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.
Find up-to-date guidance on points of law and then easily pull up sources to support your advice with Lexis PSL
Check out our straightforward definitions of common legal terms.
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Access our unrivalled global news content, business information and analytics solutions
Insurance, risk and compliance intelligence using big data, proprietary linking and advanced analytics.
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
Discuss the latest legal developments, ask questions, and share best practice with other LexisPSL subscribers
Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 19 July 2018.
The Department for Exiting the European Union (DExEU) published its White Paper on the future relationship between the EU and UK, which seeks to ensure ‘frictionless trade’ between the UK and EU post-Brexit while enabling the UK to make global trade deals and avoid a hard border between Ireland and Northern Ireland. The White Paper reiterates, among other things, the UK’s priorities and red lines, acknowledges that the UK will have more trade barriers than at present and reaffirms that the UK will end the free movement of people.
The European Parliament issued a press release stating that MEPs want a greater say on equivalence of EU/third country rules in financial services. Transparent procedures are needed to govern the adoption, withdrawal or suspension of decisions as to whether third country rules are equivalent to EU ones, according to European Parliament Committee on Economic and Monetary Affairs (ECON) MEPs.
The Financial Markets Law Committee (FMLC) published a paper on issues of legal uncertainty arising in the context of the establishment of an EU insurer in another Member State. It also sent a letter to the DExEU detailing the issues of legal uncertainty which arise in relation to insurance business in the context of Brexit.
SI 2018/Draft: These draft Regulations are made in exercise of the legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This draft enactment amends pieces of legislation to ensure that binding technical standards (BTS) and rules made by the UK’s financial services regulators under the Financial Services and Markets Act 2000 continue to operate effectively after the UK’s withdrawal from the EU.
The Department for Work and Pensions appointed John Govett as the first Chief Executive Officer of the new Single Financial Guidance Body (SFGB), which will replace the 3 existing providers of government-sponsored financial guidance – the Money Advice Service, the Pensions Advisory Service and Pension Wise. He will take up his new post in October 2018.
The economic secretary to the Treasury, John Glen MP, said his vision for the next year and beyond is ‘an explosion of the momentum’ to the point where ‘green finance’ becomes simply ‘finance’. Mr Glen was speaking at the second annual Green Finance Summit.
ECON published a draft report on the European Commission’s proposed directive amending MiFID II and Solvency II, which would enhance the supervisory role of the European Supervisory Authorities (ESAs). The draft report only suggests one minor change to the proposal.
The Financial Conduct Authority (FCA) published a report on supervision of the pawnbroking sector, following a wide-ranging data request, visits to a number of firms, discussions with the National Pawnbrokers Association and a review of information the FCA already held.
In 'Key elements of the 2018 stress test' (March 2018) the Bank of England (BoE) noted its intention to change the way hurdle rates are calculated in the annual stress test in four ways. The BoE Prudential Regulation Authority (PRA) published a statement which provides further specific details on two of these changes. They apply only to those firms to which the Capital Requirements Directive 2013/36/EU (CRD IV) and Capital Requirements Regulation 575/2013 (CRR) apply.
The FCA published policy statement 18/17 ‘PS18/17: The European Money Market Funds (MMF) Regulation’, in which the FCA responds to feedback arising from consultation paper CP18/4 and publishes final rules amending the Handbook to ensure consistency with the requirements of the MMF Regulation. The FCA also applied fee schedules to enable it to recover the cost of authorising and supervising money market funds under the Regulation.
Commission Delegated Regulation (EU) 2018/990 of 10 April 2018 was published in the Official Journal of the EU. It amends and supplements the MMF Regulation with regard to simple, transparent and standardised (STS) securitisations and asset-backed commercial papers, requirements for assets received as part of reverse repurchase agreements, and credit quality assessment methodologies.
The European Commission adopted a Delegated Regulation amending Commission Delegated Regulation (EU) 2015/61, which clarifies how the liquidity coverage ratio (LCR) for banks should be calculated under the CRR. The new Delegated Regulation makes a number of limited amendments to the LCR rules.
The European Central Bank (ECB) announced further steps in its supervisory approach for addressing the stock of non-performing loans (NPLs) in the euro area. ECB Banking Supervision will engage with individual banks to define its supervisory expectations, which are based on a benchmarking of comparable banks and guided by individual banks’ current NPL ratio and main financial features. The aim is to ensure continued progress to reduce legacy risks and achieve the same coverage of the stock and flow of NPLs over the medium term.
The ECB released a working paper on the benefits and costs of liquidity regulation. The paper concludes that liquidity tools are beneficial but cannot completely remove the need for lender of last resort (LOLR) interventions by the central bank. The authors find that full compliance with the current LCR and net stable funding ratio (NSFR) rules would have reduced banks’ reliance on publicly provided liquidity during the global financial crisis without removing such assistance altogether.
The ECB published an opinion dated 12 July 2018 (CON/2018/32) in response to requests from the European Parliament and the Council of the EU for the ECB's views on a proposed regulation amending the CRR in relation to minimum loss coverage for non-performing exposures.
The FCA said that it will review the wording of 'minded to refuse' (MTR) letters in light of a complaint that was upheld by the Complaints Commissioner. The Commissioner also recommended that the FCA review the information given to firms about the application withdrawal process and consider the impact on consumers.
The Complaints Commissioner criticised the handling by the PRA of a 2013 complaint regarding the regulation of the Co-operative Bank. While the questions raised about the adequacy of the PRA's regulatory approach are being pursued elsewhere, the Commissioner said that there were shortcomings in the PRA's response to the complaint and follow-up correspondence.
The Financial Ombudsman Service (FOS) published ‘Report of the independent review of the FOS’ prepared by former Which? executive director Richard Lloyd concerning FOS's complaints handling.
The FOS published its annual report and accounts for the year ended 31 March 2018. The report sets out FOS's progress against its strategic commitments, and gives other key information about its performance in 2017/2018. It also gives more information about the trends the FOS has seen in complaints being referred to it.
Following a report in The Times newspaper on 10 July 2018 suggesting that the PRA is querying the potential appointment of Grant Thornton as the statutory auditor of Goldman Sachs, the chairs of the Work and Pensions Committee (Frank Field MP), the Treasury Committee (Nicky Morgan MP) and the Business, Energy and Industrial Strategy Committee (Rachel Reeves MP) wrote to PRA chief executive Sam Woods challenging the PRA's concerns that Grant Thornton might not have the ‘required skill, resources and experience to perform its function under the regulatory system’. The PRA is apparently engaging in a dialogue with Grant Thornton in which Grant Thornton is being asked to demonstrate that it possesses these qualities.
Insurance Europe (IE) is urging the European Data Protection Board (EDPB) to issue guidance to clarify as swiftly as possible that the approval and implementation of a code of conduct does not require the establishment of a monitoring body pursuant to Article 41 of the General Data Protection Regulation (GDPR).
HM Treasury updated its guidance for money laundering and terrorist financing controls in overseas jurisdictions with the addition of a new advisory notice. The document relates to the risks posed by unsatisfactory money laundering and terrorist financing controls in a number of jurisdictions.
The Financial Action Task Force (FATF)’s incoming president for 2018-19, Marshall Billingslea, published the objectives for the year ahead. Under US leadership, Mr Billingslea said, the FATF will enhance its work on preventing the financing of the proliferation of weapons of mass destruction (WMD) and maintain an emphasis on combating terrorist financing. The FATF will also take further action regarding virtual currencies, given their expansion and attractiveness as a payment method for illicit actors, and it will continue to focus on financial and regulatory technologies, private sector outreach, and capacity-building at FATF-style regional bodies.
The European Securities and Markets Authority (ESMA) issued a first set of technical standards under the Securitisation Regulation (Regulation (EU) 2017/2402) (SR), containing both draft regulatory and implementing standards (RTS/ITS). These TS contain detailed arrangements to implement the new European regulatory framework, which is intended to promote simple, transparent and standardised (STS) securitisations. ESMA submitted the draft standards to the European Commission for endorsement.
ESMA published supplementary guidance on the application of the endorsement regime for non-EU credit ratings under the Credit Rating Agencies Regulation (CRAR). In order to ensure that third-country credit ratings, which are endorsed for use by EU investors, meet requirements that are at least as stringent as those set out in CRAR, ESMA has added a new section to its November 2017 guidance.
ESMA issued RTS specifying the implementation of certain provisions in the Prospectus Regulation. Under the new Prospectus Regulation, ESMA was mandated to develop draft RTS by 21 July 2018. The draft RTS have been sent to the European Commission for endorsement. The new Prospectus Regulation entered into force in June 2017 and will be fully applicable by 21 July 2019.
ESMA launched two public consultations under the new Prospectus Regulation. ESMA is seeking views on its technical advice on exempt documents produced for the purpose of offers/admission of securities connected to a takeover, merger or division, as well as in relation to its proposed guidelines on risk factors. The consultations close on 5 October 2018. ESMA also called on the European Commission to make some changes to the level 1 text of the Prospectus Regulation.
ESMA published a consultation paper proposing amendments to the tick size regime under Commission Delegated Regulation (EU) 2017/588 (RTS 11). The consultation aims to address issues that have arisen with respect to financial instruments where only a marginal proportion of trading is executed on EU trading venues and the main pool of liquidity is located outside the EU (third country instruments). Feedback is sought by 7 September 2018.
ESMA published details of its action plan (within its updated Q&As on MiFID II and MiFIR transparency topics) for systematic internaliser (SI) regime calculations ahead of their publication on 1 August 2018. ESMA's action plan focuses on equity, equity-like instruments and bonds, while postponing the publication for derivatives and other instruments to 1 February 2019.
ESMA updated its Q&A document on the implementation of investor protection topics under MiFID II/MiFIR.
ESMA updated its Q&A document on MiFID II and MiFIR transparency topics to include new guidance on the treatment of updated international securities identification numbers (ISINs) following corporate actions. The document also sets out ESMA's latest timetable for publishing data with respect to the systematic internaliser regime.
ESMA updated its Q&As on temporary product intervention measures on the marketing, distribution or sale of contracts for difference (CFDs) and binary options to retail clients, based on Article 40 of MiFIR.
ESMA updated its Q&A on practical questions regarding the European Markets Infrastructure Regulation (EMIR). The purpose of the Q&A is to promote common supervisory approaches and practices in the application of EMIR. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR.
ESMA updated its Q&As on the Benchmarks Regulation (EU) 2016/1011, with new answers on whether calculation agents should be considered users of benchmarks, and whether a benchmark can be considered as ‘regulated-data benchmark’ if a third party is involved in the process of obtaining the data.
The European Commission has adopted a number of Delegated Regulations supplementing the Benchmarks Regulation. The delegated regulations are based on draft regulatory technical standards (RTS) drafted by ESMA:
Commission Delegated Regulation (EU) …/... supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying further the governance and control requirements for supervised contributors
Commission Delegated Regulation (EU) …/... of 13.7.2018 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying further the contents of, and cases where updates are required to, the benchmark statement to be published by the administrator of a benchmark
The BoE’s Working Group on sterling risk-free reference rates launched a consultation on term SONIA reference rates (TSRRs). The BoE is seeking feedback on specific recommendations and encourages market participants to take forward work on the development of robust TSRRs, which members anticipate could be available in the second half of 2019. Feedback should be provided by 30 September 2018.
The Financial Stability Board (FSB) published a statement concerning reforms to interbank offered rates (IBORs) and the development of overnight risk-free, or nearly risk-free, rates (RFRs) and term rates. The statement is intended to provide market participants and other stakeholders with the FSB's views ahead of a forthcoming consultation by the International Swaps and Derivatives Association (ISDA) which contemplates fall backs for certain derivative contracts based on overnight RFRs. Meanwhile, the FCA CEO Andrew Bailey gave a speech warning firms not to assume that LIBOR may somehow survive, and urging them to increase the speed of the transition to alternative interest rate benchmarks. ISDA also launched a consultation on benchmark fallbacks.
The FSB published a self-assessment questionnaire for prospective unique product identifier (UPI) service providers, and is seeking responses from entities that wish to be designated by the FSB as a service provider. Responses are requested by Tuesday 4 September 2018.
The FCA published a speech by its director of enforcement and market oversight, Mark Steward, delivered at the Duff & Phelps Global Enforcement Review 2018 on 3 July 2018, which focused on MiFID II/MiFIR, in particular the requirements relating to legal entity identifiers (LEIs) and data reporting, as well as financial crime and money laundering in financial markets.
The FCA published slides from its transaction reporting forum, which took place on 26 June and 4 July 2018. Topics covered include the FCA's market data reporting (MDP) system, errors & omissions notification forms, requesting sample data, and data quality issues.
The European Association of Corporate Treasurers (EACT) launched a register for corporates adhering to the FX Global Code, which provides a common set of principles to promote the integrity and effective functioning of the wholesale foreign exchange market. EACT’s register is intended for corporate treasury departments that are participating in FX markets as end-users. The EACT register is included in the global index of public registers.
ESMA published its response to the European Commission consultation on the fitness of the EU framework for public reporting by companies. ESMA’s response focuses on those matters falling under the remit of securities regulators—and emphasises the requirements applicable to issuers admitted to trading on regulated markets.
The European Commission adopted Commission Delegated Regulation (EU) …/... amending Delegated Regulation (EU) No 2016/438 as regards safe-keeping duties of depositaries (UCITS) and Commission Delegated Regulation (EU) …/... amending Delegated Regulation (EU) No 231/2013 as regards safe-keeping duties of depositaries (AIFMD).
The FCA published the interim findings of its market study into investment platforms. The FCA says competition is working well for most consumers, but it is concerned about how platforms compete for particular groups of consumers. Given the rapid growth in this market, the FCA is proposing measures to address these problems before they get bigger.
The Association of Investment Companies (AIC) responded saying the report raises some important issues, but encourages the FCA to look at how platforms promote competition in a broader sense. ‘Looking at competition between asset managers is fine, but competition between different types of investment product is also vital for a healthy market.’
The Competition & Markets Authority (CMA) published its provisional decision in its investment consultants market investigation. Although the investment consultancy market is not highly concentrated with a wide range of firms to choose from, the CMA identified a number of issues that impact competition, namely that some trustees don’t have time to scrutinise their consultants; some schemes (particular small and defined contribution schemes) have low levels of engagement; and in general there is insufficient information available on the quality of services provided. Therefore, the CMA proposed a number of reforms to the investment consultancy and fiduciary management sector, including requiring pension trustees to run a competitive tender when they choose a fiduciary manager.
The Investment Association (IA) launched Velocity, its specialist FinTech accelerator for the asset management industry, with a view to promoting innovative new technological solutions to increase business efficiency and enhance customer experience. FinTech firms with market-viable technology are invited to apply to participate in the accelerator programme by 28 September 2018.
The House of Commons European Scrutiny Committee published its summary and conclusions regarding the European Commission's proposals with regard to the cross-border distribution of funds within the Single Market, which were considered by the Committee on 11 July 2018. The Committee decided to retain the proposals under scrutiny, while raising concerns about the implications of Brexit for the UK asset management sector more generally.
The CMA has been investigating the supply and acquisition of investment consultancy and fiduciary management services in the UK. The CMA confirmed that the provisional decision report will be published at 7am on Wednesday 18 July 2018.
The FCA published an Approach to consumers document to set out the measures it will take to protect consumers and how the organisation takes action. In addition, the FCA also published a new discussion paper on whether a new duty of care towards consumers would enhance good conduct and culture and provide additional protections for consumers.
The PRA published consultation paper CP15/18: Solvency II: Group own fund availability, setting out its proposed approach to the determination of the availability of group own funds and its expectations on firms in presenting relevant analysis to the PRA. Feedback is sought by 12 November 2018. The PRA also published policy statement PS17/18, which provides feedback on the responses to CP 38/16: Solvency II: Group supervision, and which contains the final supervisory statement SS9/15: Solvency II: Group supervision.
The European Insurance and Occupational Pensions Authority (EIOPA) published a report giving an overview of the causes and early identification of failures and near misses in insurance. EIOPA suggests that the reasons insurers—as well as banks—were affected by the financial crisis included inappropriate investment decisions by insurers, which led to significant losses, the interconnectedness with banks or, in general, evidence of poor governance.
The House of Commons European Scrutiny Committee published its summary and conclusions regarding the European Commission's proposal for a Regulation on a pan-European Personal Pension Product (PEPP), which was considered by the Committee on 11 July 2018. The Committee decided to retain the proposal under scrutiny, while raising concerns about the implications of Brexit for the UK insurance and pensions industry more generally.
Commission Delegated Regulation (EU) 2018/977 of 4 April 2018 was published in the Official Journal of the EU. It corrects the Bulgarian language version of Delegated Regulation (EU) 2017/653, which supplements Regulation (EU) No 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurance-based investment products (PRIIPs).
The FCA published a speech delivered by its executive director of strategy and competition, Christopher Woolard, on the challenges regulators and governments face over intergenerational issues in pensions. Mr Woolard said the way life looks in your 20s and 30s has changed dramatically, with demographic shifts and economic trends over the last 30 or so years remaking the social contract across the generations—from the difficulties younger people face getting on the housing ladder, to the need for older people to pay for care for longer.
The Board of Supervisors of EIOPA appointed new members to its Insurance and Reinsurance Stakeholder Group (IRSG) and Occupational Pensions Stakeholder Group (OPSG). The new members will take up their appointment on 4 September 2018 and will serve a 2½ year term.
The European Banking Authority (EBA) published its final guidelines on fraud reporting under the revised Payment Services Directive (PSD2). The guidelines require payment service providers across the 28 EU Member States to collect and report data on payment transactions and fraudulent payment transactions using a consistent methodology, definitions and data breakdowns.
The Payment Systems Regulator (PSR) issued a statement on access to cash machines. The PSR said that, according to LINK, the cash machine operator, 500 cash machines closed each month in the UK between December 2017 and May 2018. However, 85% were pay-to-use, so do not fall within the PSR’s access requirements.
The European Economic and Social Committee says it welcomes the European Commission's proposal to amend Regulation (EC) 924/2009 with regard to certain charges on cross-border payments in the EU and currency conversion charges, and it urges that the proposal be rapidly implemented. At the same time, it says that the costs to providers should be taken into account.
The European Commission announced that it is to launch a negotiated call for tender in order to carry out a proof-of-concept exercise to perform an analysis of a limited set of regulatory legal documents related to financial supervisory reporting applying natural language processing and machine-learning techniques.
The Bank for International Settlements published a speech by Benoît Cœuré, a member of the executive board of the ECB, urging central banks to be wary of distributed ledger technology (DLT) and blockchain, and concentrate on using less-disruptive existing technologies to make current payment systems more efficient and safer.
The FSB prepared a report on crypto-assets for the G20 finance ministers and central bank governors, ahead of their meeting in Buenos Aires from 21-22 July. The report sets out the metrics that the FSB will use to monitor developments in crypto-asset markets as part of the FSB’s ongoing assessment of vulnerabilities in the financial system.
Free trials are only available to individuals based in the UK
* denotes a required field
0330 161 1234