Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 31 August 2017.
Recommendations made to solve post-Brexit cross-border insolvency proceedings issues
The Financial Markets Law Committee (FMLC) evaluated issues of legal uncertainty with regards to cross-border insolvency proceedings, which may follow Brexit. They have identified a plethora of issues that may still occur, despite the government’s plan to implement the European Union (Withdrawal) Bill, if no agreement is made between the EU and the UK. The FMLC is particularly concerned about the financial markets, due to loss of the mutual and reciprocal recognition provisions written into the Recast EU Insolvency Regulation (EU) 2015/848, which cannot be resolved by means of a wide-ranging reception statute. The paper looks at issues with restructuring tools, such as schemes of arrangement or related financial services measures, for example the Settlement Finality Directive 98/26/EC and the Financial Collateral Arrangements Directive 2002/47/EC.
Deutsche Bundesbank executive assesses European banking union
A member of the executive board of the Deutsche Bundesbank, Dr Andreas Dombret, delivered a speech examining different approaches to dealing with struggling banks in the euro area, and asking ‘does European banking union actually work?’ Dr Dombret looked at the work of the single supervisory mechanism (SSM), the role of the single resolution mechanism (SRM) and national insolvency regimes, and the current state of affairs in the European banking sector in the context of the banking union. The speech examines the actions taken in relation to Banco Popular Español, Banca Monte dei Paschi di Siena and two Venetian banks liquidated in June 2017.
ECB fines Permanent tsb Group Holdings plc for liquidity breaches
The European Central Bank (ECB) fined Permanent tsb Group Holdings plc €2,500,000 for two breaches of ECB-imposed specific liquidity requirements between October 2015 and April 2016. The ECB noted that the bank has fully remediated the issue.
PRA publishes updated XBRL taxonomy template
The Prudential Regulation Authority (PRA) published an updated v1.1.0 of the Capital+ XBRL Utility, the excel spreadsheet containing the Capital plus templates that can be used to generate XBRL submissions based on v2.0.0 of the Banking XBRL Taxonomy. The changes reflect amendments following PS20/17 ‘Regulatory reporting: Responses to CP6/17’ to show that values in the template should be reported in units, not thousands, as well as fixing issues outlined in the release notes.
ECB amends reporting requirements to reflect IFRS 9
The ECB published amendments to Regulation (EU) 2015/534 (ECB/2015/13) on reporting of supervisory financial information. The amendments reflect the requirements of International Financial Reporting Standard 9 (IFRS 9) and also include further changes and clarifications based on experience gained since the regulation was first implemented on 31 December 2015.
European Parliament briefing sets out resolution actions for Banco Popular
The European Parliament published a briefing note on the timing of, and reasons for, the resolution of Banco Popular by the Single Resolution Board (SRB). The briefing explains how the SRB implemented the framework for the recovery and resolution of credit institutions and investment firms under the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) and the Single Resolution Mechanism Regulation (EU) 806/2014 (SRM Regulation).
EBA publishes responses to recovery and resolution planning consultation
The European Banking Authority (EBA) published the feedback it received on its consultation on draft regulatory technical standards (RTS) further specifying the eligibility criteria to determine whether institutions should be subject to simplified obligations when drafting their recovery and resolution plans. The EBA received seven responses, plus an opinion from its Banking Stakeholder Group, which ‘wholeheartedly supports’ the concept of simplified obligations for less systemically important banks.
Risk management and controls
Corporate governance reforms aim to enhance public trust in business
The government announced a package of corporate governance reforms which will, among other things, require all companies of significant size to explain how their directors comply with the requirements of section 172 of the Companies Act 2006 (CA 2006) to have regard to wider interests in pursuing the success of the company. The aim is to reassure the public that companies are being run with an eye to the interests of the employees, suppliers, customers and wider society as well as the board and shareholders.
DBEIS asks FCA, FRC and Insolvency Service to clarify corporate governance powers
The Department for Business, Energy & Industrial Strategy responded to the feedback it received on its November 2016 proposals to strengthen the UK’s corporate governance. The government says that, during the consultation, questions were raised as to whether the Financial Reporting Council (FRC) had the powers, resources and status to undertake its functions effectively. To address this the government will ask the FRC, the Financial Conduct Authority and the Insolvency Service to conclude new or, in some cases, revised letters of understanding with each other before the end of 2017 to ensure the most effective use of their existing powers to sanction directors and ensure the integrity of corporate governance reporting.
Two Société Générale executives charged in US with LIBOR manipulation
The former global head of treasury and former head of treasury Paris at Société Générale have been indicted in US federal court of conspiring to manipulate the US Dollar (USD) LIBOR interest rate. Danielle Sindzingre, 54, and Muriel Bescond, 49, were charged in the Eastern District of New York with one count of conspiring to transmit false reports concerning market information that tends to affect a commodity and four counts of transmitting such false reports. The charges follow an ongoing investigation by the FBI.
Enforcement and redress
FCA begins advertising campaign for PPI claim deadline
The Financial Conduct Authority (FCA) launched an advertising campaign publicising the 29 August 2019 deadline for Payment Protection Insurance (PPI) claims. The campaign, which features Arnold Schwarzenegger, will appear on TV, online and on outdoor advertising across the UK over the next two years.
Markets and trading
Commission amends definition of systematic internaliser under MiFID II
The European Commission adopted a Commission Delegated Regulation (C(2017) 5812 final) amending Commission Delegated Regulation (EU) 2017/565. The amendment provides that an investment firm will not be considered to be dealing on own account for the purposes of the definition of ‘systematic internaliser’ set out in Article 4(1)(20) of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II) where it participates in matching arrangements entered into with entities outside its own group with the objective or consequence of carrying out de facto riskless back-to-back transactions in a financial instrument outside a trading venue.
ESMA guidelines on data transfer between TRs authorised under EMIR
The European Securities and Markets Authority (ESMA) issued final guidelines on data transfer between trade repositories (TRs) authorised under the European Market Infrastructure Regulation (EMIR). There are currently seven authorised TRs operating in the EU. Data portability is essential for data quality, competition between TRs, and for risk monitoring by authorities.
FCA webpage lists position limits for MiFID II commodity derivative contracts
The FCA published a webpage listing the commodity derivative contracts that it has currently identified as trading on a UK trading venue which, from 3 January 2018, will have a bespoke position limit set against them. Under MIFID II all commodity derivatives will be subject to position limits. For new and illiquid contracts the limit will be 2,500 lots from 3 January 2018. For other contracts the FCA will set a position limit, as listed on the webpage.
ESMA issues compliance table for guidelines on MAR—inside information on derivatives
ESMA published a compliance table on its guidelines on information relating to commodity derivatives markets or related spot markets for the purpose of the definition of inside information on commodity derivatives under the Market Abuse Regulation (EU) 596/2014 (MAR). The guidelines (ESMA/2016/1480) apply from 17 March 2017.
ESMA publishes responses to consultation on conflicts of interest for CCPs
ESMA posted the responses it received to its June 2017 consultation ESMA70-151-291 on guidelines setting out the criteria central counterparties (CCPs) should apply to avoid or mitigate the risks of conflicts of interest and to ensure a consistent implementation across CCPs.
EMMI publishes summary of euro repo benchmark consultation feedback
The European Money Markets Institute (EMMI) published a summary of the feedback it received on its consultation paper on a new reference index for the euro repo market. EMMI says that, overall, the feedback received is supportive of its plans for the new index, and that it will shortly publish on its website a factsheet summarising the key features and characteristics of the index.
ICE Benchmark Administration to run London silver price auction
ICE Benchmark Administration (IBA) announced that it expects to begin administering the benchmark and operating the auction underlying the London Bullion Market Association (LBMA) silver price from 25 September 2017, subject to regulatory approval.
Consumer credit, mortgage and home finance
ECB paper presents new way to analyse risk in the residential property sector
As part of its working paper series, the ECB published ‘Home, safe home: cross-country monitoring framework for vulnerabilities in the residential real estate sector’. The paper proposes a framework for monitoring the sector in a cross-country context, and says it proves to be a significant predictor of historical real estate crises, with a better forecasting performance than other models.
Citizens Advice calls for a ban on raising credit limits for those already in debt
The Citizens Advice charity called for a ban on credit card companies raising limits on credit cards of those who are in debt without their approval. This follows the charities ‘Stuck in Debt’ report which found that 18% of people who are in debt have had their limits raised without their knowledge—6% more compared with all credit card holders.
Insurance and pensions
IAIS reports on observance of ICPs 13 and 24
The International Association of Insurance Supervisors (IAIS) published the report from the team conducting the self-assessment and peer review (SAPR) of levels of observance of Insurance Core Principles (ICPs) 13 and 24 by insurance supervisors. The IAIS identifies implementation of the ICPs by insurance supervisors as one of its strategic priorities. The IAIS says that determining the observance level of the ICPs and, as a result, identifying gaps in implementation and observance of the ICPs is the critical first step for implementation.
Online pension info could help 90% of parents save more
Nine out of ten parents think a service showing them all of their pension savings together online would be important in helping them save more for their retirement, according to an online survey run by Mumsnet on behalf of the Association of British Insurers and the Pensions Dashboard Project.
Fintech and virtual currencies
Precision timing experiment aligns blockchain trades to atomic clocks
Researchers from Strathclyde Business School, the National Physical Laboratory (NPL), the Toronto Stock Exchange (TMX) and consultancy firm Z/Yen successfully conducted an experiment timestamping financial stock trades using atomic clocks, recording the trades directly on a distributed ledger. Precision timing is becoming ever more important as fintech companies adopt blockchain for financial transactions, but different processing speeds, server capabilities and execution code can result in digitally programmed orders arriving at a market place at different times.
Dates for your diary
|4 September 2017||Short Selling Regulation||Deadline for responses to ESMA ‘Consultation Paper: On the evaluation of certain elements of the Short Selling Regulation (ESMA70-145-127)’.|
|6 September 2017||Fourth Money Laundering Directive||Deadlines for responses to European Commission’s impact assessment on law enforcement agencies’ access to centralised bank and payment account registries.|
|7 September 2017||Markets in Financial Instruments Directive II, Markets in Financial Instruments Regulation and Market Abuse Regulation||Deadline for responses to FCA consultation ‘CP17/19: Markets in Financial Instruments Directive II Implementation—Consultation Paper VI’.|