Weekly highlights—12 January 2017

Weekly highlights—12 January 2017

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 12 January 2017.


Senior City figures call for three-year standstill after Article 50

On 10 January 2017, witnesses at a Treasury Committee evidence session warned that accepting the loss of a part of the UK's financial services, such as euro-clearing, in Brexit negotiations could have ‘unintended and disruptive consequences’. They called for a three-year standstill after triggering Article 50 to reduce the risk of banks taking ‘pre-emptive action’.

Horizon scanning

Malta lists financial services priorities for 2017 Presidency

As Malta assumes the Presidency of the Council of the European Union, it has set out its aims and priorities in the financial services sector. These include work on Capital Markets Union (CMU), venture capital, access to finance for small to medium enterprises (SMEs), capital requirements and banking union, together with ongoing work to counter fraud and money laundering.

Regulatory architecture

ESMA seeks new consultants for its Corporate Reporting Standing Committee

On 5 January 2017, the European Securities and Markets Authority (ESMA) announced it is looking to newly constitute a consultative working group (CWG) for its Corporate Reporting Standing Committee (CRSC) as the two-year term of the existing CWG will expire shortly. ESMA is therefore calling for expressions of interest from stakeholders to become a member of the CWG by 6 February 2017.

EBA revises procedure for investigation of breach of Union law

On 11 January 2017, the European Banking Association (EBA) published a Decision dated 23 December 2016 adopting revised Rules of Procedure for investigation of breach of Union law (EBA/DC/2016/174).

EBA adopts Rules of Procedure

On 11 January 2017, the Board of Supervisors of the EBA adopted rules of procedure for meetings and voting, the management board, the executive director and general organisation of the EBA. The rules enter into force immediately.

EACB issues revised European Interbank Compensation Guidelines

On 11 January 2017, the European Association of Co-operative Banks (EACB) published a revised version of the European interbank compensation guidelines. The guidelines, dated 1 January 2017, are issued jointly with the European Banking Federation and the European Savings Bank Group.

Financial Conduct Authority updates

FCA publishes policy development update for January 2017

On 6 January 2017, the Financial Conduct Authority (FCA) published its latest policy development update, which provides information on its recent and upcoming publications, including forthcoming consultations on crowdfunding platforms, the Insurance Distribution Directive implementation and proposed Handbook changes to reflect the new regulatory framework for insurance-linked securities.

Reporting requirements

ESMA Board to decide on ESEF approach

On 5 January 2017, ESMA published a letter to the European Commission to update it regarding the draft regulatory technical standard (RTS) on the European single electronic format (ESEF) for annual financial reports, which ESMA has been empowered to develop and submit to the Commission according to the provisions of the Directive 2004/109/EC and the Amending Directive 2013/50/EU (altogether referred to as ‘amended TD’). ESMA says budgetary considerations mean it must decide whether to further postpone the work or proceed in a ‘minimal’ way.

EIOPA updates Q&A regulation tool on the submission of information to supervisory authorities

On 5 January 2017, the European Insurance and Occupational Pensions Authority (EIOPA) updated its Q&A regulation tool to cover answers to questions on the fi​nal report on the implementing technical standards on the templates for the submission of information to the supervisory authorities (CP-14-052). The EIOPA regulation tool ​​​​​​​​​can be used by all parties to submit questions on particular regulatory tools that have been published by EIOPA.

BoE releases technical artifacts for forecast capital data

On 9 January 2017, the Bank of England (BoE) published a public working draft (PWD) of its Banking XBRL Taxonomy v0.9.1 and related technical artefacts following its Policy Statement (PS32/16 ‘Responses to Chapter 3 of CP17/16—forecast capital data’) on 16 November 2016. The taxonomy, Data Point Model (DPM) dictionary, annotated templates and validation rules represent the requirements for Capital+ reporting as set out in PS32/16 (para 1.8). Firms and software vendors are invited to provide feedback on the PWD of the technical artefacts by 16 January 2017.

BBA supports EBA's draft ITS for operational risk and sovereign exposures

On 10 January 2017, the British Bankers’ Association (BBA) responded to the EBA’s Consultation Paper (CP) on its Draft Implementing Technical Standards amending Implementing Regulation (EU) No 680/2014 with regard to operational risk and sovereign exposures. The BBA is in principle supportive of the CP, but recommends that the proposed standards are amended to improve presentation and pertinence of proposed reporting.

Recovery and resolution

BIS official sees improvements and risks in post-crisis landscape

On 6 January 2017, the Bank for International Settlements (BIS) published a speech given by Jaime Caruana, General Manager of BIS, on 6 December 2016 at the FSI–IADI Conference on bank resolution, crisis management and deposit insurance issues in Basel. In the speech, entitled ‘Post-crisis financial safety net framework: lessons, responses and remaining challenges’, Mr Caruana looked at the key lessons learned from the global financial crisis and outlined what has been done in response. He concluded that, in the face of new and evolving systemic risks, regulatory reforms should be finalised in a timely fashion, and that reforms are needed to raise productivity growth, generate earning and repayment capacity, and improve the longer-term outlook.

Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017

SI 2017/Draft: existing legislation is amended to implement changes in response to recommendations by Peter Bloxham, who carried out the first statutory review of the Regulations. The Banking Act 2009 (BA 2009), s 232, which defines ‘investment bank’ for the purposes of BA 2009, ss 233, 234 is also amended.

Prudential requirements

EBA publishes Opinion on Turkey and New Zealand regulatory equivalence

On 11 January 2017, at the request of the European Commission, the EBA published an Opinion dated December 2015 stating that the supervisory and regulatory framework applicable to credit institutions in Turkey and New Zealand can be regarded as equivalent to that applied in the EU, so that EU credit institutions can apply preferential risk weights to relevant exposures to entities located in those countries.

ECB issues Recommendation on dividend distribution policies under SSM

On 11 January 2017, the European Central Bank (ECB) published a Recommendation (ECB/2016/44) dated 13 December 2015 on dividend distribution policies. The recommendation requires credit institutions to establish dividend policies using conservative and prudent assumptions in order, after any distribution, to satisfy the applicable capital requirements and the outcomes of the supervisory review and evaluation process (SREP).

EBA final report on equivalence of confidentiality regimes under CRD IV

On 11 January 2017, the EBA published Recommendations amending Recommendation EBA/REC/2015/01on the equivalence of confidentiality regimes. The EBA Recommendation is designed as a guide for EU authorities in their assessment of the equivalence of confidentiality regimes of third country supervisory authorities to facilitate their participation in supervisory colleges overseeing international banks. The Recommendation applied from 12 January 2017.

Authorisation, approval and supervision

ESMA methodology for CCP peer reviews

On 5 January 2017, ESMA published its methodology for conducting mandatory peer reviews in relation to the authorisation and supervision of central counterparties (CCPs) under Regulation (EU) 648/2011 on OTC derivatives, central counterparties and trade repositories (EMIR). The methodology will apply to peer reviews undertaken by ESMA pursuant to art 21(6)(a) of EMIR, which requires ESMA to conduct an annual peer review analysis of the supervisory activities of all competent authorities in relation to the authorisation and the supervision of CCPs.

BBA and AFME respond to consultation on responsibility and conduct rules for NEDs

On 10 January 2017, the BBA responded jointly with the Association for Financial Markets (AFME) to the FCA's consultation papers 16/26: Guidance on duty of responsibility, and 16/27: Applying Conduct Rules to all non-executive directors (NEDs). While the BBA and AFME said the extra guidance was helpful and broadly aligned with the Prudential Regulation Authority’s (PRA) draft Supervisory Statement PS 28/15, incorporated as Appendix 3 in PRA consultation paper 34/16, a number of amendments were put forward.

In-house legal functions should not fall under SMCR, BBA and AFME say

On 10 January 2017, the BBA responded jointly with AFME to the FCA discussion 16/4 paper: Overall Responsibility and the Legal Function in relation to how and why the legal function is currently captured under the Senior Managers and Certification Regime (SMCR). In their joint response the BBA and AFME assert that requiring firms to designate the individual responsible for the management of the legal department as a Senior Manager under the SMCR is not justified by law or by policy considerations, and would give rise to material risk of harmful unintended consequences.

Financial crime

ECON and LIBE propose rejection of amended list of high-risk third countries under MLD4

On 9 January 2017, the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties, Justice and Home Affairs (LIBE) of the European Parliament published a proposed motion (dated 13 December 2016) objecting to the Commission Delegated Regulation of 24 November 2016 amending Commission Delegated Regulation (EU) 2016/1675 supplementing Directive (EU) 2015/249 (MLD4) by identifying an amended list of high-risk third countries with strategic deficiencies.

Markets and trading

New Japanese jurisdictional module on contractual stays

On 5 January 2017, a Japanese jurisdictional module to the International Swaps and Derivatives Association (ISDA) Resolution Stay Jurisdictional Modular Protocol (JMP) was launched, ISDA announced. The module, which lets market participants comply with certain Japanese regulations on contractual stays, will take effect from 1 April 2017.

FIA publishes due diligence questionnaire for IT outsourcing and procurement

On 11 January 2017, the Futures Industry Association (FIA) e-Trading Working Group produced a Due Diligence Questionnaire for IT Outsourcing and Procurement, which aims to provide a standard form for firms to request information from their vendors as part of MiFID II regulatory requirements.

ESMA reports improvement in best execution supervision under MiFID

On 11 January 2017, ESMA published a follow up report (ESMA42-1643088512-2962) which said national regulators are giving greater attention to best execution requirements under the Markets in Financial Instruments Directive (MiFID) in the follow-up report to its Peer Review published in 2015.

Investment funds and wealth management

Updated guidelines for cash ISA to cash ISA transfers

On 9 January 2017, the BBA, the Building Societies Association (BSA) and the Tax Incentivised Savings Association (TISA) issued revised guidance on Cash ISA transfer performance. The associations have agreed that, from 2017, a minimum of 80% of transfers will be carried out within seven working days.

Consumer finance

LSB completes gap analysis process

On 5 January 2016, the Lending Standards Board (LSB) announced that it had completed its gap analysis exercise in respect of adherence to the new Standards of Lending Practice (SLP) for personal customers, and was ‘reassured’ by the results. The LSB says that while most firms will have taken any actions required within a few months, adherence will be required by October 2017.

Insurance and pensions

EIOPA monthly update on the equity capital charge for Solvency II

On 9 January 2017, EIOPA published the technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of December 2016.

Insurance Europe questions point of European Services e-card

On 11 January 2017, following the publication of the European Commission’s legislative proposal for a European Services e-card, Insurance Europe raised ‘significant concerns’ that the proposal is based on the ‘incorrect assumption’ that businesses are being impeded from conducting cross-border business due to a lack of available insurance.

Payment and fintech

ECB official outlines 2017 innovations in payments

On 6 January 2017, the European Central Bank (ECB) released a keynote speech delivered in Paris by a member of its executive board, Yves Mersch, at the French Payments Committee conference on ‘Technological innovations in payments and beyond’. Mr Mersch reviewed 2016 developments in payments innovation and outlined three key areas of activity for 2017.

ECB consults on TIPS user requirements

On 10 January 2017, the ECB launched a market consultation on the TARGET Instant Payments Settlement (TIPS) User Requirements Document (URD), which aims to describe the principles and functionalities of TIPS on a high level to cater for the business level perspective in which TIPS could be beneficial to the European financial market. The consultation runs until 24 February 2017.


Chancery division

Property Alliance Group Ltd v Royal Bank of Scotland plc

[2016] EWCH 3342 (Ch)

The Chancery Division dismissed the claimant company's claims against the defendant Royal Bank of Scotland (RBS) in relation to four interest rate derivative products which RBS sold to the claimant (the swaps). In particular, it rejected claims for rescission, damages arising out of RBS's representations and/or breaches of contract in connection with the sale of the swaps, the transfer of its business, and participation in and knowledge of the manipulation of the London Interbank Offered Rate rates.

Dates for your diary

Key Date Subject Event
13 January 2017 Payments and fintech—payment systems Deadline for responses to Payment Systems Regulator (PSR) 'Consultation Paper (CP16/5): Consultation on the Financial Penalty Scheme for the use of the retained amount from PSR regulatory penalty receipts'.
13 January 2017 Prudential requirements The ECB will hold a public hearing as part of the consultation on guide to assessments of board members.
13 January 2017 Regulatory architecture Deadline for responses to Basel Committee on Banking Supervision (BCBS):

  1. consultive document on regulatory treatment of accounting provisions—interim approach and transitional arrangements, and
  2. discussion paper on regulatory treatment of accounting provisions

13 January 2017 Payment Services Directive 2 Deadline for the European Banking Authority (EBA) to:

  1. submit to the European Commission final draft RTS on strong customer authentication and secure communication (Article 98)
  2. submit to the European Commission final draft RTS on determining whether a central point of contact is appropriate (Article 29(5))
  3. issue guidelines on the criteria on how to stipulate the minimum amount of professional indemnity insurance (Article 5(4))

13 January 2017 Prudential requirements The ECB will hold a public hearing as part of its consultation on the draft ECB guide on materiality assessment for changes or extensions to counterparty credit risk models.
13 January 2017 FCA conduct requirements Deadline for responses to chapter 2 on changes to the pension projection rules to remove conflicts with the FCA's Conduct of Business (COBs) 13 Annex 2, when providing risk warnings to scheme members with safeguarded-flexible benefits, as set out in FCA consultation 'CP16/39: Quarterly Consultation Paper No.15'.
15 January 2017 Markets and trading—Market Infrastructure Deadline for responses to HMRC consultation 'Rules on ensuring the effective functioning of the financial market infrastructure special administration regime'.
16 January 2017 Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation Deadline for responses to chapter 7 on fees in FCA consultation paper 'CP16/43: Markets in Financial Instruments Directive II Implementation – Consultation Paper IV'.
16 January 2017 Regulatory architecture The new rules on the European Parliament’s Rules of Procedure come into effect on this date.
16 January 2017 Authorisation, approval and supervision Deadline for responses to joint PSR and FCA consultation 'CP 16/35: PSR regulatory fees 2017/18'.
16 January 2017 Authorisation, approval and supervision Deadline for responses to FCA consultation 'CP16/33: Regulatory fees and levies, policy proposals for 2017/18'.
17 January 2017 Prudential Requirements Following the implementation of the new credit union regulatory reporting requirements, by this date principal users will receive notification that regulatory returns are available to submit to the PRA.
For most credit unions, the first return they must submit on the portal will be the quarterly return for the period ending 31 December 2016. Credit unions with a September year-end will be required to submit their annual return for the period ended 30 September 2016.
See the PRA's webpage on credit unions.
18 January 2017 Insurance Deadline for responses to HM Treasury consultation 'Regulations implementing a new regulatory and tax framework for Insurance Linked Securities'. This should be read in conjunction with FCA and PRA consultation 'CP42-16/CP16-34: Authorisation and supervision of insurance special purpose vehicles'.
18 January 2017 Consumer finance Updated information sheets for consumer credit firms to use to accompany arrears and default notices are applicable from this date.
18 January 2017 Consumer finance Deadline for responses to FCA consultation 'GC16/6: The fair treatment of mortgage customers in payment shortfall: impact of automatic capitalisations'.
19 January 2017 Regulatory architecture—FCA Deadline for firms to apply to be part of the FCA's second sandbox cohort.

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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.