Weekly highlights—16 February 2017

Weekly highlights—16 February 2017

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 16 February 2017.


Brexit: House of Lords debate transcript published—Financial Services Committee Report

On 13 February 2017, the Hansard transcript from a debate held in the House of Lords on 9 February 2017 on the European Union Committee Report on Brexit: Financial Services was published.

Bank of England updates

Charlotte Hogg appointed new Deputy Governor for Markets and Banking

On 9 February 2017, HM Treasury announced that Charlotte Hogg has been appointed the new Deputy Governor for Markets and Banking at the Bank of England (BoE), effective 1 March 2017. She replaces Minouche Shafik, who is leaving the BoE at the end of February 2017 to become the Director of the London School of Economics. In addition to taking on the role of Deputy Governor, Ms Hogg will continue in her current role as Chief Operating Officer.

Mark Carney delivers speech on diversity and inclusion

On 10 February 2017, the governor of the Bank of England (BoE), Mark Carney, delivered a speech to the BoE about what it means to be diverse and inclusive, why it is important to the Bank and how it is making the workplace more diverse and inclusive.

Financial Conduct Authority updates

FCA requests feedback on its website usability

On 13 February 2017, the Financial Conduct Authority (FCA) published a short survey for customers to provide feedback on the usability of its website. The survey is designed to address the ease of locating information, the types of content users would like to see and asks how users receive updates from the FCA.

FCA speech on good conduct regulation

On 14 February 2017, the FCA published a speech on what makes good conduct regulation, delivered by John Griffith Jones, chairman at the FCA, at the Cambridge Judge Business School on 13 February 2017. Among other things, he outlined the ‘building blocks’ of good conduct regulation, including a clear set of objectives for the regulator, and a clear perimeter of coverage.

Regulatory architecture

ESMA sets out supervisory convergence plans for 2017

On 9 February 2017, the European Securities and Markets Authority (ESMA) published its Supervisory Convergence Work Programme for 2017. The document sets out the activities and tasks that ESMA will carry out, the aim being to promote sound, efficient, and consistent supervision across the EU.

ESMA publishes new Q&A tool

On 9 February 2017, ESMA launched a new Q&A tool, designed to provide easy access to stakeholders to consult existing Q&As and submit new questions. The tool is available on the new 'questions and answers' page, which contains an overview of all Q&As developed by ESMA per legislative act and instructions on submitting new questions to ESMA.

European Parliament overview briefing on Basel Committee on Banking Supervision

On 13 February 2017, the European Parliament published an overview briefing of the role of the Basel Committee on Banking Supervision (BCBS) in setting international standards in banking regulation and supervision. The briefing paper also raises questions on how the preparatory work is organised in the EU to enhance transparency and co-operation.

New trade body to act as voice for finance sector

On 14 February 2017, it was announced that a new body is to launch later in 2017, designed to be the authoritative voice for the finance sector in the UK. Bob Wigley has been appointed as Chair. The name and brand of the body is to be announced in summer 2017. Mr Wigley will oversee the appointment of the chief executive and the integration of the existing trade associations later in 2017.

ESMA updates technical standards schedule

On 15 February 2017, ESMA updated its schedule showing the actual and proposed adoption dates for technical standards.

‘Building a single market for capital remains a top priority’—Valdis Dombrovskis

On 10 February 2017, in a speech on the merits of upholding a strong international financial system, the European Commissioner for financial stability, financial services and the Capital Markets Union, Valdis Dombrovskis, said ‘Europe needs to get much better at linking growth opportunities to the capital that can support them’.

Authorisation, approval and supervision

ECB publishes draft decision on providing performance feedback to NCAs

On 13 February 2017, the Governing Council of the European Central Bank (ECB) published a draft Decision repealing Decision EU 2016/3 which lays down principles for providing performance feedback to national competent authority (NCA) sub-coordinators. Among other things, the draft Decision addresses specific powers conferred on the ECB for the prudential supervision of credit institutions which were contained in particular within Article 6(1) and 7 of Council Regulation (EU) 1024/2013.

Prudential requirements

EBA publishes final draft technical standards on exclusion from CVA of non-EU non-financial counterparties

On 9 February 2017, the European Banking Authority (EBA) published its final draft Regulatory Technical Standards (RTS) specifying the procedures for excluding transactions with non-financial counterparties (NFCs) established in a third country from the capital requirement for credit valuation adjustment (CVA) risk. The proposed RTS have been developed according to Article 382(5) of the Capital Requirements Regulation (Regulation (EU) 575/2013), and look to harmonise the treatment of third country NFCs across EU Member States.

Commission issues delegated regulation on classes of arrangements to be protected under BRRD

On 9 February 2017, the European Commission published a Delegated Regulation to specify the classes of arrangements to be protected in a partial transfer or in case of modification of contractual terms, under Article 76 of the Directive 2014/59/EU (BRRD). The BRRD establishes a framework for the recovery and resolution of credit institutions and investment firms based on the EBA technical advice.

Applying Basel III to small and savings banks in Germany

‘A demanding 2017 lies ahead of banks and savings banks’, Dr Andreas Dombret, member of the executive board of the Deutsche Bundesbank, said in a speech delivered at the Handelsblatt conference on ‘Future strategies for savings banks and Landesbanken’. He warned that, while the sector is witnessing a structural scale-back, ‘low interest rates and competition from digital service providers are weighing on profit opportunities’.

EBA publishes list of institutions for supervisory benchmarking

On 10 February 2017, the EBA published an updated list of institutions which have a reporting obligation for the purpose of the 2017 EU supervisory benchmarking exercise. The EBA runs this exercise leveraging on established data collection procedures and formats of regular supervisory reporting and assists Competent Authorities in assessing the quality of internal approaches used to calculate risk weighted exposure amounts. Institutions are asked to submit the relevant data to their Competent Authorities by 11 April 2017.

AFME responds to draft EBA Guidelines on the treatment of defaulted exposures

On 10 February 2017, the Association for Financial Markets in Europe (AFME) published its response to the EBAs consultation paper on draft guidelines on probability of default estimation, loss given default (LGD) estimation and the treatment of defaulted exposures (EBA/CP/2016/21). Among other things, the AFME says the guideline focus must be on eliminating unjustified risk weighted asset variance, but ensuring that risk sensitivity is maintained.

Co-Operative Bank puts itself up for sale

On 13 February 2017, after warning in January 2017 that it would fail to meet its capital reserve targets over the next few years, the Co-operative Bank has put itself up for sale. The lender says it is considering ‘alternative options to build its capital position’ for the future. It has concluded that embarking on a sale process is the best route forward to deliver the next phase of the Bank’s turnaround plan following its rescue from the brink of collapse after losses from problem real estate loans by a group of hedge funds in 2013. In January 2017, the Bank said it expected its core capital ratio to fall below 10%, falling short of regulatory requirements.

EBA Banking Stakeholder Group comments on EBA consultation

On 13 February 2017, the EBA Banking Stakeholder Group (BSG) published comments on a consultation on Guidelines on Probability of Default (PD) estimation, Loss Given Default (LGD) estimation and the treatment of defaulted exposures (EBA/CP/2016/21) launched by the EBA on 14 November 2016.

Risk management and controls

Newly opened National Cyber Security Centre a ‘unique institution’, says Chancellor

On 14 February 2017, the Chancellor said in a speech at the opening of National Cyber Security Centre (NCSC), that the NCSC, and its work, is vitally important in tackling cyber attacks against UK homes and businesses. The Chancellor also announced a further £1.9bn to protect against cyber attacks during the current Parliament.

Data on bank’s financial breaches must be publicly available, says report

On 15 February 2017, a report from anti-corruption organisation Transparency International recommended, to reduce money-laundering risks and increase the systemic accountability of the financial sector, that financial sector supervisors should make a standard set of supervisory and enforcement statistics public on a yearly basis, including the number of banks inspected, the number of regulatory breaches found, and the number and value of sanctions imposed.

Financial Crime

ESAs consult on establishment of central contact points to tackle financial crime

On 10 February 2017, the Joint Committee of the three European Supervisory Authorities (ESAs) launched a public consultation on joint draft RTS on the criteria for determining the circumstances in which the appointment of a central contact point (CCP) pursuant to Article 45(9) of the Fourth Money Laundering Directive (EU) 2015/849 (MLD4) is appropriate and the functions of the central contact point. The draft RTS are designed to help Member States determine when payment service providers and electronic money issuers should appoint a CCP to help combat money laundering and terrorist financing. The consultation runs until 5 May 2017.

Enforcement and redress

PRA fines two firms for failure to disclose US settlement

On 9 February 2017, the Prudential Regulation Authority (PRA) announced it had fined the Bank of Tokyo-Mitsubishi UFJ Ltd (BTMU) and MUFG Securities EMEA plc (MUS(EMEA)) for failing to be open and cooperative with the PRA regarding an enforcement action into BTMU by the New York Department of Financial Services (DFS). The PRA imposed penalties of £17.85m on BTMU, and MUS(EMEA) was fined £8.925m.

Letters regarding complaints process for SME’s in RBS Restructuring Group published

On 10 February 2017, the Treasury Committee published responses from RBS chief executive Ross McEwan and the FCAs chief executive Andrew Bailey to letters regarding the new complaints review process for small and medium-sized enterprises customers in RBS' Global Restructuring Group (GRG). The letters emphasise the need for greater transparency of the Independent Skilled Persons report on the treatment of SME customers transferred to GRG between 2008 and 2013.


Brokering of portfolio management agreement under MiFID I

In an opinion given on 8 February 2017 in the case of Mohammad Zadeh Khorassani v Kathrin Pflanz (C-678/15), the advocate general of the Court of Justice of the EU, Manuel Campos Sánchez-Bordona, considered whether brokering the conclusion of a portfolio management agreement amounts to the provision of investment services under the Markets in Financial Instruments Directive 2004/39/EC (MiFID I).

ESMA revises ITS on position reporting under MiFID II

On 9 February 2017, ESMA published a revision of its draft Implementing Technical Standards (ITS) on position reporting under the Markets in Financial Instruments Directive (Directive 2014/65/EU) (MiFID II).

Government announces next steps on MiFID II transposition

On 9 February 2017, HM Treasury has published its response to its consultation on the transposition of MiFID II, which closed in June 2015, providing further clarity on how the Directive will be implemented in the UK. Among other things, the government has confirmed that it will maintain its current third country regime and that binary options will be brought within the MiFID II regime.

MEPs move to block Commission proposal on MiFID II position limits for commodity derivatives

On 9 February 2017, a group of MEPs called on the European Parliament to reject the European Commission’s draft delegated regulation supplementing MiFID II with regard to position limits for commodity derivatives. According to the MEPs, who submitted a motion for a resolution on behalf of the GUE/NGL Group, the Commission’s proposed baseline limit of 20% is not sufficient to prevent market abuse and support orderly pricing and settlement conditions for the most sensitive and highly liquid food contracts. They also maintain that the discretion afforded to national competent authorities to modulate the baseline figures could endanger the whole position limits regime.

Markets and Trading

Responses to ESMA consultation on fees under SFTR and EMIR

On 14 February 2017, ESMA published the responses to its Consultation Paper, ‘ESMA’s technical advice to the Commission on fees for Trade Repositories (TRs) under SFTR and on certain amendments to the fees under EMIR’ (ESMA/2016/1672).

ISDA and IHS Markit tutorial on new CSA

On 14 February 2017, the International Swaps and Derivatives Association (ISDA) and IHS Markit published a three part pre-recorded tutorial series to explain how to create a new-style credit support annex (CSA) under English Law.

ESMA expresses concerns on systematic internaliser networks

On 14 February 2017, ESMA published a letter to the European Commission raising its concerns over the potential establishment of networks of systematic internalisers (SIs) by investment firms to circumvent certain obligations under MiFID II.

FCA consults on UK primary capital markets and Listing Rules

On 14 February 2017, the FCA published a discussion paper: ‘Review of the Effectiveness of Primary Markets: The UK Primary Markets Landscape’ (DP17/2) and consultation paper: ‘Review of the Effectiveness of Primary Markets: Enhancements to the Listing Regime’ (CP17/4). The papers are part of the FCA’s 2016/17 Business Plan commitment to review the structure of the UK’s primary markets to ensure they continue to serve the needs of issuers and investors. Comments and responses are requested by 14 May 2017.

FCA releases new evidence on liquidity in UK corporate bond market

On 15 February 2017, the FCA released Occasional paper No.14: Liquidity in the UK corporate bond market: evidence from trade data. The study is the first systematic assessment of liquidity in UK corporate bond markets with transaction-level data.

ICMA European repo market guide approved

On 15 February 2017, a guide setting out standards for the orderly trading and settlement of repos in the European repo market was published by the International Capital Market Association (ICMA) and adopted with the approval of the ICMA International Repo and Collateral Council (IRCC) Committee.

Investment funds and wealth management

ESAs consult on minimum requirements for PRIIPs with environmental and social objectives

On 10 February 2017, the Joint Committee of the ESAs launched a consultation on a proposal to set minimum requirements which manufacturers of packaged retail and insurance-based investment products with environmental or social objectives (EOS PRIIPs) should comply with to ensure credible products are offered to retail investors. The consultation closes on 23 March 2017.

Insurance and pensions

EIOPA invites website feedback

On 13 February 2017, EIOPA started a review of its website by gathering feedback from all website users in an online survey. EIOPA’s aim is to ensure that users’ experience and views are taken into account in developing a user-friendly and accessible website.


On 14 February 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published two new Q&As on implementing technical standards (ITS) under Directive 2009/138/EC (Solvency II).

PLSA proposes authorisation regime to tackle pension scams

On 14 February 2017, the Pensions and Lifetime Savings Association (PLSA) set out proposals for an authorisation regime for pension schemes as part of its response to the government’s consultation on pension scams. The PLSA has also welcomed the government’s proposed ban on cold calling, but says the ban should also cover text messages and other forms of digital messaging.

Payments and fintech

BoE works with Anomali to improve cyber-threat intelligence capabilities

On 10 February 2017, following the successful completion of a proof of concept (PoC) looking at innovative technologies that collect, integrate, hunt and investigate cyber security intelligence data this proof of concept—run by the BoE FinTech Accelerator—the BoE decided to continue to work with Anomali to monitor and mitigate efforts against cyber threats.

EBA presentation on major incidents reporting under PSD2

On 14 February 2047, the EBA published a presentation on major incidents reporting under the Payment Services Directive 2015/2366/EU (PSD2) given by Dirk Haubrich and Sergio Gorjón of EBA at a public hearing in London on 9 February 2017.

Seven hurdles to adopting cloud technology for banks

On 15 February 2017, it was announced that a Cloud Computing Working Group had been set up by the British Bankers' Association (BBA) in collaboration with Pinsent Masons to help banks tackle seven hurdles to the adoption of cloud technology faced by the banking industry. The hurdles could have an impact on the extent to which banks can adopt public cloud solutions efficiently, with confidence, and without creating exposure to levels of regulatory compliance risk which they consider unacceptable.

Dates for your diary

Key Date Subject Event
17 February 2017 Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation Deadline for responses to FCA consultation paper (excluding chapter 7) 'CP16/43: Markets in Financial Instruments Directive II Implementation – Consultation Paper IV'.
17 February 2017 Reporting requirements Deadline for responses to the Financial Reporting Council's (FRC) consultation on its draft plan, and budget and levy proposals 2017/18.
20 February 2017 Payments and fintech—payment systems Deadline for responses to ECB consultation on a revision of the Regulation on oversight requirements for systemically important payment systems, known as the SIPS Regulation.
20 February 2017 Investment and wealth management Deadline for responses to FCA consultation 'MS15/2.2: Asset Management Market Study'.
21 February 2017 Markets and trading Deadline for responses to the International Organization of Securities Commission's (IOSCO) consultative report on order routing incentives.
22 February 2017 Financial crime—anti-money laundering and counter-terrorist financing Deadline for responses to the Basel Committee on Banking Supervision's (BCBS) 'Consultation: Guidelines on revised annex on correspondent banking'.
23 February 2017 FCA conduct requirements—client asset rules Deadline for responses to FCA consultation 'CP17/2: CASS 7A & the Special Administration Regime Review’ in relation to the EMIR and MiFIR RTS proposals in chapter 3.
23 February 2017 Insurance Deadline for responses to FCA and PRA consultation 'CP42-16/CP16-34: Authorisation and supervision of insurance special purpose vehicles. This should be read in conjunction with HM Treasury consultation 'Regulations implementing a new regulatory and tax framework for Insurance Linked Securities' (this consultation period ended on 18 January 2017).

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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.