Weekly highlights—20 October 2016

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 20 October 2016.

Brexit

FRC chairman promotes the UK’s excellence at Brexit summit

On 12 October 2016, the Financial Reporting Council (FRC) published a speech made by Sir Win Bischoff, chairman of the FRC, at the Financial Services Brexit summit on 11 October 2016. Sir Win Bischoff stressed that the goal for the FRC is that the UK remains a global centre of excellence for accounting and audit, and a magnet for global investors’ capital, both during and after Brexit.

EU Financial Affairs Sub-Committee to take evidence of impact of Brexit on financial services sector

On 17 October 2016, the Lords Select Committee announced that on 19 October 2016, the House of Lords EU Financial Affairs Sub-Committee would hold an evidence session with officials from HM Treasury to understand the possible impact of Brexit on the UK’s financial services industry. The Sub-Committee would hear from the Simon Kirby MP, economic secretary to the Treasury, Katharine Braddick, director of financial services, HM Treasury and Lowri Khan, director of financial stability, HM Treasury.

FS 'passports' should be kept in place following Brexit, Open Europe finds

On 17 October 2016, Open Europe (OE) published a report where it has explored measures which the financial services sector could take if the UK leaves the Single Market following Brexit. Issues covered include the true value of the financial services passport and the alternative arrangements that the UK should pursue in negotiations with the EU if the UK leaves the Single Market.

Regulatory architecture

ESMA and IFRS Foundation issue updated set of protocols on increased cooperation

On 13 October 2016, the European Securities and Markets Authority (ESMA) and the International Financial Reporting Standards Foundation (IFRS Foundation) announced an updated Statement of Protocols: For Co-operation on International Financial Reporting Standards. The two organisations said they intend to deepen their cooperation on the development of IFRS Foundation Standards and support the protocols' consistent application across the European Union (EU).

TTIP Advisory Group report considers financial services under TTIP

On 17 October 2016, the European Commission's Transatlantic Trade and Investment Partnership (TTIP) Advisory Group published a report following its meeting on 6 September 2016 together with an agenda for the meeting which took place on 18 October 2016. The financial services discussion focused on: transparency, domestic and international legislation; market access offer; and consumer measures to help navigate transatlantic financial services—including reduced charges for international transfers and simpler opening of bank accounts.

Authorisation, approval and supervision—Senior Managers and Certification Regime

FCA chief economist speaks on culture in UK banking

On 18 October 2016, the Financial Conduct Authority (FCA) published a speech given by chief economist Peter Andrews at the Westminster Business Forum on Banking reform in the UK. Mr Andrews described the FCA’s initiatives on culture in UK banking, including the Senior Managers and Certification Regime (SM&CR) and the interplay between banking culture, financial stability and economic growth. He also examined what ‘good culture’ means in practice and what economics and related disciplines tell us about establishing and maintaining an appropriate culture in organisations. He also examined the strategies used by tax authorities to promote compliance and their implications for financial regulation.

Prudential requirements

EBA issues reminder to competent authorities on key deadlines for data submission for 2017 benchmarking exercise of internal approaches

On 12 October 2016 the European Banking Authority (EBA) published a reminder to competent authorities of the key dates for the submission of data for the 2017 benchmarking exercise for internal approaches for credit and market risk. The reminder is designed to ensure a smooth and timely start to the exercise to amended the Implementing Technical Standards (ITS) on benchmarking of internal approaches due to run in 2017.

PRA statement on feedback received on CP21/16 ‘Pillar 2 liquidity’

On 18 October 2016, the Prudential Regulation Authority (PRA) issued a statement summarising feedback received on consultation paper (CP) 21/16 ‘Pillar 2 liquidity’, published in May 2016. The PRA will publish a second consultation paper covering a range of risks outlined in CP21/16 (mid-2017 on current plans).

FSB publishes key attributes assessment methodology for the banking sector

On 19 October 2016, the Financial Stability Board published a methodology for assessing the implementation of the Key Attributes of Effective Resolution Regimes for Financial Institutions (Key Attributes) in the banking sector.

BCBS updates progress report on adoption of the Basel regulatory framework

On 19 October 2016, the Basel Committee on Banking Supervision (BCBS) updated its 11th progress report on adoption of the Basel regulatory framework which provides a high-level view of Basel Committee members' progress in adopting Basel III standards as of end-September 2016.

Risk management and controls

SEC fines Deutsche Bank for failing to properly safeguard research information

On 12 October 2016, the Securities and Exchange Commission (SEC) announced that Deutsche Bank Securities had agreed to pay a US$9.5m penalty for failing to properly safeguard material non-public information generated by its research analysts. Deutsche Bank also published an improper research report and failed to properly preserve and provide certain electronic records sought by the SEC during its investigation.

MEPs question Deutsche Bank stress tests

On 19 October 2016, the European Parliament published details of two questions from MEPs (Fabio De Masi and Paloma López Bermejo) to the European Central Bank (ECB) concerning the treatment afforded to Deutsche. The ECB has been asked justify why it allowed Deutsche Bank to book in the €3.3bn proceeds of the agreed sale of its 19.99% stake in the Chinese bank Hua Xia (the approval process of which is expected to be completed by late 2016) for the stress test conducted by the European Banking Authority (EBA) this year, when this resembles an exemption from the EBA’s methodology.

Financial crime

New law enforcement powers to tackle money laundering

On 13 October 2013, the Home Office introduced new legislation which will give law enforcement agencies new powers to tackle money laundering. Law enforcement will be able to demand criminals explain the origins of their wealth or risk having it seized. The Criminal Finances Bill will also strengthen the partnership between the public and private sectors through a provision allowing them to share more information.

Council of the EU publishes Opinion of the ECB on a proposal to amend MLD4

On 14 October 2016, the Council of the EU published a European Central Bank (ECB) Opinion on a proposal for a Directive of the European Parliament and of the Council Amending Directive (EU) 2015/849 (MLD4) on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and amending Directive 2009/101/EC (CON/2016/49).

G20 and FATF experts meeting on corruption focuses on transparency and beneficial ownership

On 16 October 2016, the G20 Anti-Corruption Working Group and the Financial Action Task Force (FATF) held a joint expert’s meeting in Paris. The focus of the meeting was transparency and beneficial ownership. Participants discussed the specific actions that the G20 and FATF members as well as FATF-style regional bodies can take to implement beneficial ownership commitments in a complementary manner.

Enforcement and redress

Treasury Committee asks FCA for publication date of review of RBS’s treatment of business customers

On 18 October 2016, HM Treasury published a letter that Andrew Tyrie, chair of the Treasury Committee, had written to the FCA asking when it will publish its review of the Royal Bank of Scotland’s (RBS) treatment of business customers in financial difficulty. The FCA announced this review in January 2014.

BBA publishes its response to FCA consultation paper on PPI

On 19 October 2016, the British Bankers Association (BBA) published its response to the Financial Conduct Authority’s (FCA) Consultation Paper CP 16/20—Rules and guidance on payment protection insurance (PPI) complaints—feedback on CP15/39 and further consultation. The BBA said it supports the introduction of FCA rules and guidance that seek to introduce a deadline, and responds to the judgment set out in Plevin v Paragon Personal Finance Ltd, in a way that brings the PPI issue to an orderly close.

Markets and trading

FCA publishes minutes of 6 September MiFID II roundtable

On 13 October 2016, the FCA published the minutes of the Markets in Financial Instruments Directive II (Directive 2014/65/EU) (MiFID II) implementation roundtable with trade associations that was held on 6 September 2016. Topics discussed include the FCA’s second consultation paper on MiFID II implementation (CP16/19), commodity derivatives, authorisation forms, and other developments.

Summary of ISDA credit default swaps decision published in the Official Journal

On 14 October 2016, a summary of a Commission Decision addressed to the International Swaps and Derivatives Association (ISDA) relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement was published in the Official Journal.

Summary of Markit credit default swaps decision published in the Official Journal

On 14 October 2016, a summary of a Commission Decision addressed to Markit relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement was published in the Official Journal.

ECB publishes latest derivatives market survey findings

On 14 October 2016, the European Central Bank (ECB) published the results of the September 2016 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).

Intercontinental exchange (ICE) announces central clearing for the LBMA Gold Price

On 16 October 2016, ICE announced the introduction of central clearing for the IBA Gold Auction which underlies the LBMA Gold Price, expected to go live in March 2017. ICE also announced it is to launch a new London gold daily futures contract in February 2017, subject to regulatory review. The contract will be for Loco London gold (which refers to gold bullion physically held in London).

ISDA reveals key trends in clearing for small derivatives users

On 17 October 2016, the International Swaps and Derivatives Association (ISDA) published the results of its analysis of publicly-available data on clearing. The analysis was conducted in response to concerns over access for smaller derivatives in the US and Europe. As part of its analysis, ISDA also surveyed and held discussions with small derivatives users in both the US and EU.

ACER 2018 draft work programme

On 18 October 2016, the Agency for the Cooperation of Energy Regulators (ACER) published a draft outline of its 2018 work programme and slides from a presentation to be given to ACER stakeholders on 17 November 2016. The deadline for comments on the draft outline work programme is 18 November 2016.

EACH responds to FSB discussion note on CCP resolution planning

On 18 October 2016, the European Association of CCP Clearing Houses (EACH) published its response to the discussion note ‘Essential Aspects of CCP Resolution Planning’ issued by the Financial Stability Board (FSB) in August 2016. EACH represents the interests of central counterparties in Europe.

FCA issues final report on investment and corporate banking (MS15/1.3) and consultation on restrictive contractual clauses (CP16/31)

On 18 October 2016, the FCA published the final report on its investment and corporate banking market study (MS 15/1.3) containing feedback on the FCA’s interim findings published in April 2016. The FCA’s final findings are that there is a wide range of banks and advisers active in primary market activities. While many clients, particularly large corporate clients, feel the universal banking model of cross-selling and cross-subsidisation from lending and corporate broking services to primary market services works well for them, there are some practices that could have a negative impact on competition, particularly for smaller clients. The FCA also published Consultation Paper CP 16/31 Investment and corporate banking—prohibition of restrictive contractual clauses, in which it consults on the ban on restrictive clauses proposed in MS15/1.3. The consultation is open until 16 December 2016. The FCA plans to publish a Policy Statement in early 2017.

European Parliament publishes non-objection to Commission EMIR Delegated Regulation

On 19 October 2016, the European Parliament published a draft decision to raise no objections to a Commission delegated regulation supplementing the  European Market Infrastructure Regulation (Regulation (EU) No 648/2012) with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty (C(2016)06329).

EMIR Delegated Regulation adopted by the European Commission

On 19 October 2016, the European Commission adopted a Delegated Regulation (annex) supplementing the European Market Infrastructure Regulation (Regulation (EU) No 648/2012) with regard to Regulatory Technical Standards (RTS) on the minimum details of the data to be reported to trade repositories. The current delegated act is an amendment of RTS which were adopted on 19 December 2012 by Commission Delegated Regulation (EU) No 148/2013 reflecting recent developments and experience gained in the area of trade reporting.

European Commission reports on several reporting obligations set out in the Credit Ratings Agencies Regulation

On 19 October 2016, the European Commission published a report concerning several reporting obligations set out in Regulation (EC) 1060/2009 on Credit Ratings Agencies (CRA) Regulation. The report analyses references to external credit ratings in EU legislation and in private contracts among parties in financial markets and assesses the impact and effectiveness of the CRA Regulation’s measures concerning competition in the credit rating industry.

Investment funds and wealth management

ESMA amends guidelines on remuneration policies under AIFMD

On 14 October 2016, ESMA translated its final guidelines (ESMA/2016/579) on sound remuneration policies under the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD) into the official languages of the EU and published them on its website. The new guidelines amend the guidelines (ESMA/2013/232) that were published on 3 July 2013, specifically with regard to AIFMs being part of a group. The amended guidelines will apply from 1 January 2017.

ESMA publishes final guidelines on remuneration policies under the UCITS Directive

On 14 October 2016, ESMA translated its final guidelines (ESMA/2016/575) on sound remuneration policies under the UCITS Directive (Directive 2009/65/EC), as amended by Directive 2014/91/EU into the official languages of the EU and published them on its website. The guidelines are intended to ensure consistent application of the provisions in the Directive related to the remuneration policies and practices for UCITS management companies and their identified staff. The guidelines will apply from 1 January 2017.

JAC calls for delay in PRIIPs Regulation

On 19 October 2016, the Joint Associations Committee (JAC) published a letter to the European Commission and the European Supervisory Authorities calling for a delay in the implementation of the Packaged Retail and Insurance-based Investment Products Regulation (Regulation (EU) 1286/2014) (the PRIIPs Regulation). The JAC said that because of repeated delays in the legislative process and the absence of final regulatory technical standards, PRIIPs manufacturers do not have time to comply with the timetable for application of the PRIIPs Regulation.

Consumer finance

FCA issues new consumer credit information sheets

On 18 October 2016, the FCA issued new information sheets for consumer credit firms to use to accompany arrears and default notices. Lenders are required by  section 86A of the Consumer Credit Act 1974 to include a copy of the relevant information sheet when notifying a consumer that they are in arrears or default. Lenders are required to use the new information sheets from 18 January 2017—before then they should use the current versions.

Savings (Government Contributions) Bill 2016/17 gets second reading

The Savings (Government Contributions) Bill 2016/17 had its second reading on Monday 17 October and will now progress to Committee stage. The Bill introduces the new Lifetime ISA, which will be a way of saving up to £4,000 each year for those between the ages of 18 and 40 and will allow them to save up to the age of 50. On top of any interest they receive on their savings, they will earn a 25% tax-free bonus from the government that is paid straight into their account.

CMA market investigation: Update on retail banking market investigation published

On 14 October 2016, the Competition and Markets Authority (CMA) published an update on its retail banking market investigation following the publication of the final report on 9 August 2016. Since then, a number of documents concerning the implementation of the remedies have been published. The update details the appointment of Andrew Pinder as the Implementation Trustee and summarises the results of the consultation on the CMA’s intention to release parties from the transitional undertakings and switching undertakings. Alongside the update on its investigation, the CMA also published a proposal for the Implementation Entity from providers and a presentation of qualitative research findings by Research Works.

CMA market investigation: Proposal from BBA and CMA note on potential presentation of service quality indicators published

On 19 October 2016 the CMA published further documents concerning retail banking market investigation following the publication of the final report on 9 August 2016. The documents include a proposal by the British Bankers Association (BBA) to implement the CMA’s remedy to standardise business current accounts (BCA) opening procedures, and the CMA’s potential standard presentation of service quality indicators document.

FCA consults on mortgage payment shortfall remediation guidance

On 19 October 2016, the FCA published guidance consultation GC16/6—The fair treatment of mortgage customers in payment shortfall—impact of automatic capitalisations which contains new guidance on the treatment of customers with mortgage payment shortfalls (commonly referred to as arrears). The proposed guidance covers remediation for mortgage customers who may have been affected by the way firms calculate these customers’ monthly mortgage payments. The consultation is open until 18 January 2017.

Insurance and pensions

ABI publishes final guidance to simplifying language on retirement options

On 13 October 2016, the Association of British Insurers (ABI) published its final guidance to simplifying language on retirement options following its consultation in April 2016 ‘Making Retirement Choices clear’.

FCA’s thematic review highlights concerns regarding annuity sales practices

On 14 October 2016, the FCA published the findings of its thematic review (TR16/7) of non-advised annuity sales practices. The review assessed how firms provided information to customers, on a non-advised basis, about shopping around for enhanced annuities. The FCA’s report presents the results of its review into customer communications and the actions it intends to take.

ABI outlines plan for fairer motor insurance

On 18 October 2016, the ABI published a report ‘Lifting the Bonnet on Car Insurance’ to set out a five-point plan to tackle higher insurance premiums being faced by many UK motorists. The ABI’s latest Motor Insurance Premium Tracker showed that the price of the average comprehensive policy has increased by 10% over the past year to £434.

High levels of customer satisfaction with Pension Wise service

On 18 October 2016, a report published by the Department for Work and Pensions shows 91% of customers say they are satisfied with the Pension Wise service. The report presents the interim findings from a process evaluation to understand customer experiences of using the service.

EIOPA chair gives keynote speech at annual conference—‘Exploring new horizons’

On 18 October 2016, the European Insurance and Occupational Pensions Authority (EIOPA) published a speech given by its chairman, Gabriel Bernadino, at its annual conference in Frankfurt. The theme of the sixth annual conference was ‘Exploring new horizons’. Mr Bernadino covered EIOPA’s approach to supervisory convergence and the evolution of the Pan-European Personal Pension Product (PEPP) in the context of the EU’s Capital Markets Union project.

Government drops secondary annuities market plans

On 18 October 2016, the UK government announced it had decided to drop plans to introduce a secondary annuities market because the consumer protections required could undermine the market’s development. The decision follows an extensive programme of engagement with industry, financial regulators and consumer groups.

IAIS publishes October 2016 newsletter

On 19 October 2016, the International Association of Insurance Supervisors (IAIS) published its October 2016 Newsletter. The Newsletter’s feature article concerns work carried out in relation to Qualitative Field Testing exercise to test the draft work done on Module 2 of the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame), excluding the capital adequacy assessment to be replaced by the global, risk based insurance capital standard (ICS) that the IAIS launched in October 2016.

Payments and fintech

PSR publishes responses to final report on payment systems ownership and infrastructure competitiveness

On 13 October 2016, due to the technical nature of the remedies proposed in its final report of July 2016 on the ownership and competitiveness of infrastructure provision in payment systems, the Payment Systems Regulator (PSR), published the responses received to allow stakeholders to consider the views on the issues raised by other stakeholders.

PSR managing director gives keynote speech at BBA Future of Payments Conference 2016

On 13 October 2016, Hannah Nixon, managing director of the PSR gave a speech at the British Bankers’ Association (BBA) Future of Payments Conference in London. The speech examined the PSR’s achievements to date following the completion of an in-depth review of indirect access and focused on the need for continued innovation to benefit consumers in the future.

Investigation, enforcement and discipline

FCA final notice cancels Wage Payment and Payday Loans Ltd interim permission

On 13 October 2016, the FCA published a final notice issued to Andrew Barry Hart, the sole director, controller and ultimate owner of Wage Payment and Payday Loans Limited (WPPL), from performing any role in regulated financial services. The FCA prohibited Mr Hart on the grounds he is not a fit and proper person, due to his lack of integrity and competence. The FCA also cancelled WPPL’s interim permission and refused its applications for WPPL to be authorised to carry out regulated activities and for Mr Hart to be an approved person.

FCA cancels permissions for consumer credit breaches

On 13 and 14 October 2016, the FCA cancelled the Part 4A permissions of six firms and one individual for failure to comply with the regulatory requirement to submit a CCR007 return to the regulator. The actions highlight the consequences for consumer credit firms if they fail to comply with their reporting requirements. The final notices can be found here as follows: Midland Motor Company Ltd, Clackmannan Car Centre Ltd, Mark Samuel Motors Ltd, Motor Spot Ltd, Select Motor Company Ltd, Samlet Car Sales Ltd and Luke Andrew Mills.

Dates for your diary

Key date Subject Event
21 October 2016 Prudential requirements Deadline for responses to Prudential Regulation Authority (PRA) Occasional Consultation Paper (CP26/16).
28 October 2016 Markets in Financial Instruments Directive II Deadline for responses to Financial Conduct Authority (FCA) consultation (CP16/19): Markets in Financial Instruments Directive II).
28 October 2016 Prudential requirements Deadline for responses to PRA consultation (CP28/16).
31 October 2016 Prudential requirements Deadline for responses to PRA consultation (CP29/16) Residential mortgage risk weights).
31 October 2016 BRRD Deadline for the EBA to submit a report to the European Commission with recommendations on the appropriate reference point for setting the target level for resolution financing arrangements.
November 2016 Consumer credit The FCA intends to issue a consultation paper on creditworthiness assessments in consumer credit.
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