Weekly highlights—5 January 2017

Welcome to the weekly Financial Services highlights from the Lexis®PSL Financial Services team for the week ending 5 January 2017.

Financial Conduct Authority updates

FCA publishes initial feedback on ‘Our future Mission’ consultation

On 3 January 2017, the Financial Conduct Authority (FCA) released preliminary feedback on its October 2016 consultation, 'Our future Mission'. The survey finds respondents want greater clarity as to what the FCA does and why.

Prudential Regulation Authority updates

PRA publishes December 2016 regulatory digest

On 4 January 2017, the Prudential Regulation Authority (PRA) published its regulatory digest for December 2016. It highlights key regulatory news and publications for November 2016, such as policy and materials on regulatory reporting for the banking sector. The issue contains items on Solvency II, including the reporting format of National Specific Templates and reporting clarifications, as well as consultations on matching adjustment for illiquid unrated assets and equity release mortgages, and maintenance of the ‘transitional measure on technical provisions’.

Regulatory architecture

ECB recommendation on dividend distribution published in the Official Journal

On 23 December 2016, a European Central Bank (ECB) Recommendation of 13 December 2016 on dividend distribution policies was published in the Official Journal of the EU (ECB/2016/44).

GHOS delays meeting in order to finalise calibration of Basel III reforms

On 3 January 2017, the Bank for International Settlements (BIS) announced that a meeting of the Group of Central Bank Governors and Heads of Supervision (GHOS)—the oversight body of the Basel Committee on Banking Supervision—originally planned for early January 2017, has been postponed.

New confirmed industry guidance for BCOBS released

On 3 January 2017, the Industry Guidance on the FCA Banking Conduct of Business Sourcebook (BCOBS) provided by the British Bankers Association, the Building Societies Association and Payments UK, was updated and confirmed by the FCA, effective from January 2017, to reflect a number of changes that became operational in 2016.

STLRP publishes January 2017 discussion papers

On 4 January 2017, six papers published by the Secured Transactions Law Reform Project (STLRP) address potential reforms in a number of key areas in secured transactions law, including asset finance, priorities and registration.

Regulated activities

CLLS responds to HMT consultation on definition of financial advice

On 23 December 2016, the City of London Law Society (CLLS) published its response to the HM Treasury consultation on amending the definition of financial advice. The letter, dated 15 November 2016, says it is sensible to amend the definition of the regulated activity of advice so that it is limited to personal recommendations, and calls for some flexibility to be built into the rules to widen the availability of financial advice.

Prudential requirements

CLLS responds to FCA consultation on remuneration provisions for CRD IV firms

On 23 December 2016, CLLS published its response to the FCA's consultation CP16-28—Consultation on remuneration in CRD IV firms: new guidance and changes to Handbook. The letter, dated 25 November 2016, says the FCA’s proposals retain the existing approach to proportionality in how the CRD IV remuneration provisions apply, but draws attention to some potentially misleading details concerning retention payments.

EBA requests revised deadlines for delivery of CRD IV/CRR technical standards

On 23 December 2016, the European Banking Authority (EBA) wrote to the European Commission requesting revised deadlines for the submission of regulatory technical standards (RTS) and implementing technical standards (ITS) under the Capital Requirements Directive 2013/36/EU (CRD IV) and the Capital Requirements Regulation 575/2013 (CRR).

Markets and trading

Coface transfers French state export guarantees activity to Bpifrance

On 1 January 2017, Coface announced it has ceded its state export guarantees activity to the French public investment bank, Bpifrance. Management of French state export guarantees, or public guarantees, was a service that Coface carried out on behalf of the French state. The transfer took place on 31 December 2016 and the teams and IT systems involved in export guarantee activity have been included in the transfer to Bpifrance.

FCA opens applications for intragroup exemption from EMIR margin requirements

On 4 January 2017, following the publication of the European Commission Delegated Regulation (EU) 2016/2251 (Margin RTS) in December 2016, the FCA confirmed it will start accepting applications for intragroup exemptions from the margin requirements for derivatives transactions not cleared through a central counterparty under Article 11 of the European Market Infrastructure Regulation (EU) (EMIR).

Investment funds and wealth management

ESAs raise concerns over European Commission’s PRIIPS amendments

On 22 December 2016, the European Supervisory Authorities (ESAs) responded to the European Commission on the amendments the Commission proposed to make to the draft regulatory technical standards (RTS) on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPS).

FMLC responds to BoE consultation on SONIA reform

On 4 January 2016, the Financial Markets Law Committee (FMLC) published a letter addressed to the Bank of England (BoE) in response to the BoE’s October 2016 consultation paper on the evolution of the Sterling Overnight Index Average (SONIA). The FMLC broadly welcomes the proposed changes and sets out its thinking on contract frustration, the definition of SONIA, and the impact that the change in publication day may have on market standard terms.

Insurance and pensions

EIOPA updates technical detail for risk-free interest rate term structures

On 23 December 2016, the European Insurance and Occupational Pensions Authority (EIOPA) published an update of the technical documentation of the methodology to derive the risk-free interest rate (RFR) term structures for Solvency II. Technical information relating to RFR term structures is used for the calculation of the technical provisions for (re)insurance obligations. EIOPA publishes technical information relating to RFR term structures on a monthly basis.

EIOPA data on the use of limitations from regular supervisory reporting

On 23 December 2016, EIOPA published its first report on the limitations from the regular supervisory reporting, used by insurance and reinsurance undertakings. The report is preliminary, as annual submissions of the 2016 quantitative reporting will only be available from 2017 onwards, so it does not include information on exemptions from annual reporting. The results of the report show that the limitations from quarterly reporting concern 924 solo undertakings and 30 groups.

New LMA guide on uncertainty in catastrophe modelling

On 4 January 2017, the Lloyd’s Market Association (LMA) published a new guide on catastrophe modelling in response to the increasing use and complexity of current models. ‘Understanding Uncertainty in Catastrophe Modelling for Non-Catastrophe Modellers’ is aimed at anyone who relies upon cat models but does not have a detailed understanding of the uncertainty contained within them.

PLSA asks FCA not to reclassify local authority pension funds as retail investors

On 4 January 2017, the Pensions and Lifetime Savings Association (PLSA) responded to the FCA's consultation, CP 16/29 Markets in Financial Instruments Directive II Implementation, opposing the classification of local authority pension funds as retail investors. The PLSA says the proposed reclassification threatens the ability of funds within the Local Government Pension Scheme (LGPS) to invest in infrastructure, as the majority of infrastructure investment firms are structured to explicitly exclude retail investors.

Payments and fintech

ECB consults on SIPS Regulation revision

On 20 December 2016, the ECB launched a public consultation on the revision of ECB Regulation (EU) 795/2014 on oversight requirements for systemically important payment systems (the SIPS Regulation). The SIPS Regulation applies to four European payment systems: TARGET2, EURO1, STEP2-T and CORE(FR). Responses should be submitted by 20 February 2017.

CMA merger: acquisition of VocaLink by MasterCard to be referred for phase 2 unless suitable undertakings offered

On 4 January 2017, the CMA decided that the anticipated acquisition of VocaLink Holdings Limited (VocaLink) by MasterCard UK Holdco Limited, a subsidiary of MasterCard International Incorporated (MasterCard) meets the test for reference to phase 2. VocaLink is a supplier of payment infrastructure services to three key UK interbank payment systems (BACS, Faster Payments Service and the LINK ATM network); MasterCard, as well as owning and operating credit and debit card schemes, has bid to supply infrastructure services to UK interbank payment systems. As a result, the CMA’s phase I investigation found that the transaction may lead to competition concerns in relation to the LINK ATM network, where the parties are two of the three most credible providers of infrastructure services. MasterCard will now have the opportunity to offer proposed undertakings in lieu (by 11 January 2017) to avoid reference to phase 2.

Dates for your diary

Key Date Subject Event
6 January 2017 Prudential requirements Following the implementation of the new credit union regulatory reporting requirements, by this date principal users will receive an email from the Bank of England’s Electronic Data Submission (BEEDS) team which will;

  • confirm the credit union is registered to use the BEEDS portal
  • provide the web address of the portal and also a temporary password, and
  • include an electronic copy of the BEEDS portal user guide and a list of key contacts

See the PRA's webpage on credit unions.

6 January 2017 Market Abuse Regulation Deadline for responses to FCA consultation 'CP16/38: DTR 2.5 changes—delay in the disclosure of inside information'.
6 January 2017 Investment and wealth management Deadline for responses to HM Revenue & Customs (HMRC) and HM Treasury consultation Draft legislation: Lifetime ISA.
7 January 2017 Capital Requirements Regulation Deadline for responses to EBA consultation Draft Implementing Technical Standards amending Implementing Regulation (EU) No 680/2014 with regard to operational risk and sovereign exposures (EBA/CP/2016/20).
9 January 2017 Senior Managers and Certification Regime Deadline for responses to the following FCA consultations:

9 January 2017 Senior Managers and Certification Regime Deadline for responses to the following PRA consultations:

10 January 2017 Consumer finance Deadline for responses to PRA consultation 'Amendments to the PRA’s rules on loan to income ratios in mortgage lending—CP44/16'.
10 January 2017 Market Abuse Regulation ESMA MAR Guidelines: Persons receiving market soundings apply from this date.
11 January 2017 Payments and fintech Deadline for responses to LSB call for input on its Standards Development Project on its digital capabilities.
Filed Under: Weekly Highlights

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