FS weekly highlights—4 July 2019

In this issue

 

Brexit news
Regulatory architecture
UK regulator updates
Prudential requirements
Financial stability, recovery and resolution
Risk management and controls
Information and cyber security for financial services firms
Financial crime
FCA consumer protection and claims management regulation
Competition in financial services
Enforcement and redress
Markets and trading
Regulation of capital markets and Capital Markets Union
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

 

ECB on post-Brexit eligibility of financial assets as collateral in Eurosystem credit operations

The president of the European Central Bank (ECB), Mario Draghi, wrote to Sven Giegold MEP in response to queries about the potential impact of the UK leaving the EU on the eligibility of certain assets as collateral in Eurosystem credit operations. Mr Draghi said the impact depends on the circumstances of the UK’s departure from the EU, and in particular on whether relevant transition arrangements will be put in place. 

 

Back to top of page

 

Regulatory architecture

 

BIS announces Innovation Hub, and publishes annual report and economic outlook

The Bank for International Settlements (BIS) approved the establishment of a BIS Innovation Hub to foster international collaboration on innovative financial technology within the central banking community. Hub centres will be set up in Basel and Hong Kong, making use of existing BIS facilities, while a third centre will be established in Singapore in due course. Additional centres across the Americas and Europe will be added as part of a second phase of implementation. The announcement came as BIS held its AGM in Basel on 30 June 2019, and released its annual report and annual economic outlook. 

Mark Carney on the UK’s economic outlook

The Bank of England (BoE) published a speech given by its governor, Mark Carney, at the Local Government Association annual conference, in which he looked at global developments in financial services and what they may mean for the UK’s economic prospects. 

 

Back to top of page

 

UK regulator updates

 

FCA confirms regulated fees and levies 2019/20

The Financial Conduct Authority (FCA) published PS19/19, FCA regulated fees and levies 2019/20: Including feedback on CP19/16 and ‘made rules’, setting out the 2019/20 periodic regulatory fees and levies for the FCA, Financial Ombudsman Service (FOS) general levy, Money and Pensions Service (MAPS), Devolved Authorities, and the illegal money lending levy. It includes feedback on the responses received to the consultation on the draft fees and levies rules in CP19/16 ‘FCA Regulated fees and levies: Rates proposals 2019/20’, published on 17 April 2019. The consultation period for CP19/16 closed on 29 May 2019. 

FCA publishes Handbook Notice No. 67

The FCA published Handbook Notice No. 67, which includes changes to the FCA Handbook made by the FCA board on 30 May and 27 June 2019. Feedback on the relevant consultation papers was published in separate policy statements

FCA policy development update for July 2019

The FCA published the latest version of its policy development update, which provides information on its recent and upcoming publications. Future developments include a possible consultation on price discrimination in the cash savings market and a policy statement on overdraft pricing and competition remedies (High-cost Credit Review). 

New chairs for FCA’s Practitioner Panels announced

The FCA announced the appointments of new chairs for its independent Practitioner Panel and Markets Practitioner Panel.

PRA publishes Regulatory Digest for June 2019

The Prudential Regulation Authority (PRA) published its Regulatory Digest for June 2019, which provides a summary and overview of PRA publications, news and speeches from June 2019. 

 

Back to top of page

 

Prudential requirements

 

EBA roadmap for new market and counterparty credit risk approaches and consultation on technical standards on the IMA under the FRTB

The European Banking Authority (EBA) published its roadmap on the new market and counterparty credit risk approaches, and launched a consultation on 11 draft regulatory technical standards (RTS) on the new internal model approach (IMA) under the fundamental review of the trading book (FRTB) standards, as set out in Regulation (EU) 2019/876 (CRR2), along with a data collection exercise on non-modellable risk factors (NMRF). The consultations run until 4 October 2019. 

EBA assessment of Basel III implementation sees impact driven by large banks

The EBA presented in a public hearing the results of its Basel III implementation assessment. The work—carried out in response to a call for advice by the European Commission—shows that following the full implementation of Basel III in the EU, the increase in minimum capital requirements and the related capital shortfall varies across banks. The EBA will publish the full report by the end of July 2019. 

SRB publishes 2018 annual report

The Single Resolution Board (SRB) published its annual report for 2018. In 2018 the SRB worked in close collaboration with national resolution authorities on more than 100 resolution plans for banks under the SRB's remit, focusing on banks without resolution colleges which are active entirely in the banking union, and the most complex, internationally active banks, for which the planning cycle reaches well into 2019. 

ECB publishes occasional paper setting out alternative EU banking system stress test methodology

The ECB published an occasional paper on an approach to a macroprudential stress test of the euro area banking system. Comprising the 91 largest euro area credit institutions across 19 countries, the approach involves modelling banks’ reactions to changing economic conditions. It also examines the effects of adverse scenarios on economies and the financial system as a whole by acknowledging a broad set of interactions and interdependencies between banks, other market participants, and the real economy. 

 

Back to top of page

 

Financial stability, recovery and resolution

 

FSB publishes TLAC Standard review

The Financial Stability Board (FSB) published a technical review of the implementation of the total loss-absorbing capacity (TLAC) Standard for global systemically important banks (G-SIBs) in resolution. When fully implemented, the TLAC Standard will promote financial stability by providing confidence that G-SIBs carry appropriate capacity to absorb losses and, if necessary, to achieve an orderly resolution and to maintain the continuity of critical functions. The FSB sees no need to modify the TLAC Standard at this time. However, as implementation is ongoing, further efforts are needed to implement the TLAC Standard fully and effectively and to determine the appropriate group-internal distribution of TLAC resources across home and host jurisdictions. 

FSB publishes public feedback on too-big-to-fail reforms

The FSB published responses to its evaluation of too-big-to-fail reforms. Interested parties were invited to provide written responses by 21 June 2019. The feedback provided in the responses will be considered by the FSB as it prepares the draft report, which will be issued for public consultation in June 2020. The final report will be published in late 2020.

 

Back to top of page

 

Risk management and controls

 

WEF report looks at cybersecurity and secure innovation

The WEF’s Centre for Cybersecurity published a report on incentivising responsible and secure innovation: principles and guidance for investors. It looks at new ways of empowering oversight and sets out a new assessment framework to ensure that technology companies prioritise security in their development and production. The report is the first in a series of resources that will be published as part of the WEF initiative on incentivising secure and responsible innovation.

 

Back to top of page

 

Information and cyber security for financial services firms

 

Sabine Lautenschläger speaks on cyber resilience for financial market infrastructures

The ECB published a speech by Sabine Lautenschläger, a member of its executive board and chair of the Euro Cyber Resilience Board for pan-European Financial Infrastructures (ECRB), to the ECRB on the cyber resilience of financial market infrastructures, including updates on the status and implementation of various initiatives. 

WEF report looks at cybersecurity and secure innovation

The World Economic Forum (WEF)’s Centre for Cybersecurity published a report on incentivising responsible and secure innovation: principles and guidance for investors. It looks at new ways of empowering oversight and sets out a new assessment framework to ensure that technology companies prioritise security in their development and production. The report is the first in a series of resources that will be published as part of the WEF initiative on incentivising secure and responsible innovation.

 

Back to top of page

 

Financial crime

 

FATF reports to G20 leaders' summit on ongoing AML/CFT work

The Financial Action Task Force (FATF) published its report to the G20 leaders' summit, which will take place in Osaka, Japan on 28-29 June 2019. The report provides an overview of the FATF’s recent and future anti-money laundering and counter terrorist financing (AML/CFT) work. 

FATF releases guidance on its risk-based AML approach

The FATF published three new pieces of guidance on its risk-based approach to AML on 26 June 2019. The guidance sets out an approach for legal professionalsaccounting professionals and for  trust and company service providers

Xiangmin Liu appointed president of Financial Action Task Force

The FATF announced that Xiangmin Liu was appointed as its president on 1 July 2019. Liu succeeded Marshall Billingslea and his term will run until 30 June 2020. Liu is a national of the People's Republic of China and he currently serves as director-general of the legal department at the China’s central bank. Previously, Liu served as director-general of the AML Bureau and the head of the Chinese delegation to the FATF. He also practiced law in New York and worked for China’s social security fund. 

HMT publishes cyber-attack financial sanctions guidance

HM Treasury and the Office of Financial Sanctions Implementation (OFSI) published guidance on the framework for persons, entities and bodies subject to financial sanctions for their involvement with cyber-attacks threatening the EU or its Member States. Restrictive measures are governed by Council Regulation (EU) 2019/796 and The Cyber-Attacks (Asset-Freezing) Regulations 2019. 

Wolfsberg Group publishes CBDDQ capacity building materials

The Wolfsberg Group (an association of thirteen global banks which aims to develop frameworks and guidance for the management of financial crime risks) published a series of materials supporting the implementation of the correspondent banking due diligence questionnaire (CBDDQ).The CBDDQ was launched in 2018 as a significant update to the original Wolfsberg AML questionnaire covering the major aspects of banks’ financial crime programmes—AML, anti-bribery and corruption, and sanctions—and is designed to be an enhanced and reasonable standard for cross-border and/or other higher risk correspondent banking due diligence, reducing to a minimum any additional data requirements, as per the Wolfsberg definition and current FATF guidance.

Ex-UBS compliance officer and day trader sentenced to three years for insider trading

Fabiana Abdel-Malek and Walid Choucair were each sentenced to three years’ imprisonment in respect of five offences of insider dealing. They were convicted of insider dealing following an 11-week trial brought by the FCA at Southwark Crown Court. 

FCA and TPR re-launch pension scam prevention campaign

The FCA and the Pensions Regulator (TPR) re-launched their joint campaign to help prevent pension scams, following a successful run in 2018. The campaign aims to provide savers aged 45-65 with the knowledge and tools to avoid pension scams; provide intermediaries with the knowledge and tools to help their clients; and ensure that employers are equipped to direct staff towards help. 

 

Back to top of page

 

FCA consumer protection and claims management regulation

 

ESMA gives details of joint ESAs Consumer Protection Day 2019

The European Securities and Markets Authority (ESMA) published details of the joint European Supervisory Authorities (ESAs) Consumer Protection Day 2019 held at the Mansion House, Dublin, Ireland on 28 June 2019. The programme started at 08.30 and finished at 17.30.

Andrew Bailey speaks at FCA conference on intergenerational differences

The FCA published a speech given by its chief executive, Andrew Bailey, at the FCA conference on intergenerational differences in London. Opening the conference, Mr Bailey discussed the need for financial services to evolve to meet changing and sometimes diverging generational needs, and said the forces shaping the intergenerational issues are the most fundamental in the area of financial wellbeing.

Missing people’s assets to be safeguarded under new act

The Ministry of Justice announced a new law which will enable families to take over the affairs of missing loved ones for the first time. The Guardianship (Missing Person’s) Act 2017 creates a new legal status of guardian of the affairs of a missing person, allowing families to act in the best interest of those missing once they are gone for 90 days or longer. The new law, named ‘Claudia’s law’ after Claudia Lawrence who went missing in 2009, will come into effect from 31 July 2019. Experts from Ridley and Hall and Missing People, a charity promoting awareness of missing persons, discuss how this act will offer support to families in legal limbo. 

 

Back to top of page

 

Competition in financial services

 

CMA seeks feedback on effect of FCA overdraft proposals on Part 6 of the Retail Banking Market Investigation Order 2017

The Competition and Markets Authority (CMA) is to conduct a review of Part 6 of the Retail Banking Market Investigation Order 2017. Part 6 delivers the programme of overdraft alerts with grace periods for personal current account customers. The CMA is asking interested parties for their views on whether publication of the FCA’s proposals on overdraft alerts and charges constitutes a change of circumstances which mean that, when they come into effect on 18 December 2019, Part 6 of the Order will be effectively superseded. Feedback is sought by 22 July 2019. The CMA will then consider the views and evidence received before reaching a provisional decision. 

 

Back to top of page

 

Enforcement and redress

 

FCA complaint and response on unprotected product dispute

The Office of the Complaints Commissioner published a report concerning a complaint made about the FCA concerning the way the FCA supervised the financial adviser in an FCA-authorised firm. There were a number of aspects to the complaint, including the FCA’s ‘badge’ giving unprotected investments ‘a false sense of approval’. The FCA also published an interim response.

Complaints Commissioner rules on regulated firms conducting unregulated business

The Complaints Commissioner published a final report in which the Commissioner recommends that the FCA takes ‘urgent steps to ensure that all its supervisory staff understand the serious consequences that inadequate investigation and insufficient follow-up can cause’. The case concerned a number of issues around the supervision, authorisation and regulation of an adviser by the Financial Services Authority and latterly the FCA. The FCA also published an interim response.

FSCS publishes annual report and accounts for 2018/19

The Financial Services Compensation Scheme (FSCS) published its annual report and accounts, which provide a comprehensive account of its work during 2018/19. The document describes FSCS’s performance and achievements during the financial year, from raising awareness of the scheme to the total number of compensation payments made.

FSCS says protected claims may result in compensation for some LCF investors

The FSCS investigated London Capital & Finance (LCF)’s practices and concluded that in some cases Surge Financial Ltd, acting on behalf of LCF, provided misleading advice to LCF’s clients. As this is a regulated activity, FSCS protection may be available to some of LCF’s clients. Investors are advised to complete a pre-application questionnaire.

FOS consults on its future funding system

The FOS is consulting on its proposed future funding system. Feedback is sought by 13 August 2019. Consultation on the FOS’s 2019/20 plans and budget opens in December 2019, with a proposed implementation date of 1 April 2020.

Ex-Barclays trader takes conviction to European Court

A former Barclays PLC trader asked a European court to overturn an eight-year prison sentence handed down in London in 2018 for rigging a key European benchmark interest rate, his lawyer said Monday 1 July 2019. Philippe Moryoussef filed a challenge against the conviction, handed down in his absence last July, at the European Court of Human Rights, his lawyer said in an email. Moryoussef, a French national, did not appear at Southwark Crown Court for the trial, and was not legally represented. A judge refused to allow Moryoussef to appeal against the conviction and sentence in February, and he lodged his application, dated 25 June, directly with the European court in Strasbourg.

Financial Conduct Authority v Neville Registrars Ltd

Statute – Interpretation. For the purpose of section 177 of the Financial Services and Markets Act 2000, the FCA could say that it was 'the person imposing the requirement' when the requirement was imposed by an investigator acting 'on its behalf'. In so deciding, the Chancery Division, ruled that the respondent company was required to pay the costs of the FCA. 

 

Back to top of page

 

Markets and trading

 

ECB summary of responses to third public consultation by the working group on euro RFRs on the EONIA to €STR legal action plan

The ECB published a summary of responses to the third public consultation by the working group on euro risk-free rates on the EONIA to €STR legal action plan. The consultation closed on 12 June 2019. The report drew considerable interest from the financial sector and other interested parties.

ESMA reports on scrutiny of multiple withholding tax reclaim schemes and launches formal inquiry

ESMA published a report on its preliminary findings on multiple withholding tax (WHT) reclaim schemes following a European Parliament request, including whether these schemes result in a breach of the Market Abuse Regulation (MAR), the Short Selling Regulation (SSR) and/or the recast Markets in Financial Instruments Directive (MiFID II). ESMA launched a formal inquiry to gather further evidence from national competent authorities (NCAs) on the supervision of those schemes across the EU.

ESMA withdraws CRA registration of Moody’s Investors Service EMEA Ltd

ESMA withdrew the credit rating agency (CRA) registration of Moody’s Investors Service EMEA Limited (MIS EMEA-UK). The withdrawal follows an official notification, sent to ESMA by MIS EMEA-UK on 24 April 2019, of its intention to renounce its registration as a CRA under the conditions set out in Article 20(1)(a) of Regulation (EC) 1060/2009 (the CRA Regulation).

BoE seeks feedback on risk management approach to collateral referencing LIBOR in the SMF

The BoE published a discussion paper on its risk management approach to collateral referencing LIBOR for use in the Sterling Monetary Framework (SMF). The BoE seeks feedback on a number of approaches currently under consideration to ensure the BoE remains well placed to provide liquidity insurance in support of financial stability. Views are sought both from firms that are signed up (or expect to sign up) to the SMF and from any other interested parties. Feedback is sought by 27 September 2019.

BoE director on the need to embrace a post-LIBOR world

The BoE’s executive director for markets, Andrew Hauser, gave a speech on the transition from LIBOR, in which he called it ‘as complex a task as any the financial sector faced over the past decade, involving a global network of market participants and public authorities, and touching most systems, products and markets in some way’. He urged firms to look at the opportunities the transition offers: to meet the borrowing needs of households and firms; to allocate and manage risk; to express views on, or hedge against, the future paths of interest rates and credit risk; and to exploit new technologies.

EMMI authorised to administrate EURIBOR

The European Money Markets Institute (EMMI) was granted an authorisation by the Belgian Financial Services and Markets Authority under Article 34 (critical benchmark administrator) of the EU Benchmarks Regulation for the administration of EURIBOR. EMMI says it conducted in-depth reforms over the last years to meet Benchmarks Regulation requirements, strengthening its governance framework, and developing a new hybrid methodology. EMMI will publish the EURIBOR Benchmark Statement within two weeks of its inclusion in the ESMA register.

Switzerland to block Swiss share trading in EU markets

Law360, London: The Swiss Government will block EU exchanges from trading Swiss shares after the two sides failed to finalise a political agreement on bilateral ties, including access to stock market. The Swiss Finance Ministry said that it is activating plans that will prohibit EU stock exchanges, including those based in London, from trading Swiss shares after the European Commission decided not to extend a stock-market equivalence regime that expired on 30 June. 

One step closer to global benchmark reform

Banking & Finance analysis: Arjun Muddu, capital markets counsel at Linklaters, advising Associated British Ports (ABP), hopes that this transaction shows issuers and investors and other market participants that a mechanism can be found to transition securities from LIBOR to SONIA.

The challenges of replacing interbank offered rates

Law360, expert analysis: Despite being part of the financial landscape since 1986, interbank offered rates (IBORs), are being phased out and are to be replaced with rates that more accurately capture a risk-free rate. The core issue when transitioning away from an IBOR to an alternative rate is the fact that the replacement benchmarks, whatever they turn out to be, will be inherently different than the previous rates. 

 

Back to top of page

 

Regulation of capital markets and Capital Markets Union

 

Council of EU adopts position on crowdfunding proposals

The Council of the EU adopted its position on the European Commission’s proposed new regulatory framework for the operation of crowdfunding platforms. The new framework is intended to make it easier for crowdfunding platforms to provide their services across the EU by harmonising the minimum requirements for these platforms. 

ESMA updates CSDR Q&As

ESMA updated its Q&As on implementation of Regulation (EU) 909/2014 (CSDR). A new Q&A clarifies which financial instruments are covered by the internalised settlement reporting obligation under Article 9 of the CSDR.

Speech by Andrew Hauser of the Bank of England on diversity in FX

The BoE’s executive director for markets, Andrew Hauser, gave a speech on diversity at a networking event for women in the foreign exchange market. He set out why promoting greater diversity in capital markets is important to the BoE, to the prosperity of financial markets, and to the economy as a whole.

 

Back to top of page

 

Regulation of derivatives

 

FCA consultation paper 19/22 seeks to ban sale of crypto-derivatives to retail consumers

The FCA published CP19/22 which seeks to ban the sale, marketing and distribution of derivatives and exchange traded notes (ETNs) referencing cryptoassets to all retail consumers. The FCA considers these products are ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets (crypto-derivatives). The consultation closes on 3 October 2019. 

FCA confirms restrictions on CFDs for retail clients

Following consultation feedback, the FCA confirmed new rules restricting the sale, marketing and distribution of contracts for difference (CFDs) and CFD-like options to retail customers. Following concerns about harm to retail consumers, the FCA is making ESMA’s temporary restrictions permanent. ‘CFD-like options’ are included to ensure firms do not try to avoid the FCA’s measures by offering closely substitutable products. The rules apply from 1 August 2019 for CFDs and 1 September 2019 for CFD-like options.

ESMA issues three opinions on product intervention measures including FCA’s CFD restrictions

ESMA issued three positive opinions on product intervention measures taken by the NCAs of Sweden, France and the UK. ESMA’s opinions find that the proposed measures are justified and proportionate, with certain qualifications in relation to the UK’s measures, and that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures.

ESMA issues binary options product intervention opinions

ESMA issued four positive opinions on product intervention measures taken by the NCAs of Cyprus, France, Malta and Sweden. ESMA’s opinion finds that the proposed measures are justified and proportionate, and that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures.

ESMA will not renew temporary binary options restrictions as NCAs have taken sufficient measures

ESMA announced that it will not renew the temporary prohibition of the marketing, distribution or sale of binary options to retail clients in the EU, as most NCAs took permanent national product intervention measures that are at least as stringent as ESMA’s measures.

FIA paper suggests ways to improve the ETD reporting framework

The Futures Industry Association (FIA) published a position paper highlighting the concerns of market participants with the current reporting framework for exchange traded derivatives (ETDs). The FIA suggests alternative solutions which will assist regulators to monitor systemic risks in the ETD market, improve data quality and reduce existing inconsistencies with reporting obligations under Regulation (EU) No 648/2012 (EMIR).

ISDA updates OTC compliance calendar and publishes June ‘In Review’

The International Swaps and Derivatives Association (ISDA) published its ‘In Review’ for June 2019 and updated its over-the-counter (OTC) derivatives compliance calendar, which sets out deadlines and regulatory dates for the sector until September 2023. 

 

Back to top of page

 

Investment funds and asset management

 

Commission adopts text of PRIIPs transitional arrangements Delegated Regulation

The European Commission adopted the text of the proposed Commission Delegated Regulation amending Delegated Regulation (EU) 2017/653 (the PRIIPs Delegated Regulation) to align the transitional arrangement for manufacturers of packaged retail and insurance-based investment products (PRIIPs) offering units of funds referred to in Article 32 of the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (EU) No 1286/2014 as underlying investment options with the prolonged exemption period under that Article.

ESMA publishes draft RTS under the ELTIF Regulation consultation responses

ESMA published the responses received to its consultation on draft RTS under Article 25 of the ELTIF Regulation. ESMA received eight responses. Two were provided by asset management firms, with the remainder coming from trade bodies such as the European Fund and Asset Management Association and Invest Europe.

IA guide to liquidity in fund management

The Investment Association (IA) published a guide to liquidity in fund management, setting out what it means for investors, a summary of the rules, and how firms manage liquidity to match customer needs. The guide urges investors to see funds as long-term investments, and that they should be thinking about the next five to ten years, not their immediate financial needs.

IA report draws on LGBT+ experiences to encourage inclusive recruitment and retention

The IA published a report aimed at helping employers recruit and retain LGBT+ talent and build inclusive workplace environments where LGBT+ employees feel welcome and valued. The report draws on the experiences of LGBT+ professionals who were asked about their first time coming out in the investment management industry and what encouraged them to do so, and makes a number workplace policy suggestions. 

 

Back to top of page

 

Banks and mutuals

 

CMA seeks feedback on effect of FCA overdraft proposals on Part 6 of the Retail Banking Market Investigation Order 2017

The CMA is to conduct a review of Part 6 of the Retail Banking Market Investigation Order 2017. Part 6 delivers the programme of overdraft alerts with grace periods for personal current account customers. The CMA is asking interested parties for their views on whether publication of the FCA’s proposals on overdraft alerts and charges constitutes a change of circumstances which mean that, when they come into effect on 18 December 2019, Part 6 of the Order will be effectively superseded. Feedback is sought by 22 July 2019. The CMA will then consider the views and evidence received before reaching a provisional decision. 

European Parliament briefing provides analysis of its banking union reports in 2015—2018

The European Parliament published a briefing which provides an overview of its expectations and priorities for the banking union as set out in its annual banking union reports during the 8th legislative term (ie 2015 to 2018). The main themes found in these reports over the last four years are highlighted in the first section of the briefing, while the second part turns to the ECB Banking Supervisor’s response to the 2017 banking union report, the most recent response available, as well as concrete actions expected from the SRB, which is yet to provide a formal response.

John Glen announces pilot firms for prize-linked credit union savings scheme

The economic secretary to the Treasury, John Glen MP, announced the 15 credit unions across the UK which will pilot the new prize-linked savings scheme to help people increase their financial resilience while boosting awareness and membership of credit unions.

Revised audit practice note introduces new financial and regulatory authorities

The Financial Reporting Council (FRC) published a revision of Practice Note 19: The audit of banks and building societies in the UK. The practice note aims to assist practitioners on complying with the requirements of UK auditing standards by providing additional material on how those standards are applied in specific situations or specialised sectors. FRC’s revisions aim to support the delivery of high-quality audit and respond to findings from their own audit inspection that covered bank audits.

FCA Insight piece on UK banks and Open Finance

The FCA published an Insight piece on Open Finance arguing that, by forcing the banks to participate in Open Banking, the CMA pioneered the way for citizens to make better use of their data, as processed by banks. FCA adviser Magnus Falk says the UK financial sector should push ahead with the technology as much of the hard work is already done.

MAPS report calls for retail banking sector to promote customer financial wellbeing

MAPS published a report which sets out the pressing financial capability challenges facing the UK population and why this should be a priority for retail banking providers. It highlights some of the existing features of current and savings accounts that can improve customers financial capability and wellbeing while also setting out ways retail banking firms can better help their customers.

ECJ dismisses appeal against decision upholding ECB classification of credit institution as significant under SSM Regulation

The First Chamber of the European Court of Justice published its judgment in a case relating to the ECB’s regime under the single supervisory mechanism (SSM). In June 2014 the ECB informed Landeskreditbank Baden-Württemberg—Förderbank that on account of its size it was subject solely to the ECB’s supervision rather than shared supervision under the SSM, pursuant to Article 6(4) of Regulation No 1024/2013, and invited the Landeskreditbank to submit its observations.

Opinion of Advocate General in State Street Bank International GmbH v Banca d’Italia

Advocate General Campos Sánchez-Bordona of the European Court of Justice delivered a preliminary ruling in State Street Bank International GmbH v Banca d'Italia (Case C‑255/18), on the interpretation of the requirements for payments to a national resolution fund under Directive 2014/59/EU (the BRRD) and Delegated Regulation (EU) 2015/63 in the context of cross-border mergers. In particular, the ruling considers whether cross-border mergers by acquisition should constitute ‘a change of status’ of the institution and whether annual contributions to a national resolution fund should be made in full or only in part (that is, pro rata in relation to the months when the institution was subject to supervision by the authority of the first Member State). 

 

Back to top of page

 

Consumer credit, mortgage and home finance

 

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2019

SI 2019/1067: Amendments are made to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to insert new article 36FA. This introduces a new exclusion from the ambit of article 36A, which specifies credit broking as a regulated activity, for introductions by registered social landlords and housing associations (RSLs) of individuals who seek to enter into a credit agreement to social and community lenders which are made on a fee free basis. RSLs are also enabled to effect fee-free referrals to tenants, or potential tenants, to these social and community lenders without requiring authorisation from the FCA. This Order will come into force on 23 July 2019.

FCA launches market study on the credit information market

The FCA launched a market study to examine how the credit information market operates, and the impact of the credit information market on consumers. The study will focus on the purpose, quality and accessibility of credit information; market structure, business models and competition; and consumers’ engagement and understanding of credit information and how it impacts their behaviour. The FCA will report on its preliminary conclusions on these themes in spring 2020 including, if appropriate, a discussion of potential remedies. The FCA is not formally consulting on the terms of reference, but welcome any views on them by the end of July 2019. 

 

Back to top of page

 

Insurance and pensions

 

Commission adopts text of PRIIPs transitional arrangements Delegated Regulation

The European Commission adopted the text of the proposed Commission Delegated Regulation amending Delegated Regulation (EU) 2017/653 (the PRIIPs Delegated Regulation) to align the transitional arrangement for manufacturers of packaged retail and insurance-based investment products (PRIIPs) offering units of funds referred to in Article 32 of the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (EU) No 1286/2014 as underlying investment options with the prolonged exemption period under that Article.

European Commission report on Solvency II group supervision and capital management within a group

The European Commission published a report it sent to the European Parliament on Directive 2009/138/EC (the Solvency II Directive) with regard to group supervision and capital management within a group of insurance or reinsurance undertakings. The report assesses the benefit of enhancing group supervision and capital management within a group of insurance or reinsurance undertakings, as required under Article 242(2) of Solvency II.

EIOPA publishes financial stability risk report for June 2019

The European Insurance and Occupational Pensions Authority (EIOPA) published its June 2019 financial stability report for the (re)insurance and occupational pensions sectors in the European Economic Area (EEA). EIOPA says the risk of a prolonged low yield environment is more prominent, and so it will continue to monitor closely this risk to identify at an early stage any potential vulnerabilities.

EIOPA launches consultation on cloud outsourcing

EIOPA launched a consultation on guidelines on outsourcing to cloud service providers. The guidelines will provide advice to market participants on how the outsourcing provisions contained in the Solvency II Directive, Commission Delegated Regulation (EU) 2015/35 and EIOPA's Guidelines on System of Governance need to be applied in the case of outsourcing to cloud service providers. The consultation will close on 30 September 2019.

EIOPA cALLS FOR CANDIDATES TO JOIN CONSULTATIVE EXPERT GROUP ON DIGITAL ETHICS IN INSURANCE

EIOPA published a call for candidates to join a multidisciplinary consultative expert group which will advise EIOPA in the development of a set of principles of digital responsibility in insurance. The consultative expert group may also act as a sounding board for EIOPA in other related policy initiatives in the area of InsurTech, for instance by supporting EIOPA’s InsurTech Task Force in the development of a sound governance framework around the use of big data analytics tools such as artificial intelligence and machine learning in insurance.

IAIS publishes public roadmap

The International Association of Insurance Supervisors (IAIS) published its first-ever public roadmap, which is intended to inform stakeholders of its key activities and facilitate greater awareness and engagement.

FCA and TPR re-launch pension scam prevention campaign

The FCA and TPR re-launched their joint campaign to help prevent pension scams, following a successful run in 2018. The campaign aims to provide savers aged 45-65 with the knowledge and tools to avoid pension scams; provide intermediaries with the knowledge and tools to help their clients; and ensure that employers are equipped to direct staff towards help.

MAPS names pensions dashboard implementation director, PLSA says MAPS’s role should not be limited to helping those most in need

MAPS appointed Angela Pober as the implementation director for the Pensions Dashboard Industry Delivery Group. MAPS also appointed Capgemini to provide support on the business case and roadmap. The Pensions and Lifetime Savings Association (PLSA) issued a statement on MAPS, which it says plays an essential role in providing impartial, non-commercial and holistic pension guidance and should be given scope to provide stronger financial guidance without it being considered personal financial advice.

Pension Advisory Group releases guidance on pensions in divorce

The Pensions Advisory Group published a guide to the treatment of pensions in divorce in England and Wales. The guidance is aimed at family judges, lawyers and pension experts to encourage fairer settlements and manage liability and follows a 'need to address the wide variation of financial settlements nationally which stems from a lack of understanding of how professionals should deal with the valuation, sharing or offsetting of pension fund assets'.

 

Back to top of page

 

Payment services and systems

 

FCA responds to EBA opinion on strong customer authentication under PSD2

The FCA published a response to the EBA opinion, published on 21 June 2019, on strong customer authentication (SCA) under Directive (EU) 2015/2366 (PSD2). The opinion allows the FCA to give some firms extra time to implement SCA, in response to concerns about industry’s preparedness and ability to comply with the requirements.

PSR provides update on access to payment systems and the governance of payment system operators

The Payment Systems Regulator (PSR) published its fourth report (and related documents) on access to payment systems and the governance of payment system operators in the UK. The report shows that access to payment systems in the UK continues to improve. The report is accompanied by a factsheet and related  document.

PSR publishes 2019/20 fees figures

The PSR published its 2019/20 fees figures, setting out how it will calculate the regulatory fees for each PSR fee payer in 2019/20. Its annual funding requirement for the year is set at £15.6m. The PSR’s collection and allocation policy is set out chapter 4 of its policy statement PS18/12.

European Payments Council consults on electronic invoice presentment and payment

The European Payments Council (EPC) launched a public consultation on Electronic invoice presentment and payment—draft documents for submission to ISO 20022 of new servicing messages. Feedback is sought by 23 August 2019. 

 

Back to top of page

 

Fintech and virtual currencies

 

BIS announces Innovation Hub, and publishes annual report and economic outlook

The BIS approved the establishment of a BIS Innovation Hub to foster international collaboration on innovative financial technology within the central banking community. Hub centres will be set up in Basel and Hong Kong, making use of existing BIS facilities, while a third centre will be established in Singapore in due course. Additional centres across the Americas and Europe will be added as part of a second phase of implementation. The announcement came as BIS held its AGM in Basel on 30 June 2019, and  released its annual report and annual economic outlook.

FCA consultation paper 19/22 seeks to ban sale of crypto-derivatives to retail consumers

The FCA published CP19/22 which seeks to ban the sale, marketing and distribution of derivatives and ETNs referencing cryptoassets to all retail consumers. The FCA considers these products are ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets (crypto-derivatives). The consultation closes on 3 October 2019.

FCA speech outlines regulatory engagement with financial innovation

The FCA published a speech given by its executive director of strategy and competition, Christopher Woolard, on ‘regulating financial innovation—going behind the scenes’, in which he argued that for the FCA, early engagement with technological developments is ‘incredibly valuable for monitoring, supervisory and policy purposes. Working with innovative firms helps us achieve a better bird’s-eye view, enhancing our understanding when the overall landscape is blurry and ­changing quickly’.

EIOPA calls for candidates to join consultative expert group on digital ethics in insurance

EIOPA published a call for candidates to join a multidisciplinary consultative expert group which will advise EIOPA in the development of a set of principles of digital responsibility in insurance. The consultative expert group may also act as a sounding board for EIOPA in other related policy initiatives in the area of InsurTech, for instance by supporting EIOPA’s InsurTech Task Force in the development of a sound governance framework around the use of big data analytics tools such as artificial intelligence and machine learning in insurance.

UK Finance paper seeks to help financial services firms implement AI

UK Finance and Microsoft published a joint paper on AI in financial services. The paper provides a set of practical tools to help financial institutions understand how AI can transform their businesses, drive efficiencies and help them to serve customers better, as well as how to take advantage of AI in a responsible way and avoid pitfalls. 

 

Back to top of page

 

Sustainable finance

 

Government launches Green Finance Strategy

The government launched the Green Finance Strategy, its comprehensive approach to greening financial systems, creating new financial markets and capturing the resulting opportunities for UK firms. The PRA, FCA, FRC and TPR issued a joint statement supporting the strategy launch.

HM Treasury publishes details of John Glen speech at the Green Finance Summit

HM Treasury published details of a speech given by the economic secretary to the Treasury, John Glen, at the City’s third Green Finance Summit at which he spoke about the publication of the Green Finance Strategy. Mr Glen noted that together with the Green Finance Institute, it represents a ‘new and exciting’ step in the UK’s long history of international leadership on climate change.

EIB and Japan’s GPIF announce sustainable finance partnership

The European Investment Bank (EIB) and Japan’s Government Pension Investment Fund (GPIF) announced a new partnership that aims to strengthen their capital market co-operation in the context of the increasingly global effort to promote sustainable finance.

GFMA reports on sustainable finance survey

The Global Financial Markets Association (GFMA) published its Sustainable Finance Survey Report, which looks at how global financial institutions are addressing environmental, social and governance considerations, including the management of physical and transitional climate risks, for themselves and their clients. The findings of the survey are intended to help global financial institutions to benchmark against their peers and also to inform future policymaking. 

AFME publishes briefing note on status of European sustainable finance initiatives

The Association for Financial Markets in Europe (AFME) published a briefing note summarising the status of European legislative and regulatory developments on sustainable finance as of June 2019. The developments, which stem from the European Commission’s ‘Action Plan: Financing Sustainable Growth’ and the package of implementing measures published in March 2018, are summarised in the note under three main topics: taxonomy, disclosure and benchmarks.

Final report for social impact investing initiative published

The final report of the government-commissioned investigation into growing a culture of social impact investing in the UK was published. The report sets out the progress which the independent Implementation Taskforce made on the 50 recommendations made in the 2017 report, and highlights the level of engagement across the private, public and social sectors. 

 

Back to top of page

 

Islamic finance

 

IFSB announces speakers and topics for its second executive programme

The Islamic Financial Services Board (IFSB) announced the speakers for its second executive programme, to be held on 17 and 18 July 2019 in Kuala Lumpur. ‘Implementing effective stress testing and financial safety nets for Islamic banks: Governance and regulatory compliance’ is the second module of the IFSB’s Effective Risk Management series, targeted at the board of directors and senior management of institutions offering Islamic financial services.

 

Back to top of page

 

Dates for your diary

DateSubjectEvent

 

4 July 2019

 

Markets and trading

 

The deadline for applications to join ESMA’s Investor Protection and Intermediaries Standing Committee (IPISC)’s consultative working group is 4 July 2019.

 

4 July 2019

Markets and trading

The ECB’s working group on euro risk-free rates will consider responses to its 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) at its meeting on 4 July 2019.

 

5 July 2019Prudential regulation

The deadline for feedback to ESMA’s consultation on proposed amendments to the main indices and recognised exchanges under the Capital Requirements Regulation is 5 July 2019.

 

5 July 2019Markets and trading

The deadline for feedback to ESMA’s call for evidence on position limits and position management in commodity derivatives is 5 July 2019.

 

5 July 2019Islamic finance

The deadline for feedback to the IFSB consultation on its Exposure Draft of Guidance Note-7 on Shari’ah-Compliant Lender-of-Last-Resort Facilities (ED GN-7) is 5 July 2019.

 

5 July 2019Payment services

The deadline for responses to the PSR’s CP19/5—Call for views: Review of the structure of LINK interchange fees is 5 July 2019.

 

5 July 2019Regulatory architecture

The FCA is hosting an industry open day on 5 July 2019 to present the next phase of work on digital regulatory reporting.

 

7 July 2019Prudential regulation

The deadline for responses to PRA consultation paper CP8/19, which sets out proposals for changes to the format and content of the branch return form, and additional guidance to assist firms in completing it, is 7 July 2019.

 

7 July 2019Mortgages and home finance

The deadline for feedback to FCA CP19/17: Consultation on mortgage advice and selling standards is 7 July 2019.

 

8 July 2019Insurance

Commission Delegated Regulation (EU) 2019/981 (the Amending Regulation), which amends the Solvency II Delegated Regulation ((EU) 2015/35) will enter into force on 8 July 2019.

 

9 July 2019Insurance

The deadline for responses to FCA consultation ‘GC19/2: General insurance distribution chain: proposed guidance for insurance product manufacturers and distributors’ is 9 July 2019.

 

9 July 2019Markets and trading

The deadline for responses to the European Commission’s consultation on Draft Implementing Act’s which recognise as equivalent the legal and supervisory system for credit rating agencies in (1) Hong Kong, (2)Japan, (3) Australia, (4) Singapore, (5) USA, (6) Argentina, (7) Canada, (8) Mexico, and (9) Brazil is 9 July 2019.

 

9 July 2019Regulation of capital markets

The deadline for feedback to the ECB’s market consultation on a potential Eurosystem initiative regarding a European mechanism for the issuance and initial distribution of debt securities in the EU is 9 July 2019.

 

9 July 2019Regulation of derivatives

The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 which implement Regulation (EU) 2019/834 (EMIR REFIT) enter into force on 9 July 2019.

 

10 July 2019Regulation of capital markets

Decision (EU) 2019/1006 of the ECB amending Decision ECB/2011/20 establishing detailed rules and procedures for implementing the eligibility criteria for central securities depositories to access TARGET2-Securities services (ECB/2019/15) will enter into force on 10 July 2019.

 

10 July 2019MiFID II

Commission Delegated Regulation (EU) 2019/1000 amending Delegated Regulation (EU) 2017/1799 as regards the exemption of the People's Bank of China from the pre- and post-trade transparency requirements under MiFIR will enter into force on 10 July 2019.

 

10 July 2019Prudential regulation

The deadline for responses to the ESAs consultation paper on amendments to Commission Implementing Regulation (EU) 2016/1800 on the mapping of credit assessments of external credit assessment institutions (ECAIs) in accordance with the Solvency II Directive is 10 July 2019.

 

11 July 2019Regulation of capital markets

Two delegated regulations supplementing the Prospectus Regulation (Commission Delegated Regulation (EU) 2019/979 and Commission Delegated Regulation (EU) 2019/980) will enter into force on 11 July 2019.

 

 

Back to top of page

Relevant Articles
Area of Interest