards (RTS) to amend the Delegated Regulation on the risk mitigation techniques for non-centrally cleared OTC derivatives (bilateral margining), under EMIR, to incorporate a one-year deferral of the two implementation phases of the bilateral margining requirements.

Sources: Joint RTS on amendments to the bilateral margin requirements under EMIR in response to the COVID-19 outbreak and  Final report: EMIR RTS on various amendments to the bilateral margin requirements in view of the international framework.

For further information, see:  EMIR—essentials and  OTC and exchange traded derivatives—key features and concepts.

FSB consults on guidance on assessing the adequacy of financial resources for CCP resolution

The FSB published a public consultation report on guidance on financial resources to support central counterparty (CCP) resolution and on the treatment of CCP equity in resolution. The guidance will assist CCP resolution authorities. Central clearing of standardised OTC derivatives is a key pillar of the G20 Leaders’ commitment to reform OTC derivatives markets in response to the 2008 financial crisis. In addition, more collateral is in place to reduce counterparty credit risks. At the same time, CCPs’ criticality to the overall safety and soundness of the financial system means that authorities must take steps to ensure that CCPs do not themselves become a source of systemic risk and that they can be successfully resolved without exposing taxpayers to loss. The FSB welcomes responses to the questions set out in the public consultation report by 31 July 2020.

Sources: FSB consults on guidance on assessing the adequacy of financial resources for CCP resolution and  Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution: Consultative document.

FCA updates position limits for certain commodity derivatives

The FCA published updated position limits for certain commodity derivative contracts traded on UK trading venues. The limits have been established under the Markets in Financial Instruments Regulations 2017 (SI 2017/701). The changes to limits will apply immediately.

Source: Update of position limits for certain commodity derivative contracts.

For further information, see: Commodity derivatives.

Government letter provides clarity on UK-EU future financial services relationship and EMIR 2.2

The government published a letter from the economic secretary to the Treasury, John Glen, to the chair of the House of Commons European Scrutiny Committee, Sir William Cash, clarifying the government’s position on certain aspects of trade in financial services under the future UK-EU economic partnership. The letter, sent in response to a letter from the Committee, addresses UK-EU institutional arrangements on financial services, equivalence assessments and EMIR 2.2.

See: LNB News 06/05/2020 43.

Source: HM Treasury letter regarding trade in financial services under the future UK-EU economic partnership.

For further information, see:  EMIR REFIT and EMIR 2.2 roadmap.

ISDA and other trade associations ask ESAs to extend time-related exemptions under EMIR

The International Swaps and Derivatives Association (ISDA), along with a number of other trade associations, has sent two letters to European Commission executive vice president Valdis Dombrovskis, ESMA chair Steven Maijoor, EBA chair José Manuel Campa, and the EIOPA chair Gabriel Bernardino, to request that existing time-related exemptions under EMIR be extended.

Source: Joint association letters on margin exemptions under EMIR.

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Banks and mutuals

EBA publishes final draft ITS on specific reporting requirements for market risk under the CRR

The EBA published its final draft implementing technical standards (ITS) on specific reporting requirements for market risk under the CRR. These ITS introduce the first elements of the Fundamental Review of the Trading Book (FRTB) into the EU prudential framework by means of a reporting requirement. The ITS are expected to apply from September 2021.

Source: EBA publishes final draft technical standards on specific reporting requirements for market risk.

EBA publishes final guidelines on credit risk mitigation and the advanced IRB approach

The EBA published final guidelines on CRM in the context of the A-IRB approach. The guidelines, which are part of the EBA's regulatory review of the IRB approach, aim to eliminate the remaining significant differences in approaches in the area of CRM, which are due to either different supervisory practices or bank-specific choices.

Source: EBA publishes final guidelines on credit risk mitigation for institutions applying the IRB approach with own estimates of LGDs.

EBA publishes final report and guidelines on determination of weighted average maturity of contractual payments under the CRR

The EBA published its final guidelines on the determination of the WAM of the contractual payments due under the tranche of a securitisation transaction, as laid down in the CRR. These guidelines (developed according to Article 257(4) of the CRR) aim to ensure that the methodology applicable for the determination of the WAM for regulatory purposes is sufficiently transparent and harmonised in order to increase consistency and comparability in the own funds held by institutions.

Sources: EBA publishes final guidelines on the methodology to determine the weighted average maturity of contractual payments due under the tranche of a securitisation transaction and  Final report: EBA guidelines on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche in accordance with point (a) of Article 257(1) of Regulation (EU) No 575/2013.

EBA publishes updated ITS package for 2021 benchmarking exercise

The EBA published an update to its ITS on benchmarking of internal approaches. The draft updated ITS set out all benchmarking portfolios that will be used for the 2021 benchmarking exercise, including two additional annexes which have been introduced to incorporate the new IFRS 9 accounting standard.

Source: EBA updated ITS package for 2021 benchmarking exercise includes IFRS 9 template.

EBA publishes updated calculation tool for the liquidity coverage ratio

The EBA published its updated calculation tool for the liquidity coverage ratio, with the aim of providing additional support for reporting institutions. This Excel-based tool takes into account the amendments in the liquidity coverage requirement introduced by Commission Delegated Regulation (EU) 2018/1620 that applies from 30 April 2020. The EBA stresses that the tool is provided for information purposes only and has no legal value.

Source: EBA publishes updated calculation tool of liquidity coverage ratio.

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

Coronavirus (COVID-19)—FCA guidance on customer access to restricted savings accounts

The FCA updated its coronavirus (COVID-19) webpage with guidance on customer access to restricted savings accounts. The FCA welcomes the steps several firms have already taken to allow access and to waive penalty fees or charges on restricted savings products, and sets out factors firms should consider around sudden financial vulnerability.

Source: Update to FCA webpage information for firms COVID-19 response.

Coronavirus (COVID-19)—EBA launches additional bank transparency exercise

The EBA launched an additional EU-wide transparency exercise to provide market participants with updated information on the financial conditions of EU banks as of 31 December 2019, prior to the start of the coronavirus (COVID-19) pandemic. The EBA is aiming to publish the results of this exercise at the beginning of June 2020. 

Source: EBA launches additional EU-wide transparency exercise.

Coronavirus (COVID-19)—European Commission note discusses prudential frameworks for bank lending

The Council of the EU published a Commission Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending to support businesses and households amid the coronavirus (COVID-19) pandemic. It outlines actions taken by central banks, supervisors and the Commission to provide banks with the necessary measures, and discusses the flexibility within the regulatory framework.

Source: Communication from the Commission to the European Parliament and the Council: Commission Interpretative Communication on the application of the accounting and prudential frameworks to facilitate EU bank lending Supporting businesses and households amid COVID-19.

Coronavirus (COVID-19)—LSB updates guidance on CBILS and BBLS

Following the chancellor’s announcement on 27 April 2020 regarding changes to the CBILS and the introduction of the new BBLS from 4 May 2020, the LSB has made further revisions to its Information for Practitioners to take account of the way that these products operate within the Standards of Lending Practice for business customers. The updates concern product information, product sale, treatment of customers in financial difficulty, customers in vulnerable circumstances, and governance and oversight.

Source: Update to Standards of Lending Practice for business customers: Coronavirus Business Interruption Loans Scheme and Bounce Back Loan Scheme 4 May 2020.

Coronavirus (COVID-19)—Treasury announces BBLS launch, chancellor writes to lenders, BoE updates TFSME and PRA issues statement on credit risk mitigation

HM Treasury issued a press release announcing the launch of the Bounce Back Loans Scheme (BBLS) whereby Britain’s small businesses will be able to apply for quick and easy-to-access loans of up to £50,000. The government has also published a letter from the chancellor of the exchequer, Rishi Sunak, addressed to accredited lenders clarifying the approach he is taking to a number of matters relevant to the design and operation of BBLS. In addition, the BoE announced a change to the Term Funding Scheme with additional incentives for SMEs (TFSME) to support the BBLS and the PRA issued a statement on credit risk mitigation eligibility and leverage ratio treatment of loans under the BBLS.

Sources: New Bounce Back Loans to launch todayBounce Back Loan Scheme and Updating the TFSME to reflect HMT’s new Bounce Back Loans Scheme.

FCA publishes guidance for lending firms seeking authorisation

The FCA published guidance for lending firms preparing a business plan as part of their application for authorisation. The FCA says some applications take longer because the business plan is not detailed enough.

Source: FCA sample business plan and guidance for lending firms.

For further information, see:  Financial Conduct Authority—preparing for authorisation.

Coronavirus (COVID-19)—ECON members to exchange views with chair of the supervisory board of the ECB

The European Parliament announced that at 11:00–12:00 CET on 5 May 2020, members of the Parliament’s Committee on Economic and Monetary Affairs (ECON) were due to hold an exchange of views with the chair of the supervisory board of the European Central Bank (ECB), Andrea Enria. This was the first public hearing with the Single Supervisory Mechanism (SSM) chair in ECON in 2020. The banking sector plays a decisive role in mitigating the negative economic effects of the coronavirus (COVID-19) pandemic. Topics addressed include therefore the various measures taken by the prudential supervisor supporting the banking sector so that it can fulfil this role effectively.

Source: Exchange of views with chair of the supervisory board of the ECB.

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Consumer credit, mortgage and home finance

Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020

SI 2020/480: Amendments are made to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to remove from the scope of consumer credit regulatory regime loans of £25,000 or less that are made by commercial lenders to sole traders, unincorporated associations and partnerships of fewer than four people under the BBLS. This Order comes into force on 4 May 2020.

Source: The Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020 and the  explanatory memorandum.

Coronavirus (COVID-19)—FCA issues updates on mortgage prisoners and those experiencing financial difficulty

The FCA has issued a statement on its work to help mortgage prisoners, saying its work in this area has continued during the disruption caused by the coronavirus (COVID-19) pandemic. In light of the situation it has extended by three months the window in which firms must write to affected customers informing them of switching options. The FCA has also written to mortgage lenders and administrators managing closed mortgage books to remind them of their obligation to treat customers fairly.

Sources: Statement on mortgage prisoners and Letter to mortgage lenders and administrators managing closed mortgage books.

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

Coronavirus (COVID-19)—Chartered Institute for Securities & Investment publishes consumer finance guides

The CISI published a series of money guides for the consumer, containing tips on managing finances in the context of the coronavirus (COVID-19) economic disruption. They are aimed at consumers across the board, including the employed, self-employed and small business owners.

Source: UK Certified Financial Planner professionals share free money guides for consumers.

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Securities financing transactions

ESMA extends four trade repositories registrations to include SFTR

The ESMA approved the extension of registrations of four trade repositories (TRs) to include securities financing transactions (SFTs) reporting under the Securities Financing Transactions Regulation. The TRs concerned are DTCC Derivatives Repository plc, UnaVista TRADEcho B.V., Krajowy Depozyt Papierów Wartościowych S.A. and REGIS-TR S.A. with effect from 7 May 2020.

Source: ESMA extends four trade repositories registrations to include securities financing transactions reporting.

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

HM Treasury sets out post-transition period trade repository registration arrangements

HM Treasury published guidance setting out its intention to enable trade repositories to register with the FCA or apply in advance to operate in the UK immediately following the end of the Brexit transition period, under the UK Securities Financing Transactions Regulation.

Source: Trade repository registration arrangements under the UK Securities Financing Transactions Regulation.

ISLA publishes bankruptcy remoteness opinions for GMSLA security interest over collateral agreement

The International Securities Lending Association (ISLA) announced the release of four additional bankruptcy remoteness opinions to support the Global Master Securities Lending Agreement (Security Interest over Collateral—2018 version). The new opinions cover English, Belgian, New York and Luxembourg law and are available to all ISLA members.

Source: ISLA publish bankruptcy remoteness opinions to support the GMSLA security interest over collateral agreement.

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Regulation of insurance

Coronavirus (COVID-19)—FCA court action on business interruption insurance and consultations on support for consumers and businesses who hold insurance products

The FCA announced that it intends to obtain a court declaration to resolve contractual uncertainty in business interruption (BI) insurance cover. The FCA is also consulting on guidance setting out its expectations for insurers and insurance intermediaries to consider the value of their products in light of the exceptional circumstances arising out of the coronavirus (COVID-19) pandemic, and guidance setting out the FCA’s expectations for firms when dealing with customers of general insurance and pure protection contracts who may be experiencing temporary financial difficulty as a result of the pandemic. James Denison, partner at Weightmans LLP, has offered his comments on the potential impacts of the judicial clarification on BI insurance.

Sources: FCA seeks legal clarity on business interruption insurance alongside package of measures to help consumers and small businessesFCA statement—Insuring SMEs: business interruption and  Mel Stride comments on FCA seeking court ruling on business interruption insurance.

PRA publishes Solvency II PS on subordinated liabilities and preference shares

The PRA published policy statement PS10/20 on group availability of subordinated liabilities and preference shares under Solvency II. It covers the determination of the availability of subordinated liabilities and preference shares in group own funds, and the expectations of firms in presenting relevant analysis to the PRA. The final policy is set out in the PRA’s updated supervisory statement SS9/15 and will apply from 30 April 2020.

Source: Solvency II: Group availability of subordinated liabilities and preference shares.

Coronavirus (COVID-19)—EIOPA extends timetable for Solvency II Review advice to December 2020

The EIOPA revised its timetable for advice on the Solvency II Review. It has decided to deliver its advice to the European Commission at the end of December 2020, to take into account the importance of assessing the impact of the current coronavirus (COVID-19) situation on the Solvency II Review. As previously announced, the deadline of the information request for the holistic impact assessment of the Review has been extended by two months, to 1 June 2020.

Source: EIOPA revises its timetable for advice on Solvency II Review until end December 2020.

Coronavirus (COVID-19)—FCA guidance for insurers on access to premises

The FCA updated its coronavirus (COVID-19) webpage for insurers, setting out its expectations around access to premises. The FCA says it does not expect insurers to void policies or reduce potential claims as a result of temporary inability to access premises.

Source: Update to FCA webpage insurance and coronavirus.

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Regulation of personal pension and stakeholder products

Complaints Commissioner urges FCA to consider PII market in context of DB transfers

The OCC published its final report (FCA00689), dated 22 April 2020, concerning the FCA’s handling of the situation which arose when the complainant’s firm was denied PII cover for DB pensions transfer business. The OCC observes that the impact of the shrinking PII market and withdrawal of cover from reputable, professional firms, is clearly a serious issue for clients, firms and the FCA.

Source: Complaint number FCA00689.

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Payment services and systems

AG opinion in case on Payments Directive

Advocate general (AG) Campos Sánchez-Bordona published an opinion in the case C 287/19 DenizBank AG V Verein für Konsumenteninformation, on the request of the Supreme Court in Austria. The case concerned interpretation of the Payment Services Directive and its application to near-field communication (NFC) functionality. In particular, AG was asked to issue a preliminary ruling on, amongst other issues, validity of terms, including use of tacit consent and transferring to the payment service user the risk of liability for unauthorised payments.

Source: Opinion of advocate general Campos Sánchez-Bordona delivered on 30 April 2020 Case C‑287/19 DenizBank AG V Verein für Konsumenteninformation.

Coronavirus (COVID-19)—FCA gives firms extra six months to implement SCA for e-commerce

In light of the ongoing coronavirus (COVID-19) pandemic, the FCA is giving the industry an additional six months to implement SCA for e-commerce. The FCA says this will minimise potential disruption to consumers and merchants. The new timeline of 14 September 2021 replaces the 14 March 2021 date.

Source: Strong customer authentication and coronavirus.

ECB issues update on T2-T2S consolidation project

The ECB published an update on its project to consolidate TARGET2 (T2) and TARGET2-Securities (T2S). The update confirms that SWIFT intends to delay the original migration date to ISO 20022 for cross-border payments by one year, from November 2021 to the end of 2022. The delay is not expected to affect the launch date of the Eurosystem Single Market Infrastructure Gateway (ESMIG) and T2, the new real-time gross settlement (RTGS), which are being developed and rolled out as part of the T2-T2S consolidation project and are scheduled to go live in November 2021.

Source: The T2-T2S consolidation project moves forward at full speed (update to news published on 25 March 2020).

LSB summary report on the APP CRM Code finds areas of good practice but room for improvement

The LSB published its summary report, ‘Review of approach to reimbursement of customers—provision R2(1) (c) of the contingent reimbursement model code for authorised push payment (APP) scams’ (the Code). The LSB found areas where the Code was applied correctly, resulting in good practice, but also identified key areas for improvement. The PSR welcomed the report but said while there were ‘some encouraging signs’ that the systems and processes are beginning to align and take shape, ‘they aren’t there yet’.

Sources: CRM Code for APP Scams: Review of approach to reimbursement of customers—provision R2(1)(c) summary reportSummary report: Review of approach to reimbursement of customers—provision R2(1)(c) of the CRM Code for APP scams and  PSR responds to the Lending Standards Board's summary report on the CRM code.

Coronavirus (COVID-19)—PSR updates webpage setting out expectations and areas of focus

The PSR updated its coronavirus (COVID-19) webpage, which contains contact detail and general information on the PSR’s expectations, updates, and information relating to decisions and developments.

Source: COVID-19: PSR sets out general expectations.

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Fintech and cryptoassets

Coronavirus (COVID-19)–FCA announces plans to pilot ‘digital sandbox’

The FCA announced that it will be piloting a ‘digital sandbox’, in collaboration with key strategic partners and the industry, to provide enhanced regulatory support to innovative firms tackling the challenges caused by the coronavirus (COVID-19) pandemic. The FCA had been exploring the concept of a digital sandbox prior to the pandemic and has now accelerated its plans.

Source: New FCA page: Digital sandbox—coronavirus (COVID-19) pilot.

European Parliament publishes briefing on regulation of cryptoassets

The European Parliament published a briefing note on cryptoassets, setting out key developments, regulatory concerns and responses. It focuses on tokens, stablecoins and the possibility of central bank digital currencies (CBDCs). The briefing notes that replacing truly anonymous, untraceable cash with a public, traceable CBDC, could theoretically mark the end of many money laundering and criminal activities, although from a political perspective such a scenario is probably unlikely.

Source: Cryptoassets: Key developments, regulatory concerns and responses.

For further information, see: Cryptoassets—essentials.

Innovate Finance blog looks at Q1 2020 fintech investment—and the road ahead

Innovate Finance published a blog on UK fintech investment for Q1 2020, which notes that $1.1bn was invested in 77 startups in the first quarter of 2020, down from the $1.74bn raised in the same period in 2019. Early signs of the coronavirus (COVID-19) pandemic affecting fintech deal-making was evidenced most clearly in monthly deal volumes, which fell to their lowest since early 2016 and trailed off abruptly in March 2020. 

Source: Coronavirus and capital: UK fintech investment in Q1 2020.

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Sustainable finance

ESMA no action letter on benchmark ESG disclosures

ESMA published a no action letter asking national competent authorities (NCAs) not to prioritise supervisory action on ESG disclosures under the Benchmark Regulation. These requirements were due to apply to benchmarks administrators from 30 April 2020, but related delegated acts have not yet been adopted. Therefore, ESMA has also published an opinion asking the European Commission to adopt these delegated acts promptly. 

Source: ESMA issues no action letter on the new ESG disclosure requirements under the Benchmarks Regulation.

For further information, see: Benchmarks Benchmarks Regulation—essentials.

First report by high-level Task Force on Climate-related Financial Risks

The Basel Committee on Banking Supervision published a stocktake report on its members' existing regulatory and supervisory initiatives on climate-related financial risks. It finds that the majority of Committee members are undertaking a number of regulatory and supervisory initiatives on climate-related financial risks. Although conducted ahead of the coronavirus (COVID-19) pandemic, the Committee says the outbreak highlights the importance of mitigating the risks of events with severe global impacts.  

Source: Basel Committee publishes stocktake report on climate-related financial risk initiatives.

ICMA guide summarises ESG developments for EU capital markets

The ICMA published an update memorandum on the EU’s sustainability disclosure regime. It aims to give a comprehensive and practical overview of new and amended EU legislation introducing significant sustainability and ESG-related disclosure requirements that will impact European capital markets.

Source: ICMA publishes update memorandum on the EU’s sustainability disclosure regime.

HoC European Scrutiny Committee asks about possible UK equivalent of Taxonomy Regulation

The House of Commons (HoC) European Scrutiny Committee published a letter from its chair, Sir William Cash, to the economic secretary to the Treasury, John Glen, regarding the proposed EU Regulation on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation). Cash notes that the Taxonomy Regulation is not expected to apply to the UK due to Brexit but asks whether the government is considering establishing a similar legally binding sustainability taxonomy domestically for investment products.

Source: Letter from the chair to John Glen MP regarding the EU's taxonomy for sustainable investment dated 30 April 2020.

UKIFC report says UN Sustainable Development Goals offer opportunities for Islamic finance

The Islamic Finance Council UK (UKIFC), in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA), has published the first report in a series that aims to assist and encourage active engagement with the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector. The report provides an introduction to the SDGs within the context of Islamic finance, and emphasises the opportunity the SDGs present to the Islamic finance sector.

Source: UKIFC and ISRA launch report on Islamic finance and the SDGs.

IE position paper on an EU climate law says ‘no one-size-fits-all solution’

Insurance Europe (IE) published a position paper on the European Commission’s proposal for a European climate law. IE says Europe’s insurers are ready to continue contributing to the EU’s political commitment to be climate neutral by 2050 and to play ‘a pivotal role’ in financing the transition to carbon-neutrality, resource-efficiency and greater sustainability. However, IE argues that it is important to recognise that each member state is affected by climate change differently and that there is therefore no one-size-fits-all solution at a European level.

Source: European climate law proposal: EU insurers ready to continue playing pivotal role in addressing climate change challenge.

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Islamic finance

UKIFC report says UN Sustainable Development Goals offer opportunities for Islamic finance

The Islamic Finance Council UK (UKIFC), in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA), has published the first report in a series that aims to assist and encourage active engagement with the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector. The report provides an introduction to the SDGs within the context of Islamic finance, and emphasises the opportunity the SDGs present to the Islamic finance sector.

Source: UKIFC and ISRA launch report on Islamic finance and the SDGs.

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Dates for your diary

 

 

DateSubjectEvent

11 May 2020

 

Investment funds and asset management

 

Deadline for responses to HM Treasury consultation on overseas funds regime.

 

12 May 2020

 

Competition in financial services

 

Deadline for responses to the Banking Competition Remedies Ltd consultation on a Capability and Innovation Fund (CIF) Pool E £100m grant funding.

 

 

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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.