Shearman & Sterling LLP | FinReg
Financial Regulatory Developments Focus
This links to the home page
FILTERS

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.

  • Global Financial Innovation Network Invites Applications for First Cross-Border Testing
    10/29/2020

    The U.K. Financial Conduct Authority has announced that it will be one of the 23 regulators participating in the cross-border testing initiative launched by the Global Financial Innovation Network. The other regulators involved are Abu Dhabi Global Market (ADGM), Australian Securities & Investments Commission (ASIC), Alberta Securities Commission (ASC), Astana Financial Services Authority (AFSA), Autorité des marchés financiers (AMF), Bank of Lithuania (LB), Bermuda Monetary Authority (BMA), British Columbia Securities Commission (BCSC), Capital Markets Authority (CMA, Kenya), Central Bank of Bahrain (CBB), Central Bank of United Arab Emirates (CB UAE), Consumer Financial Protection Bureau (CFPB), Ontario Securities Commission (OSC), Dubai Financial Services Authority (DFSA), Financial Services Commission Taiwan (FSC Taiwan), Guernsey Financial Services Commission (GFSC), Hong Kong Insurance Authority (HKIA), Hong Kong Monetary Authority (HKMA), Hong Kong Securities and Futures Commission (HKSFC), Jersey Financial Services Commission (JFSC), Magyar Nemzeti Bank (Central Bank of Hungary), Monetary Authority of Singapore (MAS).

    The GFIN was launched at the start of 2019 and is a network of organizations committed to supporting financial innovation in the interests of consumers. One of GFIN's priorities is facilitating cross-border trials of emerging technologies across global jurisdictions (a global sandbox). GFIN has opened applications from firms to test innovative financial products, services or business models across more than one country or jurisdiction, and applications should be submitted by December 31, 2020.

    View the GFIN cross-border testing site.

    View the FCA's announcement.
    TOPIC: FinTech
  • UK Conduct Regulator Extends Certification and Conduct Rules Implementation Deadlines
    10/28/2020

    Following its consultation earlier this year, the U.K. Financial Conduct Authority has published its final policy statement and rules to extend certain implementation deadlines for the Certification Regime and Conduct Rules. To assist firms impacted by the COVID-19 pandemic, the U.K. has made legislation—The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) (Amendment) Regulations 2020— extending the deadline for completion of firms' first assessments of the fitness and propriety of their Certified Persons from December 9, 2020, to March 31, 2021. This applies only to solo-regulated firms (other than benchmark administrators).

    In addition to extending that date, the FCA has also extended the following deadlines from December 9, 2020, to March 31, 2021:
    • the date the Conduct Rules come into force for staff that are not Senior Managers, Certification Staff or board directors;
    • the date by which relevant employees must receive training on the Conduct Rules; and
    • the deadline for submission of information about Directory Persons to the FS Register.

    The FCA has reiterated that firms that are able to certify staff and submit information for the FS Register before March 31, 2021, should do so.

    View the FCA's policy statement and amended rules.
  • EU Moves to Ease Brexit Implications for Post-Trade Transparency and Position Limits Regime
    10/27/2020

    Following its statement at the start of October 2020, the European Securities and Markets Authority has announced that U.K. trading venues have been positively assessed for the purposes of the post-trade transparency obligations and position limits regime under the Markets in Financial Instruments package. From January 1, 2021, EU investment firms will not be required to make transactions public in the EU via an EU Approved Publication Arrangement if they are executed on a U.K. trading venue that appears on ESMA's transparency list. In addition, commodity derivative contracts traded on U.K. trading venues that are on ESMA's position limits list will not be considered as economically equivalent OTC contracts and will thus not be subject to the EU position limit regime.

    View ESMA's announcements and lists.

    View details of ESMA's earlier statement in October.

    View details of the FCA's statement on the U.K.'s position.
  • EU Publishes Further Statement on Endorsement by EU Credit Rating Agencies of UK Ratings After the Brexit Transition Period
    10/27/2020

    The European Securities and Markets Authority has published a further statement confirming that U.K. credit ratings can be endorsed by EU credit rating agencies from January 1, 2021, when the Brexit transition period ends. The EU CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings only for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. There is currently no equivalence decision for the U.K. CRA regime. Therefore, EU entities may use U.K. credit ratings only for regulatory purposes if the rating has been endorsed by an EU CRA. ESMA confirmed in March 2019 a positive assessment of the U.K.'s CRA regime for the purposes of endorsement. However, the final decision to endorse is for an EU CRA.

    Read more.
  • EU Markets Authority Updates Post-Brexit Position on EU Share Trading Obligation
    10/26/2020

    The European Securities and Markets Authority has published an updated statement on the impact of 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 EU 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. onshored share trading obligation would restrict the trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.

    Read more.
  • Final Roadmap for Enhancing Cross-Border Payments Published by the Financial Stability Board
    10/13/2020

    The Financial Stability Board has published a Roadmap for enhancing cross-border payments. The Roadmap is the final stage in the G20's three-stage process to enable countries to enhance their cross-border payments systems. The FSB published the Stage 1 report in April 2020, which identified existing challenges in cross-border payments systems and specified key "frictions" in the cross-border payments system that contribute to these challenges. The Stage 2 report, published by the Committee on Payments and Market Infrastructures in July 2020, covered the 19 building blocks where further public and private sector work would enhance cross-border payments and address the frictions ascertained by the FSB.

    Read more.
  • Financial Stability Board Publishes Final Recommendations on Global Stablecoins
    10/13/2020

    Following its consultation earlier this year, the Financial Stability Board has published a final report on the regulation, supervision and oversight of global stablecoin arrangements. In the report, the FSB discusses the characteristics of GSCs, the risks posed by GSCs, existing approaches to regulating and supervising GSCs and issues with cross-border supervision of GSCs. Alongside the report, the FSB has published a summary of the responses to its consultation.

    Read more.
  • UK Conduct Regulator Bans Sale to Retail Clients of Derivatives Referencing Crypto-Assets from January 2021
    10/06/2020

    The U.K. Financial Conduct Authority has published a Policy Statement and final rules prohibiting the sale, marketing and distribution to retail clients of derivatives and exchange traded notes referencing certain types of unregulated, transferable crypto-assets by firms acting in, or from, the U.K. The ban will apply from January 6, 2021.

    The prohibition will apply to the marketing, distributing or selling of crypto derivatives in, or from, the U.K. to retail clients by MiFID investment firms, MiFID optional exemption firms, U.K. branches of third-country investment firms and to EEA MiFID investment firms that currently passport into the U.K. and which will continue operating after the Brexit transitional period ends on January 1, 2021.

    Read more.
  • EU Final Guidelines on Transfers of Information Between Securitization Repositories
    10/05/2020

    The European Securities and Markets Authority has published a final report and final guidelines on the portability of information between securitization repositories under the EU Securitization Regulation. ESMA is responsible for the registration and supervision of securitization repositories. It is required under the Securitization Regulation to develop guidelines for supervisory purposes and will apply them from January 1, 2021, except for those provisions that require securitization repositories to have policies for the orderly transfer of data to other securitization repositories, which apply from June 18, 2021. The guidelines will apply to transfers of information between repositories either at the request of a reporting entity or in the event of a securitization repository's registration being withdrawn. The guidelines set out the specific procedures and the content of policies for the orderly transfer of information by securitization repositories.

    View ESMA's final report and guidelines.
  • EU Report on the Potential for a Digital Euro
    10/02/2020

    The European Central Bank has published a report by the Eurosystem High-Level Task Force on a digital euro. The digital euro would be a form of central bank digital currency. No decision has been taken yet to issue a digital euro. The report sets out the reasons for having a digital euro, the potential impact of a digital euro, legal considerations, functional design possibilities and technical and operational approaches to digital euro services. A consultation on the potential launch of a digital euro is expected in October 2020.

    The Bank of England issued a discussion paper in March 2020 on the opportunities, challenges and design of a potential U.K. CBDC. The ECB and the BoE are two of the central banks that are investigating the potential of CBDCs. Other central banks include the Bank of Canada, the Bank of Japan, the Sveriges Riksbank, the Swiss National Bank and the Bank for International Settlements.

    View the ECB's report on a digital euro.
  • UK Conduct Regulator Confirms Post-Brexit Position on Post-Trade Transparency and Position Limits
    10/02/2020

    The U.K. Financial Conduct Authority has issued a statement confirming the U.K. position from January 1, 2021, for post-trade transparency reporting obligations and position limit regime under the U.K. Markets in Financial Instruments package. The FCA confirms that:
    • U.K. firms trading on non-U.K. trading venues will not be required to publish details of those transactions through a U.K. Approved Publication Arrangement; and
    • Commodity derivative contracts traded on trading venues are not considered by the FCA to be economically equivalent OTC contracts and will not be subject to the U.K. commodity derivatives position limits regime.

    The FCA's statement follows the statement made the previous day by the European Securities and Markets Authority that it intended to assess U.K. trading venues for the purpose of the EU post-trade transparency obligations and position limits regime. If ESMA assesses a U.K. trading venue positively, then trades on the venue will not need to be reported by EU investment firms through an EU APA, and they will not be subject to the position limits regime.

    View the FCA's statement.

    View details of ESMA's statement.
  • EU to Assess UK Trading Venues to Clarify Post-Brexit Position for Post-Trade Transparency and Position Limits Regime
    10/01/2020

    The European Securities and Markets Authority has published updated statements on the impact of Brexit on the application of the Markets in Financial Instruments package and the EU Benchmark Regulation. ESMA issued statements in 2019 to clarify the position in a no-deal scenario. These latest statements provide updates to take into account the Withdrawal Agreement and the end of the Brexit transition period on December 31, 2020.

    Read more.
  • Final Technical Standards on Third-Country Investment Firm Registration and Reporting Requirements
    09/28/2020

    The European Securities and Markets Authority has published final draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. Amendments that were made to the MiFID II package under the Investment Firm Regulation and Directive require, among other things, third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions. The revisions will apply from June 26, 2021.

    Read more.
  • EU Grants Temporary Recognition to UK CCPs For End of Brexit Transition Period
    09/28/2020

    The European Securities and Markets Authority has announced that it has granted temporary third-country recognition to three U.K. CCPs from January 1, 2021 under the European Market Infrastructure Regulation. ESMA's announcement follows the time-limited equivalence decision for the U.K.'s legal and regulatory supervision regime of U.K. CCPs, which was published on September 21, 2020. The third-country recognition for ICE Clear Europe Limited, LCH Limited and LME Clear Limited means that EU clearing members of these three CCPs will be able to continue to access the services and that the CCPs will be able to continue to provide their services in the EU at the end of the transition period on December 31, 2020, following the U.K.'s withdrawal from the EU.

    Read more.
  • EU Securities Authority Recommends Changes to EU Market Abuse Regulation
    09/24/2020

    The European Securities and Markets Authority has published a final report on the review of the 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. ESMA's final report and recommendations will support the work by the Commission on producing that report. The proposals will mostly affect issuers of financial instruments admitted to trading or trading on a trading venue, investment firms and asset management firms.

    Read more.
  • European Commission Sets out Capital Markets Union Action Plan
    09/24/2020

    The European Commission has published a Communication to EU bodies on its Capital Markets Union Action Plan. The CMU is an EU initiative which aims to enhance and further integrate the capital markets of EU Member States. An action plan to develop the initiative was first adopted in 2015 and has been commented upon and updated since then. The Commission's Communication sets out the latest Action Plan, and is accompanied by a Q&A. It follows the recommendations of the High-Level Forum on the CMU, which proposed 17 key recommendations for the CMU, and the Commission's Roadmap on the CMU which set out details of the Commission's proposed Action Plan for comments by interested parties.

    Read more.
    TOPICS: COVID-19Securities
  • European Commission Sets Out EU Digital Finance Strategy
    09/24/2020

    The European Commission has published a Communication on its EU digital finance strategy for the coming years. The global economy has been transformed by digital innovation, and this includes financial services. The Commission's strategic objective is to embrace digital finance for the benefit of consumers and businesses while ensuring digital transformation is soundly regulated. To achieve this objective, the Commission sets out four priorities for the digital transformation of the EU financial sector over the next four years and the actions it will take to achieve them.

    Read more.
    TOPICS: COVID-19FinTech
  • European Commission Proposal for Pilot Distributed Ledger Technology Regime Regulation
    09/24/2020

    The European Commission has published a proposal for a new EU Regulation on a pilot regime for distributed ledger technology. The pilot regime is intended to promote legal certainty, to support innovation, to preserve market integrity and to ensure financial stability for the use of DLT in crypto-asset and e-money token markets. The Commission has simultaneously published a proposed Regulation on markets in crypto-assets and e-money tokens. The proposed Regulations follow the Commission's consultation on an EU framework for crypto-assets, which closed in January 2020.

    Read more.
  • European Commission Proposal for Crypto-asset Regulation
    09/24/2020

    The European Commission has published a proposal for a new EU Regulation on crypto-assets. The proposed Regulation is intended to improve legal certainty in the regulatory treatment of crypto-assets, to support the development of crypto-assets, to preserve consumer protection and market integrity in crypto-asset markets and to ensure financial stability. The Commission has simultaneously published a Regulation on a pilot regime for distributed ledger technology. The proposed Regulations follow the Commission's consultation on an EU framework for crypto-assets, which closed in January 2020.

    Read more.
  • European Commission Proposals for Digital Operational Resilience Regulation and Amending Directive 
    09/24/2020

    The European Commission has published proposals for a new EU Regulation on digital operational resilience for the financial sector and a new EU Directive amending certain pieces of existing EU financial services legislation to strengthen digital operational resilience and provide legal certainty on crypto-assets. The new legislation has been proposed as a result of the risks arising from the increase in digital opportunities within the financial sector. There are currently no detailed rules at EU level on digital operational resilience, exposing the need for comprehensive and harmonized legislation governing this area.

    Read more.
  • European Commission Sets out EU Retail Payments Strategy
    09/24/2020

    The European Commission has published a Communication on its EU retail payments strategy for the coming years. The payments sector has experienced significant change in recent years. Retail payments are increasingly dematerialized and disintermediated, with large technology companies playing a more significant part in the payments sector. The EU payments market is also largely fragmented along national borders, leading to a small number of large firms providing cross-border services and inhibiting domestic FinTechs. The Commission's strategic objective is to establish a clear EU policy framework for retail payments that manages the risk of inconsistencies and market fragmentation across the EU.

    Read more.
  • UK Conduct Regulator Consults on Post-Brexit Approach to Authorization for Non-UK Firms
    09/23/2020

    The U.K. Financial Conduct Authority has launched a consultation on its intended approach to international firms seeking to provide regulated financial services in the U.K. after the Brexit transition period ends on December 31, 2020 and the U.K.'s temporary permissions regime comes to an end three years later.  The FCA intends to use the consultation responses to inform the publication of a document that would explain the FCA's general approach to regulating international firms. The consultation does not propose any changes to the FCA's existing rules or to the FCA Handbook. Responses should be submitted by November 27, 2020.

    Read more.
  • Bank of England Consults on Changes to Brexit Onshoring Legislation
    09/22/2020

    The Bank of England has launched a consultation on proposed changes to the BoE and Prudential Regulation Authority's Brexit onshoring legislation. The U.K. left the EU on January 31, 2020. Under the terms of the EU Withdrawal Agreement, the U.K. agreed that EU legislation continues to apply in the U.K. until the end of the transition or implementation period on December 31, 2020 (known as "IP completion day"). The existing Brexit onshoring legislation ensures that, after EU law ceases to apply in the UK at the end of the transition or implementation period, U.K. legislation remains functional. Further updates to the onshoring legislation and regulatory rules are needed, however, to take account of the transition or implementation period (which delayed the entry into force of the onshoring legislation) and of additional EU legislation that will apply in the U.K. prior to the end of that period.

    Read more.
  • UK Treasury Committee Seeks Answers from UK Bodies on FinCen Papers and Economic Crime
    09/22/2020

    The U.K. Treasury Committee has written to the U.K. Financial Conduct Authority, HM Revenue and Customs and the U.K. Department for Business, Energy and Industrial Strategy, seeking answers to a series of questions on the actions each of the bodies are taking to combat economic crime and the significance of the "FinCen files" leak. The FinCen files are essentially a series of leaked suspicious transaction reports originally sent by banks to the US Financial Crimes Enforcement Network between 2000-2017 notifying FinCen of suspicious transactions.

    Read more.
  • European Banking Authority Phases Out COVID-19 Guidelines on Loan Repayments Moratoria
    09/21/2020

    The European Banking Authority has confirmed that it will phase out its Guidelines on legislative and non-legislative payment moratoria in accordance with its September 30, 2020 deadline. The EBA originally published the Guidelines in April 2020, stipulating that, for a period of three months, banks should not class payment moratoria that were based on national law or private-sector initiatives as forbearance or distressed restructuring practices, in light of the COVID-19 pandemic. The Guidelines were extended for a further three months on June 30, 2020 but the EBA now intends to comply with the September 30, 2020 phase out deadline in light of the success of the temporary moratoria and the need to return to the usual rescheduling of loans on a case-by-case approach.  The treatment described in the Guidelines will continue to apply to payment holidays granted prior to September 30, 2020.

    View the EBA's statement on the phase-out of its Guidelines.

    View details of the EBA's Guidelines.
  • UK Prudential Regulation Authority Publishes Proprietary Trading Review
    09/21/2020

    The U.K. Prudential Regulation Authority has published a report on the extent of proprietary trading by PRA-authorized deposit takers and investment firms incorporated in the U.K. Restrictions on proprietary trading (being the trading of financial instruments or commodities as principal by banks or investment firms) were introduced for ring-fenced retail banks in the wake of the 2008 financial crisis and came into force in January 2019. However, the U.K. decided not to impose a complete ban on proprietary trading for all banks, as had been seen in other countries, such as the U.S. under the Volcker Rule. Instead, the PRA was mandated to produce a report under the Financial Services (Banking Reform) Act 2013, with a view to informing the U.K. Parliament of the need for any further restrictions on proprietary trading.

    Read more.
  • International Organization of Securities Commissions Publishes Guidance on Conflicts of Interest in Debt Capital Raising
    09/21/2020

    The International Organization of Securities Commissions has published guidance on how to address potential conflicts of interest and associated conduct risks for intermediaries involved in the issuance of debt securities. Intermediaries may perform a variety of roles on a debt capital raising transaction and may also have a proprietary interest in the transaction itself.  In 2017, the IOSCO Board decided to examine conflicts of interest and other conduct risks in the capital raising process. IOSCO published guidance for the equity capital raising process in September 2018.

    Read more.
    TOPICS: COVID-19Securities
  • UK Law Commission Announces Projects on Accommodating Smart Contracts and Digital Assets into English Law
    09/21/2020

    The U.K. Law Commission has announced two new projects designed to ensure that English law is able to accommodate smart contracts and digital assets.

    Smart contracts are automated contracts such as distributed ledgers which are produced without human intervention. The Law Commission plans to investigate various questions arising from the use of smart contracts, including: (i) in what circumstances will contracts written in code be legally binding; (ii) how should smart contracts be interpreted by the courts; and (iii) what are the legal consequences of the code not performing as intended? The Law Commission is seeking input from the business and technology sectors and intends to publish a call for evidence in late 2020.

    Read more.
    TOPIC: FinTech
  • International Swaps and Derivatives Association Letter on Timing of ISDA IBOR Fallbacks Protocol
    09/21/2020

    The International Swaps and Derivatives Association has written to the Co-Chairs of the Financial Stability Board Official Sector Steering Group seeking input on its proposed timing for the launch of its IBOR Fallbacks Protocol and IBOR Fallbacks Supplement. The Protocol and Supplement will implement fallbacks for derivatives contracts that reference discontinued or non-representative IBORs. The launch of the Protocol and Supplement is subject to approvals from various international competition authorities, which are still pending. Once the approvals have been obtained, ISDA intends to provide market participants with roughly two weeks' notice of the launch and effective dates of the Protocol and Supplement, allowing market participants to adhere to the Protocol 'in escrow' prior to its launch date. ISDA expects the effective dates of the Protocol and Supplement to occur approximately three months after the launch date, and in any case not before the second half of January 2021.

    View ISDA's letter.
  • European Commission Decision Temporarily Establishes UK CCP Equivalence
    09/21/2020

    The European Commission has published a Decision temporarily determining that U.K. central counterparties will be deemed equivalent to EU standards under the European Market Infrastructure Regulation. The Decision will apply from January 1, 2021 until June 30, 2022. The U.K.'s Brexit transition period ends on December 31, 2020, after which it will cease to form part of the EU's arrangement for financial services. The Decision grants equivalence for a limited 18-month duration.

    Read more.
  • EMIR 2.2 Secondary Legislation Published
    09/21/2020

    Three Commission Delegated Regulations have been published in the Official Journal of the European Union, supplementing the revised European Market Infrastructure Regulation. The Delegated Regulations contain provisions related to the changes introduced by EMIR 2.2, the amending EU Regulation that came into force on January 1, 2020 and introduced changes to the procedures and authorities involved in the authorization of central counterparties and the requirements for the recognition of third-country CCPs. EMIR 2.2 also introduced a new tiering system for third-country CCPs, making non-systemically important (or "Tier 1") third-country CCPs subject to less stringent requirements than systemically important (or "Tier 2") third-country CCPs. The Commission Delegated Regulations all relate to third-country CCP provisions of EMIR 2.2 and will enter into force on September 22, 2020. They have been published in the form adopted by the European Commission in July 2020.

    Read more.
  • European Central Bank Decision Excluding Eurozone Central Bank Exposures from Total Exposure Measures
    09/21/2020

    The European Central Bank has published a Decision in the Official Journal of the European Union temporarily excluding certain central bank exposures from significant Eurozone banks' leverage ratio calculations for the purposes of the EU Capital Requirements Regulation. The Decision will enter into force on September 26, 2020 and the exclusion will apply until June 27, 2021.

    Read more.
  • European Securities and Markets Authority Renews Notification Requirement for Net Short Positions at or Exceeding 0.1%
    09/18/2020

    The European Securities and Markets Authority has renewed its decision requiring holders of net short positions in shares traded on an EU-regulated market to notify national regulators if the position reaches or exceeds 0.1% of issued share capital. ESMA originally introduced the requirement on March 16, 2020 for a period of three months, extending it for a further three months on June 17, 2020. ESMA's latest decision means the measure will now apply from September 18, 2020 until December 18, 2020.

    Read more.
    TOPICS: COVID-19Securities
  • European Central Bank Publishes Guide to Assessment Methodology for Counterparty Credit Risk and Credit Valuation Adjustment Risk Calculations
    09/18/2020

    The European Central Bank has published its final Guide on the assessment methodology it will use to examine: (i) the internal model methods banks use to calculate exposures to counterparty credit risk; and (ii) the advanced methods banks use to calculate own funds requirements for credit valuation adjustment risk. The EU Capital Requirements Regulation requires the ECB to permit banks to use internal models for counterparty credit risk purposes if those models comply with relevant CRR provisions. The ECB's Guide sets out how the ECB will determine banks' compliance.

    Read more.
  • European Banking Authority Publishes Survey on Banks' Environmental, Social and Governance Risk Disclosure Frameworks
    09/17/2020

    The European Banking Authority has published a survey designed to collect information on large banks' disclosure practices on environmental, social and governance risks. The EU Capital Requirements Regulation implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce draft Implementing Technical Standards to ensure comparability of the disclosures made with international non-EU active banks.

    Read more.
  • Financial Action Task Force Highlights Red Flag Indicators Associated With Virtual Assets
    09/14/2020

    The Financial Action Task Force has published a report on red flag indicators of money laundering and terrorist financing in virtual assets. The FATF highlights that although virtual assets have the potential to create efficiencies and enhance innovation, they can also be used by money launderers and terrorist financers to launder proceeds or finance illicit activities. The FATF recognizes that virtual assets may be used outside of the regulated financial system and to hide the origins or destination of funds. These factors make it harder for financial entities and regulators to identify suspicious activities. The report is therefore intended to assist financial institutions, virtual asset service providers, regulators and authorities to overcome these challenges.

    Read more.
  • European Banking Authority Publishes Advice on Steps to Strengthen the EU's AML/CTF Legislation
    09/10/2020

    The European Banking Authority has published an Opinion recommending that the European Commission establish a single rulebook on anti-money laundering and counterterrorist financing. The EBA’s Opinion, and report annexed to the Opinion, are in response to the Commission’s call for advice on defining the scope of application and the enacting terms of an AML/CTF regulation that is to be adopted. The EBA sets out how to address the gaps and vulnerabilities in the EU framework, mostly due to divergent national approaches across the EU. The EBA is proposing that in the areas where national differences and practices disadvantage the EU’s fight against AML/CTF, directly applicable rules should be introduced in a new EU regulation. According to the EBA, this would cover customer due diligence, AML/CTF systems and controls and certain key supervisory processes such as risk assessments, cooperation and enforcement.

    Return to main website.
  • Financial Stability Board Further Delays Implementation Deadlines for Minimum Haircut Standards for Uncleared SFTs
    09/07/2020

    The Financial Stability Board has announced delays to the implementation of minimum haircut standards for non-centrally cleared securities financing transactions. 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. In 2015, the FSB published its regulatory framework and recommendations for haircuts on uncleared SFTs, which included timelines for the implementation of the recommendations by FSB member jurisdictions. The deadline for implementation was extended in July 2019 by the FSB because of the delay to implementation of the Basel III framework, including the minimum haircut standards on bank-to-non-bank SFTs, which was postponed to January 2022. In March 2020, a further delay to the implementation of the Basel framework to 2023 was announced, with the objective of relieving the operational burden on banks impacted by the coronavirus pandemic. The FSB has decided to delay its framework again because it is expected to be implemented by many jurisdictions through the Basel III framework.

    Read more.
  • EU Authority Allows Further Short Delay to Annual Transparency Calculations for Non-Equities
    09/07/2020

    The European Securities and Markets Authority has announced the delay of the publication dates by investment firms and trading venues of the annual transparency calculations for non-equity instruments (other than bonds) from September 15, 2020 to September 21, 2020. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, which became effective on January 3, 2018, introduced pre- and post-trade transparency requirements for equity and non-equity financial instruments. In April 2020, ESMA postponed the publication of the annual transparency calculation for derivatives, emission allowances and structured finance products from April 30, 2020 to July 15, 2020 and their application from June 1, 2020 to September 15, 2020 in response to the coronavirus pandemic. The latest delay is made in response to industry concerns that the revised application of the non-equity transparency calculations falls during the quarterly expiry week of many equity derivatives, which usually involves high trading volumes and high volatility. ESMA is also postponing to September 21, 2020 the mandatory systematic internaliser regime for derivatives, emission allowances and structured finance products.

    View ESMA's announcement.

    View details of ESMA's April 2020 announcement.
    TOPIC: MiFID II
  • Confirmation on EU Securitization Disclosure Requirements
    09/04/2020

    The European Securities and Markets Authority has published a press release confirming that certain requirements under the Securitization Regulation will enter into force on September 23, 2020.

    Read more.
  • EU Technical Standards Supplementing the Securitization Regulation
    09/03/2020

    Several EU Technical Standards supplementing the EU Securitization Regulation have been published in the Official Journal of the European Union. The Securitization Regulation has applied directly across the EU since January 1, 2019. It provides the criteria for identifying which securitizations will be designated as "simple, transparent and standardized" (STS) securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related amendments to the EU Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations.

    Read more.
  • UK Government Consults on International Regulatory Cooperation Strategy
    09/02/2020

    The U.K. Government has launched a consultation on its future international regulatory cooperation strategy. The consultation has been prompted by a report published by the Organization for Economic Cooperation and Development. In its report, the OECD set out 25 recommendations for how the U.K. can improve its policies and practices in shaping and complying with international agreements and collaborating with international counterparts when designing and enforcing regulations. The report is intended to cover regulatory practices in general, meaning banking regulation falls within the scope of the recommendations. With the U.K. having left the EU on January 31, 2020, and the end of the U.K.'s transitional period due to end on December 31, 2020, the U.K. Government believes there is an opportunity to build new regulatory practices that support the future prosperity of the U.K.

    Read more.
  • EU Publishes Draft Delegated Regulation on Changes to CCP Colleges under EMIR 2.2
    09/01/2020

    The European Commission has published a draft Delegated Regulation designed to amend existing Delegated Regulation (EU) No 876/2013, which supplements the European Market Infrastructure Regulation with regards to changes to the composition, functioning and management of colleges for central counterparties. Under EMIR, "colleges" are supervisory bodies made up of the regulators responsible for supervision of a given CCP. From January 2020, revisions to EMIR (known as "EMIR 2.2") took effect, which introduced changes to the procedures and authorities involved in the authorization of central counterparties and the requirements for the recognition of third-country CCPs. EMIR 2.2 required ESMA to develop draft Regulatory Technical Standards on: (i) which currencies were "most relevant" for the purposes of determining which central banks should be included in a CCP's college; and (ii) details of the practical arrangements for the functioning of the college that should be agreed in writing between the members of the college.

    Read more.
  • UK LIBOR Working Group Publishes Recommendations on SONIA Conventions for the Sterling Loan Market
    09/01/2020

    The U.K.'s Working Group on Sterling Risk-Free Reference Rates has published a set of non-binding Recommendations on the conventions that market participants may wish to adopt to support their use of the Sterling Overnight Index Average as a replacement for LIBOR in sterling bilateral and syndicated loan facilities. 

    Read more.
  • UK Prudential Regulator Reminds Firms of Need to Satisfy Temporary Permissions Regime Requirements
    09/01/2020

    The U.K. Prudential Regulation Authority has published a Dear CEO letter addressed to all PRA-regulated firms on operational readiness for the Temporary Permissions Regime. The U.K. left the EU on January 31, 2020 and the related transitional period, during which EU firms maintain their U.K. passporting rights, will expire at 11 pm on December 31, 2020. The TPR will take effect from after that time. The Dear CEO letter reminds firms of their obligations under the TPR and urges them to consider their firm's operational preparedness for entering the TPR, including satisfying their regulatory requirements.

    View the Dear CEO letter.
  • Certification Deadline Extended for UK-Solo-Regulated Firms
    09/01/2020

    A U.K. statutory instrument—The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) (Amendment) Regulations 2020—has been published. This extends from December 9, 2020, to March 31, 2021, for solo-regulated firms (other than benchmark administrators) the deadline for completion of firms' first assessments of the fitness and propriety of their Certified Persons. HM Treasury agreed to the extension to assist firms impacted by the coronavirus pandemic.

    The Financial Conduct Authority recently consulted on extending certain other implementation deadlines for the Certification Regime and Conduct Rules and intends to publish its Policy Statement in October 2020.

    View The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) (Amendment) Regulations 2020.

    View details of the FCA's consultation.
  • EU Draft Technical Standards Published for Further Delaying Securities Settlement Discipline Rules to 2022
    08/28/2020

    The European Securities and Markets Authority has published a final report and final draft Regulatory Technical Standards to further postpone the securities settlement discipline rules under the Central Securities Depositories Regulation to February 2022. ESMA announced on July 28, 2020 that it was preparing the draft RTS in response to a request from the European Commission to consider whether a further delay was needed due to the impact of COVID-19. The EU has already postponed the application date of the settlement discipline rules from September 13, 2020 to February 1, 2021 due to industry feedback that more time was needed to put in place the operational requirements for implementation of the rules. The draft RTS published today by ESMA would further delay the application date by a year from February 1, 2021 to February 1, 2022.

    View the final report and final draft RTS.

    View details of the amending RTS delaying the rules to February 2021.
    TOPICS: COVID-19Securities
  • UK Prudential Regulator Announces Termination of Temporary Approach to VAR Back-Testing Exceptions
    08/27/2020

    The U.K. Prudential Regulation Authority has published a statement confirming that, following its review of the temporary approach that allows firms to offset increases in VAR back-testing exceptions through a reduction in risks-not-in-VAR capital requirements, it has decided to terminate the temporary approach from September 30, 2020. The PRA has made this decision because of the changes introduced to the EU Capital Requirements Regulation (known as the CRR Quick Fix package), which has applied directly across the EU since June 27, 2020.

    From October 1, 2020, firms should no longer apply any commensurate reduction in risks-not-in-VAR capital requirements. Firms should apply to the PRA to exclude back-testing options that do not result from deficiencies in their internal model occurring between January 1, 2020 and December 31, 2021.

    View the PRA's statement.

    View details of CRR Quick Fix.
  • Confirmation Announced of Revisions to EU Guidelines on Stress Testing of Money Market Funds
    08/27/2020

    The European Securities and Markets Authority has published a statement confirming that the 2019 Guidelines on stress test scenarios under the Money Market Funds Regulation will be updated by the end of 2020 to reflect COVID-19 market developments. The MMF Regulation has applied directly across the EU since July 21, 2018. MMFs are fund vehicles that invest in highly liquid short-term debt instruments, such as government bonds, and are often regarded as a short-term cash management function alternative to bank deposits. The MMF Regulation requires MMFs and MMF managers to measure the impact of the common reference stress test scenarios, as specified by ESMA in its guidelines, and to report the outcomes to their national regulators. ESMA is required to assess annually whether the Guidelines should be updated to reflect market developments. ESMA states that it intends to update the Guidelines published in July 2019 to reflect the impact of COVID-19 on the market, in particular, the liquidity challenges faced by MMFs. The 2019 Guidelines will continue to apply until the revised Guidelines apply—ESMA intends to publish the updated Guidelines in Q4 2020, following which they will be translated into EU national languages. The updated Guidelines will apply two months after the translations are published.

    View ESMA's statement.
    TOPICS: COVID-19Funds
  • UK Prudential Regulator Issues Updated Statement on IFRS 9 and Capital Requirements
    08/26/2020

    The U.K. Prudential Regulation Authority has published a further statement on IFRS 9 and capital requirements in the context of COVID-19. In line with the Financial Conduct Authority's guidance in relation to mortgage payments, firms should consider tailored forbearance arrangements where, at the end of the COVID-19 payment deferral period, a borrower is unable to resume payments in full immediately, with all deferred sums either paid in full or capitalized. The PRA states that the tailored forbearance arrangements may be as good an indicator of significant increases in credit risk, credit impairments or defaults as forbearance before the pandemic. Any loans subject to tailored forbearance should not be automatically treated as having experienced SICR or become credit impaired or in default, and firms will need to exercise judgment where the position is not clear.

    The PRA also states that some of the guidance in its statement on March 26, and June 4, 2020 continues to be relevant, depending on the circumstances.

    View the PRA's statement.

    View details of the PRA's June statement.

    View details of the PRA's March statement.
View All (500+)