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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.

  • European Commission Consults on MiFID II
    02/17/2020

    The European Commission has launched a consultation on reviewing the EU Markets in Financial Instruments package. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation have applied across the EU since January 1, 2018 and regulate the functioning and transparency of EU financial markets. The consultation closes on April 20, 2020. The Commission is due to publish a legislative proposal to amend MiFID II and MiFIR in Q4 2020.

    Read more.
    TOPIC: MiFID II
  • UK Payment Systems Regulator Publishes Policy Statement on Confirmation of Payee Requirements
    02/14/2020

    The U.K. Payment Systems Regulator has published a policy statement setting out its final decision on varying Specific Direction 10, which requires payment service providers to implement the Confirmation of Payee system by March 31, 2020. Confirmation of Payee is a system which ensures that certain identifiers (including name, sort code and account number) of a payee are verified against the records of a payment services provider before a payment is made.
    Read more.
  • European Banking Authority Consults on Guidelines on Systemic Risk Buffers for Sectoral Exposures
    02/12/2020

    The European Banking Authority has launched a consultation on proposed Guidelines on the appropriate subsets of sectoral exposures to which national regulators may apply a systemic risk buffer under the Capital Requirements Directive. CRD 5 amended the provisions on when a national regulator may set a systemic risk buffer for sectoral exposures.  The EBA is mandated to prepare Guidelines to enhance harmonization of the approach across the EU. CRD 5 must be transposed into Member State laws by December 28, 2020 and those laws must be applied from December 29, 2020. Responses to the consultation can be submitted until May 12, 2020. Once finalized, the Guidelines will apply to the relevant national regulators from December 29, 2020.

    View the consultation paper.

    View details of CRD 5 and CRR 2.
  • International Organization of Securities Commissions Reports on Risks and Regulatory Considerations for Crypto-Asset Trading Platforms
    02/12/2020

    Following its consultation last year, the International Organization of Securities Commissions has published a report on the key issues and risks related to trading of crypto-assets on crypto-asset trading platforms (referred to as CTPs). The report aims to assist IOSCO member jurisdictions to assess the issues and risks relating to CTPs and sets out key considerations to be taken into account, including related toolkits for regulators. 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. IOSCO states that where a regulator has determined that a crypto-asset is a security, the provisions on securities trading and regulation apply.

    Read more.
    TOPICS: FinTechSecurities
  • European Banking Authority Publishes Final Set of Recommendations for Improving the EU Deposit Guarantee Scheme Directive
    02/11/2020

    The European Banking Authority has published the third in a series of three opinions on the implementation of the Deposit Guarantee Scheme Directive in the EU. This opinion relates to DGS funding and uses of DGS funds. It is dated January 23, 2020. The first opinion related to the eligibility of deposits, coverage level and cooperation between deposit guarantee schemes and was published in August 2019. The second opinion, published in October 2019, was on DGS payouts. The opinions have been prepared to assist the European Commission in its obligation to report on the implementation of the DGSD.

    Read more.
  • European Commission Confirms Scope of Securities Financing Transactions Regulation for Non-EU Funds
    02/10/2020

    In a letter published by the International Securities Lending Association, the European Commission confirms that the reporting obligations of the EU Securities Financing Transactions Regulation will not apply to non-EU Alternative Investment Funds, even if the manager is an EU AIFM, except for SFTs concluded in the course of the operations of the non-EU AIF’s EU branch.

    View the letter.
    TOPICS: FundsSecurities
  • European Central Bank Proposes Guide on Assessing Counterparty Credit Risk
    02/07/2020

    The Banking Supervision arm of the European Central Bank has opened a consultation on a proposed guide on assessing counterparty credit risk. The proposed guide sets out the ECB's approach to assessing the internal models that banks use to calculate their exposure to counterparty credit risk under the Capital Requirements Regulation. The proposed guide would apply to those Eurozone banks for which the ECB is responsible for direct prudential supervision as part of the Single Supervisory Mechanism, and that are permitted to use internal model methods. The consultation closes on March 18, 2020.

    View the ECB public consultation.
  • EU Recommendations for Alignment of the EU Derivatives Trading and Clearing Obligations
    02/07/2020

    The European Securities and Markets Authority has published a final report and recommendations on aligning the trading obligation under the Markets in Financial Instruments Regulation with recent changes made to the clearing obligation under the European Markets Infrastructure Regulation by the EMIR Refit Regulation. ESMA's report to the European Commission will support the Commission's report to the European Parliament and Council that is due by December 18, 2020.

    Read more.
    TOPICS: DerivativesMiFID II
  • Macroprudential Weaknesses in EU's Alternative Investment Fund Managers Directive to Be Addressed in AIFMD Review
    02/05/2020

    The European Systemic Risk Board has published a letter (dated February 3, 2020) to the European Commission on the weaknesses of the Alternative Investment Fund Managers Directive. The ESRB is responsible for macro-prudential oversight within the European Union. The AIFMD framework provides the ESRB with data to assist it to analyze systemic risks. The ESRB considers that the AIFMD reporting framework could be improved and wants the Commission to consider these issues as part of the review of the AIFMD. The letter sets out the ESRB's experiences with the scope and application of the AIFMD, in particular considering:
     
    1. The suitability of the reporting framework and access to data for monitoring systemic risk: the ESRB highlights that the AIFMD framework could be improved, particularly with regards to fund identification, fund classification, information on the interconnectedness of funds, information on leverage and liquidity risk, reporting frequency and access to data.

    Read more.
    TOPIC: Funds
  • Further Consultation on Pre-Cessation Fallbacks Announced
    02/05/2020

    The International Swaps and Derivatives Association has announced that it will be issuing later in February 2020 a further consultation on how to implement pre-cessation fallbacks. A “pre-cessation” trigger in derivative contracts would cause LIBOR-based contracts to fall back to an alternative reference rate in the event that the U.K. Financial Conduct Authority deemed LIBOR no longer to be representative. 

    Read more.
  • EU Consultation on Revised Risk Factor Guidelines for Assessing Money Laundering Risks
    02/05/2020

    The European Banking Authority has launched a consultation on proposed revisions to the Risk Factor Guidelines for financial institutions to assess money laundering and terrorist financing risks. The proposed changes aim to take into account the most recent revisions to the EU Anti-Money Laundering Directive (i.e. 5MLD) and newly identified risks, including those specified in the EBA's implementation reviews. The consultation closes on May 5, 2020.

    Read more.
  • EU-Wide Supervisory Focus on MiFID II Suitability Compliance
    02/05/2020

    The European Securities and Markets Authority has announced an EU-wide common supervisory action in 2020 on the application of the suitability requirements under the Markets in Financial Instruments Directive. National regulators of EU member states will simultaneously assess compliance with the applicable requirements by market participants established in their jurisdictions. The knowledge and experience of the national regulators will be shared through ESMA to enhance the convergence of supervisory practices. ESMA's Suitability Supervisory Briefing and Suitability Guidelines are relevant to this initiative.

    View ESMA's announcement.

    View details of ESMA's suitability supervisory briefing.

    View details of ESMA's suitability guidelines.
    TOPIC: MiFID II
  • Amended EU Guidelines for National Regulators on Enforcing Financial Information Publication by EU Issuers
    02/04/2020

    The European Securities and Markets Authority has published amended Guidance for national regulators on the enforcement of financial information that issuers listed on regulated markets are required to publish under the EU Transparency Directive. The amended Guidelines will apply from January 1, 2022. ESMA is making the amendments following the peer review exercise it conducted in 2017. The amendments focus on the methods that regulators use to select issuers for financial information examination and the procedures applied during such examinations.

    View the amended Guidelines.
    TOPIC: Securities
  • EU Recommendations on MiFID II Product Intervention Amendments
    02/04/2020

    The European Securities and Markets Authority has published Technical Advice on the impact and functioning of the product intervention rules in the Markets in Financial Instruments Regulation. MiFIR gives ESMA powers temporarily to prohibit or restrict the marketing, distribution or sale of financial instruments or types of financial activity. The European Banking Authority has similar powers in relation to certain structured deposits. National regulators of EU Member States are able to impose permanent product intervention measures. ESMA's Technical Advice to the European Commission is on the functioning of the MiFIR provisions and their impact, taking into account its experience and the feedback from market participants to its Call for Input last year.

    Read more.
    TOPIC: MiFID II
  • EU Consultation on Potential Amendments to MiFID II's Equity Transparency Regime
    02/04/2020

    The European Securities and Markets Authority has commenced a consultation on proposed amendments to the provisions of the Markets in Financial Instruments package on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligation for shares. The consultation is part of the larger review on the implementation of the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. Feedback to the consultation will aid ESMA in preparing its report to the European Commission, which in turn is expected to report in 2020 to the European Parliament and Council of the European Union. ESMA's consultation closes on March 17, 2020. It intends to publish its final report to the Commission in July 2020. ESMA will be consulting separately on the transparency regime for non-equity instruments, such as bonds and derivatives.

    Read more.
    TOPIC: MiFID II
  • EU Moves to Delay Securities Settlement Discipline Rules to 2021
    02/04/2020

    The European Securities and Markets Authority has published draft amending Regulatory Technical Standards to delay the implementation of the settlement discipline requirements under the EU's Central Securities Depositories Regulation. The draft RTS would postpone the application date of the settlement discipline rules from September 13, 2020 to February 1, 2021, by amending the existing RTS (Commission Delegated Regulation (EU) 2018/1229). The RTS cover measures for preventing settlement fails through automated matching, a hold and release mechanism and partial settlement. The RTS also provide measures for monitoring and addressing settlement fails, such as a mechanism for cash penalties and a buy-in process. ESMA has acted amid calls from industry associations and other stakeholders to delay the application date so that systems, procedures and measures can be put in place properly.

    View the draft RTS.
    TOPIC: Securities
  • UK Joint Money Laundering Steering Group Proposes Amendments to Guidance
    02/03/2020

    The Joint Money Laundering Steering Group has opened a consultation on proposed amendments to its Guidance. The revisions to the Guidance are to account for changes introduced by The Money Laundering and Terrorist Financing (Amendment) Regulations 2019. The Regulations amend the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, incorporating changes arising from the EU’s Fifth Anti-Money Laundering Directive. 

    Read more.
  • European Banking Authority Publishes Report on Diversity Practices in Banks and Investment Firms
    02/03/2020

    The European Banking Authority has issued a report on diversity practices in credit institutions and investment firms. The report is based on diversity data collected by national regulators under the Capital Requirements Directive. CRD requires banks (known as “credit institutions”) and investment firms to adopt policies promoting diversity in their management bodies. The report finds that 41% of institutions still do not have a diversity policy, despite a CRD obligation to implement one. Even amongst institutions that have implemented a policy, not all promote gender diversity. The EBA is calling on institutions and Member States to consider additional measures to promote a more balanced gender representation and to ensure compliance with diversity policy requirements. It intends to continue monitoring diversity in management bodies and to issue further benchmark studies in the future.
     
    View the EBA's report on diversity practices
  • U.K. Prime Minister Sets Out Plan for Post-Brexit Relationship with EU
    02/03/2020

    The U.K. Prime Minister, Boris Johnson, has published a written statement on the U.K. Government’s proposed approach to negotiations on the U.K.’s future relationship with the EU. The U.K. formally left the EU on January 31, 2020 and entered an 11-month transition period, expiring on December 31, 2020, during which most EU legislation will continue to apply. The U.K. must now negotiate how the U.K. will interact with the EU after the end of the implementation period. 

    Read more.
  • European Securities and Markets Authority Consults on Pre-Trade Transparency Regime
    02/03/2020

    The European Securities and Markets Authority has launched a consultation to collect the views of market participants on the pre-trade transparency regime applicable to systematic internalizers for “non-equity instruments” (which include bonds, structured-finance products, emission allowances and derivatives) under the Markets in Financial Instruments Regulation. A consultation on the transparency regime for equity and equity-like instruments has been launched separately.

    Read more.
  • European Commission Takes First Step to Formally Open Negotiations With UK on Future Relationship
    02/03/2020

    The European Commission has published a Recommendation for a Decision by the Council of the European Union authorizing the opening of negotiations for a trade deal between the U.K. and the EU. The draft Recommendation authorizes the opening of the negotiations, appoints the Commission as negotiator and establishes a special committee for consultation. The annex to the draft Recommendation sets out the proposed negotiating directives and describes the EU's vision for its future relationship with the U.K., based on the EU-U.K. Withdrawal Agreement. Once the Council adopts the decision, the Commission will formally open the negotiations.

    View the draft Recommendation and negotiating directives.
  • EU Opinion on Italian Accepted Market Practice in Accordance with the Market Abuse Regulation
    01/31/2020

    The European Securities and Markets Authority has published an opinion supporting the Italian Commissione Nazionale per le Società e la Borsa’s (Consob) revised accepted market practice on liquidity contracts for the purposes of the Market Abuse Regulation. The Market Abuse Regulation provides certain prohibitions against market manipulation but allows “accepted market practices” (AMPs) as a defense against allegations of market manipulation. To benefit from the defense, it is necessary to establish that a relevant transaction was conducted for legitimate reasons and in accordance with a formally accepted AMP. AMPs must be established by national regulators and notified to ESMA. ESMA will then issue an opinion on the compatibility of the AMP with MAR and whether its establishment would threaten market confidence.
    Read more.
  • European Securities and Markets Authority Confirms Brexit Implementation Period Requirements
    01/31/2020

    The European Securities and Markets Authority has released a statement confirming that, during the Brexit implementation or transitional period, the reporting and notification requirements for U.K. firms under EU legislation, such as the Markets in Financial Instruments package and the European Market Infrastructure Regulation, will continue to apply. In addition, ESMA will continue directly to supervise U.K. established credit rating agencies, trade repositories and securitization repositories until January 1, 2021. Under the EU-U.K. Withdrawal Act, the U.K. will leave the EU on January 31, 2020. However, EU laws will continue to apply in the U.K. until the end of the implementation period that will run from February 1, 2020 to December 31, 2020.

    View ESMA's statement.
  • Scope of Jurisdiction of Court of Justice Over UK Matters Confirmed
    01/31/2020

    The Court of Justice of the European Union has published a press release on the consequences for it of the U.K.'s withdrawal from the EU on January 31, 2020. The announcement confirms that U.K. judges will no longer serve the Court of Justice and of the General Court. The statement also confirms that the Court of Justice will continue to have jurisdiction in proceedings brought by or against the U.K. until the end of the implementation period (December 31, 2020). The Court will also have jurisdiction to give preliminary rulings on requests from U.K. courts that are made before the end of the implementation period.

    View the press release.
  • EU Debate on Usefulness of Equivalence Regime Under the Prospectus Regulation
    01/31/2020

    The European Securities and Markets Authority has published a letter it addressed to the European Commission about the technical advice that the Commission requested from ESMA on the general equivalence criteria to guide future equivalence assessments for prospectuses prepared under the laws of third countries. The Prospectus Regulation allows national regulators of EU member states to approve a prospectus for an offer of securities to the EU public or for admission to trading on an EU exchange, prepared in accordance with the laws of a third country, provided the disclosure laws of the third country are equivalent to those of the Prospectus Regulation. The Commission is empowered to adopt legislation setting out general equivalence criteria and may also adopt a decision determining that the laws of a specific third country are equivalent.

    Read more.
    TOPIC: Securities
  • EU Consultation on Draft Technical Standards For Third-Country Firm Registration and Disclosure Under MiFID II
    01/31/2020

    The European Securities and Markets Authority has launched a consultation on proposed 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. The consultation closes on March 31, 2020 and ESMA intends to submit the final draft Technical Standards to the European Commission in Q3 2020.

    The provisions in the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation on third-country firms were recently amended. Among other things, the changes require 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.

    ESMA's consultation paper covers the proposed:
    • draft Regulatory Technical Standards on the information for registration of third-country firms and the information to be reported annually by third-country firms registered with ESMA;
    • draft Implementing Technical Standards on the format of applications for registration of third-country firms and the format of the information to be reported annually; and
    • draft ITS on the format of the information to be reported annually to national regulators by branches of third-country firms.

    View the consultation paper.
  • UK Conduct Regulator Confirms EU Regulatory Reporting Regime Applies During Brexit Implementation Period
    01/30/2020

    The U.K. Financial Conduct Authority has announced that during the Brexit implementation period, all existing regulatory reporting will continue under the EU regime. The FCA's announcement follows the adoption by the Council of the European Union of the Withdrawal Agreement on the same day, which means that the U.K. will leave the EU on January 31, 2020. Although the U.K. will have left the EU, EU law will apply in the U.K. until the transitional or implementation period ends on December 31, 2020. The FCA confirmed that EEA firms wanting to enter the Temporary Permissions Regime or fund managers wanting to continue to market funds in the U.K. under the Temporary Marketing Permissions Regime had until the end of the day on January 30, 2020 to notify the FCA.

    View the FCA's announcement.
  • Bank for International Settlement Says Buy-Side Firms Need to Adopt Global FX Code
    01/30/2020

    The Chair of the Markets Committee of the Bank for International Settlements has written to the Chair of the Global Foreign Exchange Committee providing a brief assessment of the effectiveness of the FX Global Code. The FX Global Code was first published by the GFXC in May 2017. It superseded and substantively updated existing guidance for participants in FX markets previously provided by the Non-Investment Products (NIPs) Code. The Code comprises a set of global principles of good practice for the FX market, covering a broad range of areas, including ethics, governance, execution, information-sharing, risk management, compliance, trade confirmation and settlement. The Global FX Committee committed to reviewing the code every three years.

    In the letter, the BIS Markets Committee sets out its assessment of and recommendations for improving the effectiveness of the FX Global Code. In particular, the Committee recommends that additional action is taken by the Global FX Committee to ensure that more of the large buy-side firms sign up to the Code.

    View the letter.
  • UK Conduct Regulator Publishes Brexit-Related Updates to Handbook
    01/30/2020

    The U.K. Financial Conduct Authority has published a series of updates to the FCA Handbook relating to the U.K.’s exit from the EU on January 31, 2020.

    Read more.
  • EU Agrees Final Brexit Legislation
    01/30/2020

    Following the signature of the EU-U.K. Withdrawal Agreement on January 24, 2020, the European Central Bank has issued a statement expressing its regret that the U.K. is leaving the EU but stating its intention to ensure that Brexit causes the minimum disruption possible.

    Read more.
  • International Organization of Securities Commissions Priorities for 2020
    01/30/2020

    The International Organization of Securities Commissions has published its annual work program, setting out its priorities for 2020. IOSCO will continue to focus on the five areas identified by its Board in 2019 as well as one new issue. The areas of focus are:
    • Crypto-assets: following its consultation last year, in February 2020, IOSCO will publish a final report on issues, risks and regulatory considerations relating to crypto-asset trading platforms. IOSCO will also publish the outcome of its review of the regulatory risks relating to investment funds exposures to crypto-assets. Finally, a report will be issued in early 2020 on issues relating to Global Stablecoins.
    Read more.
  • EU-Wide Supervisory Focus on UCITS Liquidity Risk Management Announced
    01/30/2020

    The European Securities and Markets Authority has announced an EU-wide common supervisory action on liquidity risk management by managers of Undertakings for the Collective Investment in Transferable Securities will be undertaken in 2020. This would appear to be a response to the Woodford scandal. The EU UCITS Regulation requires UCITS managers to manage a UCITS liquidity risk to ensure, among other things, that investors can redeem their investments on demand. National regulators of EU member states are going to simultaneously assess compliance with the requirements by market participants established in their jurisdictions. The knowledge and experience of the national regulators will be shared through ESMA to enhance the convergence of supervisory practices.

    View ESMA's announcement.
    TOPIC: Funds
  • European Commission Seeks Feedback on Changes to Non-Financial Reporting Regime
    01/30/2020

    The European Commission is seeking feedback on a roadmap for its proposed changes to the Non-Financial Reporting Directive. The Directive specifies the non-financial information (e.g., regarding the environment, social issues and bribery and corruption) that large listed companies, banks and insurance companies must report on annually. The Commission has committed to review the Directive in order to strengthen firms’ reporting in this area, particularly with respect to the adequacy of reporting on sustainable investment. Policy options include: (i) revising the existing non-binding guidelines on reporting under the Directive; (ii) endorsing existing or future voluntary standards on non-financial reporting; and (iii) revising and strengthening the provisions of the Directive itself. Feedback on the roadmap should be submitted by February 27, 2020. The Commission intends to launch a further consultation on the possible revision of the Directive in Q1 2020.

    View the Commission's roadmap on revision of the Non-Financial Reporting Directive.
  • EU Adopts Withdrawal Agreement
    01/30/2020

    The Council of the European Union has adopted a decision to conclude the EU-U.K. Withdrawal Agreement. The European Parliament consented to the Agreement on January 29, 2020.

    The Withdrawal Agreement will enter into force when the U.K. leaves the EU on January 31, 2020 (midnight CET / 11 p.m. GMT). Although the U.K. will have left the EU, it will still apply EU laws until December 31, 2020, which is the agreed transitional or implementation period under the Agreement.

    View the Council's press release.
  • European Commission Publishes 2020 Work Programme
    01/29/2020

    The European Commission has published its 2020 Work Programme, setting out the EU’s strategic priorities for the next 12 months.

    Read more.
  • EU Amends Implementing Standards for Diversified Stock Indices Under Capital Requirements Legislation
    01/29/2020

    A Commission Implementing Regulation amending existing Implementing Technical Standards under the Capital Requirements Regulation has been published in the Official Journal of the European Union. The ITS specify the stock indices that are sufficiently diversified to be counted as individual equities, without requiring market participants to take account of their specific risk under CRR for any stock index future placed on them. The amendments to the ITS update the stock indices listed in light of the latest available data. The ITS will apply directly across Member States from February 19, 2020.

    View the amending Commission Implementing Regulation.  
  • UK Legislation Published Introducing Commencement of Brexit Withdrawal Act
    01/29/2020

    The European Union (Withdrawal Agreement) Act 2020 (Commencement No. 1) Regulations 2020 have been published by the U.K. Government. The Commencement Regulations establish “exit day” (January 31, 2020), as the day upon which certain provisions of the European Union (Withdrawal Agreement) Act 2020 will come into force, including provisions that give domestic legal effect to the Withdrawal Agreement and EEA EFTA separation agreement and those providing for the retention of existing grounds for deportation of relevant persons. 

    Read more.
  • UK Legislation Published Delaying Brexit Transitional Regimes to End of Implementation Period
    01/28/2020

    The Financial Services (Consequential Amendments) Regulations 2020 have been published by the U.K. Government. The Regulations delay the application of various financial services temporary permissions and transitional regimes until the end of the implementation or transitional period (December 31, 2020) which was established under the European Union (Withdrawal Agreement) Act 2020. The Regulations come into force immediately before exit day, which is due to occur on January 31, 2020.

    Read more.
  • UK Payment Systems Regulator Consults on Competition and Innovation Issues in the New Payments Architecture
    01/28/2020

    The U.K. Payment Systems Regulator has published a Call for Input on competition and innovation in the U.K.'s New Payments Architecture. Feedback can be provided to the PSR until March 24, 2020. The PSR confirms that it will consult further on this issue, including on a draft policy statement. All of the feedback will assist the PSR to develop the NPA regulatory policy, the final version of which will be published before the end of 2020. The NPA will reorganize the clearing and settlement of most of the U.K.'s domestic interbank payments, including payments that currently use the BACS and Faster Payments systems. The consultation paper sets out certain potential harms to competition and innovation and possible mitigating measures to address these.

    View the call for input.
  • UK Government Confirms Aim of Achieving Equivalence for Financial Services by End June 2020
    01/27/2020

    HM Treasury has published a letter addressed to the Chair of the European Union Committee of the House of Lords concerning equivalence for financial services as a result of Brexit. In the letter, HM Treasury confirms that the priority for the U.K. Government is to obtain equivalence from the EU (and grant the same to the EU for U.K. purposes) by June 30, 2020 across all areas of the financial services sector where the EU framework currently provides for equivalence. There are just over 40 areas within the existing EU equivalence framework. This is in line with the EU-U.K. Withdrawal Agreement. The Withdrawal Agreement is subject to approval by the EU on January 29, 2020. The U.K. legislation to implement the Withdrawal Agreement, the European Union (Withdrawal Agreement) Act 2020, received Royal Assent on January 23, 2020.

    HM Treasury also confirms that discussions have already been held with countries outside the EU regarding the U.K.'s equivalence framework and states that the U.K. could grant equivalence even where there is no EU equivalence, confirming the U.K.'s sovereign rights following Brexit.

    View the letter.

    You may like to view our client note: "The EU-UK Future Relationship: EU Announces its Timetable For Cross-Border Equivalence in Financial Services", dated January 15, 2020.
  • UK Government Launches Consultation on Application of EU Fifth Money Laundering Directive to Trusts
    01/24/2020

    HM Treasury and HM Revenue and Customs have launched a consultation on the implementation of rules governing the registration of trusts under the EU Fifth Anti Money Laundering Directive. Responses to the consultation should be submitted by February 21, 2020.

    Read more.
  • UK Legislation Published Implementing Revised Brexit Deal
    01/24/2020

    The European Union (Withdrawal Agreement) Act 2020 has received Royal Assent and has been published by the U.K. Government. The EUWA Act 2020 implements the revised Withdrawal Agreement agreed between the EU and the U.K. last October and provides for that Agreement to have direct legal effect in the U.K. Subject to final EU sign-off, the U.K. is scheduled to leave the EU with this deal on January 31, 2020.

    Read more.
  • Christopher Woolard Appointed as Interim Chief Executive of UK Conduct Authority
    01/24/2020

    Christopher Woolard has been appointed Interim Chief Executive of the U.K. Financial Conduct Authority from March 16, 2020. Mr. Woolard is currently the Executive Director of Strategy and Competition and an Executive member of the FCA's Board. He will take on the role when the current FCA Chief Executive Andrew Bailey becomes Governor of the Bank of England. HM Treasury will be running an open process for the role of permanent CEO in due course.

    View the announcement.
    TOPIC: People
  • UK Regulator Outlines Priorities for Supervising Benchmark Administrators
    01/24/2020

    The U.K. Financial Conduct Authority has written to the CEOs of benchmark administrators that it supervises. In the letter, the FCA sets out its supervisory strategy as well as the potential harms that benchmark administrators pose to their customers and to the financial markets. The FCA is asking all benchmark administrators to consider the harm that their firm may present and to consider how those could be mitigated. The FCA intends to focus over the next two years on the following areas to ensure that its supervision of benchmark administrators mitigates the identified risks:
    • Quality of standards: the quality of an administrator's governance and controls, the information provided in their Benchmark Statement, their recalculation and cessation policies, their outsourcing arrangements and their approach to operational resilience; and
    • Excessive fees and costs: the FCA is concerned that competition may not be working well in the provision of benchmarks following the feedback received to its Wholesale Sector Competition Review and Asset Management Market Study. The FCA intends to carry out a Call for Input on access to data in wholesale markets so that it can gain a better understanding of the issues and determine whether any action is needed.
    Read more.
  • UK Prudential Regulator Publishes Policy Statement on Changes to Pillar 2 Capital Requirements
    01/23/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement following its consultation last year on changes to the Pillar 2 capital requirements for banks and large investment firms. The amendments will apply from January 23, 2020. The PRA has made some changes to the proposed text following feedback from respondents that further clarification would be helpful, in particular on the setting of the PRA buffer using the hurdle rate in stress, buffer interactions and usability. The amendments are implemented in:
    • Statement of Policy, "The PRA's methodologies for setting Pillar 2 capital";
    • Supervisory Statement, "The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)" (SS31/15); and
    • Supervisory Statement, "Implementing CRD IV: Capital buffers" (SS6/14).

    View the Policy Statement.

    View the updated Statements.

    View details of the PRA's consultation.
  • UK Regulators Take Steps to Establish Financial Services AI Public Private Forum
    01/23/2020

    The Bank of England and the U.K. Financial Conduct Authority are establishing the Financial Services AI Public Private Forum that Governor Mark Carney announced in June 2019. The regulators are calling for expressions of interest to join the forum from a range of sectors, including, but not limited to: (i) asset and investment management; (ii) banking; (iii) financial market infrastructure; (iv) fintech; (v) insurance; (vi) non-governmental organizations; and (vii) technology service providers.

    The purpose of the forum is to:
    • share information and understand the practical challenges of using AI and machine learning in financial services, including obstacles to implementation and potential risks and trade-offs;
    • establish the potential areas where principles, guidance, regulation or good practice might assist in the safe adoption of AI and machine learning; and
    • assess whether ongoing industry input would be useful and what form that could take, such as through industry codes of conduct or an industry standard board.

    View the FCA's announcement.

    View the BoE's webpage.

    View the terms of reference.
    TOPIC: FinTech
  • Revised EU Guidelines on Fraud Reporting Under the Payment Services Directive Published
    01/22/2020

    The European Banking Authority has published amendments to the 2018 Guidelines on fraud reporting under the revised Payment Services Directive (known as PSD2). The Regulatory Technical Standards on "strong customer authentication" requirements for payments services providers, setting out the process by which service providers authenticate the identity of customers have applied directly across the EU since September 14, 2019. Following clarifications by the European Commission on the application of SCA to certain transaction types, the EBA has amended the reporting templates linked to the guidelines to cater for reporting of transactions where SCA is not applied for reasons other than an exemption under the SCA RTS. The amendments will apply to the reporting of payment transactions initiated and executed from July 1, 2020.

    View the EBA's announcement and the consolidated Guidelines.

    View details of the SCA RTS.
  • UK Conduct Regulator Wants Asset Management Sector to Reflect on Risks to Customers and Markets
    01/22/2020

    The U.K. Financial Conduct Authority has published two letters addressed to the CEOs of firms in the asset management and funds sectors. The first letter is addressed to CEOs of FCA-authorized firms directly managing mainstream investment vehicles or advising on mainstream investments, excluding wealth managers and financial advisers. The second letter is addressed to CEOs of FCA-authorized firms managing alternative investment vehicles, such as hedge funds or private equity funds, or managing alternative assets directly or advising on these types of investments. The letters follow the FCA's report on its review of how firms in the asset management sector selected and used risk modeling and other portfolio management tools.

    Read more.
  • EU Proposals to Amend the EU-Wide Stress Test Framework for Banks
    01/22/2020

    The European Banking Authority has commenced a consultation on proposed changes to the EU-wide stress test framework for banks. The EU-wide stress test contributes to improving the financial resilience of banks. Responses to the consultation may be submitted until April 30, 2020. The EBA is holding a public hearing on the proposals on February 21, 2020. The 2020 EU-wide stress test is going to run under the current framework, the results of which will be published in July 2020.

    The EBA is proposing to amend the framework to have two parts. The first would be the supervisory element, based on a common EU methodology. It would include the current constrained bottom-up approach, but also have an option for national regulators to adjust or replace banks' estimates based on top-down models and other tools. The second part would be the bank element and would be based on the same common methodology applied in the supervisory part. However, banks would be given more discretion to calculate their projections, provided an explanation and disclosure of the rational and impact of any deviations is possible. The quality of disclosure of the results would remain high, with only the supervisory leg being amended to limit the quantity of disclosure. Feedback is also sought on the approach to scenario designs.

    View the consultation paper and other details.
  • UK Conduct Authority to Review Suitability of Retirement Income Financial Advice
    01/21/2020

    The U.K. Financial Conduct Authority has announced the focus of its second review assessing suitability - advice received by consumers on retirement income. The FCA intends to publish a report on the outcome of the review in 2020. Alongside the announcement, the FCA has published a letter addressed to the CEOs of financial advice firms describing its approach to tackling key areas of concern with financial advice firms and setting out the action it expects these firms to undertake. The letter covers assessing suitability of advice, defined benefit pension transfer advice, pensions and investment scams, adequate financial resources and professional indemnity insurance, the FCA's recently imposed ban on the promotion of speculative mini-bonds to retail consumers, the Senior Managers and Certification Regime and preparing for the end of the Brexit implementation period.

    View the FCA's statement.

    View the Dear CEO letter.
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