Weekly highlights—29 September 2016

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 29 September 2016.

Financial Conduct Authority updates

FCA publishes Handbook Notice 37

On 23 September 2016 the Financial Conduct Authority (FCA) issued Handbook Notice 37, which includes the Handbook amendments and other material made by the FCA Board under its legislative powers and rules and standard terms made by the Financial Ombudsman Service, as passed at the FCA Board meeting on 23 September 2016 and Financial Ombudsman Service Board meeting on 21 September 2016. It also contains information about other publications relating to the Handbook.

FCA warning over trading with OneCoin

On 26 September 2016, the FCA issued a warning with regard to dealing with OneCoin, which markets itself as ‘a digital currency, based on cryptography’. The FCA stated that OneCoin is not authorised by the FCA and the FCA does not believe it is undertaking any activities that require the FCA’s authorisation. However, the FCA is concerned about the potential risks posed to UK consumers by OneCoin, which is currently being investigated by the City of London Police.

Regulatory architecture

Decision on ECB rules of procedure published in the Official Journal

On 24 September 2016, Decision (EU) 2016/1717 of the European Central Bank (ECB) of 21 September 2016 amending Decision ECB/2004/2 adopting the Rules of Procedure of the ECB (ECB/2016/27) was published in the Official Journal of the EU.

Recovery and Resolution

BRRD financial contracts RTS published in the Official Journal

On 24 September 2016, Commission Delegated Regulation (EU) 2016/1712 of 7 June 2016 supplementing the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) with regard to regulatory technical standards (RTS) specifying a minimum set of information on financial contracts that should be contained in the detailed records and the circumstances in which the requirement should be imposed pursuant to Article 71(8) of the BRRD was published in the Official Journal off the EU.

BRRD—European Parliament does not object to Delegated Regulation on classes of arrangements to be protected in a partial property transfer

On 26 September 2016, the European Parliament updated its procedure file on the Commission Delegated Regulation on the classes of arrangements to be protected in a partial property transfer under Article 76 of the BRRD to state that on 24 September 2016, the European Parliament did not object to the Delegated Regulation. The Council of the EU’s decision on the Delegated Regulation is awaited.

EBA introductory statement by Andrea Enria

On 26 September 2016, the European Banking Authority (EBA) published an introductory statement by Andrea Enria, Chairperson of the EBA, at the hearing of the Chairpersons of the European Supervisory Authorities (ESAs) before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament on 26 September 2016. He said that progress in improving bank asset quality across EU banks' balance sheets remains slow and uneven.

Authorisation, approval and supervision—Senior Managers and Certification Regime

FCA publishes new rules and proposals for the SMCR aimed at  maintaining firms’ focus on culture

On 28 September 2016, the FCA published a number of documents, including four consultation papers, a policy statement and a discussion paper which set out new rules concerning the Senior Managers and Certification Regime (SMCR). The documents provide feedback on the SMCR's implementation so far and propose measures to further strengthen the regime. The proposed rules will reinforce the importance of individual accountability at the most senior level of organisations.

PRA publishes new requirements and proposals on strengthening accountability, remuneration rules and whistleblowing

On 28 September 2016, the Prudential Regulation Authority (PRA) published final rules, guidance and proposals on accountability, remuneration and whistleblowing. These give important clarity to the PRA’s supervisory approach in these areas.

Prudential requirements

EBA publishes ITS for competent authorities consulting on qualifying holdings in credit institutions

On 22 September 2016, the EBA published its final draft implementing technical standards (ITS) on the procedures, forms and templates that Competent Authorities in the EU should use when consulting each other on qualifying holdings in credit institutions in accordance with the Capital Requirements Directive 2016/36/EU (CRD IV). The objective of the ITS is to streamline information exchanges and ensure effective communications between concerned authorities, both on a cross-border basis and across sectors.

FCA issues letters to IFPRU firms regarding CRD IV/CRR obligations

On 26 September 2016, the FCA published two letters addressed to CEOs and chairs of the board respectively of IFPRU firms, which relate to governance requirements of significant IFPRU firms and the prudential approach for IFPRU investment firms. The ’Dear CEO’ letter for the prudential approach for IFPRU investment firms can be found here. The ‘Dear Chair of the Board’ letter for governance requirements of a significant IFPRU firm can be found here.

Capital Requirements Regulation—European Commission adopts data waiver permissions Delegated Regulation

On 26 September 2016, the European Commission adopted Delegated Regulation (C(2016) 5905) supplementing the Capital Requirements Regulation 575/2013 (CRR) with regard to RTS specifying the conditions within which competent authorities may permit institutions to use relevant data covering shorter time periods (data waiver permissions) pursuant to Articles 180(3), 181(3) and 182(4) of the CRR.

ECB speech—Euro area banks after the 2016 Stress Test

On 26 September 2016, the European Central Bank (ECB) published slides from a speech given on 26 September 2016 by Ignazio Angeloni. a member of the Supervisory Board of the ECB, at the conference on ‘The Strengths and Weaknesses of European Banking’, at Imperial College London.

BCBS guidance on financial inclusion

On 27 September 2016, the Basel Committee on Banking Supervision (BCBS) issued final guidance on the application of the Core Principles for Effective Banking Supervision (the Basel Core Principles) to the regulation and supervision of institutions relevant to financial inclusion.

Financial crime

Alex Hope sentenced for failing to pay confiscation order

On 27 September 2016, the FCA announced that Alex Hope had been sentenced to 603 days’ imprisonment for failing to pay the full value of a £166,696  confiscation order made against him. This is in addition to the term of seven years’ imprisonment that Mr Hope received on 30 January 2015.

Enforcement and redress—compensation

PRA publishes PS25/16 and Statement of Policy

On 27 September 2016, the PRA issued policy statement PS25/16 which provides feedback on responses to the Consultation Paper (CP) 7/16 ‘Implementing risk-based levies for the Financial Services Compensation Scheme deposits class’.

Markets and trading

Council of EU indicates no objection to MiFID II and MiFIR delegated acts

On 22 September 2016, the General Secretariat of the Council of the EU recommended that the Council confirm that it has no objection to several delegated acts adopted by the European Commission supplementing the Markets in Financial Instruments Directive 2014/65/EU (MIFID II) and the Markets in Financial Instruments Regulation (EU) No 600/2014 (MiFIR). The 'I/A' Item notes can be found here as follows: ST 12457 2016 INIT,ST 12456 2016 INIT, ST 12455 2016 INIT, ST 12453 2016 INIT, ST 12452 2016 INIT, ST 12448 2016 INIT, ST 12446 2016 INIT, ST 12444 2016 INIT.

BoE publishes speech on rebuilding trust through the ‘FX Global Code’

On 23 September 2016, the Bank of England (BoE) published a speech entitled 'Rebuilding Trust through the ‘FX Global Code’: Reasons for optimism, which was given by Chris Salmon, Executive Director, Markets, at the ACI UK Square Mile Debate in London on 21 September 2016. The focus of the speech was the work underway to develop a single, global code of conduct for foreign exchange (FX).

BIS speech on the Global Code of Conduct for the FX market

On 23 September 2016, the Bank for International Settlements (BIS) published a speech by Guy Debelle, chair of the BIS FX working group (FXWG) given at the TradeTech FX, London on 14 September 2016  to provide an update on the second phase of work to deliver a Global FX Code of Conduct.

ECON hearing statement by ESMA chairman Steven Maijoor

On 26 September 2016, Steven Maijoor, European Securities and Markets Authority (ESMA) Chair, addressed the annual hearing of the Chairs of the European Supervisory Authorities—the EBA, the European Insurance and Occupational Pensions Authority (EIOPA) and ESMA—by ECON at the European Parliament.

Corrigendum for MiFID II

On 26 September 2016, the Council of the European Union issued a corrigendum to MiFID II to correct errors in all language versions regarding Article 63. Member States may make observations on the corrigendum during the next eight days and it will be published in the Official Journal after approval by the European Parliament.

Market Watch—FCA gives findings from Market Maker Review and update on PFOF

On 28 September 2016, the FCA published the 51st issue of Market Watch, its newsletter on market conduct and transaction reporting issues. The newsletter includes observations from the FCA’s Market Maker Review, which covered risk awareness, information barriers, wall-crossing procedures and insider lists, and ongoing monitoring and surveillance. Additionally, Market Watch provides an update on payment for order flow (PFOF).

Investment funds and asset management—UCITS

ESMA publishes responses to call for evidence on asset segregation

On 27 September 2016, ESMA published the responses received to its call for evidence on asset segregation and custody services issued in July 2016.

Consumer finance

Price comparison websites come with benefits and risks, UKRN says

On 27 September 2016, the UK Regulators Network (UKRN) released a report on Price Comparison Websites (PCWs), which examines how consumers engage with PCWs, their benefits, risks and how these risks can be managed. The report also highlights competition concerns relating to use of most favoured nation clauses. The UKRN hopes the report will be a useful tool for other regulators and consumer groups, and has made a number of recommendations to the Competition and Markets Authority (CMA) on what areas it believes warrant further research.

FCA speech at the Future of Lending Conference

On 27 September 2016, the FCA published a speech given by Jonathan Davidson, the FCA’s Director of Supervision—retail and authorisations, at the Future of Lending Conference in London. The Future of Lending conference brought together market leaders and challengers to discuss the transformative effects of new entrants and emerging technologies on the consumer finance sector.

LSB publishes the outcome of its Standards Development Project on Affordability

On 28 September 2016, the Legal Standards Board (LSB) published a report of its Standards Development Project on Affordability Assessments and Repayment Plans. The Standards Development Project builds on the customer outcome in the Standards of Lending Practice (the Standards) which states that customers in financial difficulty, or in the early stages of the collections process, will receive appropriate support and fair treatment. The development project has therefore, been undertaken with the aim of providing clearer guidance on affordability, focused on achieving fair customer outcomes and to identify areas of good practice.

Insurance and pensions

ABI publishes checklist for insurers and partners to counter fraud

On 22 September 2016, the Association of British Insurers (ABI) published a document entitled 'Effective Counter Fraud Practices—Checklist for insurers and partners'. The checklist is designed to assist insurers, particularly smaller insurers with a limited counter fraud function, and their corporate partners, in putting in place strong fraud defences. It also sets out how firms can contribute to the UK insurance sector’s counter fraud strategy, to ensure that the UK remains an attractive place to do business.

EIOPA publishes Q&A on regulation

On 22 September 2016, EIOPA published a Q&A on regulation providing answers to questions that cover guidelines on such topics as complaints handling by insurance undertakings, guidelines on classifications of own funds and guidelines for reporting for financial stability purposes.

Two studies on the application of the Insurance Block Exemption to the insurance production process published by Commission

On 26 September 2016, as part of the European Commission’s review of the Insurance block exemption regulation (IBER) the European Commission published two studies commissioned by European Economics, on issues raised in the consultation process. The focus of the studies are: (i) Switching of tangible and intangible assets between different insurance products—supply-side substitutability in insurance (asset switching between different insurance products of relevance for pools) and (ii) Different forms of cooperation between insurance companies and their respective impact on competition—different forms of co-(re)insurance available on the market and their impact on competition. The Commission will make its final proposals on the IBER in early 2017.

EIOPA chairman statement at the hearing of the Chairpersons of the ESAs

On 26 September 2016, Gabriel Bernardino, chairman of EIOPA provided a statement at the hearing of the Chairpersons of the ESA's, Brussels.  The statement addresses how EIOPA has promoted the successful implementation of Solvency II and sets out EIOPA’s current focus on supervisory convergence, reinforcing consumer protection and preserving financial stability.

PRA publishes policy statement and consultation paper on SIMR

On 28 September 2016, the PRA published PS27/16: 'Strengthening accountability in banking and insurance': PRA requirements on regulatory references (part II), which contains the PRA’s final policy, rules and guidance on regulatory references. According to the PRA, the requirements represent a robust yet proportionate framework to prevent the ‘recycling’ of individuals with poor conduct records across PRA-regulated firms. The PRA also published CP34/16; 'Strengthening accountability in banking and insurance: amendments and optimisations', which sets out series of targeted improvements to the SMCR and Senior Insurers Managers Regime, including draft guidance on the PRA’s expectations on the statutory duty of responsibility and the related concept of reasonable steps. Appended to the consultation paper are two revised supervisory statements; namely SS28/15 Strengthening individual accountability in banking and SS35/15 Strengthening individual accountability in insurance.

Payments Services

Which? makes super-complaint over bank transfer protections

On 23 September 2016, consumer body Which? made a ‘super-complaint’ to the Payment Systems Regulator (PSR) and alerted the FCA, calling for banks to implement better consumer safeguards for customers who transfer money into a fraudulent bank account. Which? believes banks should shoulder more responsibility for money lost to scams through bank transfers and consider reimbursing customers. However, Financial Fraud Action UK (FFA) disagrees and says there is not a blanket solution to the problem of bank transfer fraud.

EBA public hearing on strong consumer authentication and secure communication under PSD2

On 26 September 2016, the EBA published a set of slides from its public hearing on strong authentication and secure communication under Article 97 and Article 98 of the Payment Services Directive 2 (PSD2) (Directive (EU) 2015/2366) held on 23 September 2016 at the EBA offices in London. The EBA is in the process of drafting RTS pursuant to Article 98 of PSD2.  The current consultation period will run until 12 October 2016 following which the EBA plans to publish the final draft RTS in Q1 2017.

BIS speech on Eurosystem market infrastructure

On 27 September 2016, the BIS published a speech given by Yves Mersch in Geneva on 26 September 2016 on the next steps in the evolution of the Eurosystem’s market infrastructure in line with the BIS's mandate to promote the smooth operation of payment systems.


ICC urges policymakers to rethink approach to data flow restrictions

On 28 September 2016, the International Chamber of Commerce (ICC) used the World Trade Organization's Public Forum in Geneva to highlight increasing business concerns regarding countries that impose restrictions on cross-border data flows. The ICC believes policy makers are not considering the impact on their respective economies and small to medium sized businesses. It issued a list of recommendations it hopes will enable the free flow of data in a way policy makers can be comfortable with.

Investigations, enforcement and discipline

EU investigation: Case AT.39861—Yen Interest Rate Derivatives—Summary of decision imposing fines published

Case AT.39861—Yen Interest Rate Derivatives

On 23 September 2016, a number of documents relating to Case AT.39861—Yen Interest Rate Derivatives were published in the Official Journal of the EU, including a summary of the Commission Decision of 4 December 2013 finding seven distinct infringements and imposing fines, following a settlement, totalling €669.72m on four banks (JP Morgan, RBS, Deutsche Bank and Citigroup) and a broker (RP Martin) for their participation in collusion to set the rates for Yen interest rate derivatives. A second broker, ICAP, did not settle with the Commission and was subsequently fined €17.96m by the Commission on 4 February 2015 in relation to the same collusion. Also published were 2016/C 348/08 Opinion of the Advisory Committee on restrictive agreements and dominant position given at its meeting of 29 November 2013 regarding a draft decision relating to Case AT.39861—Yen Interest Rate Derivatives, and 2016/C 348/09 Case AT.39861—Yen Interest Rate Derivatives—Final Report of the Hearing Officer.

FCA cancels Michael Wilkinson’s Part 4a permission
FCA Decision Notice

On 28 September 2016, the FCA issued a decision notice to Michael Wilkinson who trades as Michael Wilkinson Mortgages to cancel his Part 4A permission. This decision was reached due to the FCA concluding Mr Wilkinson had failed to satisfy the Threshold Conditions by providing inaccurate and misleading information, as well as his financial resources not being adequate in relation to the regulated activities he carries out. This action was taken under section 55Z and in accordance with section 388 of the Financial Services and Markets Act 2000 (FSMA 2000). The matter has been referred to the Upper Tribunal.

FCA cancels Murrayfield Management’s registration under MLR
FCA Decision Notice

On 28 September 2016, the FCA issued a decision notice to Murrayfield Management Limited (MML) to cancel MML’s registration under the Money Laundering Regulations 2007 (MLR). The decision had been taken because MML failed to pay a charge imposed by the FCA under regulation 34(7)(a) of the MLR. The charge was for £433, which was due by 28 August 2015.

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