Weekly highlights—1 June 2017

Weekly highlights—1 June 2017

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 1 June 2017.


ESMA rules for relocating firms aim to avoid regulatory arbitrage

On 31 May 2017, ESMA published an opinion setting out general principles aimed at fostering consistency in authorisation, supervision and enforcement related to the relocation of entities, activities and functions from the UK. The opinion is addressed to national competent authorities (NCAs) of the 27 Member States that will remain in the EU (EU27).

Financial Conduct Authority updates

FCA announces latest Handbook changes

On 26 May 2017, the Financial Conduct Authority (FCA) published Handbook Notice No 44, which includes changes to the FCA Handbook made in three instruments adopted by the FCA Board on 25 May 2017. Among other things, the instruments amend the FCA’s rules to require firms to inform consumers how much they could gain from shopping around and switching provider before a potential annuity purchase, and provide a decision-making mechanism for the use of new powers under the Bank Recovery and Resolution Order 2016.

Regulatory architecture

EU Finance newsletter for May 2017 available

On 25 May 2017, the European Commission published the latest issue of its Finance newsletter. The issue contains news, consultation updates, diary events, and an interview with the president of the European Financial Reporting Advisory Group, Jean-Paul Gauzès, explaining the group’s role and how it contributes to improving European financial reporting and standard setting.

EIOPA calls for enhanced powers in response to ESAs consultation

On 29 May 2017, the European Insurance and Occupational Pensions Authority (EIOPA) responded to the European Commission’s consultation on the structure, remit and efficiency of the European Supervisory Authorities (ESAs). EIOPA says its regulatory powers should be strengthened, with a mandate to act more intrusively when it detects signals of risks of cross-border failures, and an enhanced role in equivalence assessments, involving full access to all relevant information from the third country concerned.

ESMA calls for strengthened regulatory framework

On 30 May 2017, the European Securities and Markets Authority (ESMA) responded to the European Commission’s consultation on the operation of the ESAs. ESMA says it will be important to find a new balance to foster the single market, reduce barriers, and avoid regulatory and supervisory arbitrage among jurisdictions.

FSB Americas group sets out key policy issues

On 30 May 2017, the Financial Stability Board (FSB) Regional Consultative Group (RCG) for the Americas metin Santiago to consider the FSB’s workplan for 2017 and its deliverables for the G20 Leaders’ Summit in July. The workplan focuses on supporting full and consistent implementation of agreed reforms, creating a structured framework for the evaluation of the effects of reforms and addressing new and emerging vulnerabilities.

OECD report warns on bribery, and lack of competition in equity finance

On 30 May 2017, the Organisation for Economic Co-operation and Development (OECD) warned that globalisation has ‘failed to create a level playing field in trade, investment and corporate behaviour’. The OECD says in its Business and Finance Outlook 2017 that establishing ‘rules of the game’ which are both fair and perceived by all to be fair is necessary if productivity growth is to be restored, excess capacity avoided and public confidence improved.

EBA says merger with EIOPA unlikely to generate substantial synergies

On 31 May 2017, the European Banking Authority (EBA) responded to the European Commission’s public consultation on the operation of the ESAs. The response suggests a possible way forward to confirm the EBA’s role as guardian of the Single Rulebook and to increase its effectiveness in ensuring supervisory convergence across the EU. It also suggests how the EBA’s role with regards to supervisory reporting could be strengthened and improved.

Prudential requirements

Basel Committee secretary general sets out regulatory priorities

On 25 May 2017, the secretary general of the Basel Committee, William Coen, delivered a speech highlighting the importance of global standards for financial regulation, and providing an overview of the Committee's finalisation of the Basel III post-crisis reforms.

EBA consults on extending scope of connected client guidelines

On 25 May 2017, the EBA launched a consultation focusing on the scope of its draft guidelines on connected clients. It has already sought the stakeholders' views on the draft guidelines in July 2016. They provide guidance on two types of interconnection: control relationships and economic dependencies, which lead to the formation of groups of connected clients.

EBA sets timetable for 2017 transparency exercise

On 25 May 2017, the EBA announced its EU-wide transparency exercise will be launched in September 2017, when the interaction with the banks in the sample for the verification of the data will start. The EBA will publish the data in December 2017, together with the risk assessment report (RAR). The exercise is part of the EBA’s efforts to foster market discipline, improve the understanding of the EU banking system and ensure both a detailed snap shot and consistent time series.

ESRB chair analyses the latest ‘EU shadow banking monitor’

On 29 May 2017, the chair of the European Systemic Risk Board (ESRB), Mario Draghi, gave a speech welcoming the publication of the second ‘EU shadow banking monitor’, which presents an annual overview of developments in the European shadow banking system to identify risks to European financial stability. The report shows that growth in broad EU shadow banking assets slowed markedly in 2016. Mr Draghi’s speech gives an overview of the risks highlighted by the report and concludes with a look at macroprudential policy in general.

PRA updates on Capital+ reporting instructions and templates

On 30 May 2017, the Prudential Regulation Authority (PRA) published updates to the forecast capital resources and requirements (Capital+) reporting templates and instructions (PRA 101—103) issued in PS32/16 'Responses to Chapter 3 of CP17/16—forecast capital data' in November 2016.

European Commission adopts Regulation on cross-border undrawn credit or liquidity facilities

On 31 May 2017, the European Commission adopted a Delegated Regulation supplementing the Capital Requirements Regulation (Regulation (EU) 575/2013) with regard to regulatory technical standards further specifying the additional objective criteria for the application of a preferential liquidity outflow or inflow rate for cross-border undrawn credit or liquidity facilities within a group or an institutional protection scheme.

Risk management and controls

ECON calls for whistleblowing protection across all public and private bodies

On 25 May 2017, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) called on the European Commission to present legislation to protect whistleblowers ‘as soon as possible’. ECON says there is a need to ensure whistleblowers are able to report not only illegal activities but also wrongdoing and any information in the public interest. The draft opinion says whistleblowers should be free to report both internally within the workplace, and externally, and should be protected regardless of their choice of reporting channel.

Financial crime

SFO pushes back Euribor rigging trial to January 2018

On 25 May 2017, the trial of six former Deutsche Bank AG and Barclays PLC bankers accused of rigging a key European interest rate benchmark was postponed until January 2018 by the Serious Fraud Office (SFO).

US Federal Reserve Board fines Deutsche Bank US$41m for money laundering deficiencies

On 30 May 2017, the US Federal Reserve Board announced a US$41m penalty and consent cease and desist order against the US operations of Deutsche Bank AG for anti-money laundering failures.

ESAs seek feedback on ML/TF draft RTS

On 31 May 2017, the ESAs—launched a public consultation on draft Regulatory Technical Standards (RTS). The RTS specify how credit and financial institutions should manage money laundering and terrorist financing (ML/TF) risks where a third country’s law prevents the implementation in their branches or majority-owned subsidiaries of group-wide policies and procedures on anti-money laundering and countering the financing of terrorism (AML/CFT). Responses are sought by 11 July 2017.

Enforcement and redress

Complaints Commissioner criticises FCA handling of PSD complaint

On 26 May 2017, the Office of the Complaints Commissioner (OCC) published a letter dated 3 May 2017 in which it criticises the way the FCA dealt with a complaint regarding the UK's implementation of the Payment Services Directive (PSD). The OCC found the FCA's initial response to be unsatisfactory, and noted that the regulator failed to update the complainant on the status of the complaint.

Markets and trading

FX Global Code is published, with FCA and others quick to welcome

On 25 May 2017, a code of conduct for the wholesale foreign exchange (FX) market, the FX Global Code, was released. The Code comprises a set of guidelines, developed under the auspices of the Markets Committee of the Bank for International Settlements. It was created by the central bank Foreign Exchange Working Group (FXWG) in partnership with a private sector Market Participants Group, and its aim is to achieve a robust, fair, liquid, open, and appropriately transparent global FX marketplace. The release of the Code completes a two-year effort by the FXWG.

GFXC seeks views on ‘last look’ practices

On 25 May 2017, the Global Foreign Exchange Committee (GFXC) asked market participants for feedback on an element of its new FX Global Code—the practice within electronic trading known as ‘last look’, and specifically trading activity during the last look window related to a last look trade request. Responses are sought by 21 September 2017.

Code of conduct launched for precious metals market

On 25 May 2017, the London Bullion Market Association (LBMA) published the Global Precious Metals Code, the first stand-alone code of conduct for the wholesale precious metals market. It sets out a common set of principles to promote the integrity and effective functioning of the global market, covering ethics, governance, compliance and risk management, information sharing and business conduct.

ESMA updates its Q&As on the Market Abuse Regulation

On 30 May 2017, ESMA updated its Q&A on practical questions regarding the implementation of the Market Abuse Regulation.

MAR reference data submission launch date announced

On 30 May 2017, ESMA announced that its IT system for the collection of financial instrument reference data under the Market Abuse Regulation—ie the Financial Instrument Reference Data System (FIRDS)—will become operational from 17 July 2017. FIRDS will collect financial instrument reference data from market participants in the jurisdictions where the competent authority delegated this task to ESMA.

New Zealand Clearing Ltd recognised by ESMA as third-country CCP

On 30 May 2017, ESMA updated its list of recognised central counterparties (CCPs) based in third countries. The update concerns New Zealand Clearing Ltd.

Commission sets out criteria for STS securitisation

On 30 May 2017, the European Commission announced that the European Parliament, the Council of the EU and the Commission have agreed on a package that sets out criteria for simple, transparent and standardised (STS) securitisation. The deal is one of the cornerstones of the Capital Markets Union (CMU), the Commission’s pivotal project to build a single market for capital in the EU.

Bloomberg Trade Repository Ltd registered as trade repository by ESMA

On 31 May 2017, ESMA registered Bloomberg Trade Repository Ltd as a trade repository (TR) under the European Market Infrastructure Regulation (EMIR), with effect from 7 June 2017. Bloomberg Trade Repository Ltd is based in the UK and covers the following derivative asset classes: commodities, credit, foreign exchange, equities and interest rates.

ESMA clarifies MIFID II position limit regime and updates Q&As

On 31 May 2017, ESMA published two opinions regarding the implementation of the Market in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II) and Market in Financial Instruments Regulation (Regulation 600/2014) (MiFIR). It also updated its Q&As on practical questions regarding the implementation of MiFID II. ESMA’s opinions helps to better understand:

Investment funds and wealth management


On 25 May 2017, ESMA published updated Q&As on the application of the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS).

EU agrees to overhaul EuVECA and EuSEF regulations

On 30 May 2017, the European Commission announced that small and growing companies and social enterprises will enjoy better access to finance, thanks to EU rules agreed by the European Parliament, the Council of the EU and the Commission. The revamped rules are part of the Commission's drive to stimulate venture capital investments in the EU, a core objective of its Capital Markets Union (CMU) project.

Consumer credit, mortgage and home finance

FCA data shows growth in retail intermediary revenues

On 25 May 2017, the FCA published the 9th edition of its Data Bulletin, focusing on new analysis of the intermediaries sector, based on information from its Retail Mediation Activities Return (RMAR). This update looks at the latest trends in activities and revenue for 2016, and provides information on advice and charges. It shows increases in revenues across the sector, particularly in mortgage mediation.

Insurance and pensions

FCA finalises rules on information prompts in the annuity market

On 26 May 2017, the FCA published a policy statement (PS17/12) with final rules requiring firms to inform consumers, by providing an information prompt, how much they could gain from shopping around and switching provider, before they buy an annuity. The policy statement also sets out the FCA's response to feedback received on consultation paper CP16/37.

EIOPA chair considers European insurance and supervision

On 30 May 2017, EIOPA published details of an interview given by its chair, Gabriel Bernardino, in which he set out EIOPA's aims and ambitions for the foreseeable future, commented on the state of insurance sectors in Europe and discussed the effects of Brexit on the insurance sector.

Insurance Europe on alternative treatment of equity risk under Solvency II

On 30 May 2017, Insurance Europe published a position paper which sets out a proposal for an alternative treatment of equity risk under Solvency II: strategic participations and long-term equity investment strategies. Insurance Europe believes the current capital requirements for long-term investments in Solvency II are based on an inappropriate view of how insurers conduct their investment activities.

Insurance Europe annual report now available

On 31 May 2017, Insurance Europe’s published its annual report for 2016/17 which sets out its positions on the main insurance topics of the day, and contains guest articles including contributions from European Commission vice-president Jyrki Katainen, Alberto Corinti of the Italian Institute for the Supervision of Insurance and Inga Beale, CEO of Lloyd’s of London.

Payments and fintech

FATF forum discusses risks, rewards and regulation of FinTech

On 30 May 2017, the Financial Action Task Force (FATF) published details of its FinTech and RegTech Forum, held on 25–26 May 2017 in the US. The meeting discussed how authorities and the private sector are navigating a world where transactions and relationships are increasingly digitised, with delegates sharing their experiences in adapting their practices to continue to identify and mitigate the different risks involved.

Commission to amend PSD2 draft RTS

On 30 May 2017, the EBA published a letter from the European Commission to the chair of the EBA stating the Commission's intention to amend the draft regulatory technical standards on strong customer authentication and common and secure open standards of communication submitted by the EBA in accordance with Article 98(4) of the recast Payment Services Directive (Directive 2015/2366/EU) (PSD2).


The Commercial Court
Deutsche Bank AG, London Branch v CIMB Bank Berhad

[2017] EWHC 1264 (Comm)

The Commercial Court ruled on a dispute between the claimant bank (Deutsche -the confirming bank), and the defendant bank (CIMB—the issuing bank), concerning Deutsche's claim for reimbursement of sums it had allegedly paid to a company (as beneficiary), under letters of credit issued by CIMB. Deutsche had argued that the issuing bank, under a letter of credit, had to accept, on its face, a statement by the confirming bank that it had paid the beneficiary under letters of credit, and that CIMB had no right to request further information in respect of that payment. The court held that, on the true construction of Article 7(c) of the Uniform Customs & Practice for Documentary Credits (UCP 600), read with the definition of 'honour' in Article 2 of UCP 600, an issuing bank's undertaking to reimburse a confirming bank arose where the confirming bank had honoured a complying presentation by making payment under the credit. It further held that, in circumstances where Deutsche had been put to proof that it had honoured presentations by the beneficiary, and where it had made assertions as to payment, CIMB was entitled to ask for further information in the usual way. However, it further ruled that the court should not entertain requests seeking unduly to investigate the confirming bank's payment arrangements, in the hope that something by way of a defence would turn up.

Dates for your diary

Key Date Subject Event
2 June 2017 Bank Recovery and Resolution Directive Deadline for responses to EBA 'Consultation Paper: Recommendations on the coverage of entities in a group recovery plan (CP/EBA/2017/03)'.
5 June 2017 Insurance Distribution Directive Deadline for responses to FCA consultation 'CP17/7: Insurance Distribution Directive Implementation—Consultation Paper I'.
5 June 2017 Wire Transfer Regulation Deadline for responses to the Joint Committee of the ESAs 'Consultation Paper: Draft Joint Guidelines under Article 25 of Regulation (EU) 2015/847 on the measures payment service providers should take to detect missing or incomplete information on the payer or the payee, and the procedures they should put in place to manage a transfer of funds lacking the required information'.
8 June 2017 Payment Services Directive 2 Deadline for responses to the FCA's consultation 'CP17/11: Implementation of the revised Payment Services Directive (PSD2)'.
8 June 2017 Payment Services Directive 2 Deadline for responses to the Payment Systems Regulator's (PSR) consultation ' The Payment Services Regulations 2017—The PSR’s draft approach to monitoring and enforcement'.

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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.