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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 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.

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  • 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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  • UK Conduct Regulator Announces Exemption from Enforcement of Strong Customer Authentication
    08/20/2019

    The U.K. Financial Conduct Authority has announced in a "Dear CEO" letter that it will not take enforcement action against firms that are not compliant with Strong Customer Authentication requirements for electronic payment transactions by the legal deadline of September 14, 2019. The exemption from enforcement will apply only to card-not-present e-commerce transactions. In order to qualify for the exemption, firms must demonstrate that they have taken the necessary steps to comply with UK Finance's plan for implementing SCA by March 14, 2021.

    Read more.
  • UK Court Grants Asset Preservation Order over Bitcoin
    08/20/2019

    A U.K. court has granted an asset preservation order over Bitcoin stolen in a "spear phishing" attack on a major crypto-currency trader. The decision confirms that proprietary claims over Bitcoin constitute serious issues that should be tried in the courts. Although the presiding judges did not make a final ruling on the legal questions surrounding the nature of Bitcoin ownership, it is believed that this is the first time the English courts have considered the nature of crypto-currencies as property.

    Read more.
  • Decision on Eurozone Oversight of Systemically Important Payment Systems
    08/16/2019

    A Decision of the European Central Bank has been published in the Official Journal of the European Union. The Decision supplements the ECB's Regulation on the oversight of systemically important payment systems. The Decision sets out the procedures and conditions for a regulator to follow when seeking to obtain information and documents from the operator of a SIPS, requiring a SIPS operator to appoint an independent expert to carry out an investigation or review on the operation of the SIPS or conduct on-site inspections.

    ​The Decision enters into force on September 5, 2019 and applies to the Eurozone regulators of Eurozone SIPS.

    View the ECB Decision.
  • European Banking Authority Recommends Changes to EU Deposit Guarantee Scheme Directive
    08/08/2019

    The European Banking Authority has published an Opinion on the eligibility of deposits, coverage level and cooperation between deposit guarantee schemes. The EU Deposit Guarantee Scheme Directive requires the European Commission to report on the implementation of the Directive. The EBA's Opinion is the first of three opinions that it will issue to support the Commission in preparing the report. The other two opinions are expected before the end of 2019, one covering deposit guarantee scheme pay outs and the other DGS funding and uses of DGS funds.

    Read more.
  • Working Group on Sterling Risk-Free Reference Rates Publishes Summary of Responses to Discussion Paper on SONIA Referencing Conventions
    08/07/2019

    The Working Group on Sterling Risk-Free Reference Rates has published a summary of the responses it received to its March 2019 discussion paper on conventions for referencing SONIA in new financial contracts.

    Read more.
  • UK Conduct Regulator Discusses Enhanced Liquidity Requirements for UCITS
    08/06/2019

    Andrew Bailey, the Chief Executive of the U.K. Financial Conduct Authority, has written to Lord Myners of the House of Lords concerning the establishment of U.K. requirements for liquidity standards for Undertakings for Collective Investment in Transferable Securities (UCITS) that are more stringent than existing EU requirements. Andrew Bailey's letter was prompted by Lord Myners' query as to whether the U.K. government has ever formally reviewed the case for imposing more stringent requirements or whether it must abide by the requirements in the EU UCITS Directive.

    Read more.
    TOPIC: Funds
  • European Banking Authority Publishes Advice on EU Implementation of Basel III
    08/05/2019

    The European Banking Authority has published several documents setting out its advice to the European Commission on the impact and implementation in the EU of the Basel III 2017 reforms. On December 7, 2017, the Basel Committee on Banking Supervision published the last part of the Basel III reforms. The revisions were to the standardized approach and the Internal Ratings-Based approach for credit risk, the Credit Valuation Adjustment risk framework, the leverage ratio framework, including the introduction of a leverage buffer for Global Systemically Important Banks, the operational risk framework and the new output ratio floor. The revised standards take effect from January 1, 2022, except that the output floor may be phased-in until January 1, 2027.

    Read more.
  • UK Conduct Regulator Concludes No Changes Needed to Banking Senior Managers Regime
    08/05/2019

    The U.K. Financial Conduct Authority has published the findings of its review into the implementation of the Senior Managers and Certification Regime for the banking sector. The SM&CR came into force for banking firms in March 2016 with the aim of making individuals in the banking sector more accountable for their conduct. The FCA conducted the review to determine how the SM&CR has been implemented in the three years since its introduction. The review is intended to aid understanding of the impact of the regime and the FCA does not intend to make any policy changes on the basis of its findings. The FCA's review focuses on the implementation of the existing banking SM&CR, but an expanded SM&CR regime will come into force for all FCA solo-regulated firms from December 9, 2019. Firms falling within scope of the expanded regime should, where appropriate, also take the findings of the FCA's review into account in their implementation of the SM&CR.

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  • UK Committee Recommends Enhancing the Financial Conduct Authority's Powers and Remit
    08/02/2019

    The U.K. Treasury Committee has published a report on the Financial Conduct Authority's perimeter of regulation. The Report is part of the Committee's ongoing inquiry, The Work of the Financial Conduct Authority, which is considering: (i) the timeliness in which the FCA is able to take action; (ii) the transparency of the FCA's work and decisions; and (iii) the scope of the FCA's regulatory perimeter. This Report considers the last of these issues and makes several recommendations to the Treasury on the remit and powers of the FCA to enhance understanding of consumers of the regulatory perimeter, reduce harm to consumers and mitigate against regulatory arbitrage.

    Read more.
  • European Banking Authority Launches Consultation on Draft Guidelines for Capital Requirements Regulation Contractual Payments
    07/31/2019

    The European Banking Authority has launched a consultation on its proposed guidelines on the methodology used to determine the weighted average maturity of contractual payments due under securitization transaction tranches for the purposes of the Capital Requirements Regulation. The CRR establishes, amongst other things, the principles by which firms should calculate their credit risk, including in relation to securitization transactions. 

    Read more.
  • EU Restrictions on Contracts for Difference Lifted in Wake of National Measures
    07/31/2019

    The European Securities and Markets Authority has announced that it will not again renew its product intervention measure for Contracts for Differences. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA's first restrictions on the marketing, distribution and sale of CfDs to retail clients applied from August 1, 2018 and was then extended every three months because ESMA did not consider that the consumer protection risk had been addressed. ESMA's view is that because most national regulators in EU member states have now adopted permanent measures, its own temporary restrictions do not need to be extended. The U.K. Financial Conduct Authority has imposed permanent restrictions on the sale, marketing and distribution of CfDs and CfD-like options to retail consumers. The rules will apply to all CfDs entered into from August 1, 2019, and to CfD-like options entered into from September 1, 2019.

    Read more.
  • UK Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
    07/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.

    The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.

    The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.

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  • UK Regulators Finalize Resolvability Assessment Framework for Banks
    07/30/2019

    Following their consultation earlier this year, the Bank of England and the Prudential Regulation Authority have finalized the new Resolvability Assessment Framework. The Framework comprises: (i) the BoE's approach to assessing resolvability, which includes the outcomes that the BoE considers necessary to support resolution; (ii) new PRA rules that require firms to assess their resolvability, submit a report to the PRA on the assessment and publish a summary statement on the assessment; and (iii) the BoE making public statements on the resolvability of each individual firm that is in-scope of the PRA's new rules.

    Read more.
  • EU Equivalence for Australian and Singaporean Benchmarks
    07/30/2019

    Two equivalence decisions under the EU Benchmark Regulation have been published in the Official Journal of the European Union. The first decision declares as equivalent to the EU regime the legal and supervisory framework of Australia applicable to the administrators of financial benchmarks that are declared significant benchmarks by the Australian Securities and Investments Commission. The second decision declares as equivalent to the EU regime the legal and supervisory framework of Singapore applicable to the administrators of financial benchmarks that are designated as designated benchmarks by means of the Securities and Futures (Designated Benchmarks) Order 2018. Both decisions will enter into force on August 19, 2019.

    Read more.
  • EU Credit Rating Equivalence Decisions Repealed for Some; Reaffirmed for Others
    07/30/2019

    A series of Implementing Decisions on the equivalence with the EU Credit Rating Agencies Regulation of the credit rating regimes of certain non-EU countries have been published in the Official Journal of the European Union. The EU CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may only use credit ratings for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with the European Securities and Markets Authority; (ii) a third-country CRA under the endorsement regime; or (iii) a third-country CRA under the equivalence/certification regime. Equivalence decisions for several jurisdictions were adopted in 2012 under the CRA Regulation, as it was at the time. The equivalence decisions were for Brazil, Canada, Argentina, Singapore, Australia, Mexico, the U.S., Japan and Hong Kong. CRAs from Mexico, the U.S. and Japan subsequently obtained certification from ESMA.

    Read more.
  • UK Conduct Regulator Consults on STS Notifications under Onshored Securitization Regulation
    07/30/2019

    The U.K. Financial Conduct Authority has launched a consultation on draft technical standards on the content and format of STS notifications under the U.K.'s onshored Securitization Regulation. The consultation closes on August 27, 2019. Unless Brexit is delayed further, the FCA intends to publish the final or near-final technical standards on or very near to Exit day, which is currently due to be October 31, 2019.

    Read more.
  • European Commission Communicates on Financial Services Equivalence
    07/29/2019

    The European Commission has published a Communication on equivalence in the area of financial services, including an annex that briefly sets out the equivalence decisions adopted by the Commission since January 2018. The Communication describes the Commission's current equivalence policy priorities, recent legislative improvements and the main assessment and the decision-making processes. It also sets out recent and ongoing work on equivalence assessments and monitoring.

    Read more.
  • UK Consultation on Draft Law Ensuring Trustee Oversight of Investment Consultants and Fiduciary Managers
    07/29/2019

    The U.K. Department for Work and Pensions has opened a consultation on draft Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2019. The consultation runs until September 2, 2019. The draft Regulations are intended to implement into law certain of the remedies made by the U.K. Competition and Markets Authority in its Investment Consultants and Fiduciary Managers Markets Investigation. The CMA published a Final Report in December 2018 that set out its finding of adverse competition in the investment consultants and fiduciary managers markets and the remedies to address that finding. The CMA's final Order to implement the remedies was published on June 10, 2019.

    Read more.
    TOPICS: CompetitionFunds
  • UK Conduct Regulator Publishes Final Senior Managers & Certification Regime Rules for Extended Regime
    07/26/2019

    The U.K. Financial Conduct Authority has published its final rules extending the Senior Managers and Certification Regime to all FCA solo-regulated firms. The final rules take into account responses to the FCA's consultation paper issued in January 2019, which proposed changes to optimize the expanded regime. 

    Read more.
  • European Central Bank Announces Publication Time for Euro Short-Term Rate
    07/26/2019

    The European Central Bank has announced the publication time for the new Euro short-term rate (or €STR) that will come into effect from October 2, 2019. €STR will represent the wholesale euro unsecured overnight borrowing costs of banks located in the euro area. The ECB has also published the final version of its Guideline in the Official Journal of the European Union. The Guideline is addressed to all Eurosystem central banks and will govern the rate and establish the responsibilities of the ECB and national central banks in determining and administering the rate.

    Read more.
  • UK Conduct Regulator Extends Period for Use of Its Brexit Temporary Transitional Power
    07/25/2019

    The U.K. Financial Conduct Authority has announced that it will extend its use of the temporary transitional power from June 30, 2020 to December 31, 2020 in light of the change to the date that the U.K. is due to leave the EU to October 31, 2019. 

    Read more.
  • UK Regulators Consult on Amending EU Exit Instruments
    07/25/2019

    The Bank of England and the Prudential Regulation Authority have opened a consultation on further changes to EU Exit instruments following the extension of Brexit from April to October 31, 2019, which means that certain EU legislation that has been published since April will become retained law. The consultation closes on September 18, 2019.

    The consultation covers: (i) a proposed update on the Bank's and PRA's intended use of the temporary transitional power; (ii) proposals for the PRA Rulebook and Binding Technical Standards that will be retained, or 'onshored', in U.K. law; and (iii) the Bank's proposed BTS under the Central Securities Depositories Regulation.

    Read more.
  • UK Draft Legislation for Post-Brexit EMIR 2.1 Published
    07/25/2019

    A draft U.K. statutory instrument to onshore into U.K. law, post-Brexit, the revised European Market Infrastructure Regulation (known as EMIR Refit) has been published - The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019.

    EMIR Refit was published in the Official Journal of the European Union on May 28, 2019 and, for the most part, has applied directly across the EU since June 17, 2019.

    Read more.
  • UK Payments Regulator Consults on Draft Updated Powers and Procedures Guidance
    07/25/2019

    The U.K. Payment Systems Regulator has launched a consultation on the updated Powers and Procedures Guidance and Interchange Fee Regulation Guidance. The Regulator published the original Powers and Procedures Guidance in March 2015 before it became operational. 

    Read more.
  • European Commission Assesses Risks to EU of AML and CTF
    07/24/2019

    The European Commission has published a Communication and a series of reports assessing the EU implementation of anti-money laundering and terrorist financing requirements and discussing whether further action is needed to improve the EU's AML/CTF framework. The Communication summarizes the reports and the Commission's conclusions. The Commission notes that some of the shortcomings identified in the reports may have been remedied through the Fourth AML Directive, and that others may still be mitigated through the implementation of the Fifth AML Directive, due to be implemented by member states by January 2020. 

    Read more.
  • European Banking Authority Publishes Opinion on Relation of Prudential Objectives to Anti-Money Laundering and Counter-Terrorism Financing
    07/24/2019

    The European Banking Authority has published an Opinion signaling the importance of money laundering and terrorism financing risks in the prudential supervision of EU Member States. The Opinion invites national prudential supervisors to make clear to institutions in their jurisdictions the expectation that prudential supervisors should be aware of AML/CTF risks that may affect the institutions they oversee. 

    Read more.
  • Reformed EONIA Publication Times Confirmed
    07/24/2019

    The European Money Markets Institute has announced that EONIA will be published daily at or soon after 9:15 CET, as from October 2, 2019.

    Read more.
  • UK Regulator Consults on Changes to Counterparty Credit Risk Treatment
    07/23/2019

    The U.K. Prudential Regulation Authority has issued a consultation on proposed additions to its Supervisory Statement on counterparty credit risk. The additions are intended to provide clarity to the market on how firms should satisfy the Capital Requirements Regulation's requirement to ensure senior management are aware of the limitations and assumptions included in models used to calculate exposure values for derivatives. The consultation is relevant to all firms captured by the provisions of the Capital Requirements Directive. Responses to the consultation are requested by October 25, 2019.

    Read more.
  • Margin Requirements for Uncleared Derivatives Delayed for Certain Counterparties
    07/23/2019

    The target date at international level for regulators to introduce margin requirements for uncleared derivatives for counterparties with lower trading volumes has been extended for a year by the International Organization of Securities Commissions and the Basel Committee on Banking Standards. The amendment may, depending on regulatory responses, in turn impact small banks, asset managers, pension funds and insurers.

    In March 2015, the Basel Committee and IOSCO published a revised version of their policy framework for the exchange of margin for uncleared derivatives. The main revisions were to delay by nine months the phase-in period for the obligations relating to both initial margin and variation margin. Relevant international standards apply to entities that are financial firms and systemically important non-financial entities, the definitions for which are determined by national regulation.

    Read more.
    TOPIC: Derivatives
  • UK Regulator Publishes Policy Statement on Eligibility of Financial Collateral Under Capital Requirements Regulation
    07/23/2019

    The U.K. Prudential Regulation Authority has published the final version of its amended Supervisory Statement on credit risk mitigation, providing additional clarity on the eligibility of financial collateral under the Capital Requirements Regulation. The Supervisory Statement is published alongside the PRA's Policy Statement, which provides feedback on the responses to the PRA's consultation paper on the same topic launched in January this year. The amendments to the Supervisory Statement are effective as of July 23, 2019, the date the Policy Statement is published. Firms with concerns about their ability to comply with the revised Supervisory Statement are advised to liaise with their usual supervisory contacts.

    Read more.
  • UK Conduct Regulator Consults on Firms' Treatment of Vulnerable Consumers
    07/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on its proposed guidance on how financial services firms should treat "vulnerable" consumers. The consultation will be divided into two stages: the first stage focuses on: (i) whether the draft guidance covers the right issues and provides sufficient clarity to firms on what they should do to improve outcomes for vulnerable consumers; (ii) the potential impact of the guidance on firms' costs and the potential benefit to consumers of the implementation of the guidance; and (iii) whether the guidance is sufficient to ensure firms take appropriate action to treat vulnerable consumers fairly or whether additional policy interventions are required. The second stage will seek input on a revised draft of the guidance, which will take account of feedback received during the first stage, together with a cost-benefit analysis. Responses to the first stage of the consultation should be provided by October 4, 2019.

    Read more.
  • UK Payment Systems Regulator Revises Timeline for Market Review into the Supply of Card-Acquiring Services
    07/22/2019

    The U.K. Payment Systems Regulator has revised the timeline for its work on the market review into the supply of card-acquiring services. The PSR will publish its interim report for consultation in Q1 2020, instead of by the end of 2019 as initially set out in the Terms of Reference. The postponement has come about as the PSR has identified a number of additional issues that need to be addressed in the review.

    The market review is a response to concerns that the supply of card-acquiring services from specialist providers by merchants (to enable card payments to be accepted and processed on their behalf) may not be working well for some merchants and, ultimately, consumers. The market review is intended to examine the lack of transparency around merchants' fees for accepting card payments and barriers to competition in the card-acquirer services market.

    View the PSR's announcement.
  • HM Treasury Seeks Input on the Future of Regulatory Coordination in Financial Services
    07/19/2019

    Launching the first phase of the Future Regulatory Framework Review, HM Treasury has issued a call for evidence on regulatory coordination in the financial services sector. The Financial Services Future Regulatory Framework Review was announced in March 2019 by the Chancellor in his Spring Statement. The Review will assess whether the U.K. financial services regulatory framework is fit for purpose, including being able to support the sector to grow in the future. Four key challenges for the sector are identified: operating outside of the EU, new relationships following Brexit, technological change and other global challenges, such as climate change. The Review will entail a comprehensive evaluation of the regulatory framework in a phased process. The first phase covers coordination by the U.K. regulators. Later phases will cover other areas, to be announced once the arrangements for the U.K.'s exit from the EU are clearer.

    The call for evidence focuses on how the government and regulators work together to ensure the best outcomes for the financial services sector, consumers of financial services and the U.K. Feedback is requested on what stakeholders consider works well and the areas for potential improvement. Where possible, responses should provide examples. Responses to the call for evidence should be submitted by October 18, 2019.

    View the call for evidence.
  • Revised EU Guidelines on Stress Testing of Money Market Funds Published
    07/19/2019

    Following its consultation in late 2018, the European Securities and Markets Authority has published final reports and updated guidelines on stress testing money market funds and the requirements imposed upon MMFs to report information to national regulators under the EU Money Market Funds Regulation.

    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 guidelines, and to report the outcomes to their national regulators. The first MMF reports are due by the end of Q1 2020.

    Read more.
    TOPIC: Funds
  • Financial Stability Board Delays Implementation Deadlines for Minimum Haircut Standards for Uncleared SFTs
    07/19/2019

    The Financial Stability Board has extended the implementation timelines for its recommendations on securities financing transactions, in particular those on minimum haircut standards for uncleared SFTs. SFTs involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy backs. The FSB published, in 2015, its regulatory framework and recommendations for haircuts on uncleared SFTs, which included timelines for the implementation of the recommendations by FSB member jurisdictions. The FSB notes that while progress is being made in implementing the recommendations, many jurisdictions have not yet done so. The FSB acknowledges that most of the delay is due to the new date for implementing the Basel III framework, including the minimum haircut standards on bank-to-non-bank SFTs, which was postponed to January 2022.

    Read more.
  • International Body Issues Statement on Liquidity Risk Management Recommendations for Investment Funds
    07/18/2019

    The International Organization of Securities Commissions has issued a statement on its Liquidity Risk Management Recommendations for investment funds. The statement is in response to the U.K.'s Financial Policy Committee's Financial Stability report which stated that the IOSCO Liquidity Risk Management Recommendations do not prescribe how it should be ensured that funds' assets and investment strategies are consistent with their redemption terms. IOSCO's statement sets out how the Recommendations provide a comprehensive framework for regulators to address liquidity risks in funds. IOSCO notes that the Recommendations allow some flexibility as to how they are implemented by jurisdiction due to the diversity of the funds sector. IOSCO does not believe that a global prescriptive standard is appropriate and will undertake an exercise in 2020 to assess how the recommendations have been implemented across the globe.

    Read more.
    TOPIC: Funds
  • Final EU Guidelines on EU Credit Rating Agency Disclosure Obligations and Advice on Sustainable Finance in the Credit Rating Market
    07/18/2019

    The European Securities and Markets Authority has published two documents relating to sustainable finance in the credit rating sector. The first document is technical advice for the European Commission, responding to the Commission's mandate in its 2018 Action Plan for Sustainable Finance for ESMA to assess the current practice within the credit rating market concerning sustainability considerations. ESMA has assessed the extent to which environmental, social or governance factors are considered within credit rating agencies' credit assessments. ESMA concludes that CRAs are including ESG factors in their ratings, but it is difficult to assess the extent to which each factor is being considered in the various asset classes. ESMA warns that credit ratings should not be understood as providing an opinion on sustainability characteristics of an issuer or entity and recommends that the CRA Regulation should not be revised to require the consideration of sustainability characteristics in CRAs' credit assessments. However, ESMA advises that it may be appropriate to update the disclosure requirements in the CRA Regulation to enhance the transparency on how CRAs are considering the ESG factors.

    Read more.
  • European Banking Authority Reports on Regulatory Perimeter, Regulatory Status and Authorization of Fintech Activities
    07/18/2019

    Fulfilling its mandate under the European Commission's FinTech Action Plan to map the current authorization and licensing approaches for innovative FinTech business models in Europe, the European Banking Authority has published a report on the regulatory perimeter, regulatory status and authorization of FinTech activities under its remit, in particular the banking, payment services and electronic money services sectors. The European Securities and Markets Authority published its related report on July 12, 2019.

    Read more.
  • EU Call for Evidence on the Impact of the Inducements and Charges Disclosure Requirements Under MiFID II
    07/17/2019

    The European Securities and Markets Authority has launched a call for evidence on the impact of the inducements and costs and charges disclosure requirements under the revised Markets in Financial Instruments Directive. MiFID II restricts the payment or receipt of all fees, commissions and non-monetary benefits (which are defined as so-called "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. EU investment firms are obliged to disclose to each client all fees, commissions and non-monetary benefits received by them in connection with any investment service provided by them to that client.

    Read more.
    TOPIC: MiFID II
  • EU Report on Sanctions and Measures Imposed under MiFID II in 2018
    07/17/2019

    The European Securities and Markets Authority has published a report on enforcement actions taken across the EU for breach of the revised Markets in Financial Instruments package. The report covers administrative sanctions and measures as well as criminal sanctions in aggregated form for 2018. ESMA notes that the data is limited because MiFID II has only applied since January 3, 2018, and some Member States were late in applying the requirements. Therefore, ESMA does not believe that it is possible to detect any trends using the limited data. ESMA will produce the same report annually, based on the submission of information from national regulators.

    View the report.
    TOPICS: EnforcementMiFID II
  • EURIBOR Benchmark Statement Published
    07/17/2019

    The European Money Markets Institute has published a Benchmark Statement on the administration of Euro Interbank Offered Rate (Euribor). Earlier in July this year, the EMMI obtained authorization as the administrator of Euribor, which is a critical benchmark under the EU Benchmark Regulation. EMMI has made reforms to Euribor in order to ensure it meets the requirements of the Regulation, including adopting a new hybrid methodology, the phased implementation of which will be completed by the end of 2019.

    View EMMI's announcement and the Benchmark Statement.
  • UK's Expanded Senior Managers and Certification Regimes Enter into Force
    07/17/2019

    The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 have been made. The Regulations bring into force, from December 9, 2019, the expanded Senior Managers and Certification Regimes for all Financial Conduct Authority solo-regulated firms authorized under the Financial Services and Markets Act 2000, which include asset managers and investment firms carrying out certain activities. These firms need to complete their initial certification assessments for existing certified staff and new hires by December 9, 2020, although they must have identified certification staff by December 9, 2019. A transitional provision states that the regime will only apply to Claims Management Companies that are authorized by the FCA by December 9, 2019 and to other CMCs on the date that they obtain their authorization.

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