Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Printer Friendly Version
Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 14 September 2017.
The EU Financial Affairs Sub-Committee opened its inquiry into post-Brexit financial supervision and regulation on 13 September 2017 with evidence from Eilís Ferran, professor of company and securities law at the University of Cambridge, and Niamh Moloney, professor of law at the London School of Economics. The inquiry is seeking to explore how regulation and supervision can evolve following Brexit in order to ensure financial stability and preserve market access.
The EU task force for the preparation and conduct of negotiations with the UK under Article 50 TEU issued a policy paper which details essential principles for the use of personal data, protection of information obtained or processed prior to the date of the UK’s withdrawal from the EU and classified information. Access to networks, information systems and databases established by EU law will, as a general rule for the UK, be terminated upon withdrawal.
UK Finance and the Association for Financial Markets in Europe (AFME) co-published a report on the impact of Brexit on cross-border financial services contracts. The paper examines the UK and EU marketplace for cross-border provision of financial services and the potential impact of Brexit on existing cross-border contracts, calling for a mechanism to allow such contracts to run to maturity. UK Finance CEO Stephen Jones said the problem was wide-ranging and not just limited to banking, affecting cross-border products and services across payments, insurance and investment management services.
Insurance Europe (IE) released a position paper on the need for grandfathering of existing (re)insurance contracts to protect consumers following the UK's departure from the EU. Currently, EU and EEA (re)insurers can provide contracts to customers in the UK, and vice-versa, through passporting and local branches. After Brexit, passporting rights between the EU/EEA and the UK will cease. EU/EEA branches of UK-based (re)insurers will become third-country branches and the status of UK branches of EU/EEA-based insurers is not clear.
The Financial Conduct Authority (FCA) published Handbook Notice 47, setting out changes to the Handbook, consultation feedback not covered by separate policy statements, and board dates for 2017 and 2018.
The National Audit Office (NAO) uncovered a series of failings in the way the government allocated and tracked the use of the £973m LIBOR fund, all proceeds of which were to go to ‘the benefit of the public’. The LIBOR fund was created with the proceeds of fines for banks manipulating the London Overnight Offered Rate. During the 2015 general election campaign, the government pledged £200m of the fund to support 50,000 new apprenticeships, but the Department for Education is unable to demonstrate that these have been delivered, nor is there any evidence of an increase in the numbers of apprenticeships.
The board of directors of the Bank for International Settlements (BIS) announced that Mark Carney will succeed Agustín Carstens as chair of the Global Economy Meeting (GEM) and the Economic Consultative Committee (ECC). The GEM monitors and assesses developments, risks and opportunities in the world economy and the global financial system, providing guidance to three Basel-based central bank committees—the Committee on the Global Financial System, the Committee on Payments and Market Infrastructures and the Markets Committee. The Economic Consultative Committee (ECC) is an 18-member group that conducts analyses and prepares proposals for the GEM's consideration. It also makes recommendations to the GEM on the appointment of the chairs of the central bank committees and on the composition and organisation of those committees.
The Committee on Economic and Monetary Affairs (ECON) published an opinion on the draft general budget of the EU for the financial year 2018 for the Committee on Budgets.
The Prudential Regulation Authority (PRA) is consulting on its proposal to correct the fee rates for its annual funding requirement for 2017/18, published in policy statement 17/17. The PRA says the fee rates set out in the policy statement ‘did not reflect the most up-to-date data received from firms prior to its publication’. For all firms, the correct fee rates will be lower than those published in the PS. The consultation closes on Thursday 12 October 2017.
The European Banking Authority (EBA) published its 12th Report of the CRDIV-CRR/Basel III monitoring exercise on the European banking system. The exercise monitors the impact of the transposition of the European Capital Requirements Directive and Regulation (CRD IV/CRR)/Basel III requirements on EU banks. In particular, it monitors the impact of fully implementing CRD IV/CRR on banks' capital ratios (risk-based and non-risk-based) and on their liquidity coverage ratio (LCR), as well as the impact of fully implementing the Basel III framework on banks' net stable funding ratios (NSFR).
The Basel Committee on Banking Supervision (BCBS) found that all banks included in the data sample were meeting their Basel III minimum target CET1 capital requirements. In addition, all global systemically important banks (G-SIBs) in the data sample were meeting their phased-in liquidity requirements.
The Bank of England (BoE) issued a summary of what has been done to secure a safer financial system in the last decade. Since the financial crisis, the BoE says it has strengthened the system with two important institutional innovations. First, it was given responsibility for the supervision of individual banks and building societies. Second is the creation of an authority in the BoE with new powers—the Financial Policy Committee—tasked by Parliament to monitor risks in the financial system that could cause problems for the wider economy.
The EBA released a revised list of validation rules in its implementing technical standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems.
ECON issued an opinion on legitimate measures to protect whistle-blowers acting in the public interest when disclosing the confidential information of companies and public bodies (2016/2224(INI)). ECON call on Member States to adopt a broad legal definition of a whistleblower, to protect them effectively through national legislation, with equal protection for public and private sector whistleblowers.
A member of the executive board of the Deutsche Bundesbank, Professor Joachim Wuermeling, said cybersecurity co-operation and co-ordination are critical in the highly interconnected financial sector, where the default of a single participant can lead to disturbances being felt throughout the entire industry. Mr Wuermeling said the aim was to optimise centralised and decentralised protective measures on an ongoing basis, foster a culture of cybersecurity, and bolster the resilience of financial market infrastructures.
Information Commissioner Elizabeth Denham spoke about the need for boards of directors to engage in their cyber security policies at the latest CBI Cyber Security Conference. Denham told the conference that the Information Commissioner’s Office was committed to working with government and the National Cyber Security Centre to provide more certainty, assurance, and guidance to businesses for cyber security legislation. Denham believes the incoming Data Protection Act should serve as an opportunity for businesses to focus on data protection and data security.
The European Securities and Markets Authority (ESMA) warned that its identity and logo have been used in scam emails targeting investors, attempting to steal personal data and convince the potential victims to transfer money to them, for example by fraudulently presenting themselves as employees of ESMA conducting ESMA investigations. Attempts were made to use the names of members of ESMA staff in fraudulent emails targeting investors who had already previously lost money to scam companies and who were thus trying to recover their money.
The Financial Action Task Force (FATF) published a report on an assessment it has conducted of Ireland’s anti-money laundering and anti-terrorist financing (AML/ATF) system, based on the 2012 FATF recommendations, reviewing both the effectiveness of its system and its technical compliance with the regulations. The report found that Ireland has a generally sound legislative and institutional AML/ATF framework. However, the report noted that given its position as an important regional and international financial centre, Ireland could further refine its understanding of international money laundering risks.
The FCA issued a ‘Dear CEO’ notice to consumer credit firms concerning complaints handling. The letter follows an FCA review of how consumer credit firms approach and deal with customer complaints. The FCA says firms’ attitudes to complaints ‘are a strong indicator of their culture and whether they have customers at the heart of their business’, but found examples of non-compliance with the requirements set out in the FCA’s Dispute Resolution rules, as well as general poor practice relating to the way firms handle complaints.
The Office of the Complaints Commissioner upheld part of a complaint concerning certain conduct during a section 166 investigation. During the investigation, the skilled persons employed to conduct the second section 166 review sent out letters to clients of the complainant offering compensation without having received any delegated authority from the directors of the firm to do so.
ESMA updated its transitional transparency calculations (TTC) for non-equity instruments in relation to the implementation of the Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR).
ESMA updated its Q&As regarding the implementation of MiFID II and MiFIR. The purpose of the Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR in relation to market structure topics.
The FCA updated its webpage on MiFID II notifications obligation for firms. Authorised firms, and certain firms exempt from MiFID II, must notify the FCA if they are providing direct electronic access (DEA) or undertaking algorithmic trading (as defined in Article 4 of MIFID II and further specified by the MiFID II Delegated Regulation (EU) 2017/565). They must notify the FCA where the UK is their home Member State and where a non-UK firm is a member or participant of a UK trading venue.
The European Commission sent a report to the European Parliament on whether to temporarily exclude exchange-traded derivatives from the scope of Articles 35 and 36 of MiFIR. Following a report by ESMA, the Commission concluded that it is not necessary to make the temporary exclusion.
The Council of the EU published an I/A item note on Commission Delegated Regulation of 11 July 2017 supplementing MiFID and MiFID II with regard to regulatory technical standards (RTS) for an exhaustive list of information to be included by proposed acquirers in the notification of a proposed acquisition of a qualifying holding in an investment firm (C(2017) 4644 final). The objection period for this Commission Delegated Regulation has been extended to 11 October 2017. The I/A item note indicates that the Council will confirm that it has no objection.
The Futures Industry Association (FIA), in co-operation with the Association for Financial Markets in Europe, the Alternative Investment Management Association and the Managed Funds Association, produced a template of questions for use by investment firms providing direct electronic access (DEA) to their clients, as required under Article 22 of regulatory technical standard (RTS) 6. The purpose of the template is to allow both the DEA provider and client to utilise a standardised set of relevant/necessary checks.
The latest ESMA report on Trends, Risks and Vulnerabilities No 2, 2017 (TRV) identifies high asset price valuations as the major risk for European financial markets in the second half of 2017. The main risk drivers are uncertainties around geopolitical developments, the resilience of economic growth, and debt sustainability.
The European Parliament published amendments to the EuVECA and EuSEF Regulations. The EuVECA and EuSEF Regulations came into effect across Europe on 22 July 2013. The original aim was to create new opportunities for market participants to raise and invest capital in innovative small and medium-sized enterprises (SMEs) and social undertakings throughout Europe.
The Futures Industry Association (FIA) responded to the European Commission’s proposed changes to the authorisation and recognition of central counterparties (CCPs) in its European Market Infrastructure Regulation (EMIR) review. The changes aim to improve the current supervisory arrangements relating to systemically important third-country CCPs. FIA believes that ‘an appropriately calibrated enhanced supervision regime would be a highly effective way to protect financial stability’, and makes 23 ‘positive recommendations’.
ESMA issued an opinion agreeing to prolong the short selling prohibition by the Comisión Nacional del Mercado de Valores (CNMV) on net short positions in Liberbank, S.A. shares under the Short-Selling Regulation. The measure is expected to enter into force at 23:59 CET on 12 September 2017 and will apply until 30 November 2017 at 23:59 CET.
ESMA launched a consultation paper on certain aspects of the Short Selling Regulation on 7 July 2017, which closed on 4 September 2017. ESMA published the responses it received from a number of different European financial institutions and regulators.
HM Treasury released responses to its consultation on the implementation of the Central Securities Depositories Regulation (EU) 909/2014 (CSDR), first issued in December 2015. The consultation closed on 4 February 2016 and HM Treasury received responses from the British Bankers' Association, the Association for Financial Markets in Europe, the City of London Law Society and Euroclear UK & Ireland.
The International Swaps and Derivatives Association (ISDA) launched the latest version of its standard initial margin model (SIMM), which includes several enhancements to further develop the SIMM methodology. The new SIMM includes new risk factors, as well as several other changes requested by the industry, including clarification of certain definitions and enhancements to the treatment of vega margin and commodity indices. The changes will come into effect on 4 December 2017.
The Hedge Fund Standards Board (HFSB), the global standard-setting body for the alternative investment industry, changed its name to the Standards Board for Alternative Investments (SBAI). The change in name, the SBAI says, reflects the evolution of the alternative investment industry, in which managers increasingly offer their investment strategies through a variety of vehicles beyond ‘hedge funds’, including liquid alternatives, regulated funds, co-investment vehicles, drawdown funds and managed accounts.
The FCA and BoE jointly published a statistical release showing mortgage lenders and administrators statistics for Q2 2017. There has been an increase in mortgage lending activity compared to Q1 2017. Mortgage commitments have increased by approximately £7bn.
The FCA published an impact assessment of its proposal to make minor changes to its MCOB equity release rules.
The FCA announced that the investigation into Police Mutual has been closed with no further action, following its prior announcement on 3 March 2017 that the firm was one of six being investigated as a result of its thematic review into the fair treatment of longstanding customers.
The European Commission published a proposal to amend the Council decision (EU) 2017/... of 27 May 2017 on the signing, on behalf of the EU, and provisional application of the bilateral agreement between the EU and the US on prudential measures regarding insurance and reinsurance. The bilateral agreement covers group supervision, reinsurance and exchange of information between supervisors.
IE responded to the International Association of Insurance Supervisors (IAIS) consultations on insurance core principles (ICPs). IE submitted comments on ICPs 1 (objectives, powers and responsibilities of the supervisor), 2 (supervisor) and 19 (conduct of business). It sought clarifications on the objectives of insurance supervision, and proposed the addition of good regulatory practices to guide supervisors in achieving these objectives.
The chair of European Insurance and Occupational Pensions Authority (EIOPA), Gabriel Bernardino, gave a speech at the 5th Conference on Global Insurance Supervision in Frankfurt. The theme of the conference was the future (re)insurance landscape: different perspectives, inspiring dialogue. Mr Bernadino stated that the European insurance industry was much stronger with Solvency II and as a result was ‘better prepared to face the new challenges and to be on the front line in the necessary adaptation of business models’.
The Organisation for Economic Co-operation and Development (OECD) published a report on InsurTech, cataloguing new technologies, how they are being funded and how insurers are engaging with the start-ups entering the market.
The Payment Systems Regulator (PSR) and the BoE announced that the Payment System Operator Delivery Group (PSODG) has completed the necessary steps in order to deliver against the mandate set down by the BoE and the PSR to form the New Payment Systems Operator (NPSO) by the end of 2017. With the NPSO chair, Melanie Johnson, now in position, the process of forming the initial board has commenced and the NPSO will now take the lead, with the PSR and the BoE confirming the closure of the PSODG.
The FCA updated its webpage explaining how firms may apply to the FCA to be authorised or registered to provide payment services. Applications under the Payment Services Directive (EU) 2015/2366 (PSD2) can be submitted from 13 October 2017.
The executive director of markets at the BoE, Chris Salmon, gave an address at the TradeTech FX Europe conference in Barcelona, focused on promoting the FX Global Code, which was launched in May 2017. The Code is a set of global principles of good practice in the foreign exchange (FX) market and its objective is to 'promote integrity and effective functioning of the wholesale FX market'.
TheCityUK published a report saying the UK is the leading Western centre for Islamic finance, and there are ‘considerable opportunities’ for further growth in the sector. The report says the UK should take a leading role in setting international Sharia-compliant standards, and is increasingly a centre of innovation and development for the use of FinTech in Islamic finance products.
The FCA published a consumer warning about the risks of Initial Coin Offerings (ICOs). In its publication, the FCA sets out what would be considered an ICO and the potential risks involved in transactions involving them.
The European Commission published a summary of the responses received to its consultation on FinTech: a more competitive and innovative European financial sector. The Commission received 226 responses, mostly from banks, investment firms, trading venues, insurance, payments and market infrastructures. While many respondents saw ‘huge opportunities’ in terms of access to finance, operational efficiency, cost-saving and competition, on the risk side the issues raised were cybersecurity, the use and control of data and money laundering.
The Money Advice Service and Tech City UK launched a fintech competition encouraging technology entrepreneurs and investors to create money management apps and services to help people take control of their finances. ‘Fintech For All’ is described as ‘an opportunity to showcase how innovation could contribute to help improve the financial capability of people in the UK’.
The head of policy at EIOPA, Dr Manuela Zweimüller, said understanding customer behaviour and adapting to the challenges coming from digitalisation is more important than ever. The financial services sector needs to embrace the benefits of consumer protection and enhance its efforts to provide quality service and suitable products.
0330 161 1234