Weekly highlights—30 March 2017

Weekly highlights—30 March 2017

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 30 March 2017.


Government aims to maintain City's position as leading global finance centre post-Brexit

On 21 March 2017, the government responded to the first report of the Exiting the EU Select Committee, which was published on 14 January 2017, saying it is aware of the importance of the financial services sector to the UK economy, and that it aims to maintain the City's leading position as one of the key centres of global finance.

Michel Barnier outlines EU’s negotiating position on Brexit

On 22 March 2017, the European Union’s chief negotiator on Brexit, Michel Barnier, gave a speech at the plenary session of the European Committee of the Regions stressing the importance of reaching an agreement with the UK and setting out what he sees as the conditions for success. He expresses solidarity with the British authorities and citizens and says the EU is determined to reach an agreement on an orderly withdrawal for the UK and to prepare the way for a new partnership, and warns that both the UK and the EU would be ‘seriously affected’ in the event of non-agreement: ‘This scenario of a non-agreement, this no-deal scenario, is not ours’.

Bar Council calls for agreement on financial services post-Brexit

On 24 March 2017, in an update to its Brexit Papers, the Bar Council Brexit Working Group published a new paper on financial services, in which it has called on the government to aim for a bespoke agreement with the EU, replicating the status quo as far as possible and covering the gaps created by the loss of the passport regime. It warns that other mechanisms used by countries outside the EEA, such as the equivalence regime and the emergent third-country passport, will not fill the gaps created by the loss of the passport, and says WTO terms are not sufficiently developed in relation to financial services to suffice.

Brexit briefing paper updated to highlight trade aspects

On 24 March 2017, the House of Commons Library updated its briefing paper on trade aspects of Brexit, adding in a new chapter covering trade with non-EU countries. Among other things, the new section five sets out which countries the UK has a trade relationship with as a member of the EU. It discusses the UK continuing to benefit from EU trade agreements after Brexit, and asks whether the UK can begin negotiations with non-EU countries pre-Brexit. It also considers the government’s priorities for new trade deals outside the EU.

ECB ready for any Brexit outcome, says ECB vice chair

On 27 March 2017, the chair and vice-chair of the supervisory board of the European Central Bank (ECB), Danièle Nouy and Sabine Lautenschläger, delivered opening addresses at the ECB Annual Report on supervisory activities for 2016 setting out views on banks’ stability, profitability and fragmentation issues.

Banks and businesses highlight Brexit fears in PwC/CBI survey

On 27 March 2017, Price Waterhouse Coopers (PwC)/Confederation of British Industry (CBI) published their latest financial services survey which found that optimism about the overall business situation fell for the fourth consecutive quarter, the longest period of declining sentiment since the global financial crisis of 2008, and the sharpest fall since December 2008. A more pessimistic mood was particularly prevalent among banks, with general insurers and finance houses also less optimistic. However, investment managers, life insurers and insurance brokers were more optimistic than they had been three months earlier.

UK formally triggers Article 50

On 29 March 2017, Theresa May gave formal notification of the UK’s intention to withdraw from the EU under Article 50 of the Lisbon Treaty. On 29 March 2017, Sir Tim Barrow, UK’s permanent representative to the EU in Brussels, handed over a letter from the PM to Donald Tusk, the President of the European Council. Mr Tusk is expected to circulate a draft copy of the EU negotiating guidelines among the remaining 27 Member States over the next 48 hours. The guidelines will not be adopted formally until finalised at a special summit of the EU27 on 29 April 2017. Speaking in Parliament following the delivery of the letter, Ms May said leaving the EU presents the UK with a unique opportunity: 'It is this generation’s chance to build a better future'. Reports show businesses are confident and more optimistic about the long term outlook than initially expected. However, others remind that businesses are facing substantial change, with the UK leaving both the EU Single Market and the Customs Union. Lawyers too stress the importance of being prepared and having in place procedures to stave off any possible ill-effects. With a view to setting out some of the legislative and regulatory changes ahead, the government is due to publish a White Paper on the Great Repeal Bill on 30 March 2017. Several pieces of legislation are expected to follow in due course.

Financial Conduct Authority updates

Craig Errington to chair FCA Smaller Business Practitioner Panel

On 23 March 2017, the Financial Conduct Authority (FCA) appointed a new chair of its Smaller Business Practitioner Panel. Craig Errington, group chief executive of specialist financial mutual Wesleyan, becomes chair on 1 April 2017. He has been a member of the Panel since May 2013.

Regulatory architecture

Financial Services and Markets Acts (Regulated Activities) (Amendment) Order 2017

SI 2017/488: EU legislation is implemented in the UK to, among other things, ensure that operating an organised trading facility (OTF) is a regulated activity. Provision is also made that structured deposits are within the scope of certain specified activities. These changes come into effect in part on 1 April 2017 and in full on 3 January 2018. (Updated from draft on 29 March 2017).

Deregulation Act 2015, the Small Business, Enterprise and Employment Act 2015 and the Insolvency (Amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017

SI 2017/400: Amendments were made to financial services legislation in consequence of insolvency reforms made by the Deregulation Act 2015 (DA 2015) and the Small Business, Enterprise and Employment Act 2015. Transitional provisions were also made.

ECB board member reviews progress and challenges for banking union

On 24 March 2017, Ignazio Angeloni, member of the supervisory board of the ECB, spoke at the Università Bocconi in Milan about promoting European integration in the banking union. In his speech, he reflects on the origins and achievements of ECB banking supervision within the banking union, and outlines three broad challenges, which he says are among the most important ones facing banks and supervisors.

New financial services trade association named UK Finance

On 27 March 2017, the Consumer Credit Trade Association (CCTA) announced that the new trade association for the UK financial services sector will be named UK Finance.

ESMA makes new appointments

On 29 March 2017, the European Securities and Markets Authority (ESMA) appointed two new members to its Management Board to replace two out of the three outgoing members whose mandates end on 31 March. ESMA also appointed João Sousa Gião, member of the Board of Administration of the Comissão do Mercado de Valores Mobiliários (CMVM) of Portugal to serve as the chair of the Supervisory Convergence Standing Committee.

Authorisation, approval and supervision

PRA consults on fees and levies for 2017/18

On 24 March 2017, the Prudential Regulation Authority (PRA) opened a consultation on its fees and levies for 2017/18. The consultation closes on 24 May 2017. Feedback on the consultation and final rules will be published in a policy statement in June 2017.

ECB must improve its accountability processes, transparency watchdog says

On 28 March 2017, Transparency International EU has published a ‘a systematic overview of the European Central Bank’s integrity framework’, saying there is an ‘uneasy balance between independence and accountability’. The report says improvements are needed in how conflicts of interest are managed, and says the chair of its Ethics Committee should not be a former European Central Bank (ECB) President.

Prudential requirements

Danièle Nouy says supervision running smoothly but warns on bank profitability

On 23 March 2017, the chair of the supervisory board of the ECB, Danièle Nouy, gave a wide-ranging interview to Latvian information agency LETA in which she said national supervisory authorities are co-operating ‘very smoothly’ and that dialogue with other countries outside the euro area is improving, since the Single Supervisory Mechanism benefits from the trust and reputation of the ECB.

ECB reports on 2016 and sets out 2017 priorities

On 23 March 2017, the chair of the supervisory board of the ECB, Danièle Nouy, presented the ECB annual report on supervisory activities 2016 to the European Parliament’s Economic and Monetary Affairs Committee. Ms Nouy also told the committee that the ECB’s priorities for 2017 were business models and profitability drivers, credit risk with a focus on non-performing loans and concentrations, and risk management.

Understanding behaviour a key to regulation, FCA economist says

On 23 March 2017, the chief economist at the FCA, Peter Andrews, gave a speech at ESMA on how individuals take decisions and what this implies for regulators’ remedies. Mr Andrews highlights that the central task of market regulators is to design remedies that ‘truly correct or, at least, offset market failures’, and that regulation designed to help financial markets allocate capital fairly and efficiently can do far more for economic growth and stability than is generally appreciated. Mr Andrews also spoke on culture and compliance in firms.

Global banking regulation needed to finish post-crisis reforms, says ECB executive

On 23 March 2017, following the ‘devastating fire’ of the financial crisis, the regulators have mended, strengthened and expanded banks, a senior ECB official told the Credit Risk 2017 forum in Vienna. Member of the executive board of the ECB and vice-chair of its supervisory board Sabine Lautenschläger said there was still more to do on banking regulation, but it had to be at a global level.

Follow-up Basel III implementation assessment reports published

On 24 March 2017, the Basel Committee on Banking Supervision published overviews of actions taken by member jurisdictions following the Committee’s regulatory consistency assessment programme (RCAP) to address deviations from the Basel standards identified in their RCAP assessments. The reports cover those jurisdictions whose RCAP assessment reports were published by December 2015, namely: Australia, Brazil, Canada, China, the EU, Hong Kong SAR, India, Japan, Mexico, Saudi Arabia, Singapore, South Africa, Switzerland and the US.

Commission assesses impact of review of prudential treatment for investment firms

On 24 March 2017, the European Commission published an inception impact assessment in connection with its review of the appropriate prudential treatment for investment firms. The objective of the review is to evaluate and, where necessary, revise the way in which capital, liquidity and other key prudential requirements apply to investment firms in the EU. Interested parties have four weeks to respond.

Bank of England publishes key elements of its 2017 stress test scenarios

On 27 March 2017, the Bank of England (BoE) announced that the stress tests for 2017 will include two scenarios—the 2017 annual cyclical scenario and the 2017 biennial exploratory scenario. Alongside the annual cyclical scenario, the BoE is, for the first time, running an additional exploratory scenario. This represents an important step towards achieving the Bank's vision for stress-testing, which it set out in 2015.

ESMA on haircuts in EU securities financing transactions

On 27 March 2017, ESMA issued a research piece which provides a stock-take of the multi-trillion euro-large market for securities financing transactions (SFTs) in the EU, and firms' use of collateral haircuts. ESMA's research looks at the level and calculation methodologies of haircuts used in the EU by SFT market participants.

BBA supportive of EBA's proposals on supervision of significant branches

On 24 March 2017, the British Bankers’ Association (BBA) responded to the European Banking Authority’s (EBA) consultation on supervision of significant branches (EBA/CP/2016/24), saying the proposals provide a co-ordinated way to manage supervision of significant branches, better separation of responsibilities between different supervisors, an improvement in how resolution is approached for significant branches, and a rationalisation of reporting and the overall regulatory burden faced by firms operating across borders through branches.

PRA consults on use of IRB approach

On 28 March 2017, the Prudential Regulation Authority (PRA) issued a consultation paper 'Internal ratings based (IRB) approach: clarifying PRA expectations' (CP5/17), in which the PRA sets out proposed changes to Supervisory Statement (SS) 11/13 'Internal Ratings Based (IRB) approach'. The consultation closes on 28 June 2017.

Updated SRR code of practice

On 27 March 2017, HM Treasury updated the special resolution regime (SRR) code of practice, which supports the legal framework of the SRR established under the Banking Act 2009 and provides guidance as to how and in what circumstances HM Treasury, the BoE, the PRA and the FCA will use the special resolution tools.

PRA sets out key principles of stress testing

On 27 March 2017, the PRA published guidance for banks to support raising standards in stress test model development and management. The PRA says the board of directors and senior management of banks should not only aim to ‘provide challenge’ to stress test model outputs, but also understand the capabilities of stress test models, model limitations and the impact of model uncertainty on banks’ stress test results.

Small increase in UK banking sector CET1 capital ratio

On 28 March 2017, the BoE published statistics which show the common equity Tier 1 (CET1) capital ratio for the UK banking sector in Q4 2016 was 15.1%. This represents an increase of 0.3 percentage points (pp) on the quarter and an increase of 1.1 pp on Q4 2015. The quarterly increase was due to a small increase in the level of CET1 capital and a small decrease in the level of total risk-weighted assets.

Pillar 3 disclosure requirements: consolidated and enhanced framework published

On 29 March 2017, the Basel Committee on Banking Supervision (BCBS) published its Pillar 3 disclosure requirements—consolidated and enhanced framework. This standard represents the second phase of the Committee's review of the Pillar 3 disclosure framework and builds on the revisions to the Pillar 3 disclosure published by the Committee in January 2015.

Interim regulatory treatment of accounting provisions and standards for transitional arrangements

On 29 March 2017, the BCBS published details of the interim regulatory treatment of accounting provisions and standards for transitional arrangements. These measures are in response to the forthcoming international accounting standards on expected credit loss provisioning.

Risk management and controls

Businesses must do more to protect against cyber attacks

On 27 March 2017, the Institute of Directors (IOD) and Barclays published a report which found that only 56% of all companies in the UK have a formal strategy in place to protect their devices and data from a cyber attack. The IoD and Barclays have urged business leaders to step up their preparations ahead of the introduction of the new General Data Protection Regulation in May 2018, which will make companies more accountable for their customers’ data.

Financial crime

EPC report warns of greater professionalism in cybercrime

On 23 March 2017, the European Payments Council (EPC) published a 2016 Payment Threads Trends Report providing an insight to the latest developments on threats affecting payments and cybercrime. The report is designed to raise awareness and to allow stakeholders involved with payments to decide on possible actions they may wish to take. The report highlights a greater degree of professionalism in cybercrime, which increasingly attacks the financial services sector.

Treasury Committee seeks clarity on cybercrime governance framework

On 23 March 2017, the chair of the Treasury Committee, Andrew Tyrie MP, made public a 28 February letterwritten to the Chancellor of the Exchequer, Philip Hammond MP, about cybersecurity in the financial services sector, warning that the lines of responsibility and accountability for reducing cyber threats ‘remain opaque’.

FATF chairs dialogues on FinTech, RegTech and AML/CFT

On 24 March 2017, the Financial Action Task Force (FATF) published a summary of outcomes from the FATF private sector consultative forum, which was held in Vienna, 20-22 March 2017, including a dialogue on FinTech and RegTech. The Forum is an opportunity for the FATF and its members to engage directly with the private sector on anti-money laundering and counter-terrorist financing (AML/CFT) issues.

Counter-terrorist asset freezing reports released

On 28 March 2017, HM Treasury published two quarterly reports on the operation of the UK’s Counter-Terrorist Asset Freezing Regime: one for April to June 2016, and one for July to September 2016.

MLD4—list of high-risk third countries modified

On 27 March 2017, the European Commission adopted a Delegated Regulation (C(2017) 1951 final)amending Delegated Regulation (EU) 2016/1675, which supplemented the Fourth Anti-Money Laundering Directive (EU) 2015/849 (MLD4) by listing high-risk third countries with strategic deficiencies in their anti-money laundering (AML)/counter terrorist financing (CFT) regimes that pose significant threats to the financial system of the EU. Guyana has been deleted from the list and Ethiopia has been added.

Tesco faces £129m penalty following agreement with SFO

On 28 March 2017, an agreement was reached between Tesco PLC and the Serious Fraud Office (SFO) following potential criminal liability for false accounting by Tesco PLC's subsidiary, Tesco Stores Limited. The agreement could result in a deferred prosecution agreement (DPA) becoming effective. Should the agreement be approved at a Crown Court public hearing on 10 April 2017, the company would face a fine of £128,992,500 plus the SFO’s full costs. The SFO said the potential DPA with Tesco Stores Limited does not address whether liability of any sort attaches to Tesco PLC or any employee or agent of Tesco PLC or Tesco Stores Ltd.

Enforcement and redress

IMCO approves legislation on pan-EU consumer protection

On 23 March 2017, the European Parliament’s Internal Market and Consumer Protection Committee (IMCO) approved draft legislation that would give national authorities enforcement powers to detect and halt online breaches of consumers’ rights across the EU. The draft rules would require EU Member States’ authorities to have a number of investigation and enforcement powers, including the ability to request information from banks to help them detect rogue traders.

Financial consumer complaints on the rise, says ESMA

On 24 March 2017, ESMA said that its recent report on trends, risks and vulnerabilities has revealed a 36% rise in complaints by financial consumers in the first half of 2016 against the previous six-month figure. Order execution generated the most complaints, and bonds and other debt securities were the most complained-about financial instrument.

FSCS updates guide to single customer view

On 24 March 2017, the Financial Services Compensation Scheme (FSCS) updated its guide to single customer view (SCV). Among other things, the compensation limit has been changed to reflect the increase from £75,000 to £85,000.

Markets and trading

Further corrigenda to MiFID II and MiFIR RTS

Following the issue of corrigenda to Commission Delegated Regulations published on 20 and 21 March 2017, the European Commission issued corrigenda to a further three Commission Delegated Regulations supplementing the Markets in Financial Instruments Directive 201/65/EU (MiFID II) and the Markets in Financial Instruments Regulation 2014/600/EU (MiFIR).

  • Corrigendum of 17/3/2017 to Commission Delegated Regulation of 25 April 2016 supplementing MiFID II as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive C(2016) 2398 final (Corrigendum)
  • Corrigendum of 17/3/2017 to Commission Delegated Regulation of 14 July 2016 supplementing MiFIR with regard to regulatory technical standards (RTS) on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser C(2016) 4390 final (Corrigendum)
  • Corrigendum of 17/3/2017 to Commission Delegated Regulation of 24 June 2016 supplementing MiFIR with regard to RTS on clearing access in respect of trading venues and central counterparties C(2016) 3807 final (Corrigendum)
ESMA releases official translations of its CRA methodologies

On 23 March 2017, ESMA published the official translations of its final guidelines on the validation and review of Credit Rating Agencies (CRAs) methodologies.

FX global code to launch in May 2017

On 22 March 2017, the deputy governor of the Reserve Bank of Australia, Guy Debelle, told the TradeTech FX Asia Conference that the FX global code is on track to be released at the end of May 2017. Mr Debelle said the Code sets out global principles of good practice in the foreign exchange market to provide a common set of guidance to the market, including in areas where there is a degree of uncertainty about what sort of practices are acceptable. ‘This should help to restore confidence and promote the effective functioning of the wholesale FX market'.

ESMA issues final report on participant default rules under CSDR

On 23 March 2017, ESMA published a final report on participant default rules and procedures under Regulation (EU) 909/2014, containing two sets of guidelines regarding the implementation of Article 41(4) of the Central Securities Depositary Regulation (EU) 909/2014 (CSDR). The CSDR harmonises the settlement of securities by providing a set of common requirements for central securities depositories (CSDs) operating securities settlement systems. The guidelines will enter into force two months after the publication of their translations into all official languages of the EU on ESMA’s website.

Commission to seek clarity on broker crossing networks under MiFID II

On 23 March 2017, the European Parliament's Committee on Economic and Monetary Affairs (ECON) published correspondence with the European Commission about the potential use of broker crossing networks to circumvent the share trading obligations of MiFID II. In its response to ECON, the Commission says that it will work with ESMA and national regulators to address the issue.

ECON adopts position on European venture capital and social entrepreneurship funds

On 23 March 2017, ECON adopted a report on the European Commission’s proposal for a regulation amending Regulation (EU) 345/2013 on European venture capital funds and Regulation (EU) 346/2013 on European social entrepreneurship funds. The report includes amendments to the Commission’s proposal, which is intended to make the original legislation more effective as part of the Capital Markets Union action plan.

European Commission report targets national barriers to CMU

On 24 March 2017, the European Commission published a report ‘Accelerating the capital markets union: addressing national barriers to capital flows’, setting out its proposals to further build on its work to create the capital markets union (CMU). The report examines the causes and possible solutions to factors hindering cross-border investment. It highlights areas where action is needed at national level to set up the ‘clear, predictable and stable environment’ that will allow for more investment and a more efficient allocation of capital, to boost financing of business and infrastructure.

G-SIBs not complying with risk data aggregation and reporting principles, says Basel Committee

On 28 March 2017, the BCBS published its latest progress report on banks’ implementation of the principles for effective risk data aggregation and reporting. The principles, issued in January 2013, aim to strengthen banks’ risk data aggregation and risk reporting practices to improve their risk management, decision-making and resolvability. They are applicable to firms designated as globally systemically important banks (G-SIBs). The report finds that, while some progress has been made, most G-SIBs have not fully implemented the principles and the level of compliance with the principles is unsatisfactory.

Tesco market abuse compensation could reach £85m

On 28 March 2017, the FCA announced that it had, for the first time, used its powers under section 384 of the Financial Services and Markets Act 2000 (FSMA 200) to require a listed company to pay compensation for market abuse. Tesco will compensate shareholders in relation to a trading update published on 29 August 2014, which gave a false or misleading impression about the value of publicly traded Tesco shares and bonds. Total compensation could reach £85m.

European Commission to hold public hearing on the CMU

On 29 March 2017, the European Commission announced that registration had opened to its public hearing on the CMU mid-term review in Brussels on 11 April 2017.

Investment funds and wealth management

Investment Association consults on disclosure for charges and transaction costs

On 27 March 2017, the Investment Association (IA) launched a public consultation on the standardisation of disclosure for charges and transaction costs. The consultation sets out an industry code, which provides a blueprint for the reporting of charges and transaction costs using a consistent approach across the market and in line with regulatory requirements. The closing date for consultation responses is 19 May 2017.

HMRC updates guidance notes for ISA managers

On 27 March 2017, HMRC updated its guidance notes for managers of individual savings accounts (ISAs). The notes provide general guidance on how to operate the ISA scheme and replace the previous version issued in April 2016.

FCA updates notification forms on national private placement regime

On 27 March 2017, the FCA announced on its national private placement regime (NPPR) web page that it has updated its NPPR notification forms. The NPPR principally relates to the marketing of non-EEA alternative investment funds (AIFs) and any AIFs managed by non-EEA alternative investment fund managers (AIFMs).

Consumer credit, mortgage and home finance

European Commission announces consumer financial services action plan

On 23 March 2017, the European Commission published an action plan setting out its strategy to strengthen the EU single market for retail financial services. The action plan seeks in particular to harness the potential of developments in financial technology (FinTech) to improve consumer access to financial services across the EU.

Select Committee calls for greater priority to tackling financial exclusion

On 25 March 2017, in calling on the FCA and banks to give greater priority to tackling financial exclusion, the Select Committee on Financial Exclusion made several recommendations for combating this issue.

New Standards of Lending Practice for business customers

On 25 March 2017, the Lending Standards Board (LSB) made changes to the voluntary code of practicecovering lending to small business customers followed by the main providers of loans, overdrafts, credit cards and charge cards. The new Standards of Lending Practice for business customers, which replace the Lending Code, extend protections beyond micro-enterprise customers to small businesses with a turnover of up to £6.5m.

CMA determines exceptions to the application of the RBMIO 2017

On 28 March 2017, the Competition and Markets Authority (CMA) published notice of its determination of exceptions to the application of the Retail Banking Market Investigation Order 2017 (the Order). Applications for exceptions under art 5 of the Order were submitted to the CMA by Lloyds Banking Group (Lloyds), RBS Group (RBS) and Santander.

Insurance and pensions

Pensions Regulator consults on revised description of a professional trustee

On 23 March 2017, as part of its 21st century trustee initiative, the Pensions Regulator (TPR) clarified its expectations by publishing a revised description of a professional trustee for consultation. The consultation also covers TPR’s draft policy for monetary penalties. Responses should be submitted by 9 May 2017.

EU needs national financial education strategies, says Insurance Europe

On 27 March 2017, Insurance Europe released financial education recommendations on how best to boost financial literacy in Europe. The publication, launched as part of the annual global financial awareness campaign for children and young people, 'global money week', suggests practical steps that can be taken. For example, it calls on the European Commission to promote the adoption of national financial education strategies in EU Member States, as well as for the incorporation of financial literacy components into school curricula.

Pensions Regulator publishes innovation and regulation plan

On 27 March 2017, TPR published its innovation and regulation plan, which sets out how it is working to support innovation and disruptive business models, and how it is using innovation to deliver its work more effectively.

ABI examines impact of InsurTech

On 28 March 2017, the Association of British Insurers (ABI) published a speech given by its director general, Huw Evans, at the FCA Project Innovate: InsurTech Forum. Mr Evans said he felt positive about the opportunities posed by InsurTech for customers, the insurance sector’s reputation and the sector’s ability to meet its wider social and economic purpose.

Payments and fintech

American Express to be subject to interchange fee caps on UK domestic transactions

On 23 March 2017, the Payment Systems Regulator (PSR) announced that American Express and the payment service providers participating in its scheme will be subject to interchange fee caps on UK domestic transactions from 1 April 2017 to 31 March 2018. The interchange fee caps do not apply to transactions where American Express is both the card-issuer and the acquirer.

Commission consults on impact of new technologies on financial services sector

On 23 March 2017, the European Commission published a consultation paper which seeks stakeholders’ perspectives on the impact of new technologies on the European financial services sector, both from the perspective of providers of financial services and consumers. The consultation, ‘FinTech: a more competitive and innovative European financial sector’ and its accompanying privacy statement, seek input to further develop the Commission’s policy approach to technological innovation in financial services. Responses are invited by the 15 June 2017.

PSR confirms how it will use money retained from financial penalties

On 24 March 2017, following its November 2016 consultation, the PSR published a decision confirming that it will adopt its proposed approach to the allocation of the money retained from financial penalty receipts. The PSR will use the money to reduce the amount it collects from payment service providers (PSPs) who pay regulatory fees in the following fees year.

ECB supervisory board vice-chair statement on Fintech and the future of banking

On 27 March 2017, Sabine Lautenschläger, member of the executive board of the ECB and vice-chair of the supervisory board of the ECB, made a statement at the ECB Fintech Workshop in Frankfurt. Ms Lautenschläger discusses how fintechs are on the rise but still only account for a small share of the markets for banking, payment services and asset management. Despite this, they are competing with banks in some parts of the value chain.

PSO Delivery Group continues work on national payments body

On 27 March 2017, the PSR released minutes of two meetings (7 March 2017 and 14 March 2017)of the Payment System Operator (PSO) Delivery Group. The group is working on the design of the National Payments System Operator (NPSO).

PSR looks to develop competition and innovation in 2017/18

On 29 March 2017, the PSR published its annual plan and budget for 2017/18, setting out its aims with a summary of anticipated activities and expected costs for the next twelve months. The PSR says the past year has seen progress in competition and innovation in payment systems, and in the year ahead it aims to build on that success.


Supreme Court
Wood v Capita Insurance Services Ltd

[2017] UKSC 24

The Supreme Court dismissed an appeal by Capita Insurance Services Ltd (Capita), which concerned the true construction of an indemnity clause in a sale and purchase agreement (SPA), entered into by the parties for the purchase of the shares in a company by Capita. Capita had claimed, under the indemnity clause, in respect of compensation paid to customers who had allegedly been mis-sold insurance products or services by the company. The court held that, on the approach to contractual interpretation, Rainy Sky SA v Kookmin Bank [2012] 1 All ER 1137 and Arnold v Britton [2016] 1 All ER 1 were saying the same thing and that, on the true construction of the clause, and in circumstances where the indemnity clause fell to be assessed in the context of time-limited warranties, the Court of Appeal, Civil Division, had been correct in declaring that the indemnity, under the clause, was confined to loss that arose out of a claim or complaint that had been registered with the Financial Services Authority.

Dates for your diary

Key Date Subject Event
31 March 2017 FCA conduct requirements Changes to the FCA Handbook (Handbook Notice 39) by the instrument 'Pension Schemes (Restrictions on Early Exit Charges) Instrument 2016 (FCA 2016/72)' comes into force on this date.
Following consultation in CP16/15, the FCA Board made changes to the FCA Handbook sections listed below:

  • Glossary
  • COBS 19, and
  • TP 2 2.3

In summary, this instrument makes changes to create rules in the Handbook that will enable the FCA to cap early exit pension charges in new and existing stakeholder personal pensions. Feedback to this consultation was published in a separate Policy Statement (PS16/24) in November 2016.

31 March 2017 Securities Financing Transactions Regulation Deadline for ESMA to submit:

  • ITS on the format and frequency of reports to Trade Repositories under the Securities Financing Transactions Regulation (SFTR)
  • RTS on access to data to Trade Repositories under the SFTR
  • RTS on data to be reported to Trade Repositories under the SFTR
  • RTS on public data and operational standards for data collection and data aggregation and comparison under the SFTR
  • RTS on the registration requirements for Trade Repositories under the SFTR, and
  • technical advice for fees for registration, recognition and supervision of Trade Repositories under the SFTR

31 March 2017 European Market Infrastructure Regulation Deadline for ESMA to submit RTS for European Market Infrastructure Regulation (EMIR) on:

  • the potential amendment to technical standards on registration of Trade Repositories under EMIR, and
  • the review of the technical standards on authorities accessing Trade Repository data

31 March 2017 Enforcement and redress Deadline for responses to FCA consultation 'CP14/42: Reviewing the funding of the Financial Services Compensation Scheme (FSCS) Consultation Paper'.
31 March 2017 Prudential requirements EBA Guidelines (EBA/GL/2016/05) on communication between competent authorities supervising credit institutions and the statutory auditor(s) and the audit firm(s) carrying out the statutory audit of credit institutions apply from this date.
31 March 2017 Authorisation, approval and supervision Firms that intend to cancel their permission and do not wish to be liable for next year's annual fee (1 April 2017 - 31 March 2018) need to apply to cancel online through the FCA's Connect page by this date, otherwise they will be liable for the full annual fee.
1 April 2017 Benchmark Regulation Deadline for ESMA to submit ITS/RTS for the Benchmark Regulation on:

  • the template for compliance statement for significant benchmarks under Article 14c(7) (ITS)
  • the template for compliance statement for nonsignificant benchmarks under Article 14d(3) (ITS)
  • the procedures and forms for exchange of information with NCAs under Article 35(3) (ITS)
  • the procedures and forms for exchange of information with NCAs under Article 47(3) (ITS)
  • the form and content for the application for recognition by third country administrators under Article 21a(9) (RTS)
  • the governance and control requirements for supervised contributors, systems and controls under Article 11(4) (RTS)
  • the specification of qualitative criteria for significant benchmarks under Article 14c(8) (RTS)
  • the contents of benchmark statement and cases in which update is required under Article 15(3) (RTS)
  • the minimum content for cooperation arrangements with third country NCAs (equivalence) under Article 30(5) (RTS)
  • the information to be provided in applications for authorisation and registration under Article 23(7) (RTS)
  • the procedures, characteristics and positioning of oversight function to avoid conflicts of interest under Article 5(5) (RTS)
  • the appropriateness and verifiability of input data, internal oversight and verification procedures of contributors under Article 7(5) (RTS)
  • the information to be provided by administrators for transparency of methodology under Article 7b(3) (RTS), and
  • the specification of elements of the contributor code of conduct under Article 9(3) (RTS)
1 April 2017 Payments and fintech—payment systems Payment date for operators to transfer collected on-account payment monies to the PSR.
See: Timetable for PSR fees.
1 April 2017 Markets and trading—derivatives The Japanese jurisdictional module of the International Swaps and Derivatives Association (ISDA) Resolution Stay Jurisdictional Modular Protocol (JMP) takes effect from this date.
1 April 2017 Insurance Following the FCA's policy statement (PS16/21), new rules about insurance renewals for retail consumers come into force on this date. The rules will apply when a firm (either the insurer or intermediary) sends a general insurance renewal notice to a consumer.
3 April 2017 Insurance Deadline for responses to the International Association of Insurance Supervisors (IAIS) consultation 'Application Paper on Group Corporate Governance'.
3 April 2017 Markets and trading Changes to the International Capital Market Association's (ICMA) revised Buy-in and Sell-out Procedures take effect from this date.
3 April 2017 Prospectus Regulation Deadline for responses to chapter 5, Q1, of the FCA's 'CP17/6: Quarterly Consultation Paper No. 16'.
4 April 2017 Money Market Funds Regulation The European Parliament intend to debate on the proposed Regulation on money market funds.
4 April 2017 Regulatory architecture The Financial Policy Committee will publish a record on this date.
6 April 2017 Investment and wealth management HMRC and HM Treasury intend that the regulations consulted on will amend the Individual Savings Account (ISA) Regulations (SI 1998/1870) from this date to establish the Lifetime ISA, including the rules in relation to the government bonus and withdrawals from accounts, and increase the overall ISA limit from £15,240 to £20,000.
On 16 January 2017, HM Treasury announced that the Lifetime ISA will be available from this date.

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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.