Shearman & Sterling LLP | Financial Regulatory Developments Focus
Financial Regulatory Developments Focus
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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.

  • UK Financial Conduct Authority Publishes First Annual Perimeter Report
    06/19/2019

    The U.K. Financial Conduct Authority has published its first annual perimeter report, which (i) describes the boundaries of the FCA's regulatory oversight, (ii) considers challenges to the regulatory perimeter and (iii) sets out its aims for the future. The motivations behind the report include recent high profile controversies involving firms on the periphery of the FCA's regulatory perimeter (including London Capital & Finance which issued non-transferable bonds to consumers), innovations in technology that test the boundaries of the perimeter and the post-Brexit future of U.K. financial regulation.

    Read more.
  • European Banking Authority Proposes Guidelines on Loan Origination and Monitoring
    06/19/2019

    The European Banking Authority has launched a consultation on draft Guidelines on loan origination and monitoring. The consultation stems from the European Council's Action Plan on tackling non-performing loans in Europe. The purpose of the guidelines is to improve the processes by which institutions grant loans and monitor them thereafter, with the overarching goal of improving the financial stability of the EU financial system.

    Read more.
  • UK Parliamentary Committee Report Criticizes UK's Post-Brexit Sanctions Policy
    06/12/2019

    The U.K. Foreign Affairs Committee has published a critical report on the U.K. government's plans for the future of sanctions policy following Brexit. Currently, the U.K. must comply with economic and financial sanctions agreed at EU-level. Following the U.K.'s exit from the EU, it will regain autonomy over sanctions policy, but the Foreign Affairs Committee report reveals a lack of high-level thought on policy, a muddled position on key issues, including the implementation of EU sanctions into U.K. law following Brexit, the U.K.'s ability to impose "Magnitsky" sanctions (sanctions imposed upon individuals accused of human rights violations), and the extent to which the U.K.'s future sanctions policy should be coordinated with allies' policies, and a lack of cross-departmental government coordination in developing a coherent U.K. sanctions policy.

    Read more.
  • European Commission Publishes Progress Report on European Economic Monetary Union
    06/12/2019

    The European Commission has published a report on progress made in Europe since the publication of "The Five Presidents' Report" of 2015, in which five of the EU's key figures set out their agenda for deepening the EU's Economic and Monetary Union. The report is published ahead of the Euro Summit on June 21, 2019, where EU leaders will meet to review progress in tackling the challenges faced by the EU.

    Read more.
  • European Commission Updates Credit Rating Agencies Regulation Equivalence Decisions
    06/11/2019

    The European Commission has published a series of draft Implementing Decisions on the equivalence with the EU Credit Rating Agencies Regulation of the credit rating regimes of certain non-EU countries. The Implementing Decisions for Brazil, Canada, Argentina, Singapore and Australia repeal the existing equivalence decisions of the credit rating legislation in these countries, stripping these regimes of their equivalent status. The Implementing Decisions for Mexico, the US, Japan and Hong Kong confirm the equivalence of such countries' credit rating legislation.

    Read more.
  • UK Law Commission Embarks Upon Review of Intermediated Securities System
    06/11/2019

    The Law Commission has been appointed to review potential legal issues with the U.K. intermediated securities system. Intermediated securities are shares and bonds held electronically through computerized credit entries.

    Read more.
    TOPIC: Securities
  • European Securities and Markets Authority Publishes Final Report on Frequent Batch Auctions
    06/11/2019

    The European Securities and Markets Authority has published a final report presenting the feedback to its November 2018 call for evidence, which sought to improve its understanding of "frequent batch" auction systems and their use in the circumvention of the "double volume cap" imposed under the Markets in Financial Instruments Regulation and transparency requirements under the revised Markets in Financial Instruments Directive (or MiFID II). ESMA intends to produce further guidance on areas highlighted in the report, particularly focusing on price determination and pre-trade transparency, and will review the broader effects of the MiFID II transparency regime.

    Read more.
    TOPIC: MiFID II
  • UK To Adopt Amendments to Brexit Legislation
    06/10/2019

    HM Treasury has laid before Parliament a draft of the Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019. The draft Regulations make amendments to certain elements of the EU exit legislation relating to financial services that has been developed by the U.K. government in preparation for the U.K.'s exit from the EU. The amendments will come into force on the later of: (i) the day after the day on which the Regulations are made; and (ii) immediately before exit day or, in the case of the amendment to the Capital Requirements Regulations, exit day. 

    Read more.
  • UK Prudential Regulator Offers Modification of UK Capital Rules Reflecting Changes to Capital Requirements Regulation II
    06/10/2019

    The U.K. Prudential Regulation Authority has published a draft modification of its capital rules to correspond with changes made to the Capital Requirements Regulation II that will apply directly in Member States from June 27, 2019. Firms wishing to benefit from the modified rules should apply to the Authorisations Division of the PRA.

    Read more.
  • UK Competition and Markets Authority Targets Anti-Competitive Practices in Investment Consultancy and Fiduciary Management Services
    06/10/2019

    The U.K. Competition and Markets Authority has issued the Investment Consultancy and Fiduciary Management Market Investigation Order 2019. This is U.K. secondary legislation intended to combat anti-competitive practices in the supply and acquisition of investment consultancy and fiduciary management services to and by the pension schemes they advise. The Order was made on June 10, 2019 and enters into force on December 10, 2019. It follows the CMA's consultation on a draft version of the Order that was published for review by interested parties on February 12, 2019. In the final Order, the CMA has endeavoured to resolve a number of the issues raised in response to the consultation. These include amending the Competitive Tender Process as originally drafted by imposing a less stringent "reasonable endeavours" obligation on trustees who are required to obtain bids from three or more unrelated Fiduciary Management Providers, and excluding in-house investment advice or fiduciary management functions from the scope of the Order.

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  • UK Regulator Publishes Thematic Review of Money-Laundering Risks in Capital Markets
    06/10/2019

    The U.K. Financial Conduct Authority has published a report on its thematic review assessing money-laundering risks posed to capital markets. The review involved 19 participants including investment banks, recognised investment exchanges, trade bodies, a custodian bank, clearing and settlement houses, inter-dealer brokers and trading firms. The report sets out what the FCA found in its review, the AML risks that were identified and fictitious case studies identifying different AML scenarios that firms may use to inform their own procedures. The FCA expects firms to review their AML systems, taking this report into account. It is considering its supervisory approach, including the possibility of utilising data supplied under MiFID II to mitigate money-laundering risks.

    Read more.
  • G20 Finance Ministers and Central Bank Governors Meet in Japan
    06/09/2019

    The G20 Finance Ministers and Central Bank Governors have published a Communiqué from the most recent G20 Summit held in Japan.

    Read more.
  • UK Regulator Publishes Policy Statement on Supervisory and Enforcement Process for Securitization Repositories, including post-Brexit
    06/06/2019

    The U.K. Financial Conduct Authority has published a Policy Statement setting out the final rules governing the FCA's authority to impose sanctions on persons for breaching requirements imposed under the U.K. Securitization Regulations 2018, which implements the EU Securitization Regulation. The Policy Statement also includes proposals on how the FCA will apply its existing supervisory and enforcement processes to securitization repositories (the bodies responsible for collecting and maintaining records of securitizations) after the U.K.'s exit from the EU.

    Read more.
  • US Commodity Futures Trading Commission Provides Margin Relief for Legacy Swaps
    06/06/2019

    In response to a request from the International Swaps and Derivatives Association, the Commodity Futures Trading Commission's Division of Swap Dealer and Intermediary Oversight issued no-action relief that will permit swap dealers to make certain amendments to so-called "legacy swaps" without such swaps losing their legacy status for purposes of the CFTC's uncleared swap margin rule. Legacy swaps are exempt from the CFTC's uncleared swap margin rule because they were entered into prior to the relevant compliance date for that rule. The relief provides clarity that certain amendments to legacy swaps will not bring them within scope of the rule.

    The relief will permit swap dealers to continue to treat the following as legacy swaps:
    • legacy swaps that are amended in an immaterial manner (defined as amendments that would not affect the economic obligations of the parties or the valuation of the swap);
    • a swap resulting from the exercise of a swaption that is itself a legacy swap;
    • the remaining portion of a swap following a partial termination of such legacy swap;
    • the remaining portion of a swap following a partial novation of such legacy swap; and
    • new swaps resulting from a multilateral compression exercise consisting solely of legacy swaps.

    View the No-Action letter.
    TOPIC: Derivatives
  • Financial Stability Board Publishes Report on Decentralized Financial Technologies
    06/06/2019

    The Financial Stability Board has published a report on the use of decentralized financial technologies and the implications these may have for financial stability, regulation and governance. The report has been delivered to G20 Finance Ministers and Central Bank Governors ahead of the G20 meeting on June 8-9, 2019.

    Read more.
  • Regulators Issue Recommendations on Sustainable Finance in Emerging Markets
    06/05/2019

    The Growth and Emerging Markets Committee, a committee of the International Organization of Securities Commissions that aims to promote the development and efficiency of emerging securities and futures markets, has published a series of recommendations on the development of sustainable finance in emerging markets and the role that securities regulators play in this arena. The report also contains an overview of sustainability-related regulatory initiatives in emerging markets and market trends arising in the sustainability sector.

    Read more.
  • International Bodies Seek Public Input on Central Counterparty Auctions Discussion Paper
    06/05/2019

    The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have published a joint discussion paper on central counterparty default management auctions. Comments should be provided by August 9, 2019.

    Read more.
  • UK Regulator Appoints New Chair for Financial Ombudsman Service
    06/05/2019
    The U.K. Financial Conduct Authority has issued a press release announcing that Baroness Zahida Manzoor CBE has been appointed Chair of the Financial Ombudsman Service. Baroness Manzoor will take up the role on August 2, 2019 and takes over from Sir Nicholas Montagu, who has held the role for more than seven years. Baroness Manzoor has spent over 20 years at board level within large organizations and was appointed to the House of Lords in 2013. Between March 2018 and May 2019, she served as House of Lords Government Whip and Minister.

    View the press release.
    TOPIC: People
  • International Task Force Report Shows Further Progress Needed for Climate-Related Financial Disclosures
    06/05/2019

    The Task Force on Climate-Related Financial Disclosures has issued its 2019 status report outlining progress on adoption of the TCFD disclosure recommendations for improved climate-related financial disclosures by companies. The TCFD was established by the Financial Stability Board in 2015 with the aim of managing climate-related risk in markets. In 2017, it published a set of voluntary disclosure recommendations for companies to provide information on their climate-related financial risks. The recommendations are structured around four areas: (i) governance; (ii) strategy; (iii) risk management; and (iv) metrics and targets.

    Read more.
  • UK Regulator Publishes Findings from LIBOR Review
    06/05/2019

    The U.K. Financial Conduct Authority has published a report summarizing the preparations that firms are making for the market transition away from LIBOR to alternative risk-free rates by the end of 2021. The report is based on feedback from firms in response to the joint Dear CEO letter sent to major banks and insurers by the FCA and the Prudential Regulation Authority, which sought information on the action firms were taking to prepare for the phase-out of LIBOR. The report also includes suggestions for how firms might enhance their preparations.

    Read more.
  • Financial Stability Board Publishes User's Guide to Overnight Risk-Free Rates
    06/04/2019

    The Financial Stability Board has published a user's guide to overnight risk free rates, providing an overview of such rates and how they can be calculated, as well as proposals for how they can be used in cash products. The user's guide falls in line with the development of RFRs as alternative benchmarks.

    Read more.
  • UK Regulator Publishes Policy Statement on Peer-To-Peer and Investment-Based Crowdfunding Platforms
    06/04/2019

    The U.K. Financial Conduct Authority has published a Policy Statement containing its final changes to the rules and guidance governing loan-based crowdfunding platforms (or "peer-to-peer" platforms). The Policy Statement follows the FCA's July 2018 consultation paper on proposed changes to the regulation of the crowdfunding sector. Peer-to-peer platforms will need to comply with the majority of the changes by December 9, 2019, with the exception of the FCA's Mortgage and Home Finance Conduct of Business rules, which will apply to platforms that offer home finance products from June 4, 2019. The Policy Statement also reflects on the rules applicable to investment-based crowdfunding platforms (i.e. platforms that allow investors to invest in businesses directly, for instance through the purchase of shares or debt securities), in particular surrounding financial promotions for non-readily realized securities and non-mainstream pooled investments. The FCA continues to review responses to its July 2018 consultation paper in relation to these platforms and may issue additional rules and guidance in due course.

    Read more.
  • EONIA Methodology and One-Off Spread Confirmed
    05/31/2019

    The European Money Markets Institute has adopted the EONIA working group's proposed methodology for calculating EONIA's replacement rate. The new methodology, dubbed "€STR" (or the "Euro short term rate"), will take effect as of October 2, 2019. In line with the adoption of the €STR, the European Central Bank has calculated the average risk spread between the new €STR and the existing EONIA rate as 0.0085% (8.5 basis points). The spread will be used for a limited period to calculate an adjusted EONIA rate for all existing contracts which continue to reference EONIA following the introduction of the €STR in October 2019.

    Read more.
  • UK Financial Conduct Authority Publishes Near Final Changes to Handbook Implementing the EU Prospectus Regulation
    05/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement containing its near final rules implementing the EU Prospectus Regulation, which will be set out in the FCA's new Prospectus Regulation Rules sourcebook. The FCA's new rules are aimed at aligning the U.K. rules with the EU Prospectus Regulation. The changes remain subject to finalization of certain related changes under the Financials Services and Markets Act 2000 and relevant EU legislation. Issuers seeking approval of a draft prospectus on or after July 21, 2019 must ensure their draft is in line with the EU Prospectus Regulation and PRR sourcebook. In the event the U.K. leaves the EU before that date, the proposals will not come into effect, and the U.K. would use the Financial Services (Implementation of Legislation) Bill to permit alignment of U.K. rules with those of the EU. The FCA would, in that situation, expect to issue a further Consultation Paper setting out proposals for replicating the EU Prospectus Regulation in the U.K. domestic regime. The FCA has so far declined to comment on the detail of any such proposals.

    Read more.
  • Financial Stability Board Delivers Report on Crypto-Assets
    05/31/2019

    The Financial Stability Board has published a report on crypto-assets outlining the actions being undertaken by various international organizations in response to the challenges posed by crypto-assets and the FSB's own proposed course of action for the year ahead. The report will be delivered to G20 Finance Ministers and Central Bank Governors at the next G20 meeting in Japan on June 8-9, 2019.

    Read more.
  • UK Financial Conduct Authority Publishes Policy Statement on Shareholder Engagement
    05/30/2019

    The Financial Conduct Authority has published a Policy Statement containing final Handbook text and guidance on new rules to improve shareholder engagement and increase transparency around stewardship. The FCA consulted on the rules from January to March 2019. The final rules will come into effect on June 10, 2019.

    Read more.
  • Revised EU Statement on the Share Trading Obligations in a No-Deal Brexit
    05/29/2019

    Following concerns regarding its March 19, 2019 statement, the European Securities and Markets Authority has published a revised statement on the impact of a no-deal Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. on-shored share trading obligation would restrict trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.

    Read more.
  • US-UK Financial Innovation Partnership Announced
    05/29/2019

    The U.S.-U.K. Financial Regulatory Working Group has announced the establishment of a Financial Innovation Partnership between the U.S. and the U.K. The objective of the Partnership is to strengthen bilateral engagement on emerging trends in financial services innovation. It will focus on regulatory engagement and commercial engagement by providing opportunities for the private sector in one country to engage with industry associations and market participants in the other country.

    The U.S.-U.K. Financial Regulatory Working Group, formed in April 2018, is a forum for treasury staff and financial regulatory authorities to exchange views on the regulatory relationship between the United States and the U.K. The objectives of the Working Group are to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.

    View the announcement.
  • UK Financial Conduct Regulator Seeks Input on a Cross-Sector Sandbox
    05/29/2019

    The U.K. Financial Conduct Authority has published a Call for Input on a Cross-Sector Sandbox, seeking input on whether a U.K. cross-sector sandbox is needed. The FCA has observed that due to emerging technologies, business models are constantly changing in all markets and that firms are diversifying into different sectors. In addition, across all sectors, firms are increasingly using big data. As a result, the FCA believes that the different sectoral U.K. regulators need to find new practical ways of collaborating. The FCA recently undertook a study into how a cross-sector sandbox involving multiple regulators could be established, engaging with a range of regulators, such as the Civil Aviation Authority, the Gambling Commission, the Information Commissioner's Office, Ofcom, Ofgem and the Prudential Regulation Authority, a small group of firms and other stakeholders. The study showed that there is potential for a cross-sector sandbox, but that further discussion is needed to understand the degree of interest and need before an operating model can be developed.

    Based on the success of the FCA's financial regulatory sandbox, the FCA suggests that a cross-sector sandbox would provide a single-point-of-entry sandbox for firms to test innovative propositions with multiple U.K. regulators. The FCA acknowledges that challenges exist to its proposal, including uncertainties about demand for the sandbox and a misunderstanding of its purpose. However, it is of the view that most of the challenges could be overcome or mitigated, as has been the case with its existing sandbox. The FCA has published the Call for Input to facilitate further discussions on the concept of a cross-sector sandbox. Responses are invited until August 30, 2019.

    View the call for input on a cross-sector sandbox.
    TOPIC: FinTech
  • EU Technical Standards on Authorization of Third-Party Firms Assessing STS Status of Securitizations
    05/29/2019

    A Commission Delegated Regulation specifying Regulatory Technical Standards on the applicable requirements for third party entities seeking authorization as providers of STS verification services has been published in the Official Journal of the European Union. The RTS supplement the Securitization Regulation (also known as the STS Regulation), which has applied directly across the EU since January 1, 2019. The Securitization Regulation provides the criteria for identifying which securitizations will be designated as "simple, transparent and standardized" (STS) securitizations and requires originators and sponsors to notify the European Securities and Markets Authority when a securitization meets the STS criteria. ESMA will maintain a list of all such securitizations on its website. The Securitization Regulation allows (but does not require) originators, sponsors and securitization special purpose entities to use third-party firms to assess whether a securitization meets the STS criteria, provided that those firms are authorized by the relevant national regulator. The new RTS set out what the application for authorization should cover, which includes information on the entities' organizational structure, operational safeguards and internal processes to assess STS compliance and conflicts of interest.

    The RTS will apply directly across the EU from June 18, 2019.

    View the RTS.
  • EU Secondary Legislation for Financial Reporting Formats Published
    05/29/2019

    A Commission Delegated Regulation establishing Regulatory Technical Standards for electronic financial reporting formats under the European Transparency Directive has been published in the Official Journal of the European Union. The Transparency Directive aims to enhance the efficiency and transparency of European securities markets by obliging security issuers to provide a regular flow of information to investors. Amongst the obligations under the Directive, issuers must publish annual financial reports in accordance with certain specifications. One such specification requires that, from January 1, 2020, reports must be in a single electronic reporting format. This reporting format is now laid out in the RTS. The RTS enter into force on June 18, 2019 and will apply to annual financial reports containing financial statements for financial years beginning on or after January 1, 2020.

    Read more.
    TOPIC: Securities
  • Financial Stability Board Publishes Progress Report on Cyber Incident Response
    05/28/2019

    The Financial Stability Board has published a progress report on the activities and work plan of its Cyber Incident Response and Recovery working group. The working group was established in 2018 with a mandate to develop a toolkit of practices for financial institutions and authorities in preparing for and dealing with cyber incidents.

    Read more.
  • European Securities and Markets Authority Consults on EMIR 2.2 Technical Advice
    05/28/2019

    The European Securities and Markets Authority has launched consultations on proposed technical advice on third-country CCP tiering, comparable compliance and fees under draft revisions to the European Market Infrastructure Regulation, known as EMIR 2.2. EMIR 2.2 will change the requirements for the supervision of both EU and third-country CCPs, and includes the controversial formal EU "location policy" for CCPs. The text of EMIR 2.2 was agreed between the European Parliament, the Council of the European Union and the European Commission on March 13, 2019, but has not yet been published in the Official Journal of the European Union. However, the European Commission requested technical advice from ESMA on May 3, 2019 and ESMA has begun that preparatory work. The consultations close on July 29, 2019. ESMA intends to submit its final reports and technical advice to the European Commission in Q3 and Q4 2019.

    Read more.
  • European Central Bank Consults on European Mechanism for Issuance and Distribution of Debt Securities
    05/28/2019

    The European Central Bank, together with those national central banks that have adopted the Euro (collectively known as the Eurosystem), has launched a consultation on proposals for a harmonized European system for issuing and distributing Euro denominated debt securities within the EU. The consultation paper seeks feedback on the state of the existing market, the most appropriate ways to deal with certain issues faced by the market and the measures the Eurosystem has proposed for a potential new system.

    Read more.
  • EMIR Refit Regulation Published
    05/28/2019

    The Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1, has been published in the Official Journal of the European Union.

    The EMIR Refit amendments aim to introduce a simplified and more proportionate approach to certain aspects of EMIR as part of the EU's broader "Regulatory Fitness and Performance Program".

    Read more.
  • European Banking Authority Publishes Draft Implementing Technical Standards For Supervisory Reporting under the Capital Requirements Regulation
    05/28/2019

    The European Banking Authority has published draft Implementing Technical Standards for supervisory reporting, which make changes to the existing reporting obligations of EU banks (credit institutions) and investment firms. The majority of the technical standards will apply from March 2020, with the exception of the liquidity coverage requirements, which will apply from April 2020.

    Read more.
  • Financial Stability Board Assesses Legal Entity Identifier Implementation
    05/28/2019

    The Financial Stability Board has published a thematic review on the implementation of the Legal Entity Identifier. An LEI is a unique identifier of entities that engage in financial transactions. It is intended that such an identifier will be held by all legal entities participating in financial markets across the globe. It is envisaged that the LEI system will lead to better data aggregation, enhance systemic risk monitoring and reduce costs to market participants. The thematic review provides a summary assessment of the successes of the LEI, sets out steps that are still needed to fully achieve the G20's objectives and makes recommendations, addressed to the FSB, other international bodies (such as the International Organization of Securities Commissions and Basel Committee on Banking Standards), FSB member jurisdictions, the LEI Regulatory Oversight Committee and Global LEI Foundation, to tackle the issues that are preventing wider adoption of the LEI.

    View the report.
  • European Commission Adopts Technical Standards on Homogeneity Conditions for STS Securitizations
    05/28/2019

    The European Commission has adopted draft Regulatory Technical Standards under the EU Securitization Regulation on the conditions for a securitization to be considered homogenous. Homogeneity is one of the requirements for a securitization to be classed as a simple, transparent and standardized securitization or STS securitization. Exposures related to STS securitizations will attract lower risk weightings for firms subject to the Capital Requirements Regulation. The new EU securitization framework has applied across the EU since January 1, 2019.

    Read more.
  • International Body Consults on Issues Relating to Regulating Crypto-Asset Trading Platforms
    05/28/2019

    The International Organization of Securities Commissions has launched a consultation on the key issues to consider for regulating crypto-asset trading platforms (referred to as CTPs). The consultation paper, which aims to assist IOSCO member jurisdictions to assess the issues and risks relating to CTPs, is based on information obtained from national regulators on the operation of CTPs and their current or proposed regulatory approaches. The consultation does not cover Initial Coin Offerings, focussing instead on the secondary markets. Responses to the consultation are due by July 29, 2019.

    The consultation paper describes certain issues and risks related to trading of crypto-assets on CTPs. The paper also sets out key considerations and corresponding toolkits for each consideration. The considerations are: (i) access to CTPs; (ii) safeguarding assets; (iii) conflicts of interest; (iv) operations of CTPs; (v) market integrity; (vi) price discovery; and (vii) technology. The toolkits are for regulators to use to address the key considerations and related issues and risks. In addition, IOSCO notes that useful guidance on the issues is already available in its Objectives and Principles of Securities Regulation and the Assessment Methodology.

    View the consultation paper.
  • Financial Conduct Authority Publishes Progress Report on Conduct Questions for Wholesale Banks
    05/28/2019

    The Financial Conduct Authority has published its latest report on industry progress made against the "Five Conduct Questions" it poses to wholesale banks in a bid to improve their conduct and culture. The FCA will use its findings to assess the impact that embedding good conduct is having on the wholesale banking market and to consider the potential for more sustainable mindset change. The report also includes strategic considerations that firms may address to improve their approach to conduct challenges and an assessment of whistleblowing initiatives in the wholesale banking sector. In particular, the FCA found that whistleblowing channels require improvement, and that non-financial misconduct (such as bullying, sexual harassment and other forms of personal misbehavior) is a significant problem across firms. The FCA continues to welcome face-to-face meetings with wholesale financial services firms to discuss thinking on all aspects of the report.

    Read more.
  • Proposed EU Guidelines for Reporting of Securities Financing Transactions
    05/27/2019

    The European Securities and Markets Authority has published a consultation paper proposing guidelines for reporting of securities financing transactions under the Securities Financing Transactions Regulation. SFTs involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy backs. The SFTR requires, amongst other things, that all securities financing transactions be reported to EU recognized trade repositories. Such reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies, and will be phased-in according to type of entity:
    • banks and investment firms from April 11, 2020;
    • CCPs and central securities depositories from July 11, 2020;
    • other Financial Counterparties from October 11, 2020; and
    • Non-Financial Counterparties from January 11, 2021.
    Read more.
  • Financial Stability Board Consults on Impact of the Too-Big-To-Fail Reforms
    05/23/2019

    The Financial Stability Board has begun its evaluation of the post-2008 financial crisis reforms on banks that were deemed "too big to fail", publishing the summary terms of reference. The evaluation will consider whether the implemented reforms are reducing the systemic and moral hazard risks associated with systemically important banks (or SIBs). The FSB is also asking for feedback from financial institutions and other stakeholders on the impact of these reforms. In particular, the FSB is seeking input on how the reforms have achieved their objectives, the impact of the reforms on SIBs, whether the impact differs for different types of banks, the impact of the reforms on financial system resilience and whether there are any unintended consequences of the reforms. The FSB asks those submitting responses to provide evidence, where possible. Responses should be submitted by June 21, 2019. The FSB intends to use the responses to prepare a draft report on the impact, which would be issued for consultation in June 2020. The final report is expected by the end of 2020.

    View the summary terms of reference.

    View the request for feedback.
  • Proposed EU Templates for Reporting of Intra-Group Transactions by Financial Conglomerates
    05/22/2019

    The Joint Committee of European Supervisory Authorities has launched a consultation on draft Implementing Technical Standards on the reporting of intra-group transactions and risk concentration for financial conglomerates under the Financial Conglomerates Directive. FICOD sets out requirements for regulated entities to report at least annually all significant intra-group transactions of regulated entities within a financial conglomerate and for information sharing between relevant regulators of conglomerates.

    Read more.
  • EU Delegated Regulation on Conflicts of Interest Published Under Social Entrepreneurship Fund Regulation
    05/22/2019

    A Commission Delegated Regulation on conflicts of interest arising in relation to European social entrepreneurship funds has been published in the Official Journal of the European Union. The Delegated Regulation sets out the parameters for conflicts of interest policies, which must be introduced by "social entrepreneurship" funds within scope of the European Social Entrepreneurship Fund Regulation. The Delegated Regulation will enter into force on June 11, 2019 and will become directly applicable in all EU Member States on December 11, 2019.

    Read more.
  • EU Delegated Regulation on Conflicts of Interest Published Under European Venture Capital Regulation
    05/22/2019

    A Commission Delegated Regulation on conflicts of interest arising in relation to European venture capital funds has been published in the Official Journal of the European Union. The Delegated Regulation sets out the parameters for conflicts of interest policies, which must be introduced by venture capital funds within scope of the European Venture Capital Regulation. The Delegated Regulation will enter into force on June 11, 2019 and will become directly applicable in all EU Member States on December 11, 2019.

    Read more.
  • UK Secondary Legislation Published to Combat Cyber-Attacks
    05/21/2019

    The Cyber-Attacks (Asset-Freezing) Regulations 2019 have been made and will come into force on June 11, 2019.

    The U.K. Regulations put in place measures applicable to U.K. nationals, U.K. incorporated entities and certain regulated institutions that will help enforce the financial sanctions provisions of the EU's new Cyber-Attacks Regulation, which came into force on May 18, 2019. The Cyber-Attacks Regulation is designed to combat cyber-attacks emanating from outside the EU against EU institutions and Member States. Its provisions include granting the Council of the European Union the ability to freeze assets of persons or entities suspected of involvement in such attacks. In order to enforce the sanctions regime throughout the EU, Member States are required to put in place legislation specifying the penalties that will be imposed upon those found to be implicated in a breach of the EU Cyber-Attacks Regulation.

    Read more.
  • EU Supervisory Authorities Finalize Proposed Revisions to Implementing Technical Standards for Mapping of External Credit Ratings
    05/20/2019

    The Joint Committee of European Supervisory Authorities has published a Final Report and final draft amending Implementing Technical Standards on the mapping of External Credit Assessment Institutions' credit assessments under the Capital Requirements Regulation. The Joint Committee comprises the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The publication of the Final Report follows the consultation conducted by the ESAs between October 26, 2018 and December 31, 2018.

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  • UK Conduct Regulator Warns Firms About Supervision of Appointed Representatives
    05/20/2019

    The FCA has published the findings of its review examining how firms in the investment management sector comply with their regulatory obligations in respect of appointed representatives used to carry out activities on their behalf. The FCA has also published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated principal firms in the sector, urging them to review their practices in relation to such representatives.

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  • EU Council Regulation to Combat Cyber-Attacks Published
    05/17/2019

    The EU Council Regulation concerning restrictive measures against cyber-attacks threatening the European Union or its Member States came into force on May 17, 2019 and will apply directly across the EU from May 18, 2019.

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  • International Swaps and Derivatives Association Consults Further on Fallbacks for the Cessation of Benchmarks
    05/16/2019

    The International Swaps and Derivatives Association has published two consultation papers on fallbacks for benchmarks. The first consultation paper concerns proposed amendments to ISDA's standard documentation to implement fallbacks based on alternative risk-free rates for certain key Interbank Offered Rates (USD LIBOR, Hong Kong's HIBOR, Canada's CDOR and Singapore's SOR), should the relevant IBOR be permanently discontinued. ISDA is intending to amend and restate the rate options in the 2006 ISDA Definitions to ensure that a fallback will apply to derivative transactions entered into on or after the effective date of the amendments and incorporate the 2006 ISDA Definitions. ISDA also intends to publish a protocol to help ensure inclusion of the fallbacks in pre-existing derivative transactions. This consultation follows ISDA's consultation last July on these changes for GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW. ISDA confirms that the feedback to that July 2018 consultation indicates that market participants prefer the "compounded setting in arrears rate" to address the difference in tenors, and the "historical mean/median approach" to address the difference in risk premia. Based on the feedback to both of these consultations, ISDA intends to implement fallbacks for the relevant benchmarks by the end of 2019.

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