Weekly highlights—29 November 2018

29 Nov 2018 | 44 min read

Welcome to the weekly Financial Services highlights from the Financial Services team for the week ending 29 November 2018.

Brexit

Bill introduced to cover ‘in flight’ EU FS legislation if no Brexit deal is reached

The Financial Services (Implementation of Legislation) Bill was introduced in the House of Lords on 22 November 2018. It is intended to provide the Government with the power to implement and make changes to ‘in flight’ files of financial services legislation for two years after the UK's withdrawal from EU in the absence of a withdrawal agreement being reached (ie in a no-deal scenario).

The Financial Services (Implementation of Legislation) Bill—policy note

HM Treasury published a policy note in relation to The Financial Services (Implementation of Legislation) Bill outlining the Bill's purpose and further detail on the 'in-flight files' specified in the Bill itself. The Bill provides the UK Government with a delegated power, in a no-deal scenario, to implement and make changes to a specified list of 'in-flight files' for two years after the UK's withdrawal from the EU. 'In-flight files' are pieces of EU financial services legislation agreed or in negotiation at the point of the UK's exit, with implementation dates falling in the two years after exit.

Interchange Fee (Amendment) (EU Exit) Regulations 2018

SI 2018/Draft: This draft enactment is laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This draft enactment proposes to amend UK legislation and retained EU legislation in relation to interchange fee regulation in order to ensure that Regulation (EU) 2015/751 on interchange fees for card-based payment transactions can continue to operate effectively as direct retained EU law after the UK’s withdrawal from the EU. It comes into force on exit day.

Brexit Financial Services draft SI Benchmarks (Amendment and Transitional Provision) (EU exit) Regulations 2019—23 November 2018

Financial Services analysis—23 November 2018: HM Treasury published explanatory information regarding a proposed Brexit Financial Services statutory instrument (SI), the Benchmarks (Amendment and Transitional Provision) (EU exit) Regulations 2019, in relation to retained EU law related to financial benchmarks, to be laid under the EU (Withdrawal) Act (EUWA).

Brexit SI Bulletin—latest drafts and sifting committee recommendations, 23 November 2018

The Commons European Statutory Instruments Committee (ESIC) and the Lords Secondary Legislation Scrutiny Committee (SLSC) are responsible for the sifting process under the EUWA. These committees scrutinise proposed negative Brexit SIs and make recommendations on the appropriate parliamentary procedure before the instruments are laid in Parliament. This bulletin outlines the latest updates and recommendations, collated on 23 November 2018. Subjects covered in this analysis include the Bank of England (Amendment) (EU Exit) Regulations 2018 and the Draft Payment Accounts (Amendment) (EU Exit) Regulations 2018.

Brexit Bulletin—agreement in principle on the framework for the future UK-EU relationship

On 22 November 2018, the UK government and the European Commission announced their agreement in principle on the wording of a political declaration on the framework for the future EU-UK relationship. An outline of the political declaration was published on 14 November 2018, along with the full text of the draft Withdrawal Agreement. Following further talks, the full text of the political declaration was agreed in principle, with both the UK government and European Commission endorsing the Withdrawal Agreement and Political Declaration at a European Council meeting on 25 November 2018.

Government analysis of no deal Brexit estimates a significant increase in trade costs for financial services

The UK government published a collection of documents to support understanding and assessment of EU exit under different scenarios. Chapter 3.2.4 of the EU Exit: Long-term Economic Analysis paper estimates that there will be a significant increase in trade costs for financial services in these scenarios. According to chapter 3.2.4, the financial services sector group contributed around 7% to the UK's gross value added (GVA) (£131bn in GVA) and employed over 1.1 million people in 2017. It also contributed 18% to UK corporation tax receipts in 2017-18.

Treasury Committee to take evidence on the economic impact of the Withdrawal Agreement

The Treasury Committee announced it plans to take evidence on the Withdrawal Agreement and the joint Political Declaration and publish a call for evidence on the economic analysis of both documents. Nicky Morgan MP, Chair of the Committee, wrote to the Governor of the Bank of England (BoE), Chief Executive Officer of the Financial Conduct Authority (FCA) and the Chancellor of the Exchequer in June, asking them to produce and publish an analysis of the impact of the Brexit Withdrawal Agreement and future framework once it is negotiated.

BoE publishes analysis of EU exit and Treasury Committee to publish FCA analysis

The BoE published its analysis of the EU Withdrawal Agreement and the Political Declaration regarding the future relationship between the EU and the UK. The Commons Select Committee also announced the Treasury Committee would be publishing the FCA's analysis at 10:30am on Thursday 29 November 2018.

FCA assesses impact of EU Withdrawal Agreement

The FCA published its EU Withdrawal Impact Assessment, which was requested by the Treasury Select Committee and sets out the impact of the Withdrawal Agreement and future framework on the FCA's objectives. Andrew Bailey, FCA Chief Executive, also wrote to Nicky Morgan MP, Chair of the Treasury Select Committee. The Treasury Select Committee requested the FCA to assess the impact of the UK's exit from the EU in three areas:

  • the UK leaving the EU without an agreement, either on 29 March 2019 or after the transitional or implementation period on 31 December 2020

  • the draft Withdrawal Agreement, and

  • the outline of the political declaration on the framework for the future relationship between the EU and the UK

FCA launches further consultation on approach to Brexit

The FCA launched a further consultation on its approach to the UK's exit from the EU. The consultation paper (CP18/36) sets out additional proposals on how the FCA will amend its Handbook and EU derived binding technical standards (BTS) if the UK leaves the EU without an implementation period. The FCA also consults on its proposed approach to non-Handbook guidance and to forms which appear in the FCA Handbook. The deadline for comments is 21 December 2018.

ESMA outlines plans to recognise UK CCPs in case of no-deal Brexit

The European Securities and Markets Authority (ESMA) published a public statement to address the risks of a no-deal Brexit scenario in the area of central clearing. ESMA says that its Board of Supervisors supports the continued access to UK central counterparties (CCPs) to limit the risk of disruption in central clearing and to avoid negatively impacting EU financial market stability.

International Trade Committee launches inquiry on UK trade in services

The International Trade Committee launched an inquiry on the UK's trade in services. The inquiry will examine the main barriers faced by UK services exporters, how the UK should seek to liberalise international trade in services, including negotiating international agreements, and potential domestic policy implications. The deadline for written submissions is 5pm on 21 January 2019.

Japanese insurer wins court approval for Brexit plans

On 19 November 2018, Japanese insurer Tokio Marine Group said that it won the backing of the High Court to finish transferring its cross-border business to Luxembourg, reaching a ‘milestone’ in its Brexit planning. With approval from the High Court, Tokio Marine said it can now transfer the relevant insurance contracts to its new subsidiary, Tokio Marine Europe SA, which will operate branches in various countries across the EU from its base in Luxembourg.

Insurers say ‘too early’ to judge merits of Brexit deal

The UK insurance industry said on Monday 26 November 2018 that it is ‘far too early’ to know whether the breakthrough Brexit agreement between Brussels and London will satisfy demands from insurers for regulatory autonomy. EU leaders formally agreed in Brussels on Sunday 25 November 2018 to Prime Minister, Theresa May’s, plans for exiting the bloc and for future relations between the two parties after 29 March 2019. The Association of British Insurers urged the EU and Britain to focus on regulatory cooperation, and to ensure that domestic insurers are not forced to obey EU regulation that London has no control over after the UK’s departure.

TheCityUK and PIMFA comment on EU Withdrawal Agreement

TheCityUK and the Personal Investment Management and Financial Advice Association (PIMFA) issued statements on the UK's Withdrawal Agreement with the EU. In TheCityUK's statement, issued following approval of the agreement by EU leaders, Miles Celic, Chief Executive Officer, commented: ‘Today marks a significant moment in the Brexit negotiations. The approval of the Withdrawal Agreement means a deal which can deliver an orderly Brexit is a major step nearer. The avoidance of instability is critical for our industry, the customers and clients we serve, and our employees in the UK and across the EU'. In its statement, issued prior to approval of the Withdrawal Agreement by EU leaders, PIMFA welcomed the inclusion of stronger language on future regulatory cooperation and noted that the Withdrawal Agreement and the Political Declaration deliver the transition period which is important for PIMFA members.

Governor of Banque de France: an integrated network of EU financial centres will replace the City post-Brexit

Mr François Villeroy de Galhau, Governor of Banque de France and Chairman of the Autorité de contrôle prudentiel et de resolution (ACPR), gave a speech on the consequences of Brexit for the French and European financial sectors, in which he outlined some of the steps being taken by the ACPR and Banque de France to manage the risks of a no-deal Brexit and discussed the opportunity to build a financial Eurosystem post-Brexit.

Prudential requirements

ECB regulation on threshold for assessing the materiality of credit obligations past due published in OJ

Regulation (EU) 2018/1845 of the European Central Bank (ECB) of 21 November 2018 on the exercise of the discretion under Article 178(2)(d) of the Capital Requirements Regulation (EU) 575/2013 (CRR) in relation to the threshold for assessing the materiality of credit obligations past due was published in the Official Journal of the EU. With this Regulation, the ECB exercises the discretion conferred on competent authorities under Article 178(2)(d) of the CRR in relation to the threshold for assessing the materiality of credit obligations past due. This Regulation applies exclusively with regard to credit institutions classified as significant in accordance with Article 6(4) of Regulation (EU) 1024/2013 and Part IV and Article 147(1)of Regulation (EU) 468/2014 (ECB/2014/17) and irrespective of the method used for the calculation of their risk-weighted exposure amounts.

Basel III implementation: progress continues but challenges remain

The Basel Committee on Banking Supervision (BCBS) published its ninth report to G20 Leaders on implementation of the Basel III regulatory reforms. This provides an update on progress and challenges in the implementation of the Basel III regulatory reforms since July 2017, when BCBS last reported to the G20.

FSI publishes report on Basel III implementation in 100 non-BCBS member jurisdictions

The Financial Stability Institute (FSI) published The Basel framework in 100 jurisdictions: implementation status and proportionality practices. This report surveys 100 jurisdictions that are not members of the BCBS on how far they have adopted key prudential requirements of the Basel framework and, if so, whether and how they apply proportionality in their regulatory regimes.

FSI publishes comparative analysis on stress-testing banks

The FSI of the Bank for International Settlements published a paper in which it reviews system-wide stress tests carried out for banks in the euro-area, Japan, Switzerland and the US. The FSI carried out a comparative analysis on system-wide stress tests for banks and identified three building blocks in the set-up of any stress test: governance, implementation and outcomes. The paper relates these three building blocks to the policy objectives of stress tests, which can be microprudential or macroprudential.

ECB’s Ignazio Angeloni assesses the success of the SSM

The ECB published a speech by Ignazio Angeloni, a member of its supervisory board, on the single supervisory mechanism (SSM). Mr Angeloni concluded that certain key objectives of banking union remain unfulfilled. Mr Angeloni said that financial stability, the statutory objective of the SSM, is ensured at all times, and prudential standards are strengthened. At the same time, however, uncertainty around the state of certain parts of the euro area banking sector persists and therefore more work is needed by both the banking industry and by their supervisors.

Regulation of claims management companies

Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018

SI 2018/1253: Amendments are made to miscellaneous pieces of legislation in order to transfer the regulation of claims management activities from the Claims Management Regulation Unit (CMRU) in the Ministry of Justice to the FCA. The Order sets out the types of claims management activities which will be regulated by the FCA and the restrictions on the promotion of those activities. It also specifies those activities which will be excluded from regulation by the FCA in England, Wales, and Scotland. This Order will come into force in part on 29 November 2018 and fully on 1 April 2019. (Updated from draft on 28 November 2018).

Financial stability

FSB reports to G20 Leaders on progress in financial regulatory reforms

The Financial Stability Board (FSB) published its fourth annual report on the implementation and effects of the G20 financial regulatory reforms, which will be delivered to the G20 Summit in Buenos Aires. As the FSB turns its focus towards implementation and rigorous evaluation of the reforms, the report highlights the progress that was made in the reform agenda since the financial crisis 10 years ago and looks ahead at future challenges.

FSB Chair reports to G20 Leaders ahead of the Buenos Aires Summit

The FSB published a letter from its Chair, Mark Carney, to G20 leaders in advance of the G20 Summit in Buenos Aires this weekend. Mr Carney highlighted in his letter that 2018 was a year of transition:

  • from robust, broad-based global growth to a more uneven global expansion with emerging downside risks

  • from accommodative to tightening financial conditions, and

  • from strong capital inflows to emerging market economies to capital outflows from many of them, in some cases significantly so
FSB completes review of its processes and transparency to maximise effectiveness

The FSB reviewed its processes and transparency to maximise its effectiveness for the next phase of its work, which focuses on promoting global financial stability. The review confirmed the FSB's existing strengths and identified scope to enhance some of its work processes, reinforce the member-driven character of its work, further foster effective communication and strengthen engagement with external stakeholders. The FSB is already implementing these actions.

Financial Stability Board appoints new Chair and Vice Chair

The FSB appointed Randal K. Quarles as its new Chair and Klaas Knot as its Vice Chair for a three-year term beginning on 2 December 2018. It was also been agreed that after three years, on 2 December 2021, Mr Knot will take over as Chair for the next three-year term. The FSB's new Chair, Randal Quarles is Governor and Vice Chairman for Supervision at the US Federal Reserve, and the new Vice Chair, Klaas Knot is President of De Nederlandsche Bank.

Authorisation, approval and supervision

FCA publishes FCA Mission: Approach to Authorisation and feedback statement

The FCA published its FCA Mission: Approach to Authorisation and feedback statement to explain the purpose of authorisation and the FCA's approach. This follows the FCA's Approach to Authorisation consultation paper published in December 2017. Following the FCA's December 2017 formal consultation with stakeholders regarding authorisation and how it fits into the FCA's overall regulatory system and decision-making framework, the FCA used the feedback received to inform its Approach to Authorisation and feedback statement. The feedback statement is contained within annex 1 to the Approach to Authorisation.

UK Finance director of Prudential Policy reflects on conduct and culture in banking

The director of prudential policy at UK Finance, Simon Hills, reflected on the focus that banks and supervisors now have on improving culture in the banking industry in his article 'A question of conduct and culture’. Mr Hills considers some of the mechanisms that can improve culture. He discusses the introduction of the Senior Managers and Certification Regime (SM&CR), which makes senior executives individually accountable both for what goes on in the businesses they manage and for ensuring there is continuous cultural improvement. Mr Hills notes that if they get it wrong, individuals can face very serious enforcement action, and regulators in other parts of the world, for instance in Australia and Malaysia, are considering introducing similar individual accountability regimes.

Risk management and controls

FSB final recommendations on compensation data reporting to address misconduct risk

The FSB published its finalised 'Recommendations for national supervisors: Reporting on the use of compensation tools to address potential misconduct risk' (the Recommendations). The FSB also published an overview of responses to its May 2018 consultation on the issues which includes an outline of changes made to the Recommendations.

FCA publishes results of cross-sector survey on cyber and technology resilience

The FCA published a report setting out the key themes from a cross-sector survey it carried out during 2017 and 2018 to assess firms' technology and cyber capabilities. The FCA surveyed 296 firms during 2017 and 2018, asking questions in key areas such as governance, delivery of change management, managing third-party risks and effective cyber defences. Firms self-assessed their abilities and the FCA analysed the responses for each firm and across sectors.

IA publishes updated executive pay guidelines

The Investment Association (IA) published updated executive pay guidelines entitled 'The 2018 principles of remuneration', which set out investor expectations and best practice for how companies should pay their top executives in line with the new Corporate Governance Code.

MP seeks FCA probe into Lloyds whistleblower case

A senior MP is to call on the FCA to scrutinise the way senior management at Lloyds Banking Group PLC handled information about a fraud investigation at HBOS PLC following its takeover in 2008. Kevin Hollinrake, chairman of the all-party parliamentary group for fair business banking, said he wrote to the city watchdog demanding an investigation into an estimated £245m ($315m) loan scam at a branch of HBOS that wrecked vulnerable companies in the run-up to the financial crisis.

Treasury Committee launches inquiry into IT failures at banks

The House of Commons Treasury Committee launched an inquiry into IT failures in the financial services sector. The inquiry will focus on the common causes of operational incidents in the sector, the ways in which consumers lose out as a result of such incidents, and whether regulators have the relevant skills to adequately hold people to account.

City of London Law Society publishes response to Law Commission consultation on electronic execution of documents

The Financial and Company Law Committees of the City of London Law Society (CLLS) published a response to the Law Commission consultation paper on electronic execution of documents. The aim of the Commission’s consultation was to address any uncertainty surrounding the formalities around the electronic execution of documents and to ensure that the law governing said formalities is flexible and certain enough to remain competitive in a post-Brexit environment.

Financial crime

Sanctions and Anti-Money Laundering Act 2018 (Commencement No 1) Regulations 2018

SI 2018/1213: Certain provisions of the Sanctions and Anti-Money Laundering Act 2018 will come into force in the UK on 22 November 2018. The commenced provisions relate to sanctions.

Draft Council of the EU AML/CFT Action Plan identifies eight short term actions

The General Secretariat of the Council of the EU issued an I/A Item Note suggesting that the Permanent Representatives Committee (COREPER) invites the Council to adopt the anti-money laundering (AML) and counter-terrorist financing (CFT) action plan annexed to the note.

EBA executive director discusses AML/CFT supervision before EP Tax3 Special Committee

Adam Farkas, executive director of the European Banking Authority (EBA), made an introductory statement at a public hearing of the European Parliament's Special Committee on financial crimes, tax evasion and tax avoidance (Tax3 Special Committee) in which he discussed the EBA's evolving approach to enhancing AML standards across the EU.

European Parliament committee recommendations for financial crime and tax evasion

The co-rapporteurs of the EU Parliament's TAX3 Special Committee presented their draft report. The report contains numerous proposals and recommendations to EU Member States and the European Commission to help them face the challenges linked to tax fraud and financial crime, such as money laundering.

Five fraudsters jailed for falsely claiming £13m in tax payments

Five fraudsters were sentenced to a total of more than 31 years in jail for facilitating around 900 false visa applications. Abul Kalam Muhammad Rezaul Karim (AKM), was the ringleader in the organised crime group and set up 79 fake companies and documentation used by Bangladeshi nationals in fraudulent visa applications. The fraudsters also used the companies to reclaim £13m in tax repayments from HMRC over a six year period.

Enforcement and redress

FCA publishes form of modification by consent of DISP 1.10.1

The FCA published the form of modification by consent of DISP 1.10.1 in the FCA Handbook. The modification allows a firm to provide the FCA with a complete report concerning complaints received from eligible complainants once a year, instead of twice, if the firm is permitted to carry on only credit-related regulated activities or operating an electronic system in relation to lending and has revenue arising from those activities that is less than, or equal to, £5m a year.

ASA rules that Lending Stream ad was misleading

The Advertising Standards Authority (ASA) ruled that a February 2018 television advertisement for LendingStream.co.uk, a short-term loans company, was misleading because it presented the representative APR (RAPR) in an ambiguous way. The ASA told Lending Stream not to broadcast the ad again in its current form and to ensure that future ads are not misleading.

Markets and trading

Council of the EU publishes compromise text on recommendations on CCPs regulation

The Council of the EU published the latest Presidency compromise proposal (Compromise Proposal) for a negotiating mandate with the European Parliament with regard to a proposed regulation which amends Regulation (EU) No 1095/2010 establishing ESMA (ESMA Regulation) and amending the European Markets Infrastructure Regulation (Regulation (EU) No 648/2012) (EMIR) as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs. The Council also published the compromise text on proposed recommendation (Proposed Recommendation) for a Decision to amend Article 22 of the statute of the European System of Central Banks and of the ECB.

Treasury Minister updates Parliament committees on EU CCP proposals

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 EU proposals regarding the authorisation and supervision of CCPs and the recognition of third-country CCPs.

FIA issues updated CCP risk management recommendations

The Futures Industry Association (FIA) published a position paper with a series of recommendations to improve clearing house risk management following recent market developments. The position paper is an update to a 2015 series of recommendations made by the FIA. In light of a recent default that touches upon several previous recommendations and that brings to light new topics, the FIA published this updated analysis to help inform the public discussion regarding the proper management of CCP risk.

Working Group on Sterling Risk-Free Reference Rates communication pack on LIBOR transition

The Working Group on Sterling Risk-Free Reference Rates (RFRWG), whose objective is to catalyse a broad-based transition from the London Interbank Offered Rate (LIBOR) to the Sterling Overnight Indexed Average (SONIA) across sterling bond, loan and derivative markets, published a communication pack entitled ‘Preparing for 2022: What you need to know about LIBOR transition’. The RFRWG is made up of banks and dealers, investment managers, non-financial corporates and other sterling issuers, infrastructure firms and trade associations. It was first convened by the BoE in 2015 to identify the preferred risk-free rate for sterling markets.

FCA reminds firms of new settlement internalisation reporting requirement

The FCA issued a reminder to firms on the upcoming obligation to report settlement internalisation, which will come into effect in July 2019, under Article 9 of the Central Securities Depositories Regulation (Regulation (EU) 909/2014) (CSDR). The FCA explains that under the CSDR, an institution is considered to be a settlement internaliser if it settles transfer orders on behalf of clients on its own account rather than through a central securities depository.

ISDA publishes preliminary results of benchmark consultation

The International Swaps and Derivatives Association (ISDA) published a statement setting out the preliminary results of a consultation on technical issues relating to new benchmark fallbacks for derivatives contracts that reference certain interbank offered rates (IBORs). The consultation was launched in July this year and covered the proposed methodologies for certain adjustments that would apply to the fallback rate in the event an IBOR is permanently discontinued.

ISDA factsheet makes case for common digital representation of derivatives trade events

ISDA published a factsheet on the Common Domain Model, its blueprint for how derivatives are traded and managed across the trade lifecycle. ISDA says a single, common digital representation of derivatives trade events and actions will enhance consistency and facilitate interoperability across firms and platforms, providing a bedrock upon which new technologies can be applied.

ISDA Credit Steering Committee’s statement on German bank credit default swap

ISDA's Credit Steering Committee (CSC) published a note which explains the CSC's recommendation for changes to documentation practice for credit default swap (CDS) transactions referencing German banks.

ISDA market practice change for settlement of EUR swaptions

ISDA updated its 2006 ISDA Definitions Settlement Matrix for Early Termination and Swaptions (the ISDA Settlement Matrix) to show Collateralised Cash Price as the default cash settlement method for EUR swaptions, effective from 26 November 2018. The change to the ISDA Settlement Matrix follows on from last year's ISDA survey on changing the market convention for the cash settlement of EUR swaptions from ‘Par Yield Curve—Unadjusted’ to ‘Collateralised Cash Price’.

ICMA releases results of second FICC Research Unbundling survey

The Asset Management and Investors Council (AMIC) of the International Capital Market Association (ICMA) issued the results of the second AMIC FICC Research Unbundling survey. The purpose of the survey is to help improve market clarity on this topic, identify remaining challenges, difficulties and outstanding issues in the implementation of the new MiFID II research rules and to establish progress compared to the first survey issued in 2017. This survey was aimed at buy-side firms and focused on FICC research only.

Regulation of capital markets

ECON committee adopts reports on proposed covered bonds legislation

The European Parliament's Economic and Monetary Affairs (ECON) committee adopted its draft reports on the European Commission proposals for a Directive on covered bonds and covered bond public supervision, and a Regulation on exposures in the form of covered bonds. The Regulation mostly amends Article 129 of the CRR, which was so far the main legal basis for determining which covered bonds on a bank's balance sheet were eligible for preferential capital treatment.

Council of the EU agrees stance on EU framework for covered bonds

The Council of the European Union issued a press release stating that EU ambassadors have taken a step forward in expanding the capital markets union and promoting access to long-term finance by reaching an agreement on the Council's stance on a harmonised EU framework for covered bonds. Covered bonds are financial instruments backed by a separate pool of assets, typically mortgages or public debt, to which investors have a preferential claim in case of failure of the issuer. Covered bonds are an efficient source of financing of the economy which ensure a high level of certainty for investors.

Feedback period open in respect of draft Act for a simplified prospectus for companies and investors in Europe

The European Commission is seeking views on its draft delegated regulation ahead of finalising its initiative for a simplified prospectus for companies and investors in Europe. The feedback period is now open and ends on 26 December 2018. The draft delegated regulation is to supplement the Prospectus Regulation (EU) 2017/1129 as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and to repeal Commission Regulation (EC) No 809/2004.

AFME responds to EBA consultation on ITS on Supervisory Reporting amendments

The Association for Financial Markets in Europe (AFME) published its response to the EBA’s consultation on the draft version of Data Point Model (DPM) 2.9. The EBA consultation is an exposure draft of the new data requirements proposed in the ongoing public consultations on amendments to the Implementing Technical Standards (ITS) on supervisory reporting on COREP LCR, COREP securitisation & FINREP-NPE&FB, P&L and IFRS16. on ITS on Supervisory Reporting amendments with regards to COREP securitisation.

Commission reports on risk reduction progress and calls for faster progress on CMU

The European Commission published a press release and two fact sheets which take stock of the latest developments in risk reduction in the banking sector and progress towards an even more integrated and stable EU financial system. According to the press release, financial stability was considerably reinforced in recent years and risk reduction in the EU banking sector is continuing at a sustained pace, where decisions on the deepening of Europe's Economic and Monetary Union should be taken. At the same time, the work on financial stability and integration needs to continue, and it is now time for the co-legislators to agree on all key outstanding files.

Banks and mutuals

PRA publishes consultation paper (CP 29/18) updating SoP on systemic risk buffer

The Prudential Regulation Authority (PRA) published consultation paper (CP 29/18) which proposes minor updates to its statement of policy 'The PRA's approach to the systemic risk buffer' (the SoP) published in December 2016. Comments are requested by 6 December 2018. The CP is relevant to ring-fenced bodies within the meaning of section 142A of the Financial Services and Markets Act 2000 (FSMA) and large building societies that hold more than £25bn in deposits (where one or more of the account holders is a small business) and shares (excluding deferred shares).

Danièle Nouy: banks should prioritise governance, profitability and NPLs

Danièle Nouy, Chair of the Supervisory Board of the ECB, gave a wide-ranging speech in which she discussed the risks currently facing the banking sector, what banks should be doing to address them and what legislators and supervisors can do to contribute to the long-term health of banks.

Consumer credit, mortgage and home finance

Creditworthiness Assessment Bill [HL]

A Bill to require certain matters to be taken into account when assessing a borrower’s creditworthiness. The House of Commons second reading took place on 23 November 2018.

FCA consultation paper (CP18/35) rent-to-own price cap and benchmarking proposals

The FCA is consulting on the proposed introduction of a price cap on rent-to-own (RTO) firms to protect vulnerable consumers from high costs (CP18/35). In addition, RTO firms will need to benchmark the cost of products against the prices charged by three other retailers. Subject to consultation, the cap will come into force on 1 April 2019 and is expected to save consumers up to £22.7m per year. Feedback is sought by 17 January 2019.

FCA announces delay to launch of credit information market study

The FCA issued a consultation paper in July 2017 on assessing creditworthiness in consumer credit and published final rules and guidance on the topic in its Policy Statement 18/19 (PS18/19). Subsequently, the FCA announced in its Business Plan 2018/19 that it would launch a market study on credit information in Q4 2018/19, in which it would collect evidence to gain a better understanding of the potential for harm in this market and, if necessary, identify remedies. The FCA confirmed it remains committed to launching this market study. However, the launch will now be delayed until June 2019 to enable the FCA to prioritise resources for launching its market study on general insurance pricing.

Payment services and systems

PSR consults on Confirmation of Payee implementation

The Payment Systems Regulator (PSR) launched a consultation on general directions for the implementation of Confirmation of Payee (CoP), which is being rolled out in order to protect people from Authorised Push Payment (APP) scams. The deadline for comments is 4 January 2019. CoP is the industry-agreed way of ensuring that names of recipients are checked before payments are sent. It will work by checking the account name and account details to make sure there is a match. Alerts will notify the payer whether there is a match or not, meaning corrections can be made before the payment is made.

EPC updates 2017 SEPA scheme rulebooks

The European Payments Council (EPC) released updated 2017 Single Euro Payments Area (SEPA) scheme rulebook versions for the SEPA Credit Transfer (SCT) scheme, the SEPA Instant Credit Transfer (SCT Inst) scheme, the SEPA Direct Debit Core (SDD Core) scheme and the SDD Business-to-Business (SDD B2B) scheme. The new versions will take effect on 1 January 2019.

BoE publishes Victoria Cleland speech on transforming payments infrastructure

The BoE published a speech given by Victoria Cleland, Executive Director, Banking, Payments and Financial Resilience, at Payments International, London in which she set out details and background to the Real Time Gross Settlement (RGTS) and CHAPS systems (including the decision to bring the operation of CHAPS in-house in November 2017) and effective risk management for CHAPS.

Insurance and pensions

Solvency II ITS on reporting templates published in OJ

Commission Implementing Regulation (EU) 2018/1844 of 23 November 2018 amending and correcting Implementing Regulation (EU) 2015/2450 laying down implementing technical standards with regard to the templates for the submission of information to the supervisory authorities in accordance with the Solvency II Directive 2009/138/EC was published in the Official Journal of the EU. This Regulation amends the templates set out in Commission Implementing Regulation (EU) 2015/2450 to improve the quality of the information reported.

EIOPA publishes European Insurance Overview 2018

The European Insurance and Occupational Pensions Authority (EIOPA) published its first annual European Insurance Overview report. The European Insurance Overview report is published by EIOPA as an extension of its statistical services to provide an easy-to-use and accessible overview of the European insurance sector. The report is based on annually reported Solvency II information, with the aim of ensuring that the data has a high coverage in all countries and is reported consistently across the European Economic Area.

EIOPA publishes Decision on IORPs cross-border activities

EIOPA published a Decision on the cross-border collaboration of national competent authorities (NCAs) regarding Directive (EU) 2016/2341 on the activities and supervision of institutions for occupational retirement provision (IORPs), the IORP II Directive. The overall objective of the Decision is to strengthen the cross-border collaboration between NCAs on cross-border activities under the IORP II Directive so that IORPs can transfer pension schemes to other IORPs in other EU Member States, including by promoting greater transparency.

ESRB publishes report on macroprudential provisions, measures and instruments for insurance

The ESRB published a report on macroprudential provisions, measures and instruments for insurance and reinsurance. The report is intended to serve as an input to ongoing Solvency II discussions on strengthening the regulatory framework for (re)insurers from a macroprudential perspective. It complements work undertaken by EIOPA.

ESMA asks IFRS to clarify aspects of IAS 19–Employee Benefits

The chair of ESMA, Steven Maijoor, wrote to the chair of the International Financial Reporting Standards (IFRS), Sue Lloyd, asking the IFRS Interpretations Committee to provide clarity on the requirements of IAS 19–Employee Benefits. Mr Maijoor said there was potential for diversity of application in the definition of defined contribution and defined benefit pension plans, and asked the Committee to clarify the relevant accounting requirements.

Fintech and virtual currencies

European Commission hosts EU Blockchain Roundtable

The EU Blockchain Roundtable: ‘Bringing industries together for Europe to lead in blockchain technologies’ took place on 20 November 2018 in Brussels. The Roundtable's objective is to gather support among EU industry leaders and policy makers for a comprehensive EU strategy to boost innovation and exploitation of blockchain technology.

BoE workshop on big data and machine learning

The BoE, the Data Analytics for Finance and Macro Research Centre at King's College London and the Federal Reserve Board are holding a two-day workshop on 26 and 27 November 2018 to discuss recent advances in modelling the economy using big data and novel modelling approaches.

Sustainable finance

Dombrovskis delivers speech on sustainable and responsible investment

Vice-President Valdis Dombrovskis gave the keynote speech at the launch of the European Sustainable and Responsible Investment Study 2018. He said that European and global capital markets are one of the most powerful tools in the fight against climate change, but also one of the most overlooked. Mr Dombrovshkis used the speech to outline the three legislative proposals put forward by the Commission in May 2018:

  • EU-wide definitions on what is green and what is not, forming a unified taxonomy on sustainable economic activities

  • a requirement for asset managers, institutional investors, and financial advisors to make disclosures on sustainability, and

  • two benchmarks: a low-carbon benchmark, which is a decarbonised version of a standard benchmark, and a positive carbon impact benchmark, which will only allow for companies that remove emissions compared with classical methods of production

Dates for your diary

Date Subject Event
30 November 2018 Markets and trading The European Money Markets Institute (EMMI) published the second stakeholder consultation on the hybrid methodology for Euribor, as part of its aim to deliver a reformed and robust methodology that meets regulatory and stakeholder expectations. Feedback is sought by 30 November 2018.
30 November 2018 Payment services and Systems The executive board of the ECB adopted a decision amending decision ECB/2007/7 concerning the terms and conditions of TARGET2-ECB. The changes reflect amendments recently made to guideline ECB/2012/27 of the ECB regarding the terms and conditions of TARGET2-ECB and clarify some other points in the terms and conditions. The amending decision, which was adopted on 8 October 2018, will enter into force on the day following that of its publication in the Official Journal of the EU and will apply from 30 November 2018.
30 November 2018 Payment services Decision (EU) 2018/1625 of the ECB amending Decision ECB/2007/7 concerning the terms and conditions of TARGET2-ECB (ECB/2018/24) will apply from 30 November 2018.
December 2018 Payment services and systems The PSR plans to consult by December 2018 on using its regulatory powers to give a General Direction to banks and payment service providers (PSPs) to implement confirmation of payee.
December 2018 Regulation of capital markets The FCA expects to publish proposals in relation to the implementation of the EU Securitisation Regulation.
December 2018 Risk management and controls The EBA expects to release data on its 2018 EU-wide transparency exercise in December 2018.
December 2018 Authorisation, approval and supervision The FCA expects to issue a policy statement to ‘CP18/23: Claims Management: fees proposals’ and to ‘CP18/15: Claims management: how we propose to regulate claims management companies’ in December 2018.
December 2018 Fourth Money Laundering Directive MLD4 requires the ESAs to issue a joint opinion on the risks of money laundering and terrorist financing affecting the Union’s financial sector every two years. The joint opinion is expected in December 2018.
December 2018 Payment services The FCA is planning to publish a policy statement in December 2018 on its proposed approach to final regulatory technical standards and European Banking Authority guidelines under the revised Payment Services Directive (CP18/25).
December 2018 Money laundering and terrorist financing The Financial Action Task Force (FATF) first plenary meeting discussed the mutual evaluation reports of Israel and the UK, which set out the level of effectiveness of each country's AML/CFT system and their compliance with the FATF Recommendations. The mutual evaluation reports are expected to be published by December 2018.
December 2018 Investment funds and asset management The CMA expects to publish it’s Final Decision in relation to definitions of Investment Consultancy services and Fiduciary Management services for the purposes of potential remedies by December 2018. The CMA also expects to publish it’s final report on it’s Investment Consultants Investigation by December 2018.
December 2018 Markets and trading ISDA plans to publish anonymised and aggregated results of its analysis and summary of responses to its Benchmark Consultation by the end of December 2018, together with the ISDA Board Benchmark Committee's final decision on the approach to the adjusted risk-free rate and spread adjustment to use for developing fallbacks.
1 December 2018 Authorisation and supervision Commission Implementing Regulation (EU) 2018/1627 amending Regulation (EU) No 680/2014(Implementing Technical Standards on Supervisory Reporting) with regard to the inclusion of prudent valuation into the Common Reporting Framework (COREP) as well as other amendments, will apply from 1 December 2018.
1 December 2018 European Money Market Funds Regulation ESMA launched a consultation on how European money market funds (MMFs) should conduct their internal stress testing. ESMA will update its existing guidelines on stress tests for MMFs following the consultation so that managers of MMFs have the information needed to fill in the required fields in the reporting template. The deadline for responses is 1 December 2018.
2 December 2018 Senior Managers and Certification Regime Insurers can now access and submit the draft forms for converting Approved Persons Regime (APR) approvals to Senior Management Functions (SMFs). The deadline submitting forms is midnight on 2 December 2018.
2 December 2018 Regulatory architecture Randal K. Quarles will serve as Chair of the FSB and Klaas Knot will serve as its Vice Chair for a three-year term beginning on 2 December 2021. On 2 December 2018.
3 December 2018 Insurance and pensions The deadline for responses to the questions posed in the terms of reference for the FCA’s MS18/1: General insurance pricing practices market study is 3 December 2018.
3 December 2018 Brexit The Treasury Committee will take evidence from FCA Chief Executive Andrew Bailey, as part of its plans to take evidence on the Withdrawal Agreement. In the week commencing 3 December 2018, the Committee will also take evidence from the Rt Hon. Philip Hammond MP, Chancellor of the Exchequer.
4 December 2018 Brexit The Treasury Committee will take evidence from BoE Governor Mark Carney, as part of its plans to take evidence on the Withdrawal Agreement.
4 December 2018 Regulatory technical standards The EBA published final versions of the updated Joint Committee guidelines on complaints-handling, which have been translated into the official languages of the EU. The update extends the scope of application of the guidelines to the authorities supervising the new institutions established under the recast Payment Service Directive (Directive (EU) 2015/2366) and the Mortgage Credit Directive (Directive 2014/17/EU). Competent authorities have until 4 December 2018 to confirm whether they comply or intend to comply with the guidelines.
5 December 2018 Insurance The IAIS will be holding a teleconference for the Accounting and Auditing Working Group on 5 December 2018.
6 December 2018 Senior Managers and Certification Regime Deadline for responses to FCA consultation paper CP 18/26: 'Claims management companies: how we propose to apply the Senior Managers and Certification Regime'.
6 December 2018 Regulatory requirements The deadline for responses to the European Supervisory Authorities have consultation paper on targeted amendments to Commission Delegated Regulation (EU) 2017/653 of 8 March 2017 covering the rules for the key information document for packaged retail and insurance-based investment products (PRIIPs) is 6 December 2018.
6 December 2018 Prudential requirements The deadline for comments on PRA CP29/18: ‘The systemic risk buffer: Updates to the statement of policy’ is 6 December 2018.
Filed Under: Weekly Highlights

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