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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 Prudential Regulator Implements New Waiver of Deposit Protection Rules
    10/13/2019

    The U.K. Prudential Regulation Authority has announced that it will provide a new waiver by consent of the Continuity of Access Rules under the Depositor Protection Part of the PRA Rulebook. The DPP Rulebook sets out rules requiring firms to ensure that eligible depositors have access to deposits covered by the Financial Services Compensation Scheme in the event of the firm’s insolvency, by establishing systems to facilitate a transfer of such deposits (the so-called “Continuity of Access” rules).

    Read more.
  • UK Financial Policy Committee Issues Summary of UK Financial System
    10/11/2019

    The U.K. Financial Policy Committee has issued a summary of the resilience of the U.K. financial system to potential economic shocks and the vulnerabilities it faces. The summary follows the FPC’s meeting on October 2, 2019, at which the FPC agreed on its intended policy action going forward. The FPC is made up of Bank of England staff, the Chief Executive of the U.K. Financial Conduct Authority and certain external members who work to identify, monitor and take action to remove or reduce systemic risks to the U.K. financial system.

    Read more.
  • International Bodies Issue Report on Governance Arrangements for Derivatives Data
    10/09/2019

    The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have published a joint report on governance arrangements for critical data elements for over-the-counter derivatives. The report does not cover governance arrangements for the Unique Transaction Identifier and Unique Product Identifier, which are being reviewed separately by the Financial Stability Board. The report aims to contribute to international efforts to improve transparency, mitigate systemic risk and prevent market abuse in derivatives markets.

    Read more.
    TOPIC: Derivatives
  • Financial Stability Board Publishes Governance Arrangements for Unique Product Identifier
    10/09/2019

    The Financial Stability Board has published a report on governance arrangements for the Unique Product Identifier, a globally harmonized code identifying over-the-counter derivatives products reported to trade repositories. The UPI will enable authorities to aggregate data on OTC derivatives transactions, which will in turn help them to assess systemic risk and detect market abuse.

    Read more.
    TOPIC: Derivatives
  • Final EU Guidelines For Improving Settlement Efficiency Published
    10/08/2019

    The European Securities and Markets Authority has published a final report and final Guidelines on standardized procedures and messaging protocols for investment firms under the Central Securities Depositaries Regulation.

    CSDR requires investment firms to take steps to limit settlement fails, including by ensuring that they have all the necessary transaction data on the day of the transaction. Investment firms must also have in place arrangements with their professional clients to ensure prompt communication of an allocation of securities to the transaction, confirmation of that allocation and confirmation of the acceptance or rejection of the terms in good time before the intended settlement date. The content of the messages and deadlines for sending them is contained in the Regulatory Technical Standards on settlement discipline (Commission Delegated Regulation (EU) 2018/1229). The Guidelines clarify the scope of these requirements and provide guidance on the standardized procedures and messaging standards to be used for firms to comply with the requirement.

    Read more.
  • European Securities and Markets Authority Issues Public Statements on No-Deal Brexit Preparations
    10/07/2019

    The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019. 

    Read more.
  • EU Economic and Financial Committee Launches Consultation on Single-Limb Collective Action Clauses for Amendments to EU Sovereign Debt Instruments
    10/07/2019

    The EU Economic and Financial Committee sub-Committee on EU sovereign debt markets (the ESDM) has launched a consultation on its proposals to mandate the introduction of single-limb collective action clauses into euro area government securities issued from January 1, 2022. The ESDM has released a draft of the proposed CAC together with an explanatory note and seeks input on its proposals from selected market participants by October 28, 2019.

    Read more.
    TOPIC: Securities
  • European Central Bank Issues Statement on Liquidity of Euro Area Banks
    10/07/2019

    The European Central Bank has issued a statement on the results of its 2019 supervisory stress test. The European Central Bank is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism. It found that the vast majority of banks directly supervised by the ECB have overall comfortable liquidity positions, although there were some vulnerabilities that required further attention. 

    Read more.
  • European Securities and Markets Authority Consults on Alignment of EU Trading and Clearing Obligations
    10/04/2019

    The European Securities and Markets Authority has published a consultation paper on aligning the trading obligation under the Markets in Financial Instruments Regulation with the recent changes made to the clearing obligation under the European Markets Infrastructure Regulation by the EMIR Refit Regulation. Responses to the consultation should be submitted by November 22, 2019. ESMA intends to submit its final report to the European Commission in early 2020, with the Commission’s report to the European Parliament and Council expected by December 18, 2020.

    Read more.
  • European Supervisory Authorities Publish Opinion on AML/CTF Risks in EU Financial Sector
    10/04/2019

    The European Supervisory Authorities have published a joint opinion on the current anti-money laundering and counter-terrorist financing risks posed to the EU financial sector. The opinion is published in accordance with the requirements of the Fourth Anti-Money Laundering Directive, which requires the ESAs to publish a joint opinion on the AML/CTF risks affecting the EU’s financial sector every two years. The most recent previous opinion was published in February 2017.

    Read more.
  • European Securities and Markets Authority Publishes Opinion on MiFID II Frequent Batch Auctions and Double Volume Cap
    10/04/2019

    The European Securities and Markets Authority has published an opinion on frequent batch auctions and the double volume cap mechanism. The opinion follows ESMA’s report, published in June this year, reviewing firms’ use of frequent batch auctions and their potential as a means of circumventing the double volume cap and transparency requirements under the Markets in Financial Instruments Regulation and Markets in Financial Instruments Directive II.

    Read more.
    TOPIC: MiFID II
  • EU Consultation on Clearing Service Provision under EMIR Refit
    10/03/2019

    The European Securities and Markets Authority has opened a consultation on its draft technical advice on commercial terms for providing clearing services under the European Market Infrastructure Regulation. Responses to the consultation should be submitted by December 2, 2019.

    Read more.
    TOPIC: Derivatives
  • EU Proposals on Amending the Market Abuse Regulation
    10/03/2019

    The European Securities and Markets Authority has launched a consultation on proposed changes to the EU Market Abuse Regulation. MAR requires the European Commission to report on certain aspects of the operation of MAR, including where appropriate, making recommendations for legislative change. The proposals will mostly affect issuers of financial instruments admitted to trading or trading on a trading venue, investment firms and asset management firms. ESMA is holding a public hearing on the proposals on November 5, 2019, and the consultation closes on November 29, 2019. ESMA expects to submit its report to the Commission in Spring 2020.

    Read more.
  • European Banking Authority Publishes Basel III Capital Monitoring Report and Update on EU Bank Liquidity Measures
    10/02/2019

    The European Banking Authority has published two reports reviewing the impact of the EU’s implementation of the Basel III capital monitoring reforms and Capital Requirements Regulation liquidity measures. The EBA estimates that once the Basel III reforms are fully implemented, EU banks’ Tier 1 minimum required capital will have increased by an average of 19.3%. Liquidity coverage ratios, meanwhile, averaged roughly 149% in December 2018, significantly above the minimum threshold of 100% set out in the CRR.

    Read more.
  • European Supervisory Authorities Publish Joint 2020 Work Programme
    10/02/2019

    The Joint Committee of the European Supervisory Authorities has published its 2020 work program, outlining revisions to the Joint Committee’s scope of work and the matters it will focus on in 2020. The Joint Committee consists of representatives from the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority, the European Commission and the European Systemic Risk Board. 

    Read more.
  • European Securities and Markets Authority Publishes Guidelines on Prospectus Regulation Risk Factors
    10/01/2019

    The European Securities and Markets Authority has published Guidelines on risk factors under the EU Prospectus Regulation that will provide guidance to Member State national regulators when reviewing prospectuses. The Guidelines will apply from December 4, 2019. Within two months of the date of publication of the guidelines in all EU official languages, national regulators must notify ESMA whether they comply with the guidelines and, if they do not, whether they intend to comply. If they do not intend to comply, national regulators must explain why that is the case.

    Read more.
    TOPIC: Securities
  • European Securities and Markets Authority Publishes 2020 Work Priorities
    10/01/2019

    The European Securities and Markets Authority has published its Annual Work Programme for 2020. The Work Programme sets out ESMA’s focus areas for 2020 and provides details of expected outputs within each of the areas. In 2019, the European Council, Parliament and Commission agreed on new tasks for ESMA, meaning that ESMA will take on an enhanced role in areas including direct supervision, supervisory convergence and investor protection. The final Regulations amending the scope of the European Supervisory Authorities’ work mandates are expected to be published in the second half of 2019.

    Read more.
  • EU Publishes Technical Advice on Disclosure Requirements for New Climate Benchmarks
    09/30/2019

    The European Commission's Technical Expert Group has published a final report on EU climate benchmarks and benchmark Environmental, Social and Governance disclosures. The Commission set up the TEG on Sustainable Finance when it published its legislative proposal for amending the EU Benchmark Regulation as part of its action plan on Sustainable Finance. The proposed legislation will create two new categories of low carbon benchmarks: the EU Climate Transition Benchmark (EU CTB) and the EU Paris-aligned Benchmark (EU PAB). It also includes ESG disclosure requirements for all investment benchmarks. The final text of the proposal has been agreed and it is expected to be published in October/November 2019.

    The TEG report provides technical advice to the Commission on: (i) the minimum ESG disclosure requirements for all benchmarks, except interest rates and currency benchmarks, and specific ESG disclosure requirements for EU CTBs and EU PABs; and (ii) the minimum technical requirements for the methodology of EU CTBs and EU PABs. In addition, the report includes recommendations on other areas of work that are connected to the benchmark ESG disclosures, such as the proposed EU Classification System of Sustainable Activities (i.e. the EU Taxonomy) and changes to the disclosure requirements in the Markets in Financial Instruments package to take into account ESG disclosures.

    View the report.
  • Council of the European Union Issues Note on Strategic Priorities for AML and CTF
    09/30/2019

    The Presidency of the Council of the European Union has issued a note inviting Ministers of the Permanent Representatives Committee to consider certain issues regarding the EU anti-money laundering and counter-terrorism financing framework. In July 2019, the European Commission published a Communication and a series of reports assessing the EU implementation of EU AML and CTF requirements and discussing whether further action is needed to improve the EU’s AML/CTF framework. In its Communication, the Commission identified certain issues that were likely to impede the effectiveness of the framework.

    Read more.
  • UK Prudential Regulator Launches Consultation on Asset Encumbrance Rules
    09/30/2019

    The U.K. Prudential Regulation Authority has launched a consultation on its proposed expectations of how firms manage prudential risks associated with asset encumbrance. The PRA’s expectations are relevant to all PRA-authorized firms, other than credit unions and insurance firms. Responses should be submitted by January 17, 2020.

    Read more.
  • European Securities and Markets Authority Issues Call for Evidence on Product Intervention Measures
    09/30/2019

    The European Securities and Markets Authority has issued a call for evidence on the impact of its product intervention powers prohibiting the marketing, distribution and sale of binary options to retail clients and imposing restrictions upon contracts for difference that were marketed, distributed or sold to retail clients. ESMA is seeking feedback from all interested stakeholders, in particular investment firms and banks providing investment services (particularly those that provide CfDs or binary options captured by the product intervention measures) and consumer groups and investors. Responses should be submitted by November 4, 2019.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Conduct Regulator Finalizes Rules for Funds Investing in Illiquid Assets
    09/30/2019

    The U.K. Financial Conduct Authority has finalized new rules governing certain types of open-ended funds that invest in inherently illiquid assets.

    Read more.
    TOPIC: Funds
  • International Organization of Securities Commissions Review of Suitability Requirements for Complex Products
    09/26/2019

    The International Organization of Securities Commissions has published a report, "Thematic Review on Suitability Requirements with respect to the Distribution of Complex Financial Products". The report summarizes the outcome of the review IOSCO undertook of a sample of member jurisdictions' implementation of the IOSCO 2013 Suitability Requirements for the Distribution of Complex Financial Products, which aims to prevent mis-selling of complex products. The Suitability requirements comprise nine principles relating to classification of customers, general duties regardless of customer classification, disclosure requirements, customers protections, incentives and enforcement.

    Read more.
  • European Banking Authority Launches Consultation on Synthetic Securitizations Framework
    09/25/2019

    The European Banking Authority has launched a consultation on its proposed simple, transparent and standardized framework for synthetic securitization. The paper also seeks feedback from stakeholders on a proposed list of criteria that should be considered when labeling a synthetic securitization an STS and on the introduction of different regulatory treatments for STS synthetic securitizations. The EBA will hold a public hearing on October 9, 2019 and responses to the consultation should be provided by November 25, 2019.

    Read more.
    TOPIC: Derivatives
  • No-Deal Brexit Uncertainty Leads EU to Suspend Assessment of Transparency Requirements on Bond Markets
    09/24/2019

    The European Securities and Markets Authority has confirmed in a letter to the European Commission that it considers it inadvisable to conduct an annual review in 2019 of the Regulatory Technical Standards on the transparency requirements for trading venues and investment firms for bonds, structured finance products, emission allowances and derivatives (sometimes referred to as RTS 2). The requirement for an annual review is stipulated in the Markets in Financial Instruments package, and ESMA's report could lead to legislative changes subjecting more bonds and derivatives to the transparency requirements. ESMA's assessment of RTS 2 would be impacted by the uncertainty arising from Brexit, in particular, the potential for a no-deal Brexit, because the outcome would vary depending on whether U.K. data was included or not.

    ESMA intends to conduct its annual review before July 2020 and to determine the impact on bond market liquidity of the U.K.'s departure from the EU.

    View ESMA's letter to the European Commission.
  • UK Conduct Regulator Appoints Executive Director of Risk and Compliance Oversight
    09/20/2019

    The U.K. Financial Conduct Authority has appointed Sheree Howard as its new Executive Director of Risk and Compliance Oversight, replacing Barbara Frohn, who left the FCA earlier this year. Ms. Howard joined the FCA as a Senior Adviser in December 2017. Her new role as part of the Executive Committee will see her advising the FCA’s Board on the breadth of risk in the organization.
     
    View the FCA's announcement.
    TOPIC: People
  • UK Conduct Authority Publishes Review Findings for EU Research Unbundling Rules
    09/19/2019

    The U.K. Financial Conduct Authority has published the outcome of its review of the research unbundling reforms implemented in the EU by the revised Markets in Financial Instruments Directive. MiFID II has applied across the EU since January 3, 2018. MiFID II restricts the payment or receipt of all fees, commission and non-monetary benefits ("inducements") unless these enhance the quality of service provided to a client, and do not impair an EU investment firm's duty to act in the best interests of its client. Any inducement that is a minor, non-monetary benefit is exempt from the limitation. Research provided by any third party (regardless of location) to an EU investment firm providing investment services or ancillary services will be regarded as an "inducement" and subject to the inducement prohibition, unless the research is received in return for either direct payment by the investment firm out of its own resources or payment from a separate research payment account (RPA). "Soft dollar" commissions are not allowed, unless these are done through an RPA. The rules have impacted buy-side and sell-side firms in the EU, as well as their non-EU counterparts.

    Read more.
    TOPIC: MiFID II
  • European Economic and Social Committee Publishes Opinion on Sustainable Finance Reforms
    09/19/2019

    The European Economic and Social Committee has published an Opinion on the European Commission’s Reflection Paper, “Towards a Sustainable Europe by 2030”, which was published earlier this year. The Commission’s Reflection Paper considers Europe’s competitive advantages in delivering sustainable development, assesses the EU and global climate change challenges that must still be tackled, and sets out policy changes and proposals that will enable the EU to adhere to the UN’s 2030 Agenda for Sustainable Development and the 17 Sustainable Development Goals.

    Read more.
  • International Swaps and Derivatives Association Consults on Final Fall Backs for Alternative Risk-Free Rates
    09/18/2019

    Following its previous two consultations, the International Swaps and Derivatives Association has launched a consultation on the proposed final parameters that will apply to alternative risk-free rates if derivatives fall backs are triggered. Responses to the consultation should be provided by October 23, 2019. ISDA will amend the 2006 ISDA Definitions based on the feedback and also intends to publish a protocol so that market participants can include fall backs in legacy IBOR contracts, if needed. Both documents are expected to be finalized before the end of 2019, ready for implementation in 2020.

    Read more.
  • UK Prudential Regulator Consults on Credit Risk
    09/18/2019

    The U.K. Prudential Regulation Authority has launched a consultation on its approach to implementing the European Banking Authority's Technical Standards and Guidelines on Probability of Default estimation, Loss Given Default estimation and the treatment of defaulted exposures in the Internal Ratings Based approach to credit risk. The consultation is relevant to U.K. banks, building societies and PRA-designated U.K. investment firms. Responses to the consultation need to be submitted by December 18, 2019.

    Read more.
  • UK Prudential Regulator Implements New Waiver of Deposit Protection Rules
    09/13/2019

    The U.K. Prudential Regulation Authority has announced that it will provide a new waiver by consent of the Continuity of Access Rules under the Depositor Protection Part of the PRA Rulebook. The DPP Rulebook sets out rules requiring firms to ensure that eligible depositors have access to deposits covered by the Financial Services Compensation Scheme in the event of the firm’s insolvency, by establishing systems to facilitate a transfer of such deposits (the so-called “Continuity of Access” rules).

    Read more.
  • UK Competition Authority Consults on Intention to Vary Retail Banking Market Investigation Order
    09/12/2019

    The U.K. Competition and Markets Authority has formally announced its provisional decision to vary the Retail Banking Market Investigation Order 2017 by removing Part 6 of the Order, which governs automatic enrollment in personal current account alerts. The CMA has published a draft of its proposed Variation Order together with its provisional decision and is seeking comments on both, which should be submitted by October 15, 2019.

    Read more.
    TOPIC: Competition
  • UK Conduct Regulator Escalates Awareness of Need for No-Deal Brexit Preparations
    09/11/2019

    The U.K. Financial Conduct Authority has published a press release announcing that it is stepping up its efforts to assist firms to prepare for a no-deal Brexit. Among other things, the FCA will be publishing a series of digital advertisements highlighting the FCA Brexit webpages, and it has set up a dedicated telephone line (0800 048 4255).

    View the FCA's press release.
  • UK Statutory Instrument Published to Amend Benchmark Regulations
    09/11/2019

    A U.K. statutory instrument has been published amending the existing U.K. legislation that gives effect to the EU Benchmarks Regulation. The new statutory instrument – the Financial Services and Markets Act 2000 (Benchmarks) (Amendment) Regulations 2019 – amends the definition of a “Miscellaneous Benchmarks Person” under the existing regulation and clarifies the scope of the U.K. Financial Conduct Authority’s powers to impose requirements on Miscellaneous Benchmark Persons. The amendments will come into force on October 14, 2019.

    Read more.
  • UK Payments Regulator Paper on Use of Data in the Payments Industry
    09/10/2019

    Following the publication of a discussion paper in June 2018, the U.K. Payment Systems Regulator has published its response paper on the issue of data in the payments industry. The discussion paper outlined three potential areas where data use could directly affect the PSR's statutory objectives of promoting competition and innovation. These are:
    • Reluctance of end-users to share payments data with third-party providers of other payments-related services (so-called "overlay services"), due to concerns over whether their data will be treated appropriately.

    Read more.
  • EU Clarification on Legacy Own Funds Instruments Coming in Mid-2020
    09/09/2019

    The European Banking Authority has announced that it will clarify by mid-2020 the position of instruments that were both issued and qualified as "own funds" for capital purposes before December 31, 2011. When the Capital Requirements Regulation entered into force, transitional provisions provided that these legacy instruments would also qualify as own funds instruments under the CRR, even if they did not meet the enhanced requirements for own funds introduced in that measure. The transitional period for such instruments ends on December 31, 2021. The EBA has stated that it will provide clarification on the appropriate treatment of the legacy instruments to ensure that banks maintain high quality regulatory capital and that the rules are consistently applied across the EU. The EBA confirms that it will take into account recent changes to own funds requirements in CRR II as well as other linked changes under the Bank Recovery and Resolution Directive.

    View the EBA's announcement.
  • UK Prudential Regulator Proposes Amendments to the Pre-Issuance Notification Rules for Regulatory Capital Instruments
    09/09/2019

    The U.K. Prudential Regulation Authority has published a consultation paper in which it proposes amendments to the Pre-Issuance Notification (PIN) requirements for regulatory capital instruments. The PIN requirements are applicable to PRA-authorized Capital Requirements Regulation firms and require firms to notify the PRA of certain capital instruments that they intend to issue. The PRA assesses the terms and conditions of these instruments prior to issuance, to ensure that firms maintain quality capital resources which comply with CRR. Responses to the consultation are requested by December 9, 2019.

    Read more.
  • UK Statutory Instrument Published to Onshore the EU Prospectus Regulation For No-Deal Brexit
    09/06/2019

    A U.K. statutory instrument has been published to onshore the EU Prospectus Regulation in the event of a no-deal Brexit. In preparing for an April Brexit, the U.K. had onshored the EU Prospectus Directive in the Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 (known as the "Official Listing instrument"). However, since then the date on which the U.K. is due to leave the EU has changed to October 31, 2019 and the EU Prospectus Directive has been repealed by the EU Prospectus Regulation (as of July 21, 2019).

    Read more.
  • UK No-Deal Brexit Legislation Extends Transitional Provisions for Third-Country Benchmarks
    09/06/2019

    A U.K. statutory instrument has been published to further the U.K.'s financial services legislation preparations in the event of a no-deal Brexit. The statutory instrument – the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 (SI 2019/1212) – provides for, among other things:
    • amending the exit legislation that establishes temporary regimes for EEA e-money and payment services firms to ensure that firms entering the Contractual Run-Off regime can carry out the full range of activities required to discharge any pre-existing contractual obligations;
    • extending the transitional provisions for third-country benchmarks in the Benchmarks (Amendment and Transitional Provisions) (EU Exit) Regulations 2019 by three years to ensure that U.K. firms can use third-country benchmarks until the end of 2022 without the benchmarks needing to be on the Financial Conduct Authority's register;
    • updating cross-references to the Capital Requirements Regulation to take into account the EU amendments to the CRR that became applicable in June 2019; and
    • amending various exit instruments to correct or clarify the original text.

    View the amending regulation and explanatory memorandum.
  • UK Brexit Legislation Published to Onshore the Revised Capital Requirements Regulation
    09/05/2019

    A draft U.K. statutory instrument to onshore into U.K. law, post-Brexit, the revised Capital Requirements Regulation (known as CRR II) has been published – the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (2019 No. 1232). CRR II and the revised Capital Requirements Directive were published in the Official Journal of the European Union on June 7, 2019. Subject to certain exceptions, the Regulation amending CRR will not apply directly across the EU from June 28, 2021. However, some of its provisions are already in force. EU Member States are required to transpose the Directive amending CRD into their national laws and to apply those provisions from December 29, 2020, subject to certain exceptions.

    The new U.K. statutory instrument amends the existing U.K. exit legislation to address deficiencies arising due to the changes made in CRR II, but only those changes that will be applicable by October 31, 2019. These changes relate to new definitions, revisions to the rules on what qualifies as capital, new mandates for technical standards to be prepared and some changes to the Minimum Requirements for Own Funds and Eligible Liabilities (MREL). In addition, the statutory instrument removes the automatic preferential capital treatment for EU exposures introduced by CRR II. This aligns with the position taken in the existing exit legislation. It is anticipated that in the event of a no-deal Brexit, the U.K. regulators may use their temporary powers to suspend the additional capital requirements for such exposures.

    View the amending regulation and explanatory memorandum.

    View details of CRR II.
  • EU Stress Simulation Framework for Investment Funds Published
    09/05/2019

    The European Securities and Markets Authority has published, in an economic report, a stress simulation framework for investment funds, which is intended for use by national regulators. The report provides an overview of the framework, options available for stress testing and discusses the calibration of redemption shocks for investment funds, methods to assess the resilience of funds to shocks, ways to measure the impact of fund managers' liquidation strategies on financial markets, and possible second-round effects. The report also includes a case study where ESMA applied the stress simulation framework to 6,000 UCITS bond funds, the underlying data for which ESMA has shared with national regulators.

    ESMA intends to use the stress test simulation to assist it in monitoring and identifying risks that may impact the funds industry.

    View the economic report.
    TOPIC: Funds
  • UK Prudential Regulator Writes to Banks on Prudential Supervision of Money Laundering and Terrorist Financing Risks
    09/05/2019

    The Prudential Regulation Authority has published a "Dear CEO" letter sent to all PRA-regulated banks and investment firms (firms that are subject to the Capital Requirements Regulation) on the prudential supervision of money laundering and terrorist financing risks. The PRA reminds firms of the Opinion published by the European Banking Authority on July 24, 2019, which invited national prudential supervisors to (i) make clear to institutions the expectation that prudential supervisors should be aware of AML/CTF risks that may affect the institutions they oversee; and (ii) notify institutions that AML/CTF concerns will be taken into account in determining prudential supervision.

    Read more.
  • European Commission Issues Communication on Final Preparations for No-Deal Brexit
    09/04/2019

    The European Commission has published a Communication on finalizing preparations for the withdrawal of the U.K. from the EU on November 1, 2019. The Commission stresses the likelihood of a no-deal Brexit on October 31, 2019 and asks all stakeholders to take action now to finalize their plans for the situation, noting that the contingency measures that are in place can only mitigate against some of the more significant disruptions. The Commission warns that a further delay to the date that the U.K. exits the EU should not be assumed, in that a delay may not be requested by the U.K. government nor granted by the EU.

    Read more.
  • US Court Rejects Suit Over Office of the Comptroller of the Currency FinTech Charter
    09/03/2019

    Judge Dabney Friedrich of the U.S. District Court for the District of Columbia has dismissed a lawsuit brought by the Conference of State Bank Supervisors (CSBS) that would have prevented the Office of the Comptroller of the Currency from offering a special purpose national bank charter to certain non-bank financial services firms. The CSBS brought the lawsuit in October 2018 following the OCC's July 2018 announcement that it would begin accepting applications for the FinTech charter, arguing that the OCC lacks the authority to award bank charters to non-depository institutions. However, Judge Friedrich concluded that the CSBS did not have standing to bring the suit given the fact that the OCC has yet to award a FinTech charter to any non-bank financial services firms.

    Read more.
    TOPIC: FinTech
  • Banking Standards Board Publishes Good Practice Guidance on Regulatory References
    09/03/2019

    The Banking Standards Board has published a statement of good practice for firms when providing and requesting regulatory references in accordance with the Senior Managers and Certification Regime. The SM&CR for banks and building societies was established in 2016 to improve management within banking sector firms. The regime includes a requirement for firms to request references when determining whether a candidate is suitable for a senior management function, certification function or non-executive director function. 

    Read more.
  • European Securities and Markets Authority Publishes Final Guidance on Liquidity Stress Tests for Investment Funds
    09/02/2019

    The European Securities and Markets Authority has published a report containing its final guidelines on liquidity stress testing in Alternative Investment Funds and Undertakings for Collective Investment in Transferable Securities. The guidelines have been published in accordance with the European Systemic Risk Board's 2018 Recommendation, which was designed to address liquidity and leverage risk in investment funds. ESMA's guidelines will apply from September 30, 2020.

    Read more.
    TOPIC: Funds
  • Financial Stability Board Publishes Summary of Workshop on Continuity of Access to Financial Market Infrastructure
    08/28/2019

    The Financial Stability Board has published a summary of an industry workshop, held on May 21, 2019, on continuity of access to financial market infrastructures for firms in resolution. The FSB held the workshop to assist in its efforts to monitor implementation of the FSB Guidance on continuity of access to FMI for firms in resolution, published in July 2017. The Guidance provides for arrangements to allow continuity of access to FMIs for a global systemically important bank in resolution. The Guidance applies to FMIs as providers of clearing, payment, securities settlement and/or custody services, to G-SIBs and other banks that are subject to resolution (referred to here as firms) and recovery planning requirements, as well as the G-SIB resolution authorities and regulators of the FMIs.

    Read more.
  • UK Conduct Regulator Sets Out Approach for Annual Remuneration Round
    08/28/2019

    The U.K. Financial Conduct Authority has published a letter (dated August 19, 2019) addressed to the chairpersons of the remuneration committees of the boards of banks and large investment firms (investment firms with total assets over £50 billion). The letter sets out the FCA's findings from the 2018/19 remuneration round and informs how the FCA intends to assess remuneration policies and practices of firms in 2019/20.

    The FCA observes that firms continue to address conduct issues in their remuneration policies and practices. It reminds the chairpersons of remuneration committees of their accountability as senior managers under the Senior Managers Regime. Noting that firms continue to adjust awards for material poor performance and misconduct, but that some firms still find it difficult to provide appropriate justification for some adjustments, the FCA states that it will work with firms this year on their approach to ex post facto risk adjustment.

    The FCA letter also states that the annual review of submitted Remuneration Policy Statements will again be coordinated with the Prudential Regulation Authority. Firms are asked to submit a short summary addressing the key points raised in the statement, including the key changes made last year and an explanation of how the chairperson has assured himself or herself that the firm's overall remuneration policies drive behavior that reduces potential harm.

    Finally, the FCA invites chairpersons of remuneration committees to engage in the FCA's work on transforming culture in financial services.

    View the letter.
  • UK Law Commission Calls for Evidence on Operation of the System for Intermediated Securities
    08/27/2019

    The UK Law Commission has published a Call for Evidence on the system for intermediated securities. The Call for Evidence will inform the Commission's scoping study to assess the current state of the law and issues arising from intermediation, which the Department for Business, Energy & Industrial Strategy has requested. Intermediated securities are shares and bonds held electronically through computerized credit entries. The Call for Evidence describes how intermediated securities are held and recorded, noting the advantages of the system. It also raises practical issues with the system and presents some potential solutions.

    Read more.
    TOPIC: Securities
  • European Central Bank Amends Its Supervisory Expectations on Non-Performing Loans
    08/22/2019

    Following the coming into force on April 26, 2019 of an EU regulation amending the Capital Requirements Regulation that introduced a statutory prudential backstop, and requires banks to have minimum loan loss coverage for newly originated loans, the European Central Bank has published a communication on supervisory coverage expectations for non-performing loans. The ECB communication announces that the ECB has revised its supervisory expectations on NPLs that it published in its March 2018 Addendum to the Guidance for Eurozone banks on NPLs as a result of the Amending Regulation. Neither the Guidance nor the Addendum are legally binding, but both apply to all Eurozone Significant Institutions supervised by the ECB in the Single Supervisory Mechanism as well as their international subsidiaries.

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