Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 17 August 2017.
Brexit impact on customs union and internal market ‘increases the more UK pushes for WTO model’
The more the future relationship between the EU and the UK takes after trade cooperation based on World Trade Organisation (WTO) principles, the less existing and future EU law can be applied to goods and services from the UK. This is according to a report by the European Parliament which identifies policy areas and legal rules in the current EU framework that will be most affected by Brexit. It includes a ‘two-step test’ to assess the potential impact to the internal market for goods and services, consumer protection and the customs union.
Director General of ABI raises concerns on insurers servicing contracts post-Brexit
The director general of the Association of British Insurers (ABI), Huw Evans, warned of the risk of British insurers being unable to legally fulfil contracts after Brexit. Mr Evans was commenting on the letter sent by the deputy governor and CEO of the Prudential Regulation Authority (PRA), Sam Woods, to the new chair of the Treasury Committee, Nicky Morgan, explaining the PRA’s work to ensure that firms are making sensible contingency plans concerning the UK’s withdrawal from the EU.
ECB executive sets out post-Brexit expectations for banks
The chair of the supervisory board of the European Central Bank (ECB), Sabine Lautenschläger, warned banks to make ‘final decisions’ very soon, as ‘no one knows how Brexit will play out’. Ms Lautenschläger said it was very important for the ECB to make sure that the banks it supervises, as well as the ones looking to set up in Europe, ‘do not just close their eyes and wait for whatever might happen’.
Treasury Committee chair responds to BoE conflicts of interest report
The chair of the Treasury Committee, Nicky Morgan, said it was right that the Bank of England (BoE) commissioned its report on conflicts of interest, in light of the resignation of Charlotte Hogg in March 2017. Ms Morgan said she expected the Treasury Committee would want to hear from the Court of Directors in due course.
Treasury Committee closes Maxwellisation inquiry
The House of Commons Treasury Committee announced that its inquiry into the use of ‘Maxwellisation’ in financial inquiries closed on 3 May 2017, when parliament dissolved for the general election. The inquiry cannot be re-opened, but the committee may decide to hold another inquiry on this subject in the future.
Treasury Committee inquiries closed
The House of Commons Treasury Committee announced that four financial and regulatory inquiries closed on 3 May 2017, when parliament dissolved for the general election.
The inquiries concerned:
- capital adequacy, resolution and recovery
- the UK’s future economic relationship with the EU
- the EU Insurance Regulation, and
- the Retail Banking Market Review
The inquiries cannot be re-opened, but the committee may decide to hold further inquiries on these subjects in the future.
MiFID II and MiFIR
ESMA issues first opinions on MiFID II position limits
The European Securities and Markets Authority (ESMA) published its first three opinions on position limits regarding commodity derivatives under the recast Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). ESMA’s opinions agree with the position limits proposed by the French stockmarket regulator Autorité des Marchés Financiers regarding rapeseed, corn and milling wheat.
Commission publishes draft MiFIR package order rules
The European Commission published a draft Commission Delegated Regulation supplementing MiFIR by establishing a methodology for determining those package orders for which there is a liquid market. Article 9(1)(e) of MiFIR states that, under certain conditions, package orders can be granted a waiver from pre-trade transparency, but the use of that waiver is more limited when the package order is considered liquid.
ESMA publishes responses to MiFIR derivatives trading obligation consultation
ESMA published the responses received to its consultation on the trading obligation for derivatives under the Markets in Financial Instruments Regulation (EU) 600/2014 (MiFIR). The responses will help ESMA finalise draft regulatory standards (RTS) implementing the trading obligation.
EBA updates data used to identify G-SIIs
The European Banking Authority (EBA) published 12 indicators and underlying end-2016 data from the 35 largest banks in the EU, which have a leverage ratio exposure measure in excess of €200bn. In 2015, 36 banks met this threshold, and three banks have changed in the sample. The data contributes to the identification of global systemically important institutions (G-SIIs), in line with standards agreed by the Basel Committee on Banking Supervision and the Financial Stability Board.
EBA updates list of public sector entities for risk-weighting
The EBA updated the list of public sector entities (PSEs) that may be treated as regional governments, local authorities or central governments for the calculation of capital requirements, in accordance with the Capital Requirements Regulation (CRR). The update includes changes to the list of PSEs in France and Croatia.
ISDA sets out objections to moratoria power amendments
The International Swaps and Derivatives Association (ISDA) issued a position paper objecting to the European Commission’s proposed amendments to the Bank Recovery and Resolution Directive (BRRD). The Commission’s proposals are intended to harmonise the use of moratoria powers by resolution authorities in the EU, but the ISDA says they would put European financial institutions at a severe competitive disadvantage globally, pose significant challenges to financial stability, and introduce new levels of uncertainty into the recovery and resolution process.
European Commission seeks feedback on centralised bank and payment account registries plans
The European Commission published an inception impact assessment on law enforcement agencies’ access to centralised bank and payment account registries. The revised 4th Anti Money Laundering (AML) Directive will allow access to such registries for the prevention of money laundering and terrorist financing, but the Commission is considering extending that access to other law-enforcement agencies, such as asset recovery offices, anti-corruption agencies and tax authorities. Views are sought by 6 September 2017.
Treasury updates financial sanctions guidance
HM Treasury and the Office of Financial Sanctions Implementation (OFSI) issued an update to the Financial sanctions: guidance, FAQs and information on monetary penalties. The guidance consists of information on the approach the OFSI takes to financial sanctions and monetary penalties for breaches in financial sanctions.
HM Treasury publishes Insurance Fraud Taskforce report
HM Treasury reported on the progress made during 2016 on the 26 recommendations put forward by the Insurance Fraud Taskforce (IFT) in January 2015 to reduce the level of insurance fraud. The IFT was set up to investigate the causes of fraudulent behaviour and recommend solutions in order to lower costs and protect the interests of consumers.
Enforcement and redress
FCA set to launch PPI consumer campaign
The FCA is to launch a consumer campaign to publicise the 29 August 2019 deadline for customers to complain about payment protection insurance (PPI). The campaign is being funded by 18 firms, including banks and other providers, that together receive more than 90% of the complaints about the sale of PPI. The campaign will launch on 29 August 2017.
Ombudsman says lenders must do more to prevent credit complaints
The financial ombudsman, Caroline Wayman, wrote on the changing nature of credit issues and possible reasons for the huge increase in complaints in this area—up 89% in the year to April 2017, following a 40% rise in the year before that. Writing in the introduction to the Ombudsman News for August 2017, Ms Wayman says lenders ‘still aren’t always making the right call in checking people will be able to repay what they owe’.
Deloitte partner fined £75,200 for misconduct
An associate partner at Deloitte LLP’s accepted a settlement, including a £75,200 fine and a reprimand, following a disciplinary hearing relating to misconduct in his provision of actuarial services to Equity Syndicate Management Limited (ESML) and Syndicate 218. James Rakow admitted to misconduct during the financial years ending 31 December 2008 and 2009.
Complaints Commissioner rejects two complaints against FCA
The Office of the Complaints Commissioner (OCC) declined to uphold two complaints (FCA00348 and FCA00309) against the Financial Conduct Authority (FCA) in two separate decisions dated 21 July 2017. In both cases the OCC agreed that the FCA could not update the complainant due to confidentiality restrictions. In one of the decisions, however, the OCC criticised some of the FCA’s actions and made some recommendations.
Markets and trading
IOSCO consults on reporting requirements in secondary corporate bonds markets
The International Organization of Securities Commissions (IOSCO) is consulting on regulatory reporting, public transparency and comparison of data across jurisdictions in secondary corporate bond markets. The consultation report makes a number of recommendations that emphasise the importance of ensuring the availability of corporate bond information, both to regulators in the form of reporting and to the public in the form of transparency requirements. Responses are sought by 16 October 2017.
ESMA publishes responses to consultation on CRA endorsement regime
The European Securities and Markets Authority (ESMA) published the responses to its consultation on updating the guidelines on the application of the endorsement regime under Article 4(3) of the Credit Rating Agencies Regulation.
Investment funds and wealth management
FCA study examines investment platform best buy lists
The FCA published a study of the drivers, impact and performance of investment platforms’ ‘best buy lists’. The study finds that while such lists outperform non-best buy list funds overall, affiliated funds included in best buy lists on average do not.
Banks and mutuals
CMA issues directions to Co-operative Bank over monthly maximum charge info
The Competition and Markets Authority (CMA) imposed an order on the Co-operative Bank requiring it to specify to personal current accountholders the monthly maximum charge (MMC) that they could face for using (or attempting to use) their unarranged overdraft.
Consumer credit, mortgage and home finance
Mortgage lending rose in Q2 2017 but may start to slow
UK Finance data shows that, on a non-seasonally adjusted basis, mortgage lending rose in June 2017, and also in Q2 2017. But the head of mortgages at UK Finance, Paul Smee, said there were also signs of a softening market and he did not expect the performance to be sustained in the second half of 2017.
Insurance and pensions
Standardised insurance product format published in the Official Journal
Commission Implementing Regulation (EU) 2017/1469 of 11 August 2017 laying down a standardised presentation format for insurance product information documents, which will have to accompany all non-life insurance policies from 2018 pursuant to the Insurance Distribution Directive (IDD), was published in the Official Journal of the EU on 12 August 2017.
Minor amendment to PRIIPs RTS published in the Official Journal
A corrigendum to Commission Delegated Regulation (EU) 2017/653 of 8 March 2017 supplementing Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) by laying down regulatory technical standards (RTS) with regard to the presentation, content, review and revision of key information documents and the conditions for fulfilling the requirement to provide such documents was published in the Official Journal of the EU.
TPR sets out monetary penalties policy and revised description of a professional trustee
The Pensions Regulator (TPR) set out how it will generally use its powers to impose monetary penalties and its revised description of who it considers to be a professional trustee, after listening to the views of the pensions industry.
TPR names pension schemes whose trustees failed to complete their basic duties
Pension trustees of a number of high profile employers have failed to comply with their basic duties, TPR revealed in its latest compliance and enforcement quarterly bulletin. TPR also published an updated quarterly list of employers taken to court for failing to pay fines for automatic enrolment non-compliance.
Payment services and systems
PSR imposes public censure on Cheque & Credit Clearing Company Ltd
The Payment Systems Regulator (PSR) publicly censured Cheque & Credit Clearing Company Ltd (C&CCC) following its failure to comply with the PSR’s general directions. C&CCC stopped publishing minutes of some of its board meetings held after February 2016, in contravention of one of the PSR’s rules, which requires regulated payment systems operators to publish the minutes of board meetings as soon as practicable, to ensure their decision making is transparent.
Lawyers seek appeal in £14bn Mastercard consumer claim
Mastercard has until 8 September 2017 to respond to an appeal of a Competition Appeal Tribunal (CAT) decision to dismiss a £14bn collective action for damages on behalf of 46 million consumers against Mastercard for illegal card fees. The appeal is the first ever application for collective proceedings. There is much uncertainty as to whether it will make it directly to the Court of Appeal or whether the application needs to go to the Administrative Court for a judicial review. However, the lawyer heading the proceedings, Walter Merricks, believes that the case will prevail as, in his opinion, the CAT did not apply the relevant legal principles.