Weekly highlights—6 December 2018

Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 6 December 2018.

Brexit

FCA assesses impact of EU Withdrawal Agreement

The Financial Conduct Authority (FCA) published its EU Withdrawal Impact Assessment, which was requested by the Treasury Select Committee and sets out the impact of the Withdrawal Agreement and future framework on the FCA's objectives. Andrew Bailey, FCA Chief Executive, also wrote to Nicky Morgan MP, Chair of the Treasury Select Committee.

ESMA proposes second and final regulatory change to support the Brexit preparations of counterparties to non-cleared OTC derivatives ​

The European Securities and Markets Authority (ESMA) published a final report with draft regulatory technical standards (RTS) proposing to amend the Commission Delegated Regulation on the risk mitigation techniques for OTC derivatives not cleared by a CCP (bilateral margin requirements) under the European Market Infrastructure Regulation (EMIR). These draft RTS provide regulatory solutions to support counterparties' Brexit preparations and to maintain a level playing field between EU counterparties, while addressing potential risks to orderly markets and financial stability.

Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

SI 2018/1285: This enactment is made in exercise of legislative powers under the European Communities Act 1972 and the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment amends pieces of UK primary and secondary legislation in order to address deficiencies in retained EU law in relation to the UK’s deposit guarantee scheme (DGS), the Financial Ombudsman Service and certain inquiries and investigations. These Regulations will come into force partly on 4 December 2018 and fully on exit day (Updated from draft on 4 December 2018).

Sanctions Review Procedure (EU Exit) Regulations 2018

SI 2018/1269: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for Brexit. This enactment is made to set out the procedure for requesting a review of sanctions designations and ship specifications and designations under the 2018 Act. It comes into force on 7 January 2019.

Brexit financial services draft SIs—30 November 2018

HM Treasury published the draft Credit Rating Agencies (Amendments etc) (EU Exit) Regulations 2018 statutory instrument (SI) (to add to the explanatory information published on 8 October 2018). Other SIs published include the draft Market Abuse (Amendment) (EU Exit) Regulations 2018 SI (to add to the explanatory memorandum published on 21 November 2018), the Credit Institutions and Insurance Undertakings Reorganisation and Winding Up (Amendment) (EU Exit) Regulations 2018 and the Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2018.

Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018

SI 2018/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This draft enactment proposes to amend UK subordinate legislation and EU legislation and revoke EU legislation in order to address deficiencies in retained EU law in relation to anti-money laundering (AML) arising from the withdrawal of the UK from the EU. This is to ensure the legislation continues to operate effectively at the point at which the UK leaves the EU. It comes into force on exit day.

Alternative Investment Fund Managers (Amendment etc) (EU Exit) Regulations 2018

SI 2018/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This draft enactment proposes to amend UK subordinate legislation and EU delegated legislation and revoke EU delegated legislation in the field of financial services, relating to the regulation of alternative investment fund managers (AIFMs), in order to address deficiencies in retained EU law arising from the withdrawal of the UK from the EU. This is to ensure the legislation continues to operate effectively at the point at which the UK leaves the EU. It comes into force on exit day.

Brexit Bulletin—government publishes legal position statement on the Withdrawal Agreement

Following repeat calls for the government to publish the legal advice that it received on Brexit in full, the government published a reasoned position statement setting out the overall legal effect of the draft Withdrawal Agreement agreed in principle with the EU. Attorney General Geoffrey Cox made a statement to the House of Commons followed by questions, coming under fire for failure to publish the full legal advice in accordance with the motion passed on 13 November 2018, but declining to break convention, citing the public interest.

House of Lords publishes briefing on Financial Services (Implementation of Legislation) Bill in advance of second reading

The House of Lords Library published a briefing in advance of the second reading in the House of Lords of the Financial Services (Implementation of Legislation) Bill [HL] on 4 December 2018. The bill would provide a delegated power to enable HM Treasury to make corresponding or similar provision to specified pieces of EU financial services legislation in the event that the UK leaves the EU without a deal. The briefing notes that the financial services industry is of particular importance to the UK economy, contributing 6.5% of its total economic output. Currently, most financial services regulation is made at EU level and is either directly applicable or transposed into domestic law by secondary legislation.

No-Deal Brexit Could Be Worse Than Financial Crisis: BoE

A disorderly Brexit could send the U.K. economy into a deeper recession than the one that followed the 2008 financial crisis, the Bank of England (BoE) said Wednesday in a report modeling a worst-case scenario if Britain and Brussels fail to reach a deal. Without a transition period for a new trading relationship with the EU in place before the UK exits the bloc on March 29, house prices could fall 30%, unemployment could hit 7.5% and inflation could soar to 6.5%, according to the central bank's report.

BoE publishes survey on preparations for Brexit and results from Decision Maker Panel survey

The BoE published the results of a survey carried out by its agents, which looked at companies’ preparations for Brexit, to support the BoE’s analysis of the impact of EU withdrawal on the UK economy. In the same publication, the BoE also included the latest results from the Decision Maker Panel (DMP) survey, which was set up to help the BoE to monitor recent developments in the UK economy and assess the implications of the UK’s withdrawal from the EU.

FCA's Bailey denies political pressure over Brexit letters

Andrew Bailey, the chief executive of the FCA, denied claims that the watchdog came under government pressure to warn banks to slow down the pace of their Brexit relocation plans. During a parliamentary hearing, Bailey was asked to respond to media reports that the FCA was potentially pressured by government ministers to write letters to banks warning them against shifting their business away from the City. ‘We are not under political pressure. We wrote those letters under our own initiatives,’ Bailey told the Treasury Committee.

ESMA publishes latest Risk Dashboard indicating rising market nervousness and sensitivity linked to Brexit risks

ESMA issued the latest iteration of its Risk Dashboard (No. 4, 2018) covering risks in the EU's securities markets for Q3 2018. ESMA's overall risk assessment remains unchanged from Q2 2018 at high levels. Going forward, ESMA sees concerns over a potential no-deal Brexit increasingly weighing on economic and market expectations. ESMA considers that risks to business operations from Brexit as well as from cyber threats continue to be a major concern, leading operational risk to remain elevated with a negative outlook.

FMLC highlights legal uncertainties arising from draft Brexit SIs for investment funds

The Financial Markets Law Committee (FMLC) issued a paper that highlights legal uncertainties arising from the changes proposed by the draft Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018 and the draft Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2018. The draft SIs were published by HM Treasury in order to onshore EU legislation related to investment funds and their managers.

ICMA: Brexit FAQs

The International Capital Market Association (ICMA) updated its FAQs on Brexit. The Brexit FAQs consider certain issues that were raised with ICMA in light of the UK's proposed exit from the European Union. The FAQs are accessible on ICMA's website and are split into the following separate pages Global Master Repurchase Agreement (accessible to ICMA members only), primary markets (accessible to ICMA members only), secondary markets and asset management.

LMA outlines consequences of a no-deal Brexit scenario for EU lenders

In a paper entitled, ‘Turning off the Liquidity Tap-the consequences of a no-deal Brexit on the European loan market’, the Loan Market Association (LMA) warns of the number of regulatory issues in a lending context that could stem from a no-deal Brexit and the negative EU economic repercussions of the UK leaving the EU without a deal.

London to lose €800bn in bank exodus, German lobby warns

London will lose up to €800bn ($909bn) in assets to rival financial hub Frankfurt by March 2019 as banks start to transfer business to the city to avoid Brexit disruption, a German lobby group said Thursday. Frankfurt Main Finance (FMF) said that 37 financial institutions and banks, all based in London, applied to the European Central Bank (ECB) or new or extended visiting licenses to allow them to operate in the EU after Britain leaves the bloc. Thirty chose Frankfurt for their European headquarters, FMF said. The lobby group said it believes that more banks will apply for licenses, and approximately half a dozen more institutions opted for locations in other EU countries and are expanding their presence in Frankfurt.

Insurer wins UK court nod to transfer policies to EU

RSA Insurance Group PLC said it gained approval at the High Court in London to transfer European policies written in its UK subsidiary to its newly established hub in Luxembourg as it prepares to avoid Brexit disruption. RSA said on 4 December 2018 that the High Court granted a so-called Part VII transfer, which allows the company to move its European insurance business to RSA Luxembourg S.A.—an office recently opened by the group to allow it to continue serving customers within the EU.

Financial Conduct Authority updates

FCA committee to oversee internal 'independent lessons learned reviews'

Board minutes published by the FCA reveal that at its meeting on 25 October 2018, the FCA Board approved the creation of a committee to oversee the conduct of 'independent lessons learned reviews' of the supervisory intervention on interest rate hedging products and the involvement of the FCA and the Financial Services Authority in the Connaught Income Series 1 Fund.

Prudential requirements

BIS publishes summaries of BCBS and ICBS recent meetings to discuss global bank supervision and regulation

The Bank for International Settlements (BIS) published a summary of the recent meetings of the Basel Committee on Banking Supervision (BCBS) and the 20th International Conference of Banking Supervisors (ICBS) which took place on 28-29 November 2018. Topics addressed include revisions to the market risk framework and the Pillar 3 disclosure framework and cyber-resilience practices.

Council of the EU publishes details of December ECOFIN meeting

The Council of the European Union published details of a meeting to be held by the Economic and Financial Affairs Council (ECOFIN) in Brussels on 4 December 2018. Among other things, Ministers will take note of progress on work aimed at reducing risk in the banking industry and on a proposed European deposit insurance scheme. In particular, they are expected to endorse the result of the informal trilogue negotiation with the European Parliament on key risk reduction measures of the so-called 'banking package' (which concerns amendments to the Capital Requirements Directive (CRD IV), the Capital Requirements Regulation (CRR), the Bank Resolution and Recovery Directive (BRRD) and the Single Resolution Mechanism Regulation (SRM)). Ministers will also take stock of the implementation of the action plan to tackle non-performing loans in Europe.

COREPER invites the Council of the EU to endorse the results of Banking Package trilogues

The Council of the EU published a note from the Permanent Representatives Committee (COREPER) in which COREPER invites the Council to endorse the results of the trilogues on the Banking Package comprising amendments to CRD IV, CRR, the BRRD and the SRM.

European Parliament to consider BRRD II, CRR II and SRM II at plenary sessions on 15 to 18 April 2019

The European Parliament updated its procedure files which indicate that the Parliament will consider the proposed Directive amending the BRRD, the proposed Regulation amending CRR and the proposed Regulation amending the Regulation establishing the SRM at its plenary sessions commencing 15 April 2019.

EBA provides overview of CRD IV implementation and transposition

The European Banking Authority (EBA) updated all the information disclosed by EU competent authorities according to its implementing technical standards (ITS) on supervisory disclosure, which was published in the EU Official Journal on 4 June 2014. This information, published in an aggregated format, provides an overview of the implementation and transposition of the CRD IV and CRR across the EU.

EBA updates compliance table for BRRD 'failing or likely to fail' guidelines

The EBA published an updated compliance table for its guidelines on the interpretation of the different circumstances when an institution shall be considered as failing or likely to fail under Article 32(6) of the BRRD. According to the table, competent authorities from all EU Member States comply or intend to comply with the guidelines.

Major UK banks pass 'severe' Bank of England stress test

Britain’s seven major lenders passed the BoE’s annual evaluation of their capital holdings and could continue to meet borrowers’ demands even at a time of ‘very severe stress,’ the central bank said Wednesday. Lenders including Royal Bank of Scotland Group, HSBC and Santander UK proved themselves resilient in the face of the threat of domestic and global recessions more severe than those caused by the financial crisis, combined with a crash in asset prices and added hypothetical costs for misconduct.

Financial stability

FSB publishes fifth annual report

The Financial Stability Board (FSB) published its fifth annual report, which provides an update on the key activities of the FSB and its audited annual financial statements for the 12-month period ended 31 March 2018. During this period, the FSB pivoted from a primary focus on new policy development towards evaluating policies already implemented and addressing any unintended consequences.

ECB warns of threats to financial stability in the eurozone

The ECB published its Financial Stability Review (FSR) for November 2018. This edition of the FSR includes special features on counterparty and liquidity risks in exchange-traded funds, how euro area banks can reach sustainable profitability in the future, and the potential implications of the resurgence of protectionism for global financial stability.

Regulatory architecture

Council of the EU publishes decision on the position to be adopted concerning the amendment to Annex IX (Financial Services) to the EEA Agreement

The Council of the EU published a decision (2018/1867 of 26 November 2018) on the position to be adopted, on behalf of the EU, within the EEA Joint Committee, concerning the amendment of Annex IX (Financial Services) to the EEA Agreement. The decision seeks to incorporate Directive 2014/51/EU(Omnibus II Directive) and includes a number of amendments to Point 1, relating to the Solvency II Directive (2009/138/EC).

European Council endorses package of risk reduction measures but AFME says more work required to complete banking union

The Council of the European Union endorsed the agreement reached between the presidency and the European Parliament on key measures of a comprehensive legislative package aimed at reducing risks in the EU banking sector. The proposals, which were presented in November 2016 and include elements agreed by the BCBS and by the FSB, aim to implement reforms agreed at international level following the 2007-8 financial crisis to strengthen the banking sector and address outstanding challenges to financial stability.

Eurogroup announces package of measures for further EMU reform

The Eurogroup, an informal body where the ministers of the euro area Member States discuss matters regarding their shared responsibilities related to the euro, released a statement on EMU reform. Their work on EMU reform follows a mandate received from the Euro Summit in June 2018 and resulted in the Eurogroup agreeing on a comprehensive package to further strengthen EMU.

ECB opinion on the proposed regulation on the establishment of a European Investment Stabilisation Function

The ECB issued an opinion (CON/2018/51) on the Commission's proposal for a regulation on the establishment of a European Investment Stabilisation Function (EISF). The proposal forms part of a broader set of new instruments designed to create a more resilient euro area and the deepening of Economic and Monetary Union (EMU).

EU legislators approve appointment of Andre Enria as chair of ECB supervisory board

The European Parliament approved the appointment of Andrea Enria as the new chair of the supervisory board of the ECB. The General Secretariat of the Council of the EU recommended that the Council approve the adoption as well. The ECB submitted its proposal for the appointment of Mr Enria as the Chair of the Supervisory Board on 7 November 2018 to the European Parliament and Council for approval. The Parliament approved the appointment on 29 November 2018.

Joint letter by Presidents Tusk and Juncker on the upcoming G20 summit

President of the European Council Donald Tusk and President of the European Commission Jean-Claude Juncker will shortly be attending the G20 Summit in Argentina on 30 November–1 December, on behalf of the EU. In a joint letter, the Presidents set out the key issues which they will be discussing at the summit including the EU's aim to build a more resilient international monetary and financial system.

BoE publishes record of Financial Policy Committee meetings

The BoE published the record of meetings of its Financial Policy Committee (FPC) held on 20 and 27 November 2018. The FPC, which was formally established by the BoE in 2013, meets to identify risks to financial stability and agree policy aimed at safeguarding the resilience of the UK financial system.

Carney responds to Treasury's remit and recommendations for the FPC

The BOE published a letter from Mark Carney, Governor of the BoE and Chair of the FPC, to the Chancellor of the Exchequer, Philip Hammond MP, in response to Mr Hammond's letter on 29 October 2018 setting out the remit and recommendations for the FPC for the coming year. In the FPC's view, stress tests and supervisory actions ensured that major UK banks have enough capital and liquidity to withstand even a severe economic shock following a disorderly Brexit.

PRA Regulatory Digest for November 2018

The Prudential Regulation Authority (PRA) published its Regulatory Digest for November 2018. This highlights key regulatory news and publications delivered for the month. This issue includes details on internalised settlement reporting under the Central Securities Depositories Regulation (CSDR), changes to supervising remuneration compliance for Level One firms and PRA Direction ‘Temporary permission and variation: notification before exit day’.

Authorisation, approval and supervision

PRA publishes policy statement 30/18 (PS30/18) and updates to supervisory statements SS 32/15 and SS 34/15 relating to regulatory reporting for banking sector firms

The PRA published Policy Statement 30/18 'Regulatory reporting: Responses to CP16/18', updates to SS34/15 'Guidelines for completing regulatory reports' and SS32/15 'Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, and PRA 111' which include links to updated PRA, RFB and FSA templates and instructions available in the relevant sections. Firms in the banking sector (banks, building societies, investment firms and credit unions) need to provide regulatory returns to the PRA and the requirements in the policy and supervisory statements make changes to those returns.

Risk management and controls

ECB issues cyber resilience oversight expectations for FMIs

The ECB issued cyber resilience oversight expectations for financial market infrastructures (FMIs). The ECB's expectations are based on the global guidance on cyber resilience for FMIs, published by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) in June 2016.

Basel Committee issues report on cyber-resilience range of practices

The BCBS published a report entitled 'Cyber-resilience: range of practices', which identifies, describes and compares the range of observed bank, regulatory and supervisory cyber-resilience practices across jurisdictions. The report is based on an analysis of authorities' responses to previous international surveys, exchanges between international experts and industry participants' input, to provide insight into the effective practices and expectations currently in place.

Financial crime

European Council adopts conclusions on an action plan to tackle money laundering and terrorist financing

The Council of the European Union adopted conclusions on an action plan to better tackle money laundering and terrorist financing through enhanced monitoring. The conclusions set out several short-term non-legislative actions to address key objectives. The action plan is the latest move to strengthen the European rules on AML and terrorist financing, which have been strengthened considerably in past years with two consecutive reforms being adopted since 2015.

FCA conduct requirements

Responsibility for accuracy of financial promotions (Ford and another v Financial Conduct Authority)

 Ford and another v Financial Conduct Authority examined questions of due diligence and where responsibility lies for accuracy of financial promotions. The findings of the tribunal in this case are instructive for senior management as they emphasise the following points:

  • the importance for distributors to have an effective approach to due diligence of products and product providers—it is not enough for distributors to rely on representations and the involvement of ‘blue chip’ firms in determining whether products are sound and suitable for distribution, particularly when distributing complex products to retail investors, and
  • responsibility for ensuring the accuracy of financial promotions rests with senior executives—the mere fact that there has been delegation within an organisation does not shift this responsibility

For further information, see: Stewart Owen Ford and Mark John Owen v The Financial Conduct Authority: [2018] UKUT 0358 (TCC).

Enforcement and redress

Anderson and others v Sense Network Ltd

Financial services—Financial advice. The claimant alleged victims of a fraudulent Ponzi scheme failed in their claims against the defendant company for which the company of the scheme's mastermind had become appointed representative. The Commercial Court dismissed claims based on s 39 of the Financial Services and Markets Act 2000, ostensible and actual authority, and breach of the supervisory duties. For the full judgment, see: [2018] All ER (D) 14 (Dec).

Mark Starling sentenced to five years' imprisonment in FCA prosecution of £3m investment fraud

In a case brought by the FCA, Mark Starling was found guilty of defrauding investors of just under £3m in relation to unauthorised investment schemes operated between 2008 and 2017. Mr Starling received a sentence of five years' imprisonment for an offence of Fraud by False Representation under Section 1 of the Fraud Act 2006 and a concurrent sentence of 12 months imprisonment for Breach of the General Prohibition under s19 of the Financial Services and Markets Act 2000 (FSMA 2000) in that he operated a collective investment scheme without being FCA authorised or exempt.

FCA publishes Decision Notice against former CEO of Sonali Bank (UK) Ltd for AML failings

The FCA published a Decision Notice against Mohammad Ataur Rahman Prodhan, the former Chief Executive Officer of Sonali Bank (UK) Ltd (SBUK), fining him £76,400 for AML failings. The Decision Notice sets out the reasons for the FCA's decision to fine Mr Prodhan, stating that he acted without due skill, care and diligence and was knowingly concerned in a breach by SBUK of its obligations to maintain effective AML systems.

SFO announces end of UK's first Deferred Prosecution Agreement

The Serious Fraud Office (SFO) announced the end of the UK's first Deferred Prosecution Agreement (DPA), confirming that Standard Bank PLC (now known as ICBC Standard Bank PLC) had fully complied with its terms. The DPA required Standard Bank to pay nearly $26m in fines and disgorgement of profits, and to pay $6m in compensation to the Government of Tanzania.

John Glen sets out the government's position on financial services dispute resolution for SMEs

The government published an open letter in which John Glen MP, Economic Secretary of the Treasure, explains the government's position on financial services dispute resolution for small and medium enterprises (SMEs) to Kevin Hollinrake MP, co-chair of the All Party Parliamentary Group on Fair Business Banking.

PIMFA calls for FSCS review following interim levy announcement

The Personal Investment Management & Financial Advice Association (PIMFA), the trade association for investment managers and financial advisers, called for an urgent review of the Financial Services Compensation Scheme (FSCS) following a further announcement of an interim levy that the industry will be required to pay for.

EFDI publishes Non-Binding Guidance Paper on alternative funding

The European Forum of Deposit Insurers (EFDI), the international non-profit association whose purpose is to contribute to the stability of financial systems by strengthening the role of Deposit Guarantee Schemes (DGSs), published a non-binding Guidance Paper on deposit guarantee schemes' alternative funding policy. It contains a set of recommendations for various features of alternative funding arrangements.

UK Finance sets out proposals in response to review of ADR for SMEs

UK Finance outlined a series of voluntary proposals that agreed upon by the banking and finance industry in response to the recommendations of Simon Walker's independent review of alternative dispute resolution (ADR) for SMEs. The proposals include supporting the extension of the mandate and scope of the Financial Ombudsman Service (FOS) to include most SMEs and funding an interim scheme for larger SMEs.

Markets and trading

Council of the EU agrees negotiating stance on revised supervisory framework for CCPs

The Council of the EU announced that EU Member States reached a compromise position on how EU and third country central counterparties (CCPs) should be supervised in the future, taking account in particular of the effects of Brexit on the European financial system. The Presidency of the Council and the European Parliament are now able to begin trilogue negotiations on the European Commission's June 2017 proposal for a Regulation amending Regulation (EU) 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority) and amending EMIR as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third country CCPs.

ESMA publishes 2018 report on market share calculation for CRAs

ESMA published its annual report setting out market share calculations for EU registered credit rating agencies (CRAs). The market share calculation is published annually to enable issuers and related third parties to evaluate which CRAs have no more than 10% total market share in the EU, for the purposes of complying with Regulation (EC) 1060/2009 (the CRA Regulation).

ESMA updates EMIR Q&As

ESMA updated its Q&A document on implementation of EMIR. The updated Q&As relate to the segregation level for indirect clearing accounts under Commission Delegated Regulation (EU) 2017/2155(OTC question 18b) and margin requirements under Article 41 of EMIR (CCP question 9).

ESMA updates list of market makers and authorised primary dealers who are using SSR exemption

ESMA updated the list of market makers and authorised primary dealers who are using the exemption under the Short Selling Regulation (EU) 236/2012 (SSR).

ESMA updates list of SFD designated payment and securities settlement systems

ESMA updated the list of payment and securities settlement systems designated by Member States under Article 10(1) of the Settlement Finality Directive 98/26/EC (SFD).

ISDA updates OTC Derivatives Compliance Calendar

The International Swaps and Derivatives Association (ISDA) updated its global calendar of compliance deadlines and regulatory dates for the OTC derivatives space.

ISDA updates information on initial and variation margin requirements for derivatives

ISDA published an updated version of its summary chart of derivatives which are subject to regulatory initial and variation margin requirements in jurisdictions which have final requirements for regulatory margin. ISDA points out that the document is intended as an information resource only and does not contain legal advice.

EMMI extends publication of Euribor under the Act/365 and 30/360 count basis until March 2019

The European Money Markets Institute (EMMI) announced that it will continue publishing Euribor calculated under the Act/365 and 30/360 day count conventions on its website until 31 March 2019. In addition, the data dissemination by the usual distribution vendors will be prolonged until 1 February 2019. Euribor under its official Act/360 day count convention is not affected by the decision and will continue to be published beyond this date.

ICE Benchmark Administration launches LIBOR survey

ICE Benchmark Administration Limited (IBA) launched a short survey on the use of London Interbank Offered Rate (LIBOR) currencies and tenors to inform its work in seeking the support of globally active banks for the publication of certain LIBOR settings after year-end 2021. The survey, which seeks to identify the LIBOR settings that are most widely used, is open to all users of LIBOR and will close for responses on February 15, 2019.

FIA calls on SEC and CFTC to harmonise regulatory frameworks

The FIA submitted a letter to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) proposing several areas where the agencies could coordinate and harmonise their regulatory programs for cleared derivatives. The FIA focused in particular on simplifying rules that apply to firms that are dually registered as futures commission merchants with the CFTC and as broker-dealers with the SEC. The FIA also proposed codifying certain exemptions for security-based swaps.

Regulation of capital markets

Securitisation Regulations 2018

SI 2018/1288: Provisions are made to gives effect to Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amends amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) 1060/2009 and (EU) 648/2012 (the EU Securitisation Regulation 2017) in the UK. The Regulations will come into force on 1 January 2019.

ESAs issue statement on Securitisation Regulation compliance challenges

The European Supervisory Authorities (ESAs) published a joint statement in response to industry concerns relating to severe operational challenges in meeting the transitional provisions of the Securitisation Regulation disclosure requirements, as well as in complying with the EU requirements on risk retention, transparency, re-securitisation and criteria for credit-granting obligations on a consolidated basis by EU credit institutions engaged in local securitisation activities in third countries.

Commission's Valdis Dombrovskis speech on Capital Markets Union

Vice President of the European Commission, Valdis Dombrovskis, gave the keynote speech at the NASDAQ Nordic Financial Ecosystems Conference entitled 'Capital Markets Union (CMU)—Time for Renewed Efforts to Deliver'. Mr Dombrovskis discusses the Commission's recent report on CMU and what he considers to be the future of finance and of the CMU, namely sustainable finance and Fintech. Mr Dombrovskis considers that now is the time to do a final push to build a genuine single market in capital. He states that of the 13 CMU legislative proposals proposed by the Commission, 10 are with EU co-legislators.

Verena Ross discusses ESMA's role in European CMU

The executive director of ESMA, Verena Ross, gave the keynote address at the International Investors' Conference, entitled 'European Capital Markets Union—Update and Future'. Ms Ross reviews progress made with regards to the CMU initiative with a particular focus on the role of ESMA. Ms Ross describes the CMU initiative as crucial for building an integrated European Union single market as a unique area of investment opportunities. She considers the CMU Action Plan launched in 2015 and its Mid-term review (June 2017).

AFME welcomes call to redouble efforts on Capital Markets Union

The Association for Financial Markets in Europe (AFME) welcomed the European Commission’s call for action to prioritise dossiers before the end of this legislature. This would send a strong signal of commitment to developing Europe’s capital markets. The AFME stressed that building a CMU with a banking union remains essential to strengthening the EU financial system. The priority dossiers include the insolvency reform directive, sustainable finance and investment firms review.

Investment funds and asset management

ECON votes on cross-border collective investments

The economic and monetary affairs committee (ECON) of the European Parliament voted on proposed new provisions relating to collective investment funds. The provisions relate to cross-border distribution of EU-regulated alternative investment funds (AIFs) and undertakings for collective investment in transferable securities (UCITS), in particular regarding marketing and pre-marketing and denotification of those funds and the exemption of UCITS from the packaged retail investment and insurance products (PRIIPs) requirements.

Investment Association consults on including ETFs in fund sectors

The Investment Association (IA) opened a consultation on the proposed inclusion of exchange traded funds (ETFs) in the IA fund sectors, in recognition of the growing number of ETFs. The consultation will close on 1 February 2019. Respondents are invited to comment on the potential benefits and drawbacks of including ETFs in the IA sectors, as well as the best means for their inclusion.

Banks and mutuals

Banks and Building Societies (Priorities on Insolvency) Order 2018

SI 2018/1244: Provisions are made to implement EU Directive 2017/2399/EU which amends the EU’s banking recovery and resolution directive, specifically the ranking of unsecured debt within the insolvency hierarchy in the UK. This instrument provides for a new class of secondary non-preferential debt to be issued by financial firms. The Order will come into force on 19 December 2018.

HMT publishes feedback from Draft Banks and Building Societies (Priorities on Insolvency) Order 2018: technical consultation

HM Treasury published feedback from the Draft Banks and Building Societies (Priorities on Insolvency) Order 2018: technical consultation. It summarises the feedback received to the consultation and provides an update on the government's approach to the transposition of the EU Bank Creditor Hierarchy Directive.

EBA publishes end of term of office report of its Banking Stakeholder Group

The EBA today published the end of term of office report (ETOR) of its officially designated advisory group, the Banking Stakeholder Group (BSG). The ETOR, which covers the period between April 2016 and October 2018, summarises the work of the BSG's five technical working groups and other relevant activities of the BSG and sets out some lessons, challenges and recommendations for the future.

Islamic Financial Services Board announces dissemination of data on Islamic Banking systems

The Islamic Financial Services Board (IFSB) announced the dissemination of country-level data on financial soundness and growth of the Islamic Banking system for 21 IFSB member jurisdictions. A special feature of this dissemination is the inclusion of Islamic banking data of Afghanistan for the first time as one Islamic banking window. The total assets of the Islamic banking industry grew by 1.7% from 2017 and financing Islamic banks from jurisdictions participating in the Prudential and Structural Islamic Financial Indicators (PSIFIs) grew by 1.9%.

Payment services and systems

European Commission adopts RTS on electronic central register under PSD2

The European Commission adopted a delegated regulation supplementing Directive (EU) 2015/2366(PSD2) with regard to RTS setting technical requirements on the development, operation and maintenance of the electronic central register within the field of payment services and on access to the information contained therein. The delegated regulation was adopted pursuant to Article 15(4) of PSD2 and is based on RTS that were drafted by the EBA and submitted to the Commission in December 2017 following a public consultation. It will enter into force 20 days after its publication in the Official Journal of the EU.

EBA publishes final ASPSP Guidelines on the exemption from the fallback mechanism under PSD2

The EBA published its final Guidelines on the conditions that account servicing payment service providers (ASPSPs) must meet to be exempted from the obligation to implement the fallback mechanism under Commission Delegated Regulation (EU) 2018/389 on strong customer authentication and common and secure communication (RTS on SCA and CSC) made under PSD2. The Guidelines are intended to provide clarity to ASPSPs and national competent authorities (NCAs) regarding the elements that should be considered for an exemption and to ensure a consistent application of the conditions for an exemption across all EU Member States.

BoE publishes Consultation Response: A Global Standard to Modernise UK Payments, ISO 20022

The BoE, Pay.UK (the leading retail payments authority in the UK) and the Payments Systems Regulator (PSR) (together 'the Regulators') published a response to the consultation on the adoption of a common global messaging standard, known as 'ISO 20022'. Over the summer, the Regulators consulted on the adoption of ISO 20022, for payments in the UK.

EPC publishes 2018 Payment Threats and Fraud Trends Report

The European Payments Council (EPC) published the 2018 Payment Threats and Fraud Trends Report. This provides an overview of the most important threats that affect electronic payments and, for each threat, an analysis of the impact and the context and suggested controls and mitigating measures.

TARGET instant payment settlement (TIPS) goes live

The TARGET instant payment settlement (TIPS) went live on 30 November 2018, the ECB announced. The first transaction took place immediately, when a client of the Spanish bank, CaixaBank, used TIPS to make an instant payment to a client of the French bank, Natixis. TIPS was launched by the ECB to provide a pan-European service for settling electronic payments instantly. It uses central bank money to settle payments individually in less than 10 seconds.

SEPA schemes to cover Andorra and the Vatican City State from 1 March 2019

The EPC announced that the Principality of Andorra and the Vatican City State/the Holy See will be part of the geographical scope of the Single Euro Payments Area (SEPA) schemes from March 2019. All existing EPC scheme participants should be able to send or to receive SEPA Credit Transfer (SCT), SEPA Instant Credit Transfer (SCT Inst) and SEPA Direct Debit (SDD) transactions to and from SCT, SCT Inst and SDD scheme participants from the Principality of Andorra and the Vatican City State/the Holy See as and when their financial institutions join these schemes.

EU investigation: Commission launches market test on proposed commitments offered by Visa and MasterCard for MIFs for non-EEA consumers

On 4 December 2018, the European Commission announced it is seeking comments on commitments offered separately by Visa and Mastercard to address competition concerns relating to inter-regional interchange fees for payment card transactions (Cases AT 39398 (Visa) and AT 40049 (Mastercard)). The Commission is concerned that inter-regional multilateral interchange fees (MIFs) may anti-competitively increase prices for European retailers accepting payments from cards issued outside the EEA and in turn lead to higher prices for consumer goods and services in the EEA. To address the Commission's concerns, Mastercard and Visa each separately offered commitments to would reduce the inter-regional MIFs by at least 40%. The commitments would apply for a period of five years and six months. Period for comment ends on 4 January 2019.

Insurance and pensions

Commission responds to ECON concerns on Solvency II review

ECON published correspondence with Valdis Dombrovskis, Vice-President of the European Commission, on the review of the implementing measures contained in Delegated Regulation (EU) 2015/35 under Solvency II (Directive 2009/138/EC), and two technical advices that the European Insurance and Occupational Pensions Authority (EIOPA) prepared for this review.

EIOPA publishes new Q&As on regulation

EIOPA published new sets of Q&As on regulation. The new Q&As relate to Commission Implementing Regulation (EU) 2015/2450 laying down ITS with regard to the templates for the submission of information to the supervisory authorities under the Solvency II Directive 2009/138/EC, and Commission Delegated Regulation (EU) 2015/35 (the Solvency II Delegated Act).

FCA advises IDD firms on delivering clear, fair outcomes for consumers

The FCA published a new webpage on delivering clear and fair outcomes for consumers under the Insurance Distribution Directive (Directive (EU) 2016/97) (IDD)). The IDD replaced the Insurance Mediation Directive (IMD) on 1 October 2018. As a result, there are a number of requirements in the FCA Handbook which apply to firms distributing insurance.

DWP consults on pensions dashboard

The Department of Work and Pensions (DWP) launched a consultation on Pensions dashboards: Working together for the consumer. The consultation closes on 28 January 2019. A pensions dashboard is a service which will let people access their pension information in a single place online, in a clear and simple form. Putting individuals in control of their data, it will bring together their pensions information from multiple sources, which can then be accessed at a time of their choosing. The government committed to facilitating industry to lead the creation of pensions dashboards to deliver the best of industry innovation and is prepared to legislate to compel pension schemes to provide their data for dashboards, and to take steps to provide State Pension data via dashboards.

PIMFA responds to Government publication of Pension Dashboard consultation

PIMFA welcomed the publication of the government's consultation on the feasibility of a pension dashboard (or pension dashboards). PIMFA expressed its support for a pension dashboard for consumers, while voicing concerns about the potential impact of multiple dashboards on consumer decision making.

Scam awareness campaign prompts tens of thousands of pension holders to seek information

The number of people seeking information about pension scams soared since the launch of the first joint campaign by the FCA and The Pensions Regulator (TPR) this summer. In the 55 days before the launch around 31,000 people visited the ScamSmart website at an average of 562 per day. In the 55 days after the launch this rose five-fold (462%) to more than 173,000 people – an average of 3,145 per day and the equivalent of one every 27 seconds. Additionally, over 370 pensions holders were warned about an unauthorised firm after using the Warning List, an online tool that helps consumers check a list of firms operating without authorisation.

Fintech and virtual currencies

Members of European Parliament call for business data protection guarantee on using blockchain

The Committee on Civil Liberties, Justice and Home Affairs (LIBE) published an opinion on blockchain and trade policy. LIBE underlines that businesses using blockchain must respect the General Data Protection Regulation (EU) 2016/679 (GDPR) to the rectification and erasure of their data. This opinion was published in response to an earlier draft report by the European Parliament’s Committee on International Trade, which flagged the potential for blockchain to cut up to $1trn in costs associated with global trade.

ESMA speech on developments in RegTech and SupTech

Patrick Armstrong, senior officer, Financial Innovation at ESMA, gave a speech on developments in RegTech and SupTech. RegTech (regulatory technology) utilises information technology to enhance regulatory processes. SupTech (supervisory technology) is the use of innovative technology in financial supervision.

FINMA publishes guidelines on its new FinTech licence

Switzerland's Financial Market Supervisory Authority (FINMA) published guidelines to assist interested parties when applying for the new FinTech licence. The FinTech licence allows institutions to accept public deposits of up to CHF 100m, provided that these are not invested, and no interest is paid on them. A further requirement is that an institution with a FinTech licence must have its registered office and conduct its business activities in Switzerland.

Sustainable finance

ECB speech by Yves Mersch on climate change and central banking

​The ECB published a speech by Yves Mersch, Member of the Executive Board of the ECB, on climate change and central banking. Ms Mersch discussed whether there is a role for central banks in contributing to finding, or financing, solutions to climate change. Ms Mersch considers both sides of the argument as to whether climate risks can create a new mandate or objective for a central bank. Among other observations, she notes that economic literature suggest that climatic events are hardly relevant for monetary policy as the monetary policy impacts are similar to those associated with other major shocks like wars or disruptive technological innovation. She further observes that the impact of climatic disasters on inflation in advanced economies appears relatively limited.

Dates for your diary

Date Subject Event
7 December 2018 Consumer Credit The deadline for responses to FCA ‘CP18/33: Regular premium PPI complaints and recurring non-disclosure of commission – feedback on CP18/18, final guidance, and consultation on proposed mailing requirements’ is on 7 December 2018.
7 December 2018 FCA Handbook The deadline for responses to FCA ‘CP18/28: ‘Brexit: proposed changes to the Handbook and Binding Technical Standards—first consultation’’ is on 7 December 2018.
7 December 2018 Regulatory architecture The deadline for responses to FCA ‘CP18/29: Temporary permissions regime for inbound firms and funds’ is on 7 December 2018.
7 December 2018 Insurance The deadline to respond to EIOPA’s request for feedback on long-term illiquid liabilities is 7 December 2018.
7 December 2018 Regulatory reporting requirements The deadline for feedback to the EBA’s consultation on the new draft version of Data Point Model (DPM) 2.9 is 7 December 2018.
7 December 2018 Insurance The deadline for feedback to the  consultation of the European Commission on proposed amendments to the implementing rules in  Delegated Regulation (EU) 2015/35, which supplements Directive 2009/138/EC and which proposes to introduce prudential criteria that would reduce the capital charges in the standard formula for insurers' unrated debt and unlisted equity investments is 7 December 2018.
10 December 2018 Brexit The Treasury Committee will write to all MPs based on the evidence it received in relation to the Withdrawal Agreement, before the House of Commons comes to vote on the Agreement.
10 December 2018 Payment services The deadline for applications to the BoE and Pay.UK open call for interest for members of the payments industry wishing to join a newly created Standards advisory panel, jointly run by the two bodies is 10 December 2018.
10 December 2018 Senior Managers and Certification Regime The final rules in ‘PS 27/18: Strengthening accountability: implementing the extension of the SM&CR to insurers (Part 2)’ will apply with effect from 10 December 2018.
10 December 2018 Senior Managers and Certification Regime Most of the changes in FCA Handbook Notice No. 58 which includes the Individual Accountability (Dual-Regulated Firms) Instrument 2018 (FCA 2018/45) that makes extensive changes to numerous sections of the Handbook to reflect the extension of the SM&CR to insurers come into force on 10 December 2018.
10 December 2018 Senior Managers and Certification Regime Comments on FCA draft guidance, ‘GC18/4: Senior Managers and Certification Regime—Proposed guidance on statements of responsibilities and responsibilities maps for FCA firms’ which aims to give FCA solo-regulated firms practical assistance and information on preparing statements of responsibilities (SoRs) and responsibilities maps (and may also be of interest to dual-regulated firms already subject to the SM&CR, when preparing new SoRs and responsibilities maps, or reviewing existing ones) are requested by 10 December 2018.
10 December 2018 Senior Managers and Certification Regime The Senior Managers and Certification Regime will be extended to include insurance firms from this date.
10 December 2018 Financial crime The FCA will be holding a showcase day on 10 December 2018 for interested organisations to demonstrate their technology and discuss how this could contribute to the FCAs 2019 AML & Financial Crime TechSprint.
12 December 2018 Prudential Requirements The deadline for responses to PRA consultation paper CP19/18: Regulatory reporting: EBA Taxonomy 2.9 is 12 December 2018.
Filed Under: Weekly Highlights

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