The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
European Supervisory Authorities Issue Final Report on Financial Institutions' Use of Big Data
The Joint Committee of the European Supervisory Authorities has published a final report on the use of Big Data by financial institutions. The Final Report has been prepared following feedback to a discussion paper published in December 2016 by the Joint Committee’s sub-Committee on Consumer Protection and Financial Innovation. “Big Data” is the term used to refer to situations where high volumes of different types of data, produced with high velocity from a wide variety of data sets and sources, is processed (often in real time) by IT tools, such as powerful processors, software and algorithms. Big Data tools have been in use for several years in some sectors, but less so in others. Nevertheless most respondents to the ESAs’ discussion paper agreed that Big Data may have an impact on almost all financial institutions and on their products and services. The use of Big Data techniques can help financial institutions to improve their understanding of customers’ preferences and their interactions with customers and clients. This can enable them to tailor products to their target markets and support effective product governance. However, the use of Big Data also entails risk.
UK Banking Standards Board Publishes Principles for Strengthening Professionalism
The Banking Standards Board has published the "BSB Statement of Principles for Strengthening Professionalism - The role of the firm", which is a guiding statement of principles intended to assist banks and building societies to strengthen professionalism in the banking sector. The BSB has defined professionalism in UK banking as "attitudes, judgement and high standards of behaviour, knowledge and skill expected of individuals working in banking". The Statement consists of six principles, each of which is supported by action points on how the principle can be achieved.
The Statement does not impose any legal or regulatory obligations on firms or replace any regulation. It is intended to assist firms in structuring their own practices and to build on regulatory initiatives, such as the Senior Managers and Certification Regimes.
View the BSB Statement.
Financial Stability Board Issues Supplementary Guidance to its Principles and Standards on Sound Compensation Practices
The Financial Stability Board has published the finalized version of its Supplementary Guidance on its Principles and Standards on Sound Compensation Practices, following feedback to a consultation it launched in June 2017. The Supplementary Guidance relates to the use of compensation tools to address misconduct risk. Misconduct, for the purposes of the Supplementary Guidance, should generally be understood as conduct that falls short of expected standards, including legal, professional, internal conduct and ethical standards.
The Supplementary Guidance is consistent with the FSB’s existing Principles and Standards on Sound Compensation Practices and provides guidance on better practice for addressing misconduct risk without adding any new or additional principles or standards. It is broken down into sections covering: (i) governance of compensation and misconduct risk; (ii) effective alignment of compensation with misconduct risk; and (iii) supervision of compensation and misconduct risk. FSB members are asked to apply the Supplementary Guidance to significant institutions and in a way consistent with the law and regulation of their jurisdictions.
UK Regulator to Consult on Expanded Financial Services Register under the Senior Managers & Certification Regimes
The Financial Conduct Authority has announced that it will be putting forward proposals for aligning the Financial Services Register with the expanded Senior Managers & Certification Regimes. The SM&CR has been in place for banks, building societies, credit unions and PRA-designated investment firms since March 2016, whilst certain insurers have been subject to the separate Senior Insurance Managers Regime. The remainder of authorized firms have continued to be subject to the Approved Persons Regime. The FCA recently consulted on expanding the existing SM&CR to all other authorized firms.
Under the SM&CR, the FCA only approves Senior Managers and it is only these individuals that appear in the FS Register. The Certification Regime requires firms to certify that all individuals in roles which pose a risk of significant harm are "fit and proper".
Feedback on the proposals to extend the SM&CR indicated that there would be public value in including details of certification of employees and other important individuals at firms in the FS Register. The FCA intends to consult in the Summer on implementing that feedback. If these proposals are implemented, non-executive directors, financial advisers, traders and portfolio managers would appear in the revised FS Register.
View the FCA's statement.
View the proposals to extend the SM&CR.
International Standards Body Seeks to Tackle Conflicts of Interest and Conduct Risks in Equity Capital Raisings
The International Organization of Securities Commissions has published a consultation report in which it seeks feedback on proposed Guidance to address the significant potential conflicts of interest arising from the role of intermediaries during key stages of an equity raising.
IOSCO has identified a number of key risks. In the early, pre-offering, phase of an equity raising, conflicts of interest can arise where analysts employed by firms managing the securities offering may be under pressure to present a positive view of the issuer. During the investor education and price-formation phase these "connected" analysts may produce conflicted research and conflicts can also be present during the allocation of securities. There can be both conflicts of interest and risks of misconduct where staff employed within firms that are managing an equity raising enter into personal transactions. These issues can damage investor confidence and the effectiveness of the capital markets as route for issuers to raise finance.
UK Banking Standards Board Publishes Further Guidance on the Certification Regime
The U.K. Banking Standards Board has published further Supporting Guidance to its Statement of Good Practice on the Certification Regime: Fitness and Propriety Assessment Principles (known as Statement of Good Practice 1). The new Supporting Guidance, "Establishing Pass/Fail Criteria and Evidencing the F&P Assessment" (known as Supporting Guidance 2), aims to assist firms and other persons assessing fitness and propriety in making certification decisions, particularly in borderline cases. The Certification Regime is part of the regulatory reforms introduced in the U.K. to strengthen individual accountability (namely, the Senior Managers Regime, the Certification Regime and the Conduct Rules). It requires firms to certify that all individuals in roles which pose a risk of significant harm are "fit and proper." The U.K. regulators are proposing to extend the Certification Regime to all other regulated firms. The BSB was launched in April 2015 as an industry initiative to help raise standards of behavior and competence in the banking sector.
Federal Reserve Bank of New York President Dudley Participates in Banking Culture Panel Discussion
William Dudley, President of the Federal Reserve Bank of New York, participated in a panel discussion entitled “Banking Culture - Still Room for Improvement?” Mr. Dudley commented that there has been significant progress and improvement in bank culture, but noted that there is room for making even further progress. The discussion also highlighted that regulation and compliance are complements, not substitutes, for good institutional culture. Mr. Dudley also noted that while many often think that supervision by regulators and firm profitability are in conflict, in reality these two forces are aligned. The panel discussed that good culture can provide a competitive advantage with respect to recruiting, given changing priorities among the growing millennial workforce, the importance that bank culture plays in the health and maintenance of a financial institution’s reputation, and how a good culture also promotes bottom-line success. The panel did note, however, that changing culture in large and complex financial institutions can be a very difficult task, and stressed that good firm culture needs to be promoted from the top down.
View full transcript of the panel discussion.
European Securities and Markets Authority Issues Final Guidelines on CCP Conflicts Management
The European Securities and Markets Authority has published a Final Report setting out Guidelines for compliance, by central counterparties authorized under the European Market Infrastructure Regulation, with their obligations to manage conflicts of interest under EMIR and related Regulatory Technical Standards. ESMA was not directly mandated by provisions in EMIR to prepare the Guidelines. Instead, ESMA has prepared the Guidelines pursuant to the wider mandate in its founding regulation to ensure common, uniform and consistent application of the relevant provisions of EMIR and the RTS.
The Final Report summarises the feedback ESMA received to its consultation on draft Guidelines, which ran between June 1, 2017 and August 24, 2017, and sets out the final form of the Guidelines. After clarifying the concept of conflicts of interest in the context of a CCP's commercial relationships, the Guidelines summarize the organisational arrangements CCPs should have in place, along with additional measures that apply in a group context. Finally the Guidelines specify a procedure for conflicts of interest management.
The Guidelines apply to all EU national regulators that supervise CCPs, and will take effect on April 7, 2018. This date is also the deadline for national regulators to inform ESMA whether they comply or intend to comply with the Guidelines, with reasons for non-compliance. All CCPs must report to their national regulator on their compliance with the Guidelines.
Bank of England Confirms its Commitment to Wholesale Market Conduct Codes
The Bank of England has published statements of commitment to the FX Global Code, the UK Money Markets Code and the Global Precious Metal Code. By issuing the statements, the BoE is demonstrating that it will abide by the principles of the three market codes, both when acting as a market participant and also when its activities include acting as agent for HM Treasury in managing the UK's official reserves in the Exchange Equalisation Account. HM Treasury has separately confirmed that it is content with the BoE's ability to adhere to the codes. Six other central banks in the European System of Central Banks have also simultaneously issued their own statements of commitment to the Global FX Code and it is expected all ESCB banks will have done so by May 2018.
UK Regulators Consult Further on Extension of Individual Accountability Regime to All Financial Services Firms12/13/2017
The UK Financial Conduct Authority and Prudential Regulation Authority have issued further consultations on aspects of the extension of the Senior Managers and Certification Regime to all firms authorized under the Financial Services and Markets Act 2000.
The FCA has published three separate consultations, which build on its previous consultation in July 2017 and set out further proportionate proposals to account for the wide differences in the sizes and nature of firms that will be brought within the regime. In the July 2017 consultation, the FCA proposed an extended SM&CR consisting of a standard set of requirements for firms within the "core" regime, and further "enhanced" or simplified "limited scope" requirements for other firms as appropriate. The PRA has published a further consultation supplementing its July 2017 consultation on the PRA's substantive proposals for extension of the SM&CR to insurers.
UK Financial Conduct Authority Elaborates on its Mission and Consults on Approaches to Competition and Authorization
The UK Financial Conduct Authority has published two consultations, seeking feedback on draft documents setting out its regulatory approach to authorization and competition. The two documents, once finalized, will form part of a series of formal approach documents explaining the FCA's approach to regulation in more depth. They should be read alongside the FCA's Mission document, which was first published in October 2016 and most recently updated in November 2017.
In the consultation on its approach to authorization, the FCA explains the public value and purpose of requiring authorization to conduct regulated financial services activities and the FCA's current approach to authorizing firms and individuals. The FCA seeks feedback on four questions: (i) understanding of the Threshold Conditions that firms and individuals must meet for authorization, and any areas where the FCA might be more specific; (ii) how the FCA might improve its approach to supporting firms and individuals to meet the minimum standards and how the FCA might better promote competition; (iii) whether the FCA has suggested the correct commitments to firms making authorization applications and what other commitments could be made; and (iv) whether the FCA has prioritized the right strategic goals, and, if not, what additional goals could add the most public value to the FCA's work.
US Federal Reserve Bank of New York Executive Vice President Discusses the Role of Bank Supervisors in the Culture Reform Dialogue
US FRB of NY Executive VP Kevin Stiroh spoke at a culture roundtable session regarding misconduct, risk, culture, and supervision. The remarks were based on a white paper that was published the same day. Mr. Stiroh’s remarks focused primarily on employee misconduct risk in the financial services industry, noting that since 2008 financial institutions have paid over $320 billion in related fines. Mr. Stiroh also highlighted the damaging effect that employee misconduct has not only on the employer and financial institutions, but also on the financial system as a whole. Mr. Stiroh contended that misconduct is the result of low cultural capital—a confluence of processes and procedures, stated values, and senior management and employees who are empowered to reinforce and conduct their day-to-day activities that promotes a culture of compliance. Mr. Stiroh also suggested that lack of cultural capital may be the result of market failures brought about by factors such as externalities, principal-agent problems and adverse selection, arguing that one possible means to remedy these issues is through internal supervision; with supervisors willing to support a culture of compliance, close gaps in rules, and advance value of safe and sound practices. To this end, Mr. Stiroh highlighted to attendees the important role that supervisors play in maintaining high levels of cultural capital at financial institutions.
View Mr. Stiroh's speech.
UK Financial Conduct Authority Publishes Note on the Compliance Function within Wholesale Banks
The Financial Conduct Authority has published a note on the compliance function in wholesale banks. The note sets out the key themes and issues arising from responses to an FCA questionnaire which was sent to 22 firms as well as the FCA's own observations. The questionnaire was sent to large global banks operating across several business lines, medium-sized firms focusing on specific areas or geographies and smaller UK firms, in order that the FCA could gain insight into how the function has changed over the past few years. The key themes are that compliance functions need to evolve in response to changes impacting the industry and that more strategic thinking is needed. The FCA has not asked individual firms to take any steps in response to the note. However, the FCA indicates that all firms and heads of compliance should use the note to develop their compliance function.
View the FCA's note.
UK Financial Conduct Authority Consults on Measures to Reduce Misconduct in Unregulated Markets and Activities
The Financial Conduct Authority has published a consultation paper on proposals to clarify its expectations on authorized firms and their staff when operating in markets or undertaking activities that are not covered by regulatory rules and principles. The FCA cites, as a particular example of the need to clarify its expectations, the spate of enforcement action in response to serious misconduct such as benchmark manipulation by employees of regulated firms in the fixed-income, currency and commodities (FICC) markets, which fall outside the FCA's regulatory perimeter.
A number of solutions to help reduce this type of misconduct in the FICC markets were suggested following the recommendations of the Fair and Effective Markets Review (FEMR) that was conducted in 2014-15. In these unregulated wholesale markets, activities undertaken by authorized firms were often only governed by industry-written codes of conduct, such as the UK's Non-Investment Products (NIPs) Code, rather than FCA rules. One recommendation of the FICC market standards board, which was established as a result of the FEMR, was that proper market conduct should be managed in FICC markets through regulators and firms monitoring compliance with all standards - formal and voluntary - under the Senior Managers and Certification Regimes.
UK Banking Standards Board Consults on What Good Banking Outcomes Look Like for Consumers
The UK Banking Standards Board, which was established in 2015 to help raise standards of behaviour and competence across UK banks and building societies, has launched a consultation seeking views, in particular from consumer and civil society organisations, about what the outcomes of a good banking culture look like to consumers. The BSB uses the term "consumers" to refer to retail banking customers (personal customers and micro businesses) and building society members, both potential and actual.
The views of consultation respondents will assist the BSB in developing a "Consumer Framework", that consumer and civil society organisations can readily relate to and that can potentially align, if wished, with some of their own work. An outline of the Consumer Framework is provided for consultation. The starting point for the Consumer Framework is a set of consumer principles (access, choice, clarity and transparency, safety and security, redress and being listened to, value for money, fairness). The BSB seeks feedback on the adequacy of these principles. It also seeks views on its proposals to adopt outcomes-focused approach and on high level questions such as how consumer outcomes could be measured, on the helpfulness of "real life" examples of what the outcomes might mean to consumers and on whether the Consumer Framework would be helpful in setting a benchmark for good practice standards.
Comments on the proposals are invited by January 26, 2018, following which the BSB will publish a further and fuller version of the Consumer Framework.
View BSB News release.
View Consultation Paper: What do good banking outcomes look like for consumers.
Financial Conduct Authority Consults on Extending Senior Managers & Certification Regime to All FCA Regulated Firms and Both UK Regulators Consult on its Extension to Insurers
The Financial Conduct Authority has published a consultation paper on its proposed rule changes to implement the extension of the Senior Managers& Certification Regime (SM&CR) to all firms that are authorized under the Financial Services and Markets Act 2000 and solo-regulated by the FCA. The SM&CR has been in place for banks, building societies, credit unions and PRA-designated investment firms since March 2016, whilst certain insurers have been subject to the separate Senior Insurance Managers Regime. The remainder of authorized firms have continued to be subject to the Approved Persons Regime, which will be replaced when the extended application of SM&CR takes effect.
Given that the extension of SM&CR will capture a very wide range of firms, the FCA has tailored the principles and tools used for the banking regime to fit the different risks, impact and complexity of the firms that will be affected by the extended SM&CR. The rules proposed by the FCA comprise (i) a "core regime" consisting of a standard set of requirements that will apply to all FCA solo-regulated firms; (ii) an "enhanced regime" which will apply extra requirements to the very small number of solo-regulated firms whose size, complexity and potential impact on consumers warrant more attention; and (iii) a reduced set of requirements which will apply to firms the FCA has categorized as "limited scope" firms.
Prudential Regulation Authority Publishes Policy Statement on Strengthening Individual Accountability in Banking
The Prudential Regulation Authority has published a Policy Statement on strengthening individual accountability in banking. The Policy Statement provides the PRA's final policy on a number of issues. Among other things, the PRA has made modifications to the final rules, such as simplifying the draft definition of the new Chief Operations Senior Management Function and narrowing the new Prescribed Responsibility accompanying the Chief Operations SMF to focus on responsibility for the firm's performance of its obligations relating to outsourcing.
Financial Conduct Authority Publishes Policy Statement on Application of its Conduct Rules to Non-Executive Directors
The Financial Conduct Authority has published a Policy Statement on applying conduct rules in the Code of Conduct sourcebook to non-executive directors in the banking and insurance sectors. In-scope NEDs are those who do not hold Senior Management Functions and therefore are not subject to regulatory pre-approval under the Senior Managers & Certification Regime, the Prudential Regulation Authority's Senior Insurance Managers Regime, or the FCA's revised Approved Persons Regime.
The Policy Statement follows a Consultation in September 2016, which proposed that NEDs would be subject to the five FCA Individual Conduct rules on acting with integrity, acting with due skill, care and diligence, cooperating with the FCA and other regulators, having regard for customer interests and observing proper standards of market conduct. In addition, NEDs would be subject to the Senior Conduct rule requiring individuals to disclose any information of which the FCA or PRA would reasonably expect notice. The remaining Senior Conduct rules will not apply to a NED unless they are also a senior conduct rules staff member. The new rules will come into force on July 3, 2017.
View the Policy Statement.
Financial Conduct Authority Publishes Policy Statement on Whistleblowing in UK Branches of Foreign Banks
The Financial Conduct Authority has published a Policy Statement introducing final rules on whistleblowing requirements for UK branches of overseas (EEA and third country) banks. The Policy Statement follows a consultation in September 2016 on a proposed approach for extending aspects of the Prudential Regulation Authority and FCA regime to require banks and insurers to introduce whistleblowing procedures internally. The proposals are broadly being implemented as consulted upon, with one minor change being the introduction of guidance reminding branches they may continue to have concurrent reporting obligations to their home state regulators. The rules will come into force on September 7, 2017.
View the Policy Statement.
Financial Conduct Authority Publishes Policy Statement and Final Guidance on the Duty of Responsibility
The Financial Conduct Authority has published a Policy Statement and final Guidance on how it will enforce the "duty of responsibility". The "duty of responsibility" came into force to replace the much-criticised so-called "presumption of guilt" for UK senior managers on May 10, 2016. The new duty applies to persons performing senior management functions at UK banks, building societies, credit unions, investment firms designated by the Prudential Regulation Authority and incoming branches of overseas firms. Under this duty, the FCA and the PRA can take enforcement action against Senior Managers if they are responsible for the management of any activities in their firm in relation to which their firm contravenes a regulatory requirement and they do not take such steps as a person in their position could reasonably be expected to take to avoid the contravention occurring or continuing. The burden of proof lies with the regulators to prove a contravention. The Guidance applied from May 3, 2017.
View the Policy Statement.
US Federal Reserve Bank of New York General Counsel Discusses Lawyers’ Role in Financial Services Culture Reform
US Federal Reserve Bank of New York General Counsel and Executive Vice President Michael Held provided remarks on the role that lawyers should play in reforming culture and conduct in the financial services industry. Held noted that reform of culture has long been a priority issue for the FRBNY. His primary recommendation was that lawyers can play an important role in advising, not just on whether an action is legal or illegal, but on matters dealing with culture as well. He argued that lawyers can identify and help combat troublesome silos of behavior and should support clients with healthy skepticism, providing “effective challenge” of assumptions that are conveyed by the institution in the course of representation. Held also supported the creation of a database of bankers with records of misconduct, thus preventing them from moving from firm to firm and spreading bad practices. He suggested that the database, originally proposed by FRBNY President Bill Dudley, would be complemented by a law requiring two duties: a duty to report misconduct and a duty to check the database before an employee begins work.
View the full text of the speech.
UK Banking Standards Board Publishes Fitness and Propriety Assessment Principles
The Banking Standards Board has published the Statement of Good Practice 1 on the Certification Regime: fitness and propriety assessment principles and Supporting Guidance for the Statement of Good Practice. The BSB was launched in April 2015 to help raise standards of behavior and competence in the banking sector. The Certification Regime, part of the regulatory reforms introduced in the UK to strengthen individual accountability, requires firms to certify that all individuals in roles which pose a risk of significant harm are "fit and proper". The first certification process was due to be completed by March 7, 2017 and thereafter firms must conduct assessments on an ongoing basis.
US Senior Deputy Comptroller Grovetta Gardineer Speaks to the CRA and Fair Lending Colloquium
Grovetta Gardineer, Senior Deputy Comptroller for Compliance and Community Affairs, spoke to the CRA and Fair Lending Colloquium about the role a “healthy culture” plays at regulated financial institutions. She called the Dodd-Frank reforms the process of establishing a “new normal,” warning institutions they cannot return to pre-crisis modes of operation. She highlighted compliance culture as a key element to a healthy institutional culture, noting OCC efforts to improve compliance supervision. She also noted a focus on existing and emerging risks in the fair lending and CRA spaces for the OCC.
View Senior Deputy Comptroller Gardineer’s remarks.
UK Legislation Implements Financial Services and Markets Act 2000 Updates to Secondary Legislation
The Financial Services (Banking Reform) Act 2013 (Consequential Amendments) (No. 2) Order 2016 was made. The Order amends secondary legislation as a result of updates to the Financial Services and Markets Act 2000 relating to disciplinary powers for the Financial Conduct Authority and Prudential Regulation Authority applying to the misconduct of individuals and the senior manager’s regime. The Order also amends FSMA secondary legislation which specifies a "qualifying EU provision" applied for the purposes of determining whether a person has been knowingly concerned in a contravention of a relevant requirement by an authorized person under the new section of FSMA relating to FCA and PRA powers. The Order will enter into force on November 21, 2016.
View the Order.
Federal Reserve Bank of New York President Delivers Opening Remarks at Conference on Culture within the Financial Services Industry
William Dudley, President of the Federal Reserve Bank of New York, delivered opening remarks at the New York Fed’s third conference on culture in the financial industry. Dudley opened by citing “pervasive” evidence that the financial services industry faces deep-seated cultural and ethical problems and an erosion of trustworthiness that impedes the ability of the industry to do its job. Dudley argued that a trustworthy financial industry would also be a more productive industry, avoiding spending time on reputational or legal problems and better attracting top talent.
Dudley also argued that incentive structures and accountability will do more to improve the culture of the industry than “statements of virtues,” citing the need for real consequences rather than aspirational ideals. He argued that firms need to assess their incentive regimes to be consistent with good conduct, and supervisors should monitor compensation to see if incentive structures must be changed. Dudley also noted the role of the public sector and new rules in overcoming collective action and first-mover problems. Dudley concluded by arguing that an effort to air previously silent issues and discuss what had not been discussed before could be an effective tool in reforming the culture of the financial industry.
View President Dudley’s remarks.
UK Regulators Move to Amend UK's Senior Manager & Certification Regime
The Prudential Regulation Authority and the Financial Conduct Authority launched a consultation proposing amendments to the Senior Manager & Certification Regime. Most of the changes result from the legislative changes made in the Bank of England and Financial Services Act 2016. However, the regulators are also proposing some other changes which they consider appropriate having had the opportunity to assess the SM&CR in practice.
UK Regulators Propose Extending Some of Their Whistleblowing Requirements to UK Branches of Overseas Banks
The Prudential Regulation Authority and the Financial Conduct Authority launched separate consultations on proposals to extend some of their whistleblowing requirements to UK branches of non-EEA banks. The proposals do not apply to UK branches of EEA banks. The regulators are proposing that non-EEA banks should be required to inform their employees about the regulators' whistleblowing services. Moreover, any non-EEA banking group that has both a UK subsidiary and a UK branch should inform branch staff about the subsidiary's whistleblowing arrangements. The PRA is also proposing that all insurers should inform employees about whistleblowing procedures. Since September 7, 2016, UK banks, building societies and credit unions with assets of £250 million or greater, PRA-designated investment firms, insurance and reinsurance firms within the scope of Solvency II or regulated by the Society of Lloyd's, as well as Lloyd's managing agents, have been required to implement internal whistleblowing procedures.They must also inform employees of the internal procedures and the whistleblowing services provided by the PRA and FCA and to ensure that employment contracts and settlement agreements do not deter employees from whistleblowing. Responses to the consultation are requested by January 9, 2017. The final rules are expected to apply from September 2017.
View the PRA's consultation paper.
View the FCA's consultation paper.
UK Regulators Revise Rules on Regulatory References
The Prudential Regulation Authority and the Financial Conduct Authority published revised rules on regulatory references for banking and insurance firms subject to the Senior Manager and Certification Regime and the Senior Insurance Manager Regime, respectively. Regulatory references are employment references passed between firms when an individual moves roles.
UK Financial Conduct Authority Discusses the Application of the Senior Managers Regime to a Firm's Legal Function
The Financial Conduct Authority published a discussion paper about how and why the legal function currently falls within the Senior Manager & Certification Regimes and whether it should continue to do so. In the lead up to implementation of the SM&CR in March 2016, the FCA became aware of significant uncertainty amongst firms as to whether an individual responsible for the management of a firm's legal function would require approval as a Senior Manager. Where heads of legal are responsible for compliance, there is a clear need to register, but the position is less clear for heads of legal who do not hold this additional function.
Financial Stability Board Reports on Progress on its Workplan to Reduce Misconduct Risk
The Financial Stability Board published a second progress report on its workplan to reduce misconduct risk. The workplan was first agreed in May 2015 and the FSB published its first progress report in November 2015. The workplan involves: (i) reviewing the effectiveness of reforms to compensation tools in reducing the risk of misconduct; (ii) examining whether the global standards of conduct in the fixed income, commodities and currency (FICC) markets need to be improved; and (iii) reforming the major financial benchmarks. The FSB's second progress report sets out the progress made to date as well as the expected dates for finalization of some of the work. By the end of 2016, the International Organization of Securities Commissions will publish final guidance for benchmark administrators on the content of the statements of compliance that administrators will be conducting a follow-up review of WM/Reuters 4 pm London Closing Spot Rate. The report also noted current reforms to the key IBOR benchmarks with a final report to be released in the course of 2017. Other items that are in the pipeline include publishing recommendations on the application of regulatory compensation tools to reduce misconduct risk by the end of 2017 and a wide-ranging FX Global Code for the wholesale foreign exchange market is expected to be finalized by May 2017.
View the progress report.
UK Legislation Implements Provisions of The Bank of England and Financial Services Act 2016
The Bank of England and Financial Services Act 2016 (Commencement No. 3) Regulations 2016 were made. The Regulations bring a majority of the provisions in The Bank of England and Financial Services Act 2016 into force. Such provisions cover topics such as financial stability strategy, Financial Policy Committee: status and membership, Monetary Policy Committee: membership and procedure, audit, activities indemnified by Treasury, appointment of Financial Conduct Authority chief executive, Treasury recommendations to the Financial Conduct Authority, administration of senior managers regime, rules of conduct, decisions causing a financial institution to fail: meaning of insolvency, enforceability of agreements relating to credit, illegal money lending and banks authorized to issue banknotes in Scotland and Northern Ireland.
The provisions will enter into force on July 6, 2016.
View the Regulations.
UK Senior Manager Misconduct Provisions Come Into Force
Two pieces of secondary legislation brought the revised provisions published on May 5th in the Bank of England and Financial Services Act 2016 on senior manager misconduct into force. The revised provisions replace the presumption of responsibility for a senior manager when a breach of regulatory provisions occurs in the area that he is responsible for (originally brought in by the Financial Services (Banking Reform) Act 2013), with a duty of responsibility. For a senior manager to be found guilty of misconduct by one of the UK regulators, the Prudential Regulation Authority and/or Financial Conduct Authority will need to prove that a senior manager did not take reasonable steps to prevent the contravention by his firm from occurring or continuing.
View the Order.
View the Regulations.
UK Senior Manager and Certification Regime Amendments and Extension Final
The Bank of England and Financial Services Act 2016 was passed by the UK Parliament. The Act includes amendments to the Senior Manager and Certification Regime and extends the SM&CR to all UK authorized firms. The amendments include removing the presumption of responsibility for a senior manager when a breach of regulatory provisions occurs in the area that he is responsible for, replacing it with a duty of responsibility. In addition, the UK regulators are granted specific powers to take enforcement action against all non-executive directors of firms for their misconduct. The extension of the SM&CR follows from the recommendations of the Fair and Effective Markets Review, published in June 2015, that the regime should be extended to wholesale participants in the fixed income, currency and commodity markets.
Certain provisions of the Act came into effect immediately. The provisions on senior management will come into effect once HM Treasury adopts regulations providing for the effective date. It is not yet known when the extension to all UK authorized firms will occur but the UK regulators have mentioned 2018 in the past.
View the Act.
View HM Treasury’s press release.
View the Bank of England’s press release.
You might like to view our client note.
UK Banking Standards Board Publishes First Annual Review Report
The Banking Standards Board published its first annual review report. The BSB was launched in April 2015 to help raise standards of behavior and competence in the banking sector. The report discusses the assessment exercise that the BSB ran during 2015 with 10 banks on how each firm was performing against its objectives on behavior, competence and culture. The BSB aims to gather information collected from the assessment and create an evidence based picture of concerns and developments at industry and individual firm level. It is intended that the 2016 exercise will be more comprehensive and will be scaled up to include a wider number of member firms.The 2016 assessment will also include quantitative factors to help firms benchmark themselves against their peer firms.
View the report.
UK Regulators Remove Certain Rules under Senior Manager and Certification Regimes
The Prudential Regulation Authority and the Financial Conduct Authority published final rules removing certain requirements under the Senior Manager and Certification Regimes. The regulators consulted earlier this year on the proposed amendments which are necessary as a result of the proposed changes to the regime that have been proposed by the UK Government, including extending the regime to all financial services firms, removing the obligation on a firm to notify the PRA or FCA when it knows or suspects that a senior manager or certified person has failed to comply with the conduct rules and replacing the presumption of responsibility with a duty of responsibility. It remains to be seen whether Parliament will approve the equivalent changes that have been proposed by the Government to legislation. An amending Order, published in December 2015, stops the above-mentioned notification requirement and the presumption of responsibility from coming into force on March 7, 2016 – the date when the remainder of the new Regime will come into effect. The regulators' rules and forms have been amended to reflect this position. The PRA has also made changes to the definition of 'significant risk taker' which sets the parameters of its Certification Regime. The amendment aims to align the definition of SRT with a 'material risk taker' under the Remuneration rules.
View the FCA Policy Statement and final rules.
View the PRA Policy Statement and final rules.
UK Regulators Joint Policy Statement on Regulatory References, Implementation of Senior Manager and Certification Regimes and Senior Insurance Managers Regime
The Prudential Regulation Authority and Financial Conduct Authority jointly published a Policy Statement on the implementation of the Senior Manager and Certification Regimes, Senior Insurance Managers Regime and the requirements of the PRA on regulatory references. The Policy Statement, amongst other things, sets out a first set of PRA rules on the provision of regulatory references by firms under the SM&CR and SIMR, i.e., employment references passed between firms when an individual moves roles. These PRA rules are set out in Appendix 1 of the Policy Statement and will apply from March 7, 2016. The rules are largely a continuation of the existing requirements under the Approved Persons Regime and should be read and applied together with the FCA's equivalent requirements. The FCA's Policy Statement was published on February 4, 2016 and sets out the feedback received on the PRA and FCA's joint consultation on regulatory references. A second set of rules are expected to be published at a later date and will cover the areas on which feedback received by the PRA is still under consideration.
View the PRA and FCA's Policy Statement.
View the FCA's Policy Statement.
UK Regulator Extends the Senior Manager and Certification Regime
The Financial Conduct Authority published a Policy Statement and final rules on the application of the Senior Manager and Certification Regimes to wholesale market activities, such as algorithmic and high-frequency trading. The SM&CR enters into force on March 7, 2016. The rules apply to banks, building societies, and investment firms designated by the Prudential Regulation Authority. The new rules extend the Certification regime to individuals who carry out two new significant harm functions: (i) the new "client dealing" function, which includes advising on investments other than non-investment insurance contracts and any associated dealing and arranging, acting as an investment manager or acting as a bidder's representative (this new function is subject to the FCA's new definition of "client" which aims to capture all clients including traditional retail clients); and (ii) "algorithmic trading". Under transitional rules, the Certification regime requires firms to identify the staff members that fall into the two new functions and train them on the new conduct rules by September 7, 2016. The commencement date for the requirement for firms to certify all staff that carry out significant harm functions remains March 7, 2017.
Consultation on Proposed Guidelines under the EU Market Abuse Regulation Launched
The European Securities and Markets Authority published proposed Guidelines under the Market Abuse Regulation. The consultation paper covers proposed Guidelines addressed to persons receiving a market sounding and Guidelines for issuers and emission allowance market participants on delaying disclosure of inside information. The MAR will apply directly across the EU from July 3, 2016.
UK Regulator to Consult on Application of the Senior Manager Regime to a Firm's Legal Function
The Financial Conduct Authority published a statement on the application of the Senior Manager Regime to a firm's legal function. The SMR will come into effect on March 7, 2016. Firms are required, by February 8, 2016, to notify the FCA and the Prudential Regulation Authority of the individuals, currently Approved Persons, that will be transitioning to the new regime as Senior Managers. The FCA has become aware of significant uncertainty amongst firms as to whether an individual responsible for the firm's legal function would need to be approved as a Senior Manager. Where heads of legal are responsible for compliance, there is a clear need to register, but the position is less clear for heads of legal who do not hold this additional function. The FCA intends to consult further on this issue. In the interim, the FCA advises that firms that have sought to make decisions in good faith about whether an individual needs approval in their firm for this responsibility, based on the current rules and guidance, should not need to change their approach.
The PRA is encouraging firms to submit their grandfathering notifications in advance of the February 8 deadline on the basis that some firms that have already submitted the forms have had to re-submit their applications.
View the FCA statement.
View the PRA website.
Chartered Banker Professional Standards Board Press Release on Foundation Standard
The Chartered Banker Professional Standards Board issued a press release stating that over the past year, over 187,000 bankers achieved the CBPSB's Foundation Standard, meeting the desired target for 2015. The CBPSB is a programme that was launched in October 2011 by eight UK banks together with the Chartered Banker Institute, aiming to encourage professionalism in banking and restore public confidence in the banking industry. The CBPSB includes a Board, consisting of senior industry leaders, as well as a Professional Standards Committee, which engages in standard-setting activities. The CBPSB's standards set out the conduct and expertise required of all professional bankers, as well as the benchmarks against which professional competence can be measured. The Foundation Standard, which is one of three professional standards (the others being the Intermediate Standard and the Advanced Standard) sets out the skill requirements and professional and technical knowledge required by all those working in the banking industry.
View the press release.
View the Foundation Standard.
UK Regulators Propose Amending Notification Rules and Forms for Senior Managers Regime
The Prudential Regulation Authority and the Financial Conduct Authority published proposed changes to their notification rules and forms under the Senior Managers and Certification Regimes. The regulators are proposing the changes in light of the changes to the regime that have been proposed by the UK Government, including extending the Regime to all financial services firms, removing obligation on a firm to notify the PRA or FCA when it knows or suspects that a senior manager or certified person has failed to comply with the conduct rules and replacing the presumption of responsibility with a duty of responsibility. It remains to be seen whether Parliament will approve those changes proposed by the Government. An amending Order, published in December 2015, stops the above-mentioned notification requirement and the presumption of responsibility from coming into force on March 7, 2016 – the date when the remainder of the new Regime will come into effect. The regulators therefore intend to amend their rules and forms to reflect the position that those provisions of the Regime will not enter into force on March 7, 2016. The PRA has also published an updated Supervisory Statement to take into account the changes. The consultations close on February 8, 2016.
View the PRA consultation paper.
View the FCA consultation paper.
View the PRA's updated Supervisory Statement.
UK Presumption of Responsibility for Senior Managers Put on Hold
An amending Order was published which stops certain provisions of the Senior Manager & Certification Regime from coming into effect on March 7, 2016, the date from which the SM&CR becomes effective for banks, building societies, credit unions and investment firms designated by the Prudential Regulation Authority. The provisions that will not come into effect on March 7, 2016 are: (i) the obligation on firms to notify the PRA or Financial Conduct Authority when it knows or suspects that a senior manager or certified person has failed to comply with the conduct rules; and (ii) the presumption of responsibility for senior managers. Certain changes to the regime have been proposed by the UK Government, including extending the regime to all financial services firms and replacing the presumption of responsibility with a duty of responsibility. It remains to be seen whether Parliament will approve those changes. In the meantime, the PRA advises firms to prepare for implementation of the regime on the basis that the above two provisions will not come into effect in March 2016.
View the Order.
View the PRA's related statement.
Senior Managers Rules for UK Branches Finalized
The Prudential Regulation Authority and the Financial Conduct Authority published their Policy Statements and final rules on the application of the UK Senior Managers and Certification regimes and new Conduct Rules to UK branches of EEA and non-EEA banks and PRA-designated investment firms. The PRA also published a related updated Supervisory Statement. Both of the regulators published near-final rules in August this year, pending legislation being adopted by Parliament which would formally extend the SM&CR to UK branches of such firms. That legislation has now come into force, allowing the regulators to publish their final rules. The PRA's final rules are the same as those published in August except for some minor corrections. The FCA's final rules for UK branches of EEA firms remain unchanged. The rules for UK branches of non-EEA firms have been amended following concerns about the wide extraterritorial reach of the FCA's proposed approach. The FCA will only apply the Certification regime and the Conduct Rules to individuals who perform significant harm functions for branches to individuals who are based in the UK. UK clients will no longer automatically be within scope. The FCA intends to keep the territorial scope of its rules under review and may amend the rules in the future if it considers it necessary to meet its objectives (although not before commencement of the regime in March 2016). The FCA has also confirmed that, in line with legislation, EEA firms that accept deposits or deal in investments as principal under a passport and which have a UK branch are caught by the SM&CR even if the firm undertakes deposit-taking a services passport and other (non-deposit-taking) activities through an establishment passport (i.e. if the UK branch does not undertake deposit-taking or proprietary trading).
UK Regulator Publishes Thematic Review on Treatment of Confidential and Inside Information
The Financial Conduct Authority published its thematic review on flows of confidential and inside information, presenting the results of an evaluation into how a sample of investment banks manage the confidential and inside information that they receive and generate. The review outlines good and poor practices mainly in the Debt Capital Markets and Mergers & Acquisitions departments of small to medium investment firms and is aimed at all FCA-regulated firms, to assist them in considering how efficient their procedures, systems and controls are. The review is aimed at senior managers as well as front office staff and all staff that make up the first, second and third lines of defense at UK firms that are FCA-regulated. Ultimate responsibility however remains with senior management and the FCA expects senior managers to be aware of their obligations and of the risks of handling confidential and inside information in an inappropriate way. The review states that all UK FCA-regulated firms should ensure that their arrangements are fit for purpose so that they meet the standards of the review, and make suitable improvements where necessary. These arrangements should be consistently reviewed from both a market abuse and conduct of business viewpoint, taking into account any new risks that may arise due to external factors such as market practices or macroeconomic issues.
View the review.
Financial Conduct Authority Publishes Guide to Enforcement under Senior Managers Regime
The Financial Conduct Authority published its Policy Statement setting out guidance on how it intends to enforce the new individual accountability rules under the Senior Managers Regime, the Certification Regime and the new Conduct Rules. The FCA's guidance, which will apply from March 7, 2016 when the new rules come into force, amends the Enforcement Guide and the Decision Procedure and Penalties Manual. The Policy Statement includes the FCA's feedback to responses to its proposed guidance, including a confirmation that the FCA does not intend to add any additional guidance on the types of conduct it would consider as falling far below what would reasonably be expected of a senior manager when assessing whether to bring criminal proceedings against an individual alleging that his decision caused a firm to fail or to refer the matter to another prosecuting authority. The FCA considers that the FCA Handbook already contains enough guidance on the standards expected of senior managers. The FCA guidance does not include guidance on the presumption of responsibility for senior managers because the FCA intends to wait for the outcome of the Parliamentary debate on whether to approve the Government's proposal to replace the presumption of responsibility with a duty of responsibility.
View the guidance.
View our client note on the Government's proposals.
Federal Reserve Bank of New York Executive Vice President Musalem Delivers Remarks on Reform of Banking Culture
Federal Reserve Bank of New York Executive Vice President Alberto G. Musalem delivered remarks regarding the New York Fed’s initiatives to endorse a positive banking culture. Mr. Musalem explained that the New York Fed’s interest in reforming culture is a product of events since the financial crisis, including recent incidents of misconduct such as the manipulation of LIBOR. In his speech, Mr. Musalem offered three messages to the banking industry: (i) cultural problems are the banking industry’s responsibility to solve; (ii) a bank’s implicit norms – especially those reinforced through incentives – must align with the public purpose of banking; and (iii) the aim of reforming bank culture should be to restore trust. Mr. Musalem delivered his remarks at an event hosted by the Goethe University of Frankfurt’s Institute for Law and Finance titled “Towards a New Age of Responsibility in Banking and Finance: Getting the Culture and the Ethics Right.”
View the speech.
Financial Stability Board Progress Report on Reducing Misconduct in Finance Industry
The Financial Stability Board published a progress report on measures to reduce misconduct in the finance industry. The report, amongst other things, sets out the next steps that the FSB will take to address such misconduct. The FSB's aims include: (i) establishing a working group so that outlooks and good practices can be exchanged with a view to create possible necessary guidelines; (ii) examining the use of compensation tools for addressing misconduct, with a view to making recommendations on better practices if needed; and (iii) organizing a workshop so that national experiences can be shared on the role of enforcement powers of bank regulators in addressing misconduct by individuals.
View the report.
US Federal Deposit Insurance Corporation Vice Chairman Hoenig Speaks on Post-Crisis Risks and Bank Equity Capital
US FDIC Vice Chairman Thomas M. Hoenig spoke at the Annual International Banking Conference regarding “Post-crisis risks and bank equity capital”. Vice Chairman Hoenig’s remarks focused on the comparison of capitalizing banks with debt or equity capital. Specifically, he pointed out the key risks of using debt capital, as required by the recent TLAC proposal by the Federal Reserve. He noted that costly debt may put earnings pressure on firms and may even accelerate failure in the case of financial distress. Moreover, debt rules essentially require regulators to “predict what activities and investments might cause future crises”. Vice Chairman Hoenig suggested that equity rules would allow well capitalized institutions to withstand shocks and crises in the financial system and would not require any “extraordinary insight” from financial regulators. He argued that the overall economic benefits will be higher than the related costs, and points to the current outperformance of well-capitalized US institutions as compared to less well-capitalized European institutions as an example. According to Vice Chairman Hoenig, “…our goal to prevent failure should be every bit as important as resolving failed firms” and increased equity capital would be a stronger deterrent as compared to debt.
View the remarks.
Federal Reserve Board Governor Daniel K. Tarullo Speaks at 18th Annual International Banking Conference
Federal Reserve Board Governor, Daniel K. Tarullo, spoke at the 18th Annual International Banking Conference on “Shared Responsibility for the Regulation of International Banks”. He spoke about the benefits of international banking, including diversification and improved efficiencies, and the associated risks including contagion risk. Governor Tarullo also made recommendations encouraging further cross-border coordination including: (i) greater information sharing between countries; (ii) encouraging financial regulators to fully understand the risks and standards in other jurisdictions when considering substituted compliance; and (iii) regular contact between top country officials. In his conclusion, Governor Tarullo encouraged a “strong set of international prudential standards” and “good institutional relationships” in order to establish an improved environment for internationally active banks.
View the speech.
Federal Reserve Bank President Dudley Opening Remarks at Reforming Culture and Behavior in Financial Services Industry Workshop
William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, made opening remarks at the Reforming Culture and Behavior in the Financial Services Industry: Workshop on Progress and Challenges. In his remarks, he reiterated certain points from his previous speeches, noting that there still remain “deep-seated cultural and ethical failures” in the financial services industry that need to be handled from the inside out. He continued to encourage the industry to focus not just on banning specific examples of misconduct, but rather to try to find the underlying causes. “I think our focus should be less on the search for bad apples and more on how to improve the apple barrels.”
View the remarks.
UK Government Publishes Order Allowing Non-UK Institutions to be Relevant Authorised Persons
HM Treasury published the Financial Services and Markets Act 2000 (Relevant Authorised Persons) Order 2015 which amends the Financial Services and Markets Act 2000. A RAP is a UK institution that, amongst other things is: (i) a credit institution with permissions under FSMA to carry on the regulated activity of accepting deposits; or (b) an investment firm that deals in investments as principal; and (c) is not an insurer. The Order provides for non-UK institutions to be "relevant authorised persons" if they fall into one of two categories and if they are not insurers. The two categories are: (i) a non-UK firm that is a credit institution with a branch in the UK and that is authorised to take deposits; or (ii) a non-UK firm that is an investment firm with a branch in the UK, authorised to deal in investments as principal in the UK and is regulated by the Prudential Regulation Authority for that activity. The Order enters into force on November 9, 2015.
View the Order and Explanatory Note.
UK Government Grants Further Disciplinary Powers to UK Regulator
HM Treasury published the Financial Services and Markets Act 2000 (Misconduct and Appropriate Regulator) Order 2015 which amends the Financial Services and Markets Act 2000. The Order, amongst other things, grants the Financial Conduct Authority with disciplinary powers over individuals working in financial services firms, and when there has been a breach of the Alternative Investment Fund Managers Regulations 2013 by a firm. The Order enters into force on March 7, 2016 (excluding Article 2 and 3(4) of the Order which enter into force on March 7, 2017).
View the Order and Explanatory Note.
Chair Janet L. Yellen Testifies on Supervision and Regulation before House Committee on Financial Services
Janet Yellen, Chair of the Federal Reserve Board, testified before the House Committee on Financial Services on supervision and regulation of financial services. Her testimony consisted largely of a review of the regulatory framework and steps US regulators have taken since the financial crisis to strengthen the regulation and supervision of the largest banking institutions, including instituting capital, liquidity, stress testing and annual resolution planning requirements. Chair Yellen further spoke to the work of the Federal Reserve’s Large Institution Supervision Coordinating Committee, which is responsible for the supervision of the eight largest US G-SIBs. Though noting that the “financial condition of the firms… has strengthened considerably since the crisis…” both from financial stability and corporate governance perspectives, she stated that US G-SIBs continue to have “substantial compliance and risk-management issues”, which the Federal Reserve Board, through the LISCC, is dealing with “directly and comprehensively”.
View the statement.
UK Regulators Consult on Proposals for Regulatory References
The Prudential Regulation Authority and Financial Conduct Authority jointly published a consultation paper on proposals for regulatory references that are employment references passed between firms when an individual moves roles. The proposals form part of the wider reforms aiming to strengthen accountability in the banking and insurance sectors and are relevant to candidates applying for new roles, including senior management functions under the Senior Managers Regime, significant harm functions under the Certification Regime and other roles within insurance firms and credit unions. The proposals include: (i) a requirement for firms to request regulatory references covering a period of six years from former employers; (ii) specific disclosures for inclusion in regulatory references, such as whether the firm has ever concluded that a candidate was at any point in the last six years deemed not fit and proper to perform a function, the details and basis of any disciplinary action taken and details of any other roles performed by a candidate within a firm whilst working as an employee of that firm; and (iii) a requirement for firms not to enter into any arrangements that would prevent them from disclosing relevant information. Final rules are expected to be in place for the start of the accountability regime on March 7, 2016. Comments on the consultation are due by December 7, 2015.
View the consultation paper.
European Securities and Markets Authority Publishes Final Draft Technical Standards under the Market Abuse Regulation
The European Securities and Markets Authority published a final report and final draft Regulatory and Implementing Technical Standards on the Market Abuse Regulation which replaces the Market Abuse Directive and applies from July 3, 2016. The report sets out the changes to the draft technical standards from those proposed in ESMA's initial consultation. The final draft technical standards cover: (i) detailed requirements for reporting of suspicious orders or transactions; (ii) the establishment, maintenance and termination of accepted market practices for certain behaviour not to be considered market manipulation; (iii) the arrangements, procedures and record keeping requirements that persons conducting market soundings must comply with for a market sounding not to be considered insider dealing, including the systems and notification templates and technical means for appropriate communication; (iv) the conditions that buy-back programmes and stabilisation of securities must meet not to be considered insider dealing or market abuse, including conditions for trading, restrictions on time and volume, price conditions and disclosure and reporting obligations; (v) notification requirements for trading venues of financial instruments for which a request for admission to trading is made, admitted to trading or traded for the first time; (vi) technical means and rules for public disclosure of insider information and rules on disclosure delays; (vii) arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest; (viii) the precise format of insider lists; and (ix) the format and template for notification of managers transactions. ESMA will submit the final report and final draft RTS and ITS to the European Commission for endorsement.
View the final report and technical standards.
European Systemic Risk Board Publishes Recommendations on Misconduct Risk
The European Systemic Risk Board published a report on misconduct risk in the banking sector. The report analyses misconduct risk in the banking sector from a macroprudential angle and makes the following recommendations: (i) prudential and conduct regulators should continue to impose requirements on banks that limit the opportunities for misconduct; (ii) coordination and transparency between regulators at an international level should be improved, including preparation of a set of principles for authorities to follow where action against a bank in one jurisdiction may have systemic implications in another jurisdiction; (iii) extension of the legal entity identifier scheme to a wider range of counterparties so that banks can determine which entities are subject to financial sanctions; (iv) the European Supervisory Review and Evaluation Process taking into account the systemic impact of potential misconduct; and (v) inclusion of potential misconduct risks in future EU-wide stress tests.
View the report.