Weekly highlights—16 August 2018

Weekly highlights—16 August 2018

Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 16 August 2018.

Regulatory architecture

APPG on Fair Business Banking says current regulatory framework is inadequate and calls for public enquiry

The All -Party Parliamentary Group (APPG) on Fair Business Banking published a letter from its co-chair, Kevin Hollinrake MP, to Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA). The letter sets out a range of general concerns about what the APPG describes as the inadequacy of the current regulatory framework for financial services, as well as specific concerns about the FCA's announcement that no further action will be taken on the investigation into Royal Bank of Scotland (RBS) and its Global Restructuring Group (GRG). It also calls for a public enquiry which would aim to produce a full set of industry standard for treatment of businesses in turnaround units in financial institutions.

ECON publishes minutes of 18 and 19 June 2018 meeting

The European Parliament's Committee on Economic and Monetary Affairs (ECON) published the minutes of its 18 and 19 June 2018 meeting. The meeting included discussion of the location of the seat of the European Banking Authority (EBA) as a result of Brexit. The minutes note that at the next trilogue, the co-legislators will address the remaining issue—the involvement of the European Parliament in the selection of the seat of European agencies.

Authorisation, approval and supervision

Financial Conduct Authority publishes gender splits for regulatory functions

The FCA published its response to a request under the Freedom of Information Act 2000 for gender splits for those performing regulatory functions under the Senior Managers Regime, the Senior Insurance Managers Regime and the Statements of Principle and Code of Conduct for Approved Persons. The information provided by the FCA shows the split at 31 December in the years 2016 and 2017 and is broken down into seven industry sectors.

CB:PSB publishes advanced standard for professional bankers

The Chartered Banker Professional Standards Board (CB:PSB) published its advanced standard for professional bankers, together with guidance to support implementation of the advanced standard. The advanced standard sets out the CB:PSB's expectations for banking leaders' conduct and expertise and is aimed at senior and experienced practitioners.

Prudential requirements

EBA updates data used for identification of global systemically important institutions

The European Banking Authority (EBA) published 12 indicators and updated the underlying data from the 35 largest institutions in the EU, whose leverage ratio exposure measure exceeds €200bn. This end-2017 data contributes to the internationally agreed basis on which a smaller subset of banks will be identified as global systemically important institutions (G-SIIs), following final assessments by the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB). The EBA, acting as a central data hub in the disclosure process, will update this data on a yearly basis and will provide a user-friendly platform to aggregate it across the EU.

EBA updates XBRL taxonomy 2.8

The EBA published a corrective update to the XBRL taxonomy that competent authorities shall use for the remittance of data under the implementing technical standards (ITS) for reference dates of 31 December 2018 onwards.

Financial crime

MLD4 RTS on central contact points for electronic money issuers and payment service providers published in OJ

Commission Delegated Regulation (EU) 2018/1108 of 7 May 2018 was published in the Official Journal of the EU. It lays down regulatory technical standards (RTS) on the criteria for the appointment of central contact points for electronic money issuers and payment service providers and rules on their functions under the Fourth Money Laundering Directive (EU) 2015/849 (MLD4).

UK Finance issues guidance on the Second Wire Transfer Regulation

UK Finance published Funds Transfer Regulation—'How to' interpretative guidance, which has been put together by UK Finance and its members to give firms a better understanding of how they might interpret the requirements of the Second Wire Transfer Regulation (EU) 2015/847 and the joint guidelines issued by the European Supervisory Authorities (ESAs) in September 2017, as well as the kinds of policies and procedures they could have in place to help to meet those requirements.

Enforcement and redress

FCA review finds room for improvement in complaints handling

The FCA published the findings of its review of how non-deposit taking mortgage lenders (NDTMLs) and mortgage third-party administrators (MTPAs) handle complaints. The FCA concludes that there is room for improvement in the areas of management information (MI) including root cause analysis (RCA), complaints handling policies and procedures, and recording complaints.

RBS and Justice Department agree $4.9bn RMBS settlement

The US Justice Department announced a $4.9bn settlement with The Royal Bank of Scotland Group plc (RBS) resolving federal civil claims that RBS misled investors in the underwriting and issuing of residential mortgage-backed securities (RMBS) between 2005 and 2008. The penalty is the largest imposed by the Justice Department for financial crisis-era misconduct at a single entity under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which authorises the US federal government to seek civil penalties against financial institutions that violate various predicate criminal offenses, including wire and mail fraud.

Burns v Financial Conduct Authority

The applicant had failed to take reasonable steps to ensure that the business for which he was responsible as a director had complied with the relevant requirements and standards of the regulatory system, in breach of Statement of Principle 7 of the Statements of Principle and Code of Practice of Approved Persons. Accordingly, the Upper Tribunal (Tax and Chancery Chamber), directed that the respondent Financial Conduct Authority impose on the applicant a financial penalty of £60,000. It further held that it was open to the FCA to make a prohibition order against him. The judgment is available at: [2018] UKUT 246 (TCC).

Markets and trading

Benchmarks Regulation ITS on the provision of information by competent authorities to ESMA published in OJ

Commission Implementing Regulation (EU) 2018/1105 of 8 August 2018 was published in the Official Journal of the EU. It lays down implementing technical standards (ITS) with regard to procedures and forms for the provision of information by competent authorities to ESMA under Regulation (EU) 2016/1011 (the Benchmarks Regulation).

Benchmarks Regulation ITS on benchmarks administrators' compliance statements published in OJ

Commission Implementing (EU) 2018/1106 of 8 August 2018 has been published in the Official Journal of the EU. It lays down ITS with regard to templates for the compliance statement to be published and maintained by administrators of significant and non-significant benchmarks under the Benchmarks Regulation.

International standard setting bodies' study highlights continued central clearing interdependencies

The Financial Stability Board (FSB), the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissions (ISOCO) and the Basel Committee on Banking Supervision (BCBS) published the second report that maps interdependencies between central counterparties (CCPs) (together 'the committees') and their clearing members and other financial service providers. The committees published the first report on central clearing interdependencies in July 2017.

MiFID II—ESMA makes new bond liquidity data available

The European Securities and Markets Authority (ESMA) made available new data for bonds subject to the pre- and post-trade requirements of the Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II) and the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) (MiFIR) through its data register.

ESMA publishes Errata on Double Volume Cap data

ESMA corrected its Suspensions File in relation to its Double Volume Cap (DVC) data, originally published on 7 August 2018, as required under MiFIR.

ESMA updates validation rules under EMIR

ESMA updated its validation rules regarding the European Markets Infrastructure Regulation (EU) 648/2012 (EMIR) with regards to the revised technical standards on reporting under Article 9 of EMIR. The amendments will be applicable from 5 November 2018.

ESMA publishes list of authorised central counterparties

ESMA published a list of central counterparties authorised to offer services and activities in the EU in accordance with EMIR.

ESMA registers Moody's Investors Service (Nordics) AB as CRA

ESMA, the EU's direct supervisor of credit rating agencies (CRAs), registered Moody's Investors Service (Nordics) AB (Moody's) as a CRA under the Credit Rating Agencies Regulation (Regulation (EC) No 1060/2009) (the CRA Regulation). The registration took effect from 13 August 2018. Moody's is based in Sweden and intends to issue sovereign and public finance ratings, structured finance ratings and corporate ratings.

Investment funds and wealth management

ECON issues proposed amendments to draft regulation on ECSP for Business

ECON issued its draft report on the European Commission's (Commission's) proposal for a regulation on European crowdfunding service providers for business.

Banks and mutuals

New requirements take effect for banks to publish data on quality of service

The Competition and Markets Authority (CMA) said that, starting 15 August 2018, banks must publish information on how likely people would be to recommend their bank, as well as its online and mobile banking, branch and overdraft services, to friends, relatives or other businesses. The new measure is one of a number required by the CMA following its in-depth investigation of the sector.

Insurance and pensions

Regulators launch new campaign to tackle pension scams

The FCA and The Pensions Regulator (TPR) joined forces to urge the public to be on their guard when receiving unexpected offers about their pension and to check who they are dealing with. The two regulators have launched a new ScamSmart advertising campaign targeting pension holders aged 45-65, the group most at risk of pension scams.

Lloyd's managing agents support ILS as permanent fixture in UK market

Eighty per cent of Lloyd's managing agents who responded to a survey by the Lloyd's Market Association (LMA) have said they would 'like to see Insurance Linked Securities (ILS) products become a permanent fixture in the re/insurance market'.

BoE seeks feedback on draft insurance XBRL taxonomy

The Bank of England (BoE) issued a public working draft (PWD) of the standalone National Specific Templates and standard formula reporting for firms with an approved internal model (SF.01) taxonomy, alongside related technical artefacts, that will make up part of the BoE's insurance XBRL taxonomy. The PWD follows the Prudential Regulation Authority's (PRA's) Policy Statement PS21/18: Solvency II: Changes to reporting format. Firms and software vendors should provide feedback on the modelling, annotated templates, validations and XBRL taxonomy by Friday 24 August 2018.

EIOPA publishes updated technical RFR documentation under Solvency II

The European Insurance and Occupational Pensions Authority (EIOPA) published updated technical documentation for the calculation of the volatility adjustment to risk-free interest rates (RFR) for the Danish krone and Denmark. The risk-free rate methodology includes updated representative portfolios for the Danish krone and for the country portfolio of Denmark as well as the inclusion of option-adjustments.

EIOPA publishes new Q&As on regulation

EIOPA published new Q&As on the Solvency II Directive.

Payment services and systems

BoE’s call for interest on synchronised settlement to renewed RTGS service

The BoE made a call for interest to gauge the demand for introducing synchronised settlement to the renewed Real-Time Gross Settlement (RTGS) service. The BoE is looking to work on this with a range of organisations, including fintech firms. The BoE has issued a questionnaire which firms can use to register their interest. Questionnaires must be completed online by 28 September 2018.

BSG responds to EBA consultation on PSD2 guidelines

The Banking Stakeholder Group (BSG) responded to the EBA consultation on draft guidelines on the conditions to be met to benefit from an exemption from contingency measures under Article 33(6) of Regulation (EU) 2018/389, which supplements the revised Payment Services Directive (Directive (EU) 2015/2366) (PSD2) with regard to RTS for strong customer authentication and common and secure open standards of communication.

Dates for your diary

Date Subject Event
17 August 2018 Financial crime
Deadline for responses to the Financial Action Taskforce’s (FATF) public consultation on the draft risk-based approach guidance for the life insurance sector.
17 August 2018 Capital Requirements Regulation Deadline for responses to ECB consultation on a draft ECB Regulation under Article 178(2)(d) of the Capital Requirements Regulation (EU) 575/2013 (CRR) setting out a materiality threshold for credit obligations past due.
20 August 2018 Risk management and controls Deadline for responses to FSB consultation on cyber lexicon.
22 August 2018 Securitisation Regulation
Capital Requirements Regulation
Deadline for responses to PRA consultation ‘CP12/18: Securitisation: The new EU framework and significant risk transfer’.

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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.