FS weekly highlights—7 February 2019

FS weekly highlights—7 February 2019

In this issue



Financial Conduct Authority updates

European Securities and Markets Authority updates

Prudential requirements

Regulatory architecture

Authorisation, approval and supervision

Risk management and controls

Financial crime

Enforcement and redress

Markets and trading


Regulation of derivatives

Regulation of capital markets

Investment funds and asset management

Banks and mutuals

Consumer credit, mortgage and home finance

Insurance and pensions

Payment services and systems

Sustainable finance

Dates for your diary




BoE and ESMA agree MoUs on CCPs and CSD

The European Securities and Markets Authority (ESMA) agreed memoranda of understanding (MoUs) with the Bank of England (BoE) for the recognition of central counterparties (CCPs) and the central securities depository (CSD) established in the UK, that would take effect should the UK leave the EU without a withdrawal agreement—a no-deal Brexit scenario. ESMA previously communicated, in its public statements of 23 November and 19 December 2018, that its board of supervisors supports continued access to UK CCPs and to the UK CSD, in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU. It will also allow the UK CSD to continue to serve Irish securities, and to limit the risk of disruption to the Irish securities market.

FCA agrees no-deal Brexit MoUs with ESMA and EU regulators

The Financial Conduct Authority (FCA) agreed MoUs with ESMA and EU securities regulators. The MoUs cover cooperation and exchange of information in the event the UK leaves the EU without a withdrawal agreement and implementation period. The MoUs will therefore only take effect in the event of a no-deal Brexit scenario. The MoUs will support cross-border supervision of firms and allow the FCA to share information with its EU counterparts. They are similar to those already concluded by EU regulators on the exchange of information with many third country supervisory authorities. Andrew Bailey, Chief Executive of the FCA, said that the MoUs should minimise the potential for disruption, which is 'particularly important' for the investment management sector, credit rating agencies (CRAs) and trade repositories (TRs).

FCA explains how it will use the temporary transitional power if there is a no-deal Brexit

The FCA set out how it would use the temporary transitional power in the event the UK leaves the EU without an agreement. The FCA intends to use this power to ensure that firms and other regulated entities do not generally need to prepare now to meet the changes to their UK regulatory obligations that are connected to Brexit. The FCA also set out the areas where it would not make transitional provision and consequently expects firms and other regulated persons to start preparing now to comply with these post-exit regulatory obligations.

FCA publishes instructions for post-Brexit Financial Instruments Reference Data System

The FCA published instructions on how to access and download full and delta reference files from its Financial Instruments Reference Data System (FIRDS), which was built to replace the ESMA FIRDS in the UK as part of the FCA’s planning for Brexit. UK and EU market participants will need to make use of the instrument reference data for the purpose of complying with the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 and the associated Binding Technical Standards.

FCA publishes webpage on requirements for UK trade repositories and reporting counterparties in no-deal Brexit scenario

The FCA published a webpage which provides information on the requirements applicable to UK TRs and reporting counterparties if the UK leaves the EU without a withdrawal agreement (a no-deal scenario). The FCA will become the UK regulator of TRs after Brexit. Any TR wishing to offer its services in the UK will need to be registered with, or recognised by, the FCA. The FCA expects to publish detailed guidance relating to the UK TR regime shortly. This will cover the obligations of UK TRs and UK reporting counterparties and will seek to minimise potential disruption for market participants.

ESMA issues statement on use of UK data in ESMA databases under a no-deal Brexit

ESMA published a statement on the use of UK data in ESMA databases and the performance of Markets in Financial Instruments Directive (MiFID II) calculations in the event of a no-deal Brexit. The statement addresses the impact on ESMA's databases if the UK leaves the EU without a withdrawal agreement in place. ESMA's statement confirms that in the event of a no-deal Brexit, the UK's FCA will stop sending data to ESMA and will cease to be granted access to ESMA's IT applications and databases, and from 30 March 2019 onwards no new UK-related data will be received and processed by ESMA or published on the ESMA website. The FCA also published a statement, welcoming ESMA’s statement and confirming that by the end of February 2019, the FCA expects to set out its approach to using its temporary powers to operate MiFID II in the UK.

ESMA updates its Q&A on Prospectuses and the Transparency Directive in the event of no-deal Brexit

ESMA added new Q&As to its Q&A documents on Prospectuses and the Transparency Directive to cover the situation where the UK withdraws from the EU without a withdrawal agreement in place. In relation to prospectuses, the new Q&As deal with the situation where either (1) a third-country issuer chose the UK as its home Member State for prospectus approval or (2) an issuer lists the UK as its home Member State for prospectus approval due to its registered office being in the UK. In relation to the Transparency Directive, the new Q&A deals with the scenario where the UK withdraws from the EU without a withdrawal agreement in place and the obligations imposed on issuers under the Transparency Directive in relation to disclosing their choice of new home Member State.

ESMA issues guidance on derivatives reporting in event of no-deal Brexit

ESMA issued a public statement on how derivatives data reported under the European Market Infrastructure Regulation (EMIR) should be handled in the event of UK leaving the EU without a withdrawal agreement. The statement clarifies a number of aspects for different reporting scenarios and sets out the timeline for completion of the relevant adjustments by EU TRs. EMIR mandates the reporting of all derivatives to ESMA-supervised TRs, who centrally collect and maintain the records of all derivative contracts. EMIR requires both counterparties to a derivative contract to report its details to TRs.

Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019

SI 2019/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 and revoke provisions of UK primary and subordinate legislation in relation to financial services and markets in order to address deficiencies arising from the withdrawal of the UK from the EU, ensuring that the UK’s financial services legislative framework continues to operate effectively in a scenario where the UK leaves the EU without an agreement. It comes into force partly on the day after which these draft Regulations will be made and fully on exit day.

Draft Financial Services Brexit SI: The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019

The draft Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 statutory instrument (SI) published by HM Treasury on 5 February 2019 addresses deficiencies in UK domestic law and retained EU law arising from the UK’s withdrawal from the EU in line with the approach taken in other financial services EU exit instruments under the European Union (Withdrawal) Act 2018 (EU(W)A 2018). Additionally, the SI also revokes a number of pieces of retained EU law and UK domestic law which would be inappropriate to keep on the statute book after exit as they deal with cross-border activity in the EU and the functioning of EU institutions.

Draft Financial Services Brexit SI: The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019

The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019 SI published by HM Treasury on 6 February 2019 seeks to preserve the overall pre-exit regulatory position in relation to Gibraltar notwithstanding amendments made to other financial services legislation under the EU(W)A 2018, unless specifically provided otherwise, to support market access between the UK and Gibraltar. It includes plans for maintaining existing treatments for depositor and policyholder protection, and clarifies home-host powers of intervention in respect of incoming firms, among others. The explanatory information relating to The Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019 first published on 19 December 2018 was updated to reflect the new SI.

Financial sanctions regime―no deal Brexit guidance

The government published new statutory guidance on financial sanctions to be applied by the UK after Brexit. Some of the guidance applies only if the UK leaves the EU without a deal. The position will vary if the Withdrawal Agreement is approved, so practitioners are advised to bookmark and monitor the relevant guidance pages for updated guidance. The UK currently implements EU and UN sanctions through EU legislation and related domestic legislation. The Sanctions and Anti-Money Laundering Act 2018 (SAMLA 2018) was passed to enable the continued application of these regimes in the UK after Brexit. Secondary legislation being introduced under SAMLA 2018 will transfer existing EU sanctions into UK law, but the relevant SIs will not come into force immediately on exit day if the UK leaves the EU with a deal in place.

Iran (Sanctions) (Human Rights) (EU Exit) Regulations 2019

SI 2019/134: This enactment is made in exercise of legislative powers under SAMLA 2018 in preparation for Brexit. This enactment amends UK subordinate legislation and revokes other subordinate legislation and retained direct EU legislation to ensure that the UK can operate an effective sanctions regime in relation to Iran after the UK leaves the EU. When these Regulations come into force they will replace, with substantially the same effect, the EU sanctions regime relating to Iran which is currently in force under EU legislation and related UK Regulations.

Venezuela (Sanctions) (EU Exit) Regulations 2019

SI 2019/135: This enactment is made in exercise of legislative powers under SAMLA 2018 in preparation for Brexit. This enactment revokes UK subordinate legislation and retained direct EU legislation to ensure that the UK can operate an effective sanctions regime in relation to Venezuela after the UK leaves the EU. When these Regulations come into force they will replace, with substantially the same effect, the EU sanctions regime relating to Venezuela which is currently in force under EU legislation and related UK regulations. This sanctions regime is aimed at encouraging the Government of Venezuela to respect democratic principles and the rule of law, and to comply with international human rights law.

Burma (Sanctions) (EU Exit) Regulations 2019

SI 2019/136: This enactment is made in exercise of legislative powers under SAMLA 2018 in preparation for Brexit. This enactment revokes UK subordinate legislation and retained direct EU legislation to ensure that the UK can operate an effective sanctions regime in relation to Burma after the UK leaves the EU. When these Regulations come into force they will replace, with substantially the same effect, the EU sanctions regime relating to Burma which is currently in force under EU legislation and related UK regulations. This sanctions regime is aimed at encouraging the Burma Security Forces (and in particular the Tatmadaw) to comply with international human rights law and to respect human rights.

European Parliament and Commission approve changes to EIB statute to reflect Brexit

The European Parliament approved a proposed amendment to the statute of the European Investment Bank (EIB) to reflect the withdrawal of the UK from the EU, which will bring an end to its membership in the EIB, and to make some other changes to the statute. The European Parliament approved the proposal on 15 January 2019. In an opinion, the European Commission also endorsed the changes, subject to some considerations. All amendments proposed by the EIB to its statute are envisaged to take effect immediately on the withdrawal of the UK from the EU.

UK infrastructure bank may be needed to replace EIB funding post-Brexit

The House of Lords EU Financial Affairs Sub-Committee published its report titled ‘Brexit: the European Investment Bank’, which calls for the government to consider establishing a UK infrastructure bank, ahead of the UK leaving the European Union. Since joining the EU in 1973, the UK’s infrastructure enjoyed more than €118bn of lending from the EIB. The report states that the UK will lose access to the EIB after Brexit and the government should therefore consult on establishing a UK infrastructure bank.

FMLC publishes report on issues of legal uncertainty arising in the context of emissions allowances after Brexit

The Financial Markets Law Committee (FMLC) published a report titled ‘UK Withdrawal from the EU: Issues of Legal Uncertainty Arising in the Context of Emissions Allowances’. The UK’s withdrawal from the EU raises various issues of legal uncertainty relating to the EU emissions trading scheme (the ‘EU ETS’) and the European emissions allowances (‘EAUs’), whether the UK leaves the EU ETS from the date of exit (as is expected in the event of a hard Brexit) or stays in the EU ETS until the end of 2020. This paper examines the legal complexities which will arise from the UK’s withdrawal from the EU ETS in the event that no agreement is reached regarding its future participation beyond March 2019 or the current phase III of the EU ETS ending in 2020.

Royal London Mutual Insurance Society obtains approval for £1bn Brexit transfer scheme

On 5 February 2019, the High Court approved plans for Royal London Mutual Insurance Society, the UK's largest mutual insurer, to transfer £1bn of European business to Ireland, over concerns about the uncertainties surrounding a no-deal Brexit. In a short hearing, Mr Justice Snowden sanctioned the insurer's plan to move hundreds of thousands of policies belonging to European customers that are currently managed in the UK to a newly created Royal London subsidiary operating in Ireland. The 22 page order found it was ‘reasonable’ for Royal London's board to avoid the risk of its UK business losing its passporting rights, which allow it to serve European customers from London, in the event the UK leaves the EU without a deal.

ICO to audit Leave.EU, Eldon Insurance after issuing fines totalling £120,000

The Information Commissioner’s Office (ICO) is set to carry out an audit of data protection practices at Leave.EU and Eldon Insurance (GoSkippy Insurance). This comes after both companies were issued with fines totalling £120,000 in November 2018 for breaching electronic marketing law by sending unlawful marketing messages. An investigation by the ICO revealed close links between Leave.EU and Eldon Insurance. It was found that systems intended to separate the personal data of insurance customers from that of political subscribers were inefficient.

New paper on Brexit and international transfers of personal data published

Information Law Analysis: The Data Protection Intelligence Group published a paper on Brexit and international personal data transfers: Practical approaches for the private sector in a time of uncertainty. The Lexis®PSL Information Law team explain the background to the paper and the issues it covers. The paper is available here


Financial Conduct Authority updates


FCA policy development update for February 2019

The FCA published the latest version of its policy development update, which provides information on its recent and upcoming publications. The FCA is planning to publish a number of policy statements, including in relation to its High Cost Credit Review between March and June 2019 and also intends to launch a consultation and discussion on Investment Platforms (Market Study remedies) in March 2019.

FCA invites applications from innovative firms for GFIN cross-border testing pilot

The FCA announced the launch of a cross-border testing pilot for firms wishing to test innovative products, services or business models across international markets. The pilot is an initiative by the Global Financial Innovation Network (GFIN), a group of 29 international organisations committed to supporting financial innovation in the interest of consumers and which is currently chaired by the FCA. Firms wishing to take part in the pilot in the UK should review the list of participating regulators and apply before the deadline of 28 February 2019.

FCA publishes Terms of Reference for Membership and Governance of GFIN

The FCA published the terms of reference for membership and governance of GFIN. GFIN is a collaborative knowledge sharing initiative aimed at advancing areas including financial integrity, consumer wellbeing and protection, financial inclusion, competition and financial stability through innovation in financial services by sharing experiences, working jointly on lessons learned and facilitating responsible cross-border experimentation of new ideas. The document will be periodically reviewed and amended as appropriate. 



European Securities and Markets Authority updates


ESMA publishes 2019 Regulatory Work Programme

ESMA published its 2019 Regulatory Work Programme (RWP). This provides an overview of ESMA’s Single Rulebook work, listing all the technical standards and technical advice that ESMA is mandated to draft by the relevant legislation. The RWP gives full references for legislation currently in force and for the legislative proposals that are yet to be adopted.

ESMA sets out 2019 priorities for supervisory convergence

ESMA published its Supervisory Convergence Work Programme (SCWP) for 2019. The SCWP sets out priorities that will drive ESMA’s convergence agenda for 2019 and foster coordinated action by national competent authorities (NCAs). Through its supervisory convergence activities, ESMA promotes a consistent and effective implementation and application of EU rules and the use of similar supervisory approaches for similar risks. The overall aim of ESMA’s supervisory convergence activities is to achieve comparable regulatory and supervisory outcomes to ensure a level playing field of high-quality regulation and supervision without regulatory arbitrage between Member States. 


Prudential requirements


BCBS looks at initial experience with G-SIB framework

The Basel Committee on Banking Supervision (BCBS) published a first analysis of the experience to date with the global systemically important bank (G-SIB) framework, the methodology for assessing the systemic importance of G-SIBs. First, BCBS investigated whether G-SIBs and non-G-SIBs behaved differently since the implementation of the G-SIB framework and if any observed differences in behaviour were in accordance with the framework’s aims. Next, BCBS asked whether there were regional differences in the behaviour of G-SIBs and non-G-SIBs. BCBS’ analysis reveals that G-SIBs and non-G-SIBs behave differently. As, however, both groups are heterogeneous, the indicator outcomes are often highly influenced by a few banks. Nevertheless, most G-SIBs reduced their G-SIB scores during the period assessed, changing their balance sheets in ways that are consistent with the G-SIB framework’s aims. In contrast, non-G-SIBs increased their relative G-SIB scores during the same period.

FSB publishes 2018 Global Monitoring Report on Non-Bank Financial Intermediation

The Financial Stability Board (FSB) published its Global Monitoring Report on Non-Bank Financial Intermediation 2018, which sets out the results of its eighth annual monitoring exercise assessing global trends and risks from non-bank financial intermediation (NBFI), (previously called shadow banking). The report is part of the FSB’s monitoring framework which aims to address bank-like financial stability risks arising from NBFI. The report covers data up to the end of 2017 from 29 jurisdictions. It compares the size and trends of financial sectors in the aggregate and across jurisdictions, then focuses on those parts of NBFI that may pose bank-like financial stability risks.

Council of EU publishes compromise legal draft of proposed directive on credit servicers, credit purchasers and the recovery of collateral

The Council of the EU published a compromise legal draft dated 14 December 2018 of the European Commission’s proposal for a directive on credit servicers, credit purchasers and the recovery of collateral. The compromise draft makes a number of changes to the Commission’s proposal, which was originally published in March 2018. The proposed directive is intended to improve banks’ access to accelerated recovery of collateral against secured loans, and to create a more efficient secondary market for non-performing loans (NPLs) by setting standardised EU-wide rules for the specialist companies that purchase NPLs or seek to enforce them on a bank’s behalf.

ECB: 2018 stress test shows improved capital basis of significant euro area banks

The European Central Bank (ECB) published aggregate results for the 2018 stress test for all participating banks under its supervision. The 87 banks covered in the report include 33 euro area banks that were part of the EU-wide stress test coordinated by the European Banking Authority (EBA). The ECB conducted additional stress tests on 54 significant institutions which it directly supervises, and which were not part of the EBA stress test. Both sets of results form the ECB’s aggregate report. The reference date for the 2018 stress test was 31 December 2017.

ESRB recommends reciprocity for French macroprudential policy measures

recommendation of the European Systemic Risk Board (ESRB) of 5 December 2018 amending recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures was published in the Official Journal of the EU. The ESRB added macroprudential policy measures from France to the list of measures which are recommended to be reciprocated. The framework on voluntary reciprocity for macroprudential policy measures set out in recommendation ESRB/2015/2 aims to ensure that all exposure-based macroprudential policy measures activated in one Member State are reciprocated in the other Member States. 


Regulatory architecture


John Glen provides further update to Parliamentary Committees on ESFS proposal

The government published letters from John Glen MP, Economic Secretary to the Treasury, to Sir William Cash, Chair of the House of Commons European Scrutiny Committee, and Lord Boswell of Aynho, Chair of the House of Lords European Union Committee, providing an update on the progress of negotiations on the European Commission’s European System of Financial Supervision (ESFS) proposal. Further to Mr Glen’s previous updates on 9 January 2019, Mr Glen reports that the ESFS proposal was discussed by the finance ministers at the Economic and Financial Affairs Council (ECOFIN) where the Romanian Presidency signalled their intention to begin interinstitutional trilogues on the anti-money laundering part of the text only.

HM Treasury publishes details of the Chancellor’s speech at TheCityUK Annual Dinner 2019

HM Treasury published details of a speech given by Chancellor of the Exchequer, Philip Hammond. In his speech, Mr Hammond sets out the Brexit timetable agreed in Parliament but notes that the City will be facing profound change, even if the UK were not leaving the EU. He notes that the global economy is changing and an irreversible shift of wealth and power is taking place. He states that dramatically higher savings rates in some emerging market economies mean the geographical balance of asset holdings is changing at a breath-taking pace. Mr Hammond states that the case will need to be made all over again for Britain as the best place in the world for financial and business services and the government is ready with a plan for doing so. 


Authorisation, approval and supervision


BSB consults on good practice guidance for SM&CR regulatory references

The Banking Standards Board (BSB) launched a consultation on its proposed good practice guidance on regulatory references, a core element of the senior managers and certification regime (SM&CR). The guidance, which aims to help firms implement the regulatory reference requirements of the SM&CR effectively, provides a high-level set of principles and good practice guidance. The final requirements for regulatory references under the SM&CR were published by the FCA and the Prudential Regulation Authority (PRA) in 2016 and came into effect in 2017. The deadline for responses to the consultation is 20 March 2019. 


Risk management and controls


Andrew Bailey speech on the importance of diversity to firm culture

Andrew Bailey, Chief Executive of the FCA, gave a speech at the Personal Investment Management and Financial Advice Association (PIMFA) Conference, entitled ‘The Importance of Diversity’. Mr Bailey says that improving firms’ culture and corresponding governance is an FCA priority and that fostering a culture of diversity can contribute to changing the behaviour of firms for the better. Mr Bailey states that the FCA does not make rules which dictate that firms must create ‘good culture’, however, the FCA’s objectives and rules shape firms’ cultures. Diversity, says Mr Bailey, is a core part of how the FCA looks at the culture in a firm. Fostering an inclusive and diverse culture can contribute to changing a firm’s behaviour, resulting in better judgments and better decision-making by mitigating the risk of group think.

European Commission publishes GDPR infographic
The European Commission published an infographic highlighting awareness of, compliance with and enforcement of the General Data Protection Regulation (EU) 2016/679 (GDPR) since it came into force on 25 May 2018. 


Financial crime


Commission adopts delegated regulation on mitigating money laundering and terrorist financing risks in third countries

The European Commission adopted a delegated regulation supplementing the Money Laundering Directive (EU) 2015/849 (MLD4) with regard to the measures credit and financial institutions must take to mitigate money laundering and terrorist financing risk in third countries whose law does not permit the application of group-wide policies and procedures. The delegated regulation is based on draft regulatory technical standards (RTS) that were submitted by the European Supervisory Authorities (ESAs) to the Commission on 6 December 2017. The regulation will enter into force 20 days after it is published in the Official Journal of the EU and will apply three months after date of entry into force.

Commission sends Statement of Objections in European government bonds cartel

The European Commission issued a press release stating that it sent a Statement of Objections to eight banks informing them of its preliminary view that they breached EU antitrust rules by colluding, in periods from 2007 to 2012, to distort competition when acquiring and trading European government bonds. The Commission is concerned that, at different periods between 2007 and 2012, the eight banks participated in a collusive scheme that aimed at distorting competition when acquiring and trading government bonds. Traders employed by the banks exchanged commercially sensitive information and coordinated on trading strategies. These contacts would take place mainly (but not exclusively) through online chatrooms.

EMPACT priority plan offers EU a united front to tackle financial crime

The 2019 Operational Action Plan for the EMPACT priority ‘Criminal Finances, Money Laundering and Asset Recovery’, an EU-financed initiative jointly led by French Customs and Judicial Police to combat financial crime, particularly money laundering, was launched in The Hague. Financial crime investigators from 25 EU Member States, alongside Europol, CEPOL and European Commission specialists, met to agree ways to deal with the broad-based criminal threat. Belgium, France, Germany, Ireland, the Netherlands and the United Kingdom all agreed to lead on operational actions.

FCA warns public of investment scams as over £197m reported losses in 2018

The FCA published a press release warning investors to be on alert to the threat posed by scammers in response to data from Action Fraud, the FCA’s call centre, which revealed that there were over £197m in reported losses during 2018. The most commonly reported scams involved investments in shares and bonds, forex and cryptocurrencies by firms that are not authorised by the FCA, which accounted for 85% of suspected scams reported in 2018. The FCA states in the press release that more and more people are being targeted online, moving away from the traditional cold call, noting that scammers are now contacting people through emails, professional looking websites and social media channels.

FCA prosecution—Manraj Virdee sentenced to two years for illegally operating an investment scheme and fraud

In a case brought by the FCA, Manraj Virdee was sentenced at Southwark Crown Court to a two-year prison sentence suspended for two years, and further ordered to carry out 300 hours of unpaid work in the community. Mr Virdee pleaded guilty in December 2018 to four charges relating to misleading consumers, fraud and the illegal operation of an unauthorised investment scheme worth over half a million pounds. As sole director of Dynamic UK Trades Ltd, Mr Virdee promoted a deposit taking scheme between October 2015 and November 2017 without authorisation from the FCA and entered into an agreement with one investor to manage £192,500 in spread betting trading of which only £10,000 was used as promised.

UK Finance publish report on Bank branch response scheme fraud prevention in 2018

UK Finance published a report revealing that figures (published by UK Finance) regarding a new rapid response scheme by banks and the police prevented potential fraud victims from being scammed out of £38m in 2018. The new Banking Protocol scheme trains bank staff to spot when someone is about to fall victim to a scam and try to prevent them from withdrawing cash to give to a fraudster, after which they can request an immediate police response to the branch. UK Finance’s latest figures revealed that the scheme led to 408 arrests in total since it was first introduced in October 2016. In November 2018, £4.5m of fraud was prevented through the scheme, which is the highest monthly total to date. It revealed that the average age of a customer helped by the Banking Protocol last year was 71, indicating that fraudsters are often targeting more elderly victims.

APPG on Fair Business Banking announces support for the Bank Signature Forgery Campaign

The All Party Parliamentary Group (APPG) on Fair Business Banking announced its support for the Bank Signature Forgery Campaign. The campaign is encouraging personal and business customers who received a bank court document from any UK bank or finance company to send a photo or photocopy of the bank signature, along with the name of the bank, to the Bank Signature Forgery Campaign. They also encourage customers to send in examples of where they feel their signature is digitally lifted.

Joint Money Laundering Steering Group outlines plans for 2019

The Joint Money Laundering Steering Group (JMLSG) says that it embarked on a comprehensive workplan for 2019, which includes matters ranging from those arising from the expected implementation of the Fifth Money Laundering Directive by January 2020, to reviews of sectoral guidance for sectors such as credit unions and brokerage services to funds. New areas of guidance will cover areas such as virtual currency exchanges, digital identities, and payment initiation services.

UK falls out of global top 10 in anti-corruption index

The UK slipped out of the top 10 in a list of the least corrupt countries in the world, a watchdog said Tuesday, delivering a blow to the government's pledge to tackle financial crime. Britain dropped to No 11 in the 2018 Corruption Perceptions Index, which is compiled by non-governmental organisation Transparency International, with the watchdog warning that corruption could pose a growing threat to a post-Brexit Britain. Some campaigners fear that the UK will come under economic pressure to break away from regulatory rule books and open up opportunities for criminals—if the UK crashes out of the EU without a deal on March 29.

Denmark readies stiffer AML penalties amid Danske probe

Denmark’s financial services regulator is proposing tough new penalties for banks that fail to clamp down on suspected money laundering in the aftermath of the Danske Bank scandal that tarnished the country’s reputation as one of the least corrupt in the world. The Danish Financial Supervisory Authority said it made 23 proposals to the government that would toughen liability rules for senior bankers and avoid a repeat of the troubles engulfing Danske and its tiny Estonian branch. The authority recommended that the ‘fit and proper’ test for top executives should be revised, and that it should be given the power to issue fines for breaches of anti-money laundering laws.

Deutsche Bank lambasted for non-cooperation by TAX3 committee

A representative of Deutsche Bank was heavily criticised for failing to provide adequate responses at a hearing on the money laundering scandals involving the bank. The hearing was held by the European Parliament's special committee on financial crimes, tax evasion and tax avoidance (the TAX3 committee) with the aim of better understanding the illicit activities Deutsche Bank was involved in and to hear from BaFin, the German financial services regulator. Deutsche Bank was summoned to the hearing due to its involvement in the alleged multibillion-dollar money laundering scandal at Danish lender Danske Bank and the Cum-ex scandal. MEPs from the TAX3 committee will travel to Denmark and Estonia this week to investigate both scandals further. 


Enforcement and redress


FSCS announces 2019/20 plan and budget and increases levies

The Financial Services Compensation Scheme (FSCS) published its plan and budget for 2019/20. The document outlines the scheme’s expected management costs and latest forecast of potential claims volumes. It also outlines its initial forecasts for the levy financial services firms will pay next year, as well as supplementary levies it will raise on firms before the end of 2018/19. As it warned in November 2018, the FSCS decided to raise supplementary levies in 2018/19 mainly because of the rising cost of claims against pension advisers. These supplementary levies fall on firms in the life and pensions intermediary, deposits, investment intermediary, general insurance provision, general insurance intermediation and debt management sectors.

FCA and PRA consult on FSCS Management Expenses Levy Limit 2019/20

The FCA and the PRA published joint consultation paper 19/9-2/19 (FCA CP19/9 / PRA CP2/19) which sets out proposals for the management expenses levy limit (MELL) for the FSCS for 2019/20. The MELL ensures that the FSCS gets adequate funding to continue to operate and meet its objective of providing a compensation scheme for consumers. PIMFA, the trade association for investment managers and financial advisers, also issued a press release in which it strongly criticises the level of the indicative FSCS levy for 2019/20.

FCA updates webpage on approach to enforcement

The FCA updated its webpage ‘our approach to enforcement’. The FCA published ‘our approach to enforcement’ for consultation in March 2018. The final document will be published Spring 2019 and will include a number of small changes as well as a broader feedback statement taking into account the responses received.

FCA fines former fund manager, Paul Stephany

The FCA fined Paul Stephany, a former fund manager at Newton Investment Management Limited, £32,200 for his conduct relating to an initial public offering (IPO) and a placing. Mr Stephany submitted orders on two separate occasions, each time as part of a book build for shares that were to be quoted on public exchanges. Before the order books for the new shares closed, Mr Stephany contacted other fund managers at competitor firms and tried to influence them to cap their orders at the same price limit as his own therefore undermining the integrity of the market and the book build by trying to use his and the other fund managers' collective power.

FOS newsletter gives insights on debt collection and its approach to claims management companies

The Financial Ombudsman Service (FOS) published Issue 147 of Ombudsman News, which focuses on dealing with debt and features different perspectives on the challenges ahead. The publication also includes a snapshot of complaints in the third quarter of 2018/19, some debt collection case studies, and a Q&A on complaints about claims management companies. Between January and December 2018, FOS dealt with around 3,300 enquiries about debt collection, and took on over 1,000 new complaints for investigation. The top three issues involved (1) whether customers were being asked for the right amount of money—21% (2) customer service issues, including administration errors, being contacted excessively or about debt customers believed they'd repaid—13% (3) customers being chased for debt that wasn't theirs—13%.

APPG co-chair raises concerns regarding proposed SME dispute resolution scheme

Kevin Hollinrake MP, co-chair of the APPG on Fair Business Banking, wrote to Stephen Jones, CEO of UK Finance, regarding the UK Finance proposals to reform dispute resolution between banks and small and medium-sized enterprises (SMEs). Mr Hollinrake raises some concerns regarding award limits, eligibility criteria, and the membership and governance of the Implementation Steering Group. While Mr Hollinrake says that the APPG appreciates the offer for a representative on the Implementation Steering Group, he asks Mr Jones to confirm that UK Finance does not enjoy influence over the composition and individuals in the group. He suggests that such decisions should be at the discretion of the chair, not UK Finance.

APPG reports on serious allegations of Treasury involvement in RBS GRG

The APPG on Fair Business Banking issued a press release in which it notes that court papers published on 31 January 2019 indicate that the government maintained ‘day-to-day’ involvement and ‘strategic’ control over RBS’ GRG division through the Asset Protection Agency. These allegations, which date back to late 2009, are extremely serious and require an urgent a thorough investigation, according to the APPG, in order to determine the true extent of the relationship between the Treasury and RBS in their mistreatment of business customers in the aftermath of the financial crisis.

Lender can't revive £32M swaps suit against Grant Thornton

An appeals court rejected Manchester Building Society's (MBS) efforts to hold Grant Thornton liable for £32.7m ($42m) in losses suffered on hedges to the lender's mortgage portfolio, leading the troubled lender to warn that its long-term future remains in doubt. In a 22-page judgment the Court of Appeal dismissed the MBS's bid to revive claims that Grant Thornton's negligent advice and information about applying hedge accounting rules to its portfolio of fixed rate mortgage and interest rate swaps led to crippling losses. The panel of three judges found that Grant Thornton did not guide the lender's entire decision-making process. As a result, they ruled, the accounting company was not responsible for the consequences of those swap transactions. 


Markets and trading


ESMA decision to renew the temporary restriction on the marketing, distribution or sale of CFDs to retail clients published in Official Journal

ESMA Decision (EU) 2019/155 of 23 January 2019 renewing the temporary restriction on the marketing, distribution or sale of contracts for differences (CFDs) to retail clients was published in the Official Journal of the EU. The decision replaces Decision (EU) 2018/1636 in which ESMA renewed and amended the temporary restriction contained in Decision (EU) 2018/796 (which itself contained a 3 month restriction from 1 August 2018) on the marketing, distribution or sale of CFDs to retail clients with effect from 1 November 2018 for a period of three months.

ESMA publishes revised guidelines on supervisory reporting for CRAs

ESMA published its revised guidelines on the information that CRAs must report to ESMA for supervisory purposes. The guidelines amend some sections of ESMA's 2015 guidelines on the reporting of periodic information, to ensure they continue to support ESMA's supervisory processes in an efficient and effective manner. The guidelines are intended to streamline the information that CRAs must report to ESMA on a periodic basis, ensuring that the information is fully aligned with ESMA's supervisory processes. The guidelines also aim to improve the predictability of ESMA's supervisory interactions with CRA. The revised guidelines will come into effect two months after their publication on ESMA's website in all of the official EU languages.

AFME and ISDA publish response the EBA’s Consultation on ITS amending Commission Implementing Regulation EU 2016-2070 on Benchmarking of Internal Models

The Association for Financial Markets in Europe (AFME) and the International Swaps and Derivatives Association (ISDA) (the associations), published a joint response to the EBA’s consultation on implementing technical standards (ITS) amending Commission Implementing Regulation EU 2016-2070 on benchmarking. In general, the associations welcome the EBA’s wish to reduce the complexity of the benchmarking exercise in relation to credit risk by reducing the granularity of reporting. The associations also appreciate the objective in collecting additional information to verify the bank specific interpretation of how to treat instruments in relation to market risk.

ISDA issues request for proposal for fallback spread vendor role

ISDA issued a request for proposal for an independent service provider to calculate and publish adjustments related to fallbacks that ISDA intends to implement for certain interest rate benchmarks in its 2006 ISDA Definitions. ISDA undertook this work at the request of global regulators and industry participants. On 20 December 2018, ISDA released the results of a consultation on certain technical aspects of the benchmark fallbacks it intends to implement, including the adjustments that will be calculated and published by the fallback spread vendor. ISDA anticipates implementing the fallbacks by the end of 2019. 




ESMA publishes MiFID II supervisory briefing on the supervision of non-EU branches of EU firms

ESMA published a MiFID II briefing on the supervision of non-EU branches of EU firms providing investment services and activities designed to assist NCAs in their supervision of the establishment by EU firms of branches in non-EU countries. The supervisory briefing covers the following topics:

  • supervisory expectations in relation to the authorisation of investment firms
  • ongoing activities of non-EU branches including reporting and collection of information, and
  • supervisory activity and cooperation with non-EU competent authorities
ESMA updates Q&As on MiFID II and MiFIR market structure and transparency

ESMA updated its Questions and Answers regarding market structures and transparency issues under MiFID II and the Market in Financial Instruments Regulation (MiFIR). The updates provide clarification on the identification of high frequency trading techniques and reports to competent authorities and ESMA. The new and updated Q&As on transparency issues relate to the following topics (1) default transparency regime for equity instruments and bonds if no calculations are published by ESMA or non-delegating competent authorities and (2) reporting of request for market data give-up or give-in trade flow.

ESMA updates Q&As on MiFIR data reporting

ESMA issued an update of its Q&As on data reporting under MiFIR. Two new Q&As provide further clarifications in relation to the requirements for submission of reference data under MiFIR relating to the following issues (1) reporting the legal entity identifier (LEI) of an issuer to a FIRDS in cases where the issuer of the instrument controls a branch(es) with an LEI, and (2) reporting maturity, expiry and termination dates to a FIRDS. 


Regulation of derivatives


EMIR reform—political agreement reached on simpler EU rules for derivatives

The European Parliament and EU Member States reached a political agreement on the targeted reform of EMIR. The changes are intended to provide simpler and more proportionate rules for over-the-counter (OTC) derivatives, helping to reduce costs and regulatory burdens for market participants without compromising market stability. The reforms agreed today were originally presented by the European Commission in May 2017 with the aim of improving the functioning of the derivatives market in the EU. The reforms include granting more time to developing solutions for pension funds before they must start clearing derivatives in CCPs. The political agreement will be followed by further technical work before the European Parliament and the Council of the EU can formally adopt the final texts.

ECON recommends early non-objection to EMIR delegated regulation amendments

The European Parliament’s Economic and Monetary Affairs Committee (ECON) recommended that the European Parliament confirm it’s non objection to three delegated regulations—in relation to (1) OTC derivatives (2) OTC derivatives cleared by CCP (3)  Date for clearing obligation—adopted by the European Commission that would amend existing delegated regulations supplementing EMIR in order to facilitate the transfer of derivative contracts to EU counterparties in the event of a no-deal Brexit and to extend the dates of deferred application of the clearing obligation for certain OTC derivative contracts.

ESRB report says more clarity needed on CCP interoperability arrangements

The ESRB published a new report on interoperability arrangements of EU CCPs. The report says the legislative proposal for a recovery and resolution framework for CCPs needs to provide greater clarity as to how the framework would apply to interoperability arrangements. It also recommends clarifying in EMIR whether interoperability arrangements for derivatives could be approved and implemented and, if so, for which product types and under what conditions.

ESMA issues statement to address upcoming EMIR REFIT implementation issues

ESMA published a statement addressing the European Commission’s proposal to amend EMIR, published on 4 May 2017. The public statement addresses issues around the clearing and trading obligations for small financial counterparties and the backloading requirement for reporting entities, ahead of upcoming deadlines, which would represent challenges for the abovementioned entities in the context of the ongoing EMIR Refit negotiations.

ESMA updates Q&As on EMIR data reporting

ESMA issued an update of its Q&A on practical questions regarding EMIR. The amendments to the existing TR Q&A 34 on contracts with no maturity date confirms that counterparties may report a derivative with Action Type ‘P’ if the derivative is included in a position on the same day that it is reported. The amendments to the existing TR Q&A 38 further clarify when reports should be submitted with Action Type ‘N’ and when with Action Type ‘P’ in relation to reporting derivatives that are terminated before the reporting deadline.

ISDA sets out solutions to regulatory driven derivatives market fragmentation

ISDA published comments by its chief executive officer, Scott O’Malia, alongside a paper which sets out proposed solutions to regulatory driven derivatives market fragmentation. According to Mr O’Malia, regulatory reform efforts too often differed in scope, substance and timing across jurisdictions and much work needs to be done to avoid fragmentation of markets. He adds that the ability to trade across borders under a consistent and predictable regulatory framework is critical for derivatives users to hedge their risk, raise financing and invest efficiently.

ISDA Commentary: A Solution for the IM Big Bang

ISDA chief executive officer, Scott O’Malia, provided informal comments on important OTC derivatives issues in derivatiViews, ISDA’s news magazine. According to Mr O’Malia, with over 1,100 small firms expected to come into scope of initial margin requirements (IM) by 2020, each needing to put IM documentation and systems in place, an early start on compliance efforts will be critical. He states that ISDA launched a new service, ISDA Create-IM, developed with Linklaters, a new digital platform that automates the negotiation and execution of IM documents. The service, which went live last week, delivers IM documentation to multiple counterparties simultaneously and then negotiates and executes those documents online.

ISDA, FIA and IIF issue joint response to FSB discussion paper on financial resources to support CCP resolution and the treatment of CCP equity in resolution

ISDA, the Futures Industry Association (FIA) and the Institute of International Finance (IIF) (the Associations) published a joint response to the FSB’s discussion paper issued on 15 November 2018, ‘Financial resources to support CCP resolution and the treatment of CCP equity in resolution’. The Associations believe that the five-step process described in the first part of the discussion paper forms a helpful basis for the analysis of the appropriateness of the financial resources of a CCP in light of its recovery and resolution plans. Applying these five steps will highlight that most CCPs don’t enjoy sufficient equity or other resources to deal with extreme events, especially for non-default losses. CCPs should be well capitalised for the risks they face, and the outcome of this five-step process should be to right-size minimum capital requirements.

EACH responds to FSB discussion paper on financial resources to support CCP resolution and the treatment of CCP equity in resolution

The European Association of CCP Clearing Houses (EACH) published its response to the FSB’s discussion paper issued on 15 November 2018, ‘Financial resources to support CCP resolution and the treatment of CCP equity in resolution’. EACH is in general agreement with the suggested five-step process to evaluate the financial resources and tools for resolution and also generally agrees that the key issues to CCP equity bearing loss in resolution are accurately identified. Despite its general agreement EACH makes a number of its own suggestions.

WFE responds to FSB discussion paper on financial resources to support CCP resolution and treatment of CCP equity in resolution

The World Federation of Exchanges (WFE) published its response to the FSB’s discussion paper issued on 15 November 2018, ‘Financial resources to support CCP resolution and the treatment of CCP equity in resolution’. In its response, the WFE notes that although the scenarios in which a CCP would need to be resolved are extreme and remote, the FSB’s work on the topic of CCP resolution gives some clarity to stakeholders concerned with managing their risk. 


Regulation of capital markets


European Commission adopts RTS on TPVs under Securitisation Regulation

The European Commission adopted Commission Delegated Regulation of 5 February 2019 supplementing Regulation (EU) 2017/2402 (the EU Securitisation Regulation 2017) of the European Parliament and of the Council of 12 December 2017 with regard to RTS specifying information to be provided to a competent authority in an application for authorisation of a third party assessing STS compliance (C(2019) 740 final). The EU Securitisation Regulation 2017 provides a framework for the authorisation of third-party verifiers (TPVs) to check compliance with the requirements for simple, transparent and standardised (STS) securitisations. The new Commission Delegated Regulation specifies the information to be provided to the competent authorities in the application for the authorisation of a TPV.

ESMA issues revised RTS/ITS and Q&A on Securitisation Regulation disclosure requirements

ESMA published an opinion containing a revised set of draft RTS/ITS under the EU Securitisation Regulation 2017, which concern the details of a securitisation to be published by the originator, sponsor and Securitisation Special Purpose Entity (SSPE), as well as the relevant format and templates. ESMA also developed a set of Q&A on the disclosure technical standards. ESMA’s opinion is its response to the European Commission’s letter of 30 November 2018, which requested amendments to the disclosure technical standards submitted by ESMA in its Final Report of 22 August 2018.

PRA and FCA issue direction on reporting of private securitisations direction under the Securitisation Regulation

The PRA and  FCA published the final direction, pursuant to regulation 25 of The Securitisation Regulations 2018 (an SI that implements the EU Securitisation Regulation 2017 in the United Kingdom), on the way firms must make information regarding ‘private’ securitisations available to their UK competent authorities. This direction is applicable to all UK established originators, sponsors and SSPEs.

Informing the FCA of STS notifications direction

The FCA made a direction, pursuant to regulation 26 of the Securitisation Regulations 2018, in relation to the manner in which an originator or sponsor of a securitisation established in the United Kingdom must inform the FCA of an STS notification in accordance with art 27(1) of the EU Securitisation Regulation 2017. The direction states: ‘An originator or sponsor of a securitisation established in the United Kingdom must inform the FCA of an STS notification in accordance with art 27(1) of the EU Securitisation Regulation 2017 by sending a copy of the STS notification to STS.Notifications@fca.org.uk at the same time as, or as soon as possible after, making the STS notification to ESMA’.

ICMA publishes guide to due diligence requirements under the Securitisation Regulation

The International Capital Market Association (ICMA) published a guide to due diligence requirements for investing in a securitisation position. The guide was developed by ICMA's Asset Management and Investors Council, through its Securitisation Working Group. It is designed as a starting point for new investors who are interested in securitisation to understand the new due diligence requirements which came into effect on 1 January 2019 under the EU Securitisation Regulation 2017. Although the Securitisation Regulation came into effect on 1 January 2019, it is not only applicable to securitisation transactions in which its securities were issued on or after 1 January 2019, but also, with respect to a securitisation position held prior to this date, where new securities are issued with respect to that transaction on or after 1 January 2019.

AFME: A new era for securitisation?
AFME published an article by Richard Hopkin, managing director and head of fixed income, regarding the STS securitisation rules coming into force. Mr Hopkin argues that there is considerable uncertainty in the sector because much of the underlying technical framework remains incomplete. He notes that European policymakers and regulators hailed the STS reforms as a crucial element in strengthening Europe’s capital markets. However, over a decade on from the financial crisis, ‘issuance in Europe is still at a fraction of the level it once was, having dropped from €819bn in 2008 to standing at just €269bn in 2018—of which only half was actually placed with investors, the remainder still being retained by originators. 


Investment funds and asset management


Capital Markets Union—political agreement reached on new EU rules for cross-border distribution of funds

The European Parliament and EU Member States reached a political agreement on measures to improve the EU's investment fund market. The new rules are intended to make it easier, quicker and cheaper for EU asset managers to sell funds to a wider range of investors and, in turn, provide investors across the EU with access to a much larger choice of fund products at better value. The legislative package on which agreement was reached today was originally presented by the European Commission in March 2018 with the aim of reducing regulatory barriers to the cross-border distribution of investment funds in the EU. The political agreement reached today will be followed by further technical work before the European Parliament and the Council of the EU can formally adopt the final texts.

European Commission adopts Level 2 measure under European social entrepreneurship fund regulation

The European Commission adopted Commission Delegated Regulation of 1 January 2019 supplementing Regulation (EU) 346/2013 (EuSEF) of the European Parliament and of the Council with regard to conflicts of interest, social impact measurement and information to investors in the area of European social entrepreneurship funds (C(2019) 669 final). EuSEF sets the out conditions on which investment funds may use the European social entrepreneurship fund label.

European Commission adopts Level 2 measure under European Venture Capital Fund Regulation

The European Commission adopted Commission Delegated Regulation of 4 February 2019 supplementing Regulation (EU) 345/2013 (EuVECA) of the European Parliament and of the Council with regard to conflicts of interest in the area of European venture capital funds (C(2019) 664 final). EuVECA sets the out conditions on which investment funds may use the European Venture Capital Fund label. The new Commission Delegated Regulation sets out, among other things, a list of types of conflict of interest in the context of qualifying venture capital funds. It covers situations that involve a manager of the qualifying venture capital fund, an employee of the management company, another qualifying venture capital fund, a collective investment undertaking managed by the same manager making gain or avoiding financial loss at the expense of the qualifying venture capital fund and its investors.

ESMA consults on draft guidelines on liquidity stress testing for investment funds

ESMA published a consultation paper setting out draft guidelines on liquidity stress testing in undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIFs). The proposed guidelines would apply to managers of UCITS, EU alternative investment fund managers (AIFMs) and EU depositaries overseeing UCITS and EU AIFs. In April 2018, the ESRB published a set of recommendations to address liquidity and leverage risk in investment funds. As part of those recommendations, the ESRB asked ESMA to develop guidance on the practices that managers should follow for the stress testing of liquidity risk for individual AIFs and UCITS, in order to promote supervisory convergence. The consultation closes on 1 April 2019.

FCA publishes PS19/4 Asset Management Market Study—further remedies

The FCA published Policy Statement 19/4 Asset Management Market Study—further remedies (PS19/4) which sets out new rules and guidance to improve the quality of the information available to consumers about the funds they invest in. The FCA’s asset management market study presented evidence of weak price competition in many areas of the asset management industry. This means lower returns for savers, pensioners and other investors. The FCA acted to tackle the issues found. In April 2018, the FCA introduced new rules to ensure fund managers act as agents of investors in their funds. The rules and guidance set out in PS19/4 complement that work by helping consumers understand more about how their money is being managed, so that they can make better investment decisions.

APPG examines UK pension schemes and alternative investments

The APPG on Alternative Investment Management published a report which examines the potential benefits of alternative investments to pension schemes, with a focus on defined contribution (DC) schemes. The report also examines the cultural, regulatory and operational pressures that are encouraging UK DC schemes to shy away from investing in alternative investments, and recommends potential actions the government could take to alleviate those pressures. APPG’s research indicated two main areas in which alternative investments could potentially benefit pension schemes: diversification and access to the illiquidity premium.

Revised asset and development management agreement published

The second edition of the Asset and Development Management Agreement was published by the City of London Law Society. This edition contains several revisions from the first edition (published in November 2015), in the effort to keep the agreement up to date with changes in the development market and its sophisticated treatment. 


Banks and mutuals


ECA publishes report on contingent liabilities of the SRB, the Council or the Commission of their tasks under SRM Regulation

An audit report was published by the European Court of Auditors (ECA) pursuant to Article 92(4) of Regulation (EU) No 806/2014 on any contingent liabilities (whether for the Single Resolution Board (SRB), the Council, the Commission or otherwise) arising as a result of the performance by the SRB, the Council or the Commission of their tasks under this Regulation for the financial year 2017 together with the replies of the SRB, the Commission and the Council. The report deals exclusively with contingent liabilities as referred to in Article 92(4) of the Single Resolution Mechanism Regulation (SRM Regulation), and covers the financial year 2017.

Open Banking publishes Operational Guidelines and Checklist

The Open Banking Implementation Entity (OBIE) published its operational guidelines and accompanying checklist. The operational guidelines were produced to provide clarity and recommendations to financial institutions which provide online payment accounts to payers (referred to as account servicing payment service providers (ASPSPs)), and together with the checklist are intended to ensure that the Open Banking standard enables a well-functioning, successful ecosystem, where there are no barriers to the provision of products and services by third-party provider. 


Consumer credit, mortgage and home finance


UK Finance issues leaflet for interest only mortgage customers

UK Finance produced a leaflet for borrowers under interest only (IO) mortgages to increase awareness of the options available to IO borrowers and help them speak to their lenders The leaflet outlines how customers can understand and take control of their circumstances and includes real-life case studies of IO customers who came to arrangements with their lenders which enabled the customers to remain in their home on affordable repayment terms. 


Insurance and pensions


PRA publishes Consultation Paper (CP3/19) on longevity risk transfers under Solvency II

The PRA published Consultation Paper 3/19 (CP3/19) on longevity risk transfers and the simplification of pre-notification expectations under Directive 2009/138/EC (Solvency II). The CP sets out the PRA's proposals to update Supervisory Statement 18/16 (SS18/16) to change its expectations for how firms pre-notify the PRA of new longevity risk transfer arrangements. The CP also proposes to update the key risks the PRA considers arise from longevity risk transfers. Under the proposal the PRA would expect firms to include their appetite for basis risk (between the terms of the annuity contract and those of the risk transfer) within their risk management frameworks. The consultation closes on Monday 6 May 2019.

EIOPA publishes updated work programme 2019-21

The European Insurance and Occupational Pensions Authority (EIOPA) published its updated Single Programming Document (SPD) 2019-21, which includes its annual work programme for 2019. The SPD sets out EIOPA’s activities and tasks for 2019 within the framework of a multiannual work programme for 2019–2021, including cross-cutting themes and strategic objectives for the period. EIOPA’s cross-cutting themes for 2019-21 are summarised in the SPD as InsurTech, which is a high-priority theme for 2019, and sustainable finance, whereby EIOPA will consider how sustainability considerations can best be included in supervisory and regulatory frameworks.

EIOPA publishes new Q&As on regulation

EIOPA published new Q&As on regulatory topics. The new Q&As cover:

  • the qualitative criteria to be met in relation to the transfer of risk to a third country insurance or reinsurance undertaking if the risk-mitigation technique in the basic solvency capital requirement is to apply
  • the EIOPA-17-403-explanatory notes on VA templates, and
  • the guidelines for reporting for financial stability purposes
Insurance Europe responds to consultation on draft EU guidelines for trustworthy AI

Insurance Europe published its response to a consultation by the European Commission's High-Level Expert Group (HLEG) on draft guidelines for trustworthy artificial intelligence (AI). The final draft guidelines are expected to be published in March 2019 and will include three use cases related to the insurance industry. In its response, Insurance Europe welcomes the HLEG's acknowledgment that there is already regulation in place in Europe that applies to AI. It highlights the highly regulated and supervised nature of the insurance sector both at national and European level and gives its view that a responsible use of trustworthy AI by insurers is already guaranteed.

IAIS Newsletter January 2019

The International Association of Insurance Supervisors (IAIS) published its January 2019 Newsletter. In the newsletter, the IAIS reports on new Financial Stability Institute insights on regulating and supervising the cloud and proportionate solvency requirements. The newsletter also contains details of stakeholder engagement, meetings and events, seminars and training, notices, committee and subcommittee activities and details of the access to insurance initiative report.

PRA responds to DWP consultation paper on defined benefit pension scheme consolidation

The PRA responded to the Department for Work and Pensions' (DWP) consultation paper on defined benefit (DB) pension scheme consolidation. In its response, the PRA supports the development of a robust authorisation and supervision regime for DB consolidators, proposes the insurance framework as an appropriate model for scheme member protection, and considers further analysis that could help develop a regulatory regime. The response focuses on five key areas: financial sustainability, future transfer of DB schemes from consolidators to insurers, authorisation, supervision, and reporting and disclosure.

TPR action leads to NOW: Pensions overhauling its administration system

Demands from The Pensions Regulator (TPR) for NOW: Pensions to overhaul its administration system led to the pension contributions of hundreds of thousands of people being collected and invested. TPR gave the trustee and trust manager of NOW: Pensions a deadline to fix serious and persistent administrative failings with the pension scheme that led to problems with the collection and investment of contributions. In April 2016, the pension contributions of almost one in three of the master trust's members—an estimated £18 million affecting over 265,000 people was not collected, and there were ongoing problems both with the collection of contributions and with ensuring the correct amounts were invested for members.

PIMFA defends contingent charging for advice on DB pension transfers

PIMFA published its response to the Work and Pension Committee’s inquiry into charging for pension transfer advice, launched on 7 January 2019. In its earlier inquiry into pension freedom and choice, the Committee found that a supposedly independent financial adviser could be incentivised to give bad advice, such as suggesting a DB transfer, because of the way their fees were structured—the adviser was only paid, or paid much more, if the person decided to take a DB transfer. This is known as contingent charging. The Committee recommended that this charging structure should be banned for DB pension transfer advice. In its response, PIMFA warns of the unintended consequences of a ban on contingent charging and urges the Committee to consider alternative means of avoiding a repeat of the problems that surrounded the termination of the British Steel DB pension scheme.

A million pension ‘dippers’ hit with harsh tax, firm reveals

More than a million savers who dipped into their pension pots using controversial British rules were caught by tough tax restrictions, according to findings by a British company specializing in retirement products. Just Group PLC said a freedom of information request to HM Revenue and Customs revealed that 980,000 individuals took flexible payments from their pension since the introduction of the UK's pension freedoms in April 2015 until the end of September 2018. The company said on Saturday that means the figure, which amounts to an average of 70,000 people per quarter, now exceeds one million individuals. 


Payment services and systems


FCA issues final rules on general standards and communication rules for payment services and e-money

The FCA published a policy statement (PS19/3) on general standards and communication rules for the payment services and e-money sectors. The policy statement confirms a number of changes to the FCA’s handbook following consultation in CP18/21. Firms need to comply with the rules and guidance from 1 August 2019. The FCA’s principles for businesses and communication rules in BCOBS 2 do not currently apply to payment institutions, electronic money institutions or registered account information service providers. The FCA’s new rulemaking powers allow it to extend rules made under the Financial Services and Markets Act 2000 so that those rules also apply to activities regulated under the Payment Services Regulations, SI 2017/752, and the Electronic Money Regulations, SI 2011/99.

PSR consults on proposed direction for Visa Europe crisis communication

The Payment Services Regulator (PSR) published for consultation a draft specific direction requiring Visa Europe to review and adopt appropriate incident communication strategy and response plans. The proposed direction is intended to make sure Visa does all it can to ensure its participants, service users and other stakeholders are given enough information, in case any future incident occurs where Visa's services are unexpectedly unavailable. The proposed direction comes after an incident on 1 June 2018, which resulted in the partial failure of Visa's ability to process authorisations for around six hours and justify many consumers across Europe unable to complete card purchases. The consultation closes on 1 March 2019.

PSR proposes to extend contract deadline for LINK’s central infrastructure services

The PSR published a consultation paper (CP 19/1) in which it proposes to vary its specific direction 4, to extend the deadline for LINK’s central infrastructure services (CIS) to be provided by the winner of a competitive tender process. The PSR proposes to change the deadline from 2 April 2021 to 2 October 2021, to allow LINK’s operator to resolve outstanding issues before awarding the CIS contract. The proposal is open for consultation until 15 February 2019.

Hannah Nixon to leave the Payment Systems Regulator

The PSR announced that Hannah Nixon will be standing down as managing director of the PSR in April. Pending the appointment of a permanent successor to Hannah, the PSR Board asked Chris Hemsley, currently head of policy, and Louise Buckley, currently chief operating officer, to act as joint interim managing directors, reporting to FCA Chief Executive, Andrew Bailey. Charles Randell, chair of the FCA and PSR, says: ‘Setting up a new organisation from scratch is always a challenging task and Hannah has led the PSR through those important and formative years with vision, skill and determination. Under her leadership the PSR has established itself and has a track record of real achievement’.

EBA defends PSD2 Level 3 guidance

The EBA published a letter from Marcus Ferber MEP to the EBA and the EBA’s response. In his letter, Mr Ferber questions the approach taken by the EBA in its guidelines on the conditions to be met to benefit from an exemption from contingency measures under art 33(6) of Regulation (EU) 2018/389 (RTS on SCA & CSC) and other Level 3 guidance, saying that the EBA moved away from the balanced approach agreed when the text of the Second Payment Services Directive (PSD2) was being negotiated and shifted the balance of power significantly towards banks. 


Sustainable finance


IOSCO GEMC launches consultation on sustainable finance

The Growth and Emerging Market Committee (GEMC) of the International Organisation of Securities Commissions (IOSCO) published a consultation report ‘Sustainable finance in emerging markets and the role of securities regulators’. The report proposes recommendations for emerging market member jurisdictions to consider when issuing regulations or guidance regarding sustainable financial instruments, explores the trends and challenges that influence the development of sustainable finance in emerging capital markets and provides an overview of the initiatives that regulators, stock exchanges, policy makers and other key stakeholders in emerging markets are undertaking in this area. Comments are requested by 1 April 2019.

AFME responds to the TEG’s report on climate-related disclosures

AFME provided feedback to the Technical Expert Group’s report on climate-related disclosures. AFME notes that the availability of client level, industry and economic climate change-related data presents obstacles to firms’ ability to embed climate change within their risk management processes and integrate financial with non-financial disclosures. Companies will need to review their internal controls and systems for gathering non-financial qualitative and quantitative data. As a result, AFME foresees a multi-year journey for firms to collect customer data, establish relationships with external data providers and to integrate this with existing systems and models. This information will be essential to insightful statements of risk appetite and the quality of respective reporting. 


Dates for your diary






7 February 2019



Markets and trading



The deadline for feedback to CP18/37: Product intervention measures for retail binary options and   CP18/38: Restricting contract for difference products sold to retail clients and a discussion of other retail derivative products is 7 February 2019.



8 February 2019Regulatory architecture

The deadline for applications to join ESMA’s Consultative Working Group advising ESMA's Corporate Reporting Standing Committee is 8 February 2019. Interested experts are asked to send their application to ESMA, using the form which can be downloaded ESMA's website, along with their CV and letter of motivation.



8 February 2019Financial crime

The ESAs are consulting on draft guidelines on the co-operation and information exchange between competent authorities supervising credit and financial institutions for the purposes of anti-money laundering and countering the financing of terrorism supervision. Feedback is sought by 8 February 2019.



8 February 2019Payment services

The deadline for applications to the EPC’s call for independent candidates for its Scheme Management Board—the body responsible for the administration and evolution of the Single Euro Payments Area payment schemes, which will be renewed in 2019 is 8 February 2019.



8 February 2019Regulatory architecture

The European Commission is consulting with the European Securities Committee until 8 February 2019, regarding a draft implementing decision on the recognition of the legal, supervisory, and enforcement arrangements of Japan for derivatives transactions supervised by the Japanese Financial Services Agency as equivalent to the valuation, dispute resolution and margin requirements of Article 11 of EMIR.



10 February 2019Payment Services Regulations 2017

The FCA directs that a service provider to which regulation 38 of the PSRs 2017 applies must provide the information required by that regulation by this date.



11 February 2019Brexit

The deadline for feedback to FCA ‘CP19/1: Recovering the costs of regulating securitisation repositories after the UK leaves the European Union’ is 11 February 2019.



12 February 2019Markets and trading

Article 9(1) of EMIR, as supplemented by Article 5 of   Commission Implementing Regulation (EU) 1247/2012, provides that derivative contracts which were not outstanding on the commencement date for reporting for a particular derivative class and were entered into on or after 16 August 2012, or were entered into before 16 August 2012 and were still outstanding on that date (historical derivatives contracts), should be reported to a trade repository by 12 February 2019.



12 February 2019Retail investments

As part of it’s live and local series the FCA will host its interactive workshop on defined benefit pension transfers on 12 February in Derby.



12 February 2019Insurance

As part of its live and local series the FCA will host it’s ‘Regulatory update focusing on the extension of the SM&CR and the Insurance Distribution Directive’ Workshop in Cheshire on 12 February 2019.



14 February 2019Markets and trading

The deadline for responses to ESMA’s consultation on future guidelines for money market funds’ disclosure is 14 February 2019.




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Prior to joining LexisNexis in 2018, Raphael carried out work placements at Willkie, Farr & Gallagher (sat in Debt Finance) and Macfarlanes (sat in Banking and Finance), through which he was able to gain knowledge about a wide variety of financial products and services. Raphael recently graduated in Law from King’s College London where he took a particular interest in modules such as Finance, Credit & Security and Transnational Company Law. Raphael has also worked as a Paralegal at Axiom Stone Solicitors in Mayfair, where he was involved in a wide range of contentious matters.